Thursday, March 31, 2022
John Wladis on Tom Brady's Last Touchdown Football
Two weeks ago, I posted about the auction of Tom Brady's "last touchdown football." A buyer paid $518,000 for the ball. Shortly thereafter, Mr. Brady announced that he would be returning for another season. Most likely, the ball will not remain Mr. Brady's last touchdown football.
I floated a theory that the auction house had given a warranty when it advertised the ball as follows:
If there is any item in the field of sports collectibles that needs no embellishment, it is this historic piece: the final touchdown ball of Tom Brady’s career.
Most people who responded to the post were unpersuaded. Everybody knows, the reasoning went, that players return from retirement. The buyer assumed the risk.
I stuck to my guns. That assumption of risk might matter for a mutual mistake analysis, but here the seller made a choice. It advertised the football as "the final touchdown ball of Tom Brady’s career." Having sold the football on that basis, I think it was bound by its words.
Friend of the blog John Wladis set me straight in an e-mail exchange that I quote below with his permission. He began by providing a doctrinal name for my interlocutors' instincts:
I do think that there is a warranty by description given by S. That warranty is a representation that the ball being sold is B's last touchdown pass as of the sale date.
I do not think that it's a promissory warranty. What's the difference between a warranty by representation and a promissory warranty?
Representation warranties speak to the past & present. So long as the ball satisfies the sale description as of the time of the sale, the warranty is made and not breached.
Promissory warranties speak to the future. In such a warranty seller is warranting both that the ball satisfies the warranty and time of sale and for some (presumably) reasonable time into the future.
What is the likelihood that a warranty that this is the last touchdown pass was a promissory warranty? Not likely because seller has no control over Brady's actions. Would a reasonable buyer expect that seller was warranting that Brady would not un-retire and throw no more touchdown pass. I think not.
Seller could undertake to warrant that but the language would need to be much clearer on this point than the description in question.
This distinction between representation and promissory warranties was new to me. I had to concede that Professor Wladis's explanation persuaded me that I was likely wrong about the warranty issue as a matter of law. But, I objected, I still don't like it as a matter of policy.
While I concede to the law as experience, I have two objections to its logic. First, I don't think an ordinary buyer should be charged with knowledge of the distinction between representation and promissory warranties. As I indicated before, I think that when a seller makes a representation, it is bound by that representation, and in the this instance, the seller's representation was incautious. Second, sellers warrant things over which they have no control all the time. Future events are just a sub-category of things over which sellers have no control. Sellers routinely sell goods that they believe to be merchantable knowing that, because of some latent defect or undiscovered design flaw, the goods may become unmerchantable in the future.
Professor Wladis weighed in again:
The representation / promissory warranty terminology is my own and inartful. I withdraw the distinction for one that is more apt which I’ll now describe.
First some preliminary points: All warranties warrant seller’s performance. When contract formation and delivery are not concurrent, a warranty is promissory in the sense that it is seller’s promise that its performance will satisfy the warranty.
The real question (and the one at issue in the football hypo) is whether the warranty promises that the goods will conform to the warranty at the time of delivery or whether the promise extends beyond that time (2-725(2)) calls these as extending to future performance, such as warranting the goods to be “free from defects for one year after purchase.”)
Is the description “Brady’s last touchdown pass” a warranty that the football will conform to the warranty at the time of delivery or until some reasonable time after delivery?
I think the resolution depends on the parties’ intent and that is not free from doubt. I do think the stronger view is that the description is a warranty that the football will conform at the time of delivery. The football does conform at that time. Hence, buyer takes the loss in value when Brady unretires.
Why do I favor that view? The hypo seems akin to risk of loss, the concept that applies when the goods are damaged or destroyed through no fault of either party. Generally [2-509(3)] risk of loss passes upon tender of delivery. Someone must take the loss. Art 2 lets the loss fall on the party who initially suffered it unless there is a good reason to shift it (such as fault or breach).
Consider also that the normal measure of damages for breach of warranty is the difference between the actual value of the goods and the value that the goods would have had at the time of acceptance; 2-714(2).
That seems to make the most sense. If the risk of Brady unretiring extends beyond delivery for some reasonable time, the half-million dollar price in seller’s hands is “tied up” until the expiration of that reasonable time. This seems inefficient and productive of litigation over what is a reasonable time. . . .
Your latent defect point is well taken but, I think, distinguishable from the football hypo. A latent defect exists at the time of delivery. The latent defect breaches the warranty then though no one knows that then.
Ultimately, it is a question of the parties’ intent subject to the usual rules for ascertaining that intent. I think that seller could warrant, in effect, that Brady will stay retired but I think clearer language is needed to do that or a custom that sellers of sports collectables routinely take back merchandise when events subsequent to the sale cause a decline in value.
If you have a case or treatise suggesting that a warranty covers events that occur after the sale, I’d be interested in looking at that.
Of course, I've got nothing, but perhaps some reader can help me out.
There are some uncertainties here. I'm not entirely sure who the seller is in this instance. Is it the fan who put the football up for auction or the auction house? The latter would be a merchant, and then under § 2-509(3), risk of loss transfers upon receipt of the goods. Mr. Brady announced his "unretirement" roughly 24 hours after the football was sold. It seems to me unlikely that the football was delivered to the buyer that quickly, in which case risk of loss would not have transferred to the buyer at the time that the fateful news became public. On the other hand, at that moment, the ball still was Mr. Brady's last touchdown football, and it will so remain until the first game of the new season at least.
March 31, 2022 in About this Blog, Commentary, Contract Profs, Current Affairs, In the News, Sports | Permalink | Comments (3)
Wednesday, March 30, 2022
Contracts with Navy Seals
I have twice previously posted about how contracts rights never come up when the Supreme Court considers First Amendment challenges in connection with a relationship governed by a contract. Drawing on Jamal Greene's How Rights Went Wrong , I have argued that one can invoke contractual rights as a consideration to which courts should give some weight without returning our constitutional jurisprudence to the Lochner era. These arguments has won me no adherents, but Professor Greene has not yet sent me a take-down notice, or even a request to stop invoking his scholarship in support of my outrageous theories, so I persist.
I made the first version of this argument in the context of the Court's decision in Fulton v. City of Philadelphia. In that post, I remarked on the oddity that the Court was forcing the City of Philadelphia to contract with Catholic Social Services (CSS), despite CSS's insistence on discriminating against same-sex married couples. CSS’s approach violates the city's policy with respect to itself and its contracting partners. I argued that CSS is entitled to its religious freedom, but it might not be entitled to a contractual relationship with the city.
I took this argument a step further in a post about Mahanoy Area School District v. B.L. That's the case in which a cheerleader was suspended from her junior varsity team when she posted a profane Snap expressing her frustration at not having made the varsity team. I have lots of reasons for thinking the First Amendment has little to say here, but one of them is that B.L. agreed when she became a cheerleader not to post any negative comments about her school or about cheerleading on social media. She then did both. The punishment might have been harsh, but absent a due-process violation (and B.L. got tons of process), that's a matter to be worked out by the local authorities and not by the Supreme court.
Enter Austin v. U.S. Navy Seals, a case in which the Navy asked the Supreme Court to lift a stay, imposed by a District Court and upheld upon appeal to the Fifth Circuit Court of Appeals, on its policy that permits the Navy to consider respondents’ vaccination status in making deployment, assignment, and other operational decisions. Until the last few terms, this case would have seemed to me a complete no-brainer. Under well-established doctrine, courts are extremely reluctant to interfere with operational decisions of the U.S. armed forces, even if those decisions burden First Amendment rights.
Austin and 34 others sought religious exemptions from the Navy's vaccination requirement. Both the District Court and the Fifth Circuit stayed the Navy's vaccination requirement pending a decision on the merits. The Supreme Court granted the Navy's request to lift the stay pending a resolution of the case on the merits in the Fifth Circuit. The majority opinion was unsigned. Justice Kavanaugh wrote a concurring opinion stating the obvious: Courts lack competence to second-guess the Navy's operational decisions, and even if those decision burden religious liberties, such rights are overridden by the state's compelling interest in providing national security. Justice Kavanaugh concludes:
I see no basis in this case for employing the judicial power in a manner that military commanders believe would impair the military of the United States as it defends the American people.
Justice Thomas dissented without opinion. Justice Alito wrote a dissent, joined by Justice Gorsuch. They point out that 4000 service members filed requests for religious exemptions. All were denied. Some were allegedly told that challenging the denials would hurt their careers and that the Navy had decided ex ante that there would be no exemptions from its vaccination policy. Justice Alito would make it the government's burden to show . . .
that mandatory vaccination is the least restrictive means of furthering the interest it asserts in light of the present nature of the pandemic, what is known about the spread of the virus and the effectiveness of the vaccines, prevalent practices, and the physical characteristics of Navy Seals and others in the Special Warfare community.
Justice Alito is concerned about the effect of the stay:
[T]he Court’s order allows the Navy to use respondents’ unvaccinated status as a reason for directing them to perform whatever duties or functions the Navy wants, including sitting alone in a room pushing paper or reading manuals for the duration of the appellate process.
I find this description of life in the military wholly unsurprising. Remember early in COVID when cruise ships became death traps? The threat that an outbreak of COVID aboard a naval vessel could infect hundreds of service members and jeopardize a mission is obviously a threat to military preparedness that merits a strong response. And the military cannot function if every one of its operational decisions is to be checked by any Article III judge with no military experience who thinks there is a less-restrictive means of achieving military ends.
But getting back to my contractual theme. I am working with a student, Jordan Kimball, mentioned in this previous post, who is active military. Jordan is writing her note about limitations on freedom of expression in the military. Her focus is on the procedural complications the military faces in communicating its directives relating to personal expression throughout a huge organization when those directives are constantly being updated in response to cultural trends. Jordan is one of my students who firmly believes that people ought to read contracts before entering into them, and she wrote in response to this case:
Read the back of the ticket before you sign the dotted line and understand that the military owns you for the entirety of your contract. Every new medication, doctor visit, tattoo, etc. is required to be reported to your chain of command and decisions are absolutely made on that basis.
In short, I think the dissenters in Austin are wrong for reasons having to do with the separation of powers and institutional competence. In addition, Justice Alito begins his opinion with outrage that people who have volunteered for hazardous service are being treated shabbily. Jordan's perspective is exactly the opposite. You volunteered for this. You signed a contract, and the possibility of shabby treatment was pretty much an express term of the deal.
March 30, 2022 in Books, Commentary, Recent Cases, Recent Scholarship | Permalink | Comments (3)
Tuesday, March 29, 2022
Tuesday Top Ten - Contracts & Commercial Law Downloads for March 29, 2022
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 28 Jan 2022 - 29 Mar 2022| Rank | Paper | Downloads |
|---|---|---|
| 1. | 1,696 | |
| 2. | 815 | |
| 3. | 730 | |
| 4. | 388 | |
| 5. | 354 | |
| 6. | 297 | |
| 7. | 290 | |
| 8. | 278 | |
| 9. | 194 | |
| 10. | 180 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 28 Jan 2022 - 29 Mar 2022| Rank | Paper | Downloads |
|---|---|---|
| 1. | 815 | |
| 2. | 354 | |
| 3. | 194 | |
| 4. | 139 | |
| 5. | 117 | |
| 6. | 114 | |
| 7. | 102 | |
| 8. | 96 | |
| 9. | 93 | |
| 10. | 90 |
March 29, 2022 in Recent Scholarship | Permalink
DePaul Seeks Visitor to Teach (inter alia) Contracts
DePaul University:
PROVOST: COLLEGE OF LAW: LAW ACADEMIC
Open Date
Mar 17, 2022
Description
DePaul University College of Law invites applications for a one-semester position as a visiting professor during the 2022-2023 academic year. Specific curricular needs include Contracts, Business Organizations, and Taxation. We welcome candidates with excellent academic credentials and strongly prefer those with a successful teaching record, including demonstrated experience teaching first-year law students. DePaul Law enthusiastically encourages applicants who would enrich the diversity of our academic community to apply.
Qualifications
All candidates must hold a J.D. or equivalent degree, with preference for candidates who have significant teaching experience.
Application Instructions
Required materials include a cover letter, curriculum vitae, and diverse learning environment statement. Please direct any questions about the position to Associate Dean for Academic Affairs Allison Brownell Tirres ([email protected]).
DePaul Law is committed to improving society by educating purpose-driven lawyers who will serve their clients, the legal profession, and the broader community in ways that enhance access to justice and promote equitable policies and processes. To learn more, please visit https://law.depaul.edu/Pages/default.aspx.
March 29, 2022 in Help Wanted, Law Schools | Permalink | Comments (0)
New Jersey Superior Court Determines that Notpetya Virus Was Not an Act of War
In June 2017, the Notpetya virus did $10 billion worth of damage to public and private entities around the world according to The Economist (I apologize for the pay-wall). Pharmaceuticals giant Merck & Co. (Merck) filed a claim for $1.4 billion in losses resulting from its loss of 40,000 computers infected by Notpetya.
Because all signs indicate that the virus came from Russia and targeted Ukraine, Merck's insurer tried to argue that the virus was an act of war and denied the claim based on the argument that its "all risks" policies excluded coverage for
Loss or damage caused by hostile or warlike action in time of peace or war. . . by any government or sovereign power . . . or by any authority maintaining or using military, naval or air forces . . . or by an agent of such government, power, authority or forces.
As a result, New Jersey Superior Court Judge Thomas J. Walsh had to determine whether this cyberattack amounted to an act of war. One expects there must have been a run on copies of the Talinn Manual at the local public library.
In Merck & Co. Inc. vs. Ace American Insurance Co. et al, Judge Walsh ruled that Notpetya was not an act of war for the purposes of the policy. The court's approach did not involve the Talinn manual. Rather, the court surveyed prior opinions and found no case in which a court had treated a cyberattack as an act of war. It also noted that the provision in the insurer's policy uses the same language that insurers had been using for decades. It had never been applied to cyberattacks in the past and so could not be reasonably interpreted to apply to them now.
Bloomberg Law has coverage here which suggests, as does The Economist, that the victory for insureds might be short-lived. Cyberattacks are taking their toll on insurers, who may now revamp their policies. Already, cyber-insurance rates are on the rise. The New Jersey court did not have to determine whether Notpetya was a cyberattack because it held that the policy at issue did not cover any cyberattacks. If insurers do try to disclaim liability for cyberattacks, there will be very difficult fact issues relating to attribution. Merck denied that Russia was the only possible culprit or, in the alternative, argued that virus might have been created by independent hackers unrelated to the Russian government. There could also be issues of transferred intent. In ordinary warfare, when one targets Ukraine, one rarely hits New Jersey, but that apparently is what happened here. Is such attenuated damage still an act of war?
Cyber-insurance is a rapidly evolving field. According to The Economist, Lloyd's Market Association has drafted four model clauses for excluding war coverage from cyber-insurance policies. But cyber warfare is probably just one small part of the threats that entities now face from computer viruses. Insurers are going to try to push the costs of such risks onto the insureds, and the latter are well advised to have their own system of self-defense to intercept potential cyberattacks.
H/t Michael Gibson, who shared his hard copy of The Economist with me.
March 29, 2022 in Current Affairs, In the News, Recent Cases, Web/Tech | Permalink | Comments (2)
Monday, March 28, 2022
Hiring: Animal Law at OCU Law
OKLAHOMA CITY UNIVERSITY SCHOOL OF LAW seeks a visiting faculty member to teach Animal Law and other subjects of interest to the candidate. The visitor will serve as a full-time faculty member for the 2022-23 academic year. Both one-semester and full-year visits may be possible. We expect successful candidates to teach in person. Both experienced and entry-level candidates will be considered.
Candidates must have a J.D., LL.M. or S.J.D. degree from an ABA-accredited law school and be licensed to practice law in one of the states or the District of Columbia.
Oklahoma City University School of Law is located in downtown Oklahoma City and is deeply engaged with the legal, business, and governmental communities. Oklahoma City has been named “American’s Most Livable Community” and is consistently ranked among the most affordable and prosperous cities, among the top cities for entrepreneurs and small businesses, and among the best-run large cities.
Oklahoma City University is an equal opportunity employer and affirms the values and goals of diversity. We strongly encourage applications from members of demographic groups historically underrepresented in the teaching and practice of law. For the university’s complete nondiscrimination policy, please see: https://www.okcu.edu/admin/hr/policies/general/nondiscrimination-policy-equity-resolution-process/nondiscrimination-policy/.
To apply, please submit a CV to Associate Dean Paula Dalley ([email protected]).
If you have questions before you brave an encounter with the imposing Paula Dalley, feel free to reach out to me, [email protected]
March 28, 2022 in Help Wanted, Law Schools | Permalink | Comments (0)
Sid DeLong on Incentive Contracts in the NFL
Express Conditions, Good Faith and Touchdowns: Incentive Contracts in the NFL
Sidney W. DeLong
Express conditions often work better than express promises to insure performance of a contract for services. A party can induce a counterparty to perform a difficult contract by using either a stick or a carrot or both. Sticks make the return performance a legally enforceable contractual duty; carrots make the return performance an express condition to the performer’s receipt of payment. A return performance is induced by both a stick and a carrot when substantial performance of a contract duty is also a condition precedent to payment for it, as in the typical construction contract.
Duties are not of much use when the return performance is difficult to ascertain or evaluate objectively. In such cases, express conditions based on performance outcomes may be the only practical way to ensure performance. Thus, promising a real estate agent a commission based on a home’s sales price is a better way to secure her optimal performance than threatening to sue her to if she fails to use her best efforts. Giving an attorney 25% of a tort recovery may be a better way of securing her best performance than paying her either a flat fee or an hourly rate.
Because of the practical difficulties of legal enforcement of the duties of good faith and best efforts. elegant design of services contracts requires the use of self-enforcing, conditional incentives to create circumstances in which each party profits most by performing as planned and neither is tempted to engage in self-seeking breach.
Which brings us to NFL incentive contracts. A football player’s performance of his contract can be extremely arduous and dangerous. His best efforts might be difficult for an owner to motivate once the player’s salary is fixed. And even if those efforts are given, it is often difficult for the owner to predict how well a player will perform over the course of a season, and equally difficult to value that performance in advance.
For these and other reasons, many NFL player contracts provide for both a base salary and an incentive bonus that is payable only if the player achieves certain statistical performance standards during the season. Generally, these standards are of two sorts: performance statistics such as numbers of yards gained or touchdowns scored and more general achievements such as making the All-Star team or winning in the postseason. You can find examples of such contracts here.
Incentive arrangements address many of the difficulties in valuing player contracts. A team that is unwilling to guess at how well an unproven player may perform may be unwilling to pay big money unless and until it receives the anticipated level of performance. The team also may want to give an established player on a fixed contract a stronger incentive to play well than an empty threat of being cut. But incentive contracts can raise the problem of opportunism.
Suppose a team has a contract with a running back under which he will make an additional $500,000 for the year if he scores 20 touchdowns. The running back begins by having a very good year and with two games left has scored 17 touchdowns. To his consternation, however, during the last two games, he is replaced in critical situations, during which four more running touchdowns are scored by his back-up. Of course, coaches have plenary power to call whatever plays they wish for whatever reasons they wish. Should they have the power to conduct the games so as to deny an incentive bonus under these circumstances?
The situation suggests a risk of bad faith. One of the most familiar forms of bad faith arises when a contract gives a party the discretion to set the level of its own performance. Contractual discretion can ensure critical flexibility, reducing the risk that circumstances can alter the risks that parties face at the time contracts are entered. Flexibility permits parties to adapt their performance to post-formation conditions without the deal blowing up or either party suffering a loss. Is the team’s exercise of discretion over the player’s achievement of his bonus an example of needed flexibility?
Several legal principles may come into conflict when incentive contracts make a player’s performance a condition precedent to the bonus payment. In some cases, courts have held that the non-occurrence of a condition precedent may be excused if it is prevented by the obligor. “It is a principle of fundamental justice that if a promisor is himself the cause of the failure of performance either of an obligation due him or of a condition upon which his own liability depends he cannot take advantage of the failure” Patterson v Pattberg 161 NE 428 (N.Y. Ct. App. N.Y. 1928). This would suggest that the player’s achievement of the bonus level of performance would be excused because the team prevented it from occurring, i.e. prevented the occurrence of the condition precedent to its duty to pay.
What if the team just terminated the player in order to prevent him from earning the bonus? Unless otherwise agreed by an express guarantee, NFL player contracts may be terminated, or the player may be “cut,” by the team at any time without cause, ending the player’s entitlement to any unpaid compensation that was not guaranteed, presumably including unearned bonuses that are not payable until the end of the year. But in other employment contexts, courts have consistently held that a business that terminates an at-will employee to prevent the collection of incentive-based pay that the employee would otherwise be due under the employment contract violates the duty of good faith and entitles the employee to recover the earned pay. Fortune v. National Cash Register Co., 364 NE 2nd 1251 (Mass. 1977); See. Tymshare Inc. v Covell, 727 F.2d 1145 (D.C. Cir. 1984) (Scalia, J).
Under this reasoning, if a team wrongfully prevents a player from reaching a statistical incentive level of performance, the condition on the payment of the bonus might be forgiven. But football coaches have, and must have, complete discretion to manage a game, including decisions on whom to play. (PeeWee League coaches, apparently answerable to angry parents, are another matter.) How can a player prove that an coach’s refusal to let him play was made in bad faith? And what exactly would be a bad faith reason? Even a decision to bench a star player on the last regular season game might make sense if, for example, the team wanted to avoid a risk of injury to the player that would affect its post-season success or its ability to trade the player to another team. In such a case, the team needs for him to be healthy more than it needs for him to score more touchdowns. Such a decision is reasonably related to its success and should not be grounds for a remedy.
All these possibilities suggest that a lawsuit seeking to recover an unpaid bonus under the hypothetical circumstances has a slim chance of success. But it remains obvious to lawyers and fans alike that giving a team unreviewable discretion to manipulate a player’s playing time in order to avoid paying him a bonus puts players at the mercy of the owners. A particularly cynical strain of contract theory will reason that this risk is so well-known to the players as to make the team’s promise illusory: “We will pay you a bonus for meeting our standard . . . if we want to. Now win one for the Gipper.“
March 28, 2022 in Commentary, Sports, True Contracts | Permalink | Comments (0)
Friday, March 25, 2022
Paul Horwitz on the Dwindling Prospects for Compromise
Over on Prawfsblawg, Paul Horwitz (right) has a long and insightful rumination on some more contractual fall-out from the Russian invasion of Ukraine, a topic we have already touched on here and here. His post was inspired by the decision of the Vancouver Recital Society (VRS) to cancel a concert by Russian pianist Alexander Malofeev (below left). VRS pursued Mr. Malofeev for six years, but then said that it could not support Russian artists unless they denounced the war.
Perhaps in response, or sua sponte, Mr. Malofeev wrote on Facebook,
The truth is that every Russian will feel guilty for decades because of the terrible and bloody decision that none of us could influence and predict.
Not good enough. In a response that it described as "complex and nuanced," VRS explained why it was nonetheless cancelling Mr. Malofeev's performance.
Professor Horwitz makes great points about how decisions like VRS's are exceptional. In most situations, we swallow our moral scruples in order to get on with life. It is obviously silly to demand that Mr. Malofeev denounce the war and then cancel the concert anyway. It is obviously hypocritical to pretend that nobody knew that Putin was a war-mongering tyrant before February 2022. But for our purposes, his most interesting point is that decisions like VRS's are business decisions, and institutions caught in the battles over "cancel culture" make such decisions all the time. First Amendment principles might come into play, but how one wields the rhetorical force of constitutional rights might be overdetermined by basic math: will our bottom line look better or worse if we go forward with this event?
And so it has ever been. The world is tainted. Unless, as Professor Horwitz put it, you are a saint or a recluse, we all weigh plusses and minuses and make compromises or simply choose not to inform ourselves of the full impact of our interactions with international markets. While "cancel culture" makes surface waves, we swim in a sea of compromise culture. Most of us have to work somewhere; we have to buy our goods somewhere, and everything is ultimately inter-connected.
Okay, so Professor Horwitz covered the hard stuff, the deep stuff. I want to know the surface stuff: Did VRS have a contractual right to cancel Mr. Malofeev's performance unilaterally. If not, wouldn't VRS have to pay Mr. Malofeev his fee, and doesn't that figure into the economic calculations relevant to the decision to cancel the concert? Could there not also be downstream consequences beyond the decision to cancel this one concert? After all, Russia has produced a great many talented musicians. So has China. So has Israel. The list goes on. No state is free from moral taint. Must every artist now pin a Tweet or a post on Facebook denouncing their home state's latest atrocities? If doing so might be deemed inadequate by the concernt promoter, aren't artists in high demand like Mr. Malofeev going to demand assurances of payment in case of cancellation by the concert promoter?
March 25, 2022 in Commentary, Current Affairs, In the News, Music, Weblogs | Permalink | Comments (1)
Thursday, March 24, 2022
Trump Campaign Ordered to Pay $300,000 in Arbitration to Enforce Its Non-Disclosure Agreement
For the sixth time, we are reporting on the Trump campaign/organization/administration's failed attempts to enforce its non-disclosure agreements (NDAs). For past posts, see this one. This time, the wound it even more self-inflicted than usual.
As reported in The New York Times, Alva Johnson was one of the few Black women who worked for the 2016 Trump campaign. She sued in 2019, alleging that she "felt violated" when Trump had kissed her against her will at a campaign stop in 2016. A District Court judge viewed a video of the incident and found that there was no evidence that the kiss was unwanted. Her claim was dismissed in June 2019.
The Trump campaign then brought an arbitration proceeding in September 2019, alleging that Ms. Johnson had violated her NDA by disclosing confidential information and making disparaging comments about Mr. Trump. The arbiter, a retired federal judge, agreed with the District Court about Ms. Johnson's original lawsuit:
No objective person could view the video of the encounter as anything even remotely supporting an accusation of battery, kissed, assaulted or anything else similar. The federal judge saw it, and the arbitrator sees it.
Nonetheless, the arbiter dismissed the Trump campaign's arbitration proceeding last December, agreeing with other findings regarding the NDA, and calling it "vague and unenforceable." Ms. Johnson sought to recover her legal fees, and last week, the arbiter awarded he $303,000 to cover fees and expenses. Mr. Trump could have brought a malicious prosecution or defamation claim in an appropriate forum, the arbiter admonished. Instead, he chose to seek enforcement of the NDA, which other adjudicators had already found to be unconstitutional.
March 24, 2022 in Current Affairs, In the News, Recent Cases | Permalink | Comments (0)
Wednesday, March 23, 2022
A Seals Case from Delaware
In Lehman Brothers Holdings, Inc. v. Kee, decided last December in the Delaware Supreme Court, Lehman lent $6 million in 2005 to borrower, Sweetwater Point, LLC (Sweetwater), to help pay for the $ 8 million purchase of two parcels of land. There were signs that the State owned at least a part of the property, but Sweetwater went ahead with the deal, thinking the government stake was de minimis. In 2007, the State asserted its property rights and indicated its intention to build a highway through the property. Protracted litigation ensued, and the Court of Chancery ruled in 2017 that the State had a superior claim to title.
The following year, Lehman and Sweetwater sued seeking rescission of the 2005 property transaction. Their legal claims, sounding in mutual mistake and unjust enrichment would have been interesting to talk about, but the court never reached them because it ruled that all of the claims were barred under the relevant three-year statute of limitations. At that point Lehman and Sweetwater brought out the big guns, claiming that the sale agreements were contracts under seal subject to a 20-year statute of limitations.
The basis for Lehman's and Sweetwater's claim is as follows:
- a testimonium clause before the signature line states, “IN WITNESS WHEREOF, the parties hereto have hereupon set their hands and seals the day and year first above written”; and
- typewritten next to each signature is the symbol “(s),” which Sweetwater claims “signif[ies] a seal.”
The Superior Court found these clauses insufficient to create a contract under seal "because the parties did not include the word 'seal' or a 'symbolic "seal"’ on the signature line." There were in fact no seals attached to the document and, the Superior Court noted, "(s)" does not signify a seal. The Supreme Court agreed.
Many states have adopted statutes clarifying what counts as a seal. Delaware, alas, is not such a state. Rather it has adopted a judicially-created bright-line test:
Delaware case law has held that a contract was under seal where it contained both a testimonium clause and the word “SEAL” printed next to the signature line.
In this case, the word “SEAL” did not appear next to the individual’s signature line, and so the parties had not signaled their intention to sign under seal. The "(s)" could mean many things.
If the parties intended to transform a three-year statute of limitations into a twenty-year statute of limitations, they had to do so more clearly. That seems right to me, but my instincts go in two directions here. First, it seems absurd that a statute should still be on the books that extends the statute of limitations so extravagantly based on obscure, outdated ceremonies. An actual seal might serve a purpose, but I have a hard time seeing how having the parties say abacadabra and suddenly making an unsealed document a document signed under seal serves any purpose. That said, if it does serve a purpose, then that purpose should not be thwarted because they said "shitbroleeth" when they meant to say "shibboleth." Even though we are dealing with a formality, courts can still undertake the ordinary inquiry into contractual meaning by exploring the parties' intentions. These are sophisticated parties who used a testimonium clause. Why did they do that? It would still be plaintiffs' burden to show that both parties intended to sign under seal. If they cannot do so because we are talking about events that took place 17 years ago, well, that's just a reminder of why statutes of limitations exist.
Having decided the seal issue, the Supreme Court then went on to find that Lehman's and Sweetwater's claims were all barred under the applicable three-year statute of limitations.
H/T Associate Dean Paula Dalley!
March 23, 2022 in Recent Cases | Permalink | Comments (1)
Tuesday, March 22, 2022
Tuesday Top Ten - Contracts & Commercial Law Downloads for March 22, 2022
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 21 Jan 2022 - 22 Mar 2022| Rank | Paper | Downloads |
|---|---|---|
| 1. | 801 | |
| 2. | 699 | |
| 3. | 378 | |
| 4. | 348 | |
| 5. | 310 | |
| 6. | 278 | |
| 7. | 274 | |
| 8. | 268 | |
| 9. | 184 | |
| 10. | 177 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 21 Jan 2022 - 22 Mar 2022| Rank | Paper | Downloads |
|---|---|---|
| 1. | 801 | |
| 2. | 348 | |
| 3. | 310 | |
| 4. | 184 | |
| 5. | 132 | |
| 6. | 132 | |
| 7. | 109 | |
| 8. | 106 | |
| 9. | 98 | |
| 10. | 88 |
March 22, 2022 | Permalink
Forum Selection, Non-Competes, Non-Solicitation, Oh My!
In 2017, Jonathan Waber entered into an employment contract with Howmedica Osteonics Corp. (HOC), the parent corporation of his employer, Stryker Corporation (Stryker). The contract included a one-year non-compete and non-solicitation clause and choice of law and forum-selection clauses requiring adjudication of disputes in New Jersey. Waber is a California resident, and he worked in Palm Springs. Nine months after starting work for Stryker, Waber left to work for Depuy Synthes Sales, Inc. (DePuy). When Stryker threatened legal action, Waber availed himself of California Labor Code § 925, which permits a California employee to avoid forum-selection and choice-of-law clauses that would require adjudication of disputes outside of California.
Depuy and Waber then filed suit in a federal district court in Central California seeking a declaration that the forum-selection and choice-of-law clauses were void under California law and that the non-compete and non-solicitation provisions violated California Business and Professions Code § 16600. Stryker filed a motion to transfer to the District Court of New Jersey under 28 U.S.C. § 1404(a).
The District Court found that the forum-selection clause could not be enforced under California law. It then weighed the appropriate factors under §1404(a) and denied Stryker's motion to transfer.
After Depuy amended its complaint to add HOC as a defendant, the District Court granted partial summary judgment in favor of DePuy and Waber, holding the forum-selection, non-compete and non-solicitation clauses in Waber’s contract void and unenforceable under California law.
On appeal before the Ninth Circuit, HOC argued that the court must transfer the cases to New Jersey under Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (1988) and Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas, 571 U.S. 49(2013). In an argument reminiscent of those deployed to defeat state statutory challenges to arbitration clauses, HOC asserted that only general contracts law, not state statutes directed at forum-selection clauses, can render such clauses invalid. In this case, however, courts have tended to find that state law governs the enforceability of forum-selection clauses, just as it would any other contractual provision.
In Depuy Synthes Sales v. Howmedica Osteonics Corp., a Ninth Circuit panel unanimously found that HOC read Stewart and Atlantic Marine too broadly. Those cases stand for the proposition that, given a valid forum-selection clause, federal law governs a court's decision on a motion to transfer under § 1404(a). Here, however, where there is no valid forum-selection, state law applies and informs the § 1404(a) analysis. Stewart assumed a valid forum-selection clause and never considered the effects of statutes like California's § 925. The District Court undertook the proper § 1404(a) analysis in this case, and so the Ninth Circuit found no grounds for disturbing its grant of summary judgment to the plaintiffs.
H/T to Timothy Murray
March 22, 2022 in Labor Contracts, Recent Cases | Permalink | Comments (1)
Monday, March 21, 2022
Teaching Assistants: Reagan Seidler on the Law of Haunted Houses
Haunted houses and stigmatized properties generally possess a striking power of fascination. Friend of the blog Eric Goldman recently shared with me Brooke Jezek's TikTok channel, "Is the Real Estate Worth the Hate," in which she bounces her infant in her lap while commenting on houses that are up for sale. What the houses have in common is that horrific crimes occurred in them. She screws up her face as if doing the math to determine whether the asking price has been sufficiently discounted due to the crime. Not my cuppa. On the other hand, realtors seek to gain notoriety by advertising that their properties are certifiably "not haunted."
It's not clear that the realtors understand their market. There is some evidence that haunted houses sell for a premium. In discussing the mother of all haunted house cases, Stambovsky v. Ackley, that same Eric Goldman noted that the case's notoriety heightened interest in the house. House Beautiful Magazine has a podcast, Dark House, that tells stories of houses with some skeletons in their closets, or something similar. Overall however, the evidence suggests that stigmatization has a negative effect on the sale price of homes.
In light of this information, should one disclose the "fact" that a house is haunted or otherwise stigmatized? What does the law require? According to Reagan Seidler's new article, The Law Of Haunted Houses, it depends. The article explores sellers' disclosure obligations in light of common law, statutes, and the patent or latent nature of the defect. Unsurprisingly, the answers vary by jurisdiction.
The article begins with an account of Wang v. Shao, a dispute over the property pictured above. The 9000 square foot property in Vancouver's Shaughnessy neighborhood sold for over $6 million in 2009, with a $300,000 deposit. The buyer, Ms. Shao, soon discovered that the son-in-law of the seller, Ms. Wang, had been gunned down in front of the house in 2007, allegedly in connection with his membership in a crime family. Ms Shao then repudiated the deal, and the house was sold to a better-informed buyer for $5.5 million. Ms. Wang sued to keep the deposit and for damages sufficient to make up the difference in the two sale prices. Ms. Shao counterclaimed, alleging that Ms. Wang had a duty to disclose the murder. Did Ms. Wang have such a duty?
The doctrine of caveat emptor provides the background rule in this realm, but there are significant exceptions. First, sellers may not actively conceal material defects in the property. Second, even if there is no duty to disclose, there is a duty to correct statements of fact that might contain misrepresentations of material facts. For example, you may state that the property is free of bug infestations. If you later learn that murder hornets (pictured, left) have taken up residence in the eaves, that's something you need to disclose.
Sellers have no duty to disclose patent defects easily discoverable by the buyer. Outside of strong caveat emptor jurisdictions such as New York, sellers must disclose at least some latent defects. Some Canadian jurisdictions and California seem to require disclosure of all latent defects, but the more common view is that one has to disclose only latent defects that render the home dangerous or unfit for habitation.
There is great statutory variation across jurisdictions. Quebec has a statute relevant to stigmatized properties. It requires disclosure of violent deaths and suicide. Sellers do not need to disclose, e.g., deaths by accidental overdose that occurred in the home. In the U.S., of 31 states that have statutes relating to home sale disclosures, 28 do not require disclosure of deaths that occurred in the home. Lizzie Borden's former home (right) is now a bed and breakfast! Alaska, California, and South Dakota are the exceptions, in case you were planning to open a bed and breakfast in one of those states and wanted to know if you had to certify that your house was murder-free.
The first difficulty with stigmatized houses is that the defect may be latent or patent, depending on the notoriety of the resident ghost or crime. The fact that most states do not require disclosure suggests a second difficulty -- how do we know when the stigma is material? I'm not moving in to Jeffrey Dahmer's house until they replace the freezer, but I would not be dissuaded from buying a newly-renovated house Victorian house in which the original owner, a melancholy local physician, had killed himself with an overdose of laudanum upon reading a translation of The Sorrows of Young Werther.
In Wang v. Shao, the trial court found that the stigma attached to the house was not a defect "in respect of the property or premises" that had to be disclosed. Even if was a defect, it was discovered through an ordinary Internet search and therefore was patent, not latent. The British Columbia Court of Appeal found no misrepresentation when Ms. Wang, when asked why she was moving, said that she wanted to be closer to her granddaughter's new school. She was not legally required to add, "We had to move after her father was killed allegedly in a gang-related shooting right in front of the house." If the buyers had thought to ask about violent deaths in the house or on the property, Canadian law might require an honest answer.
March 21, 2022 in Famous Cases, Recent Cases, Recent Scholarship | Permalink | Comments (2)
Friday, March 18, 2022
Weekend Frivolity: A Whole New Word le!
But first, a secular prayer:
H/t Wendy Hinton Vaughan, who may or may not play Wordle
March 18, 2022 in Miscellaneous | Permalink | Comments (1)
Teaching Assistants: The Battle of the Contracts Law Titans over the "Eisenberg Uncertainty Principle"
This is the eighth in a series of posts on Victor Goldberg's work. Today's post is about Chapter 11 of his book, Rethinking Contract Law and Contract Design (RCL). Links to related posts follow this one.
In 2009, Mel Eisenberg published Impossibility, Impracticability, and Frustration, in which he made a sophisticated, nuanced, and carefully calibrated argument about when performance should be excused and what damages should be available in "unexpected circumstances cases." Professor Goldberg thought Professor Eisenberg got it wrong, and Chapter 11 of RCL seems to be a reprint of his critique with a few additions. You can read the original version here. In this post, I will first lay out Professor Goldberg's criticisms and then summarize Professor Eisenberg's response to those criticisms. That seems prudent, as Professor Eisenberg thought that Professor Goldberg had misstated his argument.
According to Professor Goldberg, Professor Eisenberg proposes a "beefed-up" excuse doctrine through two tests relating to remote risks: the shared-assumption test, which permits excuse when the parties shared a tacit assumption about some low-probability event, and the bounded-risk test, which allows for excuse when a change in prices leaves a promisor with a loss significantly greater than could have ben expected (RCL, 137). Professor Goldberg's assessment is that the shared-assumption test would be hard to apply and that the bounded-risk test is fundamentally wrong (RCL, 138).
The analysis of the shared-assumption test begins with an illuminating discussion of the insurance market relevant to the classic frustration-of-purpose case, Krell v. Henry. Krell sought to recover £50 owed under a contract to rent rooms with a view of the parade commemorating the coronation of Edward VII. Due to the King's illness, the coronation did not take place. The court found that the non-occurrence of the coronation parade frustrated Henry's purpose in leasing the flat and thus excused him from his contractual obligation to pay.
In Professor Eisenberg's language, the coronation parade was a shared tacit assumption, the non-occurrence of which excused performance. But Professor Goldberg points out (quite wittily) that "[t]he likelihood that a 60-year-old, grossly overweight, heavy smoker, who had been the target of at least one assassination attempt might be unavailable was not trivial." In fact, there was an active insurance market related to the coronation, and Lloyds was quoting odds of 300-1 against cancellation. That cancellation was not an event that could not have been foreseen and against which the parties could not have protected themselves (RCL, 139-43).
Professor Goldberg next discusses Taylor v. Caldwell, the first English case to recognize the doctrine of impossibility, a doctrine expanded in Krell v. Henry. There is not much to be said here. Taylor establishes a default rule for when a venue is destroyed and performance is therefore impossible. Default rules are not that important, because parties routinely contract around them. Today, parties allocate risks with express contractual language. We learn, for example, that Paula Abdul's contract provides that she gets paid whether or not she performs, so long as she is not at fault. Rod Stewart's contract was a bit more involved, leading to a decade of litigation. The point is not that unexpected events should never excuse performance; rather, Professor Goldberg maintains that the cases on which Professor Eisenberg relies would fail under his test, because the events that occurred were not unforeseen, and thus Professor Eisenberg's theory cannot provide the basis for the default rule (RCL, 144-45).
Professor Goldberg's attack on the bounded-risk test is multi-pronged, but in the end, he just doesn't think Professor Eisenberg's approach actually provides much guidance that would help determine actual cases. According to Professor Goldberg, Professor Eisenberg thinks that the bounded-risk test would apply in cases of market-wide price increases (but see Professor Eisenberg's response, summarized below), but Professor Goldberg points out that excuses tend to work best in litigated cases involving fact-specific events, like fires, burst pipes, etc. The only case that fits the market-wide paradigm is Alcoa v. Essex, in which the court imposed a floor under the seller's profits, but Professor Eisenberg does not rely on that case perhaps, Professor Goldberg suggests, "because he feared that his analysis would be tainted if it were associated with such a bad decision." Here, as in most cases, Professor Goldberg prefers negotiated solutions to Professor Eisenberg's proposal, which he views as setting a cap on prices established by courts in response to sudden and dramatic price increases. The reality is that parties do not choose gross inequity clauses that excuse performance in case of dramatic price changes. If the parties disfavor such a solution, courts should not impose it on them (RCL, 146-53).
In his response, Professor Eisenberg clarifies that the shared assumption test is not about the parties' inability to foresee remote risks. The could see the risks, but in actuality they don't -- or at least, they do not address those risks in the contract. His test does not turn on whether the parties should have foreseen the risk; it turns on their tacit shared assumptions, regardless of foreseeability: "But reasonable foreseeability normally should be only an index, not the test. The test should be what the parties tacitly assumed (Eisenberg 2009, 216). From this perspective, Krell v. Henry was not wrongly decided, as Professor Goldberg argues. Yes, the cancellation of the coronation parade was foreseeable, but Krell and Henry did not foresee it.
Professor Eisenberg proposes a default rule; Professor Goldberg does not. He thinks it matters little, given that parties can contract around default rules. Professor Eisenberg proclaims, "you can't fight something with nothing" (Eisenberg 2010, 390). That said, Professor Goldberg also notes the general tendency of default rules to be sticky. Courts are wary of parties' attempts to evade them, and so a bad default rule is to be avoided. Professor Goldberg may be justified in fighting something with nothing if he prefers a return to more traditional approaches.
As to the bounded-risk test, Professor Eisenberg admits to one misstatement of his test. Professor Goldberg seized upon that misstatement to highlight the theory's erroneousness. But the bounded-risk test is not limited to instances of market-wide cost changes. It applies to both seller-specific and market-wide cost increases, so long as they are dramatic (Eisenberg 2010, 390-91). Professor Eisenberg then responds to Professor Goldberg's argument that the bounded-risk test should not apply to market-wide increases in cost. The hypo author is the master of the hypo, so long as his hypothetical actors do not act unreasonably (Eisenberg 2010, 391-93).
While Professor Eisenberg's response is mostly dedicated to demonstrating the extent to which Professor Goldberg has misstated his thesis, in his conclusion, Professor Eisenberg clarifies the two authors' substantive differences and the stakes. Professor Eisenberg's purpose was to provide a theoretical grounding for our current approach to excuse doctrine. In resisting that approach, Professor Eisenberg argues, Professor Goldberg seeks to return contracts doctrine to its pre-Restatement classical period (Eisenberg 2010, 395).
A post on Chapters 8-10 (consequential damages) is here.
A post on Chapter 7 (liquidated damages) is here.
A post on Chapters 5 & 6 (speculative damages) is here.
A post on Chapter 4 (lost-volume damages) is here.
A post on Chapter 3 (timing for assessing damages) is here.
A post on Chapter 2 (the flexibility/reliance trade-off) is here.
The introductory post is here.
March 18, 2022 in Books, Contract Profs, Famous Cases, Recent Scholarship | Permalink | Comments (2)
Thursday, March 17, 2022
Contracts Fall-Out From the War: The Case of RT America
As we noted last week, many novel contracts issues will arise in connection with the Russian invasion of Ukraine. Over the weekend, the New York Times reported on the demise of RT-America. From the perspective of this blog, the Times buried the lede. Only in the final section of the article does the Times make clear that it was not the U.S. war machine or rivals within the mainstream media that did in RT America. It was contracts:
DirecTV and Dish Network had taken RT America off their distribution networks. Ora TV announced on March 1 that it would suspend production of content for RT America. Companies were distancing themselves from the Russian government-backed media company in protest of the invasion of Ukraine.
The Times story focused on how working at RT America felt like working at any other U.S. cable news station. In fact, some of RT America's talent had come from other networks. For example, Rick Sanchez, fired from CNN in 2010 after an anti-Semitic outburst for which he apologized, landed at RT America. America is a country that believes in second chances, and so is RT America.
But Sanchez does not seem to have been representative of RT America's work force as a whole. The station was a great place for people new to the industry to launch their careers. The Times article gives the impression that the station was pretty hands-off when it came to editorial content, with the exception of Russia's intervention in Ukraine in 2014. In that context, the station required that Russian troops be referred to a peacekeepers and the term "invasion' was not permitted. But for the most part, the station did not have to censor its employees because it attracted journalists (or whatever) who wanted to do reporting critical of the United States. A lot of people with critical angles on U.S. policy and culture landed at RT. They could further their own political agendas without any encouragement from foreign handlers because their critical perspectives meshed nicely with the message those foreign handlers wanted to promote. And at least some RT America employees were also critical of the Russian invasion of Ukraine.
But none of that has much to do with contracts.
Barrons provides a more direct account of what happened. Two weeks ago, DirecTV announced that it was "accelerating this year’s contract expiration timeline and will no longer offer [RT's] programming effective immediately.” RT America's contract with DirecTV was due to expire this summer. The article does not reference contractual provisions permitting such an acceleration. Other media companies and Internet companies: Google, Facebook, YouTube, Instagram, Roku, and Microsoft also removed RT from their platforms. Dish and Sling TV followed suit a few days later, as reported here.
I wonder whether RT America had to sign up for these platforms through a contract of adhesion similar to those that ordinary consumers confront. Were RT America's agreements with all of these platforms subject to the platform's unilateral right to change terms or terminate service in the platforms' sole discretion? If not, World War III might have a new front: the contracts battle. Look to this space for unique coverage of that theater of war.
March 17, 2022 in Current Affairs, In the News, Television | Permalink | Comments (0)
Wednesday, March 16, 2022
The Delaware Supreme Court on Agreements to Agree
In Cox Communications, Inc. v. T-Mobile, US, Inc., the Delaware Supreme Court construed one provision in a settlement agreement between Cox Communications (Cox) and T-Mobile's predecessor in interest, Sprint Corporation (Sprint). In § 9(e) of that agreement, Cox represented that, before it offered wireless mobile services to its customers, it would enter into an exclusive provider agreement with Sprint “on terms to be mutually agreed upon between the parties for an initial period of 36 months[.]” Notwithstanding that provision, Cox entered into an agreement with Verizon, and T-Mobile alleged breach of the settlement agreement.
Cox sued seeking a declaratory judgment that Section 9(e) is an unenforceable agreement to agree. It raised two arguments that tickle my pedagogical itches. First, it argued that § 9(e) is a "Type II" agreement that required only that it negotiate in good faith, which it claims it did. Second, it claimed that its agreement was with Sprint, not T-Mobile, and it never agreed to Sprint's assignment of its rights under § 9(e). What larks!
T-Mobile counterclaimed, alleging breach of contract and contending that, having failed to negotiate an agreement pursuant to § 9(e), Cox was precluded from entering the wireless mobile market at all. The Chancery Court sided with T-Mobile. The Delaware Supreme reversed. Although Cox implicitly consented to the assignment by not raising its objections in a timely manner (rats!), this is indeed a Type II agreement, and the Court remanded the case to Chancery to determine whether the parties had negotiated in good faith.
There were negotiations between the parties. Cox was choosing between 3 1/2 year swing dance with Verizon and a 4 1/2 year waltz with T-Mobile. The fancy get-ups associated with the waltz made T-Mobile's offer $90 million more costly to Cox, and it went with Verizon. T-Mobile attempted a last ditch counter-proposal, including a three-year term. "We can swing too!" in short. Cox went home with the partner it came in with.
Finding that § 9(e) left material terms open, the Court found it to be a prototypical Type II agreement to agree that required negotiation in good faith. The Court thus rejected the Chancery Court's finding that § 9(e) entailed a promise not to enter into the wireless mobile market except through T-Mobile. The Chancery Court had found that § 9(e) must entail more than a duty to negotiate in good faith, as it constituted consideration for Sprint's agreement to drop a legal claim against Cox. But a promise to negotiate in good faith is not nothing, and so it too can serve as consideration.
Two Justices dissented. While they found plausible the Supreme Court's reading of § 9(e) as entailing only one promise, they also found plausible the Chancery Court's reading of the clause as entailing two promises. The clause is, at best, ambiguous. Moreover, the latter reading found more support in the evidentiary record. The dissenters would have found the clause ambiguous and remanded to the Chancery Court for a finding, based on extrinsic evidence, of the parties' intentions regarding § 9(e).
H/t John Wladis
March 16, 2022 in Recent Cases, Web/Tech | Permalink | Comments (3)
Tuesday, March 15, 2022
Tuesday Top Ten - Contracts & Commercial Law Downloads for March 15, 2022
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 14 Jan 2022 - 15 Mar 2022| Rank | Paper | Downloads |
|---|---|---|
| 1. | 783 | |
| 2. | 663 | |
| 3. | 363 | |
| 4. | 335 | |
| 5. | 310 | |
| 6. | 272 | |
| 7. | 269 | |
| 8. | 196 | |
| 9. | 173 | |
| 10. | 170 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 14 Jan 2022 - 15 Mar 2022| Rank | Paper | Downloads |
|---|---|---|
| 1. | 783 | |
| 2. | 335 | |
| 3. | 310 | |
| 4. | 170 | |
| 5. | 131 | |
| 6. | 117 | |
| 7. | 104 | |
| 8. | 96 | |
| 9. | 86 | |
| 10. | 85 |
March 15, 2022 in Recent Scholarship | Permalink
Sid DeLong and the Reasonable Man
L’Homme Raisonnable: C’est Moi!
Sidney W. DeLong
When a judge is asked to interpret the meaning of a term in a contract, she is not expected to answer simply, “It means X” or, perhaps more modestly, “To me, it means X.” That would not be deciding the case under the rule of law, which prohibits, as Judge Traynor said in Pacific Gas and Electric Co. v G.W. Thomas Drayage & Rigging Co. 442 P.2d 641 (Cal. 1968) the court from imposing “the judge’s own linguistic education and experience.”
Instead, the judge is required to interpret the contract by using the Objective Theory of Contract Interpretation. The judge first considers extrinsic evidence of any relevant facts that were apparent to both parties at the time the contract was made. Then the judge decides what meaning the contract language would have to a “reasonable person” in the position of the parties who was aware of those facts. The court ignores extrinsic evidence of the parties’ actual or “subjective” understanding or belief about the meaning of the contract. (Some judges might consider subjective understandings if both parties admit that they held them.)
But how does a judge who follows this procedure decide how such a “reasonable person,” informed about the relevant context, would have understood the contract language? Must the judge have in mind an operational concept of reasoning? Are the cognitive characteristics of a reasonable person learned in law school or from treatises? Are these specifications a matter of public knowledge? If the answer to these questions is “no” then how is the objective theory of contract interpretation even theoretically possible?
A hint might be given by philosophy. In analytic philosophy, Moore's Paradox arises when a person says, “A is true but I do not believe that A is true.” Moore noted that even though this statement is bizarre, it is nevertheless logically consistent, it is not self-contradictory, and it is possible that both of its disjunctive elements may in fact be true. But it is also impossible for us to imagine a person making such a statement and meaning it.
A speech act theorist might argue that Moore’s statement is self-contradictory because to assert that something is true is to assert by implication that one believes it to be true. But this argument begs the question by ignoring the second part of the sentence, which expressly refutes the implication.
Moore noted the further curious fact that very similar statements are not paradoxical at all. For example, it is not absurd to assert both the propositions of Moore’s sentence as of a time other than the present (“A was true but I did not believe that it was true.”) or about a different person (“He said that A was true but he did not believe A was true.”)
Now consider the application of Moore's Paradox to the judge who announces an interpretation under the objective theory of contract. As noted above, she cannot simply say, “The clause means X” because that would not be using the reasonable person test of the objective theory. She must instead say, “X is the meaning the contract language would have to a reasonable person in the position of the parties at the time the contract was made.”
“But how do you know what a reasonable person would interpret the language to mean in those circumstances?” the losing litigant might ask.
“Because that is what the term would mean to me.”
How can she give any other answer? She would commit Moore's Paradox if she said:
“I find that a reasonable person would understand this term to mean X even though I understand it to mean Y.”
The heuristic construct of the reasonable person must always be the judge herself. But the Reasonable Person to which the judge appeals is not in any sense “objective.” She is just the judge herself, referred to in the Third Person.
March 15, 2022 in Commentary, Famous Cases | Permalink | Comments (6)
Monday, March 14, 2022
A New Deflategate
Tom Brady's career will always be defined for some by the original deflategate, involving allegations that Mr. Brady (seen at right) had ordered that footballs be slightly under-inflated, making them (I guess) a bit easier to catch. It's great that the scandal has a "gate" name. The original "gate" scandal, Watergate, involved a Republican incumbent burglarizing the democratic national committee, seeking advantage in the upcoming elections. In the ensuing election, that incumbent won re-election by a margin of 520 electoral votes to 17. I suspect he would have won even if he hadn't cheated. That's why people say of Mr. Brady's 45-7 victory over the Colts in the deflategate game, "He's a successful quarterback, alright, but he's no Richard Nixon."
The second coming of deflategate involves the sale at auction of the football that Mr. Brady allegedly threw to Tampa Bay wide receiver Mike Evans for the latest of his touchdown passes. The football was of special value to some because, when Mr. Brady announced that he planned to retire, it became his "last touchdown" football, and it sold for $518,000. Shortly after the sale, Mr. Brady announced that he would not be retiring, deflating the value of the football considerably according to news reports.
One of my students shared this story with me, wondering if the buyer could seek rescission based on mutual mistake. My instincts are as follows, and I welcome alternative takes.
On the one hand, one could argue that the parties both believed that Tom Brady had retired and that the football in question had indeed played a part in his last touchdown. That seems like a basic assumption about a fact that had a material effect on the sale price for the item. Touchdown buyer! On the other hand, pro athletes do come out of retirement. My student pointed out that Mr. Brady had a fine season last year, and so the possibility that he might return to the sport seemed possible. Perhaps the mistake was not as to a fact but as to judgment. Touchdown seller!
Both parties likely knew that there was some possibility that Mr. Brady would return to football. Perhaps the sale price even reflected that uncertainty. But the same auction house (Lelands) sold the football involved in Mr Brady's first touchdown last year for just under $430,000. Moreover, Lelands advertised the sale as follows:
If there is any item in the field of sports collectibles that needs no embellishment, it is this historic piece: the final touchdown ball of Tom Brady’s career.
That statement seems to me to put the burden of the risk of mistake squarely on the seller, with a little help from the doctrine of equitable estoppel. The buyer was entitled to rely on the seller's representations. Touchdown buyer!
But the inquiry should not end there. We would have to look at the contractual language relating to the sale. Auction houses must be aware of the danger of counterfeits or mistakes. In this case, they must be aware of the possibility that a professional athlete will come out of retirement. Does the auction house disclaim liability associated with such risks? If so, touchdown seller!
Such disclaimers might be effective as an allocation of risk, but I think the buyer could still have an express warranty claim, as such warranties are very difficult to disclaim. Lelands advertised the item as "the final touchdown ball of Tom Brady's career." That factual claim creates a warranty, and it may turn out to be a false statement, constituting a breach of warranty. But the buyer may have to wait until next season to find out. After all, Mr. Brady might have an off year and throw no more touchdown passes. Buyer could settle for a field goal at this point, but I'm guessing if he goes for it, he's looking at a 21-14 victory.
H/T Jackson George
March 14, 2022 in In the News, Sports, True Contracts | Permalink | Comments (2)
