ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Wednesday, November 4, 2020

Guest Post by Yehuda Adar and Samuel Becher on Consumer Contracts

Yehuda Adar and Samuel Becher, on Taking Boilerplate Seriously

Becher
Samuel Becher

One of the things that the current pandemic emphasizes is the importance of prevention. As Benjamin Franklin remarked a long time ago, “an ounce of prevention is worth a pound of cure.” While Franklin had fire prevention in mind, and while the pandemic brings to mind the context of health, this maxim is true in many other walks of life.

We all teach our contract law students the core principles of ‘meeting of minds’ and ‘assent.’ We explain that contracts reflect the preferences and desires of the contracting parties. At the same time, we acknowledge that consumer contracting realities misalign with these fundamental assumptions (here’s a humorous take on that). We realize that consumers cannot be expected to read these lengthy and unreadable contracts. We are aware that they in fact don’t. We also know that these contracts often contain one-sided, if not plainly illegal and unenforceable, contract terms. Yet, we pretend that contract law can somehow efficiently deal with consumer form contracts. 

The American approach to consumer form contracts is a bit puzzling. In many other countries and jurisdictions – including the UK, the EU, Australia, New Zealand and Israel – there are specific, detailed laws and regulations pertaining to unfair terms in consumer contracts. But not so much in the U.S. As a result, a great deal of the burden of disciplining unscrupulous firms falls on consumers and courts.

Yehuda Adar
Yehuda Adar

But those institutions cannot do so effectively, because consumers are not sufficiently motivated to litigate unfair contract terms. The small money typically involved in consumer transactions, the costs of litigation, the fear of unequal bargaining power, and the common belief in the validity and enforceability of consumer contracts, all suggest that most consumers will not successfully challenge exploitative boilerplate. In the current environment, even if consumers wanted to litigate, they would probably be prevented from doing so by an arbitration clause that would block their access to the judicial system and by a class action waiver that would deprive them of the ability to sue as a class.

Furthermore, even if consumers do litigate unfair terms, courts are not well-positioned to police such terms using the unconscionability doctrine. The doctrine requires terms to be so biased as to “shock the conscience of the court,” thus excluding many one-sided terms that might not reach this threshold. Furthermore, the doctrine can generally be used only as a shield, not as a sword. Since unconscionability is a vague legal norm (rather than a well-defined rule) with no clear legislative guiding principles, courts have very little guidance in designing its boundaries. All in all, and as Arthur Leff noted decades ago: “One cannot think of a more expensive way and frustrating course than to seek to regulate…‘contract’ quality through repeated lawsuits against inventive ‘wrongdoers.’”

Against this somewhat gloomy reality, we suggest taking prevention more seriously. According to the model we envisage, administrative agencies will be empowered to oversee the content of consumer form contracts and tackle any kind of exploitation – be it in the form of unfair, unconscionable, or illegal terms. The agencies (at the federal and state levels) will focus on the markets or contracts where contractual exploitation is most frequent and severe. They will be authorized to negotiate suspect terms with the relevant firms, ensure any exploitation is removed at the macro level, and enforce their decisions using either consent orders or administrative (or judicial) orders.

We believe that the time is right to consider a supplementary tool in the form of ex ante administrative enforcement. To be sure, implementing such a mechanism entails serious practical and political challenges. These may pertain to institutional capacity, budgeting, legitimacy, regulatory capture and the need to analyze complex markets and contracts. But while not a panacea, such a regime has the promise of shifting the burden of confronting exploitation in consumer contracts from a feeble and ineffective system of private enforcement to a sophisticated and robust system of public oversight.

This post is based on our working paper, Taking Boilerplate Seriously: Tackling Exploitation in Consumer Contracts, available here. Any comments or suggestions are most welcome.

November 4, 2020 in Contract Profs, Legislation, Recent Scholarship | Permalink | Comments (0)

Friday, September 18, 2020

Virtual Symposium Part VII: Ben Davis on the Wisdom of Wisdom-Tooth-Extraction During a Pandemic

Selling out the ordinary citizen: COVID-19 Limitation of Liability
Benjamin G. Davis, University of Toledo College of Law

I. The Wisdom of Fixing My Wisdom Teeth in a Pandemic

This is a dental story about wisdom teeth.

This past July I had my son over with a couple of friends to grill steaks.  When it got dark, we went inside to finish the meal. 15 days later I learned that one of those friends might have been exposed to COVID-19.  So I immediately set up to be tested three days later.  And I called my dentist to reschedule my upcoming appointment because I was not sure if I had been exposed and was getting tested.  Fortunately, another week later the test came back negative.

BGDHIRESII. Contractual Assumption of Risk?

So I went to my rescheduled dentist appointment in early September and one of the conclusions was that my wisdom teeth needed to be removed.  And I was referred to a maxillo-facial surgeon for that.  In the first meeting I was asked to sign a document entitled COVID-19 PANDEMIC DENTAL TREATMENT AND ACKNOWLEDGEMENT OF RISK FORM.  I posted that document to the Contracts listserv.

That document – as a contractual matter was saying that I was assuming the risk of contracting COVID-19 in this treatment.

III. Enter State Limitation of Liability Law

On Friday, September 19, 2020, I am to have the first of two wisdom teeth surgeries under general anesthesia.

And today I learn that the governor has signed  Ohio legislation that would grant employers state law immunity from COVID-19 related civil lawsuits.  As reported in the National Law Review,

Ohio employers will likely soon enjoy greater legal protections when it comes to their efforts to stem the spread of COVID-19. Acknowledging the legal uncertainties faced by essential workers and businesses in the wake of reopening, the Ohio Senate on September 2, 2020, passed House Bill (H.B.) 606, a measure which, if signed into law (and it is expected that Governor Mike DeWine will sign the bill very quickly), would grant state-law immunity from civil lawsuits for “injury, death, or loss” related to “the transmission or contraction” of the novel coronavirus. The bill specifically provides that public health orders issued by the executive branch (i.e., the governor and the Ohio Department of Health), as well as public health orders issued by federal government agencies, counties, local municipalities, and boards of health or public health agencies, do not create new legal duties for purposes of tort liability. The bill and its corresponding protections will be retroactive to the date of the declared state of emergency in Ohio, March 9, 2020, and will expire on September 30, 2021.

The bill significantly limits legal exposure to Ohio businesses, which, absent a showing of reckless, intentional, or willful or wanton misconduct, would not be liable to customers, employees, or others for actions or omissions resulting in the exposure to, or transmission or contraction of, COVID-19. The bill, which is expansive, extends protections to all Ohio entities, including schools, nonprofit and for-profit entities of any size, governmental entities, churches, colleges, and universities.

Subject to limited exceptions, the new law would also shield health care providers from liability in tort actions arising from the “provision, withholding, or withdrawal” of health care services resulting from the coronavirus pandemic. The bill does not provide total protection; plaintiffs who can prove a health care provider acted with “reckless disregard for the consequences” of their actions, or engaged in “intentional misconduct or willful or wanton misconduct” could still recover.

In addition to the above protections, the bill would flatly bar class actions based in whole or in part on allegations that a health care provider, business, government entity, or person caused “exposure to, or the transmission or contraction of” COVID-19.”

As reported on Patch.com, Andrew Doehrel, president and CEO of the Ohio Chamber of Commerce said, "Ohio businesses stepped up when asked to help with this pandemic crisis and we are pleased that the Senate and House, along with the governor, have acted to help protect jobs and our economy,"

The story continues:

Health care providers are also protected from liability in tort actions related to COVID-19 care and services under the law. Again, anyone looking to sue a health care provider would have to prove they were acting recklessly or displaying intentional misconduct.

IV. What if I were to get COVID-19 in this wisdom tooth operation?

COVIDAs the form I signed was prior to the operation, I would imagine that if I could prove I got COVID-19 during the operation on Friday, I would have to face a question as to whether I had assumed that liability and therefore a breach of contract claim would fail.

If I were to assert a breach of contract or tort claim, given that the operation is two days after the passage of the above law, the bar for my getting any relief for COVID-19 illness contracted in that operation and even for a death from it (I hope not, egads) has been significantly raised by this law.

And there will be a second wisdom tooth operation in the future where the same issue would arise for that operation too.

I could walk into the operation wearing my “Everybody Say, Corona Virus Don’t Play” t-shirt as a kind of new offer that if they operate on me and I contract COVID-19 from it, the surgeon is assuming that risk.  But, that might be a bit too ambiguous.  So maybe I should make up a t-shirt like Ian Ayres once suggested in Guerilla Consumerism that says, “Notwithstanding any other document or legislation, by serving me in any manner you waive any rights or defenses that you may have with respect to any legislation or contractual or other document that limits your liability to anything below the liability that you would have had before the COVID-19 pandemic.”

That is a bit long to put on a t-shirt but maybe I could get it done in very small print that was big enough for them to see, but small enough that they skip over reading it.  Maybe I could put the words NOTICE in big letters to attract their attention.

V. Been warning about this kind of thing since April. 

Pernicious contractual waivers to address a systemic risk that is a pandemic, I have warned, are not a solution to risk.  Nor is this type of legislation.  All these things do is shift the risk to the individual and away from employers.  They do nothing to address the underlying problem, which is the COVID-19 pandemic.

So we have a combination of market failure and state government failure in betraying the public trust by getting employers off the hook for COVID-19 liability.

It is all of a pattern of repression and weaponizing COVID-19 that I have described in a number of articles since April

VI. So what does one do?

A state constitutional, federal constitutional, or international law challenge of these kinds of approaches are something that I think I should think about.  But, in the meantime, I have to get this wisdom tooth out.

The systemic failures of the federal, state, and business communities to do what was and is needed to protect the ordinary citizen are appalling and criminal.  And, ordinary citizens, like me are left to the dogs of COVID-19 – air-borne, relentless, and many times deadly.

No wonder the United States is the butt of jokes around the world such as the following:

Q:  What borders on insanity? 

A: Canada and Mexico.

September 18, 2020 in Commentary, Current Affairs, In the News, Legislation, Recent Scholarship | Permalink | Comments (3)

Wednesday, August 19, 2020

Uber and Lyft drivers in CA

In a previous post, I blogged about the legal (and particularly, legislative) constraints on private parties to recharacterize legally defined relationships such as calling an employee an independent contractor.  In CA, the issue has been heating up and reached a critical point when AB 5, a new law addressing the classification of employees v. independent contractors, went into effect.  As I mentioned in that prior post, the California Attorney General Xavier Becerra and the city attorneys of Los Angeles, San Diego, and San Francisco sued Uber and Lyft, arguing that they had misclassified their drivers as independent contractors when they should be employees under AB 5.  Last week, a California judge agreed and issued a preliminary injunction compelling the companies to classify their drivers as employees immediately (due to the pandemic, this issue has even greater urgency given have financially stressed many drivers are.  Uber and Lyft ridership is also way down). The Verge has the story and a copy of the complaint.

The takeaway is that parties to a contract may allocate their rights and responsibilities but only in areas where they have the authority to do so.  Private parties do not have the right to characterize their relationship in a way that doesn’t reflect reality (as defined by statute).  Facts matter, even in contracts.

August 19, 2020 in Commentary, Current Affairs, Labor Contracts, Legislation | Permalink | Comments (0)

Friday, July 10, 2020

Legislation and Contract Law in the Classroom

My impression is that most non-lawyers think that “the law” is legislation so law students are often surprised at the first-year curriculum which is mostly focused on common law.  Most 1L contracts courses pay scant attention to how contracts (and the drafting of contracts) are affected by legislation (other than the UCC, of course).  But when law students become lawyers, they must pay attention to legislative changes and may be required to change their clients’ contracts to conform to changes in the law.

Along those lines, there are several new laws that might be of interest to readers of this blog.  Not only should they prompt lawyers to revisit their existing contracts, they might freshen the usual classroom discussion and provide some more context to the role of the common law and its relationship with contract doctrine.  I plan to discuss the new laws in the classroom as part of a focus on “practical lawyering skills” (or, my take on it, which is, what a lawyer should do with the knowledge learned in law school).

                Privacy policies - The California Consumer Privacy Act officially became effective January 1st   but there was a six-month grace period that expired on July 1.  The Act gives consumers more power over their data and how it is used, including the right to opt-out of data collection.  In my experience, some companies, especially the credit agencies, need to do a lot more to make it easier to opt-out. Some companies make it very easy – just a click on their website – but the ones that should make it easy, such as the big three credit reporting agencies, make it very difficult by asking for a mailed-in request and all your personal information, including SSN.  Companies should revisit their TOS and privacy policies to make sure that they comply with the act – and preferably, make it easy for consumers to opt-out and/or request what data the company is collecting.

                Employment Contracts and Handbooks – I like to discuss how lawyers often ignore their standard form contracts and policies, and how doing so may affect enforceability and interact with interpretation, illegality, bad faith, and unconscionability (especially when they conflict with legislative changes).  For example, lawyers should revisit and consider whether to update their contracts and handbooks in light of these recent changes:

                Minimum wage - California’s minimum wage is currently $12/hour (for employers with 25 or fewer employees) and $13/hour (for employers with 26 or more employees), eventually reaching $15/hour by 2022; effective July 1, 2020, some counties and cities are moving toward that goal more quickly, including Berkeley and San Francisco ($16.07/hour) and Los Angeles ($14.25 or $15.00/hour). 

                Family Leave – Unlike the federal government, California has a paid family leave which Gov. Newsom extended from six to eight weeks, effective July 1, 2020. 

                Gig workers – Under a recently enacted law, the test for determining whether a worker is an independent contractor or an employer broadens the requirement of “independence” for the independent contractor so that the worker is both free to figure out how to do the work as well as not economically dependent upon the company for a paycheck – and the employer is not dependent upon the worker for survival (okay, that’s just my super quick description of the “ABC” test).  Earlier this pandemic season, the California Attorney General, Xavier Becerra, and the City Attorneys of Los Angeles, San Diego and San Francisco sued Uber and Lyft for misclassifying their drivers as independent contractors instead of employees. It always bears repeating to students (and clients) that a contract can only allocate rights that the parties have – it can’t attempt to change definitions that are defined by the law, meaning that even if the  agreement is titled “Independent Contractor Agreement” doesn’t mean that the relationship is one between an independent contractor and a company.

                One law that California has not enacted, but which has been enacted in other states (Kansas, Louisiana, Oklahoma) according to law firm Littler, is legislation protecting employers from liability if they act in good faith and their employees or customers are exposed to COVID-19.  These are typically pretty limited in scope and generally do not protect employers from intentional or reckless negligence.  The whole issue of waivers in the employment context is a live one that this blog will be keeping an eye on in the weeks to follow….

July 10, 2020 in Commentary, Current Affairs, Legislation | Permalink | Comments (1)

Tuesday, May 21, 2019

Information Asymmetries Lead to Women Being Underpaid

Democratic presidential candidate Kamala Harris has revealed a plan that would overhaul American discrimination laws to ensure that women and men are paid the same for the same work. Unknown-1

Under the plan, companies with 100 or more employees would, among other things, be required to obtain a federal certification showing they are not underpaying women.  If they fail to do so, they may be fined.  The burden would be on the employers to show that any pay gap is based on merit, performance, or seniority.  If companies discriminate, they would be fined 1% of their average daily profits for every 1% of their average daily profits for every 1% gap that exists between the gender-based pay differential.  The plan would also bar employers from asking job applicants about their salary history and ban forced arbitration in pay discrimination disputes.

But is this really necessary?  Can’t employees themselves contract around this problem in a free marketplace? Unknown

Sadly, the answer is no. Women who work full time are paid an average of 80 cents for every dollar paid to men.  For black women, the figure is 61 cents.  For Latinas: only 53 cents.  And we are talking about pay for the same jobs; not educational or other relevant differences.

Of course, this is just a proposal from a political candidate who at this point in time appears unlikely to win the race.  But it raises an important, yet sadly not new, contractual problem, namely that of disparity in bargaining positions.  As the situation is now, much of the burden of avoiding this problem is on the potential or actual employee.  If a woman needs a job, how is she going to ensure that she is, in effect, paid the same as her fellow male workers?  In other words, how would she even find out what males earn in a particular job?  She can’t. And the pressure of adding one’s salary history is also known to create a bargaining inequality.  This is an example of information asymmetry; a situation in which government action might help ensure a better situation for individuals who have proved unable to obtain that situation contractually.  This is a political issue that will, of course, have to be decided by legislators.  The free market is not producing an acceptable situation here as it is unacceptable that employers pay their employees differently simply because of gender. The fact that race makes the pay disparity even greater makes matters worse.

May 21, 2019 in Contract Profs, Current Affairs, In the News, Labor Contracts, Legislation | Permalink | Comments (0)

Wednesday, May 30, 2018

Temperatures Affecting Test Scores - Bar Results Too?

Although this post does not have anything to do with contracts law, it is hopefully interesting to many of you law professors anyway.

Scientific research shows that in years with warmer temperatures, students score worse on tests.  The link is "significant."  Researchers calculated that for every 0.55° C increase in average temperature over the year, there was a 1% fall in learning.  

Colder days did not seem to damage achievement - but the negative impact began to be measurable as temperatures rose above 21° degrees C.  The reduction in learning accelerated once temperatures rose above 32° C and even more so above 38° C.

A simple solution could be to use more airconditioning on test days.  The more complex, but necessary, solution is to curb climate change.  The world is still not doing enough in that respect despite the 2015 Paris Agreement.  In particular, it is problematic that the USA has announced its withdrawal from the climate change agreement.

Could increasing temperatures also be part of the reason for our students' worse and worse bar performances?  Apparently so.  

May 30, 2018 in Commentary, Contract Profs, Current Affairs, In the News, Law Schools, Legislation, Science | Permalink

Friday, May 25, 2018

Trump Seeks to Alter Post Office Contracts with Amazon

As widely reported in, for example, the Washington Post, whose owner founded Amazon, President Trump has pushed Postmaster General Megan Brennan to double the rate that the post office charges Amazon.com and some, but not all, similar online retailers.  

The contracts between the Postal Service and Amazon are secret out of concerns for the company's delivery systems.  They must additionally be reviewed by a regulatory commission before being changed.  That, perhaps unsurprisingly, does not seem to phase President Trump who appears to be upset at both Amazon and the Washington Post.   The dislike of the latter needs no explanation, but why Amazon?  Trump has accused it of pushing brick-and-mortar stores out of business.  Others point out that if it weren't for Amazon, it is the post office which may be out of business.

Aside from the political aspects of this, does Trump have a point?  Is Amazon to blame for regular stores going out of business?  I am no business historian, but it seems that Amazon and others are taking advantage of what the marketplace wants: easy online shopping.  Yes, it is very sad that smaller, "regular" stores are closing down, most of us probably agree on that.  But retail shopping and other types of business contracting will evolve over time as it has in this context.  That's hardly because Amazon was founded; surely, the situation is vice versa.  Such delivery services are fulfilling a need that arose because of other developments.

From an environmental point of view, less private vehicle driving (for shopping, etc.) is better.  Concentrating the driving among fewer vehicles (FedEx, UPS, USPS, etc.) is probably better, although I have done researched this statement very recently.  One fear may be the additional and perhaps nonexistent/overly urgent need for stuff that is created when it becomes very easy to buy, e.g., toilet paper and cat litter online even though that may in and of itself create more driving rather than just shopping for these items when one is out and about anyway, but that is another discussion.

Suffice it to say that Trump should respect the federal laws governing the Postal Service _and_ existing contracts. What a concept!  If the pricing structure should be changed, it clearly should not be done almost single-handedly by a president.  

Meanwhile, the rest of us could consider if it is really necessary to, for example, get Saturday snail mail deliveries and to pay only about 42 cents to send a letter when the price of such service is easily quadruple that in other Western nations (Denmark, for example, where national postal service has been cut back to twice a week only and where virtually all post offices have been closed).  Fairly simple changes could help the post office towards better financial health.  This, in turn, would help both businesses and private parties.  

 

May 25, 2018 in Commentary, Current Affairs, E-commerce, Government Contracting, In the News, Legislation | Permalink | Comments (1)

Wednesday, May 23, 2018

Banks Violating Federally Mandated Contract Law Provisions

PNC Bank, Wells Fargo and U.S. Bank have been sued for charging interest from homeowners paying off their mortgages early without disclosing how to avoid the charges in spite of HUD rules requiring the latter (and, in the case of one California plaintiff, the California Unfair Competition Law).  When do they ever learn, you ask yourself? - Not soon enough, seems to be the answer. 

This is how the most recent scandal went down (and might still be, so anyone wishing to pay off their mortgages before time, be aware): Homeowners paying off their mortgages ahead of schedule were charged “post-payment interest charges” for the entire month in which the loan was otherwise paid off.  What’s the big deal, you ask yourself?  Consider this: Lead California plaintiff Sandi Vare alleged that she asked PNC for a payoff statement when refinancing her home in July 2016.  She was charged $1,227.16 in interest for the entire month, despite the fact that her loan was paid off on July 16; roughly $600 too much.  Even for you and I, that’s a good chunk of change. Images-1

Banks, it seems, try whatever they can to fog and outright cheat their own clients in many contexts and certainly in the home financing/refinancing ones.  I am personally altering my home loan with Wells Fargo to 1) pay a chunk extra into the principal and 2) pay the loan off in a shorter timeframe than the current one.  The amount of fogging and, in effect, secret “code talk” one has to be subject to or use to achieve such a simple objective is amazing.  For example, if one does not mention the word “recast,” the bank representative may not mention this or may not outline the otherwise relatively advantageous terms of obtaining such a contractual amendment. If one does not very specifically ask for the interest rates and amounts per month, total loan period and interest vs. principal amount, etc. (you get it), the bank – at least Wells Fargo – does not seem to lay out all the details that could work in the borrower’s favor.  Granted, they do if one asks them to do so, but is this this amount of fogging, secrecy, and, in the case of the above-mentioned lawsuit, outright disregard of not only contractual ethics, but also state and federal law what we wish to accept as society just so that banks, who have repeated proved to not follow the law, ethics or even sound market-based risk principles, can continue to make money on services that their customers actively seek to avoid?  One would hope not, but as this case shows, more litigation is apparently needed to continue reigning in overly greedy banks. Images

The case is Vare et. al v. PNC Bank, U.S. District Court for the Northern District of California, 18-2988. The lawsuit is asking for a nationwide class for breach of contract.  Wells Fargo and U.S. Bank defeated nationwide class status last year as too many state-specific rules were involved in that case. 

May 23, 2018 in Commentary, Current Affairs, In the News, Legislation, True Contracts | Permalink

Friday, September 15, 2017

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.

September 15, 2017 in Commentary, Current Affairs, Famous Cases, In the News, Legislation, Recent Cases, True Contracts | Permalink

Monday, May 8, 2017

UCC Update: Missouri Adopts Revised Articles 1 and 7

ULCLogo

Our friends at the Uniform Law Commission (better known by some as the National Conference of Commissioners on Uniform State Laws) sent out a press release today highlighting another adoption of revisions to the Uniform Commercial Code:

REVISED UCC ARTICLES 1 AND 7 ENACTED IN MISSOURI

 May 8, 2017 — Missouri has become the latest state to enact important provisions of the Uniform Commercial Code (UCC).  HB 34, which included the most recent versions of UCC Article 1 and UCC Article 7, was sponsored by Rep. Dean Plocher and signed into law today by Missouri Governor Eric Greitens.  *  *  *

UCC BookThe UCC is a comprehensive set of laws governing all commercial transactions between U.S. states and territories.  It is not a federal law, but a state law.  The UCC is organized into nine substantive articles, each article governing a separate area of the law.

UCC Article 1 provides definitions and general provisions that apply to transactions covered by other articles of the UCC.  Article 1 impacts every transaction governed by the UCC, including any sale of goods, any letter of credit, any warehouse receipt, or any transfer of an investment security.  It is important to have Article 1 up-to-date and consistent with the rest of the UCC.

UCC Article 7 deals with documents of title.  Documents of title – either bills of lading or warehouse receipts – are commonly used in the shipment and storage of goods.  Article 7 provides a framework for the further development of electronic documents of title and updates the article for modern usage.  To the extent possible, the rules for electronic documents of title are the same or as similar as possible to the rules for tangible documents of title.

The Uniform Commercial Code is a joint project of the Uniform Law Commission and the American Law Institute (ALI).  Revisions to various UCC Articles are part of an ongoing undertaking by the ULC and the ALI to modernize the UCC, originally promulgated in 1951 and enacted in every state, and keep it responsive to contemporary commercial realities.

Further information on the Uniform Commercial Code can be found at the ULC’s website at www.uniformlaws.org.

The Uniform Law Commission, now in its 126th year, provides states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state statutory law.  The organization comprises more than 300 lawyers, judges, and law professors, appointed by the states as well as the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, to research, draft and promote enactment of uniform state laws in areas of state law where uniformity is desirable and practical.  Since its inception in 1892, the group has promulgated more than 200 acts, among them such bulwarks of state statutory law as the Uniform Commercial Code, the Uniform Probate Code, and the Uniform Partnership Act.

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May 8, 2017 in Legislation | Permalink | Comments (0)

Sunday, March 19, 2017

The Oxford Comma is (Still) Important

In case you have not yet heard about the recent First Circuit Court of Appeals case discussing the legal importance of a comma, here goes: A Maine statute lists the following activities as not counting for overtime pay: Images

The canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of: (1) Agricultural produce; (2) Meat and fish products; and (3) Perishable foods.

Does that mean that drivers can get overtime because driving does count for overtime since “packing” covers both “shipment or distribution”? Or should the sentence be read as “packing for storage” as one thing and “distribution” another, thus precluding the drivers from earning overtime pay?

Circuit judge David J. Barron concluded that “the exemption’s scope is actually not so clear in this regard. And because, under Maine law, ambiguities in the state’s wage and hour laws must be construed liberally in order to accomplish their remedial purpose, we adopt the drivers’ narrower reading of the exemption.”

So, commas still matter. Consider too how “I love my parents, Lady Gaga and Humpty Dumpty” and “I love my parents, Lady Gaga, and Humpty Dumpty” are a little different. Language aficionados take note! Precise drafting still matters. Was this an outcome-oriented holding? Perhaps. But if so, a holding in favor of workers over a company in a case of interpretive doubt may, in today’s increasingly tough economy for middle and low-income earners, not be such a bad idea from a public policy point of view.

The case is O’Connor v. Oakhurst Dairy, No. 16-1901 (1st Cir. 2017).

March 19, 2017 in Commentary, Current Affairs, Famous Cases, In the News, Legislation, Miscellaneous, Recent Cases | Permalink | Comments (1)

Sunday, February 26, 2017

Iowa Bill Proposal: To Get Faculty Position, Must Have Correct Political Affiliation

Just when you think the political debacle in this country cannot get anymore grotesque, here's a recent proposal by Iowa State Senator March Chelgren: to counter the liberal slant at Iowa's three public universities, the job candidates' political affiliations would have had to be considered.   Why?  To ensure "balanced speech" and avoid the "liberal slant" in public universities these days. 

Under SF 288, the universities would use voter registration information when considering job applicants, and could not make any hire that would cause declared Democrats or Republicans on the faculty to outnumber the other party by more than 10%.

Demonstrating the very deep and logical (not!) argument, check this line of thinking: Chelgren said professors who want to be hired could simply change their party affiliation to be considered for the position.  "We have an awful lot of taxpayer dollars that go to support these fine universities," he said. "(Students) should be able to go to their professors, ask opinions, and they should know publicly whether that professor is a Republican or Democrat or no-party affiliation, and therefore they can expect their answers to be given in as honest a way possible. But they should have the ability to ask questions of professors of different political ideologies."

Duh!

February 26, 2017 in Commentary, Contract Profs, Current Affairs, Government Contracting, In the News, Labor Contracts, Legislation | Permalink

Monday, February 6, 2017

Federal Law Bans Gag Clauses

We’ve written about non-disparagement or “gag” clauses in wrap contracts on this blog in the past.  These clauses prohibit consumers from writing negative reviews about a company and typically impose a penalty or fee if the consumer does so.  California already has a law which prohibits them and now there’s a federal law.  The Consumer Review Fairness Act (CRFA) prohibits gag clauses and intellectual property transfer clauses in consumer form contracts.  (The prohibition on IP transfers is intended to prevent companies from using the DMCA takedown provisions to get posted content removed).  “Form contract” is defined as a contract with standardized terms “imposed on an individual without a meaningful opportunity for such individual to negotiate the standardized terms.”  Form contract does not include an employment or independent contractor contract.  The CRFA permits state attorney generals to bring a civil action on behalf of state residents.  The Federal Trade Commission may also institute action or intervene in a pending action.    

The law goes into effect for on March 14, 2017.

February 6, 2017 in Current Affairs, Legislation, Web/Tech | Permalink | Comments (0)

Saturday, February 4, 2017

Providing "Retirement Benefits" Isn't the Same as Providing Health Insurance Coverage

A recent case out of New York, Wilson v. New York State Thruway Authority, 931-16, deals with the collective bargaining agreement between the New York State Thruway Authority and its retirees over whether the Thruway Authority was contractually bound to provide health insurance coverage to the retirees at no cost. The retirees had enjoyed free health insurance until April 1, 2016, when the Thruway Authority required them to start paying six percent of their premiums. The retirees wanted to introduce evidence that the parties understood that the Thruway Authority was going to pay all of their health insurance premiums, pursuant to the collective bargaining agreement. 

The problem was that the contract between the parties contained no such obligation and the court found that the contract was unambiguous on its face. All that the contract stated was that the Thruway Authority should provide "retirement benefits" made available by New York statutes the contract went on to enumerate. None of those statutes contained provisions requiring the Thruway Authority to provide health insurance coverage. In fact, health care benefits were governed by different New York statutes, not the ones enumerated, and New York state courts had long pointed out that "retirement benefits" and "health care benefits" were two different things governed by two different statutes under New York law. Given that, the court concluded that "retirement benefits" was an unambiguous term of art that the parties knew the definition of, given their particular citation of New York statutes to define it. The court refused to allow extrinsic evidence in the face of this lack of ambiguity. If the retirees had wished the Thruway Authority to pay for their health insurance premiums, they should have included an express provision saying that in the collective bargaining agreement, as many other collective bargaining agreements construed under New York law had done. 

This decision is fairly straightforward as a matter of the law: finding that the term was unambiguous (and indeed basically defined within the document through the statutory citations) and so therefore extrinsic evidence was unnecessary to decide the breach of contract action (the court here concluded that, with no obligation to pay the health insurance premiums, the Thruway Authority had not breached the contract). However, it is a legal dispute that we might see more and more of, as deals with retirees are reevaluated and altered in an age of shrinking budgets. 

February 4, 2017 in Commentary, Government Contracting, Labor Contracts, Legislation, Recent Cases, True Contracts | Permalink | Comments (0)

Thursday, December 1, 2016

Outlandish Contract Decision re. ADA-related Construction

How is this for a most bizarre contract law decision: The Chicago Housing Authority (“CHA”) contracted with architectural and engineering company DeStefano and Partners (“DeStefano”) for consulting services in connection with the construction of seven multifamily residential buildings. CHA required a certain percentage of the homes to comply with Section 504 of the Rehabilitation Act of 1973 and other federal law (some of the housing was to be accessible by mobility impaired individuals, some by elderly residents). Among other things, DeStefano was made contractually aware that the company was to “certify that all work was performed under the direct supervision of the Project Architect and that it conforms to… the American with Disabilities Act of 1990 … [and] Section 504 of the Rehabilitation Act of 1973.”

During the construction, CHA was notified by HUD that the project did not meet the various federal requirements. CHA hired another architecture firm to perform the work necessary to comply with its obligations under the voluntary compliance agreement with HUD. CHA incurred more than $4.3 million to bring the buildings into compliance with federal standards and brought suit against DeStefano for material breach of contract.

DeStefano defended itself by, at bottom, arguing that since CHA had a nondelegable duty to comply with the federal accessibility standards, it should not be able to recover damages from DeStefano for CHA’s failure to do so. In other words: “It’s your own fault that you have this problem, not ours, even though we were the designers and the problem was with the design.” Yah.

But wait, it gets better than that: the court agreed! It apparently bought wholesale defendant’s argument that “permitting CHA to proceed with its state-law breach of contract action would discourage CHA from fulfilling its own obligations to prevent discrimination under Section 504 and the ADA, directly undermining the goal and purpose expressed by Congress in enacting those statutes.” It also stated that “notably, however, … there are no provisions within the ADA, or its accompanying regulations, that permit indemnification or the allocation of liability between the various entities subject to the ADA.” The court found that CHA’s duties were, as mentioned, nondelegable and, because the duties were imposed on CHA by HUD, CHA’s failure to comply was the problem. “CHA was a ‘wrongdoer’ in the sense that it failed to ensure the subject premises complied with the applicable federal accessibility standards in order to prevent discrimination.”

Wait a minute! So, in trying to make sure that the housing in fact complied with the law, the housing authority was found to have violated it! That’s just crazy.

This case may work as a good example if you want to train your students how to identify faulty reasoning and logic by courts.

The case is can be found here. Hat tip to Justen Hansen of WesTech Engineering for bringing this to my attention. http://www.westech-inc.com/en-usa

December 1, 2016 in Commentary, Government Contracting, Labor Contracts, Legislation | Permalink | Comments (0)

Sunday, November 13, 2016

Scholarship highlight: Climate change and the "Act of God" doctrine

Allow me to highlight my most recent article, An “Act of God”? Rethinking Contractual Force Majeure in an Era of Anthropogenic Climate Change.

Given anthropogenic climate change, what were previously considered to be inexplicable and unpredictable “acts of God” cannot reasonably be said to be so anymore. They are acts of man. “Extreme” weather events have become the new normal. Accordingly, the contractual force majeure defense, which largely rests on the notion that contractual parties may be exculpated from liability for failed or delayed performances if supervening unforeseen events that the party could not reasonably control or foresee have made a performance impracticable, is becoming outdated in the weather context. It makes little sense to allow contractual parties to escape contractual performance liability for events that are highly foreseeable given today’s knowledge about climate change. Parties can and should take reasonable steps to contractually assess and allocate the risks of severe weather events much more accurately than ever before. Further, they should be better prepared to take reasonable steps to alleviate the effects of severe weather on their contractual performances instead of seeking to avoid liability at the litigation stage.

Time has come for the judiciary to rethink the availability of the impracticability defense based on “extreme” weather for public policy purposes. Perhaps most importantly, by taking a hard look at the doctrine and modernizing it to reflect current on-the-ground reality, the judiciary may help instigate a broader awareness of the underlying pollution problem and need for action at many scales. Meanwhile, a more equitable risk-sharing framework that might become known as “comparative risk sharing” and which would resemble the notion of comparative negligence in torts could be introduced where parties have failed to reach a sufficiently detailed antecedent agreement on the issue. This is surprisingly often the case. Parties often use mere boilerplate phrases that do not reflect today’s highly volatile weather and appurtenant risks.

The law is never static. It must reflect real world phenomena. Climate change is a super-wicked problem that requires attention and legal solutions at many fronts to many problems, including contractual ones. The general public is often said to have lost faith in the judiciary. Given this perception, courts could regain some of that faith in the context of contracts law and force majeure caused by events for which no “God,” other supernatural power, or even nature can be blamed.

The article can be downloaded here.

I apologize that I have not been able to post very many blogs recently and that I will, for family and work reasons, also not be able to do so until January.  I trust it that my lovely assistant Ashley and my co-bloggers will keep you intrigues until then!

November 13, 2016 in About this Blog, Commentary, Contract Profs, Current Affairs, Legislation, Miscellaneous, Science, True Contracts | Permalink

Monday, August 29, 2016

“Trophy hunting” contracts – unenforceable for reasons of public policy

Allow me to highlight my most recent article on the questionable ecosystem viability and contractual common law validity of so-called “trophy hunting” contracts. With these contracts, wealthy individuals in or from, often, the Global North contract for assistance in hunting rare animals for “sport.” Often, these hunts takes place in the Global South where targeted species include giraffes, rhinos, lions, and other vulnerable if not outright threatened or endangered species.  Images
A famous example of this is Minnesota dentist Walter Palmer killing “Cecil the Lion” in 2015 causing widespread outcry in this country and around the world. Trophy hunting also takes place in the USA and Canada, where targeted animals include polar bears, grizzly bears, and big horn sheep.

Trophy hunting should be seen on the background of an unprecedented rate of species extinction caused by several factors. Some affected species are already gone; others are about to follow. Western black rhinoceroses, for example, are already considered to have become extinct in 2011.   The rest of the African rhinoceros population may follow suit within the next twenty years if not sufficiently protected. In the meantime, more than 1.2 million “trophies” of over 1,200 different kinds of animals were imported into the United States just between 2004 and 2015. In addition to the extinction problem, the practice may also have ecosystem impacts because, among many other factors, the trophies often stem from or consist of alpha animals.

UnknownOf course, no one is arguing that rare species should be driven to extinction, in fact, quite the opposite: both trophy hunters and those opposing the practice agree that such species should be conserved for the future. However, the question lies in how to do so. Some argue that trophy hunting creates not only highly needed revenue for some nations, but also brings more attention to the species conservation issue.

I argue that at least until there is much greater certainty than what is currently the case that the practice truly does help the species in the long run (and we don’t have much time for “the long run”!), legal steps must be taken against the trophy hunting. Even when positive law such as hunting laws and/or the Endangered Species Act (“ESA”) do not address the issue (yet), common law courts may declare contracts that have proved to be “deleterious effect upon society as a whole,” “unsavory,” “undesirable,” “nefarious,” or “at war with the interests of society” unenforceable for reasons of public policy. Images-2

In the case of Cecil, African lions had been proposed for listing under the ESA when the animal was killed, but the listing did not take effect until a few months later. The case, others like it, and several studies demonstrate that a sufficient and sufficiently broad segment of the population have come to find the killing of very rare animals so reprehensible that common law courts can declare them unenforceable should litigation on the issue arise. This has been the case with many other contracts over time. The same has come to be the case with trophy hunting. As long as doubt exists as to the actual desirability of the practice from society’s point of view – not that of a select wealthy individuals – the precautionary principle of law calls for nations to err on the side of caution. The United States prescribes to this principle as well.

The article also analyzes how different values such as intrinsic and existence values should be taken into account in attempts to monetize the “value” of the practice. Instead of the here-and-now cash that may contribute to local economies (much revenue is also lost to corruption in some nations), other practices such as photo safaris are found by several studies to contribute more, especially in the long term. (Note that Walter Palmer paid a measly USD 50,000 for his contract with the landowner and local hunting guide).

Finally, the article draws in arguments under the public trust doctrine and the state ownership of wildlife doctrine. Ethically, these animals belong to all of us (or none of us). Images-1

Trying to save rare animals by shooting them simply flies in the face of common sense. It also very arguably violates notions of national and international law.

August 29, 2016 in Commentary, Current Affairs, Famous Cases, In the News, Legislation, Recent Scholarship, Science, Travel, True Contracts | Permalink | Comments (0)

Thursday, August 25, 2016

Rent-to-Own Contracts: Caveat Emptor or Unconscionable Behavior?

The New York Times reports here (paid access) on the increasing use of so-called “rent-to-own” housing contracts. Under these contracts, companies from big Wall Street giants to a slew of small landlords hoping to strike it rich lend or, should I say, purport to sell homes to tenants who contractually commit to make all repairs on the homes no matter how major or minor (yes, you read that right: all repairs… and it gets more extreme than that, read on!). Typically, tenants under such contracts are not told what repairs are needed, yet face a contractual deadline for making sure that the houses in question are brought up to local code. Unlike most typical home purchases, rent-to-own contracts do not require the tenant/buyer to obtain an independent home inspection.  Images-2

We probably all know how many things can go wrong with older homes, even newer ones. Examples of how bad things can go in this context thus abound. One tenant moved into a home not having been told that it had several unresolved building code violations and had to remain vacant by city order. Another moved into a home that had no heat, no water, and major problems with its sewage system that led to nearly $10,000 in repairs (many of these homes have been purchased by the lender for less than $10,000 and are not worth very much more than that, if any). A third example describes a woman moving into a home with her three children and partner in Michigan, living in the house during cold winter with the only heat sources being one electric heater and a wood-burning stove in the kitchen, only to be evicted and charged $3,100 in overdue rent after she stopped paying rent because of the heat issue.

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People who accept these kinds of contracts often do not qualify for mortgages. Banks have virtually stopped making mortgages on homes worth less than $100,000, which leaves millions of people with few options for - now or one day - owning their own homes.

One company that rents homes on a rent-to-own basis does so “as is,” calling the contracts “hybrid leases” that allow people to build up “implied equity.” If tenants are evicted during the contract (typically of a seven-year-duration), they get no credit for money spent on repairs or renovations. Neither do they receive any equity unless they actually end up buying the home at the end of the contract term. At that point, they still need financing for the home which, as mentioned, many people just cannot obtain.

A number of legal questions arise in this context, among them several contractual ones such as the role of caveat emptor vs. the violation of a possible duty to disclose. If the landlords know of the problems from which many of these houses suffer, should they disclose this knowledge? On the other than, shouldn’t these potential (long-term) buyers be presumed to have at least enough savvyness to not promise to bring a home that they do not own outright up to Code by a certain deadline? Then again, are landlords fraudulent in their dealings with these folks when the landlords require such potentially extensive repairs when, as the owners of the homes, they presumably if not actually have actual knowledge of the problems from which these houses suffer? What about the statement that renters get “implied equity?” What in the world does that mean, if anything? Do low-income folks that may never have been homeowners truly understand what it means to bring a home “up to Code” and buying “as is?” Does it matter? And what about the doctrine of unconscionability, which is alive and well in some states such as California? If nothing else, this case seems to smack of both procedural and substantive issues. Images

In some states, landlords are required to keep homes and apartments in habitable condition. But rent-to-own contracts have, for good reason, been said to reside in a gray area of the law: are they rental contracts? - Or purchase contracts? Or something else?

Further, rent-to-own contracts may, to some extent, resemble contracts for deeds. However, the latter are subject to basic consumer-lending regulations such as the Federal Truth in Lending Act.

The housing market again seems to host highly questionable practices. This story almost reads as a contract or property law issue-spotting exam. Meanwhile, housing sharks seem to be swimming relatively freely in some areas of the nation.

For further information, see Alexandra Stevenson and Matthew Goldstein, Rent-to-own Homes: A Win-Win for Landlords, a Risk for Struggling Tenants, the New York Times, Aug. 21, 2016.

August 25, 2016 in Commentary, Current Affairs, In the News, Legislation, Miscellaneous, True Contracts | Permalink | Comments (0)

Wednesday, August 3, 2016

Leveling the Playing Field in the MA Job Market

Yesterday, Stacey noted how employers should be careful not to be too greedy when dealing with employees. Another example of the backlash – judicial or legislative – that may be the result if employers overstep what ought to be reasonable limits in interactions with their employees is a new law in Massachusetts that prohibits employers from asking job candidates about their salary history as part of the screening process or during an interview.

Why indeed should they be able to do so?! In a free market, freedoms cut both ways: just as an employee can, of course, not be sure to get any particular job at any particular salary, the employer also cannot be sure to be able to hire any particular employee! There is no reason why employers should enjoy financial insight about the employee when very often, employees don’t know about the salaries at the early stages of the job negotiation process. Both parties should be able to come to the negotiation table on as equal terms as possible, especially in this job market where employers already often enjoy significant bargaining advantages.

Massachusetts also requires Commonwealth employers to pay men and women equally for comparable work.

August 3, 2016 in Commentary, Current Affairs, E-commerce, Labor Contracts, Legislation | Permalink | Comments (0)

Tuesday, July 5, 2016

Ticket Scalping Machines – An Intersection between Contracts and Criminal Law

Have you ever tried buying concert tickets right when they were made available for sale on the Internet, only to find out mere minutes later that they were all sold out? Or, for that matter, highly coveted camping reservations in national or some state parks?

Where once, we all competed against the speed of each other’s fingertips and internet connections, nowadays, “ticket bots” quickly snatch up tickets and reservations making it virtually impossible for human beings to compete online. Ticket bots are, you guessed it, automatic computer programs that buy tickets at lighting speed. They can even read “Captcha boxes;” those little squiggly letters that you have to retype to prove that you are not a computer. Yah, that didn’t work too well for very long.

“A single ticket bot scooped up 520 seats to a Beyonce concert in Brooklyn in three minutes. Another snagged up to more than 1,000 U2 tickets to one show in a single minute, soon after the Irish band announced its 2015 world tour.”

Ticket bots scoop up tickets for scalpers who then resell them on other websites, marking the tickets up many times the original price. (I’m actually not saying that state and national parks are cheated that way, maybe camping reservations in those locations are just incredibly popular as hotel prices have increased and incomes are staggering. I personally used to be able to, with t Imageshe help of a husband and several computers, make campground reservations for national holidays, but those days are long gone…”we are now full.”).

Ticket bots are already illegal in more than a dozen states. New York is considering cracking down on this system as well. However, the most severe penalty under New York law is currently fines in the order of a few thousand dollars where ticket scalpers make millions of dollars. A new law proposes jail time for offenders. This is thought to better deter this type of white-collar crime in the ticket contract market.

July 5, 2016 in Commentary, Current Affairs, E-commerce, In the News, Legislation, Web/Tech | Permalink | Comments (0)