ContractsProf Blog

The Two ships Peerless, the Two Players Brooks, and “The Deal that Never Really Was”

Dear readers:

The below guest blog was shared with us by Oren Gross, the Irving Younger Professor of Law with the University of Minnesota Law School:

Who amongst us has not taught the 1864 case of Raffles v. Wichelhaus, a.k.a. the two ships Peerless? The story of the ships (by some accounts there have been up to eleven ships bearing the same name!) has tantalized and captured the imagination of numerous generations of students learning about meeting of the minds.

You can imagine my delight when, taking a much-needed break from grading exams, I came across a modern version of the story involving three NBA teams and two players named Brooks.

The Washington Wizards, it seems, wanted to strengthen their roster by adding the Phoenix Suns forward Trevor Ariza. For its part, Phoenix was interested in Memphis Grizzlies players and the Grizzlies – in Wizards players. And so, the Wizards’ general-manager concocted a three-team trade and served as the go-between the Suns and the Grizzlies. As part of that trade, the Suns were to get two players from Memphis, namely Selden and Brooks.

Simple enough. Or so it seems. However, as Chris Herrington reported in the Daily Memphian on December 15, 2018, the deal fell apart or, in an insight worthy of contracts’ scholars, “maybe never quite was.”

The problem is that Memphis currently has not one, but two, players on its roster whose last name is Brooks. And whereas the Suns thought they were getting Dillon Brooks, the Grizzlies intended to trade MarShon Brooks. Thus, while “two Grizzlies sources confirmed to The Daily Memphian that it was MarShon Brooks, not Dillon Brooks in the deal. Media in Phoenix, however, insisted it was Dillon, not MarShon.”

As the two teams negotiated through the Wizards as the go-between, the miscommunication as to the identity of the player actually to be traded was not revealed until news of the deal leaked to the media.

The outcome? The three-team deal collapsed. As Herrington put it “the deal that never really was was nixed.”

The Periodic Table of Top Ten SSRN Contracts & Commercial Law Downloads (December 18, 2018)

Top Downloads For:

Contracts & Commercial Law eJournal

Recent Top Papers (60 days)

As of: 19 Oct 2018 - 18 Dec 2018

Rank	Paper	Downloads
1.	Regulating Blockchain: Techno-Social and Legal Challenges - An Introduction Philipp Hacker, Ioannis Lianos, Georgios Dimitropoulos and Stefan Eich Humboldt University of Berlin, University College London - Faculty of Laws, Hamad Bin Khalifa University and Princeton Society of Fellows	148
2.	The Value of Choice and the Justice of Contract Hanoch Dagan Tel Aviv University - Buchmann Faculty of Law	78
3.	Digitalisation of Payment Services Fernando Zunzunegui Universidad Carlos III de Madrid - Faculty of Social Sciences and Law	74
4.	The Story of the Dubai International Financial Centre Courts: A Retrospective Jayanth K. Krishnan Indiana University Maurer School of Law	62
5.	Addressing Infringement: Developments in Content Regulation in the US and the DNS Annemarie Bridy University of Idaho	61
6.	Contract Governance in Small World Networks: The Case of the Maghribi Traders Lisa Bernstein University of Chicago - Law School	58
7.	Legal Boundaries of Blockchain Technologies: Smart Contracts as Self-Help? Florian Möslein Universität Marburg (Institut für Handels- und Wirtschaftsrecht)	57
8.	Substituted Performance in Contract Law: An Analysis Badrinath Srinivasan Independent	53
9.	The Middleman's Damages Revisited Victor P. Goldberg Columbia Law School	52
10.	Arbitrators and the Interpretation of Contacts Alan Scott Rau University of Texas at Austin - School of Law	48

 

Top Downloads For:

Law & Society: Private Law - Contracts eJournal

Recent Top Papers (60 days)

As of: 19 Oct 2018 - 18 Dec 2018

Rank	Paper	Downloads
1.	The Value of Choice and the Justice of Contract Hanoch Dagan Tel Aviv University - Buchmann Faculty of Law	78
2.	Transaction Costs of Blockchain Smart Contracts Jakub J. Szczerbowski SWPS University of Social Sciences and Humanities	63
3.	Addressing Infringement: Developments in Content Regulation in the US and the DNS Annemarie Bridy University of Idaho	61
4.	Contract Governance in Small World Networks: The Case of the Maghribi Traders Lisa Bernstein University of Chicago - Law School	58
5.	Legal Boundaries of Blockchain Technologies: Smart Contracts as Self-Help? Florian Möslein Universität Marburg (Institut für Handels- und Wirtschaftsrecht)	57
6.	Substituted Performance in Contract Law: An Analysis Badrinath Srinivasan Independent	53
7.	The Middleman's Damages Revisited Victor P. Goldberg Columbia Law	52
8.	Arbitrators and the Interpretation of Contacts Alan Scott Rau University of Texas at Austin - School of Law	48
9.	Quantifying Damages in Cases of Advantageous Breach: The Curious Case of McDonald’s Milkshakes Mark Giancaspro University of Adelaide - School of Law	38
10.	Comments on the (Indian) Arbitration & Conciliation (Amendment) Bill, 2018 Badrinath Srinivasan Independent	38

A past consideration case reminds us that being recognized for your past hard work isn't good for your breach of contract claim

I don't know about everyone else but my casebook teaches past consideration using very old cases. Here's past consideration raised as an issue with a recent case out of the Southern District of California, Wright v. Old Gringo Inc., Case No. 17-cv-1996-BAS-MSB (behind paywall). 

The case is really interesting, because the court acknowledged that the complaint had proper consideration allegations: ownership interest, salary, and performance bonuses in exchange for providing "expertise and services." The problem came from the deposition testimony, all of which seemed to establish that in fact the ownership interest had been provided as a reward for previous work. The plaintiff herself testified that the ownership interest was effective even if she immediately quit the job, indicating it wasn't in exchange for future services. Plaintiff's friends and relatives provided similar testimony, that the ownership interest was given "to show . . . appreciation" and "for . . . recognition of her hard work." There was no evidence presented that the ownership interest was offered on the condition of future work in exchange. For that reason, the court granted summary judgment for failure of consideration. 

The plaintiff's remaining claims were permitted to go forward, including promissory estoppel and tort claims. Those claims (as I remind my students!) don't require consideration. 

I find this case really interesting because I'm sure the plaintiff's friends only thought they were helping her with their testimony. This is the kind of thing that I think makes instinctive sense to non-lawyers: the plaintiff did something awesome and they recognized it by giving her an amazing gift. But lawyers know that consideration doctrine makes that a bad thing, not a good one. 

(The decision also contains a statute of limitations and damages discussion.)

When setting a noncompete time period, "not less than five years" = five years

A recent case out of Illinois, Pam's Academy of Dance/Forte Arts Center v. Marik, Appeal No. 3-17-0803 (behind paywall but you can listen to the oral argument here), highlights the weirdness of just throwing extra words into a contract without thinking through what they really mean. 

The dispute concerned a noncompete between a dance studio and Marik, one of its employees. The covenant not to compete stated that Marik wouldn't engage in any similar business "for a period of not less than five (5) years," and wouldn't solicit any teachers or students "for a period of not less than three (3) years." The parties were arguing over whether this language meant "five years" and "three years," or whether it meant that the noncompete could extend past five and three years. 

In a vacuum, the statement "not less than five years" reads as "at least five years" to me, meaning that the time period could last longer. But as a matter of contract interpretation, that makes no sense. Could the noncompete theoretically go on for 50 years? After all, that would be a period "not less than" five. On the other hand, as the defendants argued, interpreting the time periods as five and three years would render the "not less than" language as "mere surplusage" -- an interpretation courts usually strive to avoid. 

The court noted that contract interpretation's goal is to discern the intent of the parties. "Not less than" has been interpreted by Illinois courts in a variety of ways, but never in the context of a noncompete. However, many out-of-state courts had come to the conclusion that, in a covenant not to compete, "not less than five years" should be construed as meaning five years. This would prevent the employer from arguing that the noncompete was violated six years later. Indeed, the court thought that arguing that it meant six years would amount to bad faith. 

Whether the five- and three-year periods were reasonable was a fact-based inquiry that had to be determined by looking at the totality of the circumstances. 

This is a situation where I'm sure the "not less than five years" language sounded fancy and official but it was truly pointless. I think the employee probably understood it to be five years and three years (to the extent that the employee read and understood the agreement), and to the extent the employer understood the language to mean otherwise and entitle it to set an indefinite time period, I'm with the court that that's an unreasonable interpretation. 

You and your corporate entities: often a complex story with repercussions

I got really excited when I saw this case because it's always nice to have a recent parol evidence case to look at, and this one involves movies!

It's a recent case out of Mississippi, Rosenfelt v. Mississippi Development Authority, No. 2017-CA-01120-SCT (you can listen to the oral arguments here). The MDA had communications with Rosenfelt regarding his movie studios' attempt to make movies in Mississippi, eventually guaranteeing a loan through a term sheet signed by the MDA and by Rosenfelt on behalf of his two movie studios. When Rosenfelt wanted to make another movie and applied for another loan under the terms of the agreement, the MDA turned down the request. Rosenfelt then sued for specific performance and damages. Rosenfelt initially triumphed on a motion for partial summary judgment but then, during the specific performance debate in the case, the MDA filed a summary judgment motion challenging Rosenfelt's standing, which resulted in dismissal of Rosenfelt's complaint. 

Rosenfelt appealed, alleging that there was an agreement between him personally and the MDA. However, the court noted that all communications from the MDA were directed explicitly to Rosenfelt as president of the relevant movie studio. The court's decision came down to contract interpretation: All of the written documents in the case unambiguously referred to Rosenfelt in his official corporate capacity or were signed by Rosenfelt in his official corporate capacity. Given the lack of ambiguity on the face of the documents, the court refused to consider parol evidence as to whether Rosenfelt was personally a party to any of the agreements.  Because all of Rosenfelt's allegations concerned his personal agreement with the MDA, the court dismissed the suit. 

This case serves as a reminder that, once you have set up corporate entities, you need to be careful to remember how those corporate entities impact not just your legal liabilities but also your legal rights. 

Taylor Swift and Contract Law

Sorry for being absent lately. Blame exam season! So this is slightly old news but I plan to bring it up in my Entertainment Law class in the spring, so I was doing a sprint through the news reporting on it: Taylor Swift and her new contract.