ContractsProf Blog

Just How Much is Becks Worth, Anyway?

Apparently there is some confusion about how much exactly David Beckham is getting paid now that he's taken up with the Los Angeles Galaxy team.  According to this story:

David Beckham's playing contract with the Loas Angeles Galaxy is worth about $27.5 million in base salary over five seasons, according to a person familiar with Major League Soccer agreements.  It's a fraction of the $250 million income figure floated for the English star when he agreed to the deal last month. . . . Beckham's contract, according to several people familiar with the details, is a complex and probably unique arrangement that gives the 31-year-old midfielder a percentage of club sponsorship, merchandizing and uniform sales contracts. Promotional arrangements also are included.

Perhaps it's just hard to pin down exactly how much Becks will being paid with these various factors, but according to the article, it's far and above what other soccer players will receive.  Sports is still one of those "winner take all" compensation arenas in many aspects (although this has come under criticism, along with CEO pay, in recent years).

[Miriam Cherry]

Mizzou and Tulane Looking for Commercial Podium Visitors

Visitors wanted in Sales, Secured Transactions, Modern Payment Systems, Negotiable Instruments or some combination of the above.  If interested in the Missouri position, contact James R. Devine, Associate Dean, University of Missouri School of Law, David Ross Hardy Professor of Law & Trial Practice; if interested in the Tulane position, contact Steve Griffin, Vice Dean, Tulane Law School. 

[Miriam Cherry/Hat tip: Blog Emperor Caron]

Franchisees of the World Unite!

In my Business Associations course, franchisor/franchisee relationships provide a wonderful opportunity to explore agency issues.  As recently reported in The New York Times (warning, registration required), discontent among Quiznos franchisees provides a great opportunity for people who teach in this area to educate themselves as to the parameters of the relationship.

According to suits filed by the franchisees, Quiznos has been accepting $25,000 franchise-fee payments but then not finding store locations for its franchisees.  In addition, as reported in the Times, plaintiffs contend that they are forced to buy everything they need to run their stores through designated suppliers and distributors owned or controlled by Quiznos, which permits the corporation to profit handsomely at the expense of its franchisees.  Plaintiffs also allege that 40% of franchises fail to break even and that this fact is not disclosed to potential franchisees.

The disaffected franchisees have set up their own organization, Toasted Subs, whose website you can visit here. 

The Times article reports on general discontent among franchisees.  As Susan P. Kezios, president of the American Franchisee Association, told the Times, franchisees sign franchise agreements with which they must comply but which franchisors may alter unilaterally.  "When they control how much you are going to pay them in royalties and advertising and then force you to buy all of your supplies from them, its not free enterprise anymore.  It's indentured servitude." 

Franchisees of the world unite!  You have nothing to lose but your (franchisor's) chains! 

[Jeremy Telman]

Law Prof Takes on Cell Phone Company

Here's a great David v. Goliath story about Osgoode Hall professor Susan Drummond taking on cellphone company Rogers Communication's Inc.  Drummond was angered when Rogers shut off her 11-year-old son's cellphone service without first notifying her that it planned to do so.

The net result: despite her lack of trial experience, Prof Drummond won $2,000 in punitive damages against Rogers and slightly more than $800 in compensatory damages for breach of contract.  Another result: "I'm sure that the Rogers' legal department is redrafting their agreement as we speak," Drummond says.  The article further reports:

Bruce Cran, president of the Consumers' Association of Canada, praised Drummond's work.

"The problem is these companies completely control these contracts," he said.

"It's a take-it-or-leave-it thing. You sign the contract or you don't get the service. I'm sure a lot of the stuff in these contracts would not pass legal tests, if someone would challenge it, but people very rarely do.

"I take my hat off to this woman."

Drummond kept her Rogers cellphone until recently, when she was able to give it up without incurring an early cancellation fee of $200.

"I am a Scot and by God I wasn't going to pay that early cancellation fee," she says.

"I was just sick at the thought of paying $200 to get out of the contract."

[Meredith R. Miller]

Limerick of the Week

In order for my students to appreciate this week's Limerick, I first have to instruct them in the patois of New York pick-up basketball.  You see, those of us who frequent the hard-scrabble asphalt courts of the City have developed our own expressions.  For example, sometimes a call in a game can be simultaneously fair and charitable.  For example, a player may travel or double-dribble, but only because -- oh, I don't know -- perhaps the sun was in his eyes, or he got scared when a bigger player came up to guard him.  In such a case, the traveling player might call out that he was fouled and the other players might agree that allowing the foul would be both fair and charitable, or to use the vernacular "fairitable." 

I swear, the word is used all the time in pick-up basketball games.  If you don't believe me, just try using it.  When someone calls a foul on you, just look him in the eye and say, "Okay, that's fairitable."  You will get no argument.

It is for that reason, and not (heavens forfend) because I was desparate for a rhyme, that the word, "fairitable" appears in this Limerick.

Allegheny College v. National Chautauqua County Bank

Although her estate was inheritable,
Ms. Johnston chose to be chartible.
A bargain was struck;
Her heir's out of luck:
To the College Cardozo was fairitable.

[Jeremy Telman]

Thanks!

Thanks are due to Frank Snyder, Val Ricks, Texas Wesleyan and South Texas College of Law for being great hosts for this year's annual International Contracts Conference. Thanks!

[Meredith R. Miller]

Launch Control, this is Houston. We are go for launch!

Well, as last year, the weather for the annual International Contracts Conference threatens to be rainy. Nevertheless, it looks like a promising line up today here in Houston:

Panel One: Transactional Economics: Victor Goldberg’s Framing Contract Law Moderator: Franklin G. Snyder Commentators: Mark A. Gergen Stewart Macaulay Keith A. Rowley Respondent: Victor P. Goldberg

Panel Two: Theoretical Perspectives
Moderator: Keith A. Rowley
Aditi Bagchi, Imperfect Rights in Private Law
Daniel Markovits, Some Core Challenges for Contract Theory
Michael Pratt, Promises in Law and Morality
Hanoch Sheinman, Contracts and Promises

Panel Three: Issues in Contract Remedies
Moderator: Deborah Zalesne
Miriam A. Cherry, The Strange Tale of Trover the Dog
Chaim Saiman, Restitution in America
Stephen A. Smith, Substituionary Damages

Panel Four: Transactions and Costs
Moderator: Peter Linzer
Christian A. Johnson, Contractual Innovations Developed by the OTC Derivatives Industry: Amending Contracts to Deal with Systemic Industry Changes
Margaret L. Moses, Lowering Transaction Costs in Commercial Letters of Credit
Val D. Ricks, Syndicate Short Covering -- A Transaction Cost?
Peter L. Fitzgerald, International Contracting Practices Survey Project

[Meredith R. Miller]

Limerick of the Week

Last week's Limerick explored the difficulty of writing a metrical poem that includes the word "consideration."  This week, we begin an investigation into the difficulties of finding a rhyme for "estoppel."

Ted Koppel might do, but how to work him into a poem?  I'm stumped.  Todd van Poppel, perhaps?  Dated, I think.  Well, you can see the bind I'm in.

Ricketts v. Scothorn

Such was the start of estoppel:
Said Grandpa to Katie, "Poppop'll
Set you up nice."
She took his advice,
And quit her old job in the shop-pel.

[Jeremy Telman]

Anna Nicole Smith's Will: A Lesson in Careful Drafting?

You may have heard that mysteriously famous Anna Nicole Smith passed away last week. Are there any lessons in careful drafting that we can learn from Anna Nicole Smith's will? Certainly seems that way.

Smith's will, executed in 2001, appears to leave everything in trust to her son. However, as any consumer of mainstream news surely knows by now, her son passed away in September, just three days after the birth of her daughter. Does the will provide for her newborn daughter? Article I of the will appears to purposefully exclude any future spouses or children:

Except as otherwise provided in this Will, I have intentionally omitted to provide for my spouse and other hiers, including future spouses and children and other descendents now living and those hereafter born or adopted, as well as existing and future stepchildren and foster children.

However (and this is where the drafting lesson comes in), as CNN coverage notes, later provisions in her will refer to her "children." For example, the will instructs the executor to manage the estate "such that my children are distributed sufficient sums for their health, education and support."

Sounds like the beginnings of an interesting interpretation battle.

[Meredith R. Miller]

Tuscaloosa Wins Breach of Contract case

The first time this New Yorker heard the about "Tuscaloosa" was in David Epstein's BarBri lecture on contracts.  Thus, I read this breach of contract story in the Tuscaloosa News with a tinge of nostalgia:

The city of Tuscaloosa has won a defamation and breach of contract lawsuit filed in March 2004 by a Mississippi construction company stemming from the Freeman Park pool project.

The ruling by U.S. District Judge L. Scott Coogler also granted the city’s counterclaim for damages that was filed in response to the initial allegations made by Humphries Kelley of Kelley Contracting Inc.

The city refused to grant payment for what it considered a breach of contract after Kelley Contracting failed to complete work on a pool house building as part of the A.L. Freeman Park swimming pool project. The park opened to the public in May 2004.

Coogler, in ruling in favor of the city, did not assess any of the more than $60,000 in damages as listed in the city’s countersuit. A March 19 trial date has been set to address this issue.

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Love Contracts

Contracts are all about promoting mutually beneficial exchanges.  And it turns out office romances can also fall into that category. National Public Radio reports that companies may benefit from facilitating such romances.  Romantically involved employees are happy, productive, loyal employees (once they get over the early part of the relationship, which apparently involves extra-long lunch breaks, pining, wool-gathering and other negative externalities associated with employees thinking about something other than the bottoom line).  As Southwest Airlines has discovered, two romantically-connected employees can share information about the company and become more than the sum of their parts.  As of 2002, Southwest employed more than 1000 married couples.

In order to protect themselves from sexual harassment suits in connection with such romances, companies are adopting so-called "love contracts."  Love Contracts (also called Relationship Contracts) are apparently especially common in the entertainment industry.  They permit employees to disclose their office romances while also shielding employers from liability.  A sample form Relationship Contract can be found here. 

What a lovely gift to get that special someone this Valentine's Day!

[Jeremy Telman]

Limerick of the Week

The casebook that I use does not include a case that addresses the peppercorn theory of consideration, so I supplement the book with Fischer v. Union Trust Co.  In that case, one of the brothers of the incompetent Bertha Fischer gave her a dollar, which she then passed on to her father, William Fischer, Sr., as purported consideration for a deed on certain property.  William Sr. descirbed the deed as "a nice Christmas present." 

I love this case, with its sweet (and remarkably precise!) details of a deal that had occurred nine years earlier.  But I can see why casebook editors would want to steer clear.  There is a disucssion of "three classes of consideration," which students find completely opaque.  It's also an uncomfortable vehicle for teaching peppercorn theory, as the opinion conclusorily states that Bertha "paid no valuable consideration" for the promised conveyance.  That's silly.  The 1895 dollar pictured above is now worth $750!

But what really bothers me is that it is very hard to work the word "consideration" into a Limerick.

Consideration provision is tough:
One dollar isn't enough.
Has this court grown weary
Of peppercorn theory
Or is the transaction a bluff?

[Jeremy Telman}

Charney v. Sullivan & Cromwell v. Charney

There has been much press, commentary and blog coverage about Charney v. Sullivan & Cromwell, wherein a (now former) associate alleges that he suffered discrimination based on his sexual orientation.  It makes for good legal drama (gossip?) for quite a few reasons-- for example, all of the high-powered lawyering and, with that, the posturing and strategizing.

Much of the frenzy was spurred by Charney's initial PR campaign, which began with a posting of portions of the complaint to the "Greedy Associates" message board, and a link to his own personal website, which contained a copy of the entire complaint.   

What does contract law have to do with this?  Well, not much until yesterday. 

Sullivan & Cromwell has countersued, asserting that Charney's complaint contains "confidential and non-public information" about the firm and its clients.  (Among other things, Charney attached a purported copy of S&C's partnership agreement as an exhibit to the complaint).  S&C claims that, by disseminating this information, Charney, among other things, breached the Confidentiality Agreement he signed (presumably as part of the HR paperwork when he commenced employment with the firm).

Stay tuned.

[Meredith R. Miller]

Charlize Theron Caught "Two-Timing"

The South African press reports that watchmaker Raymond Weil has slapped Charlize Theron with the following breach of contract lawsuit:

Weil says in court papers the South African-born actress, who won a best actress Oscar for 2003's Monster, signed an endorsement deal saying that from October 2005 through December 2006 she would only wear Weil's high-end watches.

That deal allowed Weil to use Theron's photographs in its advertisements in exchange for "substantial funds", court papers say.

Meanwhile, says Weil's lawsuit, the 31-year-old Theron, who also starred in North Country, Mighty Joe Young and The Legend Of Bagger Vance, had an endorsement deal to promote a Dior perfume.

At a news conference on March 14, 2006, at a film festival in Austin, Texas, court papers say, Theron "was actually photographed wearing a watch from the Christian Dior line". A photo of her wearing the watch is included as an exhibit.

The court papers also say: "Although the agreement clearly prohibits (Theron) from appearing in any advertisement for any jewellery, even for charity, she appeared wearing a necklace in an advertisement benefiting an Aids charity, violating the agreement, from February 2006 to December 2006."

"Plaintiffs were led to believe and had a right to believe by their written agreement that (Theron) would not promote jewellery or watches," court papers say.

The lawsuit does not say how much Weil is seeking in damages, but the watchmaker's lawyer, David Jaroslawicz, says his client spent more than $20-million on the Theron advertising campaign.

A spokesperson for Theron did not immediately return a call for comment.

[Meredith R. Miller]

Limerick of the Week

Park 100 Investors v. Kartes

The Karteses signed the "lease papers,"
A guaranty hidden in vapors.
The court found this coarse
And would not enforce
A contract procured through such capers.

[Jeremy Telman]

Barry Bonds' $15.8 Million Agreement not to Agree

Well, on a slow sports news day like today, there's always Barry Bonds. . . .

Last week, Major League Baseball's commissioner rejected a one-year, $15,8 million agreement between Barry Bonds and the San Francisco Giants.  Although nobody is yet coming forth with details, anonymous sources indicate that the commissioner rejected the contract because of a personal-appearance provision, which is impermissible under an agreement between the commissioner and the players' union. 

Now, there is another stumbling block: language permitting the Giants to void the agreement if Bonds should be indicted in the on-going federal investigation into steroid use by major league ballplayers.  While it had been  reported previously that Bonds was refusing to sign the agreement unless the language was expunged, it now appears that Bonds has signed  or will sign but is claiming that the language is unenforceable.  Bonds' agent is reported to believe that the language in question is inconsistent with the players' collective bargaining agreement and therefore "meaningless."

[Jeremy Telman]

Contract Rider: No Shaking The Hips

Here's a story that (1) has Elvis rolling over in his grave and (2) restores the inspiration in the movie Footloose.  Harding University hosted a performance by Robert Randolph & The Family Band.  During the band's set they played their song Shake Your Hips and encouraged audience participation -- dancing on the stage.  Zach Neal, the University's Director of Campus Life, "was concerned about the 'spirit of rebellion'" and the band's breach of contract:

"We have a specific rider that spells out expectations," [David Burks, the President of the University] said. "They expressly violated it when [Randolph] repeatedly invited people on stage."

Though the contract says nothing regarding inviting students on stage, the contract does state that "The school permits no dances."

Neal said the school will not pursue legal action, but will make the contract clearer for future bands, including a "no students allowed on the stage" clause.

It wasn't only about the no dancing rule; Neal did also express concern for the equipment on the stage.  And this concern appears warranted in light of this video of the event.

[Meredith R. Miller]

UCC Article 2 & 2A Legislative Update

As of January 31, 2007, only three state legislatures (Kansas, Nevada, and Oklahoma) have considered bills proposing to enact the 2003 amendments to UCC Articles 2 and 2A.  None of the bills were enacted.

During the 2005 legislative session, the Kansas bill was tabled for further study and the Nevada bill died in committee.

During the 2006 legislative session, each house of Oklahoma's legislature passed a version of a bill to enact the Article 2A amendments.  However, the conference committee was unable to reconcile the two versions and the bill died in conference.  Meanwhile, a separate bill proposing to enact the Article 2 amendments died in committee.

Oklahoma 2172, proposing adoption of the 2003 amendments to UCC Articles 2 & 2A (along with certain conforming amendments to other articles), is scheduled to be introduced on February 5, 2007.

This is not to say that none of the content of the 2003 amendments has found its way into any state's law.  In 2005, Oklahoma amended Sections 2-105 and 2A-103 of its Commercial Code to add that the definition of "goods" for purposes of Articles 2 and 2A, respectively, "does not include information," see 12A Okla. Stat. Ann. §§ 2-105(1) & 2A-103(1)(h) (West Supp. 2007), and amended its Section 2-106 to add that "contract for sale" for purposes of Article 2 "does not include a license of information," see id. § 2-106(1).  The net effect is similar to having enacted Amended §§ 2-103(k) & 2A-103(1)(n), both of which exclude information from the meaning of "goods" for purposes of Article 2 and 2A, respectively.

[Keith A. Rowley]

Revised Article 1 Legislative Update (2/1)

Three quick updates to my 1/29 posting about Revised Article 1:

1. Utah SB 91 has been replaced with a substitute bill that abandons uniform R1-301 in favor of language tracking pre-Revised 1-105.  Substitute SB 91 also eschews the unitary good faith standard of uniform R1-201(b)(20) in favor of the bifurcated good faith standard in pre-Revised 1-201(19) & 2-103(1)(b).

2. Informed sources report that South Dakota SB 85 will soon be amended to replace uniform R1-301 with language tracking pre-Revised 1-105.

3. Florida has joined the fray with parallel bills -- SB 252 and HB 151.  The texts of the two bills are identical.  Both reject uniform R1-301 and embrace uniform R1-201(b)(20).

[Keith A. Rowley]