ContractsProf Blog

New Legal Profession Blog

We're delighted to note the addition of a great new blog to the Law Professor Blog Network, which features (among others) Tulane contracts prof Jeff Lipshaw.(left).  The new Legal Profession Blog aims to explore the boundary (or perhaps "no fly zone"?) between the law schools and the practicing bar.  Lipshaw, who before he became an academic was a law firm partner and general counsel of a Fortune 500 company, knows that line better than most.  His colleagues include procedure scholar Alan Childress (George Washington) and Michael Frisch, who is General Counsel to Georgetown University.

There are several good posts there already, including a good discussion of the New York State Bar's consideration of the question whether lawyer blogs should be considered "advertising," and Lipshaw's advice to new graduates on how to be successful.  (Note:  It's not brown-nosing and stabbing your colleagues in the back.) 

Rather shockingly, Lipshaw reveals that he does not drink at lunch, even when the martinis are a dime each, which means that New Orleans is apparently wasted on him.

[Frank Snyder]

Do Religious Requirements Justify Breach?

Does a religious observance provide an impracticability defense to a breach of contract claim? That may be one of the issues in a case from Qatar, where a man booked a "full fledged Arab-style tent" for his wedding from a club in Doha. The club later advised him that the tent would be unavailable because it had to be prepared for the holy month of Ramadan.

[Frank Snyder]

Carolina Looking for Authors

If you're a law professor with a hankering to do something comparative, Carolina Academic Press has a really interesting opportunity.  CAP is launching a series of books treating law from a comparative perspective, under the general editorship of Andrew McClurg (Mempis).  He's looking for folks who want to work as authors in the series.  Current comparative law expertise isn't necessary, since the books are sensibly going to be co-authored by both U.S. and foreign experts.  Click on "continue reading" for the details.

Continue reading

Contracts Prof Weekly Spotlight: Daniel Schwarcz

Daniel Schwarcz (Harvard University)
A.B., Amherst College
J.D., Harvard Law School

Daniel Schwarcz is in his second year of a two-year post as a Climenko Fellow and Lecturer in Law at Harvard Law School. His work to date focuses primarily on insurance law and includes "A Products Liability Theory for the Judicial Regulation of Insurance" (forthcoming in the William & Mary Law Review and available at http://ssrn.com/author=499486).  Daniel graduated from Harvard Law School in 2003.  While a law student, he was an Articles Editor of the Harvard Law Review and an Olin Fellow in Law and Economics.

Since graduating from law school, he has stayed in Boston while his fiancée, Tamar, has worked on her Ph.D. in biology.  Before starting at Harvard, he clerked for Judge Sandra Lynch of the First Circuit and then practiced in the Boston office of Ropes & Gray, where he focused on insurance law matters.  The next few months promise to be eventful for Daniel, as he is simultaneously in the process of looking for a permanent academic post and getting married.  To relax during this time, Daniel looks forward to making frequent visits to Hartford, Connecticut where he will enjoy being around other people who actually care about insurance.  (In reality, Daniel likes to relax by cooking, playing strategy games, and watching football (Miami Dolphins) and baseball (the dreaded Yankees)).

[To have your profile featured in the weekly ContractsProf Spotlight or recommend someone to be featured, please email Meredith Miller]

Contract Law Limerick of the Week

Hamer v. Sidway

by Jeremy Telman (Valparaiso)

Did dissolute William fulfill
A contract with rich Uncle Will?
Yes, forbearance from vice,
Said the court, will suffice
As performance, and so it is still.

More Taste, Less Filling?

Okay, I was teaching this Cardozo opinion today.  You know, the one with the rather florid language that none of the students can make any sense of?  That seems to make these sweeping statements that can't possibly be literally what he means?  And I ran across this while looking for a visual aid.  (Click to enlarge.)

These folks can make this clock with any name you like, so I have absoultely no idea how they managed to pick this one for their sample.

[Frank Snyder]

In Texas, This Would Be About Football

We all know that hockey is a big thing in Canada. So big that a father in British Columbia is suing the local youth hockey association for breach of contract after it refused to allow his three children to register this year. He’s claiming $100,000 in damages though the article doesn't explain the calculation.  Perhaps it's the discounted present value of the reduced chance at a lucrative NHL contract.

The association claims it simply doesn’t have anyone who will volunteer to coach the guy's children, at least so long as they remain his chlidren.

[Frank Snyder]

Three Year Old Buys a New Car (Sort of)

Just saw this news story, about a three-year-old, named Jack, who wanted to buy a new car:

Jack's mother told the BBC she had left her password for the eBay auction site in her computer and her son used the "buy it now" option to complete the purchase.

"Jack's a whizz on the PC and just pressed all the right buttons," Rachel Neal said.

The seller of the second-hand car, a dealer from Worcestershire, central England, was amused by the bid and agreed not to force the sale through.

"Luckily he saw the funny side and said he would re-advertise," Neal said.

[Miriam Cherry]

Speaking of Taylor v. Caldwell . . .

The good folks at the Wikipedia Free Encyclopedia have a public domain image of the interior of the Surrey Gardens Music Hall (left--click to enlarge) dating from 1858, three years before the fire that destroyed it and led to the most famous of the "impossibility of performance" cases.

The encyclopedia article also gives some interesting background on the Music Hall.  More information, and additional pictures can be found on the Arthur Lloyd web site here.

[Frank Snyder]

Weekly Top Ten

Technology and economics again dominate the top spots in this week's Top 10.  Following are the top ten most-downloaded recent papers from the SSRN Journal of Contract and Commercial Law for the 60 days ending September 24.

1  Technoconsen(t)sus, Andrea M. Matwyshyn (Florida).

2  The Law and Economics of Contracts, Benjamin E. Hermalin (Cal Berkeley-Business), Avery W. Katz (Columbia) & Richard Craswell (Stanford).

3  Transaction Cost Economics: An Assessment of Empirical Research in the Social Sciences, Barak D. Richman (Duke), Jeffrey Macher (Georgetown-Business).

4  Terms of Use, Mark A. Lemley (Stanford).

5 Payment Wars: The Merchant-Bank Struggle for Control of Payment Systems, Adam Levitin (Independent).

6  The Promise and Perils of Credit Derivatives, David A. Skeel (Penn) & Frank Partnoy (San Diego).

7  The Strange Death of Academic Commercial Law, Larry T. Garvin (Ohio State).

8  Between Rights and Contract: Arbitration Agreements and Non-Compete Covenants as a Hybrid Form of Employment Law, Cynthia L. Estlund (NYU).

9  Illuminating Secrecy: A New Economic Analysis of Confidential Settlements, Scott A. Moss (Marquette).

10 The Use of MTAs to Control Commercialization of Stem Cell Diagnostics and Therapeutics, Sean M. O'Connor (U Washington).

[Frank Snyder]

Prof's contract claim escalates

A breach of contract claim by Canadian law professor Susan Drummond (left) is heating up as a result of Drummond’s self-help tactics in her battle with Rogers Wireless over a $14,000 bill on a stolen wireless phone. Drummond launched the web site Rogers And Me to document her battle with the firm; Rogers says it’s being defamed by her statements.

Drummond is an associate professor at Osgoode Hall Law School, where she teaches legal anthropology, comparative law, civil law, and family law.

[Frank Snyder]

Sic transit gloria mundi. . . .

. . .  Coudert Brothers, the firm synonymous for decades with sophisticated international law practice, has suffered the last sling and arrow from a cruel world -- a Chapter 11 filing in New York bankruptcy court.  Adding insult to the injury, the defunct firm, whose practice was once the international gold standard, can’t even afford to file an appeal bond on a $2.5 million malpractice judgment against it.

[Frank Snyder]

Recent Statute of Frauds Case from Delaware

Based on the statute of frauds, a Delaware court recently granted an employer's motion for summary judgment and dismissed a doctor/employee's claim for breach of an oral employment contract.

Dr. Aurigemma sued his employer, a rehabilitation center, for violation of an alleged oral agreement pursuant to which the doctor alleged he was to serve as medical director for the employer. The doctor alleged that he entered into an oral agreement on September 4, 2003, whereby he agreed to serve as medical director for one year beginning October 1, 2003.  The employer denied any such agreement and contended that, even by the doctor’s own contention, the contract was not enforceable because the statute of frauds required that it be in writing.

The court held for the employer.  The statute of frauds requires that a contract be in writing when it is not capable of being performed in one year. In this case, the doctor’s alleged oral agreement was for exactly one year of employment – but he allegedly entered into the agreement roughly a month before the commencement of his service as medical director under that agreement. The court held:

The general rule regarding the Statute of Frauds can be stated as follows: "An oral contract for a year's services to begin more than one day after the contract is entered into is invalid under that provision of the statute of frauds making invalid an oral contract not to be performed within a year." The time within which such a contract is to be performed is reckoned from the making of the contract, not from the time the performance is to begin." Although this rule of law has never been explicitly expounded in Delaware, it appears to be the widely accepted construction of this particular provision of the Statute of Frauds.

(footnotes omitted).  Thus, the alleged oral agreement came within the statute of frauds, necessitating that it be reduced to writing.

The court further held that no exception to the statute of frauds applied. The doctor argued that he partially performed the alleged contract to serve as medical director by assuming the duties of acting medical director on September 4, 2003. In response, the employer argued that the partial performance exception is limited to real estate and financial transactions and does not apply to service or employment contracts.  Moreover, the employer argued, even though Dr. Aurigemma began to perform as interim medical director, this was not a partial performance of permanent medical director position duties. The court held:

Delaware law is clear that the part performance doctrine does not apply to oral contracts not to be performed within one-year. "It is ... uncontroverted that partial performance of services under an oral contract not to be performed within a year does not remove the contract from the operation of the Statute of Frauds so as to affect the portion of the services not performed." This view has been expressed as the majority view and is supported by case law in many jurisdictions.  The purpose of the Statute of Frauds is to prevent frauds that may occur if oral contracts were permitted in certain areas of the law. The Indiana Supreme Court recently penned an excellent recitation of the purpose of the Statute of Frauds in considering an argument identical to that offered here by Dr. Aurigemma. In Coca-Cola Co.v. Babyback International, Inc., that court said:

This purpose would be undermined if a party's conduct could form the basis for establishing and enforcing a claimed oral agreement not to be performed within one year simply because the same party's conduct arguably provided the only explanation for the agreement. Such an approach would invite persons to concoct and seek enforcement of fictitious contracts on grounds that the existence of an agreement would provide the only possible explanation for such persons' conduct. In contrast to real estate contracts, where evidence of part performance is relatively clear, definite, and substantial, the nature of evidentiary facts potentially asserted to show part performance of an agreement not performable within one year would be vague, subjective, imprecise, and susceptible to fraudulent application.

Aurigemma v. New Castle Care LLC,2006 WL 2441978 (Del.Super. Aug. 22, 2006).

 [Meredith R. Miller]

A Van for the Eternal Footman

Earlier this week, the New York Times published this article and this video about Mike Thomas, a man who retrieves dead bodies for the county morgue in Detroit.  The article and video paint a grim picture of Detriot.  The deal and Thomas' job description for tax purposes:

Call the job dirty. Call it 14 bucks the hard way — $14 a human body, $9 an animal. He said he made $14,000 last year. He made most of it at night.

His tax forms officially read “body technician.” Unofficially, Mike Thomas calls himself body snatcher, grim reaper, night stalker, bag man. Whatever you call it, it is one man’s life.

A few days later, the NY Times reports that, after the story was published, Thomas was "supsended indefinitely without pay pending investigation" by his employer Professoinal Removal Services.

“I told Mike not to talk to the media, and he did it anyway,” said the company’s owner, Eric Orr. “It’s company policy not to talk about the job.”

But Mr. Orr said the policy is not in writing.

“He really didn’t make the city look too good,” he added. “I saw the video.”

Mr. Thomas, 36, said that he might not have gone to college, but that he knew the meaning of suspended indefinitely: “Permanent vacation.”

Mr. Orr’s county contract is up at the end of this month, but the answering machine for Professional Removal Services advertises a position available: body technician.

“I was just telling my life story,” Mr. Thomas said by telephone. “This is America, right? Don’t we still got freedom of speech?”

He has three children, no car and, now, no job — a bad combination when you live in the poorest big city in America.

The body job paid $14 dollars a corpse, though it did have its drawbacks: picking body parts from Dumpsters, ferrying corpses in an unrefrigerated van.

Mr. Thomas said he hoped his recent notoriety had hatched an entertainment career. Record people have been to his producer’s Web site, he said, and filmmakers are pitching the idea of a reality show based on his life.

“I got some other options,” Mr. Thomas said.

[Meredith R. Miller]

Don't Bogart that Carbolic Smoke Ball My Friend

Gearing up to teach one of my favorite old chestnuts, I was reminded of these two posts by Frank: Today in History, Mrs. Carlill Reads the Paper and Today in History, The Argument in Carbolic Smoke Ball.  At the very least, some captivating visual aides and a good historical anecdote.

[Meredith R. Miller]

eBay User Agreement Enforced (Twice!)

The eBay user agreement has to be one of the most widely read/entered-into contracts of all time.  eBay claims nearly 200 million registered users, all of whom putatively entered into the agreement.  Yet, despite this ubiquity, surprisingly few court cases have addressed its validity.  Until very recently, I knew of only three: Bergraft (an unpublished NJ state trial court opinion), Ploharski (an unpublished ruling from ND Ga), and Grace (a CA appellate court case that was subsequently depublished by the CA Supreme Court).

Then, in the last 10 days, two cases addressing eBay's user agreement showed up in Westlaw, including what I think is the first binding appellate court precedent (now that the Grace case is depublished).  Both cases efficiently, and without much fuss, upheld the formation and terms of the eBay user agreement.

In Nazaruk v. eBay, 2006 WL 2666429 (D. Utah Sept. 14, 2006), the plaintiff sued over feedback left in eBay's feedback forum.  eBay moved to dismiss based on (among other things) improper venue due to the mandatory venue clause in the user agreement.  The court agreed.  This must be particularly satisfying for eBay because a previous case, Comb v. PayPal, had deemed its mandatory arbitration clause unconscionable (the case interpreted PayPal's agreement, not eBay's, but they were virtually identical at the time).

In Durick v. eBay, 2006 WL 2672795 (Oho Ct. App. Sept. 11, 2006), the plaintiff tried to sell some items that were putatively prohibited by eBay's user agreement.  eBay suspended the plaintiff, who then sued eBay claiming that it was in breach of contract for suspending him.  The court found that eBay's user agreement was binding on the plaintiff, it clearly prohibited the items, and thus eBay didn't breach the agreement by suspending him. 

Among other interesting aspects, the actual terms restricting the items in question were located in two policies that were incorporated by reference into eBay's general prohibited items policy, which in turn was incorporated by reference into eBay's user agreement.  Thus, like the user interaction process in the Specht case, the restrictions were two links away from the page where the user clicked "I agree."  The court didn't seem fazed at all by this multiple-level incorporation by reference; it was not even acknowledged expressly.

[Eric Goldman]

New Consumer Law and Policy Blog

A new consumer law and policy blog has been launched, hosted by the Consumer Justice Project (part of Public Citizen's Litigation Group).   The blog is coordinated by Deepak Gupta from Public Citizen Litigation Group and Jeff Sovern of St. John's University School of Law, and will include contributions from a diverse group of lawyers and law professors who practice, teach, or write about consumer law and policy.  You can reach the blog at www.clpblog.org.

[Carol Chomsky]

Contracts Prof Weekly Spotlight: Ronald J. Colombo

Ronald J. Colombo (Hofstra University)

B.S., Cornell University
J.D., New York University School of Law

Professor Colombo has joined Hoftra University Law School, where he will teach Contracts, Securities Regulation, and Business Organizations.

My research focuses primarily on corporate and securities law and, more specifically, the application of non-economic principles and norms to these fields.  Before joining the Hofstra faculty in 2006, I served in the Complex Global Litigation Group of Morgan Stanley & Co. Incorporated as Vice-President and Counsel. In this position, I supervised investigations, litigations, and regulatory inquiries affecting Morgan Stanley’s investment banking franchise. Prior to that, I practiced as a litigation associate at the New York office of Sullivan & Cromwell, where, among other things, I represented corporate and banking clients in civil and criminal investigations conducted by the S.E.C., the U.S. Attorney’s Office, and the Federal Reserve Bank; in matters before state courts, federal courts, and arbitration panels; and in appeals before the Third Circuit, the D.C. Circuit, and the U.S. Supreme Court. From 2000 – 2003, I also served on the Committee on Professional and Judicial Ethics of the Association of the Bar of the City of New York.

I graduated, magna cum laude, from N.Y.U. School of Law.  At N.Y.U., I served as a Note & Development Editor of the N.Y.U. Law Review, published a note on the clergy-penitent evidentiary privilege, interned at the Federal Defender Division of the Legal Aid Society in Brooklyn, N.Y., and was elected to the Order of the Coif. Immediately following graduation, I clerked for Judge Jerry Smith of the U.S. Court of Appeals for the Fifth Circuit.

Notwithstanding my dedication to law and teaching, my pride and joy remains my three children:
Isabella (4 yrs); Christina (2 yrs); and Ron Jr. (6 mos.).

And if any time remains after the day is done, I might be found in front of a television or radio watching or listening to a N.Y. Yankees ballgame.

Limitation on Liability: Burning Down the House

Plaintiffs equipped their home in Lexington, Kentucky, with an ADT fire alarm system. ADT retained title to the alarm system and provided a monitoring service in return for a monthly fee.  Plaintiffs' house was destroyed by an accidental fire. The alarm malfunctioned and failed to inform the local fire department of the fire. Plaintiffs' contract with ADT contained the following clause limiting ADT’s liability to $250 as liquidated damages in the event of an equipment malfunction:

LIMIT OF LIABILITY--IT IS UNDERSTOOD THAT ADT IS NOT AN INSURER, THAT INSURANCE, IF ANY SHALL BE OBTAINED BY THE CUSTOMER AND THAT THE AMOUNTS PAYABLE TO ADT HEREUNDER ARE BASED UPON THE VALUE OF THE SERVICES AND THE SCOPE OF LIABILITY AS HEREIN SET FORTH AND ARE UNRELATED TO THE VALUE OF THE CUSTOMER'S PREMISES. ADT MAKES NO GUARANTY OR WARRANTY, INCLUDING ANY IMPLIED WARRANTY OR MERCHANTABILITY OR FITNESS THAT THE SYSTEM OR SERVICES SUPPLIED, WILL AVERT OR PREVENT OCCURRENCES OR THE CONSEQUENCES THEREFROM, WHICH THE SYSTEM OR SERVICE IS DESIGNED TO DETECT. IT IS IMPRACTICAL AND EXTREMELY DIFFICULT TO FIX THE ACTUAL DAMAGES, IF ANY, WHICH MAY PROXIMATELY RESULT FROM FAILURE ON THE PART OF ADT TO PERFORM ANY OF ITS OBLIGATIONS HEREUNDER. THE CUSTOMER DOES NOT DESIRE THIS CONTRACT TO PROVIDE FOR FULL LIABILITY OF ADT AND AGREES THAT ADT SHALL BE EXEMPT FROM LIABILITY FOR LOSS, DAMAGE, OR INJURY DUE DIRECTLY OR INDIRECTLY TO OCCURRENCES OR CONSEQUENCES THEREFROM, WHICH THE SERVICE OR SYSTEM IS DESIGNED TO DETECT OR AVERT; THAT IF ADT SHOULD BE FOUND LIABLE FOR LOSS, DAMAGE OR INJURY DUE TO A FAILURE OF SERVICE OR EQUIPMENT IN ANY RESPECT, ITS LIABILITY SHALL BE LIMITED TO A SUM EQUAL TO 10 OF THE ANNUAL SERVICE CHARGE OR $250, WHICHEVER IS GREATER, AS THE AGREED UPON DAMAGES AND NOT AS A PENALTY, AS THE EXCLUSIVE REMEDY, AND THAT THE PROVISIONS OF THIS PARAGRAPH SHALL APPLY IF LOSS, DAMAGE OR INJURY IRRESPECTIVE OF CAUSE OR ORIGIN, RESULTS DIRECTLY OR INDIRECTLY TO PERSON OR PROPERTY FROM PERFORMANCE OR NONPERFORMANCE OF OBLIGATIONS IMPOSED BY THIS CONTRACT OR FROM NEGLIGENCE, ACTIVE OR OTHERWISE, OF ADT, ITS AGENTS OR EMPLOYEES....

Plaintiffs argued that the limitation of ADT’s liability should not be enforced. First, they contended that the contract for the alarm service was one of adhesion. The court disagreed because the contract, while a standardized form, was not a “take-it-or-leave-it” proposal. Rather, the contract provided that plaintiffs could pay ADT more to assume a greater liability – the plaintiffs, thus, could have bargained for more favorable terms.

Plaintiffs next argued that the contract was unconscionable. The court also rejected this contention, holding that the limitation-of-liability clause was not one-sided, oppressive nor unfairly surprising. While the language of the clause was located on the back of the contract document, and plaintiff signed on the bottom front of the document, near the signature block, the contract stated in bold, capital letters:

ATTENTION IS DIRECTED TO THE LIMITED WARRANTY, LIMIT OF LIABILITY AND OTHER CONDITIONS ON REVERSE SIDE.

The court noted that the language stood separate and apart from the rest of the paragraphs of the contract and was easily readable, not unduly lengthy and not couched in vague or obscure language. The court also noted that one of the plaintiffs was a “highly educated medical doctor” who read the document before signing it.

Plaintiffs also argued that the limitation of ADT’s liability was an unenforceable penalty. The court disagreed and enforced the liquidated damages clause:

Damages based on a breach of the contract by [ADT] would have been difficult, if not impossible, to ascertain because they did not contract to assume the duties of an insurer and did not know the value of the home, its contents, or the extent of any possible fire damage that might result. Additionally, the $250.00 limitation of liability amount represents nearly one year of monitoring fees and is reasonably proportionate to the damages expected from a breach of a $24.00 per month monitoring agreement. Accordingly, we hold that the $250.00 contemplated under the agreement is a proper measure of liquated damages and does not constitute an unenforceable penalty.

United Services Auto. Ass'n v. ADT Sec. Services, ___ S.W.3d ___, 2006 WL 2578019 (Ky. App
Sep. 8, 2006).

[Meredith R. Miller]

UCC Legislative Wrap-up

Governor Arnold Schwarzenegger signed SB 1481 yesterday, making California the 22nd state to have enacted Revised Article 1 and the 24th state to have enacted Revised Article 7.  SB 1481 makes California the 22nd state to reject uniform R1-301 and the sixteenth to adopt uniform R1-201(b)(20).

Massachusetts HB 3731 appears to be going nowhere until at least 2007.  So, barring some unexpected development elsewhere this fall, the enactment of SB 1481 should bring to a close a fairly successful season for Revised Article 1 with eight adoptions (Arizona, California, Colorado, Kentucky, Louisiana, New Hampshire, North Carolina, and West Virginia).

[Keith A. Rowley]