ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Friday, May 20, 2016

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)

Wednesday, February 10, 2016

Negligence Liability Releases, Delaware Planet Fitness Edition

 Planet Fitness, Revere, Massachusetts

On the subject of, again, releases for liability for negligence, a recent Delaware case, Ketler v. PFPA, LLC, No. 319 2015, examined one in the context of a Planet Fitness gym. The plaintiff was a member at Planet Fitness and had signed a membership agreement that contained a release for liability from negligence. The plaintiff was later injured while working out at Planet Fitness when the rowing machine he was using broke. He tired to argue that the release from liability for negligence was unenforceable. The court disagreed. 

Under Delaware law, a release is enforceable if it is unambiguous, not unconscionable, and not against public policy. Here, the language of the release was straightforward and unambiguous. Furthermore, the court found the release wasn't unconscionable. It was true that the plaintiff had no opportunity to negotiate the terms of the contract but that wasn't enough on its own to find unconscionability. The court noted that the plaintiff was free to not join Planet Fitness so the release wasn't unconscionable. Finally, the release wasn't against public policy because the Delaware legislature has never spoken on the issue of releases of liability and it is the legislature that establishes public policy. So the release was enforceable and the plaintiff's claims were barred. 

February 10, 2016 in Recent Cases, Sports, Weblogs | Permalink | Comments (0)

Friday, September 25, 2015

Private Law Blog on Fried's Contract as Promise 2.0

Yonathan Arbel has a post over on the New Private Law blog about the publication of the 2d edition of Charles Fried's classic Contract as Promise.  

The post is here.

The post also includes a video of a panel discussion on the publication, which is embedded below.

 

September 25, 2015 in Books, Conferences, Contract Profs, Weblogs | Permalink | Comments (0)

Friday, September 4, 2015

Martha Ertman at the Faculty Lounge

ErtmanI just noticed that Martha Ertman (pictured) will be a guest blogger at The Faculty Lounge.  As the introductory post notes,

Her new book is  Love’s Promises: How Formal & Informal Contracts Shape All Kinds of Families.  More broadly, she rights about the role of contracts in intimate relationships.   Here full cv is here

We look forward to seeking lots of great posts on contracts law in the Lounge.

September 4, 2015 in Contract Profs, Recent Scholarship, Weblogs | Permalink

Friday, June 5, 2015

Follow-up on Andermann v. Sprint Spectrum

We posted about this case last week.

It was an easy decision for Judge Posner; he granted Sprint's motion to compel arbitration without too much difficulty, leaving him time to ruminate more generally on the purposes of the Federal Arbitration Act.  We summarized his views as follows:

Having quickly dispensed with plaintiffs' opposition to the motion to compel arbitration, Judge Posner then focused his attention on Sprint's effusive celebration of arbitration provisions as "a darling of federal policy" (Judge Posner's wording).  Judge Posner emphasized that language encouraging judges to enforce arbitration clauses was a corrective to an era when judges disfavored arbitration.  The aim of federal policy is neither to favor nor disfavor arbitration but to compel arbitration when the parties have agreed to arbitrate claims.  Fortunately for Sprint, this case was, in Judge Posner's view, not a close call.

Judge Posner then when on to note Sprint's motives in challenging the denial for arbitration when, in Judge Posner's view, the Andermanns will lose on the merits wherever their claim is decided.  Judge Posner pointed out that Sprint wants to avoid class action litigation, which is prohibited under the applicable arbitration provision.  He also noted that without the class action option, the claim is unlikely to be brought at all.   Judge Posner then explained the absurd results that would follow from a finding that Sprint had violated the TCPA, thus effectively deciding a claim that the Seventh Circuit ruling will prevent from ever being brought, before catching himself and noting that the decision is really for the arbiter and limiting the Court's ruling to the instruction that the claim be sent to arbitration.

BagchiFordham Law Professor Aditi Bachi (pictured) now has a post up over at the New Private Law blog in which she uses Judge Posner's opinion as an occasion to ruminate on the need for a federal arbitration policy.  As she puts it:

Putting aside for the moment what stance federal courts should take (and which Congressional statutes might speak to the question), arbitration is too substantial a public policy issue for courts to approach these terms with ostensible neutrality.  In the absence of an articulated policy, we are likely to end up with courts that are in practice either friendly or hostile but march under the banner of neutrality.

We look forward to the ensuing policy debate, which is long past due.

June 5, 2015 in Commentary, Recent Cases, Weblogs | Permalink

Monday, May 25, 2015

Law School Interactive's New Podcast on Contracts Law

SnyderLaw School Interactive, which provides podcasts for various purposes relating to law school, has a new podcast up featuring Frank Snyder (pictured left), the Zeus from whose head this blog sprung, and two friends of the blog, Brian Bix and Steven Schooner.  It's always interesting to hear how colleagues introduce the topic of contracts law to prospective students.  You can find the podcast here.

Law School Interactive summarizes the podcast as follows (slightly edited):

Frank Snyder starts his comments by defining contract law and explaining it as an unusual part of the legal system, and speaks of its practical aspects and the importance of being attuned to the client’s needs. Professor Snyder finishes his comments by likening the practice of contract law to business advising. He mentions that those who are good business advisers will likely enjoy and do well with contract law. He also advises students to investigate all areas of legal practice that they are interested in to find the one they would like to specialize in.

Steven Schooner [right] Schoonerexplains that contract law is a very different law practice than the more common practice areas of criminal, tort, or defense law. He underscores the fact that there seems to be no gray areas when it comes to students and contract law: Students either consider the field fascinating, or they don’t. He says that if you find business and bargains interesting, contract law might be the practice for you—and a love of math and numbers helps too.

BixOur final guest, Brian Bix [left], talks about contract law’s connection with many other specialties. Although undergraduate courses will not teach you much about the intricacies of contract law, Professor Bix tells budding law school student not to worry—law school will definitely give you the tools you need to succeed in the field. He ends his advice by saying that to be successful in this practice of law, face-to-face interaction and conversational skill are definitely a necessity.

May 25, 2015 in Contract Profs, Weblogs | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 5, 2015

The Blogosphere Responds to Our Series on Legal Education

ScholarYesterday's post has inspired quite a bit of traffic here and elsewhere.  Over on Brian Leiter's Law School Reports, Michael Simkovic asks whether conditional scholarships are good for law students.  

Deborah Merritt responds on the Law School Cafe and answers the question in the negative.  She thinks conditional scholarships mostly help law schools, and they hurt students by creating a stressful competitive environment.

Michael Simkovic (again on Leiter) disagrees.  He argues that conditional scholarships motivate students to work hard in law school and cites to studies linking motivation and academic performance.

Deborah Merritt shoots back on the Law School Cafe.

And Michael Simkovic again responds on Leiter.  

It is hard for me to keep up with the pace at which these people blog.

I have only a few quick points to make in response to Professor Merritt, whose remarks are largely critical of the position I have taken here:

  • It seems we are all agreed that the disclosure problems related to conditional scholarships have largely been addressed through the ABA website that enables students to comparison shop among scholarship offers from various schools and know their chances of retaining their conditional scholarships.  Some law schools routinely offer a lot of merit scholarships in the first year knowing that most students will not retain them thereafter.  But that information is now easily available, and we will see if students vote with their feet against such a model.
  • Professor Merritt properly chastises me for treating Wikipedia's listing of normalization curves as authoritative.  I think Wikipedia is a good place to start, but my main point is that information about normalization curves should be readily available for each school a student is considering attending.
  • I find the absence of curves in undergraduate grading perplexing, and I find it astonishing that anybody would think non-curves are better than curves.  I could easily design an exam that all my students would ace (above 90% correct) and an exam that all my students would fail (below 60% correct).  But there is nothing holy about base ten, and my aim should not be to design a test so perfectly calibrated that the difference between a 91% and an 89% is meaningful but the difference between 86% and 84% is not.  My aim in assessment is, among other things, to have a tool that helps me distinguish within a group of students who have had the same educational experience.  A curve helps me do that better than random divisions at every point at which the score passes a 0.  
  • Professor Merritt points to a study in which the J.D. placed only sixth in a  ranking of the best graduate degrees.  As if that were a bad thing!  Three of the degrees that ranked more highly are Ph.D. programs likely to take twice as long as the J.D. and the others likely require higher math or computer programming skills.  This extremely high ranking for the J.D. is terrific news.  By the way, the MBA, a frequent alternative to the J.D., ranked 14th.
  • Professor Merritt tells an anecdote about a student who decided not to pursue a J.D. when she learned of conditional scholarships.  She decided to take her graduate tuition dollars elsewhere, but where?  Unless she earned a Ph.D. in statistics, computer science or physics, or a Masters Degree in human computer interaction or  biostatistics, according to the study cited by Professor Merritt, she made a poor choice.

Professor Merritt's second post turns on an anecdote about teaching the same course (torts) the same way to different students and getting very different results.  As a consequence, she had to give students in the "smart section" who did better on the exam worse grades than some students who did worse on the exam in the weaker section.  Three thoughts:

First, one cannot step into the same river twice.  One semester when I taught history at the College of Charleston in the 1990s, I had four sections of Western Civ., all on a Tuesday/Thursday schedule (they were long days!).  Same readings, same outside materials, same assignments, same lecture notes.  Each section developed its own identity.  They were four different courses.

Second, in fifteen years of teaching at both the college and law school level, I have never had a similar problem.  An anecdote is not an argument.  No system of grading is perfect, and I can live with small injustices around the edges of grade normalization.  Whether or not a student retains a conditional scholarship is not determined by her performance in any one course.  

Third, consider the insight of Professor Merritt's plucky college student who decided against a J.D.  Knowing only undergraduate education, the student remarked, “It’s not like there’s a quota on the number of A’s or anything.”  In that world, the undergraduate professor gives A's to all of the students in the "smart section" who "earned" them according to some mysterious but fixed standard.  Outside of the STEM courses, the undergraduate professor can also give As to the best students in the weaker section, even though the same performance would have earned them a B in the "smart section."  Within the STEM courses, imagine the stampede of angry pre-med students from the weaker section who will decry the injustice that there were no A's in their section but eight in the other. I pity the department chair who has to sort out that mess.

Links to Related Posts:

The Current Series 

XI:Another Transparency Issue: Conditional Merit-Based Scholarships
X: Siloing: The Next Unneeded Import from Undergraduate Education
IX: Legal Education in the News and on the Blogosphere
VIII: Myanna Dellinger, Caveat Emptor and Law School Transparency
VII: Myanna Dellinger, On Issue-Spotting and Hiding the Ball
VI: Issue Spotting: A Response to a Comment
V: Did Legal Education Take a Wrong Turn in Separating Skills and Doctrine?
IV: What Is the Place of Core Doctrinal Teaching and Scholarship in the New Curriculum?
III: My Advice to Law School Transparency: Declare Victory and Move On
II: SLOs and Why I Hide the Ball (and Why You Don't Have To)
I: Why Is the Legal Academy Incapable of Standing Up for Itself? 

Related Posts form 2012:

Thoughts on Curricular Reform VI: Preparing the Academically Adrift for Practice
Thoughts on Curricular Reform V: A Coordinated Curriculum and Academic Freedom
Thoughts on Curricular Reform IV: The Place of Scholarship in the 21st Century Legal Academy
Thoughts On Curricular Reform III: The Costs of Change
Thoughts on Curricular Reform II: Teaching Materials
Thoughts on Curricular Reform I: The Problem

May 5, 2015 in Commentary, Teaching, Weblogs | Permalink | Comments (11) | TrackBack (0)

Welcome to the Blogosphere to New Private Law

GoldbergJohn Goldberg (right top) and Henry Smith (right bottom) have launched a new law blog: New Private Law.

Contributors include:

Aditi Bagchi
Shyam Balganesh
Janet Freilich
Andrew Gold
John Golden
Keith Hylton
Daniel Kelly
Greg Klass
SmithDaniel Markovitz
Tom Merrill
Anthony Sebok
Ted Sichelman
Benjamin Zipursky

You can read the introductory post here.

It's quite a line-up!  We look forward to some interesting posts.

May 5, 2015 in Weblogs | Permalink | TrackBack (0)

Tuesday, April 28, 2015

Legal Education in the News and on the Blogosphere

I began this series with the question: Why Is the Legal Academy Incapable of Standing Up for Itself?  Paul Campos thinks we are doing far too much of that, going so far as to compare those of us who think legal education is worth defending with Holocaust deniers.   Fortunately for us, I suppose, this blog isn't on anybody's radar, but in any case I think it bears noting that I value the contributions of people who have shed critical light on legal education, although I don't agree that it is anything approaching a scam.  I have gained valuable insights from the work of Law School Transparency, Brian Tamanaha, Deborah Merritt, and Bill Henderson on our sister blog, The Legal Whiteboard, among others.

That said, there is another side of the story.  Legal education is constantly re-forming itself in fundamental ways.  Clinical education has only been with us since the 70s; legal writing programs took off in a major way in the 80s and 90s.  Both represent fundamental shifts in pedagogy in response to perceived deficits in the legal education model.  Those programs continue to develop and expand, now supplemented with robust ASP programs.  All of these things jack up the costs of legal education and all in the name of better preparing students for the profession.  Nobody is fiddling while our students burn.  In fact, at this point, it is clear that everybody in the debate passionately believes that they have the best interests of our students at heart, and I do not doubt their sincerity.  

Meanwhile, just when you thought it was safe to read what the New York Times has to say about legal education, we get another one-sided piece based on a few anecdotes and one piece of scholarship.  I thought I had a lot to say in response, but others have beaten me to it, so I will just provide the links:

Simkovic on Leiter

Stephen Diamond on his own blog

Brian Galle on Prawfsblawg

Deborah Merritt, on whose scholarship the piece relies, on The Law School Cafe 

Links to Related Posts:

The Current Series 

VIII: Myanna Dellinger, Caveat Emptor and Law School Transparency
VII: Myanna Dellinger, On Issue-Spotting and Hiding the Ball
VI: Issue Spotting: A Response to a Comment
V: Did Legal Education Take a Wrong Turn in Separating Skills and Doctrine?
IV: What Is the Place of Core Doctrinal Teaching and Scholarship in the New Curriculum?
III: My Advice to Law School Transparency: Declare Victory and Move On
II: SLOs and Why I Hide the Ball (and Why You Don't Have To)
I: Why Is the Legal Academy Incapable of Standing Up for Itself?

Related Posts form 2012:

Thoughts on Curricular Reform VI: Preparing the Academically Adrift for Practice
Thoughts on Curricular Reform V: A Coordinated Curriculum and Academic Freedom
Thoughts on Curricular Reform IV: The Place of Scholarship in the 21st Century Legal Academy
Thoughts On Curricular Reform III: The Costs of Change
Thoughts on Curricular Reform II: Teaching Materials
Thoughts on Curricular Reform I: The Problem

April 28, 2015 in About this Blog, Commentary, In the News, Law Schools, Teaching, Weblogs | Permalink | Comments (0) | TrackBack (0)

Thursday, February 12, 2015

Bar Prep Teaching

This year, I am teaching a bar preparation course on contracts, which is being offered for the first time at my Law School.  This is a lot of fun for me -- I like teaching contracts both semesters because it keeps my mind more focused on the subject.  It's also fun to teach the material in a different way -- no cases, as some familiarity with the case law is assumed at this point, so I just give mini refresher lectures and then move on to the homework assignment.

So it's fun, but it's also a lot of work.  I give my students four multiple choice questions each day, and they have to turn in their answers -- explaining why the right answer is wrong and the wrong answers are wrong.  The idea is to both solidify their understanding of the doctrine and alert them to the strategy behind bar exam "distractors" -- that is, wrong answers that are trying to trick students into mistaking them for correct answers.  Most days, they also have to write a short essay, designed to be akin to MEE questions.  

Because I am teaching such a course myself, I read with some interest David Frakt's recent post on The Faculty Lounge on the value of in-house bar prep courses.  But I was taken aback by the comments.  The anonymous or pseudonymous commentators asked the following rhetorical questions:

  • Does bar prep make students better lawyers?
  • What good is passing the bar when there are no jobs for lawyers anyway?
  • Don't law schools have an obligation to refrain from flooding the market with unemployable lawyers?

I think this is a case of massive anger that is massively misdirected.  Students are in law school.  They want to stay in law school and they want to become lawyers.  I have met with many students facing dismissal from my Law School for poor academic performance.  The ones I have spoken to all are willing to do whatever it takes to stay in, and they are furious with us when we dismiss them.  So we put the time and the energy into bar prep courses because it is what our students need.  Some of them need it because they won't do the work without the additional kick in the pants.  Others need it because they have many natural gifts that will make them great lawyers, but excelling at standardized tests is not one of them.  We are trying to get them over that hurdle so that they can have the careers for which they are otherwise qualified.

I certainly understand the anger of the unemployed law students.  I was an unemployed Ph.D. before I went to law school.  I know what professional devastation feels like.  It seems like the "Law School Scam" crowd thinks the solution is to just shut law schools like the one I teach at.  But how would throwing me, my colleagues, and our support staff out of work improve the situation?  It certainly would not improve things for the students we serve, most of whom pass the bar, find work, and do better than they would have done without their degrees.  Law school opened for me a range of career options that would have been completely unthinkable without my J.D.  Why should that opportunity be denied to the current generation of potential law students?

February 12, 2015 in Commentary, Teaching, Weblogs | Permalink | Comments (0) | TrackBack (0)

Monday, November 24, 2014

Blogosphere Debate on "Whimsy Little Contracts"

SovernFriend of the blog Jeff Sovern, and his co-authors are creating quite a stir with their article that has been topping the charts on SSRN, 'Whimsy Little Contracts' with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements.

You can follow the discussion in the blogosphere at these sites:

Alan S. Kaplinsky and Mark J. Levin start things off  on Ballard Spahr's CFPB Monitor.  They make two main points.  First,  arbitration language  is generally quite easy to understand.  Second, it does not matter whether or not consumers know what they are getting into when they enter into a credit card agreement with an arbitartion clause if consumer arbitration is actually good for consumers.

Jeff Sovern responds on the Consumer Law and Policy blog to a number of the CFPB Monitor points, but on the main question of whether or not consumers benefit from arbitration, he concedes that the study did not attempt to answer that question  Rather, the point is that the basis for such arbitration is consent, and his study shows that consumers do not give meaningful consent to arbitration.

On the ADR Prof Blog, Sovern's co-author Paul Kirgis has a short response, the substance of which is as follows:

Levin and Kaplinsky don’t actually address the core problem we address in our article–that citizens are being unwittingly and unwillingly forced to give up important (and constitutionally guaranteed) procedural rights. Their point–and it is the point arbitration advocates almost invariably make–is that arbitration can be better for consumers than litigation. That may very well be true, at least some of the time. (See my post on the benefits of limited consumer arbitration here.) But it doesn’t answer the right question.

Kaplinsky and Levin have filed their response on Ballard Spahr's CFPB Monitor. They reiterate their argument, citing numerous court opinions, that arbitration clauses can be readily understood by consumers.  They remind readers that the purpose of the Federal Arbitration Act was to prevent courts from treating arbitration agreements differently from other agreements.  An arbitration clause in an otherwise enforceable agreement ought to be enforceable just as any other term in the agreemnt would be.

My questions in these debates are always the same.  If arbitration clasues are potentially beneficial to consumers, why make them mandatory?  Provide for arbitration as an option and make clear that if a consumer chooses to arbitrate, she cannot also sue.  In addition, what of class action waivers, which now often accompany arbitration provisions?  Kaplinsky and Levin claim that some studies show that plaintiffs do better off in individual arbitrations than they do in class actions, but I don't know how studies could show that since (so the argument goes), in some cases plaintiffs won't file claims at all unless they can do so through class actions.

November 24, 2014 in Commentary, Recent Scholarship, Weblogs | Permalink | Comments (1) | TrackBack (0)

Thursday, October 2, 2014

Moving at the Speed of Facebook to Improve Experimentation on Consumers

As we learned from reading Michelle Meyer on The Faculty Lounge today, Facebook has issued a Press Release on Research at Facebook.  As we discussed previously here, Internet-based companies have decided that they will self-regulate their own research programs.  Here are the highlights:

  • The_Anatomy_LessonGuidelines: we’ve given researchers clearer guidelines. If proposed work is focused on studying particular groups or populations (such as people of a certain age) or if it relates to content that may be considered deeply personal (such as emotions) it will go through an enhanced review process before research can begin. The guidelines also require further review if the work involves a collaboration with someone in the academic community.
  • Review: we’ve created a panel including our most senior subject-area researchers, along with people from our engineering, research, legal, privacy and policy teams, that will review projects falling within these guidelines. This is in addition to our existing privacy cross-functional review for products and research.
  • Training: we’ve incorporated education on our research practices into Facebook’s six-week training program, called bootcamp, that new engineers go through, as well as training for others doing research. We’ll also include a section on research in the annual privacy and security training that is required of everyone at Facebook.
  • Research website: our published academic research is now available at a single location and will be updated regularly.

Based on the New York Times article we cited in our last post on this subject, we hoped that Internet companies would at least subject research designs to outside review.  It looks like Facebook's review process is going to be entirely in-house.  

October 2, 2014 in Commentary, Web/Tech, Weblogs | Permalink | TrackBack (0)

Thursday, September 25, 2014

Cross Post from Legally Speaking Ohio on Specific Performance of an Employment Agreement

BettmanThis is a edited version of a longer post from the Legally Speaking Ohio blog, written by Marianna Brown Bettman (pictured), a law professor at the University of Cincinnati College of Law, where she teaches torts, legal ethics, and a seminar on the Supreme Court of Ohio.  She is also a former Ohio state court of appeals judge.  

Professor Bettman's full blog post can be found here.

Cedar Fair, L.P. v. Falfas

Case Background

Jacob Falfas worked continuously for Cedar Fair for nearly thirty five years. In 2005 he was promoted to Chief Operating Officer, pursuant to a written employment agreement. Falfas reported directly to Richard Kinzel, Cedar Fair’s Board Chair, President, and CEO.

In June of 2010 Falfas became aware of Kinzel’s dissatisfaction with certain aspects of his work. The two men had a 94 second telephone call on June 10, 2010. It is undisputed that after this phone call, Falfas’ employment with the company ended, but Kinzel believed that Falfas had quit, and Falfas believed he had been fired.

Arbitration

The employment agreement between the parties contained a binding arbitration provision. The parties arbitrated their dispute, resulting in a finding that Falfas had not resigned, but was terminated for reasons other than cause. The arbitrators found that equitable relief was needed to restore the parties to the positions they held prior to the breach of the employment agreement, and ordered Cedar Fair to reinstate Falfas to his former position.

Judicial Review of Arbitration Award

On appeal to the Erie County Common Pleas Court, the trial judge found that the arbitration panel’s order of reinstatement exceeded its authority under the employment agreement.  The Sixth District Court of Appeals reversed, finding that the trial court erred in refusing to order reinstatement.

Executive Summary

Specific performance is not a remedy in this breach of an employment agreement case.

Arbitration Fundamentals

An arbitrator’s authority to interpret a contract is drawn from the contract itself. The statutory authority of courts to vacate an arbitrator’s award is very limited. Arbitrators act within their authority to craft a remedy as long as the award “draws its essence” from the contract, but an award departs from the essence of a contract when the award conflicts with the express terms of the agreement or cannot rationally be supported by the terms of the agreement.

In this case the court found that the arbitration panel exceeded its powers in ordering Cedar Fair to reinstate Falfas.

Case Syllabus

Specific performance is not an available remedy for breach of an employment contract unless it is explicitly provided for in the contract or by an applicable statute. (Masetta v. Natl. Bronze & Aluminum Foundry Co., 159 Ohio St. 306, 112 N.E.2d 15 (1953), applied.)

September 25, 2014 in Recent Cases, Weblogs | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 23, 2014

Planet Money Episode 570: The Fine Print

38108_logo
The folks over at NPR's PlanetMoney have a new episode titled "The Fine Print." And it delivers!  By their description:

On today's show, we read our homeowners insurance policy.

The details are amazing. Lava! Vermin! Falling objects! And, hiding in all the fine print, the story of how insurance works — and what makes it break.

The episode happens to have relevance to our ongoing symposium and even features a conversation with Daniel Schwarcz, one of the symposium contributors.  If you listen, you'll hear Prof. Schwarcz admit that, to be sexy, insurance law might just need a little airbrushing.

Definitely worth listening - Enjoy!

September 23, 2014 in In the News, Miscellaneous, Teaching, Weblogs | Permalink | Comments (0) | TrackBack (0)

Thursday, August 21, 2014

Contracts and the Case of Steven Salaita

A lot of ink has been spilled over this subject, and I don't have much to add, except to note that I have not seen a very many good discussions of the contract issues.  

The very short version of the story, as best I can cobble it together from blog posts, is that the University of Illinois offered a position in its American Indian Studies program to Steven Salaita, who had previously been teaching at Virginia Tech.  According to this article in the Chicago Tribune, the U of I sent Professor Salaita an offer letter, which he signed and returned in October 2013.  Professor Salaita was informed that his appointment was subject to approval by the U of I's Board of Trustees, but everyone understood that to be pro forma.  In August 2014, Salaita the U of I Chancellor notified Professor Salaita that his appointment would not be presented to the Board and that he was no longer a candidate for a position.  According to the Tribune, the Board next meets in September, after Professor Salaita's employment would have begun.  The Chancellor apparently decided not to present Professor Salaita's contract for approval because of his extensive tweets on the Isreali-Palestinian conflict, which may or may not be anti-Semitic, depending on how one reads them.  

The main argument in the blogosphere is over whether or not the U of I's conduct is a violation of academic freedom. But there is also a secondary argument over whether Professor Salaita has a breach of  contract of promissory estoppel claim against the U of I.  The list of impressive posts and letters on the whole Salaita incident include:

Michael Dorf on Verdict: Legal Analysis and Commentary from Justia

Katherine Franke, et al. in a letter to the U of I Chancellor

Brian Leiter commenting on the Franke letter on Brian Leiter's Law School Reports

Michael Rothberg, in a letter to the U of I Chancellor

Steven Lubet at The Faculty Lounge here and here

Jonathan Adler on the Volokh Conspiracy here, here and here

Finally, Dave Hoffman stepped in on Concurring Opinions to address the promissory estoppel issues  and then answers Michael Dorf's response 

Hoffman makes strong arguments that there was no breach of contract here, because the offer was clearly conditional on Board approval.  There are arguments that the promise breached was a failure to present Salaita's employment to the Board, but the remedy for that breach would simply be presentment, at which point both the claim and the appointment would go away (unless U of I has a change of heart on the matter).  

We would have to know more about the process to make a more educated guess about whether or not a breach of contract claim here could succeed.  I think it is relevant that, at the point Salaita was informed that the offer was rescinded, the Board could not meet before his employment would have begun.  I suspect that his courses were already scheduled and that students had, at least provisionally, registered for them.  I wonder if there were any announcements on the U of I website crowing about their recent hires.  All of this would be relevant, it seems to me, to the state of mind of the parties regarding whether or not a contract had been made.  It would be very sad for all of us in academia if it turned out to be the case that our offer letters mean nothing until the Board has spoken, as acceptance of a position usually involves major life changes, including giving notice at current jobs, moving to a new city, selling and buying a residence, etc.

I have no doubt that Dave Hoffman is right that promissory estoppel claims rarely succeed.  I do think that some versions of the facts presented here suggest that this one might be a winner nonetheless or, as Hoffman suggests, is the kind of claim that is worth bringing at least in order to make the threat of discovery on the subject a strong inducement to the U of I to settle the case.  But the remedy for promissory estoppel is probably not really the remedy Salaita seeks.  

Professor Salaita's claims -- his academic freedom and constitutional claims -- go beyond the issues of contract and promissory estoppel.  A lot has been written on this situation, and I haven't had a chance to read everything carefully, but I have yet to see a clear discussion of whether those claims hinge on Professor Salaita's contractual claims.  It seems likely to me that if he had no contract, then he had no free speech or academic freedom rights vis a vis the U of I.  And I don't think a promissory estoppel claim would get him such protections either.  Or do people think that universities have a generalizable erga omnes duty to protect academic freedom?

ADDENDUM

Dave Hoffman has an additional post up on Concurring Opinions here.  

August 21, 2014 in Conferences, Contract Profs, In the News, Weblogs | Permalink | Comments (1) | TrackBack (0)

Monday, August 11, 2014

Presidential Executive Order Refuses Government Contracts to Companies that Mandate Employee Arbitration

This informative post from Jean Sternlight (via Art Hinshaw) over at ADR Prof Blog:

President Obama today signed a new Fair Pay and Safe Workplaces Executive Order refusing to grant government contracts of over a million dollars to companies who mandate their employees arbitrate disputes involving discrimination, accusations of sexual assault, or harassment.  This new order mirrors protections Congress already provided to employees of Defense Department contractors in 2011 in the so-called “Franken amendment.” The order also requires prospective federal contractors to disclose prior labor law violations and will instruct agencies not to do business with egregious violators.

While the executive order is limited in its scope (only protects employees who work for companies with large government contracts and only applies to arbitration of certain kid of claims), it is a step toward the Arbitration Fairness Act, which would prohibit mandatory arbitration more braodly.  More here.  

August 11, 2014 in In the News, Legislation, Weblogs | Permalink | Comments (0) | TrackBack (0)

Thursday, July 24, 2014

The ContractsProf Blog Welcomes Mirror of Justice to the LPBN Family

LPBNAs Blog Emperor Paul Caron announced here on the Mother of All Blawgs, the TaxProf Blog, Mirror of Justice, a blog dedicated to the development of Catholic legal theory edited by Rick Garnett (Notre Dame) and 19 other prominent law professors of faith, has joined the Law Professor Blogs Network.  

Rick Garnett announced the move on MoJ here.

We are delighted to welcome this well-established and tremendously interesting blog to the LPBN family, and we marvel at Paul's remarkably expanding empire.

July 24, 2014 in About this Blog, Weblogs | Permalink | TrackBack (0)

Monday, July 21, 2014

Supreme Court of Ohio Rules in Condition Precedent Case

BettmanThis is a edited version of a longer post from the Legally Speaking Ohio blog, written by Marianna Brown Bettman (pictured), a law professor at the University of Cincinnati College of Law, where she teaches torts, legal ethics, and a seminar on the Supreme Court of Ohio.  She is also a former Ohio state court of appeals judge.  

Professor Bettman's full blog post can be found here.

On July 17, 2014, the Supreme Court of Ohio handed down a merit decision in Transtar Elec., Inc. v. A.E.M. Elec. Servs. Corp.Slip Opinion No. 2014-Ohio-3095. In a 5-2 opinion authored by Justice Kennedy, the Court held that a contract for work performed by a subcontractor for a general contractor which contains a provision that payment by the project owner to the general contractor is a condition precedent to payment by the general contractor to the sub is a pay-if-paid provision. Such a provision clearly and unequivocally shows the intent of the parties to transfer the risk of the owner’s nonpayment from the general contractor to the subcontractor.  Justice O’Neill dissented, for himself and Justice Pfeifer.  The case was argued November 5, 2013.

Case Background

A.E.M was the general contractor on the construction of a swimming pool at a Holiday Inn. A.E.M. entered into a subcontract with Transtar to perform electrical work on the project. Transtar fully performed the work under the contract, and was paid $142,620. A.E.M. did not pay Transtar the remaining balance of $44,088 because A.E.M. contended the owner failed to pay it for Transtar’s work.

Section 4 of the subcontracting agreement included this provision, which was in bold and in capital letters: “Receipt of payment by contractor from the owner for work performed by subcontractor is a condition precedent to payment by contractor to subcontractor for that work.”

. . .

Analysis of Merit Decision

Definitions: Pay-when-Paid versus Pay-if-Paid

The Court explains there are two types of contract provisions between general and subcontractors.  A pay-when-paid provision is one in which a general contractor makes an unconditional promise to pay the subcontractor, within a reasonable period of time to allow the general contractor to be paid.  A pay-when-paid provision is not affected by the owner’s nonpayment.

By contrast, a pay-if-paid provision is a conditional promise to pay that is enforceable only if a condition precedent has occurred.  Under this type of contract, the general contractor is only required to pay the subcontractor if the owner pays the general contractor.  Under a pay-if-paid contract, the risk of the owner’s nonpayment is shifted to the subcontractor.

The issue in the case is which kind of contract provision was this one? Short answer: pay-if-paid.

. . .

Application of the Rule to the Contract in this Case

The Court held that Section 4 of the contract between A.E.M. and Transfer is a pay-if-paid provision, and clearly and unequivocally shows that the parties intended to transfer the risk of the owner’s nonpayment from A.E.M. to Transtar.

Conclusion

The court of appeals is reversed and the judgment of the trial court granting summary judgment to A.E.M. is reinstated.

Dissent

Justice O’Neill, joined by Justice Pfeifer in dissent, would find the language in this particular contract inadequate as a matter of law to transfer the risk of nonpayment by the owner from A.E.M. to Transtar.  He would find the ambiguities in the wording create genuine issues of material fact that make summary judgment inappropriate.

 . . .

July 21, 2014 in Recent Cases, Weblogs | Permalink | Comments (0) | TrackBack (0)

Monday, July 7, 2014

23andMe's Wrap Contracts

H/T to Eric Goldman for sharing with the list a new case from Judge Lucy Koh of the federal district court of Northern California.  Tompkins v. 23andMe provides a detailed analysis of 23andMe's wrap contracts.  The case involves the same Terms of Service presented as a hyperlink at the bottom of the website's pages, and then later, post-purchase and at the time of account creation, as a hyperlink that requires a "click" in order to proceed (which I refer to as a "multi-wrap" as it's neither browsewrap nor clickwrap but a little of both).  The court says the former presentation lacks notice, but the latter constitutes adequate formation.  Eric Goldman provides a detailed analysis of the case here.  

Not surprisingly, the Terms contained a unilateral modification clause which was briefly discussed in the context of substantive  unconscionability.  It was not, however, raised as a defense to formation, i.e. to argue that the promises made by 23andme were illusory.  

July 7, 2014 in Commentary, E-commerce, Famous Cases, Miscellaneous, Web/Tech, Weblogs | Permalink | Comments (0) | TrackBack (0)

Friday, July 4, 2014

Follow-up on Nancy Kim's Post about Facebook's Creepy Experiment

Michelle-meyerMichelle Meyer (pictured) has a very detailed post on this subject over at The Faculty Lounge.  Her approach is different from Nancy's, focusing narrowly (but thoroughly) on the question of whether an Institutional Review Board (IRB) could have approved the FB experiment. There Meyer arrives at a different conclusion than I think Nancy would arrive at.  Meyer thinks an IRB could have and should have approved the FB experiment based on informed consent (although she recognizes that one could dispute whether such consent was actually present), and Nancy, I think correctly, questions whether there are very strong arguments that FB users knowingly agreed to this kind of experiment when they agreed to FB's terms.  

July 4, 2014 in About this Blog, Web/Tech, Weblogs | Permalink | Comments (2) | TrackBack (0)