ContractsProf Blog

Semper ubi sub ubi

Okay, stop what you are doing and make sure you are sitting down.  Get this:

Dame Kiri Te Kanawa (at left) is being sued for breaching a $1.55 million contract after she withdrew from a tour with Australian rock star, John Farnham.  The duo was to appear in three "Two Great Voices" concerts, but Te Kanawa backed out after watching a DVD of a Farnham concert and learning that his fans like to celebrate Farnham's great voice by throwing their underwear onto the stage.

I'm not making this up. It's even reported in the New York Times.

Te Kanawa stated that she might feel differently if the underwear were tasteful, or promoted positive views of women (see left, e.g.).  She added that she was devastated that she and her fellow "star-crossed crooner" were splitting up.  As you may recall, Te Kanawa sang at the wedding of Prince Charles and Lady Diana.  "I felt the same connection to John that I sensed Charles felt for his Di," the Diva disclosed in an exclusive interview with the Contracts Profs Blog.  She added that she is not giving up on the idea of a crossover concert.  "I am currently talking with one of your charming American pop stars, Mr. Snoop Doggy Dogg.  Have you heard of him?"

Prediction: this will all blow over when Farnham explains that the underwear was found on stage after his warm-up act, Britney Spears, finished her set.

Okay, I am making some of this up.

[Jeremy Telman]

CISG's Critical Mass Continues to Grow

El Salvador and Montenegro have recently become the 68th and 69th countries to have acceded to, accepted, approved, ratified, or succeeded to the CISG.

Montenegro became a Contracting State effective retroactively to June 3, 2006, when the former Serbia and Montenegro notified the United Nations that it would thenceforth be two countries, with the Republic of Serbia succeeding to, inter alia, Serbia and Montenegro's status as a CISG Contracting State.

El Salvador, which acceded to the CISG on November 26, 2006, will become a Contracting State effective December 1, 2007.

In the interim, Paraguay, which acceded to the CISG on January 13, 2006, will become a Contracting State effective February 1, 2007.

Ghana and Venezuela, which signed the CISG in 1980 and 1981, respectively, have yet to accede to, accept, approve, ratify, or succeed to the CISG.  Therefore, they do not qualify as Contracting States for purposes of Article 1(1)(a).

[Keith A. Rowley]

Revised Article 1 Feeding Frenzy

With the legislative session's opening gavel yet to fall in several states, six state legislatures are already about the business of considering recently-introduced bills to enact Revised UCC Article 1.

Indiana SB 419, Kansas SB 183, Rhode Island SB 105, South Dakota SB 85, and Utah SB 91 are all before their initial committees.  North Dakota HB 1035, by contrast, has already unanimously passed the North Dakota House and is now in the Senate. The Kansas and North Dakota bills represent second chances for Revised Article 1 in those states.  Each state's legislature had a Revised Article 1 bill before it during the prior legislative session.  In addition to these six new bills, long-suffering Massachusetts HB 3731 appears to still be alive but going nowhere.

To date, all twenty-two states that have enacted Revised Article 1 -- Alabama, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Idaho, Kentucky, Louisiana, Minnesota, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, Oklahoma, Texas, Virginia, and West Virginia -- have rejected uniform R1-301 in favor of language similar to pre-Revised 1-105.  Six enacting states -- Alabama, Arizona, Hawaii, Idaho, Nebraska, and Virginia -- have rejected uniform R1-201(b)(20) in favor or retaining a bifurcated good faith standard that requires only "honesty in fact" from non-Article 2 or 2A merchants.

Of the seven pending bills, Indiana SB 419, Kansas SB 183, South Dakota SB 85, and Utah SB 91 include uniform R1-301, while Massachusetts HB 3731, North Dakota HB 1035, and Rhode Island SB 105 eschew it in favor of pre-Revised 1-105.  Kansas SB 183, Massachusetts HB 3731, North Dakota HB 1035, South Dakota SB 85, and Utah SB 91 include uniform R1-201(b)(20).  Rhode Island SB 105 retains the bifurcated good faith standard.  Indiana SB 419 eliminates the bifurcated good faith standard in a more unique way: it retains the pre-Revised 1-201(19) “honesty in fact in the conduct or transaction concerned” definition and deletes the “honesty in fact and the observance of reasonable commercial standards of fair dealing” standard for merchants from current Article 2.

I will continue to monitor and comment on these and other legislative efforts on my website and will try to keep this blog current, as well.  If you are or become aware of unreported developments in any of the foregoing states or legislation in other states, please e-mail me at [email protected].

[Keith A. Rowley]

Limerick of the Week

There was a lot of talk about tobacco barns and Buffaloe v. Hart last week on the Contracts Profs Listserve.  I think we established to our satisfaction that students should come away from their first year in law school secure in the knowledge that tobacoo barns (pictured) are moveable. 

And while we are on the topic of useful knowledge, here is a Limerick memorializing the case:

Acceptance of "goods" was the start
Of Buffaloe's barn deal with Hart.
A torn check was the end,
Evincing a trend
To bind through Llewellyn's black art.

[Jeremy Telman]

Contract and Same-Sex Marriage: Yoshino Op-Ed on Gonzalez v. Green

Just before the new year, in Gonzalez v. Green, a New York trial court "declared valid and in full force and effect" a separation agreement between a gay couple. Kenji Yoshino (Yale) published an op-ed in today's NY Times. Here's his synopsis of the facts:

The case sounds like a contracts question on the New York Bar Exam. Steven Green and David Gonzalez moved in together in 2001. Over the course of their relationship, Mr. Green, whom the court describes as “a person of considerable assets and income,” showered Mr. Gonzalez with gifts, including cars and a ski house.

In 2005, the couple, whose primary residence was in Westchester County, traveled to Massachusetts, which permits resident same-sex couples to marry, and took part in a marriage ceremony on Valentine’s Day. But months later, they decided to end their relationship.

In September 2005, the two men signed a written separation agreement under which Mr. Green paid Mr. Gonzalez $780,000 and Mr. Gonzalez transferred the title of the ski house to Mr. Green. More than a year later, when Mr. Gonzalez filed for divorce, Mr. Green sought to rescind the contract. He argued that because there was no marriage, the contract was invalid. Question: Can Mr. Green get his money back?

[The answer is after the jump.]

Continue reading

Roehm v. Wal-Mart

Ah, where would the blogosphere be if we didn't have Wal-Mart?

Julie Roehm, hired with great fanfare in January 2006 as Wal-Mart's Senior Vice-President for marketing communications, was fired with even greater fanfare in December 2006. 

Wal-Mart, having just settled one high-profile suit and won a significant victory in the Fourth Circuit, now has to deal with a new suit, Roehm v. Wal-Mart Stores, Inc. (the link is to Wal-Mart's removal motion, which attaches the original complaint filed in Michigan state court).  The complaint purports to state claims sounding in breach of contract, fraud and misrepresentation, and claim and delivery.  While press reports suggested that Roehm was fired in part because of an "inappropriate relationship" with her subordinate, Sean Womack, the complaint alleges that she was terminated because she was not "fulfilling the expectations of an officer of the company."  Discovery in this case could be juicy.  Stay tuned.

[Jeremy Telman]

Congratulations....Never Mind.

Thanks to Isaac Samuels (Touro 1L) for bringing this news piece to my attention. It could make for a fun discussion of contract formation and defenses if we imagine that one of the applicants attempted to enroll before the University's follow up email explaining its mistake:

CHAPEL HILL, N.C. - An admissions department e-mail sent from the University of North Carolina at Chapel Hill congratulated 2,700 prospective freshmen this week on their acceptance to the school.

The problem is that none of the applicants have been admitted. They won’t start finding out until March whether they’ve made the cut.

“We deeply regret this disappointment, which we know is compounded by the stress and anxiety that students experience as a result of the admissions process,” Stephen Farmer, the school’s director of undergraduate admissions, said in a news release.

Farmer said two employees accidentally sent the e-mail Tuesday. It began, “Congratulations again on your admission to the University.”

The e-mail was intended to request midyear grades from high school students who already have been accepted to the school.

Admissions officials have sent follow-up e-mails apologizing for the error. They have also e-mailed admissions counselors around the nation to explain the mistake.

About 20,000 people apply each year to UNC Chapel Hill, and the school enrolls about 3,800 new freshmen.

[Meredith R. Miller]

Noncompete "Conventional Wisdom"

Here is a noncompete Q&A from Sunday's NY Times "Career Coach" column. Here's a flavor:

Q. Is there a way to avoid these issues altogether?

A. Not if an employer insists on a noncompete agreement.

Peter Polachi, managing partner at Polachi & Company, an executive search firm in Framingham, Mass., says that because a noncompete agreement has such bearing on future employability, it should be regarded as a crucial facet of a job offer — equivalent to factors like pay and benefits packages.

D. Kevin Berchelmann, president of Triangle Performance, a consulting firm in Spring, Tex., says that if a prospective employer insists on a signed agreement, you have a choice: approve the document or decline it and start your job search all over again.

“Noncompete agreements are not designed to be win-win for employees,” he said. “No matter how much you may not like the idea of a noncompete, if you want the job, you may have to sign.”

[Meredith R. Miller]

Add: Pickfords

Our friend Andrew Tettenborn (Exeter) mentions that during the 19th century Pickfords was a major part of British culture, as witness this scene from Gilbert & Sullivan's Iolanthe (1890):

[Enter Lord Mountararat and Lord Tolloller from Westminster Hall.]
     Celia: You seem annoyed.
     Lord Mountararat:  Annoyed!  I should think so!  Why, this ridiculous protégé of yours is playing the deuce with everything!  To-night is the second reading of his Bill to throw the Peerage open to Competitive Examination!
     Lord Tolloller: And he’ll carry it, too!
     Lord Mountararat:  Carry it?  Of course he will! He’s a Parliamentary Pickford – he carries everything!

[Frank Snyder]

Paternity Contract Invalid on Policy Grounds

A man whose wife has, with his consent, been artificially inseminated with an anonymous donor's sperm cannot escape parental liability by contract, according to a new ruling from a New York state trial court.

In the case, the husband -- who had previously undergone a vasectomy -- reluctantly agreed to his wife's desire to have another child by artificial insemination.  Later, when the couple split before the child was born, they agreed that the husband would not be considered the father of the child.  After the child was born, they again signed an agreement stating that the husband would not be liable.

But that agreement violates public policy, said Justice Eugene Peckham.  New York law provides that the husband of a woman who conceives by artificial insemination with his consent "shall be deemed the legitimate, natural child of the husband."  The parties apparently cannot get around that obligation by contract.  Justice Peckham also apparently ruled that the husband would be estopped from denying paternity in any case, since the child had relied on his prior consent by being conceived and born.

[Frank Snyder]

 

Insuring your Picasso against the Risks of your Elbow

Lloyd's of London has a reputation for "insuring anything": Tina Turner's legs, Brooke Shield's legs, Liberace's fingers, Ben Turpin's crossed eyes. It doesn't seem odd, then, that Lloyd's would also insure a certain Picasso painting (Le Reve) owned by a certain casino magnet (Steve Wynn). Miriam has mentioned "the right to destroy" here before, and Jeremy has discussed the broken promises surrounding Wynn's $139 elbow. Well, it turns out that Wynn had insured the painting and he claims that the tear has decreased its value from $139 to $85 million. He's suing Lloyd's to recover on his policy. Courtesy of The Smoking Gun, here's the latest:

Months after he accidentally poked a hole in a Picasso painting, casino magnate Steve Wynn today sued Lloyd's of London for failing to pay off a $54 million insurance claim. Wynn, who purchased the painting "Le Reve" for $48.4 million in 1997, contends that the painting was worth $139 million when, on September 30, he "accidentally placed a tear" in it while showing the work . . . to friends visiting his Las Vegas office. According to Wynn's U.S. District Court complaint, a copy of which you'll find below, the businessman contends that, as a result of the tear, the painting's value has plummeted to $85 million. He has demanded that Llloyd's pay him the difference in the appreciated value of the painting and its post-damage worth. The day before he punctured the painting, Wynn had entered into an agreement with hedge fund titan Steven Cohen to sell "Le Reve" for $139 million. That deal died after the damage was disclosed to Cohen.

The complaint, adorned with Wynn's Sworn Statement in Proof of Loss.

[Meredith R. Miller]

Weekly Top Ten

Following are the top ten most-downloaded new articles from the SSRN Journal of Contract and Commercial Law for the 60 days ending January 21, 2007.  (Last week's ranking in parentheses.)

1 (1) Busting Blocks: Appropriate Legal Remedies for Wrongful Inclusion in Spam Filters under U.S. Law, Jonathan I. Ezor (Touro).

2 (2) The Perpetual Anxiety of Living Constitutionalism, Ethan J. Leib (Cal-Hastings).

3 (-) The Effect of Contract Regulation: The Case of Franchising, Jonathan Klick (Florida State), Bruce H. Kobayashi (George Mason) & Larry E. Ribstein (Illinois).

4 (3) Solvency Tests, J.B. Heaton (Bartlit Beck Herman Palenchar & Scott LLP).

5 (6) Contracts as Reference Points, Oliver Hart (Harvard-Econ) & John Moore (Edinburgh-Econ).

6 (5) Party Autonomy and Private-Law Making in Private International Law: The Lex Mercatoria that Isn't, Symeon C. Symeonides (Willamette).

7 (4) The Economic Loss Rule and Private Ordering, Jay M. Feinman (Rutgers-Camden).

8 (7) Is an Advertisement an Offer? Why it is, and Why it Matters, Jay M. Feinman (Rutgers-Camden) & Stephen R. Brill (Fox Rothschild LLP).

9 (9) The Structure of Good Faith: A Comparative Study of Good Faith Arguments, Marietta Auer (Munich).

10 (8) Mutually Assured Protection: Toward Development of Relational Internet Data Security and Privacy Contracting Norms, Andrea M. Matwyshyn (Florida).

[Frank Snyder]

Perfect Timing: Parol Evidence under the CISG

Given that I am gearing up to teach MCC-Marble v. Ceramica Nuova D'Agostina, 144 F.3d 1384 (11th Cir. 1998), I was happy to find today in LSN Contracts & Commercial Law (Vol. 8 No. 8,  01/22/2007) that Karen Halverson Cross (John Marshall) has posted to SSRN a piece entitled Parol Evidence under the CISG: the 'Homeward Trend' Reconsidered.  Here's the abstract:

The CISG has been described as one of history's most successful attempts to harmonize international commercial law. Consistent with its goal of harmonizing the law of international sales, Article 7(1) of the CISG instructs courts and arbitrators to interpret the Convention in light of “its international character and the need to promote uniformity in its application.” MCC-Marble v. Ceramica Nuova D'Agostina is a U.S. decision that has been praised for its adherence to Article 7(1). In contrast with conventional academic commentary, which praises MCC-Marble and criticizes the tendency of courts to interpret the CISG in light of their respective domestic legal traditions (the 'homeward trend'), this essay critiques MCC-Marble as a decision that emphasizes uniformity at the expense of other important considerations. Notwithstanding Article 7(1), uniformity was not the exclusive goal of the CISG project. Although it may result in some inconsistency in the Convention's implementation, the homeward trend also should enhance the CISG's legitimacy and acceptability over the long term. MCC-Marble is examined to illustrate how its interpretative approach to the CISG's provisions regarding parol evidence may exacerbate the tendency of U.S. parties to opt out of the CISG. The essay argues for an interpretation of the CISG that allows greater weight to be afforded the terms of a final written agreement.

[Meredith R. Miller]

Limerick of the Week

Ray v. William G Eurice & Bros., Inc.

Ray's specs were enough to confound
These "hatchet and saw" men, whose ground
For breaching the pact
Was mistake of fact,
But they signed it and so they are bound.

[Jeremy Telman]

Pickfords: The Careful Movers

It's one of the sad facts of life that great people and institutions are sometimes remembered more for their one great failure than for their successes.  Baseball fans, for example, remember Bill Buckner not as the guy who collected 2,700 career hits and batted over .300 seven times, but as the guy who let a ground ball go between his legs to cost the Chicago Cubs a World Championship.

If there's a Bill Buckner in the contract law field, it's Pickfords, a venerable firm that has been reliably moving stuff around the United Kingdom since the days when "William and Mary" was hot new style in English furniture.  But in contracts classes, the firm is known chiefly for its most famous screw-up:  mislaying the mill shaft in Hadley v. Baxendale.

Here, courtesy of Richard Dennery of Gloucester, are two images of the modern Pickfords your students may get a chuckle out of.

[NOTE:  Thanks to the careful readers who pointed out that Bill Buckner was playing for the Boston Red Sox when he let Mookie Wilson's grounder roll through his legs.  Buckner had been a Cub for a long time before joining the Bosox, and is said to have been wearing a Cubs batting glove under his mitt on the play.]

[Frank Snyder]

Losing Bidder Seeks Pre-Contract Reliance Damages

A railroad repair company is suing the Hancock County (Miss.) Port and Harbor Commission for money that it spent getting ready to perform an expected contract that went to another bidder.

Jackson Track Construction, Inc., says it had been led to believe it was going to get a $7,6 million contract to do repair work to some rail facilities, a contract delayed by Hurricane Katrina.  Jackson says it had been the only bidder and had been twice promised that it would receive a "notice to proceed."  The lawsuit claims the contract went "at the last minute" to another bidder.  Jackson is claiming more than $2 million, including both lost profits and the money it expended while expecting to get the "notice to proceed."

[Frank Snyder]

Rock, Paper, Gun

A federal judge in Georgia has apparently decided to settle some of the disputes in a consumer debt-collection case by making the lawyers do "rock-paper-scissors."  If this sort of alternative dispute resolution catches on, we'll need professional advice from folks like the World Rock-Paper-Scissors Society, which has been "serving the needs of decision makers since 1918."

Which reminds me that my two little boys have learned a Texas version of this, which is called "rock-paper-gun."  Gun apparently beats both scissors and paper.

[ADD:  Alan Childress over at our sister blog, Legal Profession, makes the excellent point that this kind of conduct by judges isn't likely to increase public confidence in the judicial system.]

[Frank Snyder]

The Carnival Cruise Line Ticket

One of the great things about contract law, as I think we've mentioned before, is that you almost never have to read U.S. Supreme Court cases.  An exception is Shute v. Carnival Cruise Line, 499 U.S. 585 (1991), found in many casebooks, where the court held a choice-of-forum clause in a cruise ticket binding on the passenger even though the terms were on a ticket she didn't get until after she'd bought it.

Here, courtesy of Irma Russell (Tulsa), is a copy of the Carnival ticket.  The yellow sticker on the right shows the bit of boilerplate that managed to momentarily distract the court from more important stuff, like whether the Founders intended a Constitutional right to lap dances, and exactly what clothing restrictions the State can put on them.

[Frank Snyder]

Pitfalls in Executive Employment Contracts

When top executives of big companies negotiate employment contracts, you tend to get experienced, sophisticated counsel on both sides of the deal.  Yet even the most carefully crafted agreements won't necessarily keep a party from a nasty surprise in subsequent litigation.

In Negotiating Bonus Provisions, a recent piece in the New Jersey Law Journal, lawyer Steven H. Sholk (left) of Newark's Gibbons, Del Deo, Dolan, Griffinger & Vecchione takes a look at the case of HealthSouth's Richard Scrushy, who saw an Alabama court hit him with an order to repay some $50 million.  The case, says Sholk, offers a good object lesson for those negotiating such deals.

[Frank Snyder]

N.D. Ill.: Letter of Intent Created Duty to Negotiate in Good Faith

The Northern District of Illinois recently held that a letter of intent (“LOI”) created a duty for the parties to negotiate exclusively and in good faith.  In negotiating a deal for the purchase of a local television station, the parties signed a LOI. The LOI detailed the price and timing of the potential sale and specified that it was non-binding. When negotiations did not consummate in a deal, the prospective buyer sued for breach of contract.  The court held that the parties’ clearly did not intend that the LOI bind them to the sale of the television station.  However, the court addressed a closer question, holding that the non-binding LOI created a duty for the parties to negotiate exclusively and in good faith.   The court reasoned:

Based on the above precedent, and on a fair reading of the letter of intent in this case, we find that the parties did intend the letter of intent to bind them to exclusive and good faith negotiations. Defendants argue that the letter is not binding in its entirety because the phrase "non-binding letter of intent" is not limited to one specific term or provision, but encompasses the entire letter (def. reply, at 6). We do not agree. The phrase defendants refer to occurs in a paragraph introducing the terms upon which defendants were prepared to sell the station. This paragraph ends with a colon and following that colon are paragraphs setting out all the general terms of the potential sale. These headings include "Purchase Price," "Deposit," and "Timing." The next paragraph begins with the phrase: "Should the above terms be acceptable to Weigel...." Reading the letter as a whole, it is clear that the non-binding clause refers only to the terms set out after the colon. After those terms are set forth, the letter concludes that if those terms are satisfactory to Weigel--indicated by Weigel's signing of the document--defendants would "cease all negotiations to sell to any other party and not enter into or entertain any such similar negotiations pending completion of a definitive and binding SPA." We find support for this conclusion in that the language of the exclusivity clause is taken verbatim from the plaintiff's letter offer, which predicated going forward with the sale on defendants providing written asurance of exclusivity.

Weigel Broadcasting v. TV-49, ___ F. Supp.2d __, 2006 WL 3486861 (N.D. Ill.Nov. 29, 2006).

[Meredith R. Miller]