ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, June 23, 2016

A Modern-day “Hamer v. Sidway-”like Case with an International Twist

Looking for an interesting new case on the statute of frauds, breach of contract, promissory estoppel, and constructive trust by a son against his father? Here’s one for you:

It is California. The year is 1994. Father Sardul allegedly promises son Paul that if he if he “stayed in school, was a good son, continued to work on the [family] ranches, and married an Indian girl, i.e., a Sikh girl, Sardul and [mother] Jitendra would take care of him financially.” Images

According to the court, this happened next: “In 1996, Sardul and Jitendra were looking for a wife for Paul. The family traveled to India for this purpose. While in India they conducted numerous interviews of the parents of potential brides. In the Sikh culture, the boy’s parents take responsibility for finding a suitable wife. If both sets of parents think a match looks promising, the boy and girl spend some time alone together. Thereafter, if the boy and girl are interested, the match will be pursued. Paul’s family and Rajneet’s family first met on February 21, 1996 and Paul and Rajneet were married on March 16, 1996.”

The couple lived in one of the family’s ranch houses without ever paying rent, never making a mortgage, and with father Sardul making certain other payments for the young couple. Paul did, however, work on the family grape ranches until 1999. At that time, he got a full-time job for other employers.

In 2002, grape growers in California encountered hard times financially. Sardul tells Paul that he (Sardul) needed to sell the ranch on which Paul and his wife lived as they risked otherwise being foreclosed on both on the ranch in question as well as others. One of the family’s properties had a “little bit of equity” on it. Paul and his wife sign a deed for that property. The couple later stated that the father had promised “to give them” the ranch on which they previously lived when “things got better financially.” The father never did so, but instead offered the couple a 99-year lease on the property in 2012. Paul subsequently filed suit, claiming breach of three separate contracts: 1) To be a good son and stay in school, work on the ranches, and marry an Indian girl, 2) to take care of his father, and 3) the transfer of the above-mentioned ranch.

The court concluded that it did not matter how many contracts were alleged because it was questionable whether “any contract was formed at any time.” The alleged promises to “be a good son and stay in school” were vague, the promise “to continue to work on the ranches” was unsupported by the evidence, and the “marry an Indian girl” term was illegal as a restraint on marriage. The alleged oral promise to transfer a ranch violated the statute of frauds. Images-1

Paul and his wife also argued equitable estoppel and that, accordingly, the contract was not barred by the statute of frauds. The appellate court upheld the trial court’s finding that neither Paul nor his wife Rajneet detrimentally relied on the alleged contract to transfer the ranch to them or suffered unconscionable injury. The court concluded that Paul did not forbear all other employment opportunities to work on the ranches. Rather, Paul began working full time for other employers in 1999 and was permitted to live rent free on the Elkhorn Ranch until 2012. The court noted that in 2012, Paul and wife Rajneet were able to purchase a $650,000 house and had saved enough money to make a $200,000 down payment. Unknown

But wait!! What about the wife? Did she not have any arguments? You bet: Rajneet appeared to claim unconscionable injury or detrimental reliance based on marrying Paul and moving to the United States in part because of Sardul's promise that they would be given a ranch. The court concluded that Rajneet did not prove her claims noting that Rajneet was still married to Paul, they both were employed with good jobs, and they were able to purchase a home after living rent free for many years.

Finally, Paul and Rajneet claimed that they partially performed when they bought the one ranch from the father in reliance on Sardul's promise to transfer another to them in exchange. Part performance of an oral agreement for the transfer of an interest in real property may, under certain circumstances, except the agreement from the statute of frauds. (Sutton v. Warner (1993) 12 Cal.App.4th 415, 422.) However, the trial court found that no Sardul’s testimony that no such promise was ever made to be credible. The appellate court supported this as issues of credibility are for the trial courts to decide.

Talk about a family relationship gone sour, and then only over money. What a shame!

June 23, 2016 in Recent Cases, True Contracts | Permalink | Comments (2)

Wednesday, June 22, 2016

The Contractual Side of Going for the Gold

The Olympics are almost here, and as we all know, they're big business: lots of television ratings, lots of advertising, lots of endorsements.

Today the District of Oregon is hearing an argument on a preliminary injunction in a contract case with Olympic implications (or an Olympic case with contract implications), Nike USA, Inc. v. Berian, Docket No. 3:16-cv-00743 (behind paywall).

The dispute, which has been widely reported online, is based on Nike's endorsement contract with Boris Berian, a track and field competitor with Olympic hopes. The contract, according to the complaint, gave Nike the right to match any offers made to Berian during a particular period of time. During that time, Berian received an endorsement offer from New Balance. Nike claims in its complaint to have matched the offer, and that Berian breached his contract with Nike when he refused to continue his relationship with Nike.

Berian kept racing. And kept winning. While wearing New Balance gear. So Nike, to keep Berian from furthering his relationship with Nike's competitor New Balance, sued him, serving him with the lawsuit during a big track meet.

Nike's allegations have been countered by Berian, who claims that New Balance's offer to him did not contain a number of restrictions that Nike's offer did contain. However, Nike has countered that by arguing that Berian did not make that clear to Nike and that Nike would have dropped its restrictions if necessary. (Nike seems to have just assumed there had to be restrictions and that any statement otherwise couldn't possibly be true.)

Endorsements are big money, of course. The Nike and New Balance offers are $125,000 for the year. While he's embroiled in the legal dispute, Berian's agent asked for donations to Berian's legal fund.

The judge has already approved a TRO in the case, prohibiting Berian from racing with any equipment other than Nike's. The hearing for the preliminary injunction is today.

June 22, 2016 in Games, In the News, Recent Cases, True Contracts | Permalink | Comments (0)

Is that Starbucks Grande Really Grande?..

Here’s a case that shows you that size really does matter… in contract law at least. Of-course-size-matters-just-ask-that-poor-ex-planet-pluto-e3505

In Strumlauf et al. v. Starbucks Corp., No. 16-01306, a federal district court judge based in San Francisco just ruled that a class action lawsuit against Starbucks.The complaint alleges breach of express and implied warranties, unjust enrichment, negligent misrepresentation, fraud and violations of California's Consumer Legal Remedies Act, the California Unfair Competition Law, and the California False Advertising Law.

The company allegedly overcharged its customers by “systematically serving lattes that are 25% too small” in order to save milk. Baristas were allegedly required to use pitchers for heating milk with etched “fill to” lines that are too low. Further, they were told to leave ¼ inch of free space in drink cups. Said U.S. District Judge Thelton Henderson: "This is not a case where the alleged deception is simply implausible as a matter of law. The court finds it probable that a significant portion of the latte-consuming public could believe that a 'Grande' contains 16 ounces of fluid." Starbucks’ cups for “tall,” “grande,” and “venti” lattes are designed to hold exactly 12, 16 and 20 ounces.

Starbucks so far counters that “if a customer is not satisfied with how a beverage is prepared, we will gladly remake it.”  Right, but how many customers would really complain that their drink is .25 inch (6 mm) too small?... And does it really matter? Much of what one pays for with a Starbucks drinks is, arguably, the knowledge of what the retail outlets offer, the ambience, convenience, “free” wifi, etc. Having said that, I am certainly not one to promote consumer fraud and recognize that little by little, the alleged milk-saving scheme could, of course, bring even more money into the coffers of already highly profitable Starbucks.

Images

June 22, 2016 in Current Affairs, Famous Cases, Food and Drink, In the News, Recent Cases, True Contracts | Permalink | Comments (2)

Monday, June 20, 2016

Have You Designated a Legacy Contact on Facebook?

Facebook

Source: facebook.com

It isn't something we typically think about but as our world shifts to digital and as more and more of us leave behind large social media footprints, what happens to those accounts when we die? I have thought about it briefly, mostly in thinking that I should give my passwords to someone, so that, if something happens to me unexpectedly, someone will be able to get onto my social media to let my followers know. I have had social media friends vanish with no explanation, and it's always haunted me that maybe something happened to them and I had no way of knowing. 

Despite the fact that I'm a lawyer, it honestly never occurred to me that what happens to my social media accounts after my death might be governed by their terms of use...until I saw this story reported widely on the local news. There was a recent tragedy in a nearby town that resulted in the unexpected, untimely death of George Heath. George's widow, Rosemary, was accessing his Facebook account to send photos and videos to family and friends and share older memories. Given how long Facebook has been around now, there are potentially years' worth of memories built up on Facebook pages, and one could see how they would be of some comfort in a time of grief. 

However, Facebook's terms of use prohibited what Rosemary was doing. Someone notified Facebook that George had died and Facebook basically locked the account down. They call it "memorializing the page," but the effect of it is that it's locked and no one can access it, not even someone who has the password. Now, this makes sense in a way: People could do malicious and terrible things to a deceased person's Facebook page, theoretically, if Facebook didn't lock it down. But it's a harsh outcome when applied to people in Rosemary's situation. 

Facebook's terms of use inform you that you should designate a legacy contact. This was actually difficult for me to find in Facebook's policies and I eventually only found it by Googling "Facebook memorialized page," so it's not like this is very obvious on the website itself. And, anyway, not many of us think a whole lot about our unexpected deaths. And, if we do, not many of us think that we should read our social media terms of use about it. I looked it up, and Twitter also has a policy where you can lock down a Twitter account if the user dies, but Twitter seems to require a lot more proof than Facebook does

Also of concern to me is that, even if someone is designated as a legacy contact, it still might not allow the kind of access that Rosemary was looking for, or that you might want to grant to someone. Facebook limits what a legacy contact can do, meaning that your power over what happens to your Facebook account really ultimately lies with Facebook, not you or your wishes. Which is a reminder, of course, that our control over our Facebook accounts is limited to begin with and pretty much at the whim of Facebook

We tend not to read the terms of use of sites, as we all know. And we talk about that a lot in the context of agreeing to arbitration clauses and stuff like that. We don't often think about how that can have consequences for our loved ones after our deaths. I understand, of course, that Facebook and Twitter don't want to hand out log-in information, but if the user has given the log-in information to someone else--and, as I could foresee, if the user has given the log-in information to someone specifically for the purpose of managing the social media account if/when they die--it seems odd for Facebook to then react as if that person's actions are prohibited. On the other hand, I suppose, how would Facebook know otherwise? A conundrum.

 

June 20, 2016 in Commentary, Current Affairs, In the News, True Contracts, Web/Tech | Permalink | Comments (4)

Wednesday, June 15, 2016

Using Your Insurance Policy's Appraisal Process? You May Still Have Tort Claims Left

I've seen a few cases now come across with people trying to sue their insurance companies after using the appraisal process in their policies to resolve a dispute, so I thought I'd blog about one of them. This one is Clark v. Pekin Insurance Co., Case No. 3:15CV2272 (behind paywall), out of the Northern District of Ohio. 

The fact patterns for all these cases is basically the same: Plaintiff makes a claim under an insurance policy. The insurance policy pays less than the plaintiff desires. Plaintiff utilizes the appraisal process found in the insurance policy, in which each side chooses an appraiser and, if they can't agree, an independent umpire then makes a finding. Plaintiff wins the appraisal process and the insurance company promptly pays plaintiff the extra money owed. 

However, plaintiff is not pleased--probably because of having had to go through a whole song-and-dance to get the money--and sues anyway. That's what happened in this case. 

Breach of contract claims are tricky after the appraisal process has been invoked. Most insurance policies prohibit the insured from recovering damages beyond that awarded through the appraisal process, as the policy did here. Because Clark received what the umpire stated she was entitled to, exactly as required under the policy, the court found there was no breach of the contract.

However, the appraisal process doesn't bar tort claims, and Clark was still alleging that the insurance company had acted in bad faith toward her insurance claim. However, the court found that the insurance company had behaved in a timely fashion and that disagreement over the amount to be paid didn't constitute bad faith on its own, and there was no other evidence on the question, so Clark lost that claim as well. So the appraisal process might still leave you with tort claims, but they would be challenging to establish, I think. 

June 15, 2016 in Recent Cases, True Contracts | Permalink

Monday, June 13, 2016

Airlines Not Required to Honor Pricing Glitches

Stories such as this [https://www.washingtonpost.com/lifestyle/travel/i-flew-to-abu-dhabi-for-265-round-trip-heres-how-you-can-do-the-same/2016/06/07/fc33cbea-29a3-11e6-b989-4e5479715b54_story.html] about finding incredibly cheap airlines to both national and international destinations because of airline computer pricing mistakes (real or otherwise…) have become commonplace. In 2012, the Department of Transportation established clear rules against changing the price of a ticket after purchase.  But in a new decision by the U.S. Department of Transportation, that rule will no longer be enforced:

“As a matter of prosecutorial discretion, the Enforcement Office will not enforce the requirement of section 399.88 with regard to mistaken fares occurring on or after the date of this notice so long as the airline or seller of air transportation: (1) demonstrates that the fare was a mistaken fare; and (2) reimburses all consumers who purchased a mistaken fare ticket for any reasonable, actual, and verifiable out-of-pocket expenses that were made in reliance upon the ticket purchase, in addition to refunding the purchase price of the ticket.

Images

Travelers’ websites thus now recommend that people hold off making further travel plans until a ticket and confirmation number have actually been issued. Some have further said about the glitch fares that “[t]ravel is not something that is only for the elite or [people] from certain economic brackets.” Of course, it shouldn’t be, but with the deregulation of the airline industry and steadily increasing prices and fees, history seems to be repeating itself: air travel is, for many, becoming unaffordable. This in spite of record-breaking profits for the airline industry benefiting from low oil prices and, I want to say of course, fares increasing, holding steady or certainly not decreasing very much.  Airline executives say they are sharing the wealth with passengers by investing some of their windfalls into new planes, better amenities and remodeled terminals. They're also giving raises to employees and dividends to investors.  Right… And whereas some years have been marked by bust, many more have been booming for the airlines.

Given that, why would the DOT be amenable to help out the airlines, and not passengers? Under contract law, mistakes that are not easily “spottable” have, traditionally, not been grounds for contract revocation. If one considers the contract to have been executed when the airline accepts one’s online offer, why should the airline, absent a clear error or other mitigating factors, not be expected to follow the common law of contracts as other parties will, depending on the circumstances, of course, likely have to? That beats me.

Some airlines are, however, choosing the honoring the mistake fares. Others don’t. Bad PR, you say? That also does not seem to matter. The most hated airline in the U.S. a few years back – Spirit Airlines – was also (at least then) the most profitable.

Hat tip to Matt Bruckner of Howard University School of Law for bringing this story to my attention.

June 13, 2016 in Current Affairs, E-commerce, Legislation, True Contracts, Web/Tech | Permalink | Comments (0)

Standard Contract Advice, Of Course: Be Careful What You Agree To

Why? Because a court is probably going to hold you to it. 

This case, Frick Joint Venture v. Village Super Market, Inc., Docket No. A-1441-15T1, out of New Jersey, is a complicated case with a lot of history between the parties which no doubt colors the court's decision but it's also a case that just makes logical sense.  

Village Super Market was the anchor tenant of Frick Joint Venture's shopping center. By the terms of the lease, Village had the right to approve certain changes to the shopping center. One of the changes involved a gas station that had gone out of business. Frick desired to set up a Starbucks in the footprint that had been occupied by the gas station; Village refused to provide its consent. 

The parties went back and forth trying to resolve the issue, but eventually Frick requested AAA arbitration pursuant to the lease agreement. Through respective counsel, Village responded requesting the choosing of a private arbitrator instead, to avoid AAA fees. The parties agreed on a succession of private arbitrators, and, eventually, to a mediator instead, over the course of several months. However, Village never provided Frick with any dates for the arbitration (later mediation), despite repeated requests on Frick's part to get the thing scheduled. Eventually, ten months after first discussing arbitration with Village, Frick contacted AAA to demand arbitration. AAA contacted Village to set dates, and at that point Village contended that it was not required to go to arbitration under the terms of the lease and thus rejected the arbitration demand. 

The court thought that the relevant portion of the contract was "not a model of clarity" but was also comfortable in making its decision regardless of what the lease agreement required, because there had been multiple communications over the course of many months in which Village agreed to arbitration. Therefore, the lease agreement's terms was unimportant in the fact of this ongoing agreement by Village. Even if these communications didn't rise to the level of a contract, Village was estopped from arguing otherwise because Frick had relied on Village's representations about arbitration to its detriment: During the delay in making the arbitration demand, the gas station portion of the shopping center continued to sit vacant. 

The court finally concluded that Village's behavior from the very beginning appeared to indicate that it understood the matter should be arbitrated, and so Frick was permitted to demand arbitration. 

June 13, 2016 in Recent Cases, True Contracts | Permalink | Comments (0)

Thursday, June 9, 2016

Unilateral Contracts: “… Never Pay for Gas Again!”

Relying on the win-a-car-for-a-hole-in-one case where a Pennsylvania court found that a car dealership was obligated to honor its offer for a unilateral contract posted at the ninth tee when a golfer finally aced a hole-in-one despite the dealership’s subjective intent to end the promotional offer two days earlier, a Third Circuit Court of Appeals court found a unilateral contract to exist under the following circumstances.

Ie85f5630164711e6a4af010000000000

A brochure distributed to the customers of Giant Eagle – a chain of retail supermarkets, gas stations, etc. – promised its customers that they could “Earn free gas – it’s easy!” and “You may never pay for gas again!” as long as they spent $50 on supermarket purchases. (See the true images posted here in this blog). The brochure, however, also included fine print provided, among other things, that “discounted fuel cannot exceed 30 gallons and discounts must be used in full on one vehicle in one transaction,” “the promotion is valid for a limited time and may end at any time without prior notice,” and “fuelperks! discounts expire 3 months after the last day of the month in which they’re earned.” However, the court found that none of the published program parameters suggested that Giant Eagle reserved the right to retract rewards that customers had already accrued. In fact, in the entire history of the Giant Eagle fuel program, no such retroactive termination ever occurred.

Said the court, “[l]ike the golfer who teed off with a promise of reward in mind, a customer anticipated the promised fuel discounts when deciding to shop at Giant Eagle in the first place—and thus deciding not to shop at a different store. Because she was then aware that she could apply the discounts as advertised if she spent fifty dollars on supermarket purchases using her Advantage Card, she was indeed a party to a unilateral contract with Giant Eagle. Liability therefore attached upon her performance, i.e., at checkout.”

A fair win for consumers, it seems.

June 9, 2016 in Current Affairs, Miscellaneous, Recent Cases, Travel, True Contracts | Permalink | Comments (3)

Wednesday, June 8, 2016

"Any Property Owner" Could Be Almost Anyone in the World

Words are tricky things, as contracts remind us every day. When I teach contract ambiguity, a lot of the cases seem to revolve around insurance contracts, with the doctrine of contra proferentem coming into play. A recent case out of Michigan, Atlantic Casualty Insurance Co. v. Gustfason, No. 325739, provides another example. 

Gustafson operated a landscaping business. While one of his employees was clearing brush on a homeowner's property, the homeowner was watching off to the side and was struck with debris and injured. The homeowner sued Gustafson, and Gustafson contacted his insurance agent. Atlantic Casualty reported that the loss to the homeowner was excluded from the insurance policy, so Gustafson sued Atlantic Casualty, contending that the loss was covered by the policy. 

The relevant clause in the policy stated that it didn't apply to bodily injury to any "contractor," and then defined "contractor" using a long string of examples: including but not limited to

any independent contractor or subcontractor of any insured, any general contractor, any developer, any property owner, any independent contractor or subcontractor of any general contractor, any independent contractor or subcontractor of any general developer, any independent contractor or subcontractor of any property owner and any and all persons providing services or materials.

The emphasis there is added, because Atlantic Casualty sought to exclude the homeowner's injuries by asserting that he was "any property owner."

The court pointed out that the phrase "any property owner" was extraordinarily broad and would include almost everyone in the world "except perhaps for a newborn baby," because most people can be found to at least own the clothes they're wearing, which would make that person a property owner. Such a broad reading, excluding virtually the entire planet, would render the policy illusory. 

Atlantic Casualty apparently acknowledged that the phrase was broad as written and instead argued that what it really meant was "the owner of the real property upon which the insured is performing work." The court, however, found that it made sense, given the other items in the list, to interpret "any property owner" to mean "those who are being compensated, or who otherwise have a commercial interest, for being on the job site." In that case, "any property owner" would cover not the real property owners whose land was being worked on but owners of any equipment being used (possibly rented) to work on the real property. 

Because "any property owner" is an ambiguous term and the court found itself with two reasonable interpretations, it employed contra proferentem and interpreted the contract against Atlantic Casualty, who had drafted the contract. Therefore, it stated that "any property owner" did not include those "without a commercial interest in the project," and therefore did not include the residential homeowners, which meant the policy covered the homeowner. 

While I generally like the court's reasoning and interpretation in this case, I do find it slightly odd to decide that a property owner doesn't have a commercial interest in the project being performed on his own land. Presumably he is paying for the work and therefore does have a commercial interest in making sure that the work is being done properly. Even if he's not paying for it, the improvement to his land will likely increase its value, also giving him a commercial interest in what's happening. I think the better phrasing is to interpret it as someone who is being compensated for their presence on the job site. 

June 8, 2016 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Tuesday, June 7, 2016

This One Again: Handwritten Contracts Really Are Binding (but Mediation Transcripts Are Highly Recommended)

The Seventh Circuit just reconfirmed the fact that handwritten contracts are enforceable as long as they contain all the material terms of the contract.

In the relevant case,Martina Beverly brought suit against her former employer, Abbott Laboratories, for discrimination and retaliation against her because of her German nationality (not a lot of anti-German discrimination going on in this country these days, one might think, but that was nonetheless the allegation) as well as on the basis of her disabilities. The case went to mediation. A day before the mediation took place, Abbott’s attorney sent Beverly’s attorney a “template settlement agreement in order to avoid any surprises in the event that [the parties] are able to resolve the matter.” That document also stated that Beverly had twenty one days to review it and seven days to revoke any possible acceptance.

Images

During the fourteen-hour mediation session the next day, both parties were represented by counsel. At the end of the session, both parties and their counsel signed a very brief handwritten agreement that, at bottom, stated that Abbott would pay the cost of mediation and “$200,000+” with Beverly demanding $210,000. The parties were probably and understandably tired after such a long session, but still: a quarter million-dollar settlement, and no one had the energy or took the time to type up one measly paragraph?...

Next day, Abbott emailed a typed agreement to Beverly’s specifying the amounts to be paid ($46,000 to Beverly and a relatively whopping $164,000 to her attorneys!). The emailed response from Beverly’s attorneys: “Oh happy days!.. You are a gem.”

Soon after that, Beverly – perhaps for good reason – got cold feet and sought to rescind from the deal, arguing that additional terms were needed for a contract to have been formed, that the twenty one days mentioned in the pre-meeting template (which was never used in its original form) were applicable to her settlement offer, and that a “more formal future writing” was anticipated.

The appellate court struck down each of these arguments. First, additional terms such as any future cooperation between the parties and Beverly’s future employment with the company were nonessential details. The language in the original template pertaining to a cool-down period was never actually used. The fact that parties anticipate a more formal writing does not nullify an otherwise binding agreement.  The court found the happy exclamation by Beverly’s attorney dispositive of the parties’ intent to enter into a contract when they did (one might also say it was simply an indication of the attorneys’ happiness with a large payment, not their clients’ mood).

Perhaps most importantly, the court pointed out that “[i]t bears mentioning that a transcript (or some other recording) of the private mediation session here may have provided important clarity regarding the parties’ beliefs and intentions relating to the handwritten agreement and the draft proposal. We encourage future litigants to record any communications that directly relate to final settlement agreements.”

Sound advice in days of, apparently, little or no secretarial assistance even when relatively large sums of money are at stake. An assistant could have typed up the agreement in less than one minute. So could an attorney. In the end, though, the handwriting argument did not prevail, but having something in writing or at least an audio recording would have precluded even more costly lawyering.

June 7, 2016 in Commentary, Labor Contracts, Miscellaneous, True Contracts | Permalink | Comments (2)

Monday, June 6, 2016

"Facebook Addendums": Does Your Landlord Want to Be Your Friend?

I'm one of those apparently rare people who doesn't really use Facebook. But Facebook was evidently very important to City Park Apartments in Salt Lake City, whose management company presented all of the tenants with a "Facebook addendum" to their lease. The addendum allegedly stated that all residents had to befriend the complex on Facebook or be found in breach of their lease agreement. 

This seems like an alarming development that I hope is going to be very limited. Is a Facebook account going to start being like a telephone number or an e-mail address, something it's assumed by everyone that you have and should hand over access to in exchange for goods or services? The reason I stopped using Facebook was because of privacy concerns. I wouldn't be thrilled about being told that I'm required by my lease to make sure my landlord can watch my Facebook activities (which often correspond, as we all know, to our real-life activities; if your landlord asked to follow you around through your daily life, or to get e-mailed your vacation photos, I would think many people would consider that a weird request).

And, since I don't do anything on Facebook, does that mean that I wouldn't be allowed to rent an apartment there unless I opened an account? Many people have legitimate, important, in some cases necessary reasons to limit their online presence. Let's hope "Facebook addendums" don't start sweeping the nation. 

June 6, 2016 in Current Affairs, In the News, True Contracts, Web/Tech | Permalink | Comments (1)

Wednesday, June 1, 2016

Settlement Agreements: On the Other Hand...

I just blogged about a settlement agreement that the court found unenforceable because there was no meeting of the minds. As always, these cases revolve around the particular circumstances, as an opposite conclusion in a recent case out of the Eastern District of Tennessee, Hira v. New York Life Insurance Company, No. 3:13-cv-527 (behind paywall), illustrates.

In that case, the attorneys had agreed on the basic terms of the settlement (money in exchange for a release and waiver). Defendant's counsel sent a draft agreement to plaintiffs' counsel, and over the next few months counsel continued to correspond about the agreement. Eventually, plaintiffs' counsel informed defendant's counsel that one of the plaintiffs had traveled to India, fallen "gravely ill," was in no state to sign any settlement agreement, and had left no power of attorney to permit anyone else to sign the settlement agreement on his behalf. Defendant asked the court to enforce the settlement agreement, notwithstanding plaintiff's lack of signature. 

And the court agreed. It found that there was no dispute regarding the settlement agreement and it did not matter that plaintiff had never signed the draft document. Therefore, the court ordered that the settlement agreement be enforced. 

June 1, 2016 in Recent Cases, True Contracts | Permalink | Comments (0)

Monday, May 30, 2016

Terms and Conditions: You Agree to What You've Agreed To

Watching terms and conditions litigations continue to play out is an interesting exercise. One of the things we learn is that the terms and conditions mean what they say, which should be obvious, but of course ignores the fact that basically nobody reads what they say. Consumers seem to be consistently caught off-guard by some of the terms. A recent Ninth Circuit decision, Geier v. M-Qube Inc., No. 13-36080, reinforces this (you can watch the oral argument here).

Geier sued m-Qube based on a mobile game it marketed called Bid and Win. m-Qube was not the provider of the game; rather m-Qube merely marketed the game. The other defendants in the case were all similarly removed from the actual content of the game, serving as "intermediaries" and "gateways." The game's actual content provider, Pow! Mobile, was not sued by Geier. 

The dispute in the case was over whether m-Qube and the other defendants were third-party beneficiaries of the terms and conditions of the game. Allegedly, when signing up for the game, subscribers, under the terms and conditions, waived all claims against Pow! Mobile's "suppliers." Despite this clause, Geier was attempting to sue m-Qube, et al., over text message abuses in violation of Washington law. (Geier, incidentally, was not alone in suing over this. A class action in the District of Nebraska was complaining about the same behavior.)

The Ninth Circuit's decision in this case is a matter of straightforward contract law: If you are an intended third-party beneficiary of the contract, you can enforce the contract. There is no real surprise there, except maybe to the consumer here, because it may sink Geier's entire case, which now hinges on whether m-Qube and the other defendants are Pow! Mobile's "suppliers." If they are, then they are intended third-party beneficiaries of the terms and conditions' waiver clause and can seek to enforce it. We may not be reading those terms and conditions, but we may be waiving lots of our rights nonetheless.  

May 30, 2016 in E-commerce, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (1)

Wednesday, May 25, 2016

No Implied Warranty of Fitness for a Particular Purpose With Regard to Architectural and Design Services in Michigan...for Now

A recent case out of the Court of Appeals of Michigan, Albion College v. Stockade Buildings Inc., No. 322917 (behind paywall), gives us an example of a case where precedent was obeyed but one of the judges worried the precedent might provide the wrong result, setting up the potential for further examination by Michigan's Supreme Court. 

Plaintiff hired Defendant to build an equestrian facility. Defendant allegedly informed Plaintiff that it had "the necessary experience and expertise" to build the facility that Plaintiff required and promised it would be backed by a warranty. 

Because this is a case I'm writing up here, we all know that the story of this equestrian center does not go smoothly. The roof leaked badly. The problem was evident during construction and theoretically repaired but the roof continued to leak badly even after construction was completed. Reviews of the structure blamed the persistent problem on poor design of the facility by Defendant. 

The crux of the case was whether the agreement between Plaintiff and Defendant contained an implied warranty of fitness for a particular purpose. In Michigan, such an implied warranty is found in sales of goods governed by the UCC and sales of electricity. The court was reluctant to extend such a warranty to the architectural and design services at issue here. 

A concurrence, however, expressed hesitation with the conclusion. While reasonably correct as a matter of simple legal precedent, the concurrence had policy concerns and thought that Michigan's supreme court should review the case and extend the warranty to this situation because of the "egregious facts" of this case.  Stay tuned for what happens next!

May 25, 2016 in Current Affairs, Recent Cases, True Contracts | Permalink | Comments (0)

Tuesday, May 24, 2016

How Bad Can a New Law Graduate’s Representation Be?

Pretty darned bad! Imagine this: A law student starts giving professional legal advice while still in law school. The advice is rendered to a 78-year-old Chinese-American with limited English skills and experience with the American legal system. The student renders the advice in person, over the phone, and in extensive e-mail exchanges. He even persuades the client to “assign” the lawsuit to the student so that the student would be “better able to control the suit and properly advise” the client. In doing so, the student promises to “minimize any legal costs to [the client] before [the student] getting [sic] his license by doing all the work he can carry on for said case.” The students subsequently graduates (from a California law school not accredited by the ABA, according to the website of the State Bar of California), passes the bar, and becomes the formally retained lawyer for the client.

The new graduate sues a party on behalf of his client. The graduate also names his own client on a lawsuit for an unrelated matter “only as a matter of legal procedure.” Additionally, the graduate sues his client’s defendants! The advice he renders is thought to be legally incorrect by a mediator. The client thus fires the graduate. The State Bar of California brings disciplinary proceedings against the new graduate for conflict of interest matters as well as the unauthorized practice of law. The graduate stipulates to the charges and is suspended for some time.  Trial is brought against the graduate by his former client for professional negligence, breach of fiduciary duty, unlawful business practice, breach of contract, and fraud. The client wins a judgment of $552,412.

You guessed it! The graduate does not pay. Rather, he appears in some subsequent judgment debtor proceedings, but disputes the court’s personal jurisdictions (that argument is waived once an appearance has been made, by the way). He submits briefs to the court misciting passages from outdated Matthew Bender Civil Procedure practice treaties. He refuses to produce tax returns to show his income. The court has to order him to do so. He goes bankrupt, and produces a “myriad” of inconsistent stories in the case. As the court said, “a few examples should suffice:

  • Yan testified he sold his membership in an LLC to two persons for $650,000, but could not remember their names.
  • Yan testified that his mother provided him checks, but could not remember: whether the checks numbered more than a hundred; when the most recent check was received; or when his mother last worked or her last job.
  • Yan testified that he was the sole support for his children, supported solely by his income, which for 2014 was “less than [$]10,000.” The support included rent, which included $8,400 in 2014, but he refused to provide the identity of the person to whom the rent was paid. Yan was asked the source of the money to pay his children's rent, and he said it was from his “income.” Asked if that was from legal fees, Yan said, “I don't know.”
  • Enough is enough.”

The monetary judgment against the graduate was affirmed. Years later, at least one other disciplinary matter has been brought against the graduate.

The question is: is this just one example of an unusually rotten apple? Or does this point to the assertion made by many that California really does not need a number of unaccredited law schools on top of the already large amount of ABA-accredited ones? (But note too that even the trial court record contains “no evidence of anything, only assertions as to what occurred, though [the plaintiff’s] assertions are supported by various exhibits” and not disputed by the defendant. There were, for example, “no reporter’s transcript, nor any real evidence – that is, sworn evidence….”

Comment below! The case Th is Charles Li v. Demas Yan, 2016 WL 1757283.

May 24, 2016 in Commentary, Contract Profs, Law Schools, True Contracts | Permalink | Comments (0)

Monday, May 23, 2016

Wait a Minute, George Zimmerman is Not a Man of His Words?

Is it unthinkable to you that George Zimmerman would seek to profit from killing Trayvon Martin? No? How about reneging on one contract if he were to get an even more lucrative one?

The latter has recently been shown to be the case. The former Florida neighborhood watchman who shot the unarmed teenager in 2012 has confirmed that he has accepted an auction bid for $250,000 for the gun with which he killed Mr. Martin. Before that, he had accepted a bid for $150,000 from a Florida bar owner for the same gun, but backed out of that deal when he got a better one. Says the bar owner, “I thought [Mr. Zimmerman] was a man of his word.”

The sale drew heavy criticism from people claiming that Mr. Zimmerman was seeking to profit from the sale. Gun rights advocates claim that Mr. Zimmerman is simply exercising his legal rights under the law.

Meanwhile, Mr. Zimmerman has displayed his apparent usual lack of social skills by accusing one gun auction website that refused to sell the gun of being “Nazi loving liberal liars Unknown” (Huh? How would that work?). At least he promises to give some of the proceeds of the sale to “fight Black Lives Matter violence against law enforcement officers”…

No further comments are needed for this story.

 

May 23, 2016 in Commentary, In the News, True Contracts | Permalink

From a Colonial Cemetery to a World War II Factory to Condos and a Spa: Environmental Concerns, Contract Releases, and Secret Underground Containers Are Just the Latest Chapter

North Jersey

(Photo from northjersey.com)

I use a lot of hypos in my class based on undiscovered buried containers of environmental hazards, and I feel like sometimes my students wonder if this is a thing that actually happens. Unfortunately, yes, as a recent case out of New Jersey, North River Mews Associates v. Alcoa Corp., Civil Action No. 14-8129, proves. 

The case centers around a piece of land on which Alcoa had operated a manufacturing facility from 1917 to 1968, a facility once so central to East Coast industry that it had actually been placed on the National Register of Historic Places. The piece of land had been vacant since 1978 and became a popular site for people looking to photograph "modern ruins." It was eventually sold to North River Mews Associates and 38 COAH Associates (the Plaintiffs). Twenty years ago, the New York Times reported optimistically that the development deal would be a "win-win" the would help clean up the Hudson River shoreline. The site, however, has been plagued by a number of challenges and tragedies (several fires, workman injuries from freak accidents, etc.) that have led some people to talk about curses. (Well, it apparently had been built on an old graveyard dating back to colonial times.) The latest obstacle has now emerged in the form of, yes, previously undiscovered buried containers of environmental hazards.  

The parties were well aware that the land would have environmental contamination, as the Times article makes clear. But the Plaintiffs had worked with the New Jersey Department of Environmental Protection and believed that the property had been remediated. In 2013, however, the Plaintiffs discovered two previously unknown underground storage tanks filled with hazardous materials. The property around the tanks seemed to indicate that at one point the tanks had attempted to be burned instead of properly disposed of. The presence of these tanks, needless to say, was never disclosed by Alcoa to the Plaintiffs. 

Alcoa's stance, however, is that the purchase contracts for the land released them from liability for various claims brought against them. The court disagreed at this motion to dismiss stage, finding that the language was ambiguous. The release in the contract stated that the Plaintiffs waived the rights "to seek contribution from [Alcoa] for any response costs or claims." The court said that it was unclear whether the contribution language modified only response costs or whether it modified both response costs and claims. Was this a blanket release of all claims, or only a release of the right to seek contribution? This question, the court concluded, could not be determined on a motion to dismiss. 

At any rate, the Plaintiffs also alleged that Alcoa concealed the presence of the underground tanks, fraudulently inducing them to enter into the contracts, and the court concluded that, if true, that would be grounds for the release to be vitiated. 

This case is a great example of how long environmental issues, development deals, and contractual disputes can drag on. In 1997, the parties signed the purchase contract. Today, the parties are still trying to clean up the site and fighting over which of them ought to pay for it, with language drafted twenty years ago taking center stage. As the case continues, it will of course likely become relevant who knew about the storage tanks and when, and I am curious to see if the tanks can be dated. Since Alcoa apparently ceased using the site for manufacture in the 1960s, it will be interesting to see how much knowledge from that time period still exists. It's the latest chapter in the history of a plot of land that seems to have been a busy place for centuries. 

May 23, 2016 in Commentary, Current Affairs, In the News, Recent Cases, True Contracts | Permalink | Comments (1)

Friday, May 20, 2016

Attempt to Pass on the Hot Potato Nixed

In a perhaps somewhat unsurprising but good holding, the Seventh Circuit has nixed a company’s attempt to not live up to its contractual promises regarding the technical functions and warranties of one of its products.

The plaintiff bought an industrial refrigeration system. The contract provided that if the system “does not meet the [contractually stipulated] requirements, defendants shall immediately, upon notice, replace or repair same or remedy any deficiency without expense to [plaintiffs].” When it came to living up to that promise, however, defendants produced a slew of other excuses for the problem such as installation errors, problems with the conditions at the facility where the system was installed, flawed wiring performed by other parties, etc.

The court found that even though defendant had presented evidence of a number of equally plausible causes, it had not provided proof that those alternative causes in fact caused the problem. Defendant, said the court, had promised to “meet requirements [sic] of plan and specifications.” Since the system did not work, defendants were liable for fixing the problem under the plain language of the contract.

It’s nice to see that at least some courts do not let contractual parties get away with such attempted, after-the-fact shirking of responsibility after the fact. A contractual promise is a promise. Surely, major industrial companies have internalized the costs of potentially having to do an odd repair here and there that they don’t believe is their fault (if that truly were the case here…). It’s somewhat amazing to see the lengths some companies will go to in order not to live up to their ends of the bargain. In this case, that attempt was nixed.

The case is Dual Temp of Illinois v. Hench Control, Inc., 2016 WL 2642030.

May 20, 2016 in True Contracts | Permalink | Comments (0)

Implied Warranties of Habitability on Houses Do Not Apply to Second Buyers If the First Buyers Waived Them

A recent case out of Illinois, Fattah v. Bim, Docket No. 119365 (behind paywall), allowed the court to clarify whether an initial home buyer's waiver of the implied warranty of the house's habitability applied to subsequent buyers, or whether the second purchaser of the house could nevertheless assert a breach of warranty claim against the builder of the home. The Supreme Court of Illinois concluded that a waiver of the warranty on the part of the first buyer eliminated the second buyer's ability to exert such a claim, overturning an appellate court decision that had sent reactionary ripples through the home-building blogosphere.

In 2005, Masterklad built a house that contained a brick patio. In 2007, Masterklad sold the house to Beth Lubeck. The sale of the house included a "Waiver and Disclaimer of Implied Warranty of Habitability" in which Lubeck "knowingly, voluntarily, fully and forever" waived the implied warranty of habitability that the State of Illinois reads into all contracts involving newly constructed houses. In exchange for the waiver of the implied warranty, Masterklad provided Lubeck with an express warranty on the house. The express warranty was limited to a one-year term. There was no allegation in the case that Lubeck's waiver of the implied warranty wasn't effective and enforceable, and there were also no allegations that Masterklad hadn't complied fully with the terms of the express warranty. 

In 2010, a couple of years after the expiration of Masterklad's express warranty on the house, Lubeck sold the house to John Fattah. The sale of the house stated that it was "as is." A few months later, the brick patio that Masterklad had installed collapsed. Fattah sued Masterklad, alleging that the patio had had latent defects that violated the implied warranty of habitability. 

At the trial court level, Fattah lost, with the court concluding that the policy that permitted knowing waivers of the implied warranty would be frustrated if subsequent buyers could resurrect the claims. The appellate court, as has been mentioned, reversed, though, finding that Fattah could assert breach of the implied warranty. 

Illinois' Supreme Court disagreed with the appellate court's decision. While Illinois has previously determined that the implied warranty extends to subsequent purchasers of a house where the first purchaser has not waived the warranty, this was a different situation: Fattah was seeking to recover damages that the first buyer would not have been entitled to. Allowing Fattah to do this alters Masterklad's risk exposure in an unfair way. Masterklad sought to manage its level of financial risk by providing an express warranty with a clear termination date, as it was permitted to do under Illinois precedent. It was unfair to switch everything up on Masterklad at this late date. In fact, allowing Fattah to bring this claim would effectively mean that the implied warranty of habitability could never be waived, as it could be resurrected by any subsequent buyer--which was the opposite of what Illinois had decided when it concluded that the implied warranty could be waived. 

The disagreements within the Illinois court system about this come down very explicitly to a policy decision. The appellate court seemed uneasy with waivers of the implied warranty because of public policy concerns, and one can see its point: You like to assume the houses you buy can generally be lived in. But the supreme court's point here also makes sense: If you buy a house "as is," you've usually gotten some kind of discount. If your gamble doesn't pay off, the courts are reluctant to revive arguments you bargained away. This might boil down to, much of the time, the maxim that a deal that seems too good to be true might, indeed, be untrue, and wariness should be employed.  

May 20, 2016 in Commentary, Recent Cases, True Contracts, Weblogs | Permalink | Comments (1)

Thursday, May 19, 2016

Settlement Agreements "in Principle" Are Not Enforceable Settlement Agreements

Negotiating a settlement can be a tricky business, with drafts going back and forth and language tweaking continually occurring. All of that document tweaking means that there's plenty of opportunity for the whole thing to fall apart, as a recent case out of Connecticut, AREH Windsor Locks, LLC v. Tops Markets, LLC, Docket Number HDSP172841 (behind paywall), reminds us. 

In the case, the parties had reached a settlement agreement "in principle," in the words used in an e-mail by one of the defendants' attorneys. The "in principle" language underlined the fact that, in fact, no true meeting of the minds had ever actually occurred. Defendants' attorneys' e-mails had warned of additional changes that would be made to the settlement agreement draft--even if those e-mails did characterize those changes as "a few" and "very minor." The last e-mail sent by defendants' attorneys before the agreement fell apart referred to the draft as "final" but explicitly noted that it was subject to the plaintiff's approval and that it needed the plaintiff's "green light." 

The court concluded that the defendants never received the requested "green light." So, although the defendants' attorneys seemed to view the agreement as "final," there had in fact never been a final agreement between the party. The defendants, it turns out, may have been counting the settlement chickens before they hatched. 

May 19, 2016 in Recent Cases, True Contracts | Permalink | Comments (0)