Wednesday, January 16, 2013
This is the second in a series of posts on issues that arise in a Sales course.
As Holly K. Towle lays it out in, Enough Already: It Is Time to Acknowledge that UCC Article 2 Does not Apply to Software and Other Information, 52 S. Tex. L. Rev. 531 (2011), many courts simply apply Article 2 to software licenses without much consideration of the law of licenses Others apply the law of licenses, which she thinks is appropriate. Her approach makes sense when we're talking about mass-marketed software provided to consumers through licenses. In fact, courts ought to take notice of the fact that all U.S. jursdictions have now clarified the status of software as a "general intangible" and not a good through the revisions to UCC Article 9 adopted in all fifty states.
But what of custom-made software that may not be licensed but sold to the client who will be its exclusive user? My impression from the limited caselaw I have reviewed on the subject suggests that courts recognized early on that software consists of both tangible and intangible elements. They seem to have assumed that the intangible elements (the services provided in developing software, for example) could be easily separated from the tangible elements (the disks, drives or hardware associated with the delivery of the software). On this line of reasoning, only the latter are goods. That distinction strikes me as artificial. Unless the deal involves a lot of hardware, the cost of the "goods" is trivial compared to the costs of software development, and in fact, with digital downloads and cloud computing, there may not be a good at issue at all. That is, my office used to be cluttered with the boxes that held the disks on which my software came to me. I may have naively thought of software as a good then because those boxes made software look like a good. Now, my software either comes pre-loaded or I download it without the aid of a disk or external drive. Now it looks much less good-like, but of course, how it looks should not matter.
Towle draws on IP law to argue that software is really "information" and information ought to be treated differently from tangible goods. I'm not sure I understand why that distinction matters if we are dealing with a sale rather than a license. A lot of things that we consider goods are really just information, in the sense that Towle uses it. Books are just information, but a sale of books is a sale of goods (although she is correct that you cannot return a lousy novel based on a breach of the implied warranty of merchantability). There are lots of other items that we buy about which is could be said that the costs of development constitute a large part of the costs of the good, but the UCC does not ask about cost breakdowns; it just asks if the subject of the transaction is moveable at the time that it is identified to the contract. Electricity has been held to be a good because it moves. So does information. More particularly, custom-made software, White & Summers point out, does not really seem much different from any other specially-manufactured good, which the UCC treats as a good for the purposes of Article 2.
I recommend Towle's article. She has persuaded me that courts err in trying to apply Article 2 to software licensing transactions, but when it comes to custom-designed software that is actually sold, rather than licensed, to the end user, I think a strong case can be made for applying Article 2.
I do not know if the software design companies agree to flat out sell the software they develop. It might be safer for them to license it so that they can re-use the code for other businesses that might need similar software designed for their specific needs. If that's the way these deals are done, it follows from Towle's reasoning that licensing law, rather than Article 2 should apply to those transactions as well.
Wednesday, December 19, 2012
Stop me if you've heard this one before - Facebook changes its Terms in a way that its users find offensive and invasive of their privacy. Uproar ensues and Facebook promises that the changes are harmless and everyone is just overreacting. Facebook backs off, a little, and then pushes the boundaries a little further next time, regaining even more ground against its users. Sound familiar?
I think the public backlash is a very good thing since it reminds companies that there are at least some people who are reading their online agreements. Unfortunately, they are usually only reading the terms of companies that already have a monopoly in the marketplace. It's not easy for unhappy Facebookers, Googlers or Instagramers to pick up their content and go elsewhere - where would they go?
What makes my skin crawl, however, is the misleading reassurances doled out by companies when they are called on their online agreements. Instagram, for example, states on its blog that users shouldn't fear, because it respects them, really it does:"Instagram users own their content and Instagram does not claim any ownership rights over your photos. Nothing about this has changed. We respect that there are creative artists and hobbyists alike that pour their heart into creating beautiful photos, and we respect that your photos are your photos. Period.
I always want you to feel comfortable sharing your photos on Instagram and we will always work hard to foster and respect our community and go out of our way to support its rights."
While it may be true that Instagram users own their content, Instagram does take a pretty broad license from its users:
As Instagram knows, it doesn't need to own your content in order to use it as if it owned it. All it needs is a broad license, like the one it has. Note that it has the right to "use" the content - and doesn't define what that means or restrict that use very much.
- "provide personalized content and information to you and others, which could include online ads or other forms of marketing
- provide, improve, test, and monitor the effectiveness of our Service
- develop and test new products and features
- monitor metrics such as total number of visitors, traffic, and demographic patterns"
I found this sentence particularly sneaky:
"We will not rent or sell your information to third parties outside Instagram (or the group of companies of which Instagram is a part) without your consent, except as noted in this Policy"
Did you like the "except as noted in this Policy" ? And, as Contracts profs know, "consent" means something other than what a layperson might think - it can mean just using a website in many cases. There is similar broad language here:
"We may also share certain information such as cookie data with third-party advertising partners. This information would allow third-party ad networks to, among other things, deliver targeted advertisements that they believe will be of most interest to you."
I'm not as concerned about the targeted advertisements (which doesn't mean I'm not concerned at all) as I am about the "such as" and "among other things."
And remember, the Terms do expressly state:
"Some or all of the Service may be supported by advertising revenue. To help us deliver interesting paid or sponsored content or promotions, you agree that a business or other entity may pay us to display your username, likeness, photos (along with any associated metadata), and/or actions you take, in connection with paid or sponsored content or promotions, without any compensation to you."
The company reassures its users, on its blog that it is not their "intention" to "sell" user photos. The company says it is working on language to make that clear. Let's hope so, but my guess is that they are probably going to use more mealy language like "at the moment" or "sell as a good defined under the UCC," or something that leaves wide open the possibility that it can make money off user photos by selling them to third party advertisers.
I'd suggest you save Granny some embarrassment and delete that photo now.
Monday, November 19, 2012
The Independent reports here that Adrian Smith, who was stripped of his managerial post with the Trafford Housing Trust (the Trust), won his breach of contract claim against his employer. London's High Court found that Mr. Smith had not engaged in "gross miconduct" by posting on this Facebook page his view that gay marriages in the church were "an equality too far." However, the High Court awarded Mr. Smith less than £100 on his breach of contract claim, despite the fact that his slaray had been reduced as a result of his demotion from more than £35,000 to £21,000.
The limited damages may have been the only remedy available to Mr. Smith in a court. He could have taken his case to an Employment Tribunal and gotten more substantial damages, but Mr. Smith claims that he did not bring the case for money. He did it for the principle involved. The Trust has apologized to Mr. Smith and claims that it attempted to settle with Mr. Smith for a much higher amount, but Mr. Smith rejected the offer and chose to proceed with his litigation.
The Trust's action against Mr. Smith is somewhat surprising, given that Mr. Smith does not oppose civil marriage for gay partners. He only spoke out against church marriages for gay couples The Independent even quotes a "gay rights campaigner Peter Tatchell" as supporting Mr. Smith:
This is not a particularly homophobic viewpoint, In a democratic society, Adrian has a right to express his point of view, even if it is misguided and wrong.
A spokesperson from Stonewall, an LGB rights charity described the Trust's treatment of Mr. Smith as "a little heavy-handed given that he had temperately expressed his point of view, however disagreeable that point of view might be to many.”
Monday, October 29, 2012
Chris Claydon, the Managing Director of a New Zealand based company, Profile Technology, Ltd. (Profile Tech.), has brought suit against the social networking giant, Facebook, alleging breach of contract, interference with business relationships, defamation, and unlawful, unfair and fraudulent business practices. Claydon’s Complaint alleges that Profile Tech. and Facebook entered into an agreement in 2008 allowing Profile Tech. to acquire Facebook data by automated “crawling,” for the purpose of creating a service called Profile Engine. Profile Engine became the world’s first search engine dedicated to Facebook. However, according to the Complaint, without notice, Facebook cut off the access Profile Tech. needed to continue its venture shorty after October 13, and began a “malicious” defamation campaign, thereby damaging Profile Tech.’s business and reputation.
Claydon further alleges that Facebook interfered with access to its other applications, independent of Profile Engine (IQ Test, Survey, Polling, etc…) Facebook’s actions were allegedly purposeful and malicious and as such, require punitive damages in addition to compensation for lost profits and defamation. In addition, Claydon requested an injunction to prevent Facebook from any further defamation it is allegedly employing against Profile Tech.
Claydon states that Facebook breached the implied duties found in every contract: to deal fairly and in good faith, and refrain from doing anything that would have an ill effect on, or injure the rights of the other party’s receiving the fruits of the contract.
[Christina Phillips & JT]
Monday, October 22, 2012
Miriam Cherry on Cunningham, Post II: Modern Technology: A Disruptive Influence on Contract Doctrine?
In my view, modern technology has exacerbated the doctrinal tensions within contract law. Currently, clickwraps and browsewraps stretch the notion of mutual assent to its extreme, perhaps warping it in the process.
The recent literature on form contracting online has been substantial. While some of this literature sees online contracting as a natural inheritance to traditional contract law doctrine, other commentators have argued that contracting online has distorted the doctrine.
In Contracts in the Real World, Prof. Cunningham attempts to reconcile two recent cases, Specht v. Netscapeand Pro-CD v. Zeidenberg, as part of his treatment of the theme of contract formation and mutual assent. As much as he tries, to me the cases still seem to be in conflict.
And if that weren’t enough, two well-known additional cases that dealt with late-arriving terms inside a computer box, Hill v. Gateway and Klocek v. Gateway, blatantly contradict each other, with contrary holdings on virtually identical facts.
In my mind, these contradictions reveal a mismatch in the doctrine and the reality on the ground. If there is no way for consumers to read or understand, or perhaps even see these clickwrap agreements, it hardly seems fair to bind consumers to them. As seen above, however, this leads to contradictory rulings.
Inconsistent holdings create the appearance of an arbitrary justice system, and these disputes, which are governed by the Uniform Commercial Code, should turn out in a uniform manner. When they do not, it only intensifies the debate about how to deal with online contracting and adhesion contracts online.
As we all continue to click our way through countless EULAs and are told that we are subject to “terms and conditions” that no reasonable consumer has had the time to read, I do not believe that it is enough to hope that antiquated laws will handle new situations.
Instead, I would suggest that we need to continue to build on the wisdom of contract law. While there is much to celebrate in the received wisdom of ancient doctrines, we must also recognize that it is the common law’s dynamism and adaptability that have led to its genius.
[Post by JT]
Wednesday, September 5, 2012
As reported here by mlb.com, ESPN and Major League Baseball (MLB) have entered into an eight-year, $5.6 billion agreement, which includes TV and radio rights to MLB programming both in the U.S. and internationally, keeps baseball on the network through 2021 and includes a record-setting increase in annual rights fees (doubled to $700 million from $360 million annually).
And there was much rejoicing.
ESPN's president said, “Baseball remains the national pastime," but the truth is, baseball has long been eclipsed by other sports and then by video games based on other sports and then by video games about killing people, and then by video games about killing zombies. Meanwhile, there was recently talk of MLB becoming a wholly-owned subsidiary of Justin Bieber, Inc. Commissioner Bud Selig commented that "today is a very historic day for baseball." Taken in the context of a sport that is so hung up on statistics that every day is considered "historic" (Wow, Lou, that's the first time that a rookie switch-hitter has struck out looking from both sides of the plate in the same inning -- what a historic day!), Selig's comments seems to be downplaying the deal.
According to the New York Times, ESPN's rival networks, Fox, TBS, NBC and CBS, are still contenders in the baseball airing arena, as ESPN did not manage to grab the division series or league championship series games. There's still some history out there to be made.
[JT and Christina Phillips]
Wednesday, August 22, 2012
Last week, the Australian High Court upheld a ban on company logos on cigarette packages. The law that was upheld also requires that the front of cigarette packages show images of the harmful effects of smoking (e.g. mouth ulcers, tumors, etc).
Okay, you might be wondering what this has to do with contracts. One of my current research interests (obsessions) is the idea of notice substituting for actual assent, especially with online contracts. A dinky hyperlink nestled at the bottom of a page can serve as "notice," at least in the eyes of some courts although most people don't actually notice them. The fuss over the cigarette packaging (and Big Tobacco really fought hard over this one) underscores something that is often lost on courts evaluating notice in contract cases -- the quality of the notice matters. A warning label in a small text box gets ignored; graphic visual depictions of injured human organs do not. Snazzy corporate labels make smoking seem cool; plain labels don't have that same cachet. Websites, too, could draw more attention to their contracts, but they don't. They certainly know how to grab our attention when they want it, with images and sounds. So why make legal terms so unobtrusive? Could it be that they don't really want us to read them?
Monday, August 20, 2012
An article posted on TechCrunch, available here, discussed a new site which reviews terms of service (TOS) of various websites. The site provides a "grade" for website policies and can be accessed here (btw, it is looking for people to get involved).
Thursday, August 16, 2012
For three decades Oracle and Hewlett-Packard (“HP”) worked together, with HP selling its hardware and Oracle selling its software, to their shared customers and the two corporations cooperating to make certain that Oracle's software was compatible with HP's servers which run on a system called "Itanium." Tensions arose when Oracle acquired Sun Microsystems (“Sun”), a direct HP competitor, in 2010. And things did not get better when Oracle hired HP's former CEO, Marc Hurd, and HP sued to enjoin Hurd from sharing trade secrets with his new employers. Meanwhile, HP sought assurances from Oracle that it would continue to offer its software on HP’s platforms. Along with assurances from Oracle’s most senior software execs that it was committed to business as usual, the parties signed a “reaffirmation agreement” (the Agreement), which stated in Paragraph 1:
Oracle and HP reaffirm their commitment to their longstanding relationship and their mutual desire to continue to support their mutual customers. Oracle will continue to offer its product suite on HP platforms, and HP will continue to support Oracle products…on its hardware in a manner consistent with that partnership as it existed prior to Oracle’s hiring of Hurd.
The parties continued business as usual until Oracle abandoned this “work together” approach. In a press release issued in March, 2011, it announced, without notice to HP, that new versions of Oracle’s software would no longer be compatible with HP’s server platform. HP then filed suit, soon followed by Oracle’s very colorful cross-complaint.
After a 12-day trial, on August 1st, the Santa Clara Couty Superior Court bestowed this win on HP, fiinding in HP's favor on its claims for both breach of contract and promissory estoppel. The court found that the parties are bound by the Agreement, and that Oracle has a continuing obligtation to offer its product suite on HP's Itanium-based server platforms until HP discontinues the sale of its Itanium-based servers.
The Superior Court began its inquiry by breaking down the plain language of Paragraph 1 and determined that (1) the first sentence was fully consistent with a continued obligation to make certain that Oracle software is compatible with HP servers, and (2) the second sentence used the language “Oracle will continue…” which can “only be reasonably interpreted as requiring Oracle to continue offering its product on HP’s Itanium platforms.”
The court rejected Oracle's argument that the Agreement “merely a ‘public hug’ that imposed no obligations on either party,” and that Oracle “retained absolute discretion with regard to” making its software compatible with HP's systems. In rejecting the "public hug" theory, the court noted that throughout the parties’ history, 99% of their dealings were accomplished without contracts. Therefore, based on the parties’ prior course of dealing and the plain language of Paragraph 1, because HP was simply asking Oracle to maintain the business relationship as it had been prior to Oracle’s hiring of Hurd, it was fair and reasonable to require Oracle to continue its obligation to make its software compatible with HP systems. Since the court interpreted the Agreement as a promise by Oracle to continue to work with HP, it found that Oracle's unilateral announcement that it would no longer make its software compatiable with HP systems constituted a breach of contract.
The court also ruled for HP on its promissory estoppel claim, based upon unambiguous promises made by two Oracle executives. In reliance upon these assurances, HP provided Oracle with nearly $5 million of Itanium servers for porting and continued to invest in research and development in order to optimizing compatibility with Oracle’s software. Further, HP also entered into the Itanium Collaboration Agreement (“ICA”) with Intel, a $264 million investment. As the parties’ had been long-time business partners, it was foreseeable that HP would have no reason to doubt Oracle’s word and would make investments based on its support. HP relied upon the parties’ long-term, upstanding business relationship to its detriment. As a result, the court found that all elements of a promissory estoppel claim were satisfied.
In sum, the plain language of the agreement, Oracle’s continued assurances of commitment, both to HP and to the public, and the parties’ long history of informal dealing sans contracts led the court to find for HP on both the breach of contract and promissory estoppel claims. The court ordered Oracle to continue its porting obligations without charge “until such time as HP discontinues the sale of its Itanium-based servers.”
As reported here by allthingsd.com, Oracle released the following statement:
“Last March, Oracle made an engineering decision to stop future software development on the Itanium chip. We made the decision as we became convinced that Itanium was approaching its end of life and we explained our rationale to customers here. Nothing in the Court’s preliminary opinion changes that fact. We know that Oracle did not give up its fundamental right to make platform engineering decisions in the 27-words HP cites from the settlement of an unrelated employment agreement. HP’s argument turns the concept of Silicon Valley ‘partnerships’ upside down. We plan to appeal the Court’s ruling while fully litigating our cross claims that HP misled both its partners and customers.”
So, the battle has been lost but the war continues.
[Chrstina Phillips and JT]
Tuesday, August 14, 2012
Docracy is an open source legal document site. The site has launched a video campaign called "Don't Get Screwed Over" - it very effectively conveys the importance of freelancers having written contracts:
A free open source contract site is a great idea. I am not convinced, however, that it obviates the need for an attorney. That said, it is true that, regardless of whether an attorney is involved, freelancers should always get their deals in writing and carefully express expecations and payment schedule. The site's founder Matt Hall appears to share in my sentiment and believes that his site is a starting point for freelancers to figure out what they need and to find an attorney. Hall told .net magazine:
[T]he video was designed to "make sure freelancers are aware how important it is to have a contract for work they do, and that there are resources like Docracy that can take the fear and mystery out of the process". He said it's increasingly common that freelancers don't get paid for work they've done, starkly highlighted by projects like the World's Longest Invoice.
Hall recommended "upfront and clear communication with your client about what's expected, when it's expected and when you'll be paid", and then getting this all down in writing and signed. "Clear communication can go a long way to avoiding problems in the future," he added. And while Docracy can be a starting point, Hall said such sites are not a replacement for proper legal advice: "A good lawyer who understands your business will save you money over the long term, so get educated and then find a good lawyer you like working with. We have a bunch of great, tech-savvy lawyers on the site who have already shown their willingness to help freelancers, so they might be a good start."
[Meredith R. Miller]
Friday, August 3, 2012
For those of you attending the ABA conference in Chicago this week, there is a CLE program on Clickwraps, Browsewraps and Why ESIGN Deserves a Bum Rap. The speakers are Mark J. Furletti of Ballard Spahr, Christine Poulon of PayPal and yours truly. The panel is from (the unspeakable hour of) 8:00am-10:00am. If any of you early risers are at the meeting in Chicago, stop by for an earful about the state of electronic contracts.
HelloFax, the company that lets you send and receive digital faxes, has spun off its digital signature service into a new stand-alone product: HelloSign.
“Everyone has to sign documents, and it’s done in a really poor way right now, which is what we’re trying to fix,” Joseph Walla, CEO of HelloSign (and HelloFax) told Mashable.
Documents can be signed and securely returned to their sender from both the web and the company’s new iPhone application. Unlike some similar services and apps that are already out there, digital signatures using the service are free and unlimited so you can send and receive just a few documents — or all the contracts for your business — with the service at no cost.
On the iPhone application, you sign a document with your finger on the screen. Once you’re done signing, the signature is brought back into your document, then you can place it where you want it to go. The same experience can be done on your home computer using a mouse.
When you send documents to be signed with HelloSign you can also track those documents with read receipts and audit trails, so you know exactly what’s going on with the document every step of the way.
Walla says that, while digital signatures have been legal in the U.S. for any document that can be signed with a pen for the past 12 years, many companies are still using pen and paper to get the job done. He sees the service as being invaluable to companies and businesses that are faced with delays waiting on paperwork to be signed.
“What we found out is that the only reason people fax things is that the vast majority of these documents are being signed,” Walla said when we spoke to him about HelloFax earlier this year. “What we’ve found is a lot of people joined us for faxing, and now they’ve converted to electronic signatures. We have a lot users who were fax users and now they don’t fax at all.”
With HelloSign, contracts and the like can be handled almost instantly, saving everyone involved in the process valuable time. The only type of document the service can’t handle is one that requires a notary.
HelloSign and its iPhone app are available now. For a limited time, those who sign up for HelloSign will also receive 25GB of free storage from Box.
[Meredith R. Miller]
Wednesday, August 1, 2012
When did you realize you had a passion for contract law?
I fell in love with contracts while working in the legal department of a Fortune 500 company during a 15-month period early in my legal career (on loan from my law firm through a secondment). I’ve long been fascinated by business, and contracts are where the rubber meets the road and business deals are hammered out. Nothing is more satisfying than looking at a deal through lawyer goggles and identifying important business issues that your client hasn’t thought of.
Who is your typical client?
I do M&A and general corporate work in addition to commercial transactions, and the typical client profile varies depending on the type of work. Contracts clients tend to be larger companies in industries where a business’s relationship with its suppliers or customers is complex. The best clients are those who’ve found contract religion as the result of being involved in litigation over a contract and having an unfavorable result. Those clients tend to appreciate the danger of time bombs sitting in their file cabinets in the form of bad contracts.
What is something interesting you worked on recently?
One of the most interesting projects I’ve done involved a franchisor that wanted its franchisees in the US and Canada to refresh the look of their stores. I represented the contractor that won the bid to perform the work. The project involved drafting and negotiating an agreement between the contractor and the franchisor that balanced the interests of the franchisor and contractor, while properly inducing the franchisees to participate. It was interesting work for a wonderful client with exceptional opposing counsel.
What is the single most valuable lesson you learned in the first year (or so) of practice?
Always produce quality work product. In the rough and tumble of practice you often have to juggle deadlines and multiple projects and sometimes something has to give. Shoddy work product is always the wrong answer. Also, for those who plan to practice in large firms, the proper method of genuflection varies from partner to partner. Keep a list.
What do you wish someone told you when you were in law school?
What are your 3 favorite legal blogs or websites?
Who should ContractsProf readers be following on Twitter?
Has legal scholarship ever been valuable to you in your practice?
I often go to the journals when I’m doing in-depth research. One of the most useful articles I’ve read is “After the Battle of the Forms” by Francis J. Mootz III in I/S: A Journal of Law and Policy. The article has informed my thinking about the battle of the forms in today’s contracting world. Plus, it introduced me to the term “sign-wrap,” which I think is a good way to think of on-line contract terms that are incorporated into paper contracts by reference.
Best efforts or reasonable efforts?
Reasonable efforts. If anything beyond reasonable is expected, it should be spelled out in the contract.
What is your favorite restaurant in St. Louis?
[Meredith R. Miller]
Monday, July 16, 2012
Via @thecontractsguy (aka Brian Rogers, if you don’t already, you should follow him on Twitter) retweeting @yanger_law, I learned of a recent federal district court case from Florida that held that an instant messaging (“IM”) conversation constituted a contract modification.
Smoking Everywhere, Inc., is a seller of e-cigarettes (hey, can I bum an e-smoke?) Smoking Everywhere contracted with CX Digital Media, Inc., to help with online marketing of a free e-cigarette promotion. CX Digital would place the ad with its affiliates to generate web traffic. I am oversimplifying the technology and metrics here, but basically the deal was that Smoking Everywhere would pay CX Digital around $45 for every completed sale that came via a customer clicking on and ad placed with one of CX Digital’s affiliates. The contract limited the deal to 200 sales per day.
After re-coding some pages for Smoking Everywhere, CX Digital believed it could drive more traffic and increase the sales it was sending CX Digital. The following exchange, part of a longer IM chat, occurred between “pedramcx” (Soltani) from CX Digital and “nicktouris” (Touris) from Smoking Everywhere:
pedramcx (2:49:45 PM): A few of our big guys are really excited about the new page and they’re ready to run it
pedramcx (2:50:08 PM): We can do 2000 orders/day by Friday if I have your blessing
pedramcx (2:50:39 PM): You also have to find some way to get the Sub IDs working
pedramcx (2:52:13 PM): those 2000 leads are going to be generated by our best affiliate and he’s legit
nicktouris is available (3:42:42 PM): I am away from my computer right now.
pedramcx (4:07:57 PM): And I want the AOR when we make your offer #1 on the network
nicktouris (4:43:09 PM): NO LIMIT
pedramcx (4:43:21 PM): awesome!
And, awesome!, indeed. CX Digital went from sending around 60-something sales a day to an average of over 1200 sales per day (with a peak of over 2800 sales in one day). Accordingly, CX Digital sent Smoking Everywhere an invoice for two months in 2009 that totaled over $1.3 million. And Smoking Everywhere refused to pay.
Among other issues, the question arose whether the IM conversation modified the existing contract. The district court held that it did:
The Court agrees a contract was formed but clarifies that Touris’s response acted as a rejection and counter-offer that Soltani accepted by then replying “awesome!” “In order to constitute an ‘acceptance,’ a response to an offer must be on identical terms as the offer and must be unconditional.” “A reply to an offer which purports to accept it but is conditional on the offeror’s assent to terms additional to or different from those offered is not an acceptance but is a counter-offer.” “The words and conduct of the response are to be interpreted in light of all the circumstances.”
Here, Touris’s response of “NO LIMIT” varies from the two specific terms Soltani offered and so acts as a counter-offer. Soltani proposed CX Digital provide 2,000 Sales per day and that CX Digital be the AOR or agent of record, a term of art meaning the exclusive provider of affiliate advertising on the advertising campaign. Touris makes a simple counter-offer that there be no limit on the number of Sales per day that CX Digital’s affiliates may generate and makes no mention of the AOR term. Soltani enthusiastically accepts the counter-offer by writing, “awesome!” and by beginning to perform immediately by increasing the volume of Sales.
Touris testified he could have been responding to something other than Soltani’s offer of 2,000 Sales per day when he said “NO LIMIT.” Touris acknowledged that he had engaged in contract negotiations about “changing the number of leads, changing URLs, deposits, that type of thing,” although he added, “we mainly spoke on the phone. A little bit of email but I had trouble receiving his emails so I mean we used Instant Messaging but you know there was a lot more than what was presented here, last court appearance.” The implication of this testimony was that Touris could have been responding to something else he and Soltani had discussed by phone. But when pressed on just what else he could have been referring to when he said “NO LIMIT,” Touris’s memory failed him. In particular, he denied that “NO LIMIT” was some kind of personal motto.
Indeed, neither Touris nor Taieb ever suggested any plausible alternative interpretation for why Touris wrote “NO LIMIT” to Soltani, nor did they explain the content of the alleged additional negotiations that took place outside of the September 2, 2009 instant messages or what effect those would have had on the apparent agreement the parties reached on September 2nd. Considering Touris’s admission that he was engaged in instant-message negotiations with Soltani about changing the number of leads along with the September 2nd instant-message transcript, directs the conclusion that those negotiations, wherever and however they occurred, culminated with a modification of the [original contract] when Touris and Soltani agreed to “NO LIMIT.”
Smoking Everywhere also observes that a significant amount of time — almost two hours— passed between Soltani’s offer of 2,000 Sales per day and Touris’s counter-offer of “NO LIMIT,” which it suggests adds uncertainty to the meaning of the conversation. However, more than an hour passes before Soltani added that he would like CX Digital to be the AOR; yet this is clearly part of Soltani’s offer. It is then only thirty-four minutes later that Touris responds “NO LIMIT.” Given that Touris testified he would not have approved such an increase without first discussing it with Taieb, one explanation for the time delay, if one is needed, is that Touris was doing just that — asking Taieb for approval.
(citations omitted). There was some ambiguity here and IM is pretty informal, but given the context, it seems like the court made the right call.
I don’t IM because I don’t understand it. Given the expectation of instantaneous communication, rather than IM, I prefer the telephone. [Notable exception: when you are in a space where you can't gossip aloud about colleagues]. But this case suggests, if you do IM, be careful what you type! It could lead to Smoking Guns Everywhere....
CX Digital Media, Inc. v. Smoking Everywhere, Inc. (S.D. Fl. Mar. 23, 2011) (Altonaga, J.).
[Meredith R. Miller]
Monday, June 11, 2012
Since much of my research tends to at least recognize that we live in a multicultural, global, interconnected world, I was a bit embarrassed to discover how U.S. -centric I am with some of my assumptions about contract law. During one class, I told my bright and engaging students at VUW how contract law theory might help them address some novel contracting issues that will likely arise in their practice. My "war story" was working at a software company in the early nineties and trying to figure out whether shrinkwrap and clickwrap licenses were enforceable (although we didn't call them that then). My students were too kind to tell me that there are no cases on this topic either in New Zealand or Australia. No New Zealand equivalent of ProCD v. Zeidenberg? No subversion of the rules of offer and acceptance? No replacing consent with reasonable notice? It may be that other laws (consumer protective legislation and the unique tort system) make such issues less relevant. In any event, it's possible that in the southern hemisphere at least there's still time to establish logical and doctrinally coherent precedent with respect to digital contracts. One can always hope...
Thursday, June 7, 2012
Spacenews.com reports that satellite fleet operator MEASAT Satellite Systems of Malaysia (MEASAT) is suing fleet operator Intelsat Corporation (Intelsat) for at least $29 million in a U.S. District Court, alleging breach of contract and collusion in Intelsat’s handling of the launch of a Measat satellite in 2009.
The lawsuit, filed on April 27, 2012, in the United States District Court, Central District of California, is really two lawsuits in one. MEASAT is after Intelsat for breach of contract in connection with two different planned launches of the same MEASAT sattelite. MEASAT contends that the parties entered in to an agreement on March 9, 2006, in which MEASAT agreed to pay over $40 million, and Intelsat agreed to launch MEASAT's satellite between November 1, 2007 and Janury 29, 2008. For reasons that are unclear from the complaint, the parties agreed to delay the launch until August 2008.
The scheduled launch on August 21, 2008, was allegedly delayed due to Intelsat's repeated mishandling of the satellite -- first by hitting it with a crane and then by dropping it while it was being loaded onto a cargo plane. In order to secure a second launch date, MEASAT alleges that it had to pay additional fees and also agree to waive any claims associated with the aforementioned breaches and/or negligence on Intelsat's part. MEASAT alleges that the delays caused by Intelsat's mishandling of its satellite it "was fast losing millions of dollars and valuable good will" and was "teetering on financial disaster."
The parties agreed to a June 2009 launch date, but Intelsat contniued to seek additional compensation, now reducing its demand to $7.5 million. Intelsat also allegedly demanded that MEASAT sign a release, abandoning all claims associated with the earlier launch date and also threatened to use the launch to send up one of its own satellites instead of MEASAT's satellite, if its demands were not met. At that point, it would have cost MEASAT between $80 and $90 million to negotiate an alternative launch. As MEASAT would not have survived had it chosen to do so, it capitulated to Intelsat's demands. The MEASAT Satellite was launched on June 21, 2009, over ten months from the previously scheduled launch date and eighteen to twenty months from the first promised launch period.
MEASAT now alleges that Intelsat conspired with other entities to "facilitate the coercive and wrongful conduct" alleged in the complaint. MEASAT is claiming that Intelsat breached its contract w/ MEASAT by demanding payments for launch in addition to the agreed-upon $40 million fee and through failures to exercise care that resulted in dealys in the launch.
In addition, MEASAT has alleged claims for economic duress, unjust enrichment, breach of the convent of good faith and fair dealing, and a violation of California Business and Professions Code §17200. MEASAT seeks damages in the amount of $29,000,000 as well as punitive damages and attorneys fees.
[Christina Phillips and JT]
Tuesday, April 17, 2012
This blog reflects the thoughts of Frank Snyder, a law professor and former Big Law partner, on the massive changes that law schools and the legal profession are facing in the decades ahead, and on the larger role of lawyers in society. Plus some other things, from time to time.
And here's what Frank has to say about Frank and his views:
I'm a law professor who has taught at law schools in each quartile of the USNews rankings, been a partner at an AmLaw 20 firm, and owned a couple of independent mionor league baseball teams.
You can find my current school on a Google search, but I'm not putting it here because I want to emphasize that this blog reflects my personal observations on legal education, the profession of law, and the vast changes (the "Apocalypse") that are looming on the horizon for each. I claim no special expertise in these topics, except for having practiced law for nearly 15 years and taught in law schools nearly as long.
Unlike some other critics, I believe that the law is the greatest of the secular professions It has played a critical role in American life. Law school is not a scam. Law has offered, and continues to offer, incredibly rewarding careers to thousands of new lawyers. My view of the American law school is like that of reforming 15th-century Catholics to abuses in the Church -- a deep love for an institution but a strong concern that it has fallen under some very bad influences.
Unless attributed and linked to specific others, all of the thoughts here are mine, unless I unconsciously stole them, in which case I apologize. None of them should be taken as the opinions of my employer, my publishers, my students, or any other person or institution
As always, we wish Frank all the best in this new venture.
Thursday, April 5, 2012
A group of unpaid bloggers brought a class action against AOL, the Huffington Post (HuffPo) and its founders, including the eponymous Arianna Huffington (pictured) in the Southern District of New York on the ground that HuffPo unjustly and deceptively denied the bloggers compensation for their submissions and promotion of that website’s content. Last week, Judge Koeltl granted the defendants’ motion to dismiss the action, styled Tasini v. AOL, Inc.
Plaintiffs are “professional or quasi professional” writers who contributed to HuffPo’s success. It was/is a spectacularly successful enterprise, attracting 26 million unique visitors per month (even the ContractsProf Blog cannot rival those numbers). HuffPo made clear from the start that, rather than monetary compensation, the writers/bloggers would get exposure—namely visibility, promotion, and distribution, for themselves and their work. All went along swimmingly until 2011, when AOL bought HuffPo for $315 million. The bloggers then sued, claiming a violation of New Yorks General Business Law § 349 (deceptive business practices) and that HuffPo was unjustly enriched, and sought at least $105 million in compensatory damages.
Judge Koeltl began by setting out New York’s law on unjust enrichment: Under New York law, a plaintiff must establish: “(1) that the defendant benefitted; (2) at the plaintiff's expense; and (3) that equity and good conscience require restitution.” Noting that the bloggers “entered into their transactions with the defendants with full knowledge of the facts and no expectation of compensation other than exposure,” Judge Koeltl concluded that “equity and good conscience counsel against retroactively altering the parties’ clear agreements.” He then dismissed both the unjust enrichment claim and the § 349 claim with prejudice.
Some see an injustice in that the plaintiffs were committed to a certain sort of institution -- they may have seen HuffPo as a not-for-profit enterprise with a clear political mission -- and that institution was then swallowed by a soulless corporation associated with the noise an old-fashioned dial-up modem makes. Plaintiffs did not make that argument, perhaps because they did not want to seem like starry-eyed idealists who never noticed that HuffPo is a full-service content aggregator that, according to Wikipedia "covers politics, business, entertainment, technology, popular media, life & style, culture, comedy, healthy living, women's interest, and local news." Rather, as there was no question that HuffPo benefitted from the bloggers' contributions, the legal issue at the heart of the case is whether New York law ever supports a claim for restitution when there is no initial expectation of payment.
Plaintiffs presented the court with a number of cases in which plaintiffs successfully brought restitution claims even without a clear initial expectation of payment. The heart of the court's reasoning on this matter runs as follows:
At best, these cases stand for the proposition that plaintiffs who are unsure of whether they will be compensated if their services are not used may still sue if the services they render do ultimately benefit a defendant who then denies compensation. . . . Stated in other terms, the plaintiffs in these cases expected compensation but the exact terms of the compensation were unclear. These cases therefore fail to support the plaintiffs’ argument that unjust enrichment does not require an expectation of compensation. Indeed, in this case, the plaintiffs expected only exposure rather than monetary compensation if their submissions were used, and those terms were clear from the outset.
In the court's view, this was a case in which the parties initial expectations were clear and the plaintiffs sought a "do over" when they learned that the price that AOL was willing to pay HuffPo for the privilege of access to the services that HuffPo writers were giving away.
[JT and Christina Phillips]
Monday, April 2, 2012
As reported in The New York Times, the discovery of a lost episode of Star Trek has sparked a, so far, non-litigious debate over CBS’s decision to enforce its right in the material and to prohibit the online airing of an amateur production based on the episode’s script.
Norman Spinrad wrote the episode, He Walked Among Us,” in 1967 after the show’s producers approached him with a four-day deadline and a box of no-doze. The producers thought the episode might provide an opportunity for comedian Milton Berle to work a dramatic role. Tragically, the episode never aired, and Spinrad’s script ended up getting donated to the archives at Cal State Fullerton, where it sat unnoticed for decades.
Years later, Spinrad was approached at a convention by a Trekkie (depicted in the image above) who asked Spinrad to sign a copy of “He Walked Among Us.” Spinrad later teamed up with James Cawley to discuss the possibility of finally producing “He Walked Among Us.” Cawley is senior executive producer for “Phase II,” a web-based production studio that uses unpaid amateur actors to act out Trekkies’ favorite episodes. In these productions, Cawley plays Captain Kirk, which is a bit like putting together a Shakespeare company so that you can play Hamlet. But still . . . .
CBS sent Cawley an email, asking him to cease production of the episode. CBS has been consistently buying merchandising, television and online rights to Star Trek. Cawley and Spinrad apparently have good relations with CBS and want to keep things that way. As Spinrad puts it on his website,
I and CBS have agreed to resolve our disputes concerning the ownership of the Work; as part of the settlement between the Parties, the Parties have agree that there will be no further comment; and CBS is considering opportunities to offer licensed copies of the Work.
Because of the above, I can no longer comment on the He Walked Among Us screenplay myself.
It is uncertain exactly why CBS has allowed Phase II to produce other unaired Trek projects but has decided to stonewall this project. Here are the leading theories:
- The subject matter of “He Walked Among Us” has been mined so thoroughly in other Star Trek episodes, CBS is concerned that further probing in this area could open up a rift in the time/space continuum;
- Due to a holodeck malfunction, the person calling himself Norman Spinrad is really Kirk’s arch-nemesis, Khan, returned to destroy the good name of the Star Trek franchise;
- After consulting with its resident half-Betazoid advisor, CBS concluded that there was something not quite right about the episode – some sort of deception may be involved, or not;
- William Shatner was insisting on playing the Milton Berle part and that the part include a fist-fight;
- CBS producers thought the episode's lower decks discussion of why Star Fleet could mandate health care coverage but not require that all replicators be programmed to synthesize broccoli when receiving requests for "junk food" was too dated; and
- A crucial element in the plot is the possibility of traveling at speeds in excess of light speed, and now that the faster-than-light neutrinos theory has been debunked, CBS thinks viewers will be unable to suspend disbelief
[JT and Justin Berggren]
Wednesday, March 28, 2012
A federal district court in New York recently ruled in Lebowitz v. Dow Jones & Co. that the Wall Street Journal Online's subscriber agreement was not illusory merely because it had a provision that allowed it to change fees at any time. (H/T Eric Goldman's Technology & Marketing Law Blog which has been on a roll with 'wrap contract issues). Pursuant to their agreement, subscribers to the Wall Street Journal Online obtained access to the Wall Street Journal Online and Barron's Online. Dow Jones (parent of both companies) decided to spin off the Barron's service. Existing subscribers were then told they could continue to access one service, but could only access the other for an additional fee. Plaintiffs sued, claiming breach of contract. At issue, was the following clause of the subscription agreement:
"We may change the fees and charges then in effect, or add new fees or charges, by giving you notice in advance....This Agreements contains the final and entire agreement between us regarding your use of the Services and supersedes all previous and contemporaneous oral and written agreements regarding your use of the Services. We may discontinue or change the Services, or their availability to you, at any time."*
The court found that Dow Jones was expressly permitted to change its services and/or fees (it gets a little fuzzy which in the opinion) pursuant to this clause. Plaintiffs argued that interpreting the above clause to mean that Dow Jones can change the fees at any time (even during the term which has already been paid for), would render the argument illusory and so such an interpretation should be avoided. The question then was whether that clause rendered the agreement illusory. The court held that it did not because "Dow Jones acted reasonably, and therefore this provision of the Subscriber Agreement is not illusory." [This seems a bit backward. It should have said that courts will interpret a requirement of reasonableness into seemingly illusory contracts if it's clear the parties intended to enter into the contract - since the court concluded that Dow Jones didn't act unreasonably, there was no breach]. I'm not sure I agree with the court's decision and wish I had a copy of the entire agreement. It seems a better interpretation of the clause would be that Dow Jones could change the fees but that subscribers would be able to discontinue the subscription and get their prepaid amounts back if they did not like the increase. I don't think that was an option. The court seemed to think that there was no real harm done by changing the terms of the agreement (even before the subscription period had expired) because the majority of WSJ Online subscribers didn't access Barron's Online. (It may also have made a difference that plaintiffs were seeking class certification)
*This provision was accidentally dropped when I copied the text in the original version of this post.
** I plan to blog a little bit more about the notice aspects of this case after I've had a chance to review the pleadings in the case.