ContractsProf Blog

On Urban Cowboys, Tanning Beds and Exculpatory Clauses

In preparation for a class discussion about public policy and the enforceability of exculpatory clauses, I did a little research on New York Law.  N.Y. General Obligations Law § 5-326 provides that:

Every covenant, agreement or understanding in or in connection with, or collateral to, any contract, membership application, ticket of admission or similar writing, entered into between the owner or operator of any pool, gymnasium, place of amusement or recreation, or similar establishment and the user of such facilities, pursuant to which such owner or operator receives a fee or other compensation for the use of such facilities, which exempts the said owner or operator from liability for damages caused by or resulting from the negligence of the owner, operator or person in charge of such establishment, or their agents, servants or employees, shall be deemed to be void as against public policy and wholly unenforceable.

In other words, an agreement waiving liability for negligence on the part of an owner or operator of a pool, gymnasium or place of amusement or recreation (or similar establishment) is not enforceable. 

My research revealed that the statute has (quite unsurprisingly) lead to litigation about what constitutes a “place of public amusement or recreation, or similar establishment.”  And, this question of statutory interpretation leads to a story about mechanical bulls (Meier v. Ma-Do Bars, Inc., 106 A.D.2d 143 (3d Dept. 1985). 

Here’s what happened.  It is the early 1980’s, presumably after or around the time of John Travolta’s brilliant performance in Urban Cowboy.  Plaintiff goes to a bar and observes other patrons riding a mechanical bull.  Here's a description of the scene:

The device simulated the spinning and bucking of actual bulls as they performed when ridden in rodeos. The participants attempted to ride the device in the same manner as animals are ridden. It must be assumed that when the device was ridden by patrons of the bar, a rodeo atmosphere was created in which satisfaction was derived from being able to stay on the bull for the predetermined period of time. That it was anticipated that some riders would be unable to stay on the bull was indicated by the fact that air mattresses were spread on the floor surrounding the device.

After observing other patrons ride the mechanical bull, plaintiff paid a $2 fee and signed a waiver of liability.  Plaintiff took a ride, leading to serious injuries (and I am in no way intending to make light of plaintiff's injuries, which are not specified in the court opinion).  Is the exculpatory clause enforceable?  Is this the type of situation/setting contemplated by the statute?  The appellate court held:

In our view, the instant case is a classic example of those situations which the Legislature had in mind when it extended the declaration of public policy in the General Obligations Law to apply to places of amusement and similar establishments. The mechanical bull was an amusement device for which plaintiff paid a fee to use and enjoy. That a potential danger existed is exemplified by the owner and operator's requirement that an exculpatory agreement be signed by a user. Defendant created a place of amusement or recreation by the installation of the device. * * * Section 5-326 of the General Obligations Law is controlling and that the agreement is null and void.

What’s the next case?  Ah, the beauty of a system of precedent.  A hairstyling salon with a tanning bed.  Does this constitute a “place of public amusement or recreation, or similar establishment”? (emphasis added).  Held: No.

A hairstyling salon with a tanning bed is not "similar" to a place of entertainment or recreation. The tanning bed may be considered part of the cosmetic service supplied by the defendant. Thus, a properly drafted exculpatory clause would not necessarily be void under the statute. Thus, the cross motion to dismiss the defense is denied.

There have been other interpretations of what constitutes a “place of public amusement or recreation, or similar establishment,” and establishments for educational purposes (even if teaching skydiving) are not within this definition.  (see, e.g., Gross v Sweet, 49 N.Y.2d 102 (NY 1979) (parachuting school held educational and not within scope of statute; exculpatory clause could be enforced); Gaskey v Vollertsen, 110 A.D.2d 1066 (4th Dept 1985) (motor speedway held to be within the scope of the statute; exculpatory clause not enforceable)).

[Meredith R. Miller]

Contracts Prof Weekly Spotlight: Sudha Setty

Sudha Setty (Western New England College School of Law)
B.A., Stanford University
J.D., Columbia University

Sudha Setty recently joined the faculty of Western New England College School of Law, teaching contracts and comparative constitutional law. 

Prior to moving to the Pioneer Valley and starting life as an academic, she was a litigator at Davis Polk & Wardwell in New York for seven years.  At Davis Polk, Professor Setty worked on a wide range of commercial civil litigation matters, enforcement proceedings before the SEC and NASD, and antitrust matters.  Her pro bono practice while at the firm included prisoner’s rights trial, working on challenges to state constitutional ballot initiatives on voter identification requirements, and mentoring high school students.

Professor Setty was a history major at Stanford University, after which she spent a year in Japan teaching English.  That was followed by law school at Columbia, where she was a Harlan Fiske Stone scholar and an editor of the Columbia Journal of Law and Social Problems. She has written in the areas of Title IX and women’s rights, and her scholarly focus is on comparative law.  She spends her free time wearing her Red Sox cap and, now that she’s not in New York City, happily not getting ridiculed for it.

Limerick of the Week

I find everything about Jacob & Youngs v. Kent difficult.  Even the name.  I always want to call it Jacobs & Young.  But this is one of those great Cardozo opinions that, like a great poem, repays re-reading.  And speaking of poems . . .

Kent called for beheading or stripes
When his builder eschewed Reading pipes.
There was no harm financial;
The court found substantial
Performance, ignoring Kent's gripes.

[Jeremy Telman]

When a donor has a change of heart...

This is the season of giving, right? Well, a recurring theme in contract law: wealthy donor pledges piles of money to a non-profit or charitable institution; wealthy donor (or wealthy donor's heirs) renege on the pledge. Recent examples include: FIU, University of Colorado, and Drexel (a la Allegheny College). (Image: Hieronymus Bosch, Death of the Miser).

In "A Prenup for Donors," the W$J reports that charitable institutions are trying to make it more difficult for donors to "renege on their gifts." It presents a delicate balancing act, however. Apparently pledges happen rather informally, without a written, signed pledge of, say, $101 million. If the charitable institution wants some legal assurances, and asks the potential donor to sign a "binding agreement," the institution might "turn off" that potential donor. The donors might feel betrayed by the institutions' lack of trust and "take their money elsewhere." The article reports:

Nonprofits also are beefing up their development offices, recruiting lawyers and former bankers to better document donations and ensure gift agreements are legally sound. At California State University, Monterey Bay, the school's director of planned giving is a former litigator specializing in estate planning. A few institutions, including Drexel University in Philadelphia, even are taking heirs of wealthy alumni to court.

But making sure donors pay up is a delicate balancing act. As with a prenuptial agreement between an engaged couple, too much tough talk could turn off a potential contributor. That's an especially tricky terrain as nonprofits court newly wealthy hedge-fund managers and investment bankers.

Peter Lewis, who made a $101 million pledge to Princeton, his alma mater, in January, says he "wouldn't react real positively" if an institution insisted he sign a legally binding gift agreement. "My word is good," says the former chief executive of insurance giant Progressive. "If they don't trust me they don't have to take the money -- I can go somewhere else. There are plenty of places that are happy to accept gifts without promises." Neither Princeton nor Mr. Lewis would say whether he signed a legally binding gift agreement.

[Meredith R. Miller]

Happy Thanksgiving!

Hope your Thanksgiving is as happy as this turkey's . . . shown here getting a pardon from President Truman.

[Frank Snyder]

Hadfield Named Kirland Professor

Southern Cal contracts prof Gillian Hadfield has been named the Richard L. and Antoinette S. Kirland Professor of Law and Professor of Economics at the L.A. school.  Hadfield has been at USC since 2001, after stints teaching at Toronto and Cal-Berkeley.  She's also director of the school's Center for Law, Economics, and Organization.

[Frank Snyder] 

Enforcing International Arbitration Agreements

The Restatement (Second) of Contracts, of course, defines a "contract" as a "promise . . . for the breach of which the law gives a remedy."  But whether an aggrieved party actually receives the remedy that the "law gives" depends on a lot more than contract law.

In a new paper, Enforcing International Arbitration Agreements in Federal Courts: Rethinking the Court's Remedial Powers, forthcoming in the Virginia Journal of International Law, Daniel S. Tan of Latham & Watkins in New York takes a look at the problem of remedies that arise under private international law. Here’s the abstract:

The area of remedies in private international law is largely unexplored, but provide the very means by which the courts can advance private international law aims such as controlling international litigation and enforcing forum selection. The contractual nature of arbitration agreements and the policy in favor of arbitration make this a good starting point from which a wider remedial framework can be developed.

In practice, the U.S. federal courts invariably enforce arbitration agreements with the statutory remedies in the Federal Arbitration Act. Yet, there is no reason why this should be. Where the statutory remedy is deficient or inappropriate, the courts may appeal to their wider inherent remedial powers to fashion suitable relief. The domestic law of remedies suggests that the courts may use specific and (antisuit) injunctive relief to enforce the parties' right to the arbitral forum, or to award ordinary contractual damages to vindicate what is a straightforward breach of contract. Private international law remedies such as stays of proceedings and nonrecognition of judgments obtained in breach of arbitration agreements are other remedial alternatives that can be used to enforce such agreements. All the same, development of each of these remedies must be done within the context of an overarching remedial scheme - akin to that which exists in domestic law. The domestic law of remedies offers an interlocking set of remedial responses to vindicate wrongs. To effectively control international litigation and improper attempts at forum shopping, the courts must endeavor to develop a similar remedial framework in the private international law context, in order that they may be able to render the most appropriate remedial relief to enforce agreements to arbitrate and advance the policy in favor of arbitration.

[Frank Snyder]

Comcastic Housewives!

The Comcast Corporation and the Walt Disney Company have agreed to a new distribution deal that would bring Disney programming to Comcast's On Demand service.  A few details of the deal have been reported here, for example.  Comcast paid $1.23 billion dollars for the distribution rights to Disney programming and also got a 39.5% stake in E Entermainment Television.  Disney owns ten broadcast television stations, including ABC and the various ESPN joints.  Episodes of ABC hits such as "Desperate Housewives" and "Lost" will be available On Demand within 12 hours of their original broadcasts, which means I can now not watch them whenever I don't want to. 

Actually, On Demand is a wonderful feature.  I never would have finished the article I wrote this summer if I could not have distracted my five-year-old daughter through the 24/7 availability of "Blues Clues" and "Dora the Explorer." 

[Jeremy Telman]

Lord Sandwich Did Not Eat Mexican Food, Except Maybe Chocolate

The question whether a burrito is a "sandwich" for purposes of a restaurant lease has been getting a lot of play among contracts profs.  Based on classroom anecdotes, some of our students agree with the court's conclusion that a burrito, which involves one tortilla instead of two slices of bread, can't be a sandwich.  Some of them, however, dispute the court's remark in dicta that a quesadilla is also not a sandwich, even though it is usually made by layering cheese or other fillings between two tortillas -- the functional equivalent of a grilled-cheese sandwich.  And a taco is much like the kind of half-sandwiches that lots of moms make for kids by folding a single slice of Wonder Bread around the PB&J filling.  Still others argue that the concept of two slices of leavened bread is inherently Eurocentric, and that many cultures have the equivalent of the sandwich without actually slicing loaves of bread.  Spring rolls, for example.  Or maybe samosas.

In any event, Mike Madison (Pitt) has done us all a favor by collecting the documents in the case, including the expert witness affidavits ("a sandwich is rarely served with beans or rice between the slices," avows an editor of Saveur magazine with an apparent straight face, while a writer for Gourmet notes that "nobody would say that they are going to . . . the sandwich shop to get a burrito") in this helpful post.

[Frank Snyder]

NFL Raiders Lose Contract Fraud Dispute

The Oakland Raiders of the National Football League (2-8 and firmly mired in last place) suffered another setback yesterday, when a California appellate court threw out a $34.2 million judgment the team had gained against the Oakland-Alameda County Coliseum.  Raiders had claimed that they had been duped into signing a stadium lease based on the Coliseum's "negligent misrepresentation" that that season tickets had been sold out for the 1995 season.

The appellate panel decided, by a 2-1 vote, that the Raiders had waived their rights to sue on the claim when they subsequently entered into a new lease which contained significant concessions from the Coliseum.

[Frank Snyder]

Weekly Top 10

Lots of things to be thankful for as we head into the Thanksgiving break, not least of which are a slew of interesting papers -- stuff we guarantee you'll enjoy reading a lot more than the essays that will soon be coming your way.  Following are the top ten most-downloaded new papers from the SSRN Journal of Contract and Commercial Law for the 60 days ending November 19, 2006.  good work to be thankful for this week as we head into Lots of good stuff in this week's Top 10 as we head into the Tha

1 (2) Hoffman v. Red Owl Stores and the Myth of Precontractual Reliance, Robert E. Scott (Columbia).

2 (3) Antitrust and Regulation, Dennis W. Carlton (Chicago-Business) & Randal C. Picker (Chicago).

3-tie (4) Friendship & the Law, Ethan J. Leib (Cal-Hastings).

3-tie (8) To Make or to Buy: In-House Lawyering and Value Creation, Steven L. Schwarcz (Duke).

5 (5) Governing Innovative Collaboration: A New Theory of Contract, Matthew Jennejohn (Columbia).

6 (6) The Cost of Norms: Tax Effects of Tacit Understandings, Alex Raskolnikov (Columbia).

7 (7) The Public Responsibility of Structured Finance Lawyers, Steven L. Schwarcz (Duke).

8 (10) Party Autonomy in the Private International Law of Contracts: Transatlantic Convergence and Economic Efficiency, Giesela Ruehl (Max Planck Institute).

9 (-) A Good Faith Revival of Duty of Care Liability in Business Organization Law, Carter G. Bishop (Suffolk).

10 (-) The Market for Contracts, Geoffrey P. Miller (NYU).

[Frank Snyder]

If Fox and HarperCollins Don't Do It, Will They Have Breached?

As everybody now knows (pretty much whether they want to or not), ReganBooks, an imprint of HarperCollins, recently announced that it would publish a book "written" by O.J. Simpson entitled If I Did It.  The book was to be promoted through a two-part interview of Simpson by Judith Regan, the editor of ReganBooks, which was to appear on Fox television.  Regan has explained at some length that she views the book as a form of confession (is she unfamiliar with the semantic power of the word "if"?) and has stated that she was motivated to publish the book becasue she was herself a victim of domestic violence.

As everybody also knows by now, Rupert Murdoch's News Corporation, the corporate parent of both the Fox network and ReganBooks, pulled the plug on both the book and the interview.  And so now only the contracts question remains: will the News Corporation have to pay damages to Simpson for breaching the contract?

The New York Times reports that Simpson likely has already been paid a percentage of his advance, and the News Corporation will likely be contractually obligated to pay whatever else was due under the contract.  But could it be that Simpson is motivated by greed alone?  I doubt it.

[Jeremy Telman]

The Law of the Turkey

I'd hazard a guess that nearly all contract law concepts can be learned with turkey cases (and one chicken case... and maybe one cow case). In the spirit of Thanksgiving, some turkey cases here (In the U.S., this time of year is rough for the turkeys. It is also likely a rough time for purveyors of turkeys, especially if their contracts do not go as planned. Thanksgiving 1917 was certainly difficult for Jacobsen-Reimers Co, a California company. . .) and here (George R. Whaley had been a poultry farmer for some 35 years. For 20 of those years, under oral contract, Whaley supplied turkeys to H&H Poultry Co., a poultry processor. . .).

Have a Happy Thanksgiving!

[Meredith R. Miller]

A $51 Million Conversation

I was a bit perplexed when I read that the Boston Red Sox had agreed to pay $51 million just for the right to talk with Japanese pitcher, Daisuke Matsuzaka.  But National Public Radio has set me straight.  The Red Sox apparently paid for exclusive rights to negotiate with Matsuzaka.  If at the end of 30 days, the negotiations do not yield a deal that will have Yankee fans crying into their spilt milk, the Red Sox get their money back.  In short, the infield fly rule applies to these negotiations.

Poor Boston.  With their luck, they will succeed in getting Matsuzaka, but since the Chicago Cubs have just re-signed Aramis Ramirez and look like they are going to land Alfonso Soriano, the Cubs will now be absolutely unbeatable in 2007. 

If I may use the vernacular.  That's right, baby! The Cubs in 2007.  An absolute lock! *

You read it here first. 

[Jeremy Telman]

*The Contracts Prof Blog and Jeremy Telman make no guarantee as to the accuracy of any of the predictions contained in this post.  If there is any doubt as to the accuracy of any claim or information in this post, the reader is responsible for verifying same against an alternative source.  This post will be subject to periodic revision from April through October 2007 with the full expectation that it and all cache copies of it will be deleted permanently in October 2007 along with a box or two of tissues and one broken heart.

Limerick of the Week

Frank has now deluged us with Too Much Information on Kirksey v. Kirksey.  Alas, Casto and Ricks' research lends no support to the pet theory of some students who read the case.  To wit, whenever I teach this case, at least one student is convinced that Isaac was a bit sweet on Angelico (Antillico), that his love was unrequited and that he avenged himself through eviction.  But the research doesn't disprove the theory either . . . .   And so, the Limerick survives. 

Bwahahaha!

From a house to a hut to the street
Was the course of Ms. Kirksey's retreat.
She could not recover
From her in-law (her lover?)
Who'd nakedly promised a suite.

[Jeremy Telman]

Blockbuster Deal

The New York Times reports that Blockbuster Inc. has reached a deal with Bob and Harvey Weinstein that will give Blockbuster exclusive rights to the Weinstein brothers'  movies through 2010.  The purpose of the agreement seems to be to prevent Netflix, my main source of entertainment, from getting its hands on the Weinstein brothers' films.  In my humble opinion, this deal makes about as much sense as my deal back in the 1970s to release my new muscial performances exclusively in 8-track.

The Weinstein brothers founded the Miramax movie studio, which is now owned by Disney.  [Miramax's recent "The Queen," featuring Helen Mirren, received rave reviews, but I can't comment because it never played anywhere near Valparaiso, Indiana, while the insipid "Marie Antoinette" played nearby for weeks.  Nothing plays in Valparaiso anymore as our only movie theater just closed.  Not that I'm bitter or anything. I'll just put "The Queen" on my Netflix queue.]

The Weinstein Brothers now run the Weinstein Company, and "Bobby," their film about the day Robert Kennedy was assassinated, is to be released today.  According to the New York Times, that film will never darken my door, as it will be covered under the new agreement.  Nor will I be able to add upcoming Weinstein Brother movies, "The Nanny Diaries," or "The Protector," to my queue. 

Pity.  At least I don't have to worry about late fees.

[Jeremy Telman]

The Face of Hamer v. Sidway

Almost all of us teach that old contract law chestnut Hamer v. Sidway, 124 N.Y. 538, 27 N.E. 256 (1891), probably the granddaddy (or at least grand-uncle) of all unilateral contract cases.  Here's a picture of Franklin Sidway (1834-1920), the executor of William E. Story's estate and the putative defendant in the case.

Sidway was a member of a well-connected Buffalo mercantile and shipping clan.  He married the daughter of Elbridge Gerry Spaulding, a Buffalo banker who served as mayor and congressman and who played a major role on the U.S. House Ways and Means Committee in financing the Civil War.  Franklin himself, after a good education and a Grand Tour of Europe, rose to become director and Vice President of the Farmers and Mechanics Nationial Bank -- his father-in-law, perhaps coincidentally, was President -- the role in which he became involved as executor of the Story estate.  He seems to have been cut out for an executor:  a contemporary biography calls him "prudent, conservative, quick of decision, and not afraid of large undertakings."  In the 1850s he had been one of the organizers of the Niagara Base Ball Club, which is famous as one of the first modern baseball clubs.

The family is remembered in the dignified Beaux-Arts Sidway Building in Buffalo.

[Frank Snyder]

Contracts Prof Weekly Spotlight: George W. Kuney

George W. Kuney (University of Tennessee College of Law)

B.A., University of California, Santa Cruz
J.D., Univerisity of California, Hastings College of Law
M.B.A., University of San Diego

George W. Kuney is an Associate Professor of Law and Director of the Clayton Center for Entrepreneurial Law at  University of Tennessee College of Law, where he teaches Contracts, Contract Drafting, Debtor-Creditor, Property, Representing Enterprises and Workouts & Reorganizations.

Professor Kuney was born and raised in San Francisco and was a partner in the San Diego office of Allen Matkins Leck Gamble & Mallory LLP where he concentrated his practice on insolvency and reorganization matters nationwide.  Prior to that he received his training with Howard, Rice, Nemerovski, Canady, Robertson & Falk LLP and Morrison & Foerster LLP. 

Professor Kuney's expertise and scholarly interests relate to business transactions and litigation with an emphasis on acquisitions, recapitalizations, reorganizations and financing. He is a Research Fellow of the Center for Corporate Governance, a multi-disciplinary research center of the University of Tennessee. He is also an Editor Emeritus of the California Bankruptcy Journal and the Business Law News and is currently the editorial advisor to Transactions: The Tennessee Journal of Business Law. He teaches Contracts, Contract Drafting, Property, Debtor-Creditor, Workouts & Reorganizations, and a transactional simulation seminar at UT.  He is an author of Kuney & Lloyd, Contracts:  Transactions and Litigation (West 2006) and the author of The Elements of Contract Drafting (2d Ed. West 2006) and Legal Drafting in a Nutshell (3d Ed. West 2007), as well as a number of law review and other articles.

In addition to his other activities, professor Kuney consults for outside clients on matters related to business law, contracts, Chapter 11, and insolvency. One of his current passions is exploring and advocating the limitations of bankruptcy law as a device to affect non-debtor rights and duties that could not be affected under otherwise applicable non-bankruptcy law. He conducts transactional training seminars and clinics for law students, lawyers, and law firms across the country.

Professor Kuney lives in the Ft. Sanders neighborhood of Knoxville with his wife, Donna C. Looper, also an attorney and an Adjunct Professor.  His interests include architecture, entrepreneurship, history, real estate development, land use, carpentry, hiking, and Lady Vols basketball.

Scott on Precontractual Reliance

The first contract law case I ever taught -- as a visitor in Bill Woodward's class at Temple Law School -- was Hoffman v. Red Owl Stores, 26 Wis. 2d 683, 133 N.W.2d 267 (1965).  It's the casebook staple about precontractual reliance, and it raises two (or maybe four) perennial questions:  (1) When (and why) is it reasonable for someone to rely on a promise that the person knows or ought to know is not legally enforceable?  (2) When (and why) should reliance on an unenforceable promise transmute the thing into an enforceable promise?

In a new paper, Hoffman v. Red Owl Stores and the Myth of Precontractual Reliance, forthcoming as part of the Ohio State Law Review symposium on "Commercial Calamities," Bob Scott (Columbia), takes a look at Hoffman and what he takes to be its misplaced importance in the contract law canon.  Here's the abstract:

Hoffman v. Red Owl Stores is one of the storied cases in modern contract law.  The conventional wisdom is that Hoffman represents the emergence of a new legal rule imposing promissory estoppel liability for representations made during preliminary negotiations.  Yet a review of contemporary case law shows that, in fact, courts require some form of agreement before they will grant recovery for early reliance.  Hoffman's main legacy, therefore, has been as a trap for the unwary lawyer (and unhappy client) who unsuccessfully seek recovery for reliance on preliminary negotiations.  This article asks how the court in Hoffman was able to find liability where other courts have not.  A careful examination of the trial record shows that the conventional understanding of the facts in Hoffman is simply wrong.  The true facts show that the breakdown in the negotiations between Hoffman and Red Owl officials was a product of a misunderstanding as to the nature of his financial contribution to the enterprise, a misunderstanding as attributable to Hoffman's carelessness as to any representations made by Red Owl's agents.  The article then uses a large sample of decided cases to recover the law in action that governs precontractual liability.  This sample highlights the emergence of a new default rule that imposes liability for a failure to bargain in good faith following a binding preliminary commitment.  This new legal duty has been largely unexplored in the casebooks or the secondary literature, in part because of the misplaced attention paid to the unfortunate controversy between Mr. Hoffman and Red Owl Stores.

[Frank Snyder]

Alaska Packers -- The Video Treatment

And if a flag is not enough, you might want to show your students a video that illustrates the problem faced by Domenico and his colleagues in the Alaska Packers case.

As I explain to my students before showing the video, the problems Domenico et al. faced went beyond faulty nets.  In fact, as the video suggests, Alaska Packers' workers were to go to extraordinary lengths to procure salmon for the company.  Given what they had to go through, it's not suprising that they demanded higher pay.  I wouldn't fight a bear for 2 cents a fish.  I mean, I might have in 1902, but I have since learned from Stephen Colbert that bears can be mean.

[Jeremy Telman]