ContractsProf Blog

Hell.com: hot address?

This past Friday, the domain name Hell.com went up for sale.  Before the auction, the W$J reported (subscription required):

Hell.com is scheduled to be offered in a live auction organizers predict will draw bids of more than $1 million. The hot market for domain names, the addresses people often type in for Web sites, is being fueled by the surge in Internet advertising and the ease with which domain owners can make money from ads brokered by the likes of Google Inc. and Yahoo Inc.

Sex.com sold for about $12 million earlier this year and Diamond.com changed hands for $7.5 million. The big-money domain-name sales echo an earlier boom, when Business.com fetched $7.5 million in 1999. Today's live auction of 300 names, by Seevast Corp.'s Moniker unit, includes more than a handful it predicts will generate bids of more than $1 million, including Iran.com, Auction.com and Elections.com.

The company that owns Hell.com marketed the sale as "the opportunity to redefine what hell means, at least on the Internet."  The company's founder set the reserve price at $2.3 million; but a domain-name appraiser put Hell.com's value at $625,000 -- based (of course?) on comparison to the revenue from advertisements on Heaven.com.

Yesterday, the W$J reported: "Hell.com failed to sell during a live auction of Internet domain names on Friday, as no bidders met the $2.3 million reserve price set by its seller."

[Meredith R. Miller]

Center for Contract and Economic Organization at Columbia

Columbia Law School has formed the Center for Contract and Economic Organization.  A description of the Center's mission is available here.

[H/T: David Hoffman at Concurring Opinions]

[Meredith R. Miller]

A $139 Million Elbow

I live in Valparaiso, Indiana, and so my New Yorker comes long after my friends back in New York City have lost all interest in its content.  So forgive me if you have moved on, but I was struck by this Nick Paumgarten entry in Talk of the Town.  The article recounts not one but two broken promises that apparently will not result in law suits.

The subject of the first promise is a celebrated Picasso painting, "Le Reve," owned by Steve Wynn, a casino magnate and art collector.  Wynn had recently agreed to sell the painting to a friend for $139 million.  The painting had been inspected and the only performance remaining on the contract was the actual exchange of the painting and the money. 

Before that exchange could take place, however, Wynn decided to show the painting to some friends, who were visiting from New York.  While so doing, Wynn accidentally put his elbow through the painting.  Understandably, Wynn was initially upset by his blunder ("Oh. shit. Oh, man."), but after he and his out-of-town guests shared a six-litre bottle of Bourdeaux, he was inclined to be more philosophical: "It's a picture, it's my picture, we'll fix it."  Wynn concluded that the exchange was never fated to occur.  Relying on the implied elbow-of-god provision in the purchase and sale agreement, Wynn called his friend and told him the deal was off.

The second promise relates to the out-of-town guests.  They all promised not to discuss the incident.  But Nora Ephron has since seen the New Yorker article and considers herself released from her promise.  Speculation abounds as to who was the original leaker.

[Jeremy Telman]

Limerick of the Week

It's a bit late in the season, but I always like to introduce the UCC with a Limerick:

There once was a man named Llewellyn
Commercial contracts' Megellyn
All stand in awe
Of his modernized lawe . . .
Hey!  He modernized contracts, not spellyn!

[Jeremy Telman]

Contracts Prof Weekly Spotlight: Jamie Fox

James W. Fox Jr. (Stetson University College of Law)
B.A., University of North Carolina
J.D., University of Michigan Law School

Jamie Fox is a Professor of Law at Stetson University College of Law in Gulfport, Florida. 

I have been at Stetson since 2000, before which I taught as a visitor at Mercer University Law School.  After law school in Ann Arbor, I clerked for Judge Phyllis Kravitch on the Eleventh Circuit and worked at Covington & Burling in Washington, D.C., where, among other things, I had the pleasure of serving as a temporary attorney at Neighborhood Legal Services.  I am also currently President of the Board for Gulfcoast Legal Services.

I write and teach in the areas of American legal history, contracts, and poverty law.  I have recently written articles on the Reconstruction and Jim Crow eras, and am currently exploring the intersection of mid-nineteenth century contract law, contract ideology, and the implementation of the Fourteenth Amendment through the Freedmen's Bureau.  I am also interested in the connections between poverty law and contract, particularly under the present regime of responsibilities-oriented welfare programs.  When I am not writing or teaching, I spend most of my time with my wife, Maria, and our three children, Nicholas (8), Luke (6), and Grace (2).  And, I have to say,raising children keeps teaching me surprising lessons about legal formalism, norms, interpretation, and excuse that weirdly affect my thinking about contract law.  In whatever time that remains I enjoy reading even more about history and theory or watching grainy documentaries (my wife, a literature scholar and fiction fanatic, finds this deeply odd).  I also enjoy college basketball (as a Carolina grad this might more aptly be described as an obsession), cooking (and, yes, eating), and a very occasional game of golf.

Yetis, Chickens, and Other Urban Myths

A propos of Meredith's earlier post on urban legends... Did you ever notice how there are some urban legends about law schools and universities that never die?  Like the old saw (debunked here) that if your roommate commits suicide, you get a 4.0?  Or the one about the professor stuck in the law school during an ice storm, who had to raid the vending machines for sustenance?   

Well, when I started teaching contracts three years ago, a colleague at Cumberland told me that he knew of a professor who dressed up in a chicken costume once a year.  The costume went with a particular lesson on the interpretation of the term “chicken” in a contract. See Frigaliment Importing Co. v. B.N.S. Int’l Sales Corp., 190 F. Supp. 116 (1960).  It’s truly a casebook classic, and Judge Friendly’s opinion begins in high dudgeon by saying “The issue is, what is chicken?”  (It just gets better from there…).

Anyway, I thought that this claim about the chicken outfit was just an effort by my colleague to pull my leg.  A practical joke that could result in my embarrassment (since he seemed to imply that any contracts teacher worth her salt would of course don a chicken costume).  I chalked it up to an urban legend – until I asked the ever fabulous AALS contracts listserve about it.  A couple people mentioned names of professors who they thought had dressed up as chickens, but those professors never wrote in to confirm, so I was unwilling to take that as proof.  One professor wrote in to say that of course he dressed as a chicken, as opposed to the other days when he dressed as a duck or a swan.  Somehow I don’t think he was serious.

But then, the other day, I got independent confirmation from an anonymous source.  Two photos.  Not an urban legend.  The chicken lives!

[Miriam Cherry]

Texas Supreme Court on Consideration and Covenants Not to Compete

This from Workplace Prof Blog:

The Texas Supreme Court last week changed its law about when such noncompetition agreements are supported by adequate consideration.  In Sheshunoff Management Services, Inc. v. Kenneth Johnson and Strunk & Associates, No. 03-1050 (Tx. Oct. 20, 2006), the court found that a unilateral promise by the employer may support a covenant not to compete.  More specifically, the court held:

In this case we revisit the Court’s 1994 decision in Light v. Centel Cellular Co. and again consider the enforceability of covenants not to compete in the context of at-will employment. The question today is whether an at-will employee who signs a non-compete covenant is bound by that agreement if, at the time the agreement is made, the employer has no corresponding enforceable obligation. Under Light, the answer to that question was always “no.” Today we modify our holding in Light and hold that an at-will employee’s non-compete covenant becomes enforceable when the employer performs the promises it made in exchange for the covenant. In so holding, we disagree with language in Light stating that the Covenants Not to Compete Act requires the agreement containing the covenant to be enforceable the instant the agreement is made.

[Meredith R. Miller]

Up in Smoke

Well, the tale described here about the man who collected on an insurance policy after his cigars went up in smoke: as suspected, it is likely an urban myth.

The antecedent of the legend?  Possibly a joke about accountants that goes something like this:

"He's the kind of accountant you've got to admire. Last year he deducted eighty cartons of cigarettes from my income tax. Called it loss by fire!"

There is even a song out there about the legend.

[Meredith R. Miller -- h/t Skipp C. Galythly]

Anchoring and The Psychology of Selling

There is an interesting article in the LA Times about the psychology of selling a home.  The story goes like this: say you bought your home ten years ago for $250,000.  Now you're thinking of selling it.  You put it on the market for $600,000.  No takers.  You reduce the price to $575,000, then to $550,000.  An offer finally comes in for $520,000, which you reject.  Then, you take the house of the market and wait for "better times" to sell.  Apparently, this is common in places where the real estate market was previously much "hotter."  Why are homeowners doing this?  Is this behavior rational?  What is the right price for your house?

There are at least two ways for the seller to look at the situation: (1) $520,000-250,000 = I've more than doubled my money considering what I paid 10 years ago or, alternatively, (2) $600,000 - $520,000 = feels like a sizable loss because I asked for $80,000 more.   Which one is the rational view?  Perhaps cognitive psychology helps explain the behavior:

Decades of research in decision-making has taught us that people depend a great deal on such anchors, or frames of comparison, in assessing the value of any deal. Unlike expectations, which are consciously held attitudes, people are influenced by anchors without even realizing it. If you ask college students if the average price of a textbook is more or less that $7,000, they look at you like you're crazy and say "less, of course." If you ask other students if the average price of a textbook is more or less than $12, they wonder if you've been asleep for 30 years and say "more, of course." Then ask both groups of students what they think the average price of a textbook actually is, and the first group will give an estimate that is more than twice the second group's. Even though the starting point that you've imposed on each group ($7,000 or $12) is absurd, it nonetheless anchors their subsequent estimate, though they don't realize it.

Is $279 a lot of money to spend on an automatic bread maker? When Williams-Sonoma first marketed these then-novel gadgets more than 20 years ago, no shopper knew what a bread maker ought to cost, and Williams-Sonoma didn't sell a lot of them. Then it introduced a deluxe, $450 model. The company didn't sell many of these either, but sales of the $279 model went through the roof. The deluxe bread maker made the regular one seem like a bargain. Conclusion: We are affected by anchors whether it's rational or not, whether we want to be or not.

And so, when irrational exuberance induces people in hot housing markets to put very high asking prices on their houses, the asking price, and not their original purchase price, will be the anchor for some, and having to come down from that price will hurt. How can $520,000 sting so much when it's actually a huge capital gain? Because another thing we have learned from research on decision-making is that people hate to suffer losses — and they feel far more pain from the loss of a sum of money than they experience pleasure from the gain of the same sum.

* * *

Knowing these quirks in decision-making helps us understand why some people take their houses off the market even when they stand to make a very large profit by selling them. Having been seduced — by real estate agents, by the media, by their neighbors — to set a high anchor, they will feel like losers even when they double their money.

The effects of "anchoring" permeate all of our decisions: political choices, choices whether to sell or hold stocks.  This is not the newest of ideas in academic circles, but, as evidenced by the newspaper article, these ideas are becoming part of popular psychology. 

[Meredith R. Miller]

Grasso's Compenation: The Contracts Counterclaims

In a 72-page opinion, Justice Ramos of the New York Supreme Court's Commercial Division, denied Richard Grasso's motions to dismiss claims broght against him by the State of New York and granted motions dismissing Mr. Grasso's counterclaims.  The full opinion can be found on the Commercial Division's website (Index No. 401620/2004, Motion No. 28).  According to press reports, the ruling will require Grasso to repay up to $100 million of a $140 million payment he received in 2003 as compensation for his services as CEO and Chairman of the Board of the New York Stock Exchange. 

Grasso brought a counterclaim for breach of contract, alleging that he was entitled to $6.2 million in benefits because the NYSE terminated him without cause in 2003. Justice Ramos dismissed the counterclaim, even assuming that any such claim had not been waived when Grasso voluntarily waived entitlement to benefits beyond the $140 million already paid, on the ground that Grasso's employment agreement provided for termination benefits only upon written notice of termination and no such written notice was provided.

Justice Ramos conceded that the result was harsh:

Though harsh, the Court is compelled to hold that without a written ntoice, no matter the circumstances, Mr. Grasso must fail because a written notice is required by all of the contracts he signed (Ramos Oct. 18 2006 Op. at 18).

Still, he viewed his ruling as compelled by prior precedent and by Section 15-301(4) of New York's General Obligations Law.

Stay tuned, as Grasso plans an appeal.

[Jeremy Telman]

Limerick of the Week

Judge Cardozo seems not to have been a slave of fashion.  I wonder what prompted the supersilious tone with which Wood v. Lucy, Lady Duff-Gordon begins.  Be that as it may, this is a highly Limerick-worthy case:

The Titanic's wreck, that was rough,
But nothing could sink Lady Duff!
Lucy's couture
Is now de rigeur
But Wood gets to market her stuff.

[Jeremy Telman]

Peer Reviewers: Careful What You Say

A peer review is undertaken by a physician's peers.  So who reviews the peers?  Answer: A jury.

After Dallas's Presbyterian Hospital suspended a physician's privileges after  a negative peer review, he sued, alleging (among other things) breach of contract, and claiming that the physicians who reviewed him were in fact competitors.  A jury agreed in 2004, socking the physician who led the review with $142 million in damages and nailing two others who participated with $32 million in damages each.  It added another $161 million from the hospital for good measure.

The hospital and the physicians appealed, and a judge has now cut the amount to $22.8 million, with a mere $12.8 million coming from the lead physician.

As your mother told you, if you can't say something nice, don't say anything at all.

[Frank Snyder]

Ono: Lennon Owed More Royalties

Yoko Ono, the late John Lennon's widow, is suing EMI Records for $10 million, claiming that the U.K. label systematically underpaid royalties on Lennon's solo works.  A spokesman for EMI says that recording contracts are so complicated that "differences of opinion" about the amounts due to artists are common.

[Frank Snyder]

Soccer Star Hit With $6.3 Million Breach: It Could Have Been Worse

It's not clear from the story why, but a Spanish court has held that 23-year-old soccer player Iban Zubiaurre won't have to pay the full $41.4 million required under his contract with the Real Sociedad club, after he signed with its arch-rival with one year left on his contract.  Iban Zubiaurre's contract apparently contained the buyout clause in the event he wanted to leave early, but a Spanish court has cut the damages down to $6.3 million.

An interesting feature of the case is that the Basque fullback has been barred from playing soccer until the dispute with his former club is resolved.

[Frank Snyder]

The Right to Destroy

Steve Wynn, a hotel/casino magnate in Las Vegas, apparently destroyed his Picasso, “The Dream” after jostling it in an attempt to point out a feature to guests.  As the full news story described:

"Smack in the middle ... was a black hole the size of a silver dollar. 'Oh s---,' he said. 'Look what I've done. Thank goodness it was me.'"

Wynn's office on Tuesday confirmed the story, an account of which also appeared in this week's The New Yorker.

He had already sold (but not delivered) the painting for $139 million.  Of course, it would have made for a more interesting contracts problem if Wynn hadn’t done the honorable thing and agreed to keep and repair the painting!

[Miriam Cherry]

Contracts Prof Weekly Spotlight: Shandrea Solomon

Shandrea Solomon (Phoenix Law)
B.A., Southern University A&M College
J.D., Loyola University School of Law (New Orleans)

Shandrea Solomon has joined the faculty of Phoenix School of Law as an Assistant Professor.  Among other subjects, she teaches contracts.

She received her J.D. in 1994 from Loyola University School of Law, New Orleans, where she accrued several honors and awards including the Shell Oil Scholarship, Trial Practice Book Award, Moot Court membership, and recognition for her skills in Mediation & Arbitration. She received her Bachelor of Arts in English from Southern University A&M College in Baton Rouge, Louisiana, where she graduated cum laude. She received several honors and awards, including the President's Scholarship, Alumni Scholarship, Lambda Iota Tau English Fraternity recognition, and Outstanding Student Awards.

Prior to joining PhoenixLaw's faculty, Professor Solomon held positions at several major schools. She was assistant to the dean and adjunct professor at the University of Mississippi Law School, director of admissions and special programs at the University of Florida College of Law, and the vice president of student affairs at Edward Waters College in Jacksonville, Florida. She also interned with ProServ Sports Agency in Phoenix and the Minnesota Vikings Football Club.

Her research interests cover several facets of the law, with a focus on affirmative action and diversity in legal education, but also contracts, criminal law and procedure, and sports and entertainment law. She is a member of the Louisiana Bar Association, National Bar Association, and Delta Sigma Theta Sorority, Inc.

Professor Solomon is passionate about community service. She serves as a faculty advisor to the Phoenix School of Law Family Advocacy Pro Bono Project, a collaborative service project of PhoenixLaw, the Salvation Army – Elim House, and the Volunteer Lawyers Project of Maricopa County. The Project provides services to survivors of domestic violence. She also sits on the board of the Literacy Volunteers of Maricopa County, an organization that addresses adult literacy issues in Arizona. Other community-based activities with which she is involved include the Arizona Cardinals Community Service Wives/Significant Others Foundation, Phoenix Rescue Mission, Boys & Girls Club, Cardinals Kids Camps, Salvation Army Annual Canned Food drive, the Phoenix Women’s Sports Foundation, and Habitat for Humanity.

Professor Solomon and her husband, Richard, defensive backs’ coach with the Arizona Cardinals Football Club, reside in Gilbert, Arizona.

Tom Waits on Commerce

Tom Waits performing "Step Right Up" in 1977.  Mostly accurate lyrics/translation available here.   ["You got it buddy: the large print giveth and the small print taketh away..."]

Enjoy!

[Meredith R. Miller]

FW: Fw: Fwd: FWD: Best Lawyer/Insurance Story of the Year...

Don't you love those forwarded, forwarded, forwarded, forwarded emails?  This is why someone invented infinity.  Well, my dear friend's mother (Ada) sent along this one, probably because I'm a lawyer.  The story (of course) proclaims itself to be true, and I paste it here (below) in its entirety -- including original emphasis and self-conscious narration (from an unknown narrator many forwards back?).  Who cares if it is true - the lesson to law students: stay awake in both contracts and criminal law.

Charlotte, North Carolina:

A lawyer purchased a box of very rare and expensive cigars, then insured them against, among other things, fire.  Within a month, having smoked his entire stockpile of these great cigars and without yet having made even his first premium payment on the policy the lawyer filed a claim against the insurance company. In his claim, the lawyer stated the cigars were lost in a series of small fires.

The insurance company refused to pay, citing the obvious reason, that the man had consumed the cigars in the normal fashion. The lawyer sued....and WON!

Now stay with me...

Delivering the ruling, the judge agreed with the insurance company that the claim was frivolous.

The judge stated nevertheless, that the lawyer held a policy from the company, which it had warranted that the cigars were insurable and also guaranteed that it would insure them against fire, without defining what is considered to be "unacceptable fire" and was obligated to pay the claim.

Rather than endure lengthy and costly appeal process, the insurance company accepted the ruling and paid $15,000 to the lawyer for his loss of the cigars lost in the fires.

NOW FOR THE GOOD PART...

After the lawyer cashed the check, the insurance company had him arrested on 24 counts of ARSON!!!

With his own insurance claim and testimony from the previous case being used against him, the lawyer was convicted of intentionally burning his insured property and was sentenced to 24 months in jail and a $24,000 fine.

This is a true story and was the First Place winner in the recent Criminal Lawyers Award Contest.

[Meredith R. Miller]

Blog Juiced

America is, if nothing else, the land of ratings.  Whether it's a TV show or a toaster, there's somebody out there who'll give you a ranking.  It's naturally interesting to know that Maria Sharapova is the World's 27th Sexiest Woman, and that Pittsburgh is the World's 39th Most Livable City, but what about something really important, like blogs?

Well, the good folks at Blog Juice are already on the job.  They've got a handy automatic calculator that can help you determine just how great your favorite blogs are, with their Blog Juice Calculator.  Check it out.

Turns out that ContractsProf has a Blog Juice rating of 4.8.  We're not sure whether that's good or bad, exactly.  As of the moment we're tied with The Poker Chronicles, a point or two behind The Cancer Blog, but well ahead of Climate Crisis.  Halfway between cancer and global warming sounds about right for a blog on contract law, I suppose.

[Frank Snyder]

Rowley on Farnsworth on Mistake

The late Allan Farnsworth was one of the titans of 20th century contract law.  His last major work was Alleviating Mistakes: Reversal and Forgiveness for Flawed Perceptions.  Now out from the Michigan Law Review is a review of that work by Keith A. Rowley (UNLV), called To Err is Human.  Rowley notes that Alleviating Mistakes is a work that "delves into how contract, criminal, and tort law, and equity deal with factual and legal mistakes and the rationale for each substantive body of law’s similar or dissimilar treatment of various types of mistakes."

Plus, if you've never quite got the distinction between being ignorant of a fact and being mistaken about it, it's a good primer.

[Frank Snyder]