ContractsProf Blog

Dark Shadows and Possible Contract Defenses

This weekend, I had a chance to see Tim Burton's latest, Dark Shadows. I mention it because it contains a tidbit about our favorite subject here at the blog - CONTRACTS. If you saw the movie, you might be wondering - huh? Too distracted by the blood (there's a vampire, what d'ya expect) and the erratic tone, you might have missed it. In fact, there are two scenes where contracts play a pivotal role. The first is when Johnny Depp's character, Barnabus Collins, approaches a fisherman honcho (I can't remember his name) and tries to get him to break his contract with the evil Angelique (I won't go into the details but basically Barnabus and Angelique are running competing fish canneries). You might be thinking, That's interference of contract, right? That's a tort - what's it doing on this blog? But when the fisherman honcho refuses to do it, professing loyalty (and embodying the notion that trust plays a vital role in contract performance), Barnabus puts him under a spell. I'm not quite sure whether that would constitute duress - there's no "improper threat", although there is "no reasonable alternative" and the so-called assent certainly wasn't voluntary. I think a stronger defense for the fisherman honcho would be a variation of an intoxication or insanity-like defense to show that he wasn't in his right mind and the assent was not voluntary.

The second contractual plot point sees Barnabus under duress this time. Angelique makes Barnabus an offer he can't refuse - in other words, she makes an improper threat that leaves him with no reasonable alternative. But rather than taking it, he makes her a "counterproposal" which is that she kiss off (or something along those lines). It's not really a counteroffer though, since there's no bargain. It's really just a rejection that he phrases as though it were a counteroffer - Hollywood again playing fast and loose with contract doctrine. Angelique, of course, hates being rejected. Her response is to throw him in a box (aka a coffin) and lock him up for eternity -- proving that there really was no reasonable alternative for ol' Barnabus. (Of course, he can't use duress as a defense because he took the unreasonable alternative to be locked in a box).

Anyway, other than the contract issues, the movie didn't really work for me. But reasonable minds may differ.

[Nancy Kim]

 

Breaking SoL News from Ohio

Watchdog.org reports a recent change made by the Ohio House concerning the statute of limitations (SoL) for lawsuits alleging causes of action for breach of contract.  Until recently, a party in Ohio had up to 15 years after a cause of action accrued to file a lawsuit for breach of written contract.  However, S.B. 224, which was unanimously passed on Thursday, May 24, 2012, reduces the time period to eight years.  In most states, the SoL for braech of contract is six years or less.

Speaker William Batchelder, R-District 69 said “this law has dated back to the days of early statehood, when businesses and consumers moved at a much slower pace.  Obviously the speed at which industry moves has increased rapidly since then and S.B. 224 brings Ohio more in line with today’s fast-paced world.”

We'll see if the governor signs the law and brings Ohio's SoL into line with that of other states.

[Christina Phillips & JT]

 

Weekly Top Tens from the Social Science Research Network

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal 
March 30, 2012 to May 29, 2012

Rank	Downloads	Paper Title
1	510	The Perils of Social Reading  Neil M. Richards,  Washington University in Saint Louis - School of Law
2	225	Zotero - A Manual for Electronic Legal Referencing  John Prebble, Julia Caldwell,  Victoria University of Wellington, Victoria University of Wellington
3	147	The Common European Sales Law (CESL) Beyond Party Choice  Jan M. Smits,  Maastricht University Faculty of Law - Maastricht European Private Law Institute (M-EPLI)
4	127	Transaction Simplicity  Stephen J. Lubben,  Seton Hall University - School of Law
5	118	The Private Equity Contract  Steven M. Davidoff,  Ohio State University (OSU) - Michael E. Moritz College of Law
6	111	Forcing Forgetfulness: Data Privacy, Free Speech, and the 'Right to Be Forgotten'  Robert Kirk Walker,  University of California - UC Hastings College of the Law
7	103	Outsourcing Regulation: How Insurance Reduces Moral Hazard  Omri Ben-Shahar, Kyle D. Logue,  University of Chicago Law School, University of Michigan Law School
8	99	'Offer to Sell' as a Policy Tool  Lucas Osborn,  Campbell University Law School
9	98	Arbitration of Trust Disputes: Two Bodies of Law Collide  S.I. Strong,  University of Missouri School of Law
10	90	The Draft Common Frame of Reference (DCFR) - The Most Interesting Development in Contract Law Since the Code Civil and the BGB  Frank Emmert,  Indiana University Robert H. McKinney School of Law

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic)  
March 30, 2012 to May 29, 2012

Rank	Downloads	Paper Title
1	510	The Perils of Social Reading  Neil M. Richards,  Washington University in Saint Louis - School of Law
2	180	The Questionable Basis of the Common European Sales Law: The Role of an Optional Instrument in Jurisdictional Competition  Eric A. Posner,  University of Chicago - Law School
3	147	The Common European Sales Law (CESL) Beyond Party Choice  Jan M. Smits,  Maastricht University Faculty of Law - Maastricht European Private Law Institute (M-EPLI)
4	145	Modern Chinese Real Estate Law: Property Development in an Evolving Legal System (Chapter 1)  Gregory M. Stein,  University of Tennessee College of Law
5	99	Errors of Fact and Law: Race, Space, and Hockey in Christie v. York  Eric M. Adams,  University of Alberta - Faculty of Law
6	63	An Empirical Study of Predispute Mandatory Arbitration Clauses in Social Media Terms of Service Agreements  Michael L. Rustad, Richard Buckingham, Diane D'Angelo, Katherine Durlacher,  Suffolk University Law School, Suffolk University - Law School, Suffolk University - Law School, Suffolk University - Law School
7	62	Instructing Juries on Noneconomic Contract Damages  David A. Hoffman, Alexander Radus,  Temple University - James E. Beasley School of Law, Temple University James E. Beasley School of Law
8	62	How Many Systems of Private Law are There in Europe? On Plural Legal Sources, Multiple Identities and the Unity of Law  Martijn W. Hesselink,  University of Amsterdam - Centre for the Study of European Contract Law (CSECL)
9	60	Europe-Building Through Private Law: Lessons from Constitutional Theory  Chantal Mak,  University of Amsterdam - Centre for the Study of European Contract Law (CSECL)
10	60	Remedial Consilience  Marco Jimenez,  Stetson University College of Law

[JT]

Breach of Contract Suit Filed Against Wayne Newton

According to USAToday.com, Wayne Newton, aka Mr. Las Vegas, is being sued for breach of contract by  the company that teamed with Newton to turn his 40-acre estate, called Casa de Shanandoah, into a museum. The company, CSD, LLC (CSD), purchased the rights to convert Newton’s 40-acre estate, which features South African penguins, Arabian horses, paintings by Renoir and 17th century antiques collected from European castles, into “Graceland West."  CSD  now alleges that Newton, along with his wife and her mother have unreasonably delayed the project. 

The complaint states that under the terms of the museum deal, the Newtons agreed to move to a $2 million home on the estate constructed by CSD, so that the mansion, which serves as the Newtons current residence, could be converted into a museum.  However, CSD alleges that the Newton family refused to relocate or turn over personal memorabilia.  Graceland West is supposed to feature certain animal attractions as well, but right now there are an extra 35 horses on the property along with large vicious dogs that Mr. New ton allows to roam freely, in spite of the fact that the dogs have attacked and bitten people on more than a dozen occasions. The dogs are also credited with killing 75 birds in the estate's aviary, as well as the occasional peacock.

The complaint details the delapidated condition of Casa de Shanadoah before its infusion of $30 million and its efforts to improve the conditions on the estate.  If you have a interest in descriptions of horses wallowing in their own feces, this is the complaint for you. 

Adding additional spice to the story, the complaint also claims that Newton sexually harassed a female equine management speicalist who was hired to train the horses for hte exhibit.  She is allegedly threatening suit against the parties to the lawsuit.  As reported by USAtoday.com, Newton’s lawyer, J. Stephen Peek, responded to the sexual harassment claims saying the accusations are merely an attempt to “obtain financial gain,” and the woman has been fired.  

Foxnews.com reports that the lawsuit seeks to have the Newton family immediately vacate their estate, Casa de Shenandoah, and allow the $50 million project to move forward.  However, the Newton family claims the lawsuit is a preemptive strike based on their plans to sue the company for breach of contract after multiple construction delays.  The family plans to file a countersuit challenging CSD’s allegations.  

For some reason, Wayne Newton has not played in Valparaiso recently, so we had to go to YouTube to get a sense of what this incomparable performer is like.  Here's a taste:

 

[JT & Christina Phillips]

Guest Post: How Do Surety Bond Costs Affect Small Contracting Firms?

Here is the first guest post by guest blogger Danielle Rodabaugh

It's no secret that the economy plays a huge role when it comes to competition in the construction industry. When the economy is down, competition goes up, and small contracting firms typically have trouble competing with larger ones. When construction professionals are unprepared to pay for the surety bonds required for large projects, the opportunity for small firms to gain access to business becomes even more limited.

Before I go much further, I'd like to review the use of surety bonds in the construction industry, as the surety market remains relatively mysterious to those who work outside of it.  As explained in more detail here, the financial guarantees provided by contractor bonding keep project owners from losing their investments.

Each surety bond that's issued functions as a legally binding contract among three entities. The obligee is the project owner that requires the bond as a way to ensure project completion. When it comes to contract surety, the obligee is typically a government agency that's funding a project. The principal is the contractor or contracting firm that purchases the bond as a way to guarantee future work performance on a project. The surety is the insurance company that underwrites the bond with a financial guarantee that the principal will do the job appropriately.

Government agencies require construction professionals to purchase surety bonds for a number of reasons that vary depending on the nature of a project. For example, bid bonds keep contractors from increasing their project bids after being awarded a contract. Payment bonds ensure that contractors pay for all subcontractors and materials used on a project. Performance bonds ensure that contractors complete projects according to contract. When contractors break these terms, project owners can make claims on the bonds to gain reparation.

The federally enforced Miller Act requires contractors in every state to file payment and performance bonds on any publicly funded project that costs $100,000 or more. However, state, county, city and even subdivisions might require contractors to provide additional contract bonds, such as license bonds or bid bonds, before they can be approved to work on certain projects. Or, sometimes local regulations require payment and performance bonds on publicly funded projects that cost much less than $100,000. Contractors should always verify that they're in compliance with all local bonding regulations before they begin planning their work on a project.

Although the purpose of contractor bonding is to limit the amount of financial loss project owners might have to incur on projects-gone-wrong, the associated costs can limit the projects that smaller contracting firms have access to.

Surety bonds do not function as do traditional insurance policies. When insurance companies underwrite surety bond contracts, they do so under the assumption that claims will never be made against the bonds. As such, underwriters closely scrutinize every principal before agreeing to issue a contract bond.

Furthermore, the premiums construction professionals have to pay to get bonded might come as a surprise to those who know little about contractor bonding. Contractors often get tripped up with how much surety bonds will cost and how they'll pay for them — especially when it comes to independent contractors who operate small firms. Surety bond premiums are calculated as a percentage of the bond amount. The higher the required bond amount, the higher the premium. Thus, purchasing bonds for large projects obviously costs contractors more than purchasing bonds for small projects.

The percentage rate used to calculate the premium depends on a number of factors, including the contractor's credit score, years of professional experience and record of past work performance. The stronger these variables are, the lower the surety bond rate. The weaker these variables are, the higher the surety bond rate.

As such, small firms often find it hard to compete for large projects because they struggle to either qualify for the required bonds or pay the hefty premiums. When contractors are unable to secure contractor bonding as required by law, they are not permitted to work on projects. This, consequently, typically limits large public projects to large contracting firms that can both qualify for and afford to purchase large bonds. Fortunately, when small contracting firms fail to qualify for the commercial bonding market, the Small Business Administration does offer a special bonding program to help them secure the necessary bonding.

Smaller contractors can improve their situation by reading up on the surety bond regulations that are applicable to their area. Those who understand the surety process and how various factors affect their bond premiums should find themselves better prepared to apply for the bonds they need.

[Posted by JT on behalf of Danielle Rodabaugh]

The Contracting of Everything - Not in NZ

I've realized that I don't have much more time in beautiful New Zealand and that I've not come close to fulfilling my promise to share my observations about how N.Z. contracts (and contracting styles) differ from those in the U.S.( I also realized I haven't come close to fulfilling my twice-a-week posting promise to our blogmeister, JT, so guilt is building, especially now that Meredith has taken unpaid leave).

As I've previously mentioned, I've been struck by how infrequently I've been forced - er, asked - to sign a form contract while here in NZ. The primary reason is probably that there is much less need to worry about tort liability (since it's already quite limited). One thing I have noticed, however, is that the merchants here check my signature when I use my credit card. As Alex Kuczynski notes in this amusing essay, merchants in the U.S. tend not to check that your signature matches the one on the back of the card. In New Zealand, however, it happens all the time. When it first happened, I was admittedly a little offended. Was it my shabby clothing? My scuffed up shoes? It turns out there was no need to be so sensitive - it apparently happens to everyone.

Another contracting practice that differs is that the few times I have had to sign a consumer contract, it was emailed to me in pdf form. Unlike receiving a hyperlink to terms which you don't read, receiving a pdf somehow made me read the contract. It made me feel as though the company (in this case, a camper van rental company) really did want me to read the terms. After making a reservation online, I got a confirmation letter with a pdf containing the contract terms. Since I made the reservation 2 weeks in advance, I had that much time to read the contract. When I picked up the camper van, they handed me the same contract and I signed it (I could have also printed it out, signed it, and brought it with me if I had been better organized). Yes, it was still a contract of adhesion, but at least I knew what I was getting myself into.

I've always suspected that the contracting of everything tends to make consumers disregard contracts - how could we function if we actually read all the legal terms that are thrust our way (online terms included)? Maybe if companies cut back on some of the legalese, consumers might start to take contracts a little more seriously. Here's hoping...

[Nancy Kim]

 

 

Introducing Our Guest Blogger, Danielle Rodabaugh

Every year when I cover the Statute of Frauds, I think about the contracts that I learned were within the Statute: MYLEGS: contracts relating to Marriage; contracts that cannot be performed within one Year; contracts for the sale of Land; Executorship contracts; contracts for the sale of Goods in excess of $500; and Suretyship contracts.  The SoF case law that we cover in first-year contracts is always about goods, land, and the one-year limitation, so I've never really had to worry about the fact that I know nothing about suretyship.  

That may change now, because Danielle Rodabaugh (pictured) will be guest posting here starting tomorrow on topics relating to suretyship law.  

Danielle is the chief editor for SuretyBonds.com, an online surety bond insurance agency that works with professionals across the nation. As a part of the company's ongoing educational outreach program, Danielle writes informational articles that help construction professionals better understand the legal implications involved with the bonding process.

Danielle is the chief editor of the Surety Bonds Insider, an online publication that tracks legal developments within the surety industry and explains how they affect working professionals across the nation. As a graduate of the Missouri School of Journalism, Danielle has a special interest in writing about issues related to changing insurance and finance policies. 

We look forward to some enlightening posts.

[JT]

Lucy van Pelt Ponders Fundamental Contractual Issues

Since Meredith has decided to take an unpaid leave-of-absence this summer, we have to take some short-cuts to make sure we can continue to feed our readers' voracious hunger for new contracts-related stimuli.

Here, for example, is a YouTube clip that bears the caption "All I need to know about contracts"

The comments following the video suggest that 1) Charlie Brown's cause of action would lie in promissory estoppel, not in contract; or 2) that the contract is binding if signed by both parties even in the absence of notarization.

As Charlie Brown might say to express exasperation in this context, *Sigh*.  Isn't this obviously a case of tort rather than breach of contract?  What contractual damages has Charlie suffered?  What non-tort damages would he have based on a theory of promissory estoppel?

[JT]

Summer Slow Down. . . . Off to Vietnam

I apologize in advance that my blogging will be light to non-existent in the next month.  I leave today to travel and then teach in Touro's summer abroad program in Vietnam.

Pursuant to my blogging contract, I believe I promised to post at least once a week. I haven't reviewed the contract in a while, but I believe there is an exemption for summer abroad programs.  Even if not expressly stated, I think the exemption is implicitly established by the previous conduct of Jeremy, our blog overlord editor.

If I don't see you on the blog, have a great month!

[Meredith R. Miller]

"Hot Dogs Don't Have Contracts...."

Yup, an ad for internet service:

[Meredith R. Miller]

Woman Breached Adoption Contract When She Sent Child Back to Russia

Remember the woman who adopted a Russian boy and then decided he had psychological problems and didn't want him anymore?  A Tennessee judge has apparently ordered the woman to pay $150,000 for breach of the adoption contract.  The Washington Post reports:

An American woman who adopted a Russian boy and later sent him back to Moscow on a one-way flight has been ordered to pay a sum of $150,000 and an additional $1,000 per month in child support until he’s an adult.

On Thursday a Bedford County, Tenn., judge said Torry Hansen must begin making the child support payments in June and continue to pay until the boy, who is now 10 years old, turns 18. Circuit Court Judge Lee Russell said the $150,000 Hansen must pay includes damages for breach of contract, legal fees and support for the boy.

Here's more:

Adoption advocates hailed the Tennessee court order as a measure of justice for the boy, and said the judge’s decision would show there are consequences to abandoning adopted children. They have said Hansen never told social workers that she was having problems with the boy.

The agency sued Hansen to deter others from doing anything similar and to show the Russians that “you cannot do this in America and get away with it,” Crain said.

“It has certainly caused concern on the part of Russian officials that unless there are consequences when a parent abandons a child placed in their home, there’s a need for safeguards to make sure this never occurs,” Crain said.

The judge said in his order that when Hanson adopted the boy she signed a contract acknowledging that it was possible the child could have physical, emotional or behavior problems that were unreported and even unknown to the adoption agency.

Lee said $58,000 of the $150,000 will pay for the past two years’ worth of support and medical fees for the boy in Russia.

Here's the entire article.

[Meredith R. Miller]

Cosmo Duff-Gordon in the News

Sir Cosmo Duff-Gordon (pictured), Titanic survivor and husband to Lucy, Lady Duff-Gordon of Wood v. Lady Duff-Gordon fame, was pictured in today's New York Times here.  The picture shows Sir Cosmo, along with two British fencing teammates, holding pistols at the 1908 Olympic Games.  Inattentive readers might conclude that Sir Cosmo competed in the dueling competition, but as his Wikipedia entry notes, his specialty (Silver Medal, 1906 Olympics) was the épée.

The individual dueling competition was featured only at the 1906 games and as the Times waggishly notes, "none of the duelists was actually shot," which must have been terribly disappointing for the audience.  No wonder you couldn't even find the games on cable in 1906. The Times explains that the competitors "shot at a dummy dressed in a frock coat."

[JT]

Weekly Top Tens from the Social Science Research Network

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal 
March 23, 2012 to May 22, 2012

Rank	Downloads	Paper Title
1	397	The Impact of the Broker-Dealer Fiduciary Standard on Financial Advice  Michael S. Finke, Thomas Patrick Langdon,  Texas Tech University, Unaffiliated Authors - affiliation not provided to SSRN
2	205	The Perils of Social Reading  Neil M. Richards,  Washington University in Saint Louis - School of Law
3	197	Zotero - A Manual for Electronic Legal Referencing  John Prebble, Julia Caldwell,  Victoria University of Wellington, Victoria University of Wellington
4	154	Does the Constitution Protect Economic Liberty?  Randy E. Barnett,  Georgetown University Law Center
5	133	The Common European Sales Law (CESL) Beyond Party Choice  Jan M. Smits,  Maastricht University Faculty of Law - Maastricht European Private Law Institute (M-EPLI)
6	123	Transaction Simplicity  Stephen J. Lubben,  Seton Hall University - School of Law
7	105	Forcing Forgetfulness: Data Privacy, Free Speech, and the 'Right to Be Forgotten'  Robert Kirk Walker,  University of California - UC Hastings College of the Law
8	97	'Offer to Sell' as a Policy Tool  Lucas Osborn,  Campbell University Law School
9	92	The Private Equity Contract  Steven M. Davidoff,  Ohio State University (OSU) - Michael E. Moritz College of Law
10	92	Outsourcing Regulation: How Insurance Reduces Moral Hazard  Omri Ben-Shahar, Kyle D. Logue,  University of Chicago Law School, University of Michigan Law Schoo

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic)  
March 23, 2012 to May 22, 2012

Rank	Downloads	Paper Title
1	205	The Perils of Social Reading  Neil M. Richards,  Washington University in Saint Louis - School of Law
2	163	The Questionable Basis of the Common European Sales Law: The Role of an Optional Instrument in Jurisdictional Competition  Eric A. Posner,  University of Chicago - Law School
3	154	Does the Constitution Protect Economic Liberty?  Randy E. Barnett,  Georgetown University Law Center
4	143	Modern Chinese Real Estate Law: Property Development in an Evolving Legal System (Chapter 1)  Gregory M. Stein,  University of Tennessee College of Law
5	132	The Common European Sales Law (CESL) Beyond Party Choice  Jan M. Smits,  Maastricht University Faculty of Law - Maastricht European Private Law Institute (M-EPLI)
6	98	Errors of Fact and Law: Race, Space, and Hockey in Christie v. York  Eric M. Adams,  University of Alberta - Faculty of Law
7	60	Instructing Juries on Noneconomic Contract Damages  David A. Hoffman, Alexander Radus,  Temple University - James E. Beasley School of Law, Temple University James E. Beasley School of Law
8	58	Remedial Consilience  Marco Jimenez,  Stetson University College of Law
9	57	Europe-Building Through Private Law: Lessons from Constitutional Theory  Chantal Mak,  University of Amsterdam - Centre for the Study of European Contract Law (CSECL)
10	57	How Many Systems of Private Law are There in Europe? On Plural Legal Sources, Multiple Identities and the Unity of Law  Martijn W. Hesselink,  University of Amsterdam - Centre for the Study of European Contract Law (CSECL)

 

[JT]

Representations and Warranties

Over at Ken Adams' Koncision blog, he has a fascinating post and cri de coeur about how to present statements of fact in a contract.  I recommend this post and this blog to practitioners who are interested in writing neat, clean, clear, and above all enforceable agreements.  In this post, Ken urges contract drafters to eschew the magic words "representations" (or "represents") and "warranties" (or "warrants"). in favor of the simpler "states."

I think I agree with Ken that the phrase "represents and warrants" is reflexive boilerplate that creates confusion in most cases.  Unlike Ken though, I think the terms have clear, separate meanings and that they retain their utility when used separately and precisely.

While I have not thought the issue through with Ken's gusto, I am far more inclined to be a traditionalist on such matters.  "States" does not mean the same thing as "represents," and there are reasons to be persnickety about this.  I may state that I am the very model of the modern major general, but that is very different from representing that I am.  Having parties state things in contracts has no meaning in standard contract parlance, nor should it because one cannot rely on a mere statement unless it is accompanied by another statement, one which acknowledges that such reliance is warranted because the party stating the facts also represents that they are true.  So, my inclination is to disagree with Ken's claim that only those of us introduced to the mysteries of the law can appreciate the difference between a statement and a representation.

I likewise disagree with Ken's claim that most practitioners could not identify the difference between a warranty and a representation or that their failure to respond satisfactorily when subjected to the terrors of my Socratic questioning is relevant to the issue of whether or not there is a useful distinction between the terms as a matter of contracts law.  If the majority of practitioners said, "I don't know; I'd have to look it up," that would satisfy me, so long as people like Ken keep writing drafting manuals that explain the difference between a statement of fact and a warranty.

Ken says that courts do not really recognize the "magic words"  ("represents and warrants") as operating as many people think they do.  However, his evidence only states that you can create a warranty without invoking the words "warranty" or "guarantee."  That evidence is not enough to persuade me that a carefully drafted contract should not clearly identify its warranties as such, and it seems to me that using some form of  the word "warranty" is the best way to do so.  As far as substituting the word "[party X] states" for "[party X] represents," with respect to factual statements/representations, I see the advantages of plain language, but beyond that, I think a representation is something more than a statement and therefore that the traditional language should be preserved.

Let the blawg battle begin!

[JT]

Resistance to Arbitration Ruled Quixotic

In M.A Mortenson Company v. Saunders Concrete Company, Inc., the Eight Circuit affirmed the District Court's decision to grant Mortenson's motion to compel arbitration in its dispute with its sub-contractor, Saunders, which allegedly supplied Mortenson with faulty concrete causing Mortenson to incur $4.5 million in repair costs on a wind turbine project.  

The arbitration clauses at issue was contained in a four-paragraph provision in the subcontract labled "Disputes."  Saunders attempted to resist arbitration by arguing that Paragrah 21.4 of the agreement violated New York's lien law and that the arbitration provision is unconscionable.  Following Rent-A-Center West, the Eighth Circuit observed that a court "must enforce 'a specific agreement to arbitrate' despite a litigant's challenges to the contract as a whole or to another provision of the contract."  Accordingly, Saunder's challenge to Paragraph 21.4 has no bearing on the enforceability of the arbitration provision, which is contained in Paragraph 21.2.  

The Court took about a nanosecond to reject Saunders' arguments that the arbitration provision was procedurally unconscionable because Saunders had no opportunity to negotiate it and that it was substantively unconscionable because it provided for arbitration in Mortenson's "sole discretion."  The Eighth Circuit affirmed the District Court's grant of Mortenson's motion to compel arbitration.

[JT]

Welcome to the Blawgosphere: LSU Law Energy Blog

Call for Blog Entries

The newly formed LSU Journal of Energy Law and Resources (JELR) at the Louisiana Sate University Paul M. Hebert Law Center invites submissions of articles for the Journal’s companion blog, The LSU Law Energy Blog. The blog will launch in August 2012 and will continue to publish pieces on a rolling basis. JELR is a student-edited journal devoted to the promotion of legal scholarship in energy law.   The Journal is committed to publishing a variety of topics within the purview of energy law, including interdisciplinary pieces. The LSU Law Energy Blog will supplement the Journal by providing shorter articles on recent developments in energy law and the surrounding fields published by students, practitioners, and professionals in these fields.

Submissions: To be considered for publication on The LSU Law Energy Blog, please submit an entry on a current, relevant energy law topic or a case note on a major energy law case. Topical entries should be around 500 words and case notes may be longer. Please email these entries to [email protected]. For publication on the blog in Fall of 2012, please submit a polished entry by July 15, 2012.

[JT]

Update: South Dakota Supreme Court sides with Costner in Breach of Contract Suit

We've mentioned (here and here) the South Dakota case by a sculpture artist against Kevin Costner -- she alleged that Costner's placement of the sculptures (many large, bronze bison) was a breach of their contract.  The Washington Post provides this update:

PIERRE, S.D. — The South Dakota Supreme Court ruled Thursday that actor Kevin Costner did not breach a contract with an artist when he placed commissioned sculptures of bison and American Indians at a different site than was originally planned.

The Hollywood superstar, who filmed much of his Academy Award-winning movie “Dances with Wolves” in South Dakota, paid Peggy Detmers $300,000 to make 17 bronze sculptures for a resort called The Dunbar he planned to build on the edge of the Black Hills gambling town of Deadwood. The resort never was built and the sculptures instead are at his Tatanka attraction near the proposed resort site.

A later contract said if the resort was not built within 10 years or the sculptures were not “agreeably displayed elsewhere,” the sculptures would be sold with Costner and Detmers sharing the proceeds.

Detmers said she spent more than six years creating the sculptures and gave Costner a price break because she anticipated selling smaller reproductions of the sculptures at the resort.

The artist contended in a lawsuit filed in 2008 that because The Dunbar was not built and the sculptures were not “agreeably displayed elsewhere,” the artwork should be sold and she should get 50 percent of the sale proceeds.

But a circuit judge ruled in July that Detmers indicated her approval of the Tatanka location by participating in the site’s development and several events related to its opening in 2003. The Tatanka site, located next to the land where Costner had planned to build The Dunbar, houses the sculptures, a museum and a visitor center.

Detmers argued that she agreed to the placement of the sculptures at the Tantanka site because she was under the impression The Dunbar would still be built.

The Supreme Court unanimously agreed with Circuit Judge Randall L. Macy’s finding that Detmers never received any promise or guarantee that the resort would be built. Detmers knew the resort’s future was questionable, the high court said.

The justices also upheld the trial judge’s ruling that the sculptures have been “agreeably displayed elsewhere,” and that the Tatanka site was separate from the Dunbar site.

On the issue of whether the sculptures had been "agreeably displayed elsewhere," The Court reasoned:

The circuit court concluded as a matter of law that the regular meaning of the term “elsewhere” applied. The court noted that Black’s Law Dictionary defines elsewhere as “in another place, in any other place,” and Webster’s Dictionary defined it as “in or to another place.” See Black’s Law Dictionary 560 (8th ed. 2004). Accordingly, there must first be a designated place to determine if somewhere is “another place.” Paragraph three provides: “if The Dunbar is not built within ten (10) years or the sculptures are not agreeably displayed elsewhere.” (Emphasis added.) The designated place is The Dunbar. The circuit court concluded that “elsewhere” meant at a place other than The Dunbar. And because The Dunbar had not been built, Tatanka was elsewhere.

Costner points out that the circuit court and Detmers both assign “elsewhere” its ordinary meaning, i.e., “in another place.” The analysis diverges on whether “in another place” means another place from The Dunbar itself or from The Dunbar’s intended site. Costner asserts that the circuit court was correct in concluding that “elsewhere” is in a place other than The Dunbar resort itself, which, according to the language, must be built. The land could not be built, but the resort could. Furthermore, the terms of the contract plainly do not say The Dunbar site.

* * *

The plain words of the contract unequivocally provide that if The Dunbar was not built or the sculptures were not agreeably displayed elsewhere, then Detmers would be entitled to the relief described in paragraph three. “Elsewhere” must be understood in relation to the named place in the contract – The Dunbar. Costner is correct that to accept Detmers argument would rewrite the contract to include The Dunbar’s intended location as well as the resort itself. This we will not do. See Culhane v. W. Nat’l Mut. Ins. Co., 2005 S.D. 97, ¶ 27, 704 N.W.2d 287, 297 (“[W]e may neither rewrite the parties’ contract nor add to its language . . . .”). As a matter of law, the court did not err in its conclusion that Tatanka was elsewhere from The Dunbar. This conclusion is supported by giving the terms in the parties’ contract their plain and ordinary meaning.

Detmers v. Costner (S.D. S. Ct. May 9, 2012).

[Meredith R. Miller]

Arkansas Statute of Limitations Trumps Insurance Policy Language

Kenneth Graham was blinded in 2005 when a can of Easy-Off oven cleaner exploded in his face.  He filed a timely proof of loss with his insurer, and after his insurer denied his claim -- and his appeal -- he filed a breach of contract claim in Federal District Court against his insurer.  Mr. Graham's claim was within the five-year statute of limitations (SoL) provided under Arkansas law.  However, the District Court dismissed his suit as outside the three-year SoL provided for in the policy.

In Graham v. Hartford Life and Accident Insurance Company, the Eighth Circuit reversed.  The District Court had relied on Arkansas cases that permit insurance policies to set reasonable SoLs.  However, the Eighth Circuit recognized a significant limitation on insurers' ability to do so:

The general rule announced and applied in Ferguson, Hawkins, and Wilkins has its limitations, however. A contractually shortened period must "not contravene somestatutory requirement or rule based upon public policy." Ferguson, 821 S.W.2d at 32. Graham contends section 23-79-202 of the Arkansas Code, which applies to property and life insurance policies,1 is one such statutory requirement. Graham further contends Hartford's policy provision, shortening the period for him to file suit to a period of less than five years, contravenes the statutory requirement. We agree.

Language in Hartford's policy setting the SoL at something less than five years was void, according to the EIghth Circuit, as inconsistent with subdivision (b) of section 23-79-202 of the Arkansas Code.  Hartford argued that the statutory language was intended to encompass the holdings of the earlier case law.  The Eighth Circuit was not persuaded.  While the Arkansas courts have not yet addressed this issue with respect to Section 202, both the Arkansas Supreme Court and the Eighth Circuit had addressed identical language in a predecessor statute and both had rejected Hartford's argument.

[JT]

New in Print

George A. Bermann, The Supreme Court Trilogy and Its Impact on U.S. Arbitration Law, 22 Am. Rev. Int'l Arb. 551 (2011)

John J. Chung, Customary International Law As Explained by Status Instead of Contract, 37 N.C. J. Int'l L. & Com. Reg. 609 (2012) 

Claudia DiMarzo, Medical Malpractice: the Italian Experience. 87 Chi.-Kent. L. Rev. 53 (2012)

William V. III Dorsaneo and C. Paul Rogers III, The Flawed Nexus between Contract Law and the Rules of Procedure: Why Rules 8 and 9 Must Be Changed, 31 Rev. Litig. 233 (2012).

Zev J. Eigen and David Sherwyn, A Moral/Contractual Approach to Labor Law Reform, 63 Hastings L.J. 695 (2012)

Gregory Klass, To Perform or Pay Damages. 98 Va. L. Rev. 143 (2012)

Florencia Marotta-Wurgler, Some Realities of Online Contracting, 19 Sup. Ct. Econ. Rev. 11 (2011)

Scott R. Peppet, Freedom of Contract in an Augmented Reality: the Case of Consumer Contracts. 59 UCLA L. Rev. 676 (2012)

Alan Scott Rau, Arbitral Power and the Limits of Contract: the New Trilogy, 22 Am. Rev. Int'l Arb. 435-550 (2011)

Daniel Schwarcz, Reevaluating Standardized Insurance Policies. 78 U. Chi. L. Rev. 1263 (2011)

Seana Valentine Shiffrin, Must I Mean What You Think I Should Have Said? 98 Va. L. Rev. 159 (2012)

Thomas J. Stipanowich, The Third Arbitration Trilogy: Stolt-Nielsen, Rent-A-Center, Concepcion and the Future of American Arbitration, 22 Am. Rev. Int'l Arb. 323 (2011)

[JT]

Eleventh Circuit Affirms Dismissal of Suit Seeking to Force Modification of Home Loan

On April 19th, the Eleventh Circuit Court of Appeals decided Miller v. Chase Home Finance, LLC, a case in which a residential mortgage borrower sought to sue a lender for refusing to agree to a permanent modification of the terms of his home loan. 

The lender, Chase, had agreed to a temporary loan modification in 2009, but in 2010, Chase informed Mr. Miller that the modification would not be extended.  Mr. Miller brought suit under the federal Home Affordable Modification Program (HAMP) alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and promissory estoppel.  The District Court granted Chase's motion to dismiss finding that HAMP provides no private right of action and that Mr. Miller would have no claim even if it did. 

The Eleventh Circuit agreed with the District Court in full.  It noted the standards for a court's recognition for an implied private right of action and found that they were not met with respect to HAMP.  In addition, it agreed with the District Court that Mr. Miller had no claim against Chase indpendent of obligations arising from HAMP.  He had effectively abandaned his breach of contract claim, and Georgia law does not recognize an independent cause of action for breach of the duty of good faith and fair dealing.  Mr. Miller's promissory estoppel claim was doomed because he apparently never alleged that Chase had promised that it would agree to modify his loan permanently.

[JT]