ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Friday, March 1, 2024

Friday Frivolity: Elon Musk, This Is Not up to Your Standards

 RocketmanSeveral of my students shared the same story with me.  Ariel Zilber, writing in The NY Post, provides the basics:

  • Corporation places a large order with a bakery for mini pies.
  • Corporation then contacts the bakery to double the order. 
  • Corporation then cancels the order by text  just as the pies are about to be sent out.
  • Bake shop claims $16,000 in losses on the order
  • CEO of the corporation (depicted at right, image by DALL-E) promises to "make things good" with the bakery.

Not much to add, beyond the fact that the corporation is Tesla, and the CEO is Elon Musk.

At first, I didn't see much potential in the hypo.  Tesla made a contract; Tesla breached the contract.  Tesla must pay damages.  Making things good with the bakery is a simple matter of paying for the pies that Tesla ordered, less any mitigation.  And since you are Tesla and this is a local bakery, why not just pay $16,000? As contracts hypos go, Mr. Musk, I expect better from you.  Remember that time you promised to buy Twitter and then pretended that it was all just a ploy to get information about the percentage of bot accounts on Twitter? 

Ah, good times. 

A few wrinkles might make this into a worthy hypo.  First, let's assume (counterfactually, apparently) that the original order and the doubled order were done by telephone and there is no electronic record.  Is the text message a sufficient writing to evidence the transaction?  According to the Post, the text read as follows: "It unfortunately sounds like we will be changing plans and will not be needing this order. Thank you so much for your support. I appreciate it."  Seems like that message must be part of a text string that provides the referent for "this order."  If so, we likely have a writing.  If not, do we have specially manufactured goods?

On that point, and also relevant to mitigation, Richard Pollina, author of another NY Post article, adds the following information.  As news of Tesla's breach spread, local residents shows up "in droves" to snatch up the pies.  If she had 4000 pies at $4/pie, it seems like the owner could have mitigated her damages by re-selling those same pies at $6/pie.  The owner also said that her business has tripled since news of the breach got out.  Is that relevant to the calculation of her damages? She also said that, notwithstanding Mr. Musk's promise to 
"make things good," she has not heard from him.

Screenshot 2024-03-01 at 6.54.53 AMSide note on the efficient use of journalistic resources: Do we really need two NY Post reporters on the Tesla pie-order beat?  Even Taylor Swift only has one dedicated reporter per news outlet. 

UPDATE: David Propper, yes a third NY Post reporter, provides the following update.  Tesla paid the bakery $2000 and also offered to place an order for Women's History month.  The bakery responded that it was too booked up with orders to provide pies to Tesla.  Also, it asked, "Good Grief!  Who do you think I am?"


March 1, 2024 in Commentary, Current Affairs, In the News, Teaching | Permalink | Comments (0)

Wednesday, February 28, 2024

The Best People Leave

Alex GeisingerWhen I got my first teaching job at Valparaiso University Law School, there was a core of people who were on the hiring committee and also became my close friends almost immediately upon my arrival.  Because they were at Valparaiso, I knew that it would be a good fit for me, They were dedicated teachers, innovative scholars, and colleagues devoted to helping our students learn and thrive as professionals and people.  They were committed to the place in the same ways as I was.  There were also great people at the university, so I had an interdisciplinary community of colleagues.

One of my law school colleagues was Alex Geisinger, who became a mentor and a friend.  He was on the committee that hired me.  He took the lead in helping me to understand the dynamics of the small community I had joined.  One of Alex's valuable assets was his honesty, and so he warned me about Valparaiso University (Valpo): "The best people leave."  

Of my close friends at Valpo, Alex was the first to leave.  He left to help Drexel gets its law school off the ground.  I had to be happy for Alex.  It was a great move for him and his family, but it was a bitter blow.  Not only had Alex been a great mentor for me in my teaching and scholarship, he was someone I could have a coffee with regularly, and his son, Michael, exactly one year older that my daughter, Sophie, was among Sophie's most regular playmates.  Alex always called Michael, "The Boy," and I still call Sophie, "The Child."  The Boy and The Child would play, while Alex and I would talk about teaching, and behavioral economics, and law school politics, and university politics, and politics politics, and life/work balance, and living in the Midwest when you don't really feel like you belong in the Midwest.  

I wrote previously about my commitment to community and how I felt that I belonged to a community when I started teaching at Valpo.  Alex was at the heart of that community, and he continued the connection after leaving.  When I got a one-semester sabbatical, Alex got me a visiting position at Drexel so that I could have full year away from Valpo, which was not always a happy place for me.  I had a wonderful experience teaching at Drexel and spending three days a week in the heart of Philadelphia.  Alex came back to Valpo to visit, we met up at conferences at every opportunity, and he kept in touch with our colleagues even after we all dispersed, making sure that we were all up to date on each other's lives.

I learned last night that Alex died this week while traveling with his family in Malaysia.  We lost colleagues at Valpo before, but among my small circle of close friends, Alex was once again the first to leave.  It is the bitterest of blows.

February 28, 2024 in Law Schools, Teaching | Permalink | Comments (4)

Wednesday, February 14, 2024

Delaware Supreme Court Ruminates on Freedom of Contract

Sparkling HeartWhat could be more fitting on this Valentine's Day than a love letter from the Delaware Supreme  Court to the doctrine of freedom of contract.  Here is how Justice Traynor begins his opinion in Cantor Fitzgerald, L.P. v. Ainslie:

The courts of this State hold freedom of contract in high—some might say, reverential—regard. Only “a strong showing that dishonoring [a] contract is required to vindicate a public policy interest even stronger than freedom of contract” will induce our courts to ignore unambiguous contractual undertakings.

Justice Traynor then proceeds to the nature of the case.  Plaintiffs, as partners at Cantor Fitzgerald (Cantor), entered into a  partnership agreement, which included a forfeiture-for-competition clause (the Clause).  The Clause bound partners for four years after leaving the partnership.  Pursuant to that clause, Cantor demanded forfeitures from six partners, ranging from under $100,000 to over $5 million.  The Chancery Court applied a test akin to those for covenants not to compete.  By that standard, the Chancery Court found the Clause unreasonable and refused to enforce it.

In keeping with its reverence for freedom of contract, the Supreme Court reversed.  The Delaware Partnership Act, the court noted, is expressly designed “to give maximum effect to the principle of freedom of contract and to the enforceability of partnership agreements.”  These partners went into the agreement with eyes open and enforced it against other departing partners.

The discussion begins with a seven-page summary of the operative provisions of the Limited Partnership agreement.  Basically, if departing partners worked for a competitor, they forfeited the contents of the Capital Accounts that would otherwise be paid out over four years after their departure from the firm.  The departing partners must have thought that the Clause was unenforceable, because when they resigned from Cantor, they notified Cantor that they were taking up employment with a competitor.  

Cantor FitzgeraldTwo findings, one factual/conceptual, one legal, seem to me crucial to the Supreme Court's ruling in favor of Cantor.  First, the contracts at issue here were among partners, not between an employer and an ordinary employee.  Under Delaware law, restrictive covenants with employees are tested for reasonableness, but when it comes to the Clause, the public policy interests are weighed differently, with principles of freedom of contract counseling more deferential treatment to the parties' reciprocal agreement.  Freedom of contract is not absolute.  It is constrained by public policy.  But simply attaching economic penalties to a decision to compete does not offend public policy.  The departing partners are free to compete against Cantor.  Having done so, they forfeit their Capital Accounts.

While there might be situations in which a Delaware court would refuse to enforce a provision like the Clause, notwithstanding freedom of contract, this was not such a case: "[T]he plaintiffs voluntarily entered into the partnership and the Agreement, elected to compete with the partnership upon their departure, and thereby assumed the risk of the forfeiture."

Teaching aside: I use Valley Medical Specialists v. Farber to teach covenants not to compete.  The case similarly involves a departing partner who might well be enforcing the covenant were the stethoscope around another neck.  I like the case because, even if we might not think the equities favor Farber, who presumably went into the agreement with eyes open, public policy disfavors enforcement of a covenant not to compete that stands between a doctor and his patients with specialized needs or between a doctor and potential patients in a region that might lack specialists in the doctor's area.  It's a nice illustration of when judges need to intervene in the interests of public policy even in the absence of legislation or regulation.

Hat tip: Eric Chiapinelli

February 14, 2024 in Recent Cases, Teaching | Permalink | Comments (0)

Tuesday, February 13, 2024

The Importance of Ordinary Acts of Kindness

Screenshot 2024-02-09 at 6.50.55 AMTwo years ago, I got a prize in my cereal.  I don't have much use for toys, and my daughter was away at college.  I decided I would give the toy to a student as a prize for a successful Socratic exchange.  I don't remember what prompted the award, but I gave it to a student, and she beamed.  As I recall, she attached the trinket to her computer as a badge of honor.  Happy with the exchange, I looked around my office for other small tokens with which I could happily part, and I occasionally gave out prizes to students.  Eventually, I found ways to hold mini review sessions in which everybody got the opportunity to win a prize.  In general, the prizes are random appreciations for successful responses to cold calls.  I don't want to be singling out students for excessive praise.  Once one student gets a prize, they should all get rewarded eventually.  

The exception was that I gave two students cara cara oranges in Sales last year.  One because the student successfully remonstrated with me that there may have been two correct answers to one of my multiple choice questions.  The other was because the student corrected my reading of a UCC section.  I wrote on the peels, "You were right; I was wrong."  And I signed it.  I think one of them said, "I'm showing this to my mom!"  I do want to highlight and reward vigorous advocacy.  On the whole, my students need to practice respectful disagreement with authority figures, starting with me, and hopefully working their way up to zealously advocating for their clients.   

Fidget Toys1I have neglected the gift-giving tradition this year.  I just haven't gotten my act together to gather the prizes, but a recent exchange with the original award winner persuaded me that I need to revive it.  And I know just the thing.  Last year, we gave students fidget toys around finals, and they were a huge hit.  You can get a big pack of them (left), they are cheap, and students, I have learned, have very particular and individualized preferences when it comes to fidget toys.  I thought everyone would fight over what I thought were the best toys, but everyone has their own itch to scratch, and so the toys found their way into the right hands.  Very few toys went unclaimed.  A few found their way to my desk, and now students have fidget toys to play with which they talk to me.  For some reason, only my Associate Dean tends to my Zen litter box (below right), and that's fine, because she keeps it looking its best.  When we are chatting in my office and I point out that the litter box needs tending. She gets this intense look in her eyes as she surveys and strategizes.  Then she sets to work as we continue our conversation.

Screenshot 2024-02-08 at 2.50.02 PMI was reminded that I have been remiss about gift-giving because I did a little quiz bowl session with my Sales students and I gave out candy for correct answers.  The topic of gift-giving came up, and I remembered that the one of my Sales students was the student to whom I gave my little cereal trinket.  I asked her if my memory was correct, and she said, "Oh, yeah, I still have it!" (top right)  I told her I remembered it because I was surprised by how happy she was to get the little prize.  She told me (and the class, and she has given me permission to share the story here) that she had been going through a rough patch in law school, and she was not feeling confident about speaking in class.  That little affirmation was just the thing she needed.  It turned out that my small gesture helped my student get over a hump.  It cost me nothing, but it had great value for her.  And that's a reason to keep engaging in ordinary acts of kindness.

When I asked the student for permission to share her story, she reminded me that there was a time that I told her a variation of something that I often tell students whom I suspect are suffering from imposter syndrome.  It is something I say to students regularly, and I always believe it when I say it.  I don't say it if I don't believe it.  Fortunately, we admit very few students to whom I could not deliver a version of the following:

We admitted to you because we think you belong here.  Now you're here, and we still think you belong here.  You are exactly where you ought to be, so don't let a disappointing Socratic exchange or a marked-up legal writing draft make you think otherwise.  Most of your peers  are experiencing the same roller-coaster ride that you are.  And nobody, including me, thinks twice about anything you say in response to Socratic questioning.  Your classmates are too worried about what they are going to say, and I am satisfied so long as you manage to produce words that are arguably responsive to my question.  Keep working at it, and it comes more easily.

I have come to believe that we law professors sometimes take ourselves too seriously, e.g., when we think that a well-placed law review article will be the lever with which we can move the world.  But I have also come to realize that we don't take ourselves seriously enough when it comes to how important it can be to students to receive encouragement and affirmation from us.

February 13, 2024 in Teaching | Permalink | Comments (0)

Wednesday, January 31, 2024

Do I Teach Too Many Old Cases?

In the past few years, I have received a few complaints in my student evaluations that I teach too many old cases.  This year, there were more such complaints than ever before.  There aren't that many; only a handful out of 75 students in my contracts courses, but the complaint is new and gaining steam.  One student helpfully defined "old" as cases from the "19th and 20th centuries."  It's official.  I'm old.

Vining Peerless
The good ship Peerless as imagined by my former student, Justin Vining

These comments led me to go back through my reader and have a look.  The oldest case I teach is Mills v. Wyman, from 1825.  I teach three cases decided in 2023.  I only teach ten cases (of fifty) from the 20th century, and the median case dates from 1968.  Fifty cases total is not a lot of cases.  I supplement my reader with an Brian Blum's Examples & Explanations book, so the students get a lot of hypotheticals that are generally in a contemporary setting.  One interesting phenomenon that I have noticed since I started supplementing cases with problems is that students have difficulty keeping straight which fact patters are real and which are hypothetical.  So, from my defensive crouch, I could argue that a supplement my two score and ten vintage cases with at least that many problems set in the 21st century.

My reader includes five cases from the 19th century: Mills v. WymanKirksey v. Kirksey (1845), Raffles v. Wichelhaus (1864), Hamer v. Sidway (1891), and Rickets v. Scothorn (1898).  I love these cases.  They all teach really well and lead to great class discussions.  There is rich literature and lore about all of them.  Is that reason enough to continue using them?  An additional argument in their favor is that they are all good law.  It would be hard for me to abandon these cases, even if I knew of more recent cases that covered the same ground, but I don't.  Perhaps that is because I have been complacent and haven't bothered to look, but it may be that these cases have come to occupy the field.  Rather than engaging in the kind of analysis that these cases engage in, modern courts simply cite to them or to equally musty old cases that lack their compelling facts or well-written opinions.

Cardozo Cup 3
Cardozo Cup Competition Entry by my former student, Jeff Miller

I may be on shakier ground with the next half-century.  I teach eleven cases published between 1901 and 1935.  Judge Cardozo accounts for four of them.  Paraphrasing Ben Jonson, I might confess, "My sin was too much hope of thee, lov'd Judge."  I could drop Lady Duff, as I pair that case with B.L. Lewis Productions.  v. Angelou, but the latter case spends so much time talking about Lady Duff, it seems a shame not to share the original with my students.  Is there a better case for charitable subscriptions that Allegheny College?  A better discussion of fatally incomplete contracts than Sun Printing?  Perhaps.

There is still a part of the course that serves to contrast the more formalist approach of the early 20th century to our more contextual approach since the adoption of the Uniform Commercial Code and the Restatement Second.  I suppose I could drop some of the material on formalism.  My fear is that there are still jurisdictions that retain a commitment to formalism.  There is also a formalist wind blowing through other regions of our jurisprudence.  Who is to say it will not invade the province of private law as well?  

Thumbs-up_1f44dI think the students who complain about the old cases do not appreciate how hard it is to find cases that teach well and state the law clearly.  As I said, I added three new cases from 2023 in my last version of Contracts I.  I don't know if any of them have staying power.  The emoji case stands the best shot, but it is a Canadian case and so has certain oddities about it.  Perhaps a red-blooded American case on emojis as acceptance/signatures will come along soon. 

When I teach Sales, I don't teach any cases that are older that Article 2 itself.  The cases I have selected are a motley crew.  Sometimes I teach against the cases, because I think the judges were simply incompetent in their understanding of either Article 2 or the transactions or both.  Electricity is not a good?  Nonsense!  At other times, the cases are well reasoned, in my view, but state only a majority view not accepted in all jurisdictions (love ya, 2-207 knock-out rule for different terms.!).  The old cases that have withstood the test of time are, at least sometimes, unavoidable in a common-law system based on precedent.  I wish there were more such definitive cases that governed Article 2.  

I will say this in favor of the old chestnuts.  I sometimes interact with alumni, and when I tell them I teach contracts, they sometimes claim no knowledge or memory of the course.  But when I remind them of some of my favorite cases, they become gleeful.  I am a communitarian, and so I love that lawyers across generations can bond over these old cases, even if just involves rolling our eyes about Pennoyer v. Neff.  In my past life as an intellectual historian, I participated in debates about canonical literary texts in which white male voices predominate.  I get that, and I am all for a more inclusive canon, but I also know how I have benefited from having experienced Columbia's core curriculum.  I went to college a midwestern yokel, the product of a decent public school but never having read or been exposed to much of the canon.  The eduction I received has facilitated connections and conversations that would never have otherwise been possible.  And non-canonical works routinely reference canonical works, permitting those familiar with the canon to appreciate the layers of meaning and the reworking of traditional material on a different level from those who just miss the references.  I want my students to get the jokes and appreciate the references.

That said, I just added a case to my syllabus for this coming semester that I discovered through work on the blog.  I hope it's a keeper!

January 31, 2024 in Famous Cases, Teaching | Permalink | Comments (2)

Friday, January 12, 2024

Friday Frivolity: An Interpretive Puzzle

I have been thinking about this sign in my fitness center's locker room for some time.  I think about it every time I walk into the locker room using my cell phone to listen to a podcast.  

Screenshot 2024-01-05 at 11.22.26 AM

Am I in violation?

I surveyed my students.  One section said, "No bruh, everyone needs their tunes at the gym."  The other section ordered me drawn and quartered, asking why I had to go into the locker room at all and questioning my taste in podcasts. 

But I was born a History of Byzantium listener, and I'll die a History of Byzantium listener!

January 12, 2024 in Teaching | Permalink | Comments (3)

Tuesday, January 9, 2024

Nature Provides a Contracts Hypo

The facts of this case are almost perfect but not quite.  I plan to tweak it and work it into my sales class.  The actual facts are that a buyer contracted to purchase a used truck in "mint condition" for $9400.  Just as the buyer was driving up to pay for the truck, a deer, no doubt in training for the US hurdling team, soared through the air over two other parked cars and landed on the bed of the truck.  It didn't exactly stick the landing, as it collided with the side of the truck, doing nearly $1000 of damage.  If it were a different species, I could say that it rammed the truck, but we're above those sorts of cheesy puns on this blog.  It was all captured on video, and this deer is awesome! 

Moreover, you can actually see the buyer opening his car door just as the deer slams into the truck he is about to buy.   In a ContractsProf Blog exclusive, we are excited to report that the buyer, upon seeing the deer exclaimed,

"D'oh!  A deer!"

And the dumbfounded teenager on the driveway adds, "A female deer!" 

And I know, you're thinking, "That's not accurate." 

Fair enough, I suppose it could have been a young male deer, but that's what our spot reporter heard them say.

The timing makes the hypo a little too straightforward for a sales course.  Although the parties have an agreement, and the good has been identified to the contract, no tender of payment or delivery has been made, and so the risk of loss is clearly with the seller.  The harm to the truck will fall to the seller.  But we can play with the timing, play with delivery/acceptance, introduce a third-party delivery service, and I think I may have a vehicle (ha!) for making delivery terms less mind-numbingly dull.

January 9, 2024 in Teaching, True Contracts | Permalink | Comments (0)

Monday, January 8, 2024

Teaching Assistants: Corbin on the Parol Evidence Rule

Corbin on DraftingTimothy Murray, the lead author of the current edition of Corbin's Contracts Treatise, was kind enough to share with me his volume, co-authored with Jon Hogue, Corbin on Contract Drafting.  Chapter 11 of that book is on drafting merger clauses, but it provides the occasion for an in-depth exploration of the parol evidence rule (PER).

I highly recommend this chapter to instructors and students.  The division of the material into ten short sections makes the doctrine easy to follow, analyze, and digest. The Authors provide helpful case studies that illuminate their points, and the material on drafting can help students understand both how the doctrine works and how to think about its operation in practice.

The Authors make the valuable point that integration and interpretation are separate matters.  An agreement is integrated if it constitutes the entirely of the agreement between the parties.  The PER will not bar the admission of prior agreements that are outside of the scope of the integration.  But even if the evidence relates to subject matter that is within the integration, the parol evidence does not bar evidence related to interpretation. The question of integration must come first.  Otherwise, a court might determine that the contract is unambiguous and bar admission of evidence relating to a subject matter that the contract does not address.

The Authors' discussion of merger clauses is highly instructive, but the material highlights what I hate most about the PER.  As the Authors note, some courts treat merger clauses as conclusive evidence of integration, but most people who enter into agreements through form contracts never see the merger clause or, if they do see it, they have no idea what it means.   The Restatement notes that a merger clause is a "clear sign" of integration.  Cases then might turn on whether the written agreement is a complete or a partial integration (see R.2d § 213, illustration 4), but courts are pretty much on their own to determine whether the integration is partial or complete.  While it seems to be universally accepted that judges, rather than juries, decide the issue of integration, there is no agreement on how to do so.  The R.2d follows the Corbinian approach of consulting parol evidence on the issue of integration, but many courts still apply a more formalist approach.

CardozoThe Authors provide separate brief discussions of three related tests: separate consideration/collateral agreement, natural omission, and scope.  I wish they had used Mitchill v. Lath, a case that infuriates me each year but seems necessary, given that, as the Authors note, some courts adhere to the "four corners" or "appearance" test to determine whether the contract is integrated.  The case involved a  pre-contractual oral promise to remove an icehouse from a neighboring property in connection with the sale of a home.  New York's Court of Appeals concluded that the oral promise was collateral, but should have been included in the written agreement, and the Court of Appeals thus allowed the seller to break a promise that nobody doubted was made.   I am bothered by the fact that Judge Cardozo concurred in Mitchill, and people less enamored of him than I am point out that he could be quite formalist. 

I see no reason for such harsh characterizations.  I think the real problem with Mitchill is that Judge Cardozo didn't write it.  If he did, I'd like to think he would have pointed out that, notwithstanding the Court's finding that the promise about the icehouse was collateral to the agreement to convey the property, it nonetheless was part of the integrated agreement because there was no separate consideration relating to the removal of the icehouse.  For that substantive reason, the promise to convey the icehouse should have been part of the written agreement and was not a "natural omission," even if it was outside the "scope" of the written agreement.

The Authors helpfully explicate the UCC's avoidance of the term "integration" in Article 2's PER provision § 2-202.  The doctrinal challenges resurface however, as § 2-202 speaks of a "final expression of agreement" and §2-202(b) speaks of "a complete and exclusive statement of the terms."  The former becomes a rough analogue of partial integration, while the latter corresponds to "complete integration."  Contradiction of a written agreement is always impermissible.  However, parol should be admitted to supplement a final agreement but not a "complete and exclusive" agreement.  Other forms of extrinsic evidence (trade usage, course of performance, course of dealing), which the Authors call "invisible evidence," is admissible, unless "carefully negated."  An ordinary merger clause will not negate such evidence.

In a negotiated contract between sophisticated parties, I have no problem with the operation of merger clauses, but they are an outrageous trap for the unwary if there are bargaining asymmetries.  

Solar PanelsI offer a real life example.  We are having solar panels installed on our home.  I met with the installer, and there are a lot of contingencies.  Will the Historic Preservation Society (we live in a historic district) allow the installers to put up the panels as they propose?  Will we need a new circuit box or just an additional panel to handle the excess load?  Was our generator installation up to code or will the electrician need to attend to that?  You get the idea.  We talked through these matters and how we would address them as the work proceeded.  Then the installer presented me with a 20+-page form contract with a merger clause that did not address everything we had talked about. 

If I were not a contracts professor, the merger clause would have meant nothing to me, but even knowing what I know, I think the options are limited.  I could have explained to the installer that I'm not comfortable with the merger clause, which does not reflect our oral agreements.  He's not an attorney, so he might happily rip it out.  In the alternative, not being an attorney, he might think, "I don't know what this thing does, but I know I need it."   If he was able to consult with the lawyer who drafted it, the lawyer would likely insist on keeping it in.  Or, if the lawyer were more enterprising, they might offer to draft language reflecting all of our various oral agreements.  The lawyer could earn a good income through such means, but the parties would not really be better off than we would be in a CISG world where evidence is admitted and given the weight that it is due.  Contracts law assumes that writings are more authoritative than oral agreements.  But we know that most people do not read form contracts, but they give a lot of weight to oral agreements or representations.

That said, Corbin on Contract Drafting is very up-to-date.  It includes a section on the new Restatement of Consumer Contracts Law § 8, which provides that a standard contract term is not a final expression of the agreement if it "contradicts, unreasonably limits, or fails to give the reasonably expected effect to a prior affirmation of fact or promise by the business."  The Authors note that Comment 1 to the Restatement indicates the Reporters' intent to replicate the impulse of R.2d § 211, which bars the enforcement of terms where a drafting party has reason to believe that the other party would not have manifested assent if they knew that the writing contained that particular term.  I think the Restatement of Consumer Contracts goes beyond the R.2d and may be helpful to consumer advocates.  As the Authors note, only Arizona has followed R.2d § 211.  Time will tell if the new Restatement moves the ball at all.

One of the challenges in teaching the PER is that evidence of an affirmative defense or of a condition precedent is admissible notwithstanding the PER.  The problem is that I have not taught defenses or conditions precedent by the time I get to the PER.  If I introduce those topics so that students will have a complete version of the rule, they will want to talk about legal doctrines that they have not yet learned in answering questions about the PER.  That's a significant danger, as students love to talk about fraud, but their discussions are rather a mess if they don't know the elements of the defense as a matter of contracts law.  But the alternative is also problematic.  If I don't mention those limitations to the scope of the PER, they haven't learned the complete doctrine.  Damned if you do; damned if you don't.  

On the subject of the fraud exception to the PER, the Authors include a rather lengthy section, with several case studies addressing attempts to contract around the fraud exception.  These clauses are called "no reliance provisions," and fortunately, it seems that court regard them with great skepticism.

I recommend this chapter to folks who, like me, struggle each year to present the PER in a way that students can follow.  It is clear, comprehensive, and up-to-date.  It presents the material in a way that is easy to follow, which is very high praise, given the complexities, nuances, and layers of the material.

January 8, 2024 in Books, Commentary, Recent Scholarship, Teaching | Permalink | Comments (0)

Wednesday, October 25, 2023

Gigi Tewari on Incorporating Narrative Justice into Teaching Contracts & Commercial Law

Contracts and business law professor Gigi Tewari of Widener University Delaware Law School spoke at the Roger Williams School of Law's Integrating Doctrine & Diversity Speaker Series.  Professor Tewari discussed  different ways diversity, equity, and inclusion pedagogy can be incorporated into business and contract law classes.

Here's a video of the session, with Professor Tewari starting just under 7 minutes in.  Contracts Profs might be especially interested in her take on Lucy v. Zehmer, but lots of great contributions here throughout.

October 25, 2023 in Famous Cases, Teaching | Permalink | Comments (0)

Monday, October 23, 2023

Can You Recover An Engagement Ring If You Are Already Married When You Proposed?

PaulaMy Associate Dean, Paula Dalley (left),  abandoned her usual haunts, allowing the steady stream of tasks, duties, distractions, requests, alerts, and demands, each accompanied by its own unique levels of exigency, to accumulate unmolested behind her, much as catastrophes mount behind Paul Klee's Angelus Novus as described by Walter Benjamin in imagining the Angel of History.  She appeared in my very office unannounced, and shorn of the dignity and authority in which she is habitually cloaked, and handed me a piece of paper so thin and transient that it was already becoming  brittle and yellow, although it was only a couple of months old.  It was a page from some obscure digest of the sort that private law scholars of a certain age are wont to peruse (in the manner of its ancient usage).  "Maybe this is something you would want for your blog thing," Dean Dalley proposed. 

And yet that humble sheet harbored a brilliant gemstone.  

The case involved a dispute over an engagement ring, which is a topic about which I posted not so long ago, recounting the very dishy case of Johnson v. Settino.

Summarizing the case of Campbell v. Tang, the digest read:

A gift given by a [donor] to a [donee] on condition that [the donee] embark on the sea of matrimony with [the donor] is no different from a gift based on the condition that the donee sail on any other sea. If, after receiving the provisional gift, the donee refuses to leave the harbor, -- if the anchor of contractual performance sticks in the sands of irresolution and procrastination -- the gift must be restored to the donor.

Alas, that part of the opinion was a quotation from Pavlicic v. Vogtsberger, a Pennsylvania Supreme Court case from 1957.  But Campbell v. Tang ain't bad, for those who like this kind of case.

Mrs. RochesterThe couple met through  Mr. Campbell represented that he was divorced.  The couple met in 2016, were engaged in 2017, and started living together at some point before the  wedding date, which was scheduled for early 2018.  At the time of their engagement, Mr. Campbell presented Ms. Tang with the diamond engagement ring and necklace at issue in the case.

Mr. Campbell requested that Ms. Tang sign a prenuptial agreement, and she eventually retained a lawyer to advise her on that matter.  It was her attorney who discovered that Mr. Campbell was in fact still married.  Ms. Tang broke off the engagement and left the couple's shared residence, apparently never having cracked the house's many mysteries: an unexplained piece of red fabric hanging from the open window of an abandoned upper room, her future husband's bed set ablaze during the night, the dour house attendant who guarded the third- floor room off the gallery, and the room itself, which Ms. Tang never dared approach.  

You think the parallels between this case and Jane Eyre wholly invented?  Well get this!  Mr. Campbell explained that, while he and his wife were long separated, he could not divorce her because she needed to retain his healthcare coverage.  He also liked the extra tax exemption he derived form their continued matrimony.  Okay, I admit it.  There was no reference in Jane Eyre to the tax advantages of having Bertha Mason residing in Mr. Rochester's attic. Not exactly Gothic, that.

Ms. Tang retained her engagement ring and accompanying necklace when she broke off the engagement.  After trial, the jury allowed Ms. Tang to keep both items.  But Pennsylvania is not Massachusetts.  As readers may recall, in Massachusetts, courts decide engagement ring disputes by determining which party was "at fault" for the breakup.  Pennsylvania adopts one of the sensible rules available: engagement rings are conditional gifts that must be returned if the couple never weds.  

But wait (and this is sweet!).  The Pennsylvania appellate court reasons that the jewelry that Mr. Campbell gave Ms. Tang was not a conditional gift.  He was already married and so he lacked capacity to become engaged.  Thus no conditions attached to his gift to Ms. Tang, and she should retain it, notwithstanding their breakup.

I love this case.  I love it so much, I may teach it as a supplement to my section on incapacity defenses.  It is a case of first impression in Pennsylvania, and I don't know how often the issue arises, but it provides an interesting exploration of the concept of capacity.  Also, it might be an opportunity to discuss legal realism with students.  Is the Pennsylvania court inventing a rule because it doesn't think people should lie to their betrotheds about their marital status?

October 23, 2023 in Recent Cases, Teaching | Permalink | Comments (5)

Friday, October 13, 2023

Weekend Frivolity: Students Can Do Stuff!

Screenshot 2023-10-08 at 6.59.44 AMChristine Farley shared with us the movie poster at right.  You may be thinking, "Wait a tick, I don't remember that movie poster.  Nor do I remember that movie!"  Or you may be thinking, "I don't even remember that case."  Well, I didn't know the case either, but after seeing the poster, I really wanted to see the movie,  I then learned that the poster was just something Professor Farley's students created and not an actual movie.  I decided that reading the case would be the next best thing.

It seems that it is a more up-to-date and same-sex version of Marvin v. Marvin and Hewitt v. Hewitt,  We once called these "palimony" cases, but I don't know what they are called now.  In Mitchell v. Moore, Mitchell moved from South Carolina to Pennsylvania to be with Moore.  He also worked on Moore's farm.  Moore made various representations relating to compensation for labor, devise of property, and return of contributions to an antique business and a property on Amelia Island Florida.  After thirteen years, the relationship ended, and Mitchell sought to enforce Moore's pledges.  

A jury found for Mitchell based on unjust enrichment and awarded $130,000.  As in Marvin, the court found that the benefits that Mitchell derived from his ability to live rent-free on Moore's property more than compensated for the lack of wages paid.  Moreover, Moore's promise to leave his property to Mitchell was a gratuitous statement of future intentions.  The court does not address the antique business or the Florida property.  Perhaps a sub-plot in the movie?

October 13, 2023 in Contract Profs, Famous Cases, Teaching | Permalink | Comments (0)

Tuesday, October 3, 2023

Meanwhile, in Contracts-by-Emoji News

Akinkugbe CurrieWe started this academic year of blogging with a report on emojis as acceptance in a case from Saskatchewan.  ContractsProfs have begun teaching the case, and students are saying 👍 or more likely "of course emojis are acceptance -- how else would you do it?"  Professors Olabisi D. Akinkugbe (left) & Robert J. Currie (right) have teamed up to publish the first scholarly treatment of the case in the Dalhousie Law Journal.  

But that is not the end of our emoji-as-acceptance news.  Stephen Sepinuck will not let those Canadians lay claim to being home to the first North American court to recognize emojis as acceptance.  He has shared with us Lightstone RE LLC v Zinntex LLC, in which New York's Supreme Court, Commercial Division addressed the issue in the early days of emoji-as-acceptance back in 2022.

The case involves about as clear a breach of contract as you can find.  Plaintiff Lightstone Re (Lightstone) contracted to purchase $2 million worth of personal protective equipment from Zinntex LLC (Zinntex) in April 2020.  Zinntex did not perform.  In June, the parties agreed that Zinntex would return $1,475,000 to Lightstone, which the court characterizes as the full amount owed.  The amount was to be paid in four installments, but only $475,000 was paid.  Lightstone alleged an executory accord to which Zinntex had no defense and sought the $1 million yet to be paid.  Zinntex argued that the parties' exchange of text messages did not evidence an agreement.

GoldmanThere is a delicious irony to the case.  Zinntex's principal was quite insistent that he would not give a personal guarantee and would not "sign anything," insisting that he just needed more time.  But then when Lightstone's principal texted the parties' agreement of four monthly payments totaling $1,475,000 and Zinntex's principal responded ten minutes later with a thumbs-up emoji, he may have in fact signed something.  The court references some sources, including an article by friend of the blog Eric Goldman (left), on the subject of whether emojis can evidence a contract.  Alas, the court did not decide whether Zinntex's principal's thumbs-up emoji counted as acceptance.  Rather, the court found for Lightstone because Zinntex obviously owed the money and that debt was evidenced by other writings sufficient to satisfy the statute of frauds.

October 3, 2023 in Contract Profs, Recent Cases, Teaching | Permalink | Comments (0)

Thursday, September 21, 2023

Dishy Case About Recovery of an Engagement Ring with a Coda on Promissory Estoppel

This week, I learned from Professor Alexandra Jane Roberts that instead of following the Grateful Dead, people now follow cases involving attempts to recover rings from failed engagements.  We got a live one out of Massachusetts.  

Fare Thee Well Soldier Field
Fans gathering in Soldier Field, perhaps to hear a new Engagement Ring Case read . . .  
Image by Shelby Bell from Omaha, NE, US, CC BY 2.0 , via Wikimedia Commons

According to Justice Singh of the Appeals Court of the Massachusetts Superior Court, writing in Johnson v. Settino, "If the contract to marry is terminated without fault on the part of the donor[, the donor] may recover the ring."   Fair enough, but what does "without fault" mean?  The Superior Court awarded the ring and one wedding band to Ms. Settino, but a divided panel of the Appeals Court reversed.  And now, . . .

TeaThe parties began dating in 2016. Mr. Johnson paid for vacations within the U.S. and abroad and bought many gifts for Ms. Settino, always providing her with receipts.  She wanted dental implants (below, left), and he paid for the first stop in the process, the extraction of her upper teeth.  After a year, he asked her parents for permission to marry her and then popped the question, to which she said yes, while slipping a $70,000 engagement ring onto her finger.  He also sent he two wedding bands, again with receipts.

Dental Implant
Isn't it romantic?

Once they were engaged, Mr. Johnson found some things about Ms. Settino troubling.  She became vexed with him about trivial things -- a spilled drink, or the way he ate his oysters.  She seemed not to appreciate his accomplishments, and he did not think she supported him when he got a cancer diagnosis.  She would call him a "moron" and storm off if he tried to prevent her from gumming his arm with her toothless mouth.  Okay, I made that last bit up, but the rest is really in the case. 

After Ms. Settino bragged to Mr. Johnson, "I can get a man whenever I want," he grew concerned that she might not be entirely faithful to him.  He found what he took to be evidence of an affair on her cellphone and confronted her.  Soon thereafter, he ended the engagement by voicemail, as one does.  The trial court found that he was mistaken in his suspicions of her fidelity, and so concluded that he was at fault for the demise of the relationship.  Ms. Settino was awarded the ring, and Mr. Johnson was also directed to pay for the completion of her dental implants, as he had promised.

On appeal, the court spends many pages reviewing the approaches that courts take to such matters.  Some courts sensibly treat engagement rings as either revocable conditional gifts or irrevocable inter-vivos gifts.  I can live with either of those rules.  Other courts try to determine who was "at fault" for the break up.  At fault might be determined by establishing which party broke off the engagement, which is arbitrary and idiotic, or by determining, regardless of who broke off the engagement, whose fault it was that the parties did not proceed, which is far more idiotic.  Who goes to court to determine why a couple broke up?   And why is there no Seinfeld episode covering the subject?  

Massachusetts opts for the most idiotic approach.  It's not the Appeals Court's fault.  They have to play the precedential hand they were dealt.  The trial court determined that Mr. Johnson was at fault, because he falsely accused Ms. Settino of being unfaithful to him.  The Appeals Court reversed.  Even granting that she did not cheat on Mr. Johnson, Mr. Johnson had other reasons for ending the relationship.  Nobody should have to marry someone who judges them based on how they eat oysters.  

Justice Milkey, sensibly dissented in part.  While he did not think Mr. Johnson was at fault for the break-up, he would not disturb the trial court's finding that he was.  More generally, Judge Milkey notes, "Simply put, there is an inherent unseemliness to having judges, or juries, sitting in judgment of matters of the heart." Justice Milkey's conclusion seems spot on to me:

None of this is to say that I think the defendant here should have kept the ring. To the contrary, my own view is that she should have given it back. But why should my personal view on this issue matter? To me, the ultimate question this case poses is whether such issues should be resolved in courts of law, or instead left to the interplay between private conscience and social norms.

The court's reasoning on the dental implants is an object lesson in the vast gulf between how we teach promissory estoppel and how courts treat it.  The trial court ordered Mr. Johnson to pay for Ms. Settino's dental implants because he breached a promise to do so.  He did not challenge that ruling on appeal.  The promise was binding because she relied on it in having her upper teeth removed.  Now that's reliance!  The court drops a footnote explaining why this is the proper result under Massachusetts law:

Val RicksThe plaintiff has not challenged the trial judge's finding on this point. See Rhode Island Hosp. Trust Nat'l Bank v. Varadian, 419 Mass. 841, 849 (1995) ("When a promise is enforceable in whole or in part by virtue of reliance, it is a 'contract,' and it is enforceable pursuant to a 'traditional contract theory' antedating the modern doctrine of consideration" [citation omitted]).

This bugs me.  I doubt that promissory estoppel predates consideration, but I know somebody who could tell us for sure 👉.  I don't think it is best understood as a contract or as a "contract."  But Val Ricks (right) has done great work showing that most courts do not follow the grand design of R.2d § 90, and award expectation damages as a remedy for promissory estoppel, effectively treating it no differently from how they would a breach of contract.  Val applauds this development as predictable, practical, and just.  I find it dissatisfying as inconsistent with the majestic theory of damages as laid out by Fuller and Perdue.  My attitude towards Val's "predictable, practical, and just" is akin to Einstein's horror of quantum mechanics.  I find this form of justice aesthetically disquieting.

September 21, 2023 in Contract Profs, Recent Cases, Recent Scholarship, Teaching | Permalink | Comments (0)

Monday, August 28, 2023

Force Majeure Clause Litigated in South Texas

Winter_Storm_Uri_on_2-16-2021This case has potential as a teaching case, but I'm not sure what you would use it for.  It has a little bit of everything -- interpretation, trade usage evidence, force majeure clauses, impossibility and impracticability, and UCC 2-615.  I'm troubled by the court's reliance on dictionary-fueled textualism (or what Dave Hoffman and Yonathan Arbel have called "the most artisanal and articulated form of textualism available in late-stage Capitalism").  Ultimately, I think the court reached the right outcome through other interpretive methods, including considering negotiating history and evidence of trade usage provided through expert testimony.  I'm curious to hear what other ContractsProfs think of this case as a teaching case. 

LNG Americas., Inc., formerly Cailip Gas Marketing, LLC, (LNG) brought a breach-of-contract action against Chevron Natural Gas, a division of Chevron U.S.A., Inc. (Chevron).  The claim arose in connection with a contract obligating Chevron to deliver 90,000 million British Thermal Units (MMbtus) of natural gas each day to Katy, Texas.  In February, 2021, Chevron, citing "unprecedented low temperatures causing freezing or failure of wells, plants or lines of pipe" caused by Winter Storm Uri (pictured, right) did not deliver 628,913 MMbtus.  Chevron invoked the contract's force majeure clause.

In April of this year, the U.S. District Court for the Southern District of Texas granted summary judgement to Chevron in LNG Americas, Inc. v. Chevron Natural Gas.  

As presented by the court, the force majeure clause reads in relevant part:

Force Majeure" . . . means any cause not reasonably within the control of the party claiming suspension . . . includ[ing], but not limited to, the following: (i) physical events such as acts of God, landslides, lightning, earthquakes, fires, storms or storm warnings, such as hurricanes . .. floods, washouts . . . (ii) weather related events affecting an entire geographic region, such as low temperatures which cause freezing or failure of wells or lines of pipe . . .  Neither party shall be entitled to the (Force Majeure provision] to the extent performance is affected by any or all of the following circumstances: . . . the party claiming excuse failed to remedy the condition and to resume the performance of such covenants or obligations with reasonable dispatch . . .

The clause was subject to three special conditions, including (#2) that Chevron's "delivery obligations under this Transaction Confirmation shall not be excused by a loss of, or fluctuations in, production from any particular Seller's, [sic] gas producing region or wellhead.In addition, excuse was only available (#3) "to the extent that such event or circumstance directly prevents or restricts delivery by Seller or receipt by Buyer of Gas at the applicable Delivery Point."

Natural Gas Drilling
By Loadmaster (David R. Tribble) - Own work
CC BY-SA 3.0

Citing these special conditions, LNG argued that Uri did not prevent Chevron from purchasing gas elsewhere and meeting its contractual obligations.  In order to determine the scope of special condition #2, the court turned to a dictionary to look up what "any" means.  Jesus wept.  Textualism can be so pathetic.  LNG's expert admitted that "any" and "any particular" essentially mean the same thing, and that violated that canon of construction against surplusage.  We should assume that the word "particular" was in the contract for a reason. The parties' negotiating history clarifies that reason.  LNG sought a broader exception to the force majeure provision:

Neither party shall be entitled to the benefit of the provisions of Force Majeure to the extent performance is affected by . . . (v) the loss or failure of Seller's Gas supply, including, without limitation, depletion of reserves or other failure of production 

Chevron rejected that language.  Not all loss-of-production events were subject to special condition #2.  

With respect to special condition #3, the court once again relies on dictionaries to resolve the troubling meaning of ambiguous terms like "delivery" and "direct."  It concludes that Uri directly restricted delivery at the applicable delivery point.  From LNG's perspective, nothing restricted such delivery if Chevron could have procured gas from some source unaffected by Uri.  The court is not interested.  The court then reasons that, assuming Chevron's narrow reading of special condition #2 is correct, as it does, a broad reading of special condition #3 would render special condition #2 superfluous.

 The court presents LNG as requiring delivery if at all possible.  The court concludes that Chevron could invoke force majeure so long as its "reasonable efforts" could not remedy the problems with delivery.  The court relied on expert testimony that suppliers did not generally assume responsibility for meeting contractual demands by purchasing replacement gas on the spot market.  In any case, the spot market at the relevant times increased between 5200% and 12,800% over the contract price.  Then, when the price on the spot market returned to reasonable levels, LNG mysteriously declined available gas.  Finally, Chevron could also rely on Texas's version of UCC 2-615, which permits suppliers to allocate limited resources to buyers in a fair and reasonable manner.

The court concludes that Chevron's force majeure defense is unambiguously permitted by the contract.  I wonder if generative interpretation would yield the same result.  If so, I suspect it would not be based on the meaning of any of the terms that the court thought it needed to look up in the dictionary.  Rather, I think the negotiating history and trade practices made clear that Chevron did not agree to limit its force majeure excuse to the extent LNG claimed.

August 28, 2023 in Recent Cases, Teaching | Permalink | Comments (0)

Wednesday, August 23, 2023

Advice to 1Ls: Course Correction

NSL PodcastI was listening to one of my favorite podcasts this morning, the National Security Law podcast, Episode 241, "Let's Barbie."   The hosts,  Bobby Chesney (below left) and Steve Vladeck (below right), started with some words of advice for new law students.  I have my own version of this that I deliver to our 1Ls at OCU Law, and I was struck by the near-complete lack of overlap between when they said and what I say.  These two are more than merely two professors with a podcast (and a Twitter account).  They are serious scholars (see, and read! e.g., Steve's new book on the Supreme Court's Shadow Docket) who are committed to their institutions (Bobby is now Dean Bobby, but both evidence their commitment to teaching in every podcast).  

So, they started with wise words about self-care: Check in weekly with family and close friends, they advise.  Don't disappear into the four-month black hole of the first semester of law school.  And then, they advised students not to panic if it seems like other students seem to be grasping the material more quickly.  They are all there for a reason.  Things tend to even out over the course of the first semester.  This is great advice, and I said very little of it.  That was an error, but I come by it honestly.  We teach at different institutions, and I have different concerns about the dangers my students face.

Bobby Chesney Vladeck MemeI find that the students who get in the biggest trouble are students who do not realize, or whose lives do not allow them to address, how much more demanding law school is than college.  I worry, because I have experienced this, about students whose parents think they can rely on them as back-up childcare providers or miss class to go for airport runs to pick up out-of-town relatives who are coming in for an anniversary celebration.  I worry about students who live at home or are married with young children and cannot carve out daily a quiet space for extended periods of intense study.   So my first bit of advice to my students is that they need to have frank conversations with family and close friends.  They need to explain that they are not "just a student."  They have a full time job and then some.  Succeeding in law school will take their full time and attention, and family and friends need to accommodate that.  My students who do poorly in law school do not lack intelligence or drive.  They lack the time and freedom to give themselves the opportunity to succeed.

But listening to Steve and Bobby, I realize I need to temper my message.  Law students need not be ascetics.  Self-care is also important to student success.  Fortunately, I have great colleagues, including staff, whom I trust communicated that message to our entering class.   Nonetheless, I am sometimes told that my students for some reason take me very seriously.  I need to let my students know that they can allow themselves some down time and enjoy the benefits of friends and family for support and companionship.  They need not feel guilty about that or think that they would thereby be disappointing my expectations.

August 23, 2023 in Teaching, Web/Tech | Permalink | Comments (0)

Tuesday, August 22, 2023

Teaching Assistants: Understanding Contracts by Jeffrey Ferriell

I have previously shared here general advice that I communicate to my students about outside materials.  Part I of the advice is here; part II is here.  The short version is as follows: you don't need to consult outside materials to do well in my course.  I provide reading materials adequate for everything I cover in the course.  In addition, I provide practice multiple choice, practice short answer questions and essay questions, including questions from past exams.  

However, some students want more, and so they want me to recommend study guides.  I don't use study guides, I tell them, so I don't know which to recommend.  To the extent that I look into them, they all seem good, but they also organize the material differently from how I do, and they cover things that I don't cover.  I worry that students working on their own might panic, thinking they missed some vital portion of the course, when in fact, the study guides tend to be more comprehensive than I can be or choose to be.  

Understanding KsJeffrey Ferriell's Understanding Contracts (5th ed.) is no exception.  In fact, it is both a very serious work of scholarship and provides a great deal more coverage than students need for course purposes.  But that is not a bad thing. It is a learned, comprehensive treatment of the material, a readable hornbook with narrative discussions of relevant caselaw and hypos.  The publisher sent me the book and asked me to review it for the blog.  Publishers take note: I am always happy to feature contracts books on the blog, and so I agreed, but it did take me eight months to get to it.

I could recommend this book to my students with the utmost confidence that they would learn a great deal from it, and it would help them to firm up their grasp of contracts doctrine.  I would however caution them that it covers a lot of material that I don't cover or don't test on.  They should, for example, read the book's introduction only when they are preparing for exams, as it references a lot of doctrine that they won't understand until they are near the end of the course.  They can skip the very interesting part of the introduction about the history of contract law, unless they want to read it for their own edification.  I will not be testing their knowledge of Roman law or of common law writs.  A lawyer speaking in the presence of a judge, a supervising attorney, or a client usually wants to come off as the second-smartest person in the room, perhaps with some relevant specialized knowledge that the smartest person in room will easily grasp.  Armed with all the knowledge that Professor Ferriell has to share, students might come off as, hands down, the smartest person in the room, and who wants that?

Topics are handled with scrupulous comprehensiveness.  So, for example, Professor Ferriell does not treat the Restatement's approach to consideration as the only relevant approach.  Courts, he observes, will still look for a benefit or a detriment to each party, even though the Restatement tells us that all we need for consideration is a bargained-for exchange.  The book covers subject-matters that I don't but that may serve students well in their preparation for the bar exam.  For example, it discusses accord and satisfaction, recitals, and guaranty contracts, as well as consideration in connection with topics like conditions that I would reserve for separate treatment.  The result is a weighty sixty-page chapter on consideration.  It's a great read for me.  I would want to go through it with a student and highlight the parts they can skip.  And if they tried to read it in connection with my very brief presentation of consideration, they would understand very little of it, but they could come back to it and profit at the end of the course.  Similarly, I would advise my students that they can skip the first eight pages of the thirty page chapter on promissory estoppel. 

Because the bar exam loves exploring the details of formation, the statute of frauds, and the parol evidence rule, the loving attention that Professor Ferriell lavishes on those topics in Chapters 4-6 repays careful reading.  He also devotes some attention in Chapter 6 to other interpretive issues, including canons of construction.  I spend a day on canons of construction in my contracts course, and many students struggle, in part because of their aversion to Latin.  But they sometimes tell me that the introduction to the canons helped them when they took Legislation and Regulation, so I am glad that Professor Ferriell devotes six economical pages to that topic.  

The fifty-plus page long chapter on warranties, including warranties of title and habitability suggests that this book can be used with Sales courses as well as with the first-year contracts course.  Many standard casebooks for the first year course leave out warranties entirely and certainly don't cover title or habitability. Again, it is wonderful to have all of this material, well -organized and well-presented in one handy book.  Students need to be able to distinguish topics they need to know for a course and topics they will want to know for a full life in the law.

The remainder of the book proceeds more or less as one would expect, with chapters on conditions, performance and breach, defenses, excuses, expectation damages, reliance and restitution damages, agreed-upon remedies and limitations on remedies, equitable remedies, third-party beneficiaries, and assignment and delegation.  All of the chapters are comprehensive in scope; all are much more than a student would need to prepare for a standard contracts course.

None of this is meant as a criticism of the book.  I read it both with admiration and with an eye to how my students could use it.  From the perspective of a contracts teacher, I am happy to have the book in my library.  In addition to being an excellent and detailed compendium of contracts doctrine, the book also provides useful examples, some drawn from case law, some hypothetical, and one can always use a fresh case or hypo to help illustrate some nook or cranny of a well-traveled doctrine.

August 22, 2023 in Books, Contract Profs, Recent Scholarship, Teaching | Permalink | Comments (0)

Monday, August 21, 2023

Blind Sided

On the first day of class each year, I tell my contracts students about the blog.  They may or may not think that they are interested in contracts law, but I think it is good to introduce them to the idea that the whole of existence can be considered through the lens of contracts law, which is what we do here.

Screenshot 2023-08-21 at 8.44.33 AMAnd then, without warning, on the second day of class, I was blindsided when OCU 1L Sydney Freshwater (left) asked me to blog about suit brought by Michael Oher (below right) challenging the conservatorship set up purportedly on his behalf in 2004.

I protested that I sat out the whole Britney Spears thing, and as a result, I know nothing about conservatorships.  Sydney was unfazed and insistent.  The world needs to read the contracts angle on all of this, she scolded.  Well here goes.

According to writing in Vulture, Mr. Oher was not adopted by the Tuohy  family as he and millions of movie-goers believed.  Rather the Tuohy's set up a conservatorship that provided, among other things, that Mr. Oher could not enter into any contracts without their direct approval. 

Jeffrey Beall, CC BY 4.0, via Wikimedia Commons

Mr. Oher claims that he was told that the conservatorship was the legal equivalent to an adoption.  Adoption itself was not an option, he was told (falsely, according to the article), as Mr. Oher was over 18 at the time the conservatorship was established.  No conservatorship was necessary, he now claims, as he suffered from no disability, and he claims that the conservatorship cost him millions of dollars.  He wants the conservatorship to be ended, and he seeks an accounting.  The Tuohys were paid $225,000 each (it's not clear if that is for husband and wife alone or also for their two children) plus 2.25% of profits on the movie The Blind Side, which grossed over $300 million.  

They respond to this suit by a man they "love as a son" by calling it "hurtful and absurd."  They are absurdly rich.  So rich, apparently, that their attorney thinks that hundreds of thousands in up-front payments from a movie studio plus perhaps millions in post-production profits amount to "a few thousand dollars in profit participation payments."  It's easy to lose track of one's spare millions when you are just throwing them on the pile.  They characterize his lawsuit as "ludicrous" and dismiss it as an attempt to drum up interest in his new book.  Gosh, they are so loving!  Imagine what they would say about him if they had actually adopted him.

Mind you, there is a lot going on here that doesn't add up.  It seems odd that Mr. Oher has gotten this far in life without noticing that the Tuohys were necessary parties to his multiple contracts over the years.  At no point did his agent tell advise him that he didn't need the Tuohys around?  Does he need to check with them before he signed with multiple NFL teams? Closed on a house?  Agreed through clickwrap to a website's Terms of Service? Bought a car?

With both parties here are well-resourced, one hopes that this case will be quickly resolved through mediation.  Otherwise both sides might be blindsided and made worse off by attorneys fees.

August 21, 2023 in Current Affairs, In the News, Recent Cases, Sports, Teaching | Permalink | Comments (1)

Wednesday, August 16, 2023

Duncan Kennedy on Williams v. Walker-Thomas Furniture

KennedyI'm am always happy to have an opportunity to look at a familiar case with fresh eyes, and Duncan Kennedy's eyes are especially good when it comes to scanning a horizon and bringing objects near and far into focus.  In The Bitter Ironies of Williams v. Walker-Thomas Furniture Co. in the First Year Law School Curriculum, newly published in the Buffalo Law Review, he sets out his aims clearly and directly.  

The article is, Professor Kennedy tells us, part of a larger project which. . .

defends the range of legal initiatives that legal services lawyers and clinicians, with progressive lawyers and academic allies, have undertaken on behalf of poor Black neighborhoods against the perennial neoliberal accusation that they "hurt the people they are supposed to help.”

It does so while contributing to critical race theory, the Black capitalism critical approach, and the critical legal studies literature on law’s distributive role in economic and social life.  This essay focuses on the teaching of Williams v. Walker-Thomas in first-year courses.  First-year students who read Williams (and most do) get a large dose of the argument that progressives who challenged the cross-collateralization clause at issue in Williams actually make it harder for poor people to buy furniture.  Professor Kennedy shows that litigating cases like Williams actually helps the residents of poor Black neighborhoods.

Williams v. Walker-ThomasThe article laments that progressives have not responded more robustly to the neo-classical law and economics critique of Williams.  The argument is familiar to those of us who have been teaching Williams, and many casebooks incorporate it, at least in the notes.  Walker-Thomas's cross-collateralization clause made it economically feasible for the store to provide goods to low-income populations lacking credit.   If we allow activist judges like Skelly-Wright to deem such clauses unconscionable, the result will be that people without credit could only buy furniture at very high rates of interest or with other extremely onerous terms.

Professor Kennedy then provides the missing robust response to the neo-classical approach and argues that the litigation strategy and liberal judicial interventions from 1965-1980 were effective in improving living conditions in poor Black neighborhoods.  He takes on the economics and law approach in its own terms, explaining that Walker-Thomas operated in an oligopolist market with a captive consumer group unable to shop for alternatives.  Once one understands the economics of that particular market, one can argue based on economic principles was that the main effect of litigation like Williams is that businesses like Walker-Thomas will become a bit less profitable than they otherwise would be.  The difference would not be significant enough to alter their basic business model.

The piece is filled with nuggets from the case that help flesh out the socio-economic setting in which Ms. Williams bought furnishings from Walker Thomas.  Much of this information is gleaned from prior scholarship on the case, but Professor Kennedy reorganizes the material and repurposes it for deployment in his argument that poor neighborhoods benefit from litigation like Williams v. Walker Thomas.  The effect of eliminating the cross-collateralization clause would be that poor consumers would have to pay a slightly higher price for their goods.  However, Professor Kennedy concludes, "[T]he consequences of reducing the rate of blanket repossession, with its obvious material and psychological cost to the family affected, is I would say obviously worth the tiny price increase and the lost monopoly profits on the seller’s side of the bargain." 

While eliminating the cross-collateralization clause might have hurt some small businesses, Walker-Thomas was not one of them.  It had annual sales of $4 million, and it was exploiting its position in the oligopoly to make such high profits that it could easily absorb the cost of profits lost through the elimination of the clause.

But the cross-collaterization clause was just one component of a multi-pronged strategy that various businesses devised to extract surplus capital on exploitative terms from poor neighborhoods.  The advocacy that resulted in the Williams decision led to legislative reforms that prohibited many of these predatory practices.  But such practices arise in new forms all the time, and the argument that progressive advocacy "hurts the people it is trying to help" stifles attempts to address those new forms.  Professor Kennedy capably deploys the methods of conventional neo-classical economics to show that progressive advocacy helps the people it is trying to help and only hurts the businesses that serve those people by reducing their profits but allowing them to continue to operate.

Careful readers might have noted that Professor Kennedy cites to Deborah Zelesne's guest post on the blog!

August 16, 2023 in Contract Profs, Famous Cases, Recent Scholarship, Teaching | Permalink | Comments (2)

Tuesday, August 15, 2023

The State Secrets Privilege, Contracts, Potential Fraud, and the First Circuit

Last week, I taught a one-week "premester" course on the state secrets privilege (SSP).  I taught it last year, and my libertarian students are all delighted as their communitarian professor gives them new reasons to distrust the government.  This year, we featured a guest appearance (via video conference) by the incomparable Dean Bobby Chesney as a special treat for our closing session.

LincolnWe start with contracts material -- the Totten doctrine, a post-Civil War case which provides that allegations that the government breached a secret agreement are non-justiciable.  The parties must know when they enter the contract that, with respect to it, their lips are "forever sealed."  Forever?  Over a century later courts were still applying Totten even to agreements with saboteurs.  Seems like sabotage does not stay secret long if you're doing it right.  Whatever.  

B-29_in_flightWe then move on to the SSP proper, which is an evidentiary privilege first recognized in United States v. Reynolds (1953).  There, the Supreme Court recognized a privilege belonging only the the government.  It excuses the government from its discovery obligations when disclosure of the material sought through discovery would pose a risk to national security.  In Reynolds, plaintiffs' decedents were civilian engineers killed in the crash of an Air Force B-29.   They sought a report on an investigation conducted by the Air Force.  The Air Force withheld the report, asserting the SSP (tardily, but whatever).  Without looking at the report (but whatever), which did not contain the sort of national security secrets the government claimed it did, SCOTUS upheld the SSP, and the case settled.  Decades later, when the report was declassified and relatives discovered that the government had misled the courts as to the contents of the report, they brought a coram nobis claim, which the Third Circuit rejected.  Even if the report contained nothing about the flight's secret mission, the Russkies might have learned from the report that B-29s fly in the air at a certain altitude.  Claim denied.  Whatever. 

If the case cannot proceed without the material subject to the privilege, the case must be dismissed.  More alarmingly, if the government cannot defend itself without being able to introduce evidence subject to the SSP, the case must be dismissed.  More alarmingly still, if a plaintiff seeks recovery from a private contractor, the government may intervene and assert the privilege and shut down the case, sometimes even on a pre-Answer motion to dismiss.  One such case made me so mad, I set aside my research agenda during a sabbatical and wrote a rage-fueled 90-page manuscript.  The SSP marches on notwithstanding.

In Sakab Suadi Holding Co. v. Aljabri, we go a step further.  I did not include this case in my course, and once I try to summarize the facts, I think you will understand why.  Sakab Saudi Holding Company (Sakab) is a Saudi government entity.  It alleged that Mr. Aljabri and his associates (collectively Aljabri) defrauded it of billions of dollars.  It seems that Mr. Aljabri was an agent of Saudi Arabia's former Crown Prince Mohammed bin Nayef, who has removed form office in 2017 and has been in detention since 2020.  In 2017 there arose a new Crown Prince over Saudi Arabia, which knew not Aljabri.  Litigation followed.

Sakab first brought suit in Canada where Aljabri resides, and where the agreeable Canadians froze Aljabri's assets worldwide and appointed a receiver for certain assets.  Sakab then filed a complaint in Massachusetts state court seeking to give effect to the Canadian order in the US.  Big mistake.

Classified documentAljabri had the case moved to federal court.  Once there, he had his own story to tell.  He too operated as a Saudi official, and he lawfully used the funds he received from Sakab to engage in counterterrorism activities in partnership with the U.S. government. 

To make a long story short, the U.S. government intervened, asserted the privilege, and shut down the U.S. litigation.  It did not do so by demanding that the litigation come to a halt.  Rather, it submitted in camera classified affidavits indicating that the U.S. government's interests would be endangered were Aljabri to seek to introduce evidence relating to "certain categories of information."  The courts could not say much more about the nature of these affidavits without disclosing the very information they government was trying to protect.  

Even thought the government did not ask for dismissal, that is what it got.  Both the district court and the First Circuit concluded that there was no way for the case to proceed without the materials subject to the SSP, nor could the court grant Sakab any of the preliminary relief it requested.  

To sum up: Sakab and Aljabri had a contractual relationship that may have involved transfers of billions of dollars.  We don't know what Aljabri did for Sakab, but it seems to have related to Saudi counterterrorism efforts, which seem to have been coordinated with U.S. national security agencies.  The U.S. government does not want any information relating to Mr. Aljabri and Sakab's joint activities to be disclosed in U.S. court proceedings because such disclosures would do harm to U.S. foreign relations -- in particular, the threatened harm is to the U.S. relationship with Saudi Arabia, one presumes.  But it was a a Saudi entity that initiated the litigation.  Seems to me that a sovereign state ought not to have its covert operations kept secret while also initiating litigation relating to those covert operations.  And so, perhaps no harm done if Sakab can get no relief in U.S. courts because of the SSP.  

Sometimes the secrets the government tries to protect through the SSP come out in foreign litigation.  We'll see how the courts in Ontario proceed.

August 15, 2023 in Commentary, Government Contracting, Recent Cases, Teaching | Permalink | Comments (0)

Friday, August 11, 2023

Weekend Frivolity: A Contracts Hypo from the X-Man (Formerly the Chief Twit)

This year, I think I may spin out some unilateral contract hypos with the help of this tweet

Screenshot 2023-08-06 at 8.12.47 AMWe can start by asking whether or not it is a real offer.  Is it sufficiently clear and definite?  I suppose we might wonder what it means to be "unfairly treated" by one's employer and who gets to determine what treatment counts as "unfair."  To whom is the tweet addressed?  Who is "we"?  Is it Mr. Musk, using the royal "we"?  Is it Twitter (no, I'm not going to call it "X")?  The use of "we" makes it seem like it is the corporation that is making the offer, but doesn't the corporation have its own Twitter account?  No limit?  Really?  At what point and through what means could it be effectively withdrawn?

Then we can imagine some scenarios . . . .

  • Can a party accept this offer if they worked for a private business and were disciplined when their employers discovered that they were behind a notorious website that made fun of the business and cost it millions in good will losses?  What if they weren't formally disciplined but everybody was cool and distant?
  • Can a party accept this offer if they had a government job and were disciplined when it was discovered that they were aggressively posting criticisms of the government under a pseudonym?  
  • Can a party accept this offer if they work for Tesla, SpaceX, or post-Musk Twitter?
  • Can a party accept this offer if they had signed a non-disparagement clause that specifically prohibited posting anything on social media critical of the employer?
  • What if your employment is at will?  What if the "unfair treatment" is that your contract was not renewed?

Evidentiary issues are likely to arise.  Would an employer be so unwary of potential First Amendment issues that it would say something along the lines of "we are disciplining you because of what we found on your social media accounts?"  Even if there were some discussion of social media accounts, couldn't an employer always claim that there were other grounds for the discipline?  So who has the burden of establishing, for the purposes of the offer that the "unfair treatment" was "due to"?

Finally, or perhaps this comes first, there is no cause of action for being treated unfairly by one's employer.  I have been an employee in many settings.  From time to time, in every setting, I have felt that I was treated unfairly by my employer, as did many of my peers.  Perhaps I have a very well-developed sensitivity to unfair treatment.  Nevertheless, in none of those situations did I choose to bring legal action against my employer.  Mr. Musk's tweet can be a game-changer for people like me.

So what if I contacted Mr. Musk and accepted his offer.  No, I was not planning on initiating a legal action against my employer.  I'm not sure what my cause of action would be, but I do post on social media in ways that my employer doesn't like, and as a result, I think people shun me, and the bosses pass me over for promotions.   Is Mr. Musk obligated to assemble a legal team and fund my legal bill without limit?

August 11, 2023 in Commentary, Teaching, Web/Tech | Permalink | Comments (0)