Friday, April 6, 2007

Rent a Wonderful Vacation House from a Contract Theorist

Posted by Jeff Lipshaw

Char1 My wife and I own a wonderful little house in Charlevoix, Michigan.  It is available for vacation rentals this summer.  We hired an agent to rent the place, but we can also do it on our own (and not pay the commission).  We are still working through some of theChar2_2 growing pains of being vacation landlords, and screwing up certainly puts my contract theorizing to the test.  (Prime weeks in beautiful Northern Michigan still available, by the way.)

Here's the not-so-hypothetical.  We rent the house for $1,500 a week during the summer.  We listed it not only with our agent, but on GreatRentals.com.  We and the agent did not do a Char3 good job of communicating with each other (actually, in this instance, my fault), and we each rented the house, signed contracts, and received deposits for one of the weeks.  In our case, we had actually agreed to rent the house for only six days for $1,300.  We had agreed to rent the house to another client for eight days and that rental overlapped by one day, but did not have a signed agreement or a deposit.  What was the role of contract law in the resolution of this problem?

The answer follows the fold.

We will assume for purposes of the hypothetical that we and our duly authorized agent had each rented the same house for the same period (overlapping by six days) on valid and enforceable contracts.  The agent gets a hefty commission if she is responsible for the rental.  I presumed (albeit in the back of my mind) that if we reneged on our contract with our client, we'd be responsible, in theory, for the difference between our contract price and what the client would have ended up having to pay for a roughly equivalent house for the same period.  I didn't even contemplate other Hadley v. Baxendale kinds of consequential damages, although we knew that our client needed the house that particular week because of a wedding she was attending.

But even the foregoing overstates the extent to which I undertook a legal analysis.  Even though we had an argument that the agent was as negligent as we were, we immediately concluded that we would deal with our client, and we asked the agent to find an equivalent house in the same neighborhood.  She did, but the weekly price was $1,800.  Nevertheless, she offered it to us for $1,700 (losing $100 of her commission from the owner of the other house).  We called our client immediately and told her about the problem, and offered to subsidize the remaining difference ($200) so that the client actually had a bigger house for the same price for the same period.  We were concerned that there would be an issue over the fact that we couldn't offer the shorter period, but that turned out not to be a problem.  The client looked at pictures of the other house, accepted the deal, and that was that.

The eight day client was just as happy to take seven days.

Observations:

1.  The amount in question - somewhere between $200 and $500 - made the legal system irrelevant (unless we wanted to be contestants on Judge Judy).

2.  Our arrangement with the agent is "relational" in the Ian Macneil sense, but the arrangement with the client was not.

3.  We did consider our obligation in deciding how to resolve the problem, but consistent with my previous statements on this issue, I don't think the law played much part, except as a back-up mechanism.  Indeed, I think the operative obligation in this instance arose out of our promise, and our response was to the broken promise, not the broken contract.

4.  That feeling is heightened by the fact that the eight day client did not have a signed contract; nevertheless we felt some responsibility for that as well.

5.  My most recent essay theorizes about a changed in focus from the first or second person to the third person when one begins to assess a problem as one of contract law - an objectification, so to speak, of the relationship - and this particular episode seemed to reinforce that.

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Comments

What came first, the episode or the theory? For if it was the latter, we can't rule out the hidden hand of (a subconscious) self-fulfilling prophecy (or what Popper called the 'Oedipus Effect') mechanism!

Posted by: Patrick S. O'Donnell | Apr 6, 2007 5:52:04 AM

Nice article. Legal Profession Blog is provide is very reasonable entry.

Posted by: Shazia | Jan 30, 2009 1:48:47 AM

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