ContractsProf Blog

"You can stay here until we come to an agreement!" Watch out for what happens if you never reach an agreement!

One of the thorniest issues I find to teach students is when an agreement is enforceable vs. when it is merely an agreement to agree. A recent case out of Wisconsin, Adrikos Real Estate Holding LLC v. Murphy, Appeal No. 2016AP1313, addresses this very issue. The document in question read,

The seller, Murphy, shall retain the right to occupy the Property for a period of 15 days following the closing date of the agreement . . . . Thereafter, the seller, Murphy, shall retain the right to occupy the Property until such date that parties reach an agreement for the purchase and sale . . . .

The parties never reached an agreement for the purchase and sale. Instead, Adrikos sought to evict Murphy. Murphy, however, argued that the contract gave him the right to stay on the property until they reached agreement for the purchase and sale--which they hadn't. 

The lower court found the agreement to be unenforceable as merely an agreement to agree. This court disagreed. The agreement explicitly granted Murphy the right to occupy the property until a purchase and sale agreement was reached. This didn't render the contract an agreement to agree; rather, it made a future agreement a "triggering condition" of the presently enforceable first agreement. 

Having found the agreement enforceable, the court then considered if, because it didn't have a particular end date, it was terminable at will and Adrikos could evict Murphy at any time. The court found that the agreement did have an end date, though: the agreement for the purchase and sale. The court found, though, that, depending on the circumstances, this could convert the contract into a perpetual lease, which was disfavored under Wisconsin law, and if so, the court should read in a reasonable duration for the occupancy right. It remanded for further determination on this question. 

Super Bowl commercial pitch copyright claim survives, but not the contract ones

A recent case out of the Southern District of New York, Betty, Inc. v. Pepsico, Inc., No. 16-CV-4215 (KMK) (behind paywall), tackles a fairly common issue: Often people make pitches based on ideas they have. Ideas aren't copyrightable, so often the only protection people have is contract-based. But, also often, they don't actually have a written contract, so they have to rely on an implied-in-fact contract theory. However, as this case reiterates, an implied-in-fact contract is more than just a conclusory allegation that "oh, we had an agreement that they'd pay me something for my pitch." 

The case in question involves an advertising agency, Betty, who pitched a commercial to Pepsi for use in the Super Bowl. Pepsi invited Betty to participate in a telephone pitch meeting, during which Pepsi provided the "general outline of what it envisioned for the Super Bowl commercial," followed by a more formal face-to-face presentation. At the presentation, Betty presented eight different ideas and provided Pepsi with a USB drive with some concepts contained on it. Pepsi allegedly reacted favorably and asked for more details about some of the concepts. 

About a month later, Pepsi informed Betty that it had decided to go in another direction with the commercial. However, when Betty saw the commercial during the Super Bowl, it thought it was substantially similar to one of the concepts it had pitched to Pepsi. The decision itself is behind a paywall but the lawsuit's filing was reported in some outlets.

This lawsuit followed, alleging copyright claims as well as a variety of contract-based claims. The breach of contract claim faltered, though. In the complaint, it consisted of just three paragraphs of conclusory allegations that didn't appear to rise to the level of an agreement. In the most generous reading, it sounded like an "agreement to agree" that can't be enforced. The complaint contained absolutely no terms of the contract. The fact that the contract was an implied-in-fact contract didn't excuse the plaintiff from having to allege facts sufficient to allow the court to draw an inference that the parties had entered into a contract based on their conduct and the surrounding facts and circumstances. That didn't happen here. Therefore, the court dismissed the breach of contract claims.  

The copyright infringement claim, though, survived, and the court granted leave to amend on the breach of contract claim, so the plaintiff does live to fight another day. 

(This post has been edited to correct a typo in the previous version. Pepsi provided the "general outline" over the phone, not Betty.)

Contracts and Commercial Law Scholarship: Weekly Top Ten SSRN Downloads (September 21, 2017)

Top Downloads for the Contracts & Commercial Law eJournal

Recent Top Papers (60 days) as of 23 Jul 2017 - 21 Sep 2017

Rank	Paper	Downloads
1.	How to Restructure Venezuelan Debt (¿Cómo restructurar la deuda venezolana?) Lee C. Buchheit and G. Mitu Gulati Cleary Gottlieb Steen & Hamilton LLP - New York Office and Duke University School of Law	2,785
2.	Relational Contracts of Adhesion David A. Hoffman University of Pennsylvania Law School	171
3.	The Choice Theory of Contracts (Introduction) Hanoch Dagan and Michael Heller Tel Aviv University - Buchmann Faculty of Law and Columbia University - Columbia Law School	167
4.	Aspects of Loyalty Lionel Smith McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law	143
5.	Forum-Selection Provisions in Corporate 'Contracts' Helen Hershkoff and Marcel Kahan New York University School of Law and New York University School of Law	120
6.	Personal Data, Exploitative Contracts, and Algorithmic Fairness: Autonomous Vehicles Meet the Internet of Things Philipp Hacker European University Institute	118
7.	Digital Technology as a Challenge to European Contract Law – From the Existing to the Future Architecture Stefan Grundmann and Philipp Hacker Humboldt University of Berlin - Faculty of Law and European University Institute	116
8.	Amending Corporate Charters and Bylaws Albert H. Choi and Geeyoung Min University of Virginia School of Law and Columbia Law School	112
9.	Consent and Contracts Brian Bix University of Minnesota Law School	89
10.	What Law Governs Forum Selection Clauses Symeon C. Symeonides Willamette University - College of Law	123

 

Top Downloads for Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days) as of 23 Jul 2017 - 21 Sep 2017

Rank	Paper	Downloads
1.	Relational Contracts of Adhesion David A. Hoffman University of Pennsylvania Law School	171
2.	The Choice Theory of Contracts (Introduction) Hanoch Dagan and Michael Heller Tel Aviv University - Buchmann Faculty of Law and Columbia University - Columbia Law School	167
3.	What Law Governs Forum Selection Clauses Symeon C. Symeonides Willamette University - College of Law	123
4.	Forum-Selection Provisions in Corporate 'Contracts' Helen Hershkoff and Marcel Kahan New York University School of Law and New York University School of Law	120
5.	Digital Technology as a Challenge to European Contract Law – From the Existing to the Future Architecture Stefan Grundmann and Philipp Hacker Humboldt University of Berlin - Faculty of Law and European University Institute	116
6.	Amending Corporate Charters and Bylaws Albert H. Choi and Geeyoung Min University of Virginia School of Law and Columbia Law School	112
7.	Consent and Contracts Brian Bix University of Minnesota Law School	89
8.	Taking Contracting Digital: Examination of the Smart Contracts Experiment Folake Alabi New York University (NYU), School of Law, Student	79
9.	The Rise of Automated Investment Advice: Can Robo-Advisers Rescue the Retail Market? Benjamin P. Edwards University of Nevada, William S. Boyd School of Law	78
10.	The Bureaucrats of Private Law Hanoch Dagan and Roy Kreitner Tel Aviv University - Buchmann Faculty of Law and Tel Aviv University - Buchmann Faculty of Law	78

Don't worry, corporate entities themselves get confused about their corporate structure...

I have actually seen a bunch of cases lately where people have either sued the wrong company in a complicated corporate structure (understandable) or where they have brought suit on behalf of the wrong company, which seems less understandable to me since you should presumably know your own corporate structure and which companies are bound by which contracts. But, as a recent case out of the District Court for the District of Columbia, Washington Tennis & Education Foundation, Inc. v. Clark Nexsen, Inc., Case No. 15-cv-02254 (APM), shows: not always. 

The parties entered into an agreement where Clark Nexsen would design a tennis and education facility. About a year after entering into this agreement, Washington Tennis & Education Foundation, Inc. ("WTEF") assigned "all of [it]s right, title and interest" in the contract to Washington Tennis & Education Foundation East, Inc. ("WTEF East"), a related company that was not a party to this lawsuit. After growing dissatisfied with Clark Nexsen's performance under the agreement, WTEF sued for breach of contract. Clark Nexsen moved for summary judgment that WTEF lacked standing to sue because all of its contractual rights now belonged to WTEF East by virtue of the assignment. 

The court agreed with Clark Nexsen. WTEF and WTEF East were two separate and distinct legal entities. It was true that they were related but they had separate boards of directors and separate records, etc. WTEF was not entitled to bring claims on WTEF East's behalf. Once WTEF assigned the contract to WTEF East, it became a "stranger" to the agreement and could not enforce it. 

WTEF tried to argue that it and WTEF East were, for all intents and purposes, the same. However, the court pointed out that WTEF created WTEF East in order to put itself in a position to secure extra financing. The court said that WTEF couldn't have its cake and eat it, too: If it wanted to have separate entities when it was advantageous for it to do so, then the court was going to treat them as separate entities even when it became disadvantageous. 

WTEF also tried to argue that it was a third-party beneficiary of the contract at issue, but there was nothing about the contract that indicated WTEF should be treated as a third-party beneficiary, and in fact the contract explicitly disclaimed that the contract should be construed to have any third-party beneficiaries. Nor was there anything in the assignment agreement indicating WTEF should now be treated as a third-party beneficiary of the original contract. In fact, the assignment agreement named Clark Nexsen as a third-party beneficiary to it, so it was clear the parties had thought about third-party beneficiary issues and had not given such status to WTEF. 

The court ended up dismissing all of WTEF's claims but maintaining jurisdiction over Clark Nexsen's counterclaim moving forward. Not a good outcome for WTEF. Double-check your corporate structure before deciding which entity needs to sue on a contract. 

“Making Money is Still Allowed” – As Are False Pricing Strategies

The United States Court of Appeals for the Second Circuit has held that retail stores, including online vendors, are free to advertise “before” prices that might in reality never have been used.

Although the particular plaintiff’s factual arguments are somewhat unappealing and unpersuasive, the case still shows a willingness by courts, even appellate courts, to ignore falsities just to entice a sale.

Max Gerboc bought a pair of speakers from www.wish.com for $27. A “before” price of $300 was juxtaposed and crossed out next to the “sale” price of $27. There was also a promise of a 90% markdown. However, the speakers had apparently never been sold for $300, thus leading Mr. Gerboc to argue that he was entitled to 90% back of the $27 that he actually paid for the speakers. Mr. Gerboc argued unjust enrichment and a violation of the Ohio Consumer Sales Practices Act (“OCSPA”).

The appellate court’s opinion is rife with sarcasm and gives short shrift to Mr. Gerboc’s arguments. Among other things, the court writes that although the seller was enriched by the sale, “making money is still allowed” and that the plaintiff got what he paid for, a pair of $27 speakers that worked. He thus did not unjustly enrich the seller, found the court. (Besides, as the court noted, unjust enrichment is a quasi-contractual remedy that allows for restitution in lieu of a contractual remedy, but here, the parties did have a contract with each other).

Interestingly, the court cited to “common sense” and the use of “tricks,” as the court even calls them, such as crossed out prices to entice buyers. “Deeming this tactic inequitable would change the nature of online, and even in-store, sales dramatically.”

So?! Where are we when a federal appellate court condones the use of trickery, even if a large amount of other large vendors such as Nordstrom and Amazon also use the same “tactic”? Is this acceptable simply because “shoppers get what they pay for”? This panel apparently thought so.

Of course, Mr. Gerboc would disagree. He cited to “superior equity” under both California case law and OCSPA. The court again merely cited to its argument that Mr. Gerboc had suffered no “actual damages” that were “real, substantial, and just.”

I find this line of reasoning troublesome. Sure, most of us know about this retail tactic, but does that make it warranted under contract and consumer regulatory law? If a vendor has truly never sold items at a certain “before” price, courts in effect condone outright lies, i.e. misrepresentation, in these cases just because no actual damages were suffered. This court said that Mr. Gerboc “at most … bargained for the right to have the speakers for 90% less than $300.” But if the speakers were indeed never sold at that price, is that not a false bargain? And where do we draw the lines between fairly obvious “tricks” such as this and those that may be less obvious such as anything pertaining to the quality and durability of goods, fine print rules, payment terms, etc.? Are we as a society not allowing ourselves to suffer damages from allowing this kind of business conduct? Or has this just become so commonplace that virtually everyone is on notice? Does the latter really matter?

I personally think courts should reverse their own trend of approving what at bottom is false advertising (used in the common sense of the word). Of course it is still legal to make money. But no court would allow consumer buyers to “trick” the online or department store vendors. Why should the opposite be true? The more sophisticated parties – the vendors – can and should figure out how to make a profit without resorting to cheating their customers simply because everyone else does it too. Statements about facts of a product should be true. Allowing businesses to undertake this type of conduct is, I think, a slippery slope on which we don’t need to find outselves.

The case is Max Gerboc v. Contextlogic, Inc., 867 F. 675 (2017).

Negotiations falling apart =/= a breach of contract

If you, like me, just taught about letters of intent and also promissory estoppel, then here's a case with both for you, out of the District of Minnesota, City Center Realty Partners v. Macy's Retail Holdings, Civil No. 17-CV-528 (SRN/TNL). (The decision is behind a paywall, but you can read about the background of the lawsuit here.) 

The parties were negotiating a sale of Macy's property in Minneapolis and had executed a Letter of Intent before (predictably, since we're in court) the deal fell apart. City Center brought claims against Macy's, including breach of contract based on the letter of intent. However, Macy's argued that the letter of intent was not binding, and the court agreed. The clauses in the letter of intent referred to a future purchase agreement that was never executed, and so, absent this purchase agreement, the letter of intent only bound the parties in very limited ways. 

City Center also brought a claim that Macy's breached the covenant of good faith and fair dealing in delaying the finalizing of the transaction. However, the actions that City Center complained about were not things that Macy's was obligated to do. Macy's fulfilled its obligations under the letter of intent and City Center's other allegations of delay and obstruction on Macy's part were not actionable. 

Finally, City Center brought promissory estoppel allegations based on oral statements Macy's made in the context of the parties' negotiations. But the court pointed out that the letter of intent represented the parties' agreements about their negotiations. City Center could not use promissory estoppel to alter the terms of the written contract. And, to the extent that City Center alleged other terms had been agreed upon not written in the letter of intent, the court refused to use promissory estoppel to save the statute of frauds problem (since this was a contract for the sale of land). Under the circumstances here, City Center knew that it and Macy's were engaged in ongoing negotiations that might not pan out. If City Center wanted assurance that Macy's would keep certain promises, it should have had those put in the letter of intent in a binding way. This was not a situation where Macy's had committed some kind of fraud where justice would require the enforcement of Macy's oral statements; it was just a situation where negotiations fell apart in a way that City Center didn't like. That didn't justify the application of promissory estoppel. 

California court finds broad arbitration clause unconscionable

A recent case out of California, Pimpo v. Fitness International, LLC, D071140 (behind paywall), finds an arbitration clause in a contract unenforceable due to unconscionability. 

In the case, Pimpo worked at one of Fitness International's fitness centers, where another employee sexually harassed her. Pimpo made several reports about the other employee's behavior and ultimately ended up suing over the sexual harassment. Fitness International responded by moving to compel arbitration based on a contract Pimpo electronically signed when she submitted her application for employment with Fitness International. However, the very terms of that agreement said it was only effective for 45 days, so it had expired by the time Pimpo filed suit. Fitness International tried to argue that Pimpo had signed a different arbitration agreement upon accepting employment but the trial court found no evidence of such agreement and the appellate court said that Fitness International's statement that it moved to compel arbitration based on this other agreement for which there was no evidence "border[ed] on a misrepresentation to this court."

So the appellate court already wasn't too happy with Fitness International as it began its unconscionability analysis, which it turned to in the interest of thoroughness. The arbitration clause that Pimpo signed when she applied for employment, the court concluded, was unenforceable due to unconscionability. Because the contract was a contract of adhesion presented to Pimpo on a take-it-of-leave-it basis, the court found that it was "by definition procedurally unconscionable." The court then went on to note, though, that Pimpo was in the usual position of someone applying for a job: She needed money to survive and did not have the resources to hire an attorney to look over the contracts for every application that she submitted. 

The court also found substantive unconscionability because the clause was drafted to be breathtakingly broad. It explicitly required Pimpo to give up her right to a jury trial on all claims, "even those unrelated to the application or her employment," against Fitness International and "its officers, directors, employees, agent, affiliates, entities, and successors," forever. The court noted that this language meant that if Pimpo got into a car accident with a Fitness International employee, it was covered by this arbitration clause. Fitness International tried to argue that the clause should be read more narrowly than that but the court noted that that was not how it was drafted (and Fitness International had drafted it). In addition, the discovery procedure that the arbitration clause allowed for placed Pimpo at such a disadvantage that the court agreed that was substantivaly unconscionable, too. 

Beware of drafting your clauses too broadly. Such can be the outcome. Even arbitration clauses can have their limits. 

California Outlaws Forced Arbitration Clauses by Banks

On Sept. 12, 2017, Senate Bill 33 was approved by the California Senate and now awaits Governor Brown’s approval before becoming law.

The legislation was designed after the Wells Fargo scandal to block legal the legal tactic of keeping disputes over unauthorized bank accounts out of public court proceedings an favor of private arbitration.

Said the law’s author, Sen. Dodd (D-Napa): “The idea that consumers can be blocked from our public courts when their bank commits fraud and identity theft against them is simply un-American.” It is also clearly unethical and, once again, emphasized how difficult it can be in modern times to strike a fair contractual bargain with a party that has much greater bargaining power than individuals and that uses lengthy and often complex boilerplate contracts with terms few read and understand.

Contracts and Commercial Law Scholarship: Weekly Top Ten SSRN Downloads (September 14, 2017)

Top Downloads For the Contracts & Commercial Law eJournal

Recent Top Papers (60 days) as of 16 Jul 2017 - 14 Sep 2017

Rank	Paper	Downloads
1.	How to Restructure Venezuelan Debt (¿Cómo restructurar la deuda venezolana?) Lee C. Buchheit and G. Mitu Gulati Cleary Gottlieb Steen & Hamilton LLP - New York Office and Duke University School of Law	2,737
2.	Corporate Governance for Complex Cryptocurrencies? A Framework for Stability and Decision Making in Blockchain-Based Monetary Systems Philipp Hacker European University Institute	167
3.	Relational Contracts of Adhesion David A. Hoffman University of Pennsylvania Law School	167
4.	The Choice Theory of Contracts (Introduction) Hanoch Dagan and Michael Heller Tel Aviv University - Buchmann Faculty of Law and Columbia University - Columbia Law School	166
5.	Aspects of Loyalty Lionel Smith McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law	140
6.	What Law Governs Forum Selection Clauses Symeon C. Symeonides Willamette University - College of Law	118
7.	Personal Data, Exploitative Contracts, and Algorithmic Fairness: Autonomous Vehicles Meet the Internet of Things Philipp Hacker European University Institute	110
8.	Digital Technology as a Challenge to European Contract Law – From the Existing to the Future Architecture Stefan Grundmann and Philipp Hacker Humboldt University of Berlin - Faculty of Law and European University Institute	108
9.	Amending Corporate Charters and Bylaws Albert H. Choi and Geeyoung Min University of Virginia School of Law and Columbia Law School	91
10.	Forum-Selection Provisions in Corporate 'Contracts' Helen Hershkoff and Marcel Kahan New York University School of Law and New York University School of Law	112

 

Top Downloads for the Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days) as of 16 Jul 2017 - 14 Sep 2017

Rank	Paper	Downloads
1.	Relational Contracts of Adhesion David A. Hoffman University of Pennsylvania Law School	167
2.	The Choice Theory of Contracts (Introduction) Hanoch Dagan and Michael Heller Tel Aviv University - Buchmann Faculty of Law and Columbia University - Columbia Law School	166
3.	What Law Governs Forum Selection Clauses Symeon C. Symeonides Willamette University - College of Law	118
4.	Forum-Selection Provisions in Corporate 'Contracts' Helen Hershkoff and Marcel Kahan New York University School of Law and New York University School of Law	112
5.	Digital Technology as a Challenge to European Contract Law – From the Existing to the Future Architecture Stefan Grundmann and Philipp Hacker Humboldt University of Berlin - Faculty of Law and European University Institute	108
6.	Amending Corporate Charters and Bylaws Albert H. Choi and Geeyoung Min University of Virginia School of Law and Columbia Law School	91
7.	Taking Contracting Digital: Examination of the Smart Contracts Experiment Folake Alabi New York University (NYU), School of Law, Student	69
8.	The Rise of Automated Investment Advice: Can Robo-Advisers Rescue the Retail Market? Benjamin P. Edwards University of Nevada, William S. Boyd School of Law	69
9.	The Rise of Modern Commercial Arbitration and the Limits of Private Ordering Christian R. Burset Yale University, Faculty of Arts & Sciences, Department of History, Students	63
10.	U.S. Unconscionability and Article 1171 of the New French Civil Code: Achieving Balance in Statutory Regulation and Judicial Intervention Charles R. Calleros Arizona State University (ASU) - Sandra Day O'Connor College of Law	58

 

Why didn't the people in "Rent" just, like, pay their rent?

The other day, I happened to re-listen to "Rent." The 20th Anniversary Tour is coming to town next month, and I have my ticket in hand, and, excited about the upcoming show, I pulled the original Broadway cast album up on Spotify for a re-listen. The thing about "Rent" is its one of those shows that I find it difficult to be rational about. It has its flaws, but I was in high school the first time that I heard "Rent," and it blew me away then, and it still stays fresh to me. Even when I think it should have aged, I hear the first notes of "One Song Glory," and they get me every time, and by the end of my re-listen I'm sitting in floods of tears on my living room and thinking, ...Huh, this whole musical is about a breach of contract. 

Because it is!

If you don't know the plot, it's loosely a re-telling of "La Boheme" that revolves around a number of young New York artists struggling to survive in an age when AIDS is ravaging their community. The titular "Rent" is the first major song in the musical, and it's a reaction to one of the characters, Benny, going back on a promise he made to the main characters, Mark and Roger. Benny used to be roommates with Mark and Roger but now (with his rich bride's money behind him), he's become their landlord. However, when he bought their building the year before he told Mark and Roger they were "golden". Nonetheless, at the beginning of the play, he shows up and demands all of the previous year's rent, which Mark and Roger allege he led them to believe they didn't have to pay (and which Benny never really refutes). 

There are a lot of critiques of the characters of "Rent" and how annoying it can be to listen to the show as an "adult." Yes, you do find yourself asking why Mark can't just rake in some dough for a little while to pay off the debt. Isn't this what all adults have to do? We all have to go out and get jobs to pay for the roofs over our heads. But Mark and Roger shouldn't have been in the rent-money debt in the first place, because they had an agreement with Benny. Are there issues with the formation of this contract? Yes. It's pretty informally done, after all, because of their friendship. And it probably suffers from a consideration issue, because it seems like a gift from Benny to Mark and Roger (the musical doesn't spend a whole lot of time on the details of the transaction, tbh, but it seems like he made the offer because he was feeling generous toward his friends). But I think it could be saved by promissory estoppel. Benny made that promise to Mark and Roger, and he's got to know them well enough to know they were going to rely on it by not worrying much about a source of income for the year, which in fact Mark and Roger did. And now Benny is demanding an entire year's worth of rent all at once, which would be a lot for anyone to come up with, never mind starving artists with uncertain sources of income. 

So it's not entirely Mark and Roger's fault that they owe a year's rent. They were led to believe they didn't. But, more than that, the more I think about the critiques of "Rent," the more I think that actually that's the point of rent. Mark and Roger are annoying and entitled, yes, not just because they don't want to have to pay rent that their friend told them they wouldn't have to pay, but because they don't want to have pay rent going forward, because the payment of rent pushes them into making compromises regarding their art and the type of life they want to live. When you listen to "Rent" as a sixteen-year-old, it's different than listening to it as a thirty-six-year-old, and that difference is that yes, I grew up, and I realized that suddenly I'm no longer on the side of the artists who want to create and live their lives. And then that makes me think about the fact that I'm on the side of people not following dreams because I grew up and I compromised and I paid my rent. And I don't think it's a failing in "Rent" that it makes me pause to think about that, that there was a teenager in me who believed in La Vie Boheme who became an adult who didn't. I think that's the point. The story takes place in the middle of the AIDS epidemic, when these people are losing friends left and right, and so it makes sense that they don't feel like they have time to pretend to be other than what they are. Maybe the joke's on all of us that we feel like we do have time. 

Because, let's face it, for all of "Rent"'s enduring genius as a musical achievement--and there's a lot of it--"Rent"'s story is also the story of all the music that its composer never got to write. Jonathan Larsen died suddenly and unexpectedly the night before the musical's Off-Broadway premiere. He left far too early and left us with just this one perfect masterpiece, about people with uncertain lives clinging stubbornly to their dreams. It's hard for you to reach the end of "Rent" without an appreciation for how lucky we are that some people live that way and give it their all in their time here on Earth. Jonathan Larsen only wrote the one masterpiece, and that's a tragedy, and he didn't live to see the huge success it became, which is an even bigger tragedy, but at least he got to write one, which meant he got to leave a legacy behind him that you've got to think he'd be pretty happy with. And how lucky we all are that he stuck with his art. 

None of which has anything to do with contracts law, oops. EXCEPT EVERYTHING HAS TO DO WITH CONTRACTS LAW. Including the entire plot of "Rent." The end, back to regularly scheduled cases, here, have a song:  

 

Uber Arbitration Clause Win

The U.S. Court of Appeals for the Second Circuit recently reversed a district court’s decision to deny Uber’s move to compel arbitration in a contract with one of its passengers, Spencer Meyers.

The district court had found that Meyer did not have reasonably conspicuous notice of Uber’s terms of service (which contained the arbitration clause) when he registered a user, that Meyer did not unambiguously assent to the terms of service, and that Meyer was not bound by the mandatory arbitration provision contained in the terms of service.

The Second Circuit summed up the usual difference between clickwrap agreements, which require a user to affirmatively click on a button saying “I agree” and which are typically upheld by courts, and browsewrap agreements, which simply post terms via a hyperlink at the bottom of the screen and which are generally found unenforceable because no affirmative action is required to agree to the terms.

In the case, Meyer had been required to click on a radio button stating “Register,” not “I agree.” But in contrast to browsewrap agremeents, Uber also informed Meyer and other users that by creating an account, they were bound to its terms. Uber did so via a hyperlink to the terms on the payment screen.

Meyer nonetheless claimed that he had not noticed or read the terms. The Court thus analyzed whether he was at least on inquiry notice of the arbitration clause because of the hyperlink to the terms. This was the case, found the court, because the payment screen was uncluttered with only fields for the user to enter his or her payment details, buttons to register for a user account, and the warning and related hyperlink. Further, the entire screen was visible at once and the text was in dark blue print on a bright white background. Thus, the fact that the font size was small was not so important.

Mayer was bound to the arbitration clause because he had assented to that term after getting “reasonably objective notice.”

The case is Meyer v. Uber Technologies, Inc., No. 16-2750 (2d Cir. 2017).

 

Employment Contracts in France under Macron

As reported by the Los Angeles Times and others, the no. two economy in the Eurozone - France - may see its notoriously worker-friendly labor laws overhauled in favor of fewer restrictions soon.

One key measure proposed by the government trims the role of unions, notably in small- and medium-size companies — which the prime minister said make up nine out of 10 companies in France.  Under the reforms, companies with fewer than 50 employees would be able to negotiate work rules with an elected colleague — not unionized — and companies with fewer than 20 employees can negotiate directly with their workers.

Labor Minister Muriel Penicaud said the reforms aim to not just change France's work rules but "to change the behavior of social dialogue in our country."

Whether this will be a favorable turn of events for France on the national and international business stage remains to be seen.  For workers, however, "negotiating directly" with employers sounds an awful lot like the very unequal bargaining powers so frequently seen in the USA.  Here, such contractual bargaining and conditions have not resulted in improved incomes for the middle and lower classes, although other factors of course also weigh in.  Nonetheless, it is a basic tenet of contract law - and thus employment law - that one can only strike the bargain that one has leverage to strike.  Trade unions and labor regulations can contribute significantly and importantly to an otherwise very skewed bargaining situation, especially in times and locations of unemployment and for older workers.

But of course, France should do something to improve its equally notorious unemployment rate, currently at 10%.  The work environment in Europe is still so much more relaxed than in the USA that it is doubtful whether any employer would seriously expect workers to amass the very high amount of hours worked by Americans or the very few weeks of vacation.  Hence, a social dialogue may be what it takes in France.

 

Conversations left open-ended don't rise to the level of an offer

In my head it's still the beginning of the school year, even though at my school we just finished our third week of classes already. This means that, because we only have a one-semester Contracts course, I'm just finishing up contract formation and moving on, and this case is kind of a nice little reminder review about the principles surrounding offers.

The case out of New Jersey, Kristine Deer, Inc. v. Booth, No. C-29-16 (behind paywall), involved a luxury active wear company, K-DEER, for which the defendant, Booth, worked. Booth had several conversations over the course of her employment with K-DEER's sole shareholder, Kristine Deer, about Booth receiving possible equity interest in the company. However, every one of those conversations was fairly vague. Deer seemed to always finish the conversations with some kind of demurral: that she had to "think about" it more, or that she wasn't "ready to have the conversation." Eventually, Booth resigned with an e-mail that read "If you are not willing to pursue an active dialog about ownership I am not interested in working at K-DEER." 

The parties are now involved in litigation, which included, among other things, Booth's counterclaim for breach of contract. She alleged that "Deer led [her] to believe she was a partner and had a right to equity in K-DEER," because she "did not explicitly deny her requests for equity" and called her a "partner" at times. However, the court quoted at length from Booth's deposition, where she admitted that Deer did not offer her any equity and that, in fact, her unwillingness to do so was why she resigned. Under these circumstances, it was impossible to find an offer from Deer to Booth. There was no expression of commitment on Deer's part. In fact, all of Deer's statements seemed to evince the opposite. So the court found no contract existed between the parties. 

As I am teaching my students to do now, the court then moved on, examining Booth's claim for quantum meruit. However, Booth never alleged that she wasn't adequately compensated, just that she would have left K-DEER earlier had she realized Deer wasn't going to give her equity. That did not justify quantum meruit. The court found that Booth had been compensated for all the work she had performed, so there was no unjust enrichment on K-DEER's part.

Contracts and Commercial Law Scholarship: Weekly Top Ten SSRN Downloads (September 7, 2017)

Top Downloads For the Contracts & Commercial Law eJournal

Recent Top Papers (60 days) as of: 09 Jul 2017 - 07 Sep 2017

Rank	Paper	Downloads
1.	How to Restructure Venezuelan Debt (¿Cómo restructurar la deuda venezolana?) Lee C. Buchheit and G. Mitu Gulati Cleary Gottlieb Steen & Hamilton LLP - New York Office and Duke University School of Law	2,693
2.	Crypto Transaction Dispute Resolution Wulf A. Kaal and Craig Calcaterra University of St. Thomas, Minnesota - School of Law and Department of Mathematics, Metropolitan State University	306
3.	The Choice Theory of Contracts (Introduction) Hanoch Dagan and Michael Heller Tel Aviv University - Buchmann Faculty of Law and Columbia University - Columbia Law School	162
4.	Relational Contracts of Adhesion David A. Hoffman University of Pennsylvania Law School	162
5.	Corporate Governance for Complex Cryptocurrencies? A Framework for Stability and Decision Making in Blockchain-Based Monetary Systems Philipp Hacker European University Institute	145
6.	Aspects of Loyalty Lionel Smith McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law	138
7.	What Law Governs Forum Selection Clauses Symeon C. Symeonides Willamette University - College of Law	113
8.	Justice, Fault, and Efficiency in Contract Law Larry A. DiMatteo University of Florida - Levin College of Law	111
9.	Personal Data, Exploitative Contracts, and Algorithmic Fairness: Autonomous Vehicles Meet the Internet of Things Philipp Hacker European University Institute	105
10.	Digital Technology as a Challenge to European Contract Law – From the Existing to the Future Architecture Stefan Grundmann and Philipp Hacker Humboldt University of Berlin - Faculty of Law and European University Institute	100

 

Top Downloads For the Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days) as of: 09 Jul 2017 - 07 Sep 2017

Rank	Paper	Downloads
1.	Crypto Transaction Dispute Resolution Wulf A. Kaal and Craig Calcaterra University of St. Thomas, Minnesota - School of Law and Department of Mathematics, Metropolitan State University	306
2.	The Choice Theory of Contracts (Introduction) Hanoch Dagan and Michael Heller Tel Aviv University - Buchmann Faculty of Law and Columbia University - Columbia Law School	162
3.	Relational Contracts of Adhesion David A. Hoffman University of Pennsylvania Law School	162
4.	What Law Governs Forum Selection Clauses Symeon C. Symeonides Willamette University - College of Law	114
5.	Digital Technology as a Challenge to European Contract Law – From the Existing to the Future Architecture Stefan Grundmann and Philipp Hacker Humboldt University of Berlin - Faculty of Law and European University Institute	100
6.	Property and the Construction of the Information Economy: A Neo-Polanyian Ontology Julie E. Cohen Georgetown University Law Center	68
7.	Taking Contracting Digital: Examination of the Smart Contracts Experiment Folake Alabi New York University (NYU), School of Law, Student	66
8.	The Rise of Modern Commercial Arbitration and the Limits of Private Ordering Christian R. Burset Yale University, Faculty of Arts & Sciences, Department of History, Students	61
9.	The Rise of Automated Investment Advice: Can Robo-Advisers Rescue the Retail Market? Benjamin P. Edwards University of Nevada, William S. Boyd School of Law	61
10.	Amending Corporate Charters and Bylaws Albert H. Choi and Geeyoung Min University of Virginia School of Law and Columbia Law School	60

 

Crumbling foundations are happening all over Connecticut, and the insurance policy fights are underway

I'd been seeing a lot of insurance cases come across my alert dealing with crumbling house foundations in the District of Connecticut. This one, Roberts v. Liberty Mutual Fire Insurance Co., No. 3:13-cv-00435 (SRU) (behind paywall), tells us why. Apparently it's part of an epidemic across Connecticut that so far has affected at least four hundred homes and may ultimately affect as many as 34,000 (!). The mix used in the concrete to pour these foundations contained a naturally existing mineral called pyrrhotite that degrades rapidly, causing the issues the homeowners are seeing. You can read more about this horrible situation here. 

The Robertses are one of the homeowners caught up in the deteriorating foundation issue. They brought a claim under their homeowners' insurance policy, which was denied because the policy excluded coverage based on faulty construction, which Liberty Mutual explained was the problem at issue with the foundation. However, the policy did cover loss due to defective construction if it resulted in "collapse." The issue in this case revolved around the definition of the word "collapse." The Robertses claimed the cracks in the foundations will eventually cause the walls to give way and collapse and so they should be covered. 

The insurance policy did not define the term "collapse," and previous Connecticut precedent had found the term in homeowners insurance contracts to be ambiguous. Because insurance contracts are construed against the insurance company, these courts had concluded that "collapse" could be something beyond just "a catastrophic breakdown" to include the "substantial impairment of the structural integrity of a building." But what does "substantial impairment" mean? Does it mean the building has to be in "imminent danger" of falling to the ground? Precedent suggested no. Connecticut courts had allowed recovery under "collapse" where the house never caved in and indeed the homeowners continued to live in it. So this court concluded that "substantial impairment" means that the building would cave in without repair to the damage. The judge found that there were factual disputes in this case involving whether the Robertses' home was in this state and thus summary judgment was inappropriate. 

This series of cases is painful to read and made me walk around my house worrying about what's not covered by my howeowners insurance that could destroy it...

Fighting over Buck Rogers

(Source: Wikipedia)

There's an interesting case out of the Eastern District of Pennsylvania, The Dille Family Trust v. The Nowlan Family Trust, Civil Action No. 15-6231, dealing with issues around the trademark BUCK ROGERS. But it also has a breach of contract angle that requires us to learn the history of Buck Rogers. So let's dive in!

Philip Nowlan wrote a story called Armageddon 2419 A.D. that appeared in August 1928, starring a character named Anthony Rogers. In 1929, Nowlan wrote a sequel to the story, also starring Rogers. Nowlan, identified as the "creator of . . . 'Buck' Rogers," entered into a contract in 1929 with a newspaper service owned by John F. Dille to syndicate the comic strip "Buck Rogers." This contractual relationship seemed to survive through the 1930s, until Nowlan died in 1940. Nowlan's widow, Theresa Nowlan, then sued the newspaper service alleging underpayment under the contracts. The parties settled in 1942, which is where the breach of contract claim in the current case arises from. The agreement provided that Theresa Nowlan and her "heirs, executors, or administrators" released all claims against the newspaper service related to Buck Rogers and also conveyed all intellectual property interest in Buck Rogers to Dille. 

Neither the Dille Family Trust nor the Nowlan Family Trust were parties to this settlement agreement. They were not even in existence until decades after it was signed. However, the Dille Family Trust asserted that it is the successor in interest to John Dille and that the Nowlan Family Trust is the successor in interest to Theresa Nowlan. Therefore, it contends that it can sue the Nowlan Family Trust for breach of the 1942 settlement agreement. 

The court, however, disagreed. While there was no dispute that the trustee and beneficiaries of the Nowlan Family Trust were descendants of Theresa Nowlan, that was not enough to establish that the Nowlan Family Trust was an "heir, executor, or administrator" or otherwise a successor in interest to Nowlan's obligations under the 1942 settlement agreement. The Dille Family Trust did not show any sort of transfer of the agreement to the Nowlan Family Trust, nor did it introduce any other document (such as Theresa Nowlan's will) that might have indicated that the rights and obligations of the 1942 settlement agreement passed to the descendants in question. Therefore, the Dille Family Trust could not maintain a breach of contract action against the Nowlan Family Trust based on the 1942 settlement agreement.