ContractsProf Blog

Binding Future Selves

On a recent plane ride, I was fortunate enough to have brought along Kaiponanea Matsumura's article, "Binding Future Selves," 75 Louisiana L. Rev. 71 (2014) which tackles the very complicated issue of decision making in the context of agreements involving "intimate subjects" such as procreation and child-rearing.  He raises a lot of issues that kept my mind engaged during the long flight. Here's the abstract:

"Courts traditionally treat a person entering an agreement as the same person at the time of enforcement notwithstanding the passage of time or an intervening change of mind. For certain agreements between intimates, however, courts have adopted the novel view that the enforcement of a person's earlier commitment would improperly constrain that person's will rather than serve as an expression of it. These cases rest on the assumption that an intervening change has created meaningful — and legally significant — differences between the later self (at the time of enforcement) and the earlier self (at the time of commitment), and that the later self deserves protection from the earlier self's choices.

This "different selves" rationale has arisen primarily in the context of agreements pertaining to matters like embryo disposition, surrogacy, and parentage. Courts and commentators appear to believe that the centrality of these types of choices to personhood justifies exceptions to general contract principles. But even assuming choices of this sort differ from choices embodied in "normal" contracts, the different selves rationale does not provide a principled basis for resolving a dispute between the selves; it does not explain why a choice central to personhood made at an earlier time is less central to that person than a choice made at a later time.

This Article contributes to the existing literature on several fronts. It reveals the increasing adoption by courts of the different selves rationale, which, until recently, was thought to be merely theoretical. It also exposes the ungrounded assumptions on which the rationale rests: that it applies only to a certain set of choices, that it can identify the proper choices to protect, and that it can actually protect those choices. Finally, this Article uses the different selves rationale as an occasion to examine the role of personal identity in contract law. Theories of personal identity emphasize the importance of self-continuity and future-regarding action, both of which are disserved by an approach that prizes a person's preference at the time of dispute rather than her earlier commitment."

Weekly Top Tens from the Social Science Research Network

SSRN Top Downloads For Contracts & Commercial Law eJournal
RECENT TOP PAPERS 

Rank	Downloads	Paper Title
1	346	Bitcoin and the Uniform Commercial Code  Jeanne L. Schroeder  Yeshiva University - Benjamin N. Cardozo School of Law
2	308	Contract as Automation: The Computational Representation of Financial Agreements  Mark D. Flood and Oliver R. Goodenough  Government of the United States of America - Office of Financial Research and Vermont Law School
3	124	Privacy in the Clouds: An Empirical Study of the Terms of Service and Privacy Policies of 20 Cloud Service Providers  Dimitra Kamarinou, Christopher Millard and W. Kuan Hon  Queen Mary University of London, School of Law - Centre for Commercial Law Studies, Queen Mary University of London, School of Law - Centre for Commercial Law Studies and Queen Mary University of London, School of Law - Centre for Commercial Law Studies
4	116	The Normative Force of Consent  Heidi M Hurd  University of Illinois College of Law
5	109	Reasoned Awards in International Commercial Arbitration: Embracing and Exceeding the Common Law-Civil Law Dichotomy  S.I. Strong  University of Missouri School of Law
6	94	R. v. Jones (1703): The Origins of the 'Reasonable Person'  Simon Stern  University of Toronto - Faculty of Law
7	93	Investment Accelerators  Brad Bernthal  University of Colorado at Boulder
8	88	The Myth of 'Legal' Consent in a Consumer Culture  Jennifer Ann Drobac  Indiana University Robert H. McKinney School of Law
9	81	Using Advertisements to Diagnose Behavioral Market Failure  Jim Hawkins  University of Houston Law Center
10	81	Efficiencies and Regulatory Shortcuts: How Should We Regulate Companies like Airbnb and Uber?  Benjamin G. Edelman and Damien Geradin  Harvard University - HBS Negotiations, Organizations and Markets Unit and George Mason University School of LawTilburg University - Tilburg Law and Economics Center (TILEC)

SSRN Top Downloads For LSN: Contracts 
RECENT TOP PAPERS

Rank	Downloads	Paper Title
1	308	Contract as Automation: The Computational Representation of Financial Agreements  Mark D. Flood and Oliver R. Goodenough  Government of the United States of America - Office of Financial Research and Vermont Law School
2	124	Privacy in the Clouds: An Empirical Study of the Terms of Service and Privacy Policies of 20 Cloud Service Providers  Dimitra Kamarinou, Christopher Millard and W. Kuan Hon  Queen Mary University of London, School of Law - Centre for Commercial Law Studies, Queen Mary University of London, School of Law - Centre for Commercial Law Studies and Queen Mary University of London, School of Law - Centre for Commercial Law Studies
3	116	The Normative Force of Consent  Heidi M Hurd  University of Illinois College of Law
4	88	The Myth of 'Legal' Consent in a Consumer Culture  Jennifer Ann Drobac  Indiana University Robert H. McKinney School of Law
5	73	Justifying Fair Price Rules in Contract Law  Horst Eidenmueller  University of Munich
6	62	The Contract Frontier: A Study of the Modern Joint Venture  Sarath Sanga  University of California, Berkeley
7	59	Good Faith in English Contract Law: A 'Contagious Disease of Alien Origin'  Andre Sinanan  Independent
8	55	U.S. CEO Employment Agreements and Non-Competition Provisions: A Literature Survey  Randall S. Thomas and Norman Bishara  Vanderbilt University - Law School and The Stephen M. Ross School of Business at the University of Michigan
9	54	The Politics of Arbitration Law and Centrist Proposals for Reform  Stephen J. Ware  University of Kansas - School of Law
10	41	The Lingering Confusion and Uncertainty in the Law of Contract Interpretation  David McLauchlan  Victoria University of Wellington - Faculty of Law

 

 

Private Law Blog on Fried's Contract as Promise 2.0

Yonathan Arbel has a post over on the New Private Law blog about the publication of the 2d edition of Charles Fried's classic Contract as Promise.  

The post is here.

The post also includes a video of a panel discussion on the publication, which is embedded below.

 

KCON XI Open for Business!

The website for the 11th edition of the International Conference on Contracts is now up.  

Here are the basics:

11th International Conference on Contracts (KCON XI)

Feb. 26 and 27, 2016
St. Mary’s University School of Law
San Antonio, Texas

The St. Mary’s University School of Law is pleased to host the International Conference on Contracts — a two-day conference designed to afford contracts scholars and teachers at all experience levels (including those preparing to enter the academy and those whose primary teaching appointment is not in a law school) an opportunity to present/demonstrate and discuss (formally and informally) recently-published and accepted-but-not-yet-published scholarship, works-in-progress, thought experiments, as-yet-fully-formed ideas for scholarship, and pedagogical innovations and to network with colleagues — and potential collaborators or mentors — from around the country and other parts of the world.

This year, we will be honoring Professor Peter Linzer of the University of Houston Law Center (pictured) with the Lifetime Achievement Award for his contributions to the field of contract law.

Call for Papers

Submissions are cordially invited for the 11th Annual International Conference on Contracts, the largest annual scholarly and educational conference devoted to Contracts and related areas of commercial law. Papers and works in progress are welcome from those who study contracts from any perspective, whether doctrinal, pedagogical, theoretical, empirical, historical, economic, critical, comparative or interdisciplinary.

Works that take an international or civil law approach are also welcome. Junior scholars are particularly encouraged to participate. Those interested in proposing and organizing panels of three to five presenters on specific themes are especially encouraged to do so.

Individual submissions should be made by a brief abstract (one page is sufficient) of the paper or work in progress that includes contact information for the author(s). Individual submissions will be placed on panels with like submissions. Panel proposals should include the name and contact information of the moderator or organizer, and a summary of the proposed papers or works in progress. There is no publication commitment for the conference, but organizers of individual panels are free to arrange for publication on their own.

Submissions: The deadline is Monday, Dec. 11, 2015. Proposals submitted earlier will be accepted on a rolling basis. Proposals submitted after the deadline will be accepted on a space-available basis.

Submissions should be directed to:
Professor Colin P. Marks
[email protected]

Preliminary Schedule

The conference program will begin both Friday and Saturday mornings at 9 a.m. Breakfast and conversational opportunities will start earlier. The conference will continue until about 5:30 p.m. each day.

Accommodations

The Menger Hotel in downtown San Antonio is holding a block of rooms from the nights of Thursday, Feb. 25, 2016 through Saturday, Feb. 27, 2016 at a rate of $139 per night (plus tax) for a single or double occupancy room or $149 per night (plus tax) for a triple or quadruple occupancy room.

To book a conference-rate room, please use this hotel registration link or call 800-345-9285 and identify yourself as an attendee of the International Conference on Contracts.

The deadline for hotel registration at the conference rate is Feb. 5, 2016. The sooner you book the more likely we will be able to get the hotel to make the conference rate available to additional attendees once the initial block is booked and the deadline passes.

Though shuttles will be provided to and from the conference and hotel, should you wish to drive, parking rates for the group are: $20 valet plus tax, (subject to change/for Hotel guest only). There are also various city lots around the hotel which cost between $12 and $20 per day.

Transportation

We’ll provide transportation between the Menger and the law school for the conference as well as forFriday’s dinner venue at the Plaza Club in downtown San Antonio. Attendees who prefer to stay elsewhere are responsible for their own transportation.

Meals

Your registration fee will cover the costs of breakfast and lunches both days and a reception and dinnerFriday evening, as well as morning and afternoon refreshments during breaks, which will include coffee, fruit, baked goods and other items.

Questions

If you have any questions, please contact the chair of the conference steering committee, Colin P. Marks, at 210-231-2248 or [email protected].

Lyft's TOS Can't Save It From the TCPA (or Why Contract Law's Version of Consent Needs to Get With the Program)

The FCC recently issued a Citation and Order to Lyft  which alleges that its terms of service violate the Telephone Consumer Protection Act (TCPA).  Under the TCPA, a company that wants to inflict autodialed phone messages or text messages for marketing purposes must first obtain the express prior written consent of the recipient. Furthermore, FCC regulations forbid requiring such consent as a condition of purchasing any goods, services or property. Significant penalties result from failure to comply with the TCPA and the accompanying rules.  Lyft has already updated its TOS in response to the FCC's action.

Lyft's terms of service required its customers to consent to autodialed calls and texts.  Prospective customers are required to check a box stating "I agree with the Terms of Service."  The sign-up page includes a link to the Lyft TOS.  Section 6 of the Lyft TOS stated:

"By becoming a User, you expressly consent and agree to accept and receive communications from us, including via e-mail, text message, calls, and push notifications to the cellular telephone number you provided to us. By consenting to being contacted by Lyft, you understand and agree that you may receive communications generated by automatic telephone dialing systems and/or which will deliver prerecorded messages sent by or on behalf of Lyft, its affiliated companies and/or Drivers, including but not limited to: operational communications concerning your User account or use of the Lyft Platform or Services, updates concerning new and existing features on the Lyft Platform, communications concerning promotions run by us or our third party partners, and news concerning Lyft and industry developments. IF YOU WISH TO OPT-OUT OF PROMOTIONAL EMAILS, TEXT MESSAGES, OR OTHER COMMUNICATIONS, YOU MAY OPT-OUT BY FOLLOWING THE UNSUBSCRIBE OPTIONS PROVIDED TO YOU.Standard text messaging charges applied by your cell phone carrier will apply to text messages we send. You acknowledge that you are not required to consent to receive promotional messages as a condition of using the Lyft Platform or the Services. However, you acknowledge that opting out of receiving text messages or other communications may impact your use of the Lyft Platform or the Services."

 The terms stated that consumers may opt out by using "unsubscribe options," but the FCC investigation discovered that such an option didn't really exist.  There was no easy way to find the unsubscribe option and consumers had to navigate Lyft's website to find the opt-out page.  Even  if they did manage to find it, if they opted out, they couldn't use the service. 

This is another instance where contract law's easy assent rules don't actually help businesses and cause too much confusion.  While a consumer may have "consented" to the autodialing and the texts under contract law, the FCC rules require something that is more like what most people consider to be consent - express written consent and a real choice not to agree.  A default opt-in unless you opt-out (and even that's illusory), well - that just doesn't cut it under the TCPA and the FCC rules.  Sadly, in contract law, too often it does.

Contract law should get with the program and follow the commonsense version of consent adopted by the FCC. 

 

Weekly Top Tens from the Social Science Research Network

SSRN Top Downloads For
Contracts & Commercial Law eJournal
RECENT TOP PAPERS 

Rank	Downloads	Paper Title
1	334	Bitcoin and the Uniform Commercial Code  Jeanne L. Schroeder  Yeshiva University - Benjamin N. Cardozo School of Law
2	291	Contract as Automation: The Computational Representation of Financial Agreements  Mark D. Flood and Oliver R. Goodenough  Government of the United States of America - Office of Financial Research and Vermont Law School
3	119	Privacy in the Clouds: An Empirical Study of the Terms of Service and Privacy Policies of 20 Cloud Service Providers  Dimitra Kamarinou, Christopher Millard and W. Kuan Hon  Queen Mary University of London, School of Law - Centre for Commercial Law Studies, Queen Mary University of London, School of Law - Centre for Commercial Law Studies and Queen Mary University of London, School of Law - Centre for Commercial Law Studies
4	112	The Normative Force of Consent  Heidi M Hurd  University of Illinois College of Law
5	105	Reasoned Awards in International Commercial Arbitration: Embracing and Exceeding the Common Law-Civil Law Dichotomy  S.I. Strong  University of Missouri School of Law
6	104	A Comprehensive Theory of Civil Settlement  J.J. Prescott and Kathryn E. Spier  University of Michigan Law School and Harvard University - Law School - Faculty
7	91	Investment Accelerators  Brad Bernthal  University of Colorado at Boulder
8	83	The Myth of 'Legal' Consent in a Consumer Culture  Jennifer Ann Drobac  Indiana University Robert H. McKinney School of Law
9	81	Using Advertisements to Diagnose Behavioral Market Failure  Jim Hawkins  University of Houston Law Center
10	77	R. v. Jones (1703): The Origins of the 'Reasonable Person'  Simon Stern  University of Toronto - Faculty of Law

SSRN Top Downloads For LSN: Contracts (Topic)
RECENT TOP PAPERS

Rank	Downloads	Paper Title
1	291	Contract as Automation: The Computational Representation of Financial Agreements  Mark D. Flood and Oliver R. Goodenough  Government of the United States of America - Office of Financial Research and Vermont Law School
2	119	Privacy in the Clouds: An Empirical Study of the Terms of Service and Privacy Policies of 20 Cloud Service Providers  Dimitra Kamarinou, Christopher Millard and W. Kuan Hon  Queen Mary University of London, School of Law - Centre for Commercial Law Studies, Queen Mary University of London, School of Law - Centre for Commercial Law Studies and Queen Mary University of London, School of Law - Centre for Commercial Law Studies
3	112	The Normative Force of Consent  Heidi M Hurd  University of Illinois College of Law
4	104	A Comprehensive Theory of Civil Settlement  J.J. Prescott and Kathryn E. Spier  University of Michigan Law School and Harvard University - Law School - Faculty
5	83	The Myth of 'Legal' Consent in a Consumer Culture  Jennifer Ann Drobac  Indiana University Robert H. McKinney School of Law
6	69	Justifying Fair Price Rules in Contract Law  Horst Eidenmueller  University of Munich
7	54	Good Faith in English Contract Law: A 'Contagious Disease of Alien Origin'  Andre Sinanan  Independent
8	52	The Contract Frontier: A Study of the Modern Joint Venture  Sarath Sanga  University of California, Berkeley
9	52	U.S. CEO Employment Agreements and Non-Competition Provisions: A Literature Survey  Randall S. Thomas and Norman Bishara  Vanderbilt University - Law School and The Stephen M. Ross School of Business at the University of Michigan
10	48	The Politics of Arbitration Law and Centrist Proposals for Reform  Stephen J. Ware  University of Kansas - School of Law

 

Weekly News Roundup

The Chicago Tribune reports here on a contracts mess at the College of DuPage.  The College's board voted 4-3 to void the contract of its president, Dr. Robert Breuder and to declare him an at-will employee.  The board claimed that the avoidance of the contract was appropriate, given that the prior board had inappropriately locked the College in to a long-term contract.  The current board also alleges that the prior board violated Illinois law in various ways relating to the hiring of Dr. Breuder  The move enables the board to cancel the $763,000 severance payment that Dr. Breuder had agreed to accept as a condition of his early retirement in 2016.  One dissenting board member characterized the decision as a breach of contract, and the County State's Attorney already had opined that the contract could not be nullified.  Meanwhile, Dr. Breuder continues to draw his $495,000 salary on paid leave from his position while the College searches for a new president.

In continuing FIFA news, Reuters reports that FIFA entered into a profit-sharing agreement with the Caribbean Football Union (CFU) in 2005.  FIFA was to receive 50 percent of all revenue generated from the sale of broadcast sponsorship and TV commercials in part of the Caribbean for the 2010 and 2014 World Cup competitions.  To date, FIFA claims it has received no payments.  FIFA seems to be mad now and has sent a letter to the CFU terminating the contract.  One wonders what because of all those advertising revenues . . . .

Finally, in Trump news, all's well that ends well.  As you may recall, and as Variety reports here, things got a bit divisive in the partnership that owns the Miss Universe, Miss USA, and Miss Teen USA pageants when co-owner Donald Trump (pictured) made nasty comments about immigrants.  When Univision and NBC refused to carry broadcasts of one of the pageants, Trump sued for breach of contract.  That suit has now been settled.  Trump bought out his partners and then sold the pageant to WME/IMG, whatever that is.  It's a shame.  Beauty pageants are so tawdry and demeaning to women, Mr. Trump was the ideal person to perpetuate them.  WME/IMG, you've got big shoes to fill.

Emailed Links to Forum Selection Clauses Constitute Sufficient Notice

Nancy Kim is, as you probably know, one of the nation’s, if not the world’s, leading experts on internet contracting.   She is a contributor to this blog as well.  Among other issues, Professor Kim rightfully questions whether consumers are put on sufficient notice of various contractual terms and conditions when they purchase goods or services via the Internet.

The Second Circuit has just held that emails sufficiently direct a purchaser’s attention to a service provider’s terms and conditions including a forum selection clause when a hyperlink is provided along with language “advising” the purchaser to click on the hyperlink.  (The case is Starkey v. G Adventures, Inc., 796 F.3d 193 (Second Cir. 2015).  Said the court, “This method serves the same function as the method of cross-referencing language in a printed copy promotional brochure and sufficed to direct [the purchaser’s] attention to the Booking Terms and Conditions. Both methods may be used to reasonably communicate a forum selection clause.”

The background is this:  A customer purchased a ticket for a vacation tour of the Galápagos Islands operated by a tour operator. Shortly thereafter, the tour operator sent the customer three emails: a booking information email, a confirmation invoice, and a service voucher.  The booking information email contained the statement, “TERMS AND CONDITIONS: ... All Gap Adventures passengers must read, understand and agree to the following terms and conditions.”  This statement was followed by a hyperlink with an underlined URL.  The confirmation invoice and service voucher each also contained hyperlinks, which were preceded immediately by the following text: “Confirmation of your reservation means that you have already read, agreed to and understood the terms and conditions, however, you can access them through the below link if you need to refer to them for any reason.”  The hyperlinks in all three emails linked to a document entitled “…. Booking Terms and Conditions.” The second paragraph of that document stated that “[b]y booking a trip, you agree to be bound by these Terms and Conditions.... These Terms and Conditions affect your rights and designate the ... forum for the resolution of any and all disputes.” The customer did not dispute that she received the relevant emails.  Instead, she alleged, as often happens, that she never read the Booking Terms and Conditions because she never clicked on the hyperlinks.

The customer alleged that she was sexually assaulted on the tour by one of the tour operator’s employees.  Instead of being able to pursue her negligence claim in a New York court, she must now pursue her claim in Ontario, Canada.  The court also held that it was not unreasonable and unjust to enforce the forum selection clause, stating that such clauses will only be set aside if (1) its incorporation was the result of fraud or overreaching; (2) the law to be applied in the selected forum is fundamentally unfair; (3) enforcement contravenes a strong public policy of the forum in which suit is brought; or (4) trial in the selected forum will be so difficult and inconvenient that the plaintiff effectively will be deprived of his day in court.  The plaintiff failed to meet any of those requirements.

This case shows how some courts still ignore the fact that, as Professor Kim has pointed out and as the case obviously shows, even though the attention of purchasers (online or otherwise) is directed towards certain crucial contractual clauses, they in fact do not read these.  Such is reality in a society such as ours with numerous and often lengthy and complicated legal notices and disclaimers.  Are purchasers then truly given sufficient notice in such modern cases?  But from  a contrary viewpoint, what else can sellers and service providers possibly do to make purchasers aware of key terms?  For more on this, read Professor Kim’s scholarship or book.

Contracting Over Privacy Conference at the University of Chicago Law School

Omri Ben-Shahar (left) and Lior Strahilevitz (right) are hosting a conference October 16 & 17 at the University of Chicago Law School.  The conference is sponsored by the Coase-Sandor Institute for Law and Economics..  The flyer is here.

Confirmed participants include: 
Alessandro Acquisti, Carnegie Mellon University
Kristen Anderson, Federal Trade Commission
Ian Ayres, Yale University
Oren Bar-Gill, Harvard University
Omri Ben-Shahar, University of Chicago
Jaspreet Bhatia, Carnegie Mellon University
Richard Brooks, Columbia University
Aaron Burstein, Federal Trade Commission
Adam Chilton, University of Chicago
Ariel Feldman, University of Chicago
Sebastien Gay, University of Chicago
Matthew Kugler, U.S. Court of Appeals, 7th Circuit
Florencia Marotta-Wrugler, New York University
Kirsten Martin George, Washington University
Randy Picker, University of Chicago
Joel Reidenberg, Fordham University
Paul Schwartz, University of California, Berkeley
Lior Strahilevitz, University of Chicago

Weekly Top Tens from the Social Science Research Network

SSRN Top Downloads For Contracts & Commercial Law eJournal
RECENT TOP PAPERS

Rank	Downloads	Paper Title
1	300	Bitcoin and the Uniform Commercial Code  Jeanne L. Schroeder  Yeshiva University - Benjamin N. Cardozo School of Law
2	113	Legal Aspects of Subordinated Debt Instruments  Vinod Kothari  Visiting Faculty, Indian Institute of Management
3	110	The Normative Force of Consent  Heidi M Hurd  University of Illinois College of Law
4	103	A Comprehensive Theory of Civil Settlement  J.J. Prescott and Kathryn E. Spier  University of Michigan Law School and Harvard University - Law School - Faculty
5	96	Privacy in the Clouds: An Empirical Study of the Terms of Service and Privacy Policies of 20 Cloud Service Providers  Dimitra Kamarinou, Christopher Millard and W. Kuan Hon  Queen Mary University of London, School of Law - Centre for Commercial Law Studies, Queen Mary University of London, School of Law - Centre for Commercial Law Studies and Queen Mary University of London, School of Law - Centre for Commercial Law Studies
6	87	Investment Accelerators  Brad Bernthal  University of Colorado at Boulder
7	87	Reasoned Awards in International Commercial Arbitration: Embracing and Exceeding the Common Law-Civil Law Dichotomy  S.I. Strong  University of Missouri School of Law
8	74	The Myth of 'Legal' Consent in a Consumer Culture  Jennifer Ann Drobac  Indiana University Robert H. McKinney School of Law
9	75	Using Advertisements to Diagnose Behavioral Market Failure  Jim Hawkins  University of Houston Law Center
10	82	The Risks of Shadow Insurance  Daniel Schwarcz  University of Minnesota Law School

SSRN Top Downloads For LSN: Contracts (Topic)
RECENT TOP PAPERS 

Rank	Downloads	Paper Title
1	110	The Normative Force of Consent  Heidi M Hurd  University of Illinois College of Law
2	103	A Comprehensive Theory of Civil Settlement  J.J. Prescott and Kathryn E. Spier  University of Michigan Law School and Harvard University - Law School - Faculty
3	96	Privacy in the Clouds: An Empirical Study of the Terms of Service and Privacy Policies of 20 Cloud Service Providers  Dimitra Kamarinou, Christopher Millard and W. Kuan Hon  Queen Mary University of London, School of Law - Centre for Commercial Law Studies, Queen Mary University of London, School of Law - Centre for Commercial Law Studies and Queen Mary University of London, School of Law - Centre for Commercial Law Studies
4	77	צדק פרוצדורלי וצדק מהותי בדיני חוזים: עושק וכפייה כמקרי מבחן (Procedural and Substantive Fairness in Contract Law: Exploitation and Duress as Test Cases)  Eyal Zamir  Hebrew University of Jerusalem - Faculty of Law
5	74	The Myth of 'Legal' Consent in a Consumer Culture  Jennifer Ann Drobac  Indiana University Robert H. McKinney School of Law
6	67	Justifying Fair Price Rules in Contract Law  Horst Eidenmueller  University of Munich
7	58	Legal Indeterminacy in the Spoken Word  Lawrence M. Solan and Silvia Dahmen  Brooklyn Law School and University of Cologne
8	50	The Contract Frontier: A Study of the Modern Joint Venture  Sarath Sanga  University of California, Berkeley
9	48	U.S. CEO Employment Agreements and Non-Competition Provisions: A Literature Survey  Randall S. Thomas and Norman Bishara  Vanderbilt University - Law School and The Stephen M. Ross School of Business at the University of Michigan
10	47	The Execution of an Arbitration Provision as a Condition Precedent of Medical Treatment: Legally Enforceable? Medically Ethical?  Marc Ginsberg  The John Marshall Law School

 

 

Calling All Shopping Geniuses - More on Fictitious Pricing

Myanna Dellinger recently blogged about false "Compare At" pricing last week.  The issues she raised are addressed in this very informative article by David Friedman of Willamette University College of Law, "Reconsidering Fictitious Pricing," (forthcoming, Minnesota L. Rev.) Here's the abstract:  

Advertised price discounting recently proliferated in retail markets, bringing with it deceptive discounting or "fictitious pricing." Many retailers advertise discounts based on fictitious or false prior-reference prices. In the immediate postwar era, the Federal Trade Commission regularly prosecuted fictitious-pricing cases. In 1969, the FTC ceased prosecution. In this Article, I explain why the FTC should resume measured enforcement today.

Since the cessation of enforcement, the retail sector experienced several transformations. Over the past several decades, the behavioral economics explaining the power of prior-reference pricing emerged. According to the consensus, advertised discounts induce consumers to stop shopping sooner than otherwise, because consumers will absorb a signal that they have found the right bargain. However, the prevalence of fictitious advertised discounts decreases the chance that consumers will end their shopping on the most competitive offers.

This Article addresses the nature of the welfare harm that results from fictitious pricing, noting the difficulty of shaping a remedy for individual harm from the practice. Private litigation and state prosecutions reveal that civil penalties and injunctive relief provide more appropriate avenues for addressing this practice. The challenge for federal and state regulators will be to find the level of regulation that maximizes welfare. I suggest that regulators renew enforcement efforts, and recommend where they might start.

Why an Absurd Prank Call about Comcast Worked

Catching up on my podcast listening, I just heard last week's episode of Reply All, a show about the Internet.  The focus of this episode is a prank telephone call that seemed to come from Comcast.  The prankster represented herself as a Comcast representative and threatened the Comcast customer that Comcast would fine him or disconnect his service if he did not remove some hostile tweets he had posted expressing dissatisfaction with that service.   The prank worked; he removed a hostile tweet, but when the prankster upped the ante and tried to get him to remove more tweets, he hung up.

Two takeaways:

1.  Adults make prank calls, and they are very sophisticated.  They can fool your caller i.d., and as a result they can fool you.  This is just sad and obnoxious, but the bigger concern is that the same techniques can be used to steal your identity.  Probably best at this point in our relationship with technology to never answer your phone.

2. The prank worked because, as we have reported about repeatedly, companies now do try to prevent customers from posting negative reviews on social media, and it is completely credible that a large media company like Comcast would empower itself to discipline customers in this way.  For the record, as Reply All showed, Comcast does not do so.  

But they could.  

But they don't.  

But they could, or at least they could try to do so and thus chill people into keeping mum about how much they hate Comcast or TimeWarner or AT&T or Verizon or Sprint or T-Mobile or . . . . 

Contracts Professor Confronts Warranty Issue

A good bicycle is a magic carpet.  It translates minimal energy into forward motion with thrilling efficiency.  In short, I love my bicycle, as evidenced by the picture at right showing me and my bicycle at the end of a three day, 200-mile ride from Chicago to Three Rivers, Michigan.  That joyful expression is not characteristic of me, unless of course I am teaching contracts law.

The folks involved in making cycling so effortless take extraordinary pride in their work.  Five years into my love affair with my bicycle, one of my shifters broke.  I took it in to the shop, prepared to pay quite a bit to replace a vital part of the mechanics of the bicycle.  When I went to pick it up, the mechanic informed me that he had only charged for labor.  The manufacturer had replaced the faulty shifter because, he said with a shrug, "they're not supposed to break."  Imagine a mechanic slamming the hood of your repaired Ford Escort and saying anything remotely similar!

About a month ago, my bicycle made a sound like I hit something, and from then on something wasn't right but I couldn't figure out what.  I had not actually hit anything that I could see.  My mechanic shared my assessment that something didn't feel right about the bike, and after a brief examination he exclaimed, "Here's the problem!  You broke the frame."  I didn't like his accusatory tone, but things got a lot better when he told me confidently that the frame was broken in a way that should not have occurred and should be covered by warranty.  I had not abused my bicycle; I was the victim here.

Sure enough.  My bicycle, like most quality bicycles, has a lifetime warranty on its frame.  

There was only one problem.  I had to prove that I was the original owner of the bicycle.  I bought it over nine years ago.  I neither registered it nor kept the receipt.  And me, a contracts professor!  The dealer who sold it to me closed his store and vanished like Keyser Soze.  The new local dealer tried his best to help me.  We both called and pleaded with my bike manufacturer, but they would not honor the warranty without proof that I was the original purchaser, and they would not accept sworn testimonials from the phalanx of friends, acquaintances and strangers to whom I had sung the praises of my bicycle over the past decade and whom I had recruited to testify on my behalf.  The acceptable forms of proof were limited to the original receipt or a facsimile thereof.  

I get it.  I could have bought the broken bicycle a week ago on e-Bay for all they know.  

My awesome mechanic loaned me a most excellent cyclocross bicycle while I grieved.  He was hoping to convert me to the brand he carries.  That bicycle was pretty amazing.  But as I said, I love my bicycle.  As I write, my mechanic is attaching my old bicycle's mechanics and cables to the new "crash replacement frame" that the manufacturer sent me.  It's a reasonable compromise.  The new frame cost me about half of what it otherwise would have, and I remain a loyal customer, perhaps a bit less starry eyed and resolved to keep my receipt somewhere memorable and to register myself as the original owner of the new frame.  I'll do all that, of course, if I can get around to it.  But how likely is it that I would ever need to enforce a warranty?  Could lightning strike twice?

You Saved More than you Spent - You’re a Shopping Genius!

A woman visits a Nordstrom Rack store and sees a cardigan that she really likes. It costs $49.97, but features a “Compare At” price tag of $218.00 representing “77% worth of savings.” The woman buys the sweater, allegedly believing that the sweater really had been sold by Nordstrom itself or other department stores at the higher price. The receipt states, “You SAVED: $168.03 Congratulations! You saved more than you spent. You're a shopping genius!” If neither Nordstrom, Nordstrom Rack nor other retailers ever sold the cardigan at the higher price, is that common-law fraud, breach of contract, or unjust enrichment?

Posting any kind of “before” prices that have never truly been in effect does, at first blush, seem fraudulent. But it is not fraud, at least according to Shaulis v. Nordstrom, Inc., d/b/a/ Nordstrom Rack.  “It is well-settled that a common-law action for fraud requires a pecuniary loss.” Here, the court found none as “plaintiff did not allege that she did not receive the sweater or that she paid more than the sweater is worth. Maybe so, but what about fraud in the inducement? This was not at issue in the case, but arguably should have been. “Fraud in the inducement occurs when a party contends it would not have entered into the agreement ‘but for’ the fraudulent statements made by the other." That is precisely what the plaintiff here seems to claim. Could the pecuniary loss then not simply be the price paid for an item believing it was a better deal than it actually was? If I buy a painting I like, but it is not the Rembrandt I was told it was, can I not sue for fraud simply because I actually got a painting that can hang on a wall and has the value it was sold for?  Alas, that goes to show that plaintiffs must “win their own cases,” as the saying goes.

Plaintiff also claimed that Nordstrom was unjustly enriched by obtaining revenues and profits that it would not otherwise have obtained absent its conduct. The court found this to be a conclusory statement that did not allege that Nordstrom retained a benefit that would be inequitable without payment for its value.

Bad faith, at least? Not even that. Plaintiff complained that Nordstrom “either explicitly violated” the contract or violated the implied covenant of good faith and fair dealing by including a “Compare At” price that “does not exist in the marketplace within the meaning of the requirements of the Code of Massachusetts Regulations.”  Having found that the common law allegations are not coextensive with or suffice under a regulatory claim, the court found no breach of the good faith covenant since the “complaint does not allege that the sweater was worth less than what plaintiff paid, or that plaintiff did not receive the benefit of the bargain. By charging this agreed price in exchange for ownership of the clothing, [Nordstrom] gave the plaintiff[ ] the benefit of [her] bargain.” 

This case shows what we probably all know: you cannot really trust retailers’ “sales” prices, “before and after” statements and the like. They simply rank alongside puffery. Whether this is acceptable under the common law or state regulations is another story. The practice seems widespread, however, so buyer beware. “The more you shop, the more you save”? I don’t think so. As one of my students recently commented in class when I asked the somewhat philosophical question of why businesses exist: “to rip you off.” Well, maybe not quite, but some business behavior does seem questionable and at least unnecessary.

Weekly News Roundup

Very excited to be able to report on a UCC case from Indiana, JMB Manufacturing, Inc. v. Child Craft, LLC decided by the 7th Circuit.  The opinion is long, but Judge Hamilton's introduction captures its spirit.

This case presents a merchant’s creative effort to avoid the limited remedies that contract law provides for a seller’s delivery of non-conforming goods. After the seller delivered about $90,000 worth of nonconforming wood products, the buyer sought recovery from both the seller and its president personally for tort damages on a tort theory, that they negligently misrepresented the quality of the delivered goods.

The district court ruled in favor of the buyer and awarded damages of more than $2.7 million on the theory that the non-conforming goods caused the complete destruction of the buyer’s business. This damages theory echoed the proverb of Poor Richard’s Almanack (“A little neglect may breed mischief; for want of a nail, the shoe was lost; for want of a shoe the horse was lost; for want of a horse the rider was lost; for want a rider the battle was lost.”), and Shakespeare’s story of Richard III [pictured], where the loss of a horse led in turn to the loss of a battle, the death of a king, and the loss of a kingdom. Cf. Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Rep. 145 (1854) (damages for breach of contract limited to consequences reasonably contemplated by both parties when they made contract).

We reverse the award of damages against the seller and the seller’s president, but for reasons that do not depend on the flawed “want of a nail” theory. Under Indiana law, a buyer who has received non-conforming goods cannot sue a seller for negligent misrepresentation to avoid the economic loss doctrine, which limits the buyer to contract remedies for purely economic losses. See Indianapolis-Marion County Public Library v. Charlier Clark & Linard, P.C., 929 N.E.2d 722 (Ind. 2010). Second, there is no basis for transforming the buyer’s breach of contract claim into a tort claim for negligent misrepresentation to hold the seller’s president personally liable. See Greg Allen Construction Co., Inc. v. Estelle, 798 N.E.2d 171 (Ind. 2003). In all other respects, we affirm the judgment of the district court. 

The opinion includes a lengthy discussion of Indiana's economic loss doctrine.   

The Complete Colorado provides this report about a court's grant of a preliminary injunction empowering a teachers' union to continue in its role as sole entity empowered to negotiate a new contract with the local school board.  The ruling keeps the union's existing contract in force until its breach of contract claim can be heard, but the grant of the P.I. suggests the likelihood that the union will succeed on the merits of its claim.  But the ultimate remedy remains unclear.

And in news that will make you say, "What the . . .???" we learn from this article from the Washington Times that Ashley Madison claims that its new users are flocking to its website after news of its massive security breach, about which Myanna Dellinger has written here, here and here.   Other than quoting a spokesperson for the company who blathered about happy return customers, he Times does not speculate on the relationship between the scandal and the increase in users.  Knock yourself out.

 

Weekly Top Tens from the Social Science Research Network

SSRN Top Downloads For Contracts & Commercial Law eJournal
RECENT TOP PAPERS 

Rank	Downloads	Paper Title
1	278	Bitcoin and the Uniform Commercial Code  Jeanne L. Schroeder  Yeshiva University - Benjamin N. Cardozo School of Law
2	160	The Commission's E-Commerce Sector Inquiry – Analysis of Legal Issues and Suggested Practical Approach  Lars Kjølbye, Alessio Aresu and Sophia Stephanou  Latham & Watkins LLP, Latham & Watkins LLP and Latham & Watkins LLP
3	137	Common Law Values: The Role of Party Autonomy in Private Law  Sarah Worthington  University of Cambridge - Faculty of Law
4	116	The Laws of Asian International Business Transactions  Gilles Cuniberti  Universite du Luxembourg - Faculty of Law, Economics and Finance
5	113	Legal Aspects of Subordinated Debt Instruments  Vinod Kothari  Visiting Faculty, Indian Institute of Management
6	103	The Normative Force of Consent  Heidi M Hurd  University of Illinois College of Law
7	100	A Comprehensive Theory of Civil Settlement  J.J. Prescott and Kathryn E. Spier  University of Michigan Law School and Harvard University - Law School - Faculty
8	86	Privacy in the Clouds: An Empirical Study of the Terms of Service and Privacy Policies of 20 Cloud Service Providers  Dimitra Kamarinou, Christopher Millard and W. Kuan Hon  Queen Mary University of London, School of Law - Centre for Commercial Law Studies, Queen Mary University of London, School of Law - Centre for Commercial Law Studies and Queen Mary University of London, School of Law - Centre for Commercial Law Studies
9	84	Contract Design and the Shading Problem  Robert E. Scott  Columbia University - Law School
10	82	Contract as Evil  Peter Linzer  University of Houston - University of Houston Law Center

SSRN Top Downloads For LSN: Contracts (Topic)
RECENT TOP PAPERS 

Rank	Downloads	Paper Title
1	160	The Commission's E-Commerce Sector Inquiry – Analysis of Legal Issues and Suggested Practical Approach  Lars Kjølbye, Alessio Aresu and Sophia Stephanou  Latham & Watkins LLP, Latham & Watkins LLP and Latham & Watkins LLP
2	137	Common Law Values: The Role of Party Autonomy in Private Law  Sarah Worthington  University of Cambridge - Faculty of Law
3	116	The Laws of Asian International Business Transactions  Gilles Cuniberti  Universite du Luxembourg - Faculty of Law, Economics and Finance
4	103	The Normative Force of Consent  Heidi M Hurd  University of Illinois College of Law
5	100	A Comprehensive Theory of Civil Settlement  J.J. Prescott and Kathryn E. Spier  University of Michigan Law School and Harvard University - Law School - Faculty
6	91	The Ties That Bind: LLC Operating Agreements as Binding Commitments  Joan MacLeod Heminway  University of Tennessee College of Law
7	86	Privacy in the Clouds: An Empirical Study of the Terms of Service and Privacy Policies of 20 Cloud Service Providers  Dimitra Kamarinou, Christopher Millard and W. Kuan Hon  Queen Mary University of London, School of Law - Centre for Commercial Law Studies, Queen Mary University of London, School of Law - Centre for Commercial Law Studies and Queen Mary University of London, School of Law - Centre for Commercial Law Studies
8	84	Contract Design and the Shading Problem  Robert E. Scott  Columbia University - Law School
9	82	Contract as Evil  Peter Linzer  University of Houston - University of Houston Law Center
10	81	Contract Formation and Performance Under the UCC and CISG: A Comparative Case Study  Kurt M. Saunders and Leonard Rymsza  California State University, Northridge and California State University, Northridge - Department of Business Law

 

When Lust Leads to Espionage

The recent massive hack into married-but-dating website Ashley Madison’s files may not only have breached the customer’s reasonable contractual expectations, but is now also said to lead to serious counter-intelligence concerns.  

Both China and Russia are collecting personal and sensitive information about people who may be involved in American national security operations.  What better leverage to have against operatives than information about their most secret, erotic desires. The temptation to resist such information being shared with even more people may persuade some operatives to render otherwise secret information about United States national security issues.  Recall that quite a few affair seekers used their official government addresses to arrange their attempted or successful trysts.  In combination with another recent OPM hack, countries that are seen as adversaries have apparently also been able to obtain information about who has sought security clearances and can use this information for counter-intelligence purposes.

That seems to provide a good public policy argument for why courts should find against Ashley Madison if it came to a contractual lawsuit regarding the breach of “100% secrecy” and “full deletes” promised, but not delivered, by Ashley Madison.

Martha Ertman at the Faculty Lounge

I just noticed that Martha Ertman (pictured) will be a guest blogger at The Faculty Lounge.  As the introductory post notes,

Her new book is  Love’s Promises: How Formal & Informal Contracts Shape All Kinds of Families.  More broadly, she rights about the role of contracts in intimate relationships.   Here full cv is here. 

We look forward to seeking lots of great posts on contracts law in the Lounge.

Uber's Employees: Employees or Independent Contractors?

Yesterday, we blogged here about important considerations regarding whether an employee will be seen as an employee or a contractor.

In O'Connor v. Uber Technologies, U.S. District Judge Edward Chen just ruled that Uber's drivers may  pursue their arguments that they were employees in the form of a class-action suit. One of the reasons was that Uber admitted that they treated a large amount of its drivers "the same."

Of course, millions of dollars may be at stake in this context.  Profit margins are much higher for companies such as Uber, Lyft, Airbnb and other so-called "on demand" or "sharing economy" companies. That is because the companies do not have to pay contractors for health insurance benefits, work-related expenses, certain taxes, and the like.  But seen from the driver/employee's point of view, getting such benefits if they are truly employees is equally important in a country such as the United States where great disparities exist between the wealthy (such as the owners of these start-up companies) and the not-so-wealthy, everyday workers.

Plaintiffs are represented by renowned employee-side attorney Shannon "Sledgehammer" Liss-Riordan who represented and won a major suit by skycaps against American Airlines some years ago, so sparks undoubtedly will fly in the substantive hearings on this issue.

The NLRB and Independent Contractors

The National Labor Relations Board recently issued a decision , Browning-Ferris Industries of California, Inc., d/b/a/ BFI Newby Island Recyclery,  that establishes a new standard for determining who is a joint employer.  

BFI Newby Island Recyclery hired Leadpoint, a staffing services company, to provide some workers for its recyclery.  BFI and Leadpoint had signed a temporary labor services agreement which could be terminated by either party upon thirty days' notice.  The agreement stated that Leadpoint was the sole employer of the workers and that nothing in the Agreement shall be construed as creating an employment relationship between BFI and the personnel supplied by Leadpoint.  In other words, the agreement contained language that is pretty standard in independent contractor agreements.  The agreement also provided that Leadpoint would recruit, interview, test, select and hire personnel for BFI.  BFI was not involved in Leadpoint's hiring procedures.  BFI, however, had the authority to "reject any Personnel and...discontinue the use of any personnel for any or no reason."  Again, this is fairly standard language in independent contractor agreements.  In a departure from precedent, the NLRB ruled that a company that hires a contractor to provide workers may be considered a joint employer of those workers if it has the right to control them even if it does not actively supervise them. The dissenters were rather unhappy and their opinions are worth reading as they lay out the expected impact of the ruling.  

It's a significant decision and one that should make lawyers take another look at their clients' independent contractor agreements to see whether they contain language that indicates the potential to control the contractor's employees. While the language in the contract was not the only factor influencing the Board's decision, it was an important one.