ContractsProf Blog

Your Public Interest Auction Donations

Over at PrawfsBlawg, Rose Cuison Villazor asks: what do you donate to your law school's public interest auction?  Here's my answer.  Each original print is signed by the undersigned, and they are pictured in the home of the 2008 auction winner:

 

[Meredith R. Miller]

Another Benefit of Contract-Based Warranties: Class Certification?

This blog's illustrious editor, Prof. Snyder, recently pointed out that tort law provides much better remedies than contracts-based breach of warranty claims, but students nevertheless need to know about contracts-based remedies because of the longer statute of limitations.

It seems that there is another reason that students should learn about UCC and common law warranty claims: class certification.  At least, for those warranty claims that don't have a reliance element.  

This is evidenced by a recent Oklahoma Supreme Court ruling in a case against Ford, as summarized at law.com: 

Among Detroit's Big Three, Ford Motor Company looks to be in the best shape. But sometimes, even when you think you're in the clear, you're not. (At least in litigation.) That's what happened to Ford last week in Oklahoma, where the state's supreme court reinstated a nationwide class action against Ford and auto parts maker Williams Controls that had been tossed by an intermediate appellate court. The class, which includes an estimated 300,000-500,000 members, contends that certain models of Ford Super Duty pickup trucks and Expedition sport utility vehicles contain faulty accelerator pedals, causing the trucks to idle rather than accelerate when drivers step on the gas.

The case, which was first filed in 2004, alleges breach of warranty, negligence, and product liability. The trial court certified a nationwide class in 2007, but last year the Oklahoma Court of Civil Appeals reversed the lower court. In reinstating the case, the Oklahoma Supreme Court found that the trial court did not abuse its discretion in certifying a class on the breach of warranty claims. It declined to affirm class certification on negligence or product liability claims.

(emphasis added).  And, a class action, by the way, seems the only feasible way such small individual warranty claims would ever be litigated.  Attorneys for plaintiffs will seek between $60-100 million, depending on the size of the class.  This amount is based on a price tag of $185 per faulty accelerator pedal.

[Meredith R. Miller]

Man claims campground had contract duty to protect him from water balloon

A New Hampshire man who suffered injuries when he was hit by a water balloon fired by a slingshot is suing his campground, claiming that the facility owed a duty to protect him from being attacked.

Things apparently get rowdly on Maine's Saco River during the summertime The plaintiff was taying at the Fiddlehead Campground (left), which advised residents to  " 'avoid rowdy groups canoeing on the river' by staying at the campground, where campers agree to standard campground groups that 'help control noise and unruly behavior."  Plaintiff nevertheless was hit in the eye by a water balloon launched 67 feet away by three men using a large slingshot.  He is apparently claiming that the campground's advice created a promise that he would be safe if he stayed there.

[Frank Snyder]

Contract law: the last resort of the tardy

Teaching contract remedies for breach of warranty, whether common law or UCC, often seems like a waste of time, since in many cirucmstances tort law provides superior remedies for defective products or services that cause injuries.  But, as we often explain to students, you need to know contract remedies if for not other reason that sometimes either you or (hopefully) your client will have blown the tort statute of limitations and will have to make out a claim under contract law.

That seems to e the situation in a recent professional malpractice case, Tower Investments Inc. v. Rawle & Henderson, where counts for negligence and breach of fiduciary duty against a law firm were barred by the statute of limitaitons, but breach  of contract claims were held to be timely.  The Legal Intelligencer, via Law.com, has a synopsis of the litigation here.

[Frank Snyder]

The case of the wry-faced llama

Karl Llewellyn liked to make fun of 19th century contract law as being based on the arms' length horse trade between two strangers.  But two centuries later animal cases still come up with some frequency.

Like this Georgia case, in which a llama breeder was held liable for breach of warranty when the two animals it sold were found to be suffering from a condition called "wry face" (left).

[Frank Snyder]

Today in history: April 26

On this date in 1607, English employees of the privately held Virginia Company of London (left: the company seal) land at Cape Henry, Virginia, with the intent of founding a gold-mining operation. A month later they will found the first successful settlement of Jamestown.

They don't actually find any gold, but the settlement will endure, making the United States the first nation in history to be founded by a for-profit corporation.

[Frank Snyder]

When promisors' intent to perform is conditional

When a contracting party makes a promise, does it intend to keep that promise, "no matter what"?  Gregory Klass of Georgetown says no.  Every promise, he says, is conditional -- that is, the promisor intends to perform under what it expects will be the future circumstances.

Sometimes, though, those future circumstances are so narrowly defined that the promise may actually amount to promissory fraud.  He explores the topic in a new paper, A Conditional Intent to Perform.  Here's the abstract:

No promisor intends to perform come what may. Yet some undisclosed conditions on a promisor's intent are so material that they can support a claim of fraud. A theory of promissory fraud should be able distinguish such foreground conditions on a promisor's intent to perform from the background conditions that attach to all intentions. Michael Bratman's planning theory of intention provides resources to explain the difference. A background condition is one that the agent accepts as satisfied or not satisfied in her practical reasoning; a foreground condition is one whose satisfaction she treats as an open question. Foreground conditions permit an agent to plan for futures in which she does not perform the act in question and reduce the rational pressure to adopt necessary means of performing it. Background conditions do neither.

This planning theory of conditional intentions provides a more complete account of why a promisee should care about foreground conditions on the promisor's intent to perform. An undisclosed foreground condition is likely material not only because it reduces probability of performance (background conditions do that too), but also because it is likely to affect the promisor's preperformance deliberations and behavior. The promisor is more likely to continue planning for possible futures in which she does not perform and less likely to invest in necessary means of performance. A foreground condition on the promisor's intent to perform also reduces the rational pressure to fill contract gaps in ways that accord or mesh with the promisee's plans and preferences, as described by the theory of shared intentions. These conclusions suggest revisions to the analysis of what a promise says about the promisor's intent to perform and any conditions on it. They also supply the beginning of a philosophical account of the relationship-based, extralegal expectations and obligations that attend agreements for consideration, and of the law's proper response to them.

[Frank Snyder]

Today in history: April 25

On this date in 1938, the United States Supreme Court shocked just about everyone with the release of Erie Railroad v. Tompkins, a decision that wiped nearly 100 years of federal common law off the books and became a permanent fixture of the U.S. civil procedure casebook.

Why mention it on a blog related to contract law?  Because the lawyer who lost the case (and who saw his law firm go out of business with the loss of the contingent fee) was 24-year-old Aaron L. Danzig, who had graduated from law school only two years earlier.  He's best known in contract law circles as the father of future Stanford Contracts tprof (and, later, my partner at Latham & Watkins partner and Secretary of the Navy) Richard Danzig, author of The Capability Problem in Contract Law.

[Frank Snyder]

"Payday lender" squeezing defenseless . . . banks?

Guess who's feeling what it's like being in the clutches of a predatory lender?  Yep, Americas's banks, who are suddenly discovering what a lot of consumers have discovered over the years: the peril of fine print in loan agreements.  Here are some highlights of a new piece by Katharine Mangu-Ward:

Everyone knows that you should read the fine print before taking out a loan, whether it's $100 from a payday lender or $100 million in bailout loans from the federal government. You'd think that no one would know this better than bankers themselves.

Banks who are trying to pay back their bailout funds are finding that it's not easy to get back out of debt.

“It almost makes the Treasury look like a payday lender," Camden Fine, president of the Independent Community Bankers of America told Bloomberg, discussing the kerfuffle over the refusal of the Treasury department to accept early repayment of bailout loans on favorable terms.

While Fine meant to criticize Treasury for the high dollar costs it was imposing on banks attempting to pay back TARP money ahead of schedule—“If you look at the cost of those warrants and turn it into an annual percentage rate, it’s enormous,” Fine said—but the point goes in both directions. The federal government may be acting like a payday lender trying to extract the greatest gain from loans to folks with limited options, but the banks are acting like payday lending customers who take out loans and then go whining to their legislators and city council members when the loans come due.

Check out the whole discussion.

[Frank Snyder]

US News First: No law school sees ranking decline

The recent U.S. News rankings are out, and apparently every law school either rose in rankings or stayed the same, according to a survey of news releases by the schools.  Announcing their highers rankings were, among others, William & Mary, Utah, Seattle, Denver, Florida State, UNLV, Georgia State, Duke, Emory, and North Carolina,  The big news, though, is that a review of school news releases shows that not a single school has announced a ratings decline from last year.  Kudos to everyone!

[Frank Snyder]

Today in history: April 24

On this date in 1957, the Suez Canal reopens for business after its extended closure during the Suez Crisis.  Egyptian President Gamal Nasser had responded to an Anglo-French seizure of the canal by sinking all 40 ships in it.  The canal couldn't be reopened until they were cleared, and much shipping was delayed or routed around the Cape of Good Hope.

The case, of course, let to some of the most famous "impracticability" and "frustration of purpose" decisions in modern contract law, including Lord Denning's influential opinion in Ocean Tramp Tankers Corporation v V/O Sovfracht (The Eugenia), [1964] 2 Q.B. 226 (CA), in which the Court of Appeal held that the closure of the canal as a result of military action was not an event that excused performance under the shipping contract.

[Frank Snyder]

Speaking of TARP

The Government's Troubled Assets Relief Program has now grown to about $3 trillion--about the size of last year's entire federal budget, according to the quarterly report to Congress made by its Special Inspector General (SIGTARP).  Other highlights of the report:

-- SIGTARP and the Treasury Department are still putting significant efforts into figuring out how to recoup $145 million in AIG executive bonsues.

-- They're also investigating whether AIG should have tried to negotiate downward its payments to its counterparties, instead of paying them at 100 percent of face value.

-- The new Auto Warranty Commitment Program, which backs auto warranties on General Motors and Chrysler products purchased after March 30, 2009 will be handled through a special purpose entity and funded at about $1.1 billion.  If you bought before that date, your warranty claims will apparently be dealt with in bankruptcy.  Sorry.

-- To speed things up, the IG has taken a lot of shortcuts in the process of awarding contracts, many of which are going to law firms and accounting firms.

-- The TARP program will be hiring a lot more employees.

[Frank Snyder]

Government endorses pre-dispute employee waivers . . . at least sometimes

Contract law types are aware that employers are more and more using the idea of contractual waivers as a way of getting employees to surrender rights, often in advance of any accrual of the actual right.  Well, what's good for Hooters Restaurants (see Hooters of America v. Phillips) is apparently good for the United States Government.

Worried that they might get sued by employees whose contracts are being rewritten new Treasury regs on executive compensation, the government asked Chrysler Financial (a sister company of Chrysler Motors) to get their employees to sign waivers of their rights to sue as a condition of additional aid under the Trouled Assets Relief Program:

Treasury asked Chrysler Financial to obtain waivers from the top 25 Chrysler Financial executives that would have waived legal claims against Treasury and Chrysler Financial resulting from the recent changes in executive compensation requirements for TARP recipients. Chrysler Financial’s management, however, informed Treasury that it was unable to obtain waivers from all 25 executives, therefore the request for additional funding was denied.

Two interesting points to this.  First, employees were asked to sign waivers without knowing exactly what limits their compensation would be subject to, since the applicable regulations aren't final.  Second, Chrysler Financial, which is privately held, is controlled by its shareholders, Cerberus Capital Management, who apparently aren't much interested in reducing the amounts they're paying their executives.

By the way, Chrysler Financial, which is struggling but isn't yet in its death throes, is denying that executive compensation is the reason it didn't take the money.  It says it didn't need it. 

[Frank Snyder]

Today in history: April 23

On this date in 1791, lawyer and politician James Buchanan was born in a log cabin in Mercersburg, Pennsylvania.  Buchanan went on to become one of the most experienced men ever to hold the office of President of the United States, having served as state legislator, Congressman, Senator, minister to Russia, minister to Great Britain, and Secretary of State -- as well as turning down a seat on the U.S. Supreme Court.

He was also a very bad prophet who wildly overestimated the power of the U.S. Supreme Court to decide contentious political issues.  In his Inaugural Address he cheerfully noted that the question of slavery was one of "little practical importance" because the U.S. Supreme Court was about to settle it as a matter of Constitutional law.  Two days later, the Court announced Dred Scott v. Sandford.  Two years later, in his 1859 State of the Union message, he was still confident that the Court's decision had finally settled the issue whether slavery could be abolished and eliminated all need for sectional strife:

I cordially congratulate you [the people] upon the final settlement by the Supreme Court of the United States of the question of slavery in the Territories, which had presented an aspect so truly formidable at the commencement of my Administration. The right has been established of every citizen to take his property of any kind, including slaves, into the common Territories belonging equally to all the States of the [Union], and to have it protected there under the Federal Constitution. Neither Congress nor a Territorial legislature nor any human power has any authority to annul or impair this vested right. The supreme judicial tribunal of the country, which is a coordinate branch of the Government, has sanctioned and affirmed these principles of constitutional law . . . .

Apparently, though, some people continued to disagree.

[Frank Snyder]

Signs of the [New York] Times

The latest group of money-grubbing executives clinging to their perks while laying off employees and asking union workers for concessions turns out to be the top dogs at the New York Times.  CEO Janet Robinson earned $5,578,451, a nice 35 percent raise over the previous year.  This, despite the fact that the company's stock has lost some 90 percent of its value over her five-year stint and the company posted a much bigger loss in the first quarter than analysts expected.  Meanwhile, the Gray Lady has been cutting staff, selling assets, and warning unions that they'll have to take pay cuts.

Perhaps tellingly, the only outisde ad on the business page announcing the paper's losses is a postage-stamp sized plug for books about, and framed photos of, Sen. Ted Kennedy.  Wonder how much that brings in?

[Frank Snyder]

Consumer exploitation, nonprofit division

You may have missed a New York Times story a couple of days ago about one of the most oppressed classes of debtors in the country:  students who borrowed for their educations.

While TV and radio commercials offering to help debtors with $15,000 in credit card bills to reduce their debts or get a fresh start in bankruptcy, some students are stuck with $150,000 in student loans.  And all the TV ads in the world can't help you with these.  A student loan "can't be bargained with . . . can't be reasoned with . . . doesn't feel pity, or remorse, or fear.  And it absolutely will not stop, ever, until you are dead."  

Over at Instapundit, Glenn Reynolds wryly notes that "when it comes to consumer exploitation, higher education has no room to strike moral poses vis-a-vis the for-profit sector."

[Frank Snyder]

Today in history: April 22

On this date in 1864, the United States Congress passes the Coinage Act.  It authorizes the creation of a new 2-cent coin (left), on which Secretary of the Treasury Salmon P. Chase decides to put the words "In God We Trust."  That's the first use of that motto on a U.S. coin.

No one at the time can possibly suspect that this will go on to become the motto of the United States, far outlasting the coin that introduced it.

[Frank Snyder]

Father offers to sell child star of Slumlord Millionaire?

The father of Rubina Ali, child star of Slumdog Millionaire, allegedly put his daughter up for sale, offering to allow her to be adopted for about £200,000.  Dad Rafiq Qureshi, who lives in one of Mumbai's worst slums and says his daughter made nothing out of the hit film, which won 8 Academy Awards, allegedly offered her to a man he thought was a sheikh from Dubai.

Qureshi and Ali have denied that claim, saying that they understood the transaction as an offer of employment for the child actress.

[Frank Snyder]

How a CDS has more than one role in a bankruptcy . . .

We're all learning a good deal about credit derivative swaps (CDSs) these days.  The point of the CDS, of course, is to protect parties from defaults on bonds.  Turns out that this protection can have a significant effect on the incentives of those who whold bonds in failing companies, according to this piece by Charles Davi of the Atlantic.magazine.

[Frank Snyder]

Today in history: April 21

On this date in 753 B.C., twin brothers Romulus and Remus found a new town on Italy's Tiber which, after a fight in which Romulus kills his brother, is called "Rome."  Remus had apparently preferred "Reme" as the town's name.  (Left: The twins with their adoptive mother.)

This, of course, sets in motion a chain of events that will lead future generations of American lawyers to deal with (and mispronounce) terms like ejusdem generis, quantum meruit, and res ipsa loquitur.

[Frank Snyder]