ContractsProf Blog

Internet Roundup

The September issue of Vincent Polley's excellent MIRLN (MIscellaneous IT Related Legal News) is out.  The regular report is put out by the ABA's Cyberspace Law Committee and Polley's firm, Dickinson Wright PLLC.  You can find it at the MRLN Blog.  There are always some interesting stories relating to contract law, but the report covers the gamut of Internet and computer law issues.

[Frank Snyder]

Web Terms Incorporated in Written K Even if Not Read

Terms included on a web site that are referred to in a written agreement become part of the contract, even if the other party refuses to visit he site and read them, according to a new federal court decision from Alabama.  The case, reported by BNA, is Conference America, Inc. v. Conexant Systems, Inc., 2007 WL 267004 (M.D. Ala. Sept. 10, 2007).

In the News: September 28, 2007

The State of Minnesota is suing Sprint for allegedly extending the contracts of its customers without getting their assent.

Mercedes-Benz has apparently decided that tennis viewers aren’t its target buyers, and will not renew its contract to sponsor ATP men’s tennis. They say they'll be advertising more in different sporting fora, like equestrian events -- which suggests their target market is people who like their transportation to be slow and expensive.

A California company has won a $30.5 million verdict against Taiwan Semiconductor on claims of breach of contract and misappropriation of trade secrets.

A New York federal judge has granted summary judgment to Snapple in a lawsuit by distributors who claimed that the juice maker had violated its promises to give them exclusive territories.

Kazakhstan’s legislature is moving to allow the country to break its contracts with developers of the potentially lucrative Kashagan oil field, after they announced that safety concerns mean that the project may not open until 2010.

Buyers of two units in Tampa’s proposed Trump Tower development won a default judgment against the developer, ordering return of their $566,000 deposits plus interest. The developer says it will try to get the judgment vacated.

[Frank Snyder]

Buyer Isn't Third Party Beneficiary of Appraisal Contract

The buyer of a painting is not the third-party beneficiary of a contract between the seller and an appraiser who issues a faulty appraiser, says a New York trial court in a recent decision, Mandarin Trading v. Wildenstein, No. 602648/06 (N.Y. Sup. Ct. Sept. 4, 2007).  And since there is no contractual relationship, writes Justice Emily Jane Goodman, the implied covenant of good faith and fair dealing provides no relief.  The case is reported here by Law.com.

In the case, Guy Wildenstein, a "world renowned" expert on the works of Post-Impressionist painter Paul Gauguin, provided an appraisal of a Gauguin painting called "Paysage" to a man named Raymondin, who was not a party to the action.  In the appraisal, Wildenstein estimated the painting's value at $15 million to $17 million, but did not mention the fact Wildenstein at some earlier date had an ownership interest in the painting.  The appraisal was later turned over to the plaintiff buyers, who relied on it to purchase the painting from a third party for $11.8 million.  The buyers immediately arranged to have it sold by the Christie's auction house.  When the high bid came in at only $9 million, the buyers withdrew the painting and sued Wildenstein, claiming that it had issued a fraudulent appraisal and that it had failed to disclose its own economic interest.

The buyers raised several claims.  First, they claimed to be third-party beneficiaries of the contract between Wildenstein and Raymondin, and so could sue Wildenstein for breach of contract.  Goodman, however, found that there were no facts to suggest that Wildenstein knew that the appraisal was being done specifically for these buyers, and third-party duties do not run to everyone who might rely on an opinion at some time in the future.  Second, since the plaintiffs were not parties to the contract, even as third party beneficiaries, their claims for breach of Wildenstein's duty of good faith and fair dealing failed, since that obligation runs to contracting parties, not to the general public.  Third, the claim that Wildenstein had engaged in misrepresentation by failing to disclose his ownership was also dismissed because Wildenstein there was no fiduciary relationship between him and the plaintiffs that would give rise to a duty to disclose.

[Frank Snyder]

Free Law School Education

We got a nice card in the mail today from the good folks at Quinnipiac University School of Law in Connecticut, telling us about their Dean's Fellows Scholarships.  Briefly, these are full-ride scholarships for students who have an LSAT of 160 or higher and a GPA of at least 3.5.  In the card, Dean Brad Saxton asks us that if we know students with those credentials we send them to him.

Our first thought was, what, are they crazy?  We're (that is, I'm) at Texas Wesleyan, not Yale, and if we see students with those credentials we make our own efforts to get them, thank you very much, even though Quinnipiac is a very fine law school with nice people in a pretty town (left) with a Division I basketball program.

But then we figured that there are students who visit this blog who we don't know who might want a free ride at a good school, so if you're interested and you can stand the brutal, soul-killing Connecticut winters, so unlike the balmy breezes we get in January in Fort Worth, check out their web site.

[Frank Snyder]

Damages for Violation of Open Source License?

It's an interesting questions:  What contract damages does a software developer who doesn't charged for the software suffer when a user violates the license agreement?  That's one of the issues in what is being called the "first known case filed in the U.S. to enforce an open-source license."  We may not learn the answer, though, since it looks like the two parties -- the Software Freedom Law Center and Monsoon Multimedia, Inc. -- are looking to settle.

In the case, Monsoon allegedly used free software called BusyBox but failed to abide by the GNU Public License.  If failure to abide by the license is treated as copyright violation, then statutory penalties would presumably apply.  But if the agreement is looked at as a contract, there's a serious question whether any damages would be available, and injunctive relief (even if available) only locks the door after the violations have taken place.  The license, moreover, might be vulnerable on the same grounds that wiped out the one in Specht v. Netscape Communications.

[Frank Snyder]

In the News: September 27, 2007

America’s Dan Rather isn’t the only newsreader to be suing his network for breach of contract; Mary Kostakidis of Australia’s SBS (left) has sued, claiming that lowering standards and growing commercialization forced her resignation.

Speaking of Rather, by the way, it looks like he may try to call George W. Bush (and maybe Bush's father) as a witness in his own $70 million lawsuit against CBS.

Miss Montana 2003 has settled her claims for breach of contract "and other wrongdoing" arising out of a dispute over misconduct that led to the cancellation of a projected school tour.

The Walt Disney Co. has won a major victory in its 16-year battle over who owns the merchandising rights to Winnie the Pooh; a state appellate panel affirmed dismissal of a case brought by the family of the licensor for "egregious misconduct" which included stealing Disney documents and then lying about it.

Monterey County (Cal.) will apparently settle its $170 million dispute with a resort operator who claimed that the County's decision to reduce water levels at two lakes where he had concessions breached his contract; it looks like the deal will include the County taking over operation of the the resorts.

Stress-Induced Illness Not Foreseeable as Damages from Contract Breach

It’s foreseeable that a contract party will get stressed out when the agreement is broken, but is physical illness caused by the stress the kind of damage that is foreseeable under the rule of Hadley v. Baxendale? That was one of the issues before the English Court of Appeal in a recent decision, Deadman v. Bristol City Council, outlined in a client advisory by Simon Cradick of Cardiff’s Morgan Cole firm. (Free registration required.)

The case involved a manager charged with sexual harassment. Under his terms of employment he was entitled to disciplinary review by a three-person panel. The employer only provided two members of the panel, which found against him. He successfully overturned that decision on the grounds that it violated his employment agreement. The employer then launched a new investigation.

One question in the case was whether the employer’s Procedure for Stopping Harassment in the Workplace became part of the contract. An employer’s announced policy does not necessarily become part of the employment contract, the court noted, but held that the nature of the Harassment Procedure, with its detailed provisions for handling disputes, did. Convening a two-person panel instead of a three-person panel was therefore a breach.

Meanwhile, though, the stress from the original finding and the reinvestigation apparently caused the employee depression and other psychiatric problems. He claimed those as consequential damages of the breach. Assuming that the breach caused the illness, however, the Court found that the damages were too remote. Neither party, said the court, could have anticipated that convening a two-person panel instead of a three-person panel would have resulted in psychiatric injury to the employee. He therefore could not recover for that harm.

[Frank Snyder]

In the News: September 26, 2007

Both sides are claiming to have got what they wanted in the new General Motors-United Auto Workers contract.  Maybe they’re both right.

Meanwhile, American Airlines has presented its pilots of with a new contract that doesn’t offer them wage increases but would let them earn more by flying more hours.

The U.S. Supreme Court (fortunately) doesn’t hear too many contract cases, but it’s apparently agreed to hear a dispute between the Snohomish County (Wash.) Public Utility District and Morgan Stanley, which the PUD says inflated its energy charges back in 2003.

Eli Lilley has settled a long-running contract dispute with Emisphere Technologies over a joint research project; the drug maker will pay $18.5 million but won’t admit it breached the agreement.

Juventus soccer captain Alessandro del Pietro says he feels "disrespected" that the club is offering him a 30 percent pay cut on a contract extension, just because he’s getting old and will probably retire in two years.

GEO Group has won a contract to build and operate a 384-bed expansion to the Graceville (Fla.) correctional facility. The deal, financed with tax-exempt bonds, will ultimately yield about $28.5 million a year, which by our calculation is about $74,000 per inmate, or about the same amount it costs to go to a U.S. law school.

[Frank Snyder]

No, I Wasn't Supposed to Lose Money

Back in 2005, former Fed Chairman Alan Greenspan made news when he suggested there was "froth" in the real estate market and there might be some "local bubbles."  Florida condo buyers who didn't listen are apparently paying for it now.  Or, rather, they're trying not to pay for the properties they agreed to purchase.

In formerly red-hot markets from Miami to San Diego, buyers who entered pre-construction contracts to purchase condos -- usually with the intention of flipping them to reap a large profit -- are trying to back out of them.  There's been a sharp rise in lawsuits against developers claiming such things as failures to complete projects on time or to include promised amenities.  Most of the suits seem to be seeking to avoid the contracts.  Experts say that these sorts of delays and issues have been routine for some time, but that no one objected while prices were skyrocketing.

[Frank Snyder]

Virginia Supreme Court to Hear Randolph College Case

It may be a small college, but there are those who love it.  And they're expressing their love by suing it.

Students at what used to be called Randolph-Macon Women’s College (now Randolph College) will have their breach-of-contract claim against the school heard by the Virginia Supreme Court.  For the first 115 years of its life the school admitted only women, and the students claim that its decision to become coeducational last year breached its promise to them that they would enjoy a single-sex education.  The school, which has an enrollment of 715 students, says it had to start admitting men to keep itself competitive.

Another interesting wrinkle to the case is the claim that donors who contributed to the school over the years did so in reliance on its historic mission -- educating women -- and that the school has an obligation to continue that mission.

[Frank Snyder]

Swamp Fight in South Florida

Potential homeowners who want their own piece of the American dream -- in this case an acre of swamp in Palm Beach County, Florida -- are running head-first into a battle between developers and local government authorities.

An acre of swamp sold for $8,000 twenty-five years ago, but has recently been going for $40,000 an acre. According to an article in the Palm Beach Post, the County has been trying to buy up the land for conservation purposes, and seems to be raising the specter of development roadblocks to buy land at lower prices. One couple, who bought their property in 1981 for $8,200, agreed to sell it to the County for $2,300 after the County informed them of the "numerous obstacles" to building their dream house on the property. The couple later tried to back out of the deal, claiming the price was too low.  The County is suing them and is also suing a coalition of local landowners, claiming the coalition tortiously interfered with its contracts.

[Frank Snyder]

Law School Rankings

It's been a tough week for UCLA and Louisville, both of which saw their law schools fall out of the Top 20.  It was a particularly nasty fall for the Westwood school, which last week was ranked 10th in the country, and particularly galling when its cross-town rival keeps a firm hold on Number One.  (Left: USC Dean Robert K. Rasmussen).

This week's best U.S. law schools, with last week's rank in parentheses:

1 (1) Southern California (Gould)
2 (2) LSU (Hebert)
3 (3) Florida (Levin)
4 (4) Oklahoma
5 (5) West Virginia
6 (6) Texas
7 (7) Cal-Berkeley
8 (9) Ohio State (Moritz)
9 (8) Wisconsin
10 (11) Oregon
11 (11) Boston College
12 (18) Kentucky
13 (17) Georgia
14 (15) Hawai'i (Richardson)
15 (11) South Carolina
16 (20) Missouri-Columbia
17 (10) Penn State (Dickinson)
18 (14) Alabama
19 (19) Nebraska
20 (-) Arizona State (O’Connor)

[Frank Snyder]

Teaching Assistants: Casto & Ricks

Okay, so who are the two biggest killjoys in the legal academy?  William R. Casto (left top) and Val .D. Ricks (left bottom), that's who!

Why, you ask?  Because in their recent essay, "Dear Sister Antillico . . ." The Story of Kirksey v. Kirksey, 94 Georgetown L. J. 321 (2006), they solve every last mystery that one might derive from the Alabama Supreme Court's laconic opinion in Kirksey.  Their solution to the great mystery of Kirksey -- why did Isaac Kirksey invite his sister-in-law to live on his land and then evict her just two years later -- sucks all the romance out of the case.  History replaces economics as the dismal science.

In my mind, the key turning point of Kirksey involves a headstrong Antillico (portrayed by Merle Oberon) lured to his lodge on the Heights by a bold, passionate Isaac (portrayed by Laurence Olivier).  The climactic scene comes after the protagonists have lived within close proximity for two years:

Isaac: Dear Sister, I can't disguise my feelings for you any longer.  I must have you!  Will you be mine, all mine?!?

Antillico: Brother, control yourself!  Think of your dear departed brother, of my children!

I: But dearest, won't you show me the slightest kindness?

A: I'm sorry.  I'll always love you, but as a brother.

I: Then torment me no longer!  I shall not share this plot of land with you nor suffer to see your face, your figure.  Leave these lands that I may skulk along my properties in my solitary meanderings, contemplating the happiness that might have been but for your rank obedience to the rabble's law of etiquette!  Haunt me no more, pale specter of a life that might have been!

Or words to that effect.  Not so, say Casto and Ricks.  Isaac and Antillico were never lovers or anything of the sort.  Her name wasn't even Antillico -- it was Angelico -- and the case was all about land and the changing law of holding over on public lands in the 1840s. 

But seriously folks, it's a wonderful essay and here's just some of what you might learn if you read it:

Continue reading

Limerick of the . . . Month

It is great fun to teach Greiner v. Greiner as a companion case to Kirksey v. Kirksey.  Vive le difference! 

Still, I didn't teach the case last year, perhaps because I had not written a Limerick for it.  This year, I have attempted to correct that slight to this most deserving case.  I'm not all that happy with the Limerick.  The Limerick is true to the decision, in that it treats it as a promissory estoppel case, but it's hard to see why the court did not simply find a binding promise supported by consideration. 

Greiner v. Greiner

At wheat-sowing time, in a bank,
Maggie promised some acreage to Frank.
"He did nothing for me!"
Averred Maggie, with glee.
For his land Frank has Corbin to thank.

[Jeremy Telman]

In the News: September 24

New York Yankees shortstop Alex Rodriguez says he doesn’t know anything at all about a reported deal being discussed between his agent and the Chicago Cubs, which would net him a $300 million contract that would include a piece of the team.

General Motors workers are out on strike for the first time in 37 years after the union-imposed deadline for a new contract passed. The strike will reportedly cost GM more than 12,000 vehicles a day, and will force shutdowns in Canada and Mexico as well.

The former drummer of Eighties punk band the Ramones is suing Apple and Wal-Mart claiming that they never got licenses for downloads of six songs he wrote for the group.

U.K. employers who object to garish tattoos, multiple face-piercings, crude T-shirt slogans, and "revealing" among their employees are entering a potential minefield, say HR specialists, who say that blanket bans on such things in the work force may be discriminatory.

A Kansas City construction company that went out of business after it didn’t paid on a construction job is suing the bank that promised to make the construction loan, apparently claiming that it relied on a bank official’s promise that the loan would be forthcoming.

The other shoe has dropped in Seattle, where city officials formally filed their long-threatened lawsuit to compel the Seattle SuperSonics basketball team to continue playing at Key Arena.

[Frank Snyder]

Keystone State Mulls Liability Waivers

People like to do things that are fun, but dangerous -- like skiing.  Those who operate the places where these fun but dangerous things occur -- like ski slope operators -- routinely get participants to sign waivers of liability before they permit them to engage in the activity.

Whether these waivers are enforceable as a matter of contract law is a hot issue in many states, including Pennsylvania, where the courts seem split on the question.  The Pennsylvania Supreme Court has granted allocatur in one case in which the lower court found that an oral promise by a ski lift attendant superseded the written liability waiver.  Meanwhile, another lower court found that a waiver was broad enough to let the ski resort off the hook even for its own negligence.

[Frank Snyder]

Weekly Top Ten

Most of the same faces, many of the same places, on this week's Top 10.  Following are the 10 most-downloaded new papers from the SSRN Journal of Contract and Commercial Law for the 60 days ending September 23, 2007.  (Last week's rank in parentheses.)

1 (1) Usury Law, Payday Loans, and Statutory Slight of Hand: An Empirical Analysis of American Credit Pricing Limits, Christopher Lewis Peterson (Florida).

2 (3) Explaining the Spread of At-Will Employment as an Inter-Jurisdictional Race-to-the-Bottom of Employment Standards, Richard A. Bales (No. Kentucky).

3 (2) Consumer Protection in the United States: An Overview, Spencer Weber Waller & Jillian G. Brady (Loyola-Chicago).

4 (8) Economics of Contract Law, Cento Veljanovski (Case Associates).

5 (4) You Asked for it, You Got It . . . Toy Yoda: Practical Jokes, Prizes, and Contract Law, Keith A. Rowley (UNLV/Alabama).

6 (5) Renting the Good Life, Jim Hawkins (Independent).

7 (7) Anti-Social Contracts: The Contractual Governance of Online Communities, Joshua Fairfield (Indiana-Bloomington).

8 (6) The Other Side of the Picket Line: Contract, Democracy, and Power in a Law School Classroom, Richard Michael Fischl (Connecticut).

9 (9) A Positive Law Theory of Contract, Fergus Farrow (Victorian Bar).

10 (-) Consent and Exchange, Oren Bar-Gill (NYU) & Lucian Arye Bebchuk (Harvard).

[Frank Snyder]

In the News: September 20

America’s Honeywell International has won a 20-year, $16 billion contract to "build and service mechanical systems" for Europe’s Airbus S.A.S.

Chicago Bulls guard Ben Gordon is suing his former financial advisors for breach of contract and breach of fiduciary duty, claiming that they took a bigger cut of his salary than agreed and cheated him on a real estate deal.

Australian cleaning companies say that they’re scrapping their Workplace Agreements because they apparently don’t meet the Government’s "fairness" standards; the companies say the rules are "complex," "confusing," "pointless," and "farcical."

Uganda will not cancel its contract with the Taxi Operators and Drivers Association even though the group is late in making payments, because it says provides superior public transportation that not only operates door-to-door but requires no Government subsidy.

The United Auto Workers and General Motors are reportedly still far apart in their negotiating positions for a new five-year agreement; the old one expired September 15.

A Canadian tribal group is suing the Saskatchewan government in a bitter battle over who gets to control a lucrative casino.

[Frank Snyder]

Martin on Contracting in War Zones

Speaking of the contract issues surrounding the use of private firms to perform quasi-military functions in Iraq, Jennifer Martin (Pitt) has a new paper, Contracting for Wartime Actors: The Limits of the Contract Paradigm, that takes a hard look at the question.  Here's the abstract:

Much can be (and has been) said about the war in Iraq.  This essay explores the role of contract in wartime and (particularly) reconstruction.  First, it considers the use of government contracts to privatize numerous government functions during the reconstruction and conflict in Iraq.  Second, it considers the private ordering by contract done by government contractors to obtain security and related services from third parties.  Both types of contracting raise complicated issues including: the proper use of force; to what extent the contracts should have government oversight; to what extent contractors should be accountable for crimes; and whether contractors qualify as noncombatants in case of capture.  The special issues of contracting in a war zone are not best addressed primarily by common law doctrine.  Additional rules and regulations are necessary to address the special issues of non-state actors who contract with the U.S. government.

[Frank Snyder]