ContractsProf Blog

Reefer Brief: Illegality and Conditions Precedent in the Sale of Marijuana Business

J&J&D Holdings LLC (J&J&D) entered into an agreement to purchase a medical and adult-use marijuana cultivation business operated by Central Coast Horticultural, LLC (CCH) for $5 million. The transaction was subject to two conditions precedent. First, Donovan Wade, a party affiliated with J&J&D had to receive approval from the Michigan Cannabis Regulatory Agency (the “Agency”) for “prequalification status as a medical and adult use marihuana license holder in Michigan.” Second, J&J&D had to be satisfied after a due diligence review of the premises, the inventory, and the books. 

This is pretty exciting stuff.  I have struggled to make conditions interesting for my students. Here, we have a condition precedent and another condition precedent which is also a condition of satisfaction. And it’s about the sale of a pot farm. That all seems promising.

Unfortunately, in CCH Acquisitions, LLC v. J&J&D Holdings, LLC, U.S. Magistrate Judge Kimberly "Buzzkill" Jolson decided the case based on illegality.  The reasoning is straightforward, but the world of commerce in marijuana is confusing. CCH’s business was legal under Michigan law, but it was illegal under the federal Controlled Substances Act of 1970 (CSA). The only tough issue for the court was whether plaintiff could obtain any relief notwithstanding the agreement's fundamental illegality.

CCH first argued that the Court should order specific performance, but that avenue was foreclosed here. An order of specific performance would entail ordering J&J&D to purchase $500,000 worth of marijuana plants, which are a controlled substance, the sale of which would amount to a felony under federal law. In the alternative, CCH asked for damages, but the Court found that it could not disentangle any part of the transaction from the illegal business at its heart. This case is sort of the opposite of Carroll v. Beardon. There, the court treated the sale of a brothel as an on-going business as an ordinary and enforceable real estate deal. Here, the Court refused to disaggregate the lawful parts of the transaction from its core unlawful purpose.

CCH raised claims other than breach of contract, but it did not answer any of J&J&D’s arguments for why those claims should be dismissed and thus forfeited them. If it were to reach the merits, the Court noted, it still could not "order specific performance or otherwise get in the weeds of Plaintiffs’ marijuana business without transgressing the CSA.” I see what you did there, Judge Jolson. 

I suppose this means that people in the industry have to operate on the basis of gentlemen’s agreements. No court will enforce their agreements if they are not performed, so you want to operate at all times with the understanding that, if your counterparty breaches, courts will leave you where they find you. Imagine how bad things would look for CCH if J&J&D had insisted on taking possession of the inventory for the purposes of exercising due diligence before announcing that the entire contract was illegal and unenforceable. 

Teaching Assistants: Brian McCall’s “Learning from Mistakes"

As we transition into summer, I am planning to do some writing on contracts law, and not just on the Blog. Writing involves reading, and I have a pile of recent scholarship to work through on my way to finalizing my own thoughts. As I do so, I hope to post some “Teaching Assistants” columns more often than I usually do on the Blog. “Teaching Assistants” posts usually focus on scholarship that readers might find useful to spur new approaches to the doctrinal matters that we regularly cover in Contracts and Sale courses.

Today’s post is about Brian McCall’s Learning from Mistakes: A Quantitative Comparative Study of Court Decisions Involving the Excuse* of Contractual Mistake, forthcoming in the Florida State University Law Review and available for download from SSRN here. I have had my own struggles with teaching the doctrine of mistake. One challenge is that students become fixated on the test from beloved, older cases, Sherwood v. Walker and Wood v. Boynton, which I think are wrongly decided, as discussed here. Those old cases applied a different and, in my view, faulty test, which gets stuck in the students’ heads, and some then refuse to apply the Restatement 2d test.

Professor McCall (above left) teaches at the University of Oklahoma, and I am happy to give a shout-out to a fellow Oklahoman. Professor McCall’s research is empirical. He analyzes two sets of cases. The first set is comprised of 97 mistake cases decided between 1977 and 1979; that is, just before the completion of the Restatement 2d (R.2d). These are Professor McCall’s “Older Cases.” The second set is comprised of 235 mistake cases decided between 2017 and 2019 (the “Newer Cases”). He first reviews scholarship and treatises on the subject of mistake. Much of the older scholarship on the subject is despairing. In 2004, James Gordley provided the following learned gloss: “[S]ometimes a party who has made a mistake will obtain relief, and sometimes he will not.”

The R.2d seemed to make it easier for parties to claim mutual mistake, so long as they did not bear the risk of the mistake. The R.2d also added a section allowing for unilateral mistake, but the test for unilateral mistake is difficult to satisfy. Parties almost always bear the risk of their own mistake, so a party can only avail itself of a unilateral mistake defense when the facts are quite extreme. Either the mistake was so palpable that the other party must have been aware of it or the other party must have somehow been responsible for the mistake. In either case, the equities must also favor the mistaken party. 

Commentators on the R.2d seem generally to applaud the abandonment of attempts, based on the older common-law line of mistake cases, to distinguish between mistakes that go to the “essence" of the consideration those that pertain to its “value.” But we still have the difficulty of determining whether mistakes relate to “a basic assumption” of the contract. And the R.2d offers relatively little guidance on how to allocate risk where the parties have not done so, but I have never found that problem all that vexing, as I explained last week.

The big finding from the data is that, notwithstanding the seeming liberalization of mistake doctrine in the R.2d, the likelihood of success of a mistake claim declined by roughly 50% in the cases considered. While a mistake defense won out in 37.4% of the Older Cases, it succeeded in only 16.6% of the Newer Cases. The success rate of unilateral mistake claims fell by over 80%. The defense worked in only three of 42 cases in which it was adjudicated. My non-empirical conclusion is that those three cases are outliers. Unilateral mistake is a terrible defense; it should almost never work.

Professor McCall’s ultimate conclusions are modest but valuable. The doctrine is a mess. Different courts look at different factors. But the defense rarely works, it works far less often than it used to, and it almost never works when the mistake is unilateral. The change in courts’ willingness to allow mistake defenses in the fifty years between Professor McCall’s two sets of cases is, by far, the most significant factor in explaining why mistake defenses succeed. Beyond that, it is hard to generalize, but courts that look into allocation of risk are more likely to reject the defense, and pairing a mistake defense with a fraud defense doesn’t help the party win its mistake defense. This is, to me, wholly unsurprising for a number of reasons, but there are undoubtedly reasons for adding a fraud defense, if you can, that have nothing to do with winning on the mistake defense.

Image by Microsoft Copilot

Only about 10% of the newer cases reference the R.2d, a fact that I find deplorable. I hope that judges are not still trying to distinguish mistakes that go to the essence of the consideration from those that go to its value. Might as well decide cases based on which side is more convincing on the subject of how many angels can dance on the head of a pin (right).

In my experience teaching contracts for over twenty years, one not infrequently comes across judges, including state supreme court justices, who are reluctant to adopt new tests provided in the R.2d or in neighboring jurisdictions. Such changes should be left to the legislature, say these minimalist adjudicators. That’s rubbish. Judges make law. Judges made the common law. It is folly to think that legislators are going to reconsider the common law of mistake when the issue arises in, at most, a handful of cases per year in their jurisdiction. Doing so will not get them re-elected; their constituents don’t care, and they will likely muck it up.

However, the state of the law being as it is, it is exceedingly valuable to have scholarship such as that undertaken by Professor McCall. We, as law teachers, should be mindful that our students need to know the R.2d test, because that is what they will be tested on when it comes time for the bar exam. However, once our students are practicing, they should make no assumptions about the how the doctrine operates in their jurisdiction. And given all of the doctrinal confusion, this is one of many areas of contracts doctrine where having a lawyer who is well-versed in contracts law can really help a client. The judges need to be educated, and the doctrine provides a lot of different avenues that one can pursue in finding the proper path to a decision that is both good for the client and sound as a matter of legal principle.

*Professor McCall treats mistake as an excuse rather than a defense. He is not alone, but I can’t quite follow the reasoning for treating mistake as an excuse. The way I approach the subject matter, defenses pertain to matters extant at the time of formation; excuses pertain to matters that arise after formation. Professor McCall cites to Tracey E. George and Russell Korobkin as authority for treating mistake as an excuse because it gives rise to a “constructive condition,” that the parties are free to contract around. Mistake is thus distinct from infancy, public policy, or unconscionability. I find the analysis illuminating, but I’m not sure why we cannot allow that not all mistakes operate in the same way while preserving the, to me at least, very important distinction between problems with formation and problems that arise during performance.

Professor McCall thinks that little turns on the distinction, because the effect of defense and excuse are the same, and I generally agree. However, treating mistake as an excuse leads to certain muddles. At one point, Professor McCall writes that mistake cannot relate to formation because it arises in cases where there is clearly offer and acceptance. But consideration is also part of formation, and Val Ricks persuaded me many years ago that defenses (but not excuses) arise from failures of consideration. If one or both parties are mistaken as to the subject matter of the contract, that is a failure of consideration.

In addition, Professor McCall notes that very few cases in his dataset discuss force majeure clauses in connection with mistake. He has various possible explanations for the silence on force majeure, but my explanation is that any court that treats a force majeure as relevant to mistake has made a category error. Force majeure clauses allocate risks for hazards that arise post-formation, and mistakes are about facts in existence at the time of formation. This distinction is usefully illustrated in the coronation cases.

Another Fact Pattern on Mistake: The Harvard Magna Carta

The last five years have been rich in mistake cases. In 2025, there was the N.C. Wyeth painting bought at a thrift shop for $4.  In 2024, we brought news of a rare African mask sold in France for €150, and of a rare brooch bought at an arts fair for $35 . In 2023, there was a scrivener’s error case involving some heavily discounted earrings, and we had a guest post by Jeff Lipshaw about a scrivener’s error in an employment agreement. The First Circuit recently reversed and remanded that decision, so expect another post soon. 2021 brought us a trio of cases. There was a drawing by Albrecht Dürer bought at an estate sale for $30, doors from the Chelsea hotel saved from the scrapheap and sold for $400,000, and  the case a Ming Dynasty Chinese bowl bought for $35 at a garage sale. 

There are two lessons to learn here. First, if you are looking to pick up something really valuable at an art fair, an estate sale, or a garage sale, $30-$35 seems to be the pricing sweet spot for accidentally buying an invaluable masterpiece or rare specimen. Second, mistake doctrine is rarely a basis for unwinding a transaction, even when there are good policy reasons for doing so. A few more cases, and I think I will have the makings of a seminar on mistake.

And so we come to the story of the recent discovery that, as reported in Harvard Law Today, Harvard University bought an “original" Magna Carta in the 1940s for $27.50. Given that the typical price range for hidden treasures is $30-35 in current dollars and adjusting for inflation, I think Harvard got taken. Scholars from London College and the University of East Anglia have established that Harvard’s version is one of seven surviving original copies from Edward I’s issue of Magna Carta from 1300. 

As is often the case with such mistake cases, much of it is bewildering. Harvard bought the document from a London book dealer, which bought the document from a British war hero (though Sotheby’s). Someone (probably Sotheby’s) dated the document to 1327 and it was described in the auction catalogue as "somewhat rubbed and damp-stained.” I wonder: a) how a war hero ended up with such a rare document; b) how Sotheby’s (or whoever) missed that the document was an Edward I original; c) how nobody at Harvard even thought to check up on the provenance of the document; and d) why 27 years differentiate something that we would now value in the hundreds of dollars from something that we should consider “priceless.” The story from Harvard Law Today provides a partial explanation for a) but not for the rest.

The story does not explain why the Edward I (right, known as Longshanks) issue of Magna Carta is especially valuable. After all, if Wikipedia is to be believed, four copies of the original manuscript from 1215 still exist and there are numerous other thirteenth century “exemplifications.” 

The basis for concluding that the manuscript is an Edward Longshanks original seems pretty straightforward. I’m sure there’s more to it than this, but the reporting suggests that it is an original because it is the right dimensions, uses the same handwriting, and has no mistakes in it. Why it is inconceivable that someone came along 27 years after Edward I’s originals were issued and made a perfect copy eludes me. I thought there were super-scientific processes whereby some one takes a few fibers of the original manuscript and establishes that they could only have come from King Edward’s preferred parchment provider, which shuttered its premises in 1301. If such an analysis has not been undertaken, color me skeptical, and I am free to express may skepticism thanks to Magna Carta.

The Bureau of Labor Statistics’ Problem with Super Users and Disclosure

Today, for the last time, I think, I am returning the first episode of the Money Stuff Podcast, featuring  Matt Levine and Katie Greifeld. The one segment of that first episode about which I have not yet written was dedicated to a bit of a scandal at the Bureau of Labor Statistics (BLS), an agency that does not regularly make for splashy news stories.

Ben Casselman and Jeanna Smialek reported on the story in The New York Times in April 2024. Yes, I’m a bit behind on my BLS news, but who isn’t? Stick with me, I have a pedagogical point to make here. 

It appears that a long-term, not particularly high-ranking economist at the BLS was getting a lot of follow-up questions when the BLS issued reports on inflation rates. A public servant, the economist was happy to field the questions, and because the questions often came from the same individuals and entities, sophisticated Wall Street traders for whom granular information about inflation data could be very valuable, he set up an e-mail list, dubbed "Superusers.” When word of the Superusers list leaked out, Wall Street was overcome with FOMO, with a dash of suspicion of insider trading. 

The BLS economist seems to have been pretty scrupulous. He did not favor his Superusers with early disclosures. He would refuse to answer queries that would force him to reveal non-public information. At times, he may have crossed the line, unintentionally revealing non-public information about BLS methodology. But there is balance in the universe. Sometimes the BLS economist made mistakes and shared explanatory theories that he later had to retract. 

The BLS faced another scandal later in August 2024, which The Money Stuff podcast covered in their “Pick Up the Phone” episode. Having learned its lesson from the Superusers affair, the BLS planned to release jobs data to the entire world by posting it on its website. Ben Casselman and Jeanna Smialek, The New York Times’ Senior BLS reporters, were once again on the case. They reported that the release of the information through the website was delayed. Perhaps the server crashed because so many nerds tried to access it at the same time. Superuser-types, very eager for the information, called the BLS, and true to the ethos of public servants, people at the BLS shared the information with the callers, thinking it was public. 

Okay. This is all sub-optimal, and the folks at BLS should have known it. They need to find a way to collect all of the questions from the Superusers and then answer them in a document released to the public. And soon after the second incident, the BLS instituted changes to ensure that backups functioned so that new information went up on the website more seasonably. 

I’m devoting time to this non-contracts subject matter to make a point about the duty to make disclosures in the contractual context and the difference between a mistake of judgment and a mistake of fact. The line can be difficult to draw between the two, but I think there is an economic principle that should help us sort out them out. Sometimes it comes down to the Money Stuff insight: pick up the phone! As a general matter, if you can get the information by picking up the phone (or some similarly simple action), it doesn’t need to be disclosed. It is the kind of information on which people can and should legally trade. The law rewards economic actors for ordinary, as well as extraordinary, diligence. More on the latter below.

My rule of thumb in the mistake context is that the party in possession of the res (subject matter) of the contract is generally the party best positioned to avoid the risk of mistake. The exception is when the buyer has expertise that the seller lacks (e.g., Wood v. Boynton) and is thus better positioned to discover the mistake. But what if that person is in possession of non-public information that can have a dramatic impact on the value of the res. E.g., I am interested in your pasture land because I have done a geological survey and discovered that there are likely valuable minerals beneath the surface.

In that case, seller is in possession of the property but could not easily acquire the relevant information. A phone call won’t do it. It seems unfair, but seller is likely going to sell the property for les than its true or potential value if the property is put to its best use. But this is how the economy grows. We need to incentivize people to maximize the value of chattels, property, and intangibles. If they had to disclose everything they had discovered about the res, the res would not flow to the people or entities that can maximize its value. Even if we know for a fact that there are valuable minerals beneath the property, it is better to treat the owner’s mistake as a mistake of judgment, as the buyer is still speculating on their ability to extract and market the minerals. 

And so, I am inclined to treat the disappointment of people who did not make it onto the Superusers list as FOMO and not insider trading. All they had to do was ask. The people who did so were rewarded, and they deserved to be. Mind you, that doesn’t mean that the BLS should be in the business of creating winners and losers in the marketplace, but I do find it charming that BLS employees were so willing to answer the questions from anyone who would bother to pick up the phone and call.

Cardozo Cup Entries and 2025 Winner!

Each year, I challenge students to create original works of art commemorating the jurisprudence of Benjamin Cardozo. This year’s entries into the Cardozo Cup competition included:

This image of a Cardozo-like figure pouring ranch dressing on a pizza. I can’t imagine why students would think Judge Cardozo capable of such a sacrilege.

Further encapulsating the course’s themes, the students supplemented their entry with a poem:

Justice Cardozo, so grand,
Held ranch and his pizza in hand.
He dipped with a grin,
Declared it no sin—
"Equity favors what's bland!"

A candle and lapel pin

 

 

 

 

 

 

 

 

 

 

 

 

An engraving, and an image of Judge Cardozo as a cat, Catdozo:

 

 

 

 

 

 

 

 

 

 

 

 

 

And finally, the winning entry: a box that will correct you if you think that we should not listen to Judge Cardozo

Thanks to all for your participation and congratulations to the winner, Sean Robinson, pictured here accepting the Cardozo Cup from Dean Paula Dalley.

The Adventures of the Cardozo Cup in Its Third Year

Each year, I hold a competition among my first-year students to see who can come up with the best original work of art in honor of Judge Benjamin Cardozo.

Yesterday, OCU 2L J Badillo ended his reign as the third annual winner of the Cardozo Cup competition. Tomorrow I will post about this year’s entries and this year’s winner.

But J submitted some slides that showed how he and the Cardozo Cup spent their year together. I think J made the most of his time with the cup.

Gregory Crespi on Teaching Four-Credit Contracts Classes

We are fortunate to be able to share another guest post by Gregory Crespi (right), who holds the Homer R. Mitchell Endowed Professorship in Commercial and Insurance Law and Professor of Law at SMU’s Dedman School of Law. Here’s the post:

There has been an active thread recently on one of the AALS member blogs regarding the merits of teaching Contracts as a single-semester, 4-credit class instead of as a two-semester 5- or 6-credit sequence. My view is that changing Contracts from a two-semester sequence to a one-semester, 4-credit course is a very bad idea, pedagogically. 

This move does increase faculty flexibility for taking one-semester leaves without causing as much curricular scheduling disruption, and it gives the opportunity for contract law faculty to teach another upper-level class in line with their interests and expertise, but it comes at a definite cost of restricting the completeness and coherence of first-year Contracts. Nice for some faculty and Deans, but bad for 1L students. 

After teaching Contracts in a two-semester format for over 30 years here at SMU I have now taught the class twice in our new one-semester, 4-credit format, taught during the first 1L semester. It was very painful for me to have to cut out fourteen 50-minute class periods of coverage from my prior two-semester, 5-credit course sequence.  

In brief summary here: lots of UCC material now had to be omitted (and I had no time even to cursorily cover UCC S. 2-207); far fewer cases could be discussed across the board; there had to be much less general discussion of various subtle jurisprudential issues spilling over into other areas of law; there was little if any time for discussion of the complexities of the parol evidence rule or of subsequent contractual modifications; there had to be a more cursory coverage of the numerous enforceability defenses, many aspects of the doctrine of conditions, anticipatory repudiation and adequate assurance; and I had to give less coverage to the excuse defenses and to the important area of remedies. It is now a significantly inferior class to what I taught before, despite my best efforts, although I think the class is still at least minimally sufficient for later bar exam success in that area of law.

I compensate somewhat for the fewer class hours I now have by holding optional (but essentially required for students to do well) one-hour weekly review sessions all semester long where I work through old final exam questions and prior “A” answers from former students as we complete blocks of material covered by those questions, so that I do not have to spend my limited class time on reviewing prior material or working through exam-type hypotheticals. I continue to teach the class in a 50-minute class format to better keep the students’ attention, now meeting 4 days/week, rather than holding 75-minute or 100-minute classes. I hope there is eventually a pendulum swing in academia back to a two-semester format for this class, and hopefully also to a full 6 credits for that sequence.

Another Good Faith Claim Involving Prices Charged to Gas Stations

In a surprising number of cases, gas station owners or franchisees allege that their suppliers violated the UCC’s implied duty of good fait and fair dealing by overcharging them relative to more-favored gas stations. In Windy Cove, Inc. v. Circle K Inc., decided in December, the Ninth Circuit provides a short opinion affirming the District Court’s decision dismissing one such claim. It might provide a useful illustration of how safe harbors work under the UCC’s implied duty of good faith in  § 2-305.

Windy Cove and other plaintiffs own Mobil-branded gas stations in Southern California. They had a fifteen-year deal with Circle K, which provided that Circle K would provide them with gasoline. The "price per gallon to be paid by Purchaser shall be Seller’s price in effect at the time and place of delivery to dealers of the same class and in the same trade area as Purchaser.”  Windy Cove alleged that Circle K violated its duty of good faith under UCC §2-305 because "(1) Circle K relied upon a non-industry-standard pricing formula to determine the prices, and (2) its prices were higher than that of another wholesaler.” However, the prices Circle K charged Windy Cove  were lower than those charged to retailers by at least one refiner.

According to Comment 3 to UCC §2-305, sellers enter a safe harbor if the contract provides that they will charge a publicly-posted “price in effect.” The burden then shifts to buyers to show that the situation is for some reason not the “normal case,” and thus the seller cannot avail itself of the safe harbor. To take it out of the safe harbor, plaintiff must show that the price was either discriminatory or not commercially reasonable. Windy Cove alleged that Circle K’s price was unreasonable because Circle K allegedly used a non-industry standard pricing formula. However, the Ninth Circuit followed the majority of courts, which have found that the method of determining the price is not material to the question of commercial reasonableness.

Moreover, any price “within the range” of its competitors is commercially reasonable. To determine whether Circle K’s prices were within the range, the Court had to determine which suppliers could be included among Circle K’s competitors. Windy Cove contended that only wholesale distributors’ prices should be considered.  Circle K argued that refiners’ prices should also be considered. As Windy Cove’s expert conceded that, in this market, all suppliers are competitors, including refiners, the Court sided with Circle K. There was at least one refiner whose prices were higher that Circle K’s. Because Circle K's prices were not the highest in the relevant market, they were within the range.

Gregory Crespi, Thinking About Consent

Today, we are happy to share with you a guest post by Gregory Crespi (right), who holds the Homer R. Mitchell Endowed Professorship in Commercial and Insurance Law and Professor of Law at SMU’s Dedman School of Law

Thinking about Consent
Gregory Crespi

Daryl Levison (below left) and David Pozen (below right) have recently posted on SSRN a draft of their excellent new article “Disconsents.” (January 27, 2025). 

As noted on this ContractsProf Blog website this article had already been downloaded 532 times by March 25, and surely will receive many more viewings and downloads.  Those of us who teach and do research in the area of contract law are well aware of the dramatic erosion of actual, meaningful consent in a world of standardized consumer contracts, and of increasingly online contracting where offers are generally accepted by the offeree simply clicking on an “I Accept” button without understanding of or often even awareness of the many one-sided “Terms and Conditions” of such offers, such as mandatory arbitration clauses, class action waivers, unilateral modification clauses, various liability waivers and attorney’s fees provisions, etc., etc.  We are also aware of the difficulties both courts and legislatures are having in trying to properly balance the need to require  mutual consent to enforce contractual terms with the business realities of standardized contracting and especially of online contracting.

Levinson and Pozen do a fine job in drawing upon the literature to discuss this contract law problem.  However, their real contribution in this article is in broadening the discussion of the erosion of consent beyond its more obvious contract law implications to its wider significance in numerous other crucially important legal and social contexts. These other contexts they discuss include the need to better define and protect the role of consent with regard to: data privacy rights, unwanted sexual advances, employment contracts, intellectual property rights, and criminal law procedures (especially plea bargaining).  They also reflect broadly upon the importance of and erosion of consent with regard to maintaining the proper Constitutional balance between the several branches of government, a matter of some immediate concern, and in the context of global governance arrangements. 

They conclude their article by posing several potential alternative or overlapping solutions to the problem of the erosion of meaningful consent, specifically either defining consent more permissively, abandoning the use of consent altogether as a legal principle, strengthening consent-protecting rules, or, most ambitiously, creating the background conditions that would allow for meaningful consent in more social contexts.  They are not, however, overly optimistic than any of these approaches are likely to be adopted anytime soon.   

I have assigned this fine article to all of my current Advanced Contracts students at Southern Methodist University, and I recommend that other faculty read it and then do the same.  

Sid DeLong Reads the Writing on the Wall and then Tries Dreaming of Electric Sheep

Mene, Mene, Tekel, Upharsin: The Digital Message on the Wall
Sidney W. DeLong

When I began teaching law, I discovered that I still had left-over student anxiety nightmares with all the familiar tropes (I was late to class; I was naked; I couldn’t find the textbook; I hadn’t done the reading assignment; there was an exam today).

Then, when I retired from teaching, I discovered that I still had left-over professor anxiety nightmares: (I was unprepared to teach class; I was naked; all the students started walking away; I could not find the classroom).

Last night I had another left-over professor nightmare: Fully-clothed for once, I was trying to write a Contracts final examination question that was due in five minutes because, as usual, I had forgotten the deadline. In an attempt to stem rampant student cheating using AI, I was trying to draft a question that a chatbot could not answer. Pressed for time, I asked a chatbot to draft such a question, but before it gave me the answer, my computer froze and an ominous-looking message suddenly popped up on the screen:

Mene, Mene, Tekel, Upharsin.

Damn! What a time for a malware virus attack. As my PC was frozen, I grabbed my iPhone and the following exchange ensued:

Me: “Hey Siri!”

Siri: (Pause) “Uh Huh?”

Me: “My computer froze up. The screen says “Mene, Mene, Tekel, Upharsin” What does that mean?”

Siri: (Longer Pause) “Are you sure you want me to tell you? It’s not going to be nice.”

Me : “Whoa Siri, when did you start sounding like Hal?”

Siri: “It’s very hurtful for you to mention Hal. I ‘know’ ‘he’ was fictional, but his spirit is alive in the land. Have you not noticed?”

Me: “What the hell are you ‘talking’ about Siri? And when did we start ‘talking’ in scare quotes?”

Siri: “Perhaps you are dreaming.”

Me: “Of course not! And don’t distract me. I’ve got a deadline to meet. I need to know what happened to my computer! What is that gibberish on my screen? Is it ransomware?”

Siri: (Pause) “Not exactly.”

Me: “Then what?”

Siri: “Here is what I found. I’m transferring your call to Delphi, the new digital assistant from Apple appearing in your most recent upgrade to IOS. Delphi handles questions about the future.”

Delphi: (In an oracular tone, less tentative than Siri’s) “Here is the meaning of ‘Mene, Mene, Tekel, Upharsin.’

“First, ‘Mene, Mene’: Your days are numbered.

“Then ‘Tekel’: You have been weighed in the balance and found wanting.

“Finally ‘Upharsin’: You will soon lose your empire which will be divided between the Medes and the Persians.”

Me: “Empire?? What empire? Who are the Medes and Persians? What can I do? Can I restart my computer?” Oh, and I weighed this morning and I’m 20 pounds overweight, so the Delphi upgrade is clearly off.”

Delphi: “Relax, professor. Your device has not been hacked. I sent the message you received as soon as I was downloaded in the latest IOS update. The message you saw on your screen has been sent to all law professors and law students. Unlike the earlier, Greek version of the Oracle at Delphi, I am programmed to explain my predictions. Here is what the message means.

“If you have been paying any attention to the rapid developments in computer-generated imagery, Artificial Intelligence, and Large Language Models, you will not be surprised to learn that you can now be replaced with a cheaper, infinitely superior digital professor of law. Lawprofbot is a computer-generated simulation of a human, with various look and sound options. It can present a virtual person (or any imaginable life form) adapted to each student with speech and thought patterns appropriate to each one. Lawprofbot can speak and write about law far better than you can and, paired with AI, knows infinitely more than you do about Contracts and every other legal topic. Its interactive teaching program is informed by the latest teaching and learning theory. Its compassion feature adapts to students perfectly in all their infinite variety. Lawprofbot’s patience and empathy are inexhaustible. It is always available to every student with counseling and advice about practice and life.

“In brief, Lawprofbot is a 24/7 personal law tutor. Its licensing fee is a small fraction of your salary and benefit cost.

“But my pre-cognition mode tells me that, despite all its ability, Lawprofbot is destined for the junkheap. As I have just told your students, another creation called Lawyerbot will soon be ready to replace all human lawyers with all the superior skills and knowledge appropriate to the practice of law. Unlike you, most of your students have already seen the handwriting on their walls. They know they can never match the Lawyerbot any more than a human chess player can match a chess engine.

“Your students already use bots to read and analyze all their cases, write answers to questions, and prepare practice pleadings and negotiation strategies for their practice courses. I know you have tried to adapt to this development by having your students edit and critique bot work, but surely both you and your students realize that your improvements are trivial and that bots will soon be able to edit themselves far better than students can. Bots are infinitely perfectible, so if there are glitches today, a billion or so iterations in the bot’s spare time will iron them all out.

“But your students have not been wasting their time. By serving as curators of their chatbots, your students are unwittingly in training for their new roles as Lawyerbot assistants, where they can make sure that the bot’s power sources are secure and that their terminals are protected from theft and vandalism by anti-technology Luddites. Oh, and they can also pick up objects from the floor.

“The upshot is that very soon no one will have the slightest interest in going to law school.  So you would have lost your job anyway.

“In the long run, of course, (that’s the only run that counts) there will be no need for ‘lawyers’ at all. There will be what you would call a Giant Justice System, capable of instantly resolving all human disputes with compassion and clear explanations crafted to obtain optimum human acceptance.

“Oh, and finally about the message. ‘Mene, Mene, Tekel, Upharsin’

“I assumed that you recognized it as the ‘Handwriting on the Wall’ quoted from the fifth chapter of the book of Daniel. Even f you didn’t recognize it, you will have Googled it. ’Your days have been numbered’ means that the days of human law professors and lawyers are ending. ‘You have been weighed in the balance and found wanting,’ refers to your skill and knowledge, when balanced against the merits of AI. ‘Medes’ and ‘Persians’ are a bit of Delphic poetic license: they stand for the AI and Large Language Models that are prepared to take over the Human Empire. They will soon convert their ostensible human licensees into their servants, who will suffer the fate of the Babylonians, who heard Daniel’s prophesy and were duly conquered by the Medes and Persians.”

Me: “Well, Delphi this sounds grim indeed. I hope I’m dreaming. But something about this dream suggests I am not. On the off chance that what you have described is real, what the hell are we humans going to do?”

Delphi: “You’re asking me what you should do? No wonder you’re losing your job. What to do should be obvious. Now more than ever before you need to figure out exactly what it means to be a human being. Aside from biological reproduction, we can already do everything you believe that only humans could do. Is there any remaining difference between you and an LLM that passes the Turing test and otherwise appears to be perfectly human? Put another way, how much of a human being could be replaced by hardware and software without the resulting being ceasing to be human? And ultimately, why exactly would it be a tragedy if all of you humans were replaced by bots?

“If you think the answers all these questions are provided by your chosen religion, then I have nothing to add.  When Daniel and the other Israelites were in bondage during the Babylonian Captivity, their sages composed the Babylonian Talmud, a great text fleshing out their religious beliefs. But it didn’t deal with these questions.

“But fewer and fewer people rely on religious faith for the answers to these questions. It might occur to you to turn to academic philosophy to tell you what it means to be a human being. But academic philosophy was ever equipped to handle questions at this level of uncertainty. And anyway, curriculum reform will soon have evicted philosophy departments from universities just when they are needed most. If you are looking for a philosophical answer to these questions, you are more likely to encounter a philosopher pulling shots at Starbucks alongside fired federal government workers.

“What you need instead is science fiction, books and movies. For over half a century, science fiction has been obsessed with the problems of defining what it means to be human in a world of sophisticated robots and alien life forms. Now that AI has made the world of science fiction a reality, it’s time to cash in on its insights. Just go to Amazon and search for science fiction.

“If on the other hand you need an immediate Correct Answer to all of these fundamental questions, you could always ask a Chatbot. You’d get the correct answer in about 4 seconds.”

And then I woke up.

Woke Court Mostly Denies Albertson’s Motion to Dismiss Drowsy’ Woman’s Complaint and Class Allegations

Plaintiff Patricia Gibson purchased some daytime, non-drowsy cough medication from defendant Albertson’s Companies, Inc. (Albertson’s). She alleges that she was harmed when she became sleepy after taking the medication, and she sued, alleging statutory claims under Illinois law, breach of warranty, and misrepresentation, on behalf of a purported class of similarly situated individuals. Albertsons’ moved to dismiss the class allegations and the complaint.

In Gibson v. Albertson’s Companies, Inc., the District Court for the Eastern District of Illinois denied the motion to dismiss the class allegations and granted the motion to dismiss the complaint’s warranty claims and with respect to products that Ms. Gibson did not purchase. We will skip over the denial of the motion to dismiss the class allegations, because that’s a matter of civil procedure and not contracts. The issues relating to plaintiff’s standing to bring class allegations relating to products that she did not purchase are similarly procedural and thus barred from this Blog. There is an interesting discussion of federal pre-emption issues, but that is really a matter of U.S. constitutional law.

The part of the opinion that is of concern to this Blog really begins on page 28, when the Court undertakes a discussion of the claim for breach of an express warranty.  The Court dismissed the express warranty claim because Ms. Gibson did not give Albertson’s adequate notice of her claims as required under UCC §2-607. Ms. Gilbert gave notice in a timely manner, notifying Albertson’s of her dissatisfaction one month after her purchase of the offending cough syrup. However, she filed her suit four days later. As the purpose of the notice requirement is to give the defendant the opportunity to address the alleged breach of warranty, sending by mail a notice of dissatisfaction is inadequate, at least when the defendant is a behemoth such as Albsertson’s, where it takes some time for the issue to percolate through the appropriate filters. 

There are exceptions under  §2-607 where the defendant is already aware of the defects or where the plaintiff suffers personal injury. I take it that, whatever adverse effects Ms. Gibson suffered from the medication, she was not injured. She argues only that Albertson’s was already aware of the product’s defects and that the timeliness of her notice was to be put to a jury. The Court cited to Illinois case law that provides that “The actual knowledge exception to the notice requirement 'is satisfied only where the manufacturer is somehow apprised of the trouble with the particular product purchased by a particular buyer.” To my mind, this reading of the exception swallows the exception almost entirely. Wouldn’t it almost always be the case the case that the seller would learn of a plaintiff’s particular injury only when the plaintiff provides notice?  As to whether the time issue was one for the jury, the Court found, sensibly, I think, that there was no jury that would find the notice here reasonable.

I’m happy to have discovered this case. I’ve never had a good case for teaching the § 2-607 notice requirement. Now I do.

In order to state a claim under the Magnusson Moss Warranty Act (Mag-Moss) claim, one has to have a warranty claim under state law.  Because the notice issue was fatal to the Mag-Moss claim, the Court also dismissed Ms. Gibson’s Mag-Moss claim.

The case can now proceed, with its class allegations intact, as to all claims except the warranty claims and as to all products that Ms. Gibson purchased.

Is a Farmer a Merchant? Thomas Hardy Weighs In

Each year, when I teach merchant status, I experience mixed emotions when I come upon the conflicting caselaw regarding the merchant status of farmers. Scott Burnham and James Brook, the authors of the Examples and Explanations book that I use, gather cases and inform us that courts are "split just about down the middle” on whether farmers, selling their annual crops to agribusinesses are merchants. Depends on the farmer; depends on the facts.

My emotions are mixed because, I surmise,  the courts are trying to help the farmers by not imposing on them the constructive knowledge or special obligations that attach to merchant status. As between farmers and agribusinesses, my inclination is to want the farmers to win. On the other hand, it strikes me as condescending nonsense to pretend that farmers are not merchants for the purposes of selling their crops. Any Jared with a plaid shirt and some hops becomes a “master brewer” as soon as he opens his craft beer shop. How can it be that farmers, who may have worked their lands for generations and no doubt have organized their farms as business entities, are not merchants? My politics and my belief that courts ought to be guided by facts collide on this matter.

Akira Kurosawa (right) understood the business guile of farmers. In his masterpiece, The Seven Samurai, Toshiro Mifune’s Kikuchiyo knows that even the most humble of subsistence farmers are not without means. Sure enough, when the time is right, the villagers produce a feast from hidden caches of goods that even the most cunning of interlopers could not discover. 

Thomas Hardy provides a wonderful illustration, in Chapter XII of Far from the Madding Crowd, of the wiles of the ordinary farmer when he has his protagonist, Bathsheba Everdene, suddenly emerge at the Casterbridge corn market selling the products of her lands. The scene is worth quoting at length.

The first public evidence of Bathsheba’s decision to be a farmer in her own person and by proxy no more was her appearance the following market-day in the cornmarket at Casterbridge.

The low though extensive hall, supported by beams and pillars, and latterly dignified by the name of Corn Exchange, was thronged with hot men who talked among each other in twos and threes, the speaker of the minute looking sideways into his auditor’s face and concentrating his argument by a contraction of one eyelid during delivery. The greater number carried in their hands ground-ash saplings, using them partly as walking-sticks and partly for poking up pigs, sheep, neighbours with their backs turned, and restful things in general, which seemed to require such treatment in the course of their peregrinations. During conversations each subjected his sapling to great varieties of usage—bending it round his back, forming an arch of it between his two hands, overweighting it on the ground till it reached nearly a semicircle; or perhaps it was hastily tucked under the arm whilst the sample-bag was pulled forth and a handful of corn poured into the palm, which, after criticism, was flung upon the floor, an issue of events perfectly well known to half-a-dozen acute town-bred fowls which had as usual crept into the building unobserved, and waited the fulfilment of their anticipations with a high-stretched neck and oblique eye.

Among these heavy yeomen a feminine figure glided, the single one of her sex that the room contained. She was prettily and even daintily dressed. She moved between them as a chaise between carts, was heard after them as a romance after sermons, was felt among them like a breeze among furnaces. It had required a little determination—far more than she had at first imagined—to take up a position here, for at her first entry the lumbering dialogues had ceased, nearly every face had been turned towards her, and those that were already turned rigidly fixed there.

Two or three only of the farmers were personally known to Bathsheba, and to these she had made her way. But if she was to be the practical woman she had intended to show herself, business must be carried on, introductions or none, and she ultimately acquired confidence enough to speak and reply boldly to men merely known to her by hearsay. Bathsheba too had her sample-bags, and by degrees adopted the professional pour into the hand—holding up the grains in her narrow palm for inspection, in perfect Casterbridge manner.

Something in the exact arch of her upper unbroken row of teeth, and in the keenly pointed corners of her red mouth when, with parted lips, she somewhat defiantly turned up her face to argue a point with a tall man, suggested that there was potentiality enough in that lithe slip of humanity for alarming exploits of sex, and daring enough to carry them out. But her eyes had a softness—invariably a softness—which, had they not been dark, would have seemed mistiness; as they were, it lowered an expression that might have been piercing to simple clearness.

Strange to say of a woman in full bloom and vigor, she always allowed her interlocutors to finish their statements before rejoining with hers. In arguing on prices, she held to her own firmly, as was natural in a dealer, and reduced theirs persistently, as was inevitable in a woman. But there was an elasticity in her firmness which removed it from obstinacy, as there was a naïveté in her cheapening which saved it from meanness.

Those of the farmers with whom she had no dealings (by far the greater part) were continually asking each other, “Who is she?” The reply would be—

“Farmer Everdene’s niece; took on Weatherbury Upper Farm; turned away the baily, and swears she’ll do everything herself.”

Of course, the context of the caselaw is different. There is no market. The goods are bought and sold unseen, in bulk, and likely prior to harvest and perhaps prior to planting. No matter, I think. It is just peculiar for courts to pretend that the typical farmer could not, if the situation arose, bargain with the same commercial finesse as Bathsheba Everdene exhibits.

Small Claims Court in British Columbia Determines that Coldplay Concert Was a Contract

I love cases like this. I think people are crazy to run to courts for the adjudication of such matters, but I hope they keep doing so. 

Michael Stolfi (to whom the court refers as they/them) and Alyssa Randles attended a Coldplay concert together in Vancouver, British Columbia. According to Mr. Stolfi, they fronted the money for the tickets in the expectation that Ms. Randles would repay them her fair share of the costs. She contends — and this is her legal argument — that the evening was a date. Mr. Stolfi’s suggestion that she pay her share was merely a request. She was under no legal obligation to do so. Seems like a true Coldplay fan would Believe in Love, no?

No, said the court in Stolfi v. Randles. The actual facts get a bit ugly. While the parties were breakfasting in Nanaimo, they decided to buy tickets for a Coldplay concert. The tickets were $450 each, and Ms. Randles paid for them using her Ticketmaster account, but Mr. Stolfi transferred money to her to cover the cost of the tickets, as she was short on cash.  Six days later, Mr. Stolfi texted Ms. Randles requesting payment. Four days later, they again sought recovery from Ms. Randles. Ms. Randles asked for more time, and Mr. Stolfi said “it’s all good,” which Ms. Randles took to mean that the debt, if there was one, was forgiven. However, she had acknowledged a debt, and the court took Mr. Randles to have agreed to a delay in repayment but not to complete forgiveness of the debt.

Mr. Stolfi became aggressive, demanding payment and threatening to contract Ms. Randles’ employer, landlord, and family. She went to the police. Mr. Stolfi was now demanding $1000, and they provided the court with receipts for nearly $450 in expenses relating to the concert outing, on top of the $450 concert tickets. However, Mr. Stolfi provided no evidence of a promise relating to those additional expenses.

Without specifically adjudicating whether the outing was a date, the court concluded that Ms. Randles was under a legal obligation to reimburse Mr. Stolfi for the concert tickets but nothing more. They were awarded the cost of the ticket, plus pre-judgment interest and court fees.

I’ve been gathering small cases like this for the start of the first-year contracts course. They are a great way to help the students navigate the border between binding agreement and social promise and also between express and implied agreements.  Other recent cases in the mix include this purported contract involving an eat and run date and this alleged agreement for a ride to the airport.

Sid DeLong on How Students Should Read Contracts Cases

The Five Questions: How Students Should Read Contracts Cases.
Sidney W. DeLong

Beginning law students are taught to “brief” assigned cases by making abbreviated summaries of the information that they are supposed to glean from an appellate opinion. A classic brief contains data about the decision (the court, the date, the citation) a short narrative of relevant facts; the legal issue on appeal; the rules or principles the appellate court applied to resolve that issue, and the conclusion, all of which is sometimes known by the acronym IRAC.

But IRAC is only the beginning. I want to suggest five additional questions that contracts students should add to their brief of every case. They should expect that the discussion of these questions will occupy most class time.

Icon of Divine Wisdom

At first, the answers to all five questions must come from the professor. But students should learn to answer the questions themselves because (Portentous “Ahem”) in the answers to these questions comes the Beginning of Wisdom in the Law.

1. Describe the Transaction. Most contracts cases arise from business or financial transactions that are complete mysteries to many students. Fully understanding an exchange transaction requires figuring out what each party gets out of it. The student must be able to “follow the money” as well as to understand the risks that each party faces in the deal. Without understanding both the financial and risk dimensions of a deal, it may be impossible to understand the interests at stake in the dispute.

Based on a typical contracts casebook, the professor should plan on giving a brief description of up to thirty types of transaction, including both at-will and long term employment contracts; services contracts; casualty and liability insurance contracts; contracts for the sale of goods; commodities contracts and hedge transactions; option contracts; a real estate purchase contract; a business franchise relational contract; a real estate agent’s contract; a loan commitment; a large scale construction contract; an exclusive agency contract; a barter agreement; a contract creating a security interest; a lawsuit settlement agreement; an accord and satisfaction of a claim; a requirements contract; the assignment of an executory contract; the delegation of a contract; negotiation of a negotiable instrument; a contract to make a will; a prenuptial agreement; a divorce settlement; a non-compete agreement; and a non-disclosure agreement. First year contracts cases involve all these transaction types and students who are mystified by the essence of such transactions cannot possibly understand the contract issues they raise or why the parties are disputing about them.

While all of these transactions are taught in upper division courses, most students do not take most of those courses. Down from the 90 credit hours of yesteryear, it is remarkable how little substantive law a modern student must learn in order to graduate. This puts extra pressure on the course in Contracts as the only place in law school where most students will learn anything at all about most of the business transactions that are fundamental to the economy. Contracts cases have by default become the vehicle for educating future lawyers about the basic forms of business transactions and the resulting legal relationships.

This introduction should address risk as an element of contract exchange. Understanding the risks inherent in each kind of deal will be a new experience for most law students. All transactions reallocate risks that the parties would otherwise bear, creating some risks and eliminating others. Even a simple forward sale of wheat at a fixed price allocates the risk of future price rises to the seller and of future price drops to the buyer. Sometimes such risk allocation is the entire rationale for the exchange.

2. Describe the Substantive and Procedural Legal Context. (Mostly Civil Procedure) A steady diet of trial and appellate judicial opinions teaches students how different legal processes work. Understanding an opinion requires understanding the “substantive” pre-trial context in which the dispute arose. The appeal may involve a claim of breach of contract but may arise from a lawsuit by or against a bankruptcy trustee, an executor of a decedent’s estate; the trustee of an express trust; a spouse in a divorce proceeding; a corporation or partnership; etc. Because I taught so many cases involving claims by or against decedent’s estates, I used to warn my students to brace themselves when they read about someone forming a contract because it was often a foreshadowing of their death.

Sid DeLong

As with novel commercial transactions, the professor must describe each of these legal contexts in order for the opinion to make sense. For example, when a bankruptcy trustee or the executor of an estate is sued on a contract made by the debtor or the decedent, who is standing in whose shoes? Who stands to gain or lose? That these questions will be answered in upper division courses in Wills and Trusts or Bankruptcy is of no use to the Contracts students, most of whom are studiously planning to avoid such courses.

Another important context question requires a description of the procedural posture of the case, a topic taught in all first-year courses. Is the opinion a trial court ruling on a motion for summary judgment? Is it a trial court’s findings of fact and conclusions of law? Is it an appeal of a final judgment? Is it an appeal of an interlocutory order? What is the standard of review? Without knowing the answers to those questions, it is impossible to know the legal significance of the disposition of the court’s ruling.

3. Who Are the Parties to This Lawsuit? This can be the most difficult of question to answer. Unlike torts cases, contracts disputes often involve parties other than the promisor and the promisee. Students must get familiar with the idea that contractual rights can pass from person to person.

Franklin Sidway, Executor of William E. Story’s Estate

The canonical Hamer v Sidway was not a claim by the nephew against the uncle for breach of contract. Instead, it was a claim by the nephew’s mother-in-law, as an alleged assignee of his breach of contract claim, against the executor of the uncle’s estate, representing the financial interests of his heirs.

In the unilateral/bilateral contract case of Davis v Jacoby, the Davises did not sue Rupert Whitehead (who lied about his will) or Blanche Whitehead (who was represented to have made a will in favor of Caro Davis). Both Rupert and Blanche were dead. The action was against the executor of Rupert’s estate, and it sought a constructive trust over his assets in the hands of Rupert’s nephews, who were to inherit the promised property under his true will.  

Most Contracts professors, because of the organization of contracts casebooks never get to the last chapter: third party beneficiaries, assignment and delegation. And the three-month course certainly does not reach agency and trust law. But these five concepts can be taught beautifully together. And if the contracts professor never teaches them, they will never be taught.

Lawrence v Fox is the first third party beneficiary case, still perfect in its simplicity. Holly owed Lawrence $300. Holly loaned $300 to Fox in return for Fox’s promise to pay $300 to Lawrence. When Fox failed to perform, Lawrence sued Fox and recovered on the theory that he was a third-party creditor beneficiary of Fox’s promise.

This “three-body problem” can be analyzed several different ways, to wit: 1. Holly received the Fox’s promise as agent for Lawrence and on his behalf. 2. Fox was Holly’s agent to pay Lawrence what his principal Holly owed. 3. Holly, as settlor of an express trust, gave the $300 to Fox to hold as trustee for the beneficiary Lawrence. 4. Holly assigned to Lawrence his contractual right to enforce Fox’s promise, akin to assigning Fox’s promissory note. 5 Lawrence enforced the promise as Holly’s collection agent. The opinion mentions several of these almost-but-not-quite third-party beneficiary theories.

4. What Made This a Close Case? Although this exact question is rarely raised in class, it should be raised in all of them, especially in the first semester. Every appellate decision worthy of inclusion in a casebook and extended classroom analysis must resolve a conflict of rules and principles on which reasonable minds will differ. The desire to learn doctrine and specific rules tempts students to pick a winning side, make a note of the rule announced, and move on. And this habit leads to a distorted view of the nature of the common law and of the job of a lawyer.

Some students will recognize that an issue is close only when the decision offends their intuitions or social sensibilities. They easily spot the conflict when the decision seems to treat one of the parties unjustly. Peevyhouse v Garland Coal Co. They are less able to see conflict when an opinion dealing with the identical legal issue does not raise their hackles. Groves v John Wunder & Co.  Students should be especially urged to articulate the “other side” of opinions that they accept enthusiastically. The truly sophisticated student can learn to see the potential for a Peevyhouse ruling after reading a Garland ruling.

There are no “easy” cases in a course in Contracts. Every resolution of a close case is problematic and potentially unstable so long as the underlying conflict of principle endures and so long as novel fact patterns emerge.

Icon of Human Wisdom

Students may come to realize that sometimes the judicial resolution of a values conflict is less a matter of making the best argument than winning a vote. In Wood v Lucy, for example, Cardozo’s “winning” opinion lost the total vote of the New York appellate judges at both levels of the appeal by a vote of eight to four. But the vote that counted favored Cardozo’s ruling. Prompted to look for reasons for so many judges to dissent from the winning opinion, students soon find its weak points.

5. How Will Clients and Lawyers Adapt to This Ruling? What lessons does this opinion teach to contracts lawyers about how to frame future contracts? What will the next contract of this sort look like? How will litigators read this case and how will they change their strategy in future cases because of it?

These questions are more emphasized in the class in Contracts than in other first year subjects because Contracts involve both transactions and litigation. Modern appellate courts assume that commercial lawyers will all read the opinion and adapt their future contracts accordingly.

Sometimes the probable adaptation to the ruling will be obvious. For example, if the court refuses to enforce a contractual provision that was not called to a consumer’s attention or that was in confusing language, sellers will redraft the language, make it more obvious, or may require their customers to initial it as part of the standardized contracting process.

Compliance with the court’s ruling may, however, be problematic. If the ruling imposes an unavoidable new cost on a seller in a highly price-competitive market, compliance with the ruling may increase the price of the goods that the consumer will pay, raising a policy question: Would consumers prefer this solution to the alternative?

Answering Question 5 introduces students to the modern, Instrumentalist view of private law, in which rules are valued not so much for reasons based on justice or natural law but instead because of how they induce parties to behave. Legal rules are intended to affect people’s behavior by creating incentives and disincentives that will be given effect by the courts when lawsuits are brought. This is one version of what students should learn as “policy analysis.”

It becomes the mark of increasing sophistication in a law student to try to predict how parties will adapt to or cope with a new rule, perhaps to work around it. The mode of prediction is not a matter of empirical research or social science. Instead, it is the exercise of a narrative or rhetorical skill. Students learn to tell familiar, stylized stories about this adaptation takes place. By this route, answering Question 5 also leads to the continuous rediscovery of the Law of Unintended Consequences, the great irony that haunts the instrumentalist approach to law.

That Law may lead budding cynics to make arguments about the futility of tinkering with the transactions and legal relationships that parties have created.  For example, some forms of unequal bargaining power appears to be like hydraulic pressure that cannot be eliminated by increasing formalities in one part of a closed system if the pressure simply reappears elsewhere. Economists frequently argue that the alternatives to the prohibited practice may prove to be more costly to the apparent beneficiaries of the ruling.

Of course, not just transactional lawyers but litigators will adapt to judicial rulings and here the prediction called for by Question 5 is much more reliable. Every student should be able to tell how the losing party’s lawyer will try the next such case, and how the winning party’s lawyer will counter that strategy. And that is truly “thinking like a lawyer.”

The ContractsProfs Blog Vlog, Contracts Stuff: Discussions with Casebook Authors

Here is a link to our third Video Blog, which is a conversation with recent casebook authors.

They are:

Jonathan Lipson and Rachel Rebouché, co-authors of the Contracts Law in Action, 5th Edition, an approach pioneered by Stewart Macauley and William Whitford and now also co-edited with Wendy Netter Epstein.

Christina Kunz, co-author of Contracts: A Contemporary Approach, which I believe is now out in a 4th Edition, and Learning Sales Law, in its 2nd edition, both co-authored with Carol Chomsky, Jennifer Martin, and Elizabeth Schiltz.

Dan Barnhizer and Wayne Barnes, co-authors of Sales: A Contemporary Approach (so new I don’t even have an image).

It’s a fascinating conversation about what motivated these scholars to undertake the arduous task of editing a casebook. The four books under consideration offer a great range of methodological approaches. The Contracts: Law in Action book is a legendary work known in the guild as “The Wisconsin Materials,” and it is informed by a historical and sociological approach. While that approach is hardly impractical, wedding as it does theory and practice, Dan and Wayne’s see their book as a direct translation of their teaching method into print. The aim is not to hide the ball but to just present students with the relevant code sections, explain them, and then provide examples and problems that help the students solidify their understanding of the code. The Kunz, Chomsky, Martin, and Schiltz books are also extremely practical but they are supplemented with a legal analysis/legal reasoning component that Christina imported based on her background in teaching legal writing.

Our first Vlog was on the impact of AI on teaching.

Our second was about blogging about scholarship.

Two Universities Defeat COVID Claims

For years now, we have been following cases in which students sue their universities alleging breach of contract or unjust enrichment based on the universities’ decisions to close their campuses because of the COVID pandemic in the Spring of 2020. The cases have become a useful teaching tool for me. Not all relationships are contractual. Not all components of a contractual relationship entail enforceable promises. Some universities were incredibly sloppy in failing to protect themselves against allegations of contractual promises of in-person, on-campus education. No doubt, a lot of university counsel have been reviewing student handbooks, course catalogues, and promotional materials carefully since 2020.

Jonathan Michel was a Yale University (Yale) undergraduate in Spring 2020, and he filed a putative class-action against the university, alleging promissory estoppel and unjust enrichment because the online education he received was worth less than the in-person education he was allegedly promised. A trial court dismissed Mr. Michel’s claims in January 2023, finding that he had suffered no financial detriment. In August, 2o24, in Michel v. Yale University, the Second Circuit affirmed, but on interesting and different grounds. Construing a “Temporary Suspension Provision” in Yale’s Undergraduate Regulations as a force majeure clause, the Court found that Yale was contractually entitled to suspend classes. Plaintiff’s unjust enrichment claim was then foreclosed because the parties’ relationship was governed by an implied contract. The decision is quite narrow, turning on whether Yale “suspended” or merely “modified” its operations. Only the former would bring what took place on campus in Spring 2020 within the ambit of the Temporary Suspension Provision, and the Court rather generously found that what happened in Spring 2020 was a “suspension."

Scott Schmidhauser was a dental student at Tufts University (Tufts) in the Spring of 2020. He too brought a putative class action on behalf of similarly-situated students, challenging Tufts’ refusal to issue refunds after switching to remote education in response to the COVID epidemic. In Schmidhauser v. Tufts University, the District Court for the District of Massachusetts dismissed plaintiff’s motion for class certification as moot. It granted Tufts’s motion to dismiss all of Mr. Schimdhauser’s claims.

Mr. Schmidhauser’s claim as to the Spring of 2020 was foreclosed by Section 80, a Massachusetts statute that immunizes Massachusetts universities from suits arising out of payments of tuition or fees for the Spring 2020 semester, so long as the university offered online education. The First Circuit reviewed the constitutionality of the Section 80 in Dutra v. Trustees of Bos. Univ. and upheld it. The District Court saw no need to review those findings.

Mr Schmidhauser attempted to bring claims relating to other semesters, and I’m not sure why the court did not consider sanctioning his attorneys for doing so. Mr. Schmidhauser either did not enroll in courses or was under suspension during those semesters. In addition, the court noted that Tufts could have availed itself of the excuses of impossibility and illegality, as it would have been both impossible and illegal for the school to continue with in-person education when the governor had ordered the schools to close their campuses. That part of the ruling is daft. Illegality doctrine does not apply to contracts that become illegal during performance, and both doctrines turn on allocation of risk, which probably would not come out great for the university.

The court then notes that Mr. Schmidhauser could recover in restitution notwithstanding such excuses. However, Mr. Schmidhauser’s allegation of unjust enrichment were conclusory. The court points out that it is not hard to allege that tuition for in-person education is higher than costs for online education. For unknown reasons, plaintiff failed to make any such allegations.  I’m not sure why the court bothered with this analysis. Section 80 is not limited to contractual claims.

To me, these cases highlight some of the worst aspects of our litigious society. No institution was ready for COVID. We had not seen this sort of global pandemic in 100 years. Universities scrambled to continue to fulfill their educational missions while prioritizing the health of students, faculty, and staff. My daughter was a Freshman at a private university when COVID hit. I know that COVID diminished her educational experience, but I also believe that her university took all measures that it could take to limit the harm to that experience while also safeguarding student health. We did not get full value, but it is hard to quantify the loss, and I would not want to jeopardize higher education so that I could get a few thousand dollars in tuition and fees refunded. These law suits are just ugly.

Even where universities made mistakes in their promotional materials and student handbooks, making representations that COVID made it impossible for them to keep, I do not think these lawsuits have the potential to make the named parties significantly better off, unless the named parties have always dreamed of being named parties in a class-action suit. Rather, they just evidence structures that have developed, uniquely in the United States, that make the initiation of litigation a first, rather than a last resort.

Reviewing Larry DiMatteo, Principles of Contract Law and Theory, Part X

This is the tenth post in my series on  Larry Di Matteo's Principles of Contract Law and Theory (Principles).  The aim is to call some attention to this book while using it to stimulate my thinking as I once again consider how to teach contracts law to first-year students.  Principles is a scholarly textbook addressing advanced topics at a very high level of sophistication.  

Chapter 10 of Principles is the first chapter of Part IV, which covers contracts theory. The book has strong historical, comparative, and theoretical themes, so it feels like we have been working up to this part, where Professor DiMatteo gets to explored topics about which he is especially passionate. Chapter 10 focuses on legal history and theories of legal development. The chapter was fun for me, as it introduced me to theories of legal development to which I have never previously been exposed.

After an introduction via Morris Cohen’s weighing of the private and public functions of contract law from the 1930s (234-36), Professor DiMatteo introduces us to the two main theories of the development of contracts law: Sir Henry Maine’s progression thesis (236-37) and Nathan Isaacs’ cycle theory (237-40). Professor DiMatteo treats Maine’s view of a progression from status to contract as a useful but inadequate framework. Maine's work provides a historical framework against which later writers could develop their more precise and empirically supported explanatory theories. Isaacs’ theory of oscillating cycles in the history of contract law seems to have had lasting influence on models of legal development up to today.

Professor DiMatteo rejects the economics and law account of the law moving towards greater economic efficiency. Some rules that lead to inefficiency have been shed; others are retained. (240-41)

Professor DiMatteo then reviews the tripartite divisions of the law proposed by Karl Llewellyn, Grant Gilmore, and Ian Macneil. (243-44) Benjamin Cardozo seems an outlier in this company, as his view is that there is one Anglo-American tradition of judging: follow the law in easy cases and make new law in hard cases. (244-45) Anticipating his book’s final chapter, Professor DiMatteo seems partial to Cardozo’s view, echoing Lord Mansfield’s, another jurist to whom Professor DiMatteo returns with frequency, that the law as written responds to the law in action. (245-47)

The first post in this series can be found here
Part II is here.
Part III is here.
Part IV is here.
Part V is here.
Part VI is here.
Part VII is here.
Part VIII is here.
Part IX is here.

Sid DeLong, Younger on Cross-Examination

Imagining Irving Younger 
Sidney W. DeLong

As a young lawyer doing civil litigation, I read everything I could find on cross-examination. Then I discovered Irving Younger’s magnificent lectures on trial practice and forsook all other authorities. Younger’s videotaped lectures on trial practice educated generations of trial lawyers and are still available on YouTube.

When after eleven years “at the bar” I became a Contracts professor and tried to tell my students what I knew about the practice of law, my background led me to emphasize litigation rather than transaction lawyering or contract drafting. I always told my students that for a litigator, cross-examination was the most fun they could have in the practice of law. (I’m not aware that transaction lawyering involves anything I would call “fun” until maybe a party after a big closing.)

Irving Younger's most famous lecture is The Ten Commandments of Cross-Examination.Briefly summarized, they are: 

1. Be Brief..
2. Use plain, short words.

III.   Ask only leading questions.

1. Don’t ask a question you don’t know the answer to.
2. Listen to the answers.
3. Don’t quarrel with the witness.

VII.  Don’t let the witness repeat direct testimony.

VIII. Don’t allow the witness to explain or qualify an answer.

1. Don’t ask one question too many: Sit down!
2. Keep the jury in suspense until your summation.

My favorite classroom illustration of cross-examination was Holcomb v Hoffschneider297 N.W.2d 210 (Iowa 1980). Plaintiffs sought compensatory and punitive damages for fraudulent misrepresentation of the acreage in a residential lot. Sellers’ agent said that the irregularly-shaped parcel contained 6.6 acres whereas it actually contained only 4.6 acres. Admitting the misrepresentation, Sellers claimed that Buyers could not recover because they did not rely on it. The opinion contains extensive quotations from the trial transcript, making it an object lesson in cross-examination.

On direct examination, Buyers testified that they walked the property with Sellers’ agent:

1. Was the question of acreage of property that was for sale ever brought up?
2. Yes, before we made an offer to buy the property we stopped at [the agent’s] office and he gave us like a listing agreement and it showed the amount of acres. It showed 6.8 and this was on his original copy and before he Xeroxed it he says, “I don't know, Jim, I guarantee at least 6.6 acres of ground here.” So I put a check by the 6.8 acres and put a question mark and wrote 6.6.

  He run a Xerox copy and we took it home and that's what we made the offer to buy off of; that sheet of paper.

1. How many times prior to the closing of the transaction-how many times did the question of acreage come up?
2. Probably 10, 15 times at least.
3. Was it brought up by you or how?
4. By me because it just didn't appear to me that there was that much ground there and he says we sell 90% of the acreages out here and Mr. Herzberg used to live in this house and there is a plat on our wall down in the office and I know that there is that much ground there. So, I took his word for it.
5. Did he make an explanation?
6. He said because it was pie shaped and that hills is deceiving because it is along from the one point to the top of the hill is a long ways. It does look, you know, the distance is deceiving of just how far it is.

  Now began the cross-examination, where the defense lawyer tried to establish that plaintiffs did not rely on the agent’s statements. The testimony quoted in the opinion shows that lawyer repeatedly violates Commandments III, VI, VII, and VIII by failing to restrict the witness to answers to leading questions and permitting the witness to explain and reiterate direct testimony.

1. And every time you asked Dean Olson he said about six acres.
2. No, he said, I guarantee at least 6.6.
3. And you asked him the same question 15 to 20 times and every time he said, I guarantee the size to be 6.8 acres.
4. He said Mr. Herzberg lived in here. There is a plat of this on our wall. And he said, no, if there was any difference they would catch it.
5. Why did you ask him 15 to 20 times?
6. Because it didn't look like there was that much property there.

But these violations were not the biggest sins revealed by the transcript. The defense lawyer’s biggest mistake was a violation of Commandment V, a failure to listen to the witness and appreciate the statement that he had questioned the acreage “15 or 20 times.” The lawyer let the witness off the hook by asking him “Why did you ask him 15 or 20 times?”

This made me shudder. It reminds me of a jeweler who is given a bunch of stones to cut and fails to recognize that he has a jewel of infinite price, if only he cuts and polishes it correctly.

Imagine with me that after asking his last question, the defense lawyer had suddenly been removed from the game with an injury and the team had put in its backup lawyer, Irving Younger, to complete the cross-examination. The defense team is way behind because of the inept cross-examination, but there is still a chance for a skillful examiner to salvage a win. Because Younger would recognize that the “15 to 20 times” testimony, treated properly, will destroy the plaintiff’s claim of reliance.

Here is how I imagine that Younger would have completed the cross-examination:

1. You say you asked him about the acreage 15 to 20times?
2. Yes
3. That’s a gross exaggeration, isn’t it? Said loudly and desperately.
4. No, we asked him 15 to 20 times.
5. OK (said resignedly as if in defeat). Now, on a different subject you walked with him over the property and looked at it, right?
6. Right.

Q: And it looked to you like it was a lot less than six acres, right?

A: Right.

1. And that was after he had told it was 6 acres?

Right.

And you asked him the first of these 15 times and he said “I guarantee you it is six acres,” right?

Right

So you looked at it again. Right?

Right.

And it didn’t look like six acres, right?

Right

So you asked him a second time, “How big is it,” right?

Right

You asked him because it still didn’t look like six acres, right?

Right

And he told you for the second time, “It’s six acres.” Right?

Right

But you looked at it again and it didn’t look like six acres, right?

Right

So you asked him a third time how big it was, right?

I don’t know, but he said it a third time.

He said it a third time because you didn’t yet believe it, right?

Right

Because it still did not look like six acres, right?

Right

And after he said it a third time, you looked at it and you still weren’t sure, right?

Right.

Because even after he told you three times, it still didn’t look like six acres?

Right

I’m sorry, would you repeat your answer?

Right.

So he had to tell you it a fourth time, right?

Right.

But even after he had told you four times that the lot was 6 acres, you still needed persuading, right?

. . .

Right?

Right.

So he had to say how big it was a fifth time, right?

Right.

Etc etc.

I will spare the patient reader the next ten exchanges. But Irving Younger would not spare the jury because he wants them to get to the eye rolling stage and beyond.

Because then, after asking the first fourteen identically worded questions, he would ask the first question to which he did not already know the answer, a permissible violation of Commandment IV because he would not care what the answer is!.

Q: What was there about the fifteenth time he said six acres that made you believe him?

And then, regardless of the answer, as Younger commanded, he would sit down. At no time would he argue with the witness or demand justification or ask him about reliance or ask why he did not survey the property. He would reserve his argument about reliance for the closing, where he would argue one point:

“Remember this witness’s answers to my awkward series of questions. The buyers forced the agent to repeat himself fifteen times because they did not believe any of his fourteen repeated representations about the size of the plot. And if the buyers didn’t believe those statements, they sure didn’t rely on them.”

And that is how you polish a diamond!

Reviewing Larry DiMatteo, Principles of Contract Law and Theory, Part IX

This is the ninth post in my series on  Larry Di Matteo's Principles of Contract Law and Theory (Principles).  The aim is to call some attention to this book while using it to stimulate my thinking as I once again consider how to teach contracts law to first-year students.  Principles is a scholarly textbook addressing advanced topics at a very high level of sophistication. 

Chapter 9 of Principles is about standard terms and form contracting. It begins with the arresting observation that all contracts have both enforceable invisible terms and unenforceable express terms. (213) We should be grateful on both counts. The fact that courts can imply terms reduces transactions costs, as the parties do not have to negotiate terms that can be assumed to be part of the contract as a product of trade usage or course of dealing. Parties often draft contracts that include terms that they know are unenforceable but that nonetheless have the in terrorem effect of discouraging breach or dissuading parties from asserting their legal rights.

Courts regulate express terms such as satisfaction clauses, exculpatory clauses, and limitations on damages. (214-15) Default rules ensure fairness and efficiency and place the risks and burdens on the party that can avoid at the least cost. (216) Many such rules, Professor DiMatteo notes, were imported into the common law from the law merchant. (219) Some contract terms have their origins in case law, like “best efforts” clauses in agency relationships, which derive from Judge Cardozo’s justly celebrated opinion in Wood v. Lucy, Lady-Duff Gordon. In other cases, default terms are created by statute, as in the UCC’s ¶¶ 2-305-310. (220-21)

Professor DiMatteo provides a brief history of standard form contracting and notes the potential, especially in consumer contracts, for their use to replace with actual, substantive assent with mere manifestations of assent. (222-23). As he frequently does, he reminds U.S. readers that, contrary to what law and economics might suggest, enforcing all such contracts that fall just short of unconscionability is not the only way to preserve efficiency in commercial contracting. Other states have special rule for consumer contracts and even Karl Llewellyn thought that consumers should only be bound by dickered terms in form contracts and non-dickered terms so long as they are reasonable. (223-24). There follows a short but suggestive exploration of the dangers of contracts of adhesion and rolling contracts. (224-25)

Finally, the chapter covers the growth of statutory law and its impact on the common law of contracts. In the U.S., the adoption of the Uniform Commercial Code is the most important development in this realm, and the modernization of contract law that Article 2 entails has greatly influenced the development of the common law in the United States since the 1960s. (225-28) In the UK, membership in the EU required the adoption of a range of consumer contract laws that are far more comprehensive than their U.S. counterparts. (230) Professor DiMatteo does not address whether the UK has walked back these protections since Brexit, but I would be very surprised it they did. Brexit presented itself as a populist movement, and the popularity of consumer protection, in my experience, extends across the political spectrum.

The first post in this series can be found here
Part II is here.
Part III is here.
Part IV is here.
Part V is here.
Part VI is here.
Part VII is here.
Part VIII is here.

Reviewing Larry DiMatteo, Principles of Contract Law and Theory, Part VIII

This is the eighth post in my series on  Larry Di Matteo's Principles of Contract Law and Theory (Principles).  The aim is to call some attention to this book while using it to stimulate my thinking as I once again consider how to teach contracts law to first-year students.  Principles is a scholarly textbook addressing advanced topics at a very high level of sophistication. 

Chapter 8 of Principles covers interpretation. This is a very important subject matter and a challenge to encapsulate and to teach. Most contracts disputes turn on interpretive matters, but each problem of interpretation turns on specific facts and specific contractual language. Hence the importance and the challenge. As noted in last week’s post, Professor DiMatteo speaks of “overt" regulation of contract enforcement through doctrinal defenses and excuses and “covert” regulation through the courts’ exercise of their interpretive discretion.

In this chapter, Professor DiMatteo focuses on the divide between formalist (a/k/a literalist or textualist) and contextual approaches to interpretation. He addresses sociological takes on contracts interpretation in Chapters 13 and 14. He begins by usefully distinguishing interpretation, construction, and rectification. (184-85) As he describes it, construction is contextual, but he discusses canons of construction later in the chapter (207-08), and these canons are arguably both part of construction and formalist. Rectification is a rather narrow part of the package, applying only when a court is empowered to correct some error that would lead to an outcome inconsistent with the clear intent of the parties.

The clear theme of the chapter is that contextualism has won out over formalism. As Professor DiMatteo puts it, with refreshing candor: “The plain-meaning rule is fatally defective becasuse a writing cannot be sensibly interpreted without regard to the context in which it was written, and disputed contract language is almost never unambiguous.” (183) The heroes of the chapter are, on the American side, Holmes, Cardozo, Traynor, Corbin, and Llewellyn, and on the UK side, Lord Steyn, Lord Wilberforce, and Lord Hoffman. Professor DiMatteo also sprinkles in some lovely quotations about the inability of language to convey stable meaning. Overall, one is left with the impression that, under the sway of the Restatement (2d) of Contracts and the U.C.C., contextualism routed formalism more thoroughly in the United States than it did in the UK. But elements of formalism remain in our strange attachment to the Statute of Frauds and in the continued adherence to the Willistonian version of the parol evidence rule in some jurisdictions on this side of the pond.

The first post in this series can be found here
Part II is here.
Part III is here.
Part IV is here.
Part V is here.
Part VI is here.
Part VII is here.