ContractsProf Blog

Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

A Member of the Law Professor Blogs Network

Friday, October 24, 2014

A Great Day For Contracts Law

Today, October 24, 2014, is a banner day for contracts law because today is the date for two major conferences honoring two giants in the field.

First UC Hastings is hosting a Symposium to Honor Professor Chuck Knapp's 50th Year of Law Teaching.  Here is the schedule for that.

Knapp8:15 - 8:45  Registration and Breakfast

8:45 – 9:00 Introduction & Welcome

9:00-10:30   Panel I -- The State of Contract Law

Professor Jay Feinman, Rutgers University - Camden

Professor William Woodward, Santa Clara University

Professor Danielle Kie Hart, Southwestern Law School

Moderator – Professor Harry G. Prince, UC Hastings College of Law

10:30-10:45  Break

10:45-12:15  Panel II -- The Role of Casebooks in the Future of Contract Law

Professor Deborah Post, Touro Law Center

Professor Carol Chomsky, University of Minnesota

Professor Thomas Joo, UC Davis

Moderator – Professor Nathan M. Crystal, University of South Carolina

12:15-1:15  Lunch:  Marvin Anderson Lecture – Professor Keith Rowley, UNLV 

1:15-1:30  Break

1:30-3:00 Panel III -- The Politics of Contract Law

Professor Peter Linzer, University of Houston

Professor Judith Maute, University of Oklahoma

Professor Emily M. S. Houh, University of Cincinnati

Moderator – Professor Jeffrey Lefstin, UC Hastings College of Law

3: 15-4:45 Panel IV -- The Future of Unconscionability as a Limit on Contract Enforcement

Professor David Horton, UC Davis

Professor Hazel Glenn Beh, University of Hawaii

Moderator – Professor William S. Dodge, UC Hastings College of Law

4:45-5:00  Concluding Remarks

In addition, the Temple Law Review is hosting a symposium in honor of Bill Whitford:

Whitfordsymposiumlogo (1)

 

And here is the schedule for that:

9:00 - 9:30 Introductory Remarks9:30 - 10:45The Bankruptcy Research Database - Its Development and Impact

Moderator:
Professor Tom C.W. Lin
Speakers:
  • Douglas Baird: The Transformation of Large Corporate Reorganizations 1979-2014 Seen Through the Lens of the BRD
  • Bob Lawless: What Legal Empiricists Do Best
  • Lynn LoPucki: Measuring Bankruptcy Success
  • David Skeel: Rediscovering Corporate Governance in Bankruptcy: The LoPucki and Whitford Studies

11:00 - 12:15 The Lifecycle of Consumer Transactions: Consumer Contracting, Protection, and Bankruptcy

Moderator:
Professor Hosea H. Harvey
Speakers:
  • Melissa Jacoby: Superdelegation
  • Ethan Leib: Contra Proferentem and the Role of the Jury in Contract Interpretation
  • Angela Littwin: Why Process Consumer Complaints? Then and Now
  • Katherine Porter: The Ideal of Rough Justice: Consumer Protection as Business, and Business in Consumer Protection

12:30 - 1:45Lunch Break

  • Brief video-presentation from a special guest
  • Talk: Bob Hillman: Precedent in Contract Cases and The Importance(?) of the Whole Story; Response by Bill Whitford

2:00 - 3:15 Mixed Methods: Comparative Law, Comparative Methods

Moderator:
Professor Salil K. Mehra
Speakers:
  • Stewart Macaulay: Bill Whitford: A New Legal Realist Seeking to Understand Law Outside the Law School's Doors
  • Iain Ramsay: US Exceptionalism and the Comparative Study of Consumer Bankruptcy
  • Jay Westbrook: The Application of the Model Law on Cross-Border Insolvency in the United States, Canada, and the United Kingdom
  • Jean Braucher: Examination as a Method of Consumer Protection

3:30 - 4:00 Free for All: What Don't You Know That You Should Know? 

October 24, 2014 in Conferences, Contract Profs | Permalink | Comments (0) | TrackBack (0)

The New York Times's "The Upshot" Column on Wrap Contracts

Yesterday's New York Times included a "The Upshot" column by Jeremy B. Merrill.  The print version was entitled Online, It's Easy To Lose Your Right to Sue [by the way, why can't the Times be consistent in its capitaliziation of "to"?], but the online version's title tells us how easy, One-Third of Top Websites Restrict Customers' Right to Sue.   The usual way they restrict the right is through arbitration provisions and class-action waivers.  They do so through various wrap mechanisms so that consumers are bound when they click "I agree" to terms they likely have not read and perhaps have not even glanced at.  

Some websites attempt to bind consumers by stating somewhere on their websites that consumers are bound to the website's and the company's terms simply by using the company's website or its products (I'm looking at you, General Mills).  The only thing surprising about this, given the Supreme Court's warm embrace of binding arbitration and class action waivers, is that two-thirds of websites still do not avail themselves of this mechanism for avoiding adverse publicity and legal accountability.

As I was reading this article, it started to sound very familiar -- a lot like reading this blog.  And just as I was beginning to wonder why the Times was not ' quoting our own Nancy Kim, the article did just that:

Wrap Contracts“Courts have been very reluctant to say that browsewrap is not enforceable,” said Nancy S. Kim, a professor at the California Western School of Law and the author of a book about online contracts.

When courts decide whether a website’s terms can be enforced, they look for two things, Ms. Kim said: First, whether the user had notice of the site’s rules; and second, whether the user signaled his or her agreement to those rules. Courts have ruled that simply continuing to use the site signals agreement. When browsewrap agreements have been thrown out, as in the Zappos case, courts have said that the site’s link to the terms wasn’t displayed prominently enough to assume visitors had noticed it.

Congratulations to Nancy on such prominent notice of her scholarship!

And congratulations to the Times for paying attention!

 

October 24, 2014 in About this Blog, Contract Profs, In the News | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 21, 2014

Weekly Top Tens from the Social Science Research Network

SSRNSSRN Top Downloads For Contracts & Commercial Law eJournal
RECENT TOP PAPERS 

RankDownloadsPaper Title
1 202 Rolling Back the Repo Safe Harbors 
Edward R. MorrisonMark J. Roe and Christopher S. Sontchi 
Columbia Law School, Harvard Law School and United States Bankruptcy Courts, District of Delaware 
2 168 Featuring People in Ads (2014 Edition) 
Eric Goldman and Rebecca Tushnet 
Santa Clara University - School of Law and Georgetown University Law Center 
3 131 Contract as Empowerment Part II: Harmonizing the Case Law 
Robin Bradley Kar 
University of Illinois College of Law 
4 94 Say the Magic Word: A Rhetorical Analysis of Contract Drafting Choices 
Lori D. Johnson 
University of Nevada, Las Vegas, William S. Boyd School of Law 
5 86 Three Models of Promissory Estoppel 
Andrew Robertson 
Melbourne Law School 
6 82 Contract Law and Regulation 
Giuseppe Bellantuono 
University of Trento - Faculty of Law
7 73 Good Faith: A Puzzle for the Commercial Lawyer 
Noel McGrath 
UCD 
8 71 Performance-Based Consumer Law 
Lauren E. Willis 
Loyola Law School Los Angeles 
9 66 Does a Promise Transfer a Right? 
David Owens 
University of Reading 
10 60 Insurance Agents in the 21st Century: The Problem of Biased Advice 
Daniel Schwarcz and Peter Siegelman 
University of Minnesota Law School and University of Connecticut - School of Law 

SSRN Top Downloads For  LSN: Contracts (Topic)
RECENT TOP PAPERS 

RankDownloadsPaper Title
1 168 Featuring People in Ads (2014 Edition) 
Eric Goldman and Rebecca Tushnet 
Santa Clara University - School of Law and Georgetown University Law Center 
2 131 Contract as Empowerment Part II: Harmonizing the Case Law 
Robin Bradley Kar 
University of Illinois College of Law 
3 94 Say the Magic Word: A Rhetorical Analysis of Contract Drafting Choices 
Lori D. Johnson 
University of Nevada, Las Vegas, William S. Boyd School of Law 
4 59 Post-Private Law? 
Martijn W. Hesselink 
University of Amsterdam - Centre for the Study of European Contract Law (CSECL) 
5 55 Disclaimers of Contractual Liability and Voluntary Obligations 
Michael G. Pratt 
Queen's University (Canada) - Faculty of Law 
6 48 Wolves of the World Wide Web: Reforming Social Networks’ Contracting Practices 
Michael L. Rustad and Thomas H. Koenig 
Suffolk University Law School and Northeastern University 
7 48 From Contract to Status: Collaboration and the Evolution of Novel Family Relationships 
Elizabeth S. Scott and Robert E. Scott 
Columbia University - Law School and Columbia University - Law School 
8 45 Some Features of Promises and Their Obligations 
Michael G. Pratt 
Queen's University (Canada) - Faculty of Law 
9 42 The Grand Unified Theory — Methods of Contract Interpretation and Result Oriented Surplus Maximization 
Kyle Chen 
Notre Dame Law School 
10 38 The End of Doctrine: Private Arbitration, Public Law and the Anti-Lawsuit Movement 
Myriam E. Gilles 
Benjamin N. Cardozo School of Law

 

October 21, 2014 in Recent Scholarship | Permalink | TrackBack (0)

Monday, October 20, 2014

After Twelve Years of Trying: No Enhanced Performance from Drinking Red Bull

Class action lawsuits can be a great way for consumers to obtain much necessary leverage against potentially overreaching corporations in ways that would have been impossible without this legal vehicle.  But they can also resemble mere litigiousness based on claims that, to laypeople at least, might simply seem silly.  Decide for yourself where on this spectrum the recent settlement between Red Bull and a class of consumers falls.  The background is as follows:

The energy drink Red Bull contains so much sugar and caffeine that it can probably help keep many a sleepy law professor and law student alert enough to get an immediate and urgent job done.  I admit that I have personally enjoyed the drink a few times in the past, but cannot even drink an entire can without my heart simply beating too fast (so I don’t). 

Red Bull’s marketing efforts promised consumers a “boost, “wings,” and “improved concentration and reaction speeds.”  One consumer alleges in the class action suit that he “had been drinking the product since 2002, but had seen no improvement in his athletic performance.” 

It strikes me as being a bad idea to pin one’s hopes on a mere energy drink to improve one’s athletic performance.  These types of energy drinks seem to be geared much more towards a temporary sugar high than anything else.  At any rate, if the drink doesn’t help, why continue drinking it for another 12 years? 

Nonetheless, a group of plaintiffs filed claim asserting breach of express warranty, unjust enrichment, and violations of various states’ consumer protection statutes.  The consumers claim that Red Bull’s deceptive conduct and practices mean makes the company’s advertising and marketing more than just “puffery,” but instead deceptive and fraudulent and thus actionable.  The company of course denies this, but has chosen to settle the lawsuit “to avoid the cost and distraction of litigation.” 

To me, this case seems to be more along the lines of Leonard v. Pepsico than a more viable claim.  Having said that, I am of course not in favor of any type of false and misleading corporate claims for mere profit reasons, but a healthy dose of skepticism by consumers is also warranted.

October 20, 2014 in Current Affairs, Famous Cases, Food and Drink, In the News | Permalink | Comments (0) | TrackBack (0)

Friday, October 17, 2014

Documentary on Forced Arbitration

The Alliance for Justice has released a documentary on forced arbitration called Lost in the Fine Print.  It's very well-done, highly watchable (meaning your students will stay awake and off Facebook during a viewing), and educational.  I recently screened the film during a special session for my Contracts and Advanced Contracts students.  It's only about 20 or so minutes and afterward, we had a lively discussion about the pros and cons of arbitration.  We discussed the different purposes of arbitration and the pros and cons of arbitration where the parties are both businesses and where one party is a business and the other a consumer.  Many of the students had not heard about arbitration and didn't know what it was.  Many of those who did know about arbitration didn't know about mandatory arbitration or how the process worked.  Several were concerned about the due process aspects.  They understood the benefits of arbitration for businesses, but also the problems created by lack of transparency in the process.  I thought it was a very nice way to kick start a lively discussion about unconscionability, public policy concerns, economics and the effect of legislation on contract law/case law.  

I think it's important for law students to know what arbitration is and it doesn't fit in easily into a typical contracts or civil procedure class so I'm afraid it often goes untaught.  The website also has pointers and ideas on how to organize a screening and discussion questions.

October 17, 2014 in Commentary, Current Affairs, Film, Legislation, Miscellaneous | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 14, 2014

Want to make sandwiches? First, sign this non-compete...

Jimmy John's, a sandwich chain that frankly I had never heard of but which has over 2,000 franchise locations, apparently makes its employees sign pretty extensive confidentiality and non-compete agreements , as reported by Bob Sullivan and this Huffington Post article.  It's not clear to me what trade secrets are involved in making sandwiches, although I am a big fan of more transparency when it comes to what goes in my food and how it's made. As Bob Sullivan points out, in this economy, employment-related agreements for most employees are typically adhesion contracts. Making workers sign non-competes to get a job makes it much harder for them to get their next job.  In this case, the employee is prohibited from working for two years at any place that makes 10% of its revenue from any sandwich-type product (broadly defined to include wraps and pitas) that is within 3 miles of any Jimmy Johns location.  Given that there are 2,000 such locations, it could make it difficult for some food industry workers to find other jobs.

October 14, 2014 in Current Affairs, Food and Drink, Labor Contracts, Miscellaneous | Permalink | Comments (2) | TrackBack (0)

Weekly Top Tens from the Social Science Research Network

SSRNSSRN Top Downloads For Contracts & Commercial Law eJournal
RECENT TOP PAPERS 

RankDownloadsPaper Title
1 198 Rolling Back the Repo Safe Harbors 
Edward R. MorrisonMark J. Roe and Christopher S. Sontchi 
Columbia Law School, Harvard Law School and United States Bankruptcy Courts, District of Delaware 
2 162 Featuring People in Ads (2014 Edition) 
Eric Goldman and Rebecca Tushnet 
Santa Clara University - School of Law and Georgetown University Law Center 
3 127 Contract as Empowerment Part II: Harmonizing the Case Law 
Robin Bradley Kar 
University of Illinois College of Law 
4 85 Three Models of Promissory Estoppel 
Andrew Robertson 
Melbourne Law School 
5 84 Unbundling Efficient Breach 
Maria BigoniStefania BortolottiFrancesco Parisi and Ariel Porat 
University of Bologna - Department of Economics, University of Bologna - Department of Economics, University of Minnesota - Law School and Tel Aviv University 
6 84 Say the Magic Word: A Rhetorical Analysis of Contract Drafting Choices 
Lori D. Johnson 
University of Nevada, Las Vegas, William S. Boyd School of Law 
7 73 Contract Law and Regulation 
Giuseppe Bellantuono 
University of Trento - Faculty of Law 
8 66 Performance-Based Consumer Law 
Lauren E. Willis 
Loyola Law School Los Angeles 
9 62 Does a Promise Transfer a Right? 
David Owens 
University of Reading 
10 62 Good Faith: A Puzzle for the Commercial Lawyer 
Noel McGrath 
UCD 

SSRN Top Downloads For LSN: Contracts (Topic)
RECENT TOP PAPERS 

RankDownloadsPaper Title
1 162 Featuring People in Ads (2014 Edition) 
Eric Goldman and Rebecca Tushnet 
Santa Clara University - School of Law and Georgetown University Law Center 
2 127 Contract as Empowerment Part II: Harmonizing the Case Law 
Robin Bradley Kar 
University of Illinois College of Law 
3 84 Say the Magic Word: A Rhetorical Analysis of Contract Drafting Choices 
Lori D. Johnson 
University of Nevada, Las Vegas, William S. Boyd School of Law 
4 55 Disclaimers of Contractual Liability and Voluntary Obligations 
Michael G. Pratt 
Queen's University (Canada) - Faculty of Law 
5 53 Post-Private Law? 
Martijn W. Hesselink 
University of Amsterdam - Centre for the Study of European Contract Law (CSECL) 
6 48 From Contract to Status: Collaboration and the Evolution of Novel Family Relationships 
Elizabeth S. Scott and Robert E. Scott 
Columbia University - Law School and Columbia University - Law School 
7 46 Wolves of the World Wide Web: Reforming Social Networks’ Contracting Practices 
Michael L. Rustad and Thomas H. Koenig 
Suffolk University Law School and Northeastern University 
8 45 Some Features of Promises and Their Obligations 
Michael G. Pratt 
Queen's University (Canada) - Faculty of Law 
9 41 The Grand Unified Theory — Methods of Contract Interpretation and Result Oriented Surplus Maximization 
Kyle Chen 
Notre Dame Law School 
10 31 The End of Doctrine: Private Arbitration, Public Law and the Anti-Lawsuit Movement 
Myriam E. Gilles 
Benjamin N. Cardozo School of Law 

October 14, 2014 in Recent Scholarship | Permalink | TrackBack (0)

Monday, October 13, 2014

Don't Want Negative Reviews? Pay to Have Them Removed

We have posted previously about business entities that try to go after customers that give them negative reviews here and here.  It seems, based on our limited experience, that threatening to sue customers for writing negative reviews is not a great business model.

Fortunately, there is a market solution.  As reported in this weekend's column in The New York Times's "The Ethicist," businesses that recieve negative online reviews can just contact the reviewers and pay them to take down the review.  According to the account in The Times, the author of a TripAdvisor review of a hotel entitled it "An Overpriced Dung Heap," but then accepted a 50% discount in return for removing the review.  He should have bargained down to "Dung Heap," since the hotel probably was still a dung heap but perhaps was no longer overpriced.

The reviewer asked The Ethicist who was most unethical: himself, the hotel or TripAdvisor for hosting a system so easily corrupted.  We don't get paid to weigh in on ethical matters.  Actually, we don't get paid at all.  But we do have opinions to vent, so here are some.

As The Ethicist acknowledged, what the hotel owner did was not illegal.  An economist might reduce the question to one of efficiency.  If the hotel owner thinks her money is well spent making bad publicity go away, rather than actually improving the quality of her hotel, that is a choice she can make as a business owner.  The market may prove her wrong.  The lack of negative reviews on TripAdvisor may not help if in fact one is greeted by a kickline of cockroaches and bedbugs when entering the guest rooms.  The Ethicist dodges the stickier problem that TripAdvisor may  contain only positive reviews of The Dung Heap Inn because the owners and their supporters flood the site with fake reviews.  One would think that TripAdvisor's value would be correlated to its accuracy, but it is hard to see what measure TripAdvisor could take to insure that posts on its site are the real deal. 

October 13, 2014 in Commentary, In the News, Travel | Permalink | Comments (0) | TrackBack (0)

Friday, October 10, 2014

Guest Post: Robin Kar, The Emerging New Life of Contract Law Studies, Part IV

KarThis is the fourth in a four-part post by Robin Kar that serves as a sort of coda to our virtual symposium on the new book by Omri Ben-Shahar and Carl E. SchneiderMore Than You Wanted to Know: The Failure of Mandated Disclosure 

Part I, The Proverbial “Egg,” can be found here.

Part II, Breaking Out of the Shell, can be found here.

Part III, What Is This Emerging New Life? can be found here.

Part IV: Discarding the Last Remnants of the Old Shell

When reading More Than You Wanted to Know together with the reactions in the virtual symposium, I have been struck by two facts. First, we clearly know much more about how mandatory disclosure regimes work than ever before. Details aside, a consensus is emerging that these regimes do not always help consumers make better decisions. Second, despite this increase in knowledge and emerging consensus over the problem, there is even more uncertainty and even less consensus over how consumer protection should be reformed in light of these facts.  

            i.          Diagnosing the Problem

How can more clarity about the empirical facts lead to less clarity about what the law should be? I believe that part of the reason is simple: many of the current debates over these issues are still insufficiently attentive to the rigorous types of argumentation needed to address the purely normative aspects of these questions. To be more specific, the third premise of the classical law and economics movement (see Part I) has not yet been replaced by rigorously developed lines of argumentation from the appropriate cognate fields—as has happened with the first two premises. 

MoreIn saying this, I do not mean to suggest that rigorous argumentation on these topics is lacking. I mean to highlight a sociological fact about the current legal academy. I believe that the right lines of argument have not yet been sufficiently absorbed by contract law scholars who work in and around the law and economics paradigm. Because of the predominance and recent expansions of this paradigm within the study of contract law, this third premise is increasingly assumed or tacitly accepted by many other contract law scholars. This includes many scholars who do work predominantly in law and psychology or engage in straightforward empirical legal research.

In More Than You Wanted to Know, Ben-Shahar and Schneider are, for example, apparently willing to accept that the primary purpose of consumer protection law is to help consumers make better decisions. This is why they recommend better advice instead of more disclosure. But interestingly enough, almost all of the people who have responded critically in this symposium appear to accept—either explicitly or tacitly—either the same normative proposition or the alternative view that consumer protection laws should be set up to promote social welfare more generally. (The most notable exception is Aditi Bagchi’s response—though Steven Burton’s plea that the authors spend more time thinking about obligation may represent a similar thought.)

Hence, there is a normative assumption running through many of the current debates. The assumption is that consumer protection laws should be shaped to promote either better subjective choice or human welfare more generally. But is this normative premise true? And before we even get to that question: how might we determine whether it is true?

After the jump, I will pursue these questions. I will suggest that we cannot get clearer about the appropriate shape of consumer protection law, however, until we ask the right normative questions. And I will suggest that we are not yet doing that in major areas of contract law studies.

Continue reading

October 10, 2014 in Books, Commentary, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Thursday, October 9, 2014

Guest Post: Robin Kar, The Emerging New Life of Contract Law Studies, Part III

KarThis is the third in a four-part post by Robin Kar that serves as a sort of coda to our virtual symposium on the new book by Omri Ben-Shahar and Carl E. SchneiderMore Than You Wanted to Know: The Failure of Mandated Disclosure 

Part I, The Proverbial “Egg,” can be found here.

Part II, Breaking Out of the Shell, can be found here.

Part III: What IsThis Emerging New Life?

In Part II, I described how More Than You Wanted to Know seeks to answer psychological and empirical questions relevant to consumer protection law based not on ungrounded psychological premises or the kind of abstract theoretical reasoning that is typically associated with the classical law and economics paradigm but rather on actual psychological and empirical research. I suggested that these methodological moves explain the power of the book to take us much closer to the truth about use and sufficiency of mandatory disclosure regimes to cure a host of problems in consumer contracting.

As someone interested in methodology and the sociology of knowledge production in the legal academy, I find developments like these incredibly interesting. I am fascinated by the fact that they are often viewed as developments internal to the law and economics movement—even though they essentially dispense with some of its early guiding premises and draw on methodologies from other cognate fields.

The movement to replace classical economic assumptions about human decision-making with psychological facts is, for example, sometimes called “behavioral economics”. But what is really happening is that classical economic assumptions about human psychology are being replaced with direct psychological research into the relevant facts. Similarly, the move to replace economic modeling with rigorous empirical research is sometimes called “econometrics”. But what is really happening—at least within the legal academy—is that fewer law and economics scholars are making predictions about legal rules based merely on theoretical modeling and more are engaging in genuine empirical research. When they do this, they typically use statistical and other methods developed in the social sciences more generally—and not methods specific to the field of economics.  

Morethan In my view, one of the greatest virtues of some parts of the law and economics movement is that it has been willing to revise many of its early premises and adopt methodologies from other fields when necessary to make its scholarship better track the truth. This willingness is also one of its greatest sources of continuing strength. Because of this willingness, the field has essentially been able to absorb a broad range of criticisms, while continuing to broaden in influence and produce scholarship that better tracks the truth. More Than What You Wanted to Know is a wonderful example of this development—at least when it come to curing distortions caused by the first two premises of the classical law and economics paradigm.  (For a description of these 3 premises, see here.)  

Still, as far as I know, there is not yet any name for the move to replace ungrounded economic assumptions about how to assess normative arguments (i.e., premise 3 from Part I) with rigorous thought developed by experts in the appropriate cognate fields. These are the fields of moral, legal and political philosophy, along with the field of meta-ethics. Corresponding to this fact, there is not yet as robust an acknowledgment of the need for this move within many influential contract law circles.

When I say I believe significant new life may be emerging in the study of contract law, I am nevertheless referring to the possibility that all three of the classical law and economics premises be replaced with rigorous lines of evidence and argumentation drawn from the correct cognate fields. I am referring to a highly interdisciplinary research program that draws on (1) our best contemporary psychological findings into decision-making and how humans operate with legal rules when asking psychological questions relevant to contract law, (2) rigorous empirical research into the consequences of different legal rules when adopted by groups with real human psychologies, and (3) philosophically well-grounded argumentation and debate over the normative propositions that are most relevant to contract law.

I am describing a hope, not an expectation—because it is we, as a field, who will decide whether this new life fully emerges. 

For a range of historically contingent reasons, the classical law and economics movement may just end up serving as the early vehicle (or the proverbial “egg”) for this transition within the legal academy. I believe that would be an incredibly good thing for the study of contract law because it would essentially allow the legal academy to adapt a ready-made set of social and academic networks that are already studying this subject matter intensively and in highly influential manners. But this would also require a much greater appreciation by scholars who work within this paradigm of the need for more rigorous philosophical input on normative questions.

The result would, moreover, not just be an expanded sub-field of law and economics. It would be better described as a fully informed search for the truth. The proverbial “egg” will have given birth to something much, much better.

But we are not yet there yet. There is still too large a disconnect between moral and political philosophers and economists within the legal academy. Hence, a great deal of highly influential work on contract law still risks producing distortion. In Part IV, I will show how this problem still affects many discussions of consumer protection law. I will also make a plea that we work together to breath the right new life into contract law studies going forward.

October 9, 2014 in Books, Commentary, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Guest Post: Robin Kar, The Emerging New Life of Contract Law Studies, Part II

KarThis is the second in a four-part post by Robin Kar that serves as a sort of coda to our virtual symposium on the new book by Omri Ben-Shahar and Carl E. SchneiderMore Than You Wanted to Know: The Failure of Mandated Disclosure 

Part I, The Proverbial “Egg,” can be found here.

Part II: Breaking Out of the Shell

As we all know, the law and economics movement has proven a formidable force within the legal academy, especially in relation to subjects like contract law. As recently as 2012, even Charles Fried, the author of Contract as Promise, was forced to acknowledge that “the economic analysis of law may today be the dominant intellectual approach to legal institutions generally and contract law in particular.”

Because of Omri Ben-Shahar’s training and intellectual ties, many will view More Than What You Wanted to Know as a work that is partly internal to the law and economics movement. This affiliation should help the book because it will allow the book to speak credibly to a wide range of influential contract law scholars who currently share this affiliation. The book ultimately challenges one of the early dogmas of the classical law and economics paradigm, as described in my prior post, but—because of the book’s intellectual affiliations—the book can pose this challenge in an especially effective manner.

It should nevertheless be noted that the central insights in the book arise not from anything specific to the field of law and economics but rather from rejection of the field’s first two classical premises. With respect to human psychology (see premise 1 in Part I), Ben-Shahar and Schneider do not simply assume that consumers make more rational decisions whenever more facts are disclosed to them. Instead, they canvass a wealth of psychological evidence to the contrary. This evidence shows that consumers are especially likely to make poorer decisions as their choices become more complex and unfamiliar and when those terms are dictated by sophisticated contracting parties. 

When determining the likely consequences of legal rules (see premise 2 in Part I), the authors similarly avoid abstract economic modeling and turn instead to direct empirical data. They draw this empirical data from a broad range of sources, and the facts suggest that mandatory disclosure regimes have increasingly begun to harm consumers in many contexts. 

Itunes scrollOne reason for this is dynamic. Over time, mandatory disclosure regimes tend to lend increasing complexity and unfamiliarity to even the most banal of transactions. In one particularly poignant example, the authors describe the $.99 purchase of an iTunes song—which was accompanied by 32 feet of complex and often incomprehensible boilerplate (when printed out in a tiny font, as illustrated on the left). One of the underappreciated consequences of mandatory disclosure regimes is that they have increasingly begun to flummox consumers in even the simplest of transactions.

In highlighting facts like these, More Than You Wanted to Know takes us much closer to the truth about mandatory disclosure regimes than classical law and economics methodologies can. Speaking from a purely methodological perspective, it is able to do this because it is willing to abandon the first two premises of the classical paradigm and replace them with something better. It seeks to answer psychological and empirical questions relevant to consumer protection law based not on ungrounded premises but rather on actual psychological and empirical research.

This is an example of the emerging new life that I see in contract law studies. It is a better life because it is more likely to track the truth.

In my next post, I will nevertheless reflect more deeply on this new life. I will ask whether we have gone far enough as a field to make it really come to life. Have we—in other words—gone far enough yet to ensure that our collective research best tracks the truth?

October 9, 2014 in Books, Commentary, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 8, 2014

New in Print

Guest Post: Robin Kar, The Emerging New Life of Contract Law Studies, Part I

KarThis is the first in a four-part post by Robin Kar that serves as a sort of coda to our virtual symposium on the new book by Omri Ben-Shahar and Carl E. SchneiderMore Than You Wanted to Know: The Failure of Mandated Disclosure 

Introduction

When an egg hatches, new life emerges. But it often takes its first steps into the world with some remnants of its newly discarded shell.

I believe that significant new life may be emerging in the study of contract law, but that too much of an old shell remains. Rather than hide the ball, let me just say that the proverbial “egg” is the classical law and economics movement. And More Than What You Wanted to Know takes us part—though only part—of the way toward that emerging new life.

Jeremy Telman has been kind enough to let me post a late addendum to this symposium so that I can explain these perceptions. I want to use this review to prompt more scholars in the field—including Ben-Shahar and Schneider—to acknowledge what we need to do as a field to get further toward the right destination in the study of contract law.

As other contributors have noted, More Than You Wanted to Know is a full-throated attack on mandatory disclosure regimes. These regimes have been widely used and accepted in many contexts for some time now. It is therefore interesting to note that almost all of the commentators here have voiced some agreement with the basic thrust of the book—even while arguing that its thesis is overly general. We are witnessing the tail end of a shift from what once seemed to be common knowledge (i.e., about the usefulness and sufficiency of mandatory disclosure to cure a host problems in consumer contracting contexts) to a very different shared understanding.

But how has this shift occurred? As someone interested in the sociology of the legal academy and how different interdisciplinary methods can combine to produce (or distort) knowledge, I want to delve further into this question. I also want to ask whether we have gone far enough, in our collective studies of contract law, in the right direction. (I should probably apologize in advance to Carl Schneider that I will focus more on contract than informed medical consent in these posts, given the nature of this blog.)

The Proverbial “Egg”

If the “egg” is the classical law and economics movement, then that is where we should start.

Interdisciplinary studies of law can obviously produce enormous insight. When methods from cognate fields are applied to the law without sufficient reflection on the validity or applicability of their guiding premises, they can, however, also produce significant distortion. In this particular case, I believe that faulty premises associated with the classical law and economics movement are part of the cause of overblown intuitions concerning the use and value of mandatory disclosure regimes.

To analyze the source of this distortion more concretely, I ask you to consider an approach to studying contract law that might seem fanciful at first. This approach combines three basic elements:

  1. MoreHuman Psychology. The approach starts with certain assumptions about how human psychology and decision-makings works. These assumptions are intuitively plausible to some but are not rooted in any rigorous psychological research.

  2. Predictions about Legal Rules. The approach then generates predictions about the consequences of legal rules by modeling interactions among hypothetical people with the psychologies presumed in premise 1 under different hypothetical legal rules. The approach thus relies on theoretical modeling instead of rigorous empirical research to make empirical predictions.

  3. Normative Questions. The approach is skeptical of any kind of value that is not reducible to the value of some state of affairs. Proponents of this approach are thus impatient with normative arguments that do not fit easily into the consequentialist (and/or welfarist or cost-benefit) frameworks that they best understand. People who adopt this approach are not, however, typically trained in moral or political philosophy—which are the fields that deal most directly and rigorously with normative questions. Nor are they trained in the field of “meta-ethics”—which is the study of the status or objectivity of normative judgments. People who adopt this approach are thus largely unversed in the considerations that might legitimately ground (or respond) to their skepticism. This prevents them from knowing whether their grounds for skepticism are valid. It also prevents them from knowing whether their skepticism can be limited to concepts they reject (like “rights” and “fairness”), or whether it equally affects the values they accept (like “welfare” and a person’s “good”).

On its face, an approach like this would appear to be a recipe for disaster. It studies contract law and makes numerous recommendations for legal reform, but it employs a methodology that is unmoored in the specific classes of evidence and types of argumentation that are most relevant to its professed subject matter. 

But as anyone reading this blog will know, this description is far from fanciful. To make it describe something real, one need only clarify that the psychology referenced in premise 1 is homo economicus—or the classical, “rational actor” model. Then these three premises provide a pretty good description of the heart of the classical law and economics approach to studying contract law. 

These three premises can also seem to lend support to the value and sufficiency of mandatory disclosure regimes to cure a host of problems with consumer contracting. Mandatory disclosure regimes purport to produce the precise information needed for rational consumers to make better choices for themselves. If people are rational actors (see premise 1), then economic modeling (as described in premise 2) can thus be used to show that these regimes should simultaneously produce overall gains for consumers who contract, overall gains in social welfare and a more efficient allocation of resources. These regimes should also work relatively automatically, or “as by an invisible hand”, in the following sense: they should produce these results without the need for any centralized state planner to know in advance which exchanges are better for specific parties. There is, moreover, nothing else to value (as per premise 3). Hence, there is nothing else that legitimately speaks to the appropriate contours of consumer protection law.

There is no doubt about it: mandatory disclosure regimes work incredibly well in (classical economic) theory. The question is whether they work in reality.  In the posts that follow, I will explore that question.  I will suggest that More Than You Wanted to Know takes us further toward the truth—but cannot, as it stands, take us all the way there. 

 

October 8, 2014 in Books, Commentary, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 7, 2014

Introducing our Guest Blogger, Robin Kar's Coda to Our Virtual Symposium on More That You Wanted to Know

KarProfessor Robin Kar is a professor of law and philosophy at the University of Illinois College of Law. He is a faculty affiliate of the Illinois Law and Philosophy Program, the Beckman Institute for Science and Technology (in the Cognitive Psychology Research Group), the Illinois Program in Law, Behavior and he Social Sciences, and the Illinois Network for Neurocultures.  He is Director of the Illinois Center for Interdisciplinary and Comparative Jurisprudence, and a Project Leader for the Illinois Program on Cultures of Law in Global Contexts.  He has a PhD in philosophy, with a special focus on moral psychology, moral, legal and social philosophy, meta-ethics, rational choice and game theory, and the foundations of economics and the social sciences.  Some of his work on moral psychology, the psychology of obligation, and the nature of law and legal obligation can be found in pieces like The Deep Structure of Law and Morality, The Psychological Foundations of Human Rights, Hart’s Response to Exclusive Legal Positivism, and The Two Faces of Morality

Readers of the blog are also likely already familiar with Professor Kar’s recent SSRN Top Ten hits on contract law and theory, Contract as Empowerment: A New Theory of Contract and Contract as Empowerment Part II: Harmonizing the Case Law, along with his piece The Challenge of Boilerplate.  Kar teaches contract law and wide array of jurisprudence and legal theory courses, including seminars like morals, markets and the law.

Professor Kar’s posts serve as a sort of coda to our our virtual symposium on the new book by Omri Ben-Shahar and Carl E. SchneiderMore Than You Wanted to Know: The Failure of Mandated Disclosure 

Professor Kar will present his argument in four parts:

Part I: The Proverbial “Egg” suggests that three ungrounded premises of the classical law and economics movement have often caused many people to think that mandatory disclosure regimes have an unwarranted degree of support. 

Morethan Part II: Breaking Out of the Shell describes More Than You Wanted to Know as emerging from the classical law and economics paradigm but as able to challenge one of its central dogmas because it is willing to depart from two of the three core assumptions associated with that classical tradition.  The book seeks to answer psychological and empirical questions based on real psychological and empirical research rather than ungrounded psychological premises and abstract theoretical modeling. This explains why the book is better able to track the truth about mandatory disclosure regimes.   

Part III: What Is This Emerging New Life? outlines a better and even more broadly interdisciplinary paradigm that Professor Kar sees as potentially emerging from these developments. This research program would draw not only on psychological and empirical research to answer any psychological and empirical questions relevant to contract and consumer protection law but also on a broader range of philosophical methods of argumentation to answer any normative questions relevant to these topics. Part III argues that further development toward this interdisciplinary collaboration is needed for contract law studies to better track the truth.      

Part IV: Discarding the Last Remnants of the Old Shell suggests that we still have a way to go in freeing ourselves from the limitations of the classical law and economics paradigm.  It describes how this problem still causes many scholars to ask the wrong normative questions when asking how best to reform consumer protection law—as illustrated both by More Than You Wanted to Know and many of the responses to it in this symposium. This has led to an increase in knowledge about the psychological and empirical facts, but even more uncertainty and less consensus over how best to reform consumer protection law in light of them.  This problem can only be fully addressed by attending better to the right normative questions. 

So what are the right normative questions, you ask?  Stay tuned to find out!

October 7, 2014 in About this Blog, Books, Commentary, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

DC Circuit Allows Class Action against American Psychological Association to Proceed on Unjust Enrichment Claims

Very interesting case!  The American Psychological Association (APA) listed as "mandatory" an optional assessment that members paid annually with their dues.  The additional fees went to support the lobbying efforts of an affiliated organization, jthe American Psychological Association Practice Organization (APAPO).

GrouptherapyUpon discovery that the fee was optional, members of the APA experienced a range of emotions consistent with symptoms of outrage and moral indignation and filed a class action lawsuit to recover the fees.  The complaint stated three causes of action, but we are here concerned only with the first, unjust enrichment and constructive trust.  The District Court opined that the plaintiffs were unreasonable, if not delusional, if they thought the fees lobbying fees were mandatory, and it dismissed the suit.  Diagnosed as crazy, Plaintiffs asked for a second option, to which the District Court replied, "Okay, you're ugly too!"

*Rimshot*

But seriously folks, Plaintiffs sought their second opinion in the D.C. Circuit.

In In re: APA Assessment Litigation, the D.C. Circuit disagreed with District Court and reversed in part.  The District Court had dismissed the quasi-contract claim on the ground that such a claim cannot exist where there is an actual contract on the same subject matter.  The D.C. Circuit agreed with the District Court's statement of the law but disagreed with its application to these facts.  The special assessment to support APAPO formed no part of the plaintiffs' contractual agreement with the APA.  As the Court noted, citing the Restatement (Third) of Restitution & Unjust Enrichment, mistaken payment of money not due is one of the core cases of restitution.  It typically applies in a contractual context in which one party negligently or fraudulently charges the other excessive fees for services that exceed the sope of the contract.

The Court was unmoved by the APA's arguments that it was not unjustly enriched because the plaintiffs benefited from APAPO's lobbying efforts.  The plaintiffs had no interest in APAPO's functions.  They were induced to make the payments because they wanted to retain their APA membership, not because they wanted to support APAPO.  Finally, the Court found that it was not unreasonable for Plaintiffs to believe that the payments were mandatory.

Nor were they ugly.

October 7, 2014 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Weekly Top Tens from the Social Science Research Network

SSRNSSRN Top Downloads For Contracts & Commercial Law eJournal
RECENT TOP PAPERS 

RankDownloadsPaper Title
1 229 Contract as Empowerment: A New Theory of Contract 
Robin Bradley Kar 
University of Illinois College of Law 
2 186 Rolling Back the Repo Safe Harbors 
Edward R. MorrisonMark J. Roe and Christopher S. Sontchi 
Columbia Law School, Harvard Law School and United States Bankruptcy Courts, District of Delaware 
3 157 Featuring People in Ads (2014 Edition) 
Eric Goldman and Rebecca Tushnet 
Santa Clara University - School of Law and Georgetown University Law Center 
4 123 Contract as Empowerment Part II: Harmonizing the Case Law 
Robin Bradley Kar 
University of Illinois College of Law 
5 81 Three Models of Promissory Estoppel 
Andrew Robertson 
Melbourne Law School 
6 80 Unbundling Efficient Breach 
Maria BigoniStefania BortolottiFrancesco Parisi and Ariel Porat 
University of Bologna - Department of Economics, University of Bologna - Department of Economics, University of Minnesota - Law School and Tel Aviv University 
7 73 Say the Magic Word: A Rhetorical Analysis of Contract Drafting Choices 
Lori D. Johnson 
University of Nevada, Las Vegas, William S. Boyd School of Law 
8 67 Contract Law and Regulation 
Giuseppe Bellantuono 
University of Trento - Faculty of Law 
9 62 Performance-Based Consumer Law 
Lauren E. Willis 
Loyola Law School Los Angeles 
10 58 Does a Promise Transfer a Right? 
David Owens 
University of Reading 

SSRN Top Downloads For LSN: Contracts (Topic)
RECENT TOP PAPERS 

RankDownloadsPaper Title
1 229 Contract as Empowerment: A New Theory of Contract 
Robin Bradley Kar 
University of Illinois College of Law 
2 157 Featuring People in Ads (2014 Edition) 
Eric Goldman and Rebecca Tushnet 
Santa Clara University - School of Law and Georgetown University Law Center 
3 123 Contract as Empowerment Part II: Harmonizing the Case Law 
Robin Bradley Kar 
University of Illinois College of Law 
4 73 Say the Magic Word: A Rhetorical Analysis of Contract Drafting Choices 
Lori D. Johnson 
University of Nevada, Las Vegas, William S. Boyd School of Law 
5 53 Disclaimers of Contractual Liability and Voluntary Obligations 
Michael G. Pratt 
Queen's University (Canada) - Faculty of Law 
6 51 Post-Private Law? 
Martijn W. Hesselink 
University of Amsterdam - Centre for the Study of European Contract Law (CSECL) 
7 45 Some Features of Promises and Their Obligations 
Michael G. Pratt 
Queen's University (Canada) - Faculty of Law 
8 41 Wolves of the World Wide Web: Reforming Social Networks’ Contracting Practices 
Michael L. Rustad and Thomas H. Koenig 
Suffolk University Law School and Northeastern University 
9 39 From Contract to Status: Collaboration and the Evolution of Novel Family Relationships 
Elizabeth S. Scott and Robert E. Scott 
Columbia University - Law School and Columbia University - Law School 
10 38 The Grand Unified Theory — Methods of Contract Interpretation and Result Oriented Surplus Maximization 
Kyle Chen 
Notre Dame Law School

 

October 7, 2014 in Recent Scholarship | Permalink | TrackBack (0)

Monday, October 6, 2014

Online Contracting Still Confusing for the Ninth Circuit

We earlier blogged on Nguyen v. Barnes and Noble in which the Ninth Circuit Court of Appeals among other things found that where consumers do not affirmatively consent to online agreements by, for example, checking off an “I agree” button, “something more” than a mere hyperlink to the vendor’s Terms of Service is required to make sure that consumers have at least constructive notice of the agreement.  Said the Court: “Where a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on – without more – is insufficient to give rise to constructive notice.”

This opinion is striking for a number of different reasons.  First, in this digital age, couldn’t online shopping in and of itself be said to constitute constructive notice of the online vendor’s terms of use?  In other words, online shoppers today must be said to have come to expect that when they buy from at least well-established vendors such as, here, Barnes and Noble, there will necessarily be terms to which the parties are bound (presuming, of course, that there is a contract to begin with).  This is especially so with the younger group of consumers.

Conversely, given the above and similar confusion, why in the world wouldn’t companies simply use an “I agree” box to be on the safe side?  Even after the case came out, the Barnes and Noble website does, granted, not feature its “TOS” hyperlink as conspicuously as other links on its website and certainly not as obviously as one would have thought the company would have learned to do after the case (see very bottom left-hand corner of website).

What is more, normally a failure to read a contract before agreeing to its terms does not relieve a party of its obligations under the contract.  In the case, however, the court said that in online cases, “the onus must be on website owners to put users on notice of the terms to which they wish to bind consumers … they cannot be expected to ferret out hyperlinks to terms and conditions to which they have no reason to suspect they will be bound.”  This is similar to a case we blogged about here.

However, it would probably be hard to find an online shopper in today’s world who would truly not expect that somewhere on the website, there is likely a link with terms that the corporation will seek to enforce.  The duty to read should arguably be extended to reading websites carefully as well.  Another medium is at stake than the paper contracts of yesteryear, but that doesn’t necessarily change the contents.  But that is not the law in the Ninth Circuit as it stands today, as evidenced by this case, which unfortunately fails to clarify exactly what the courts think would be enough to constitute constructive notice.  So for now, “something more” is the standard.  Perhaps this is an issue of “millenials” versus a slightly older generation to which some of the judges deciding these cases belong.

October 6, 2014 in Current Affairs, E-commerce, Web/Tech | Permalink | Comments (2) | TrackBack (0)

New Jersey Supreme Court Finds Arbitration Agreement Unenforceable for Lack of Notice

The New Jersey Supreme Court rendered a decision on September 23 that found an arbitration provsion unenforceable because the language was insufficient to alert a reasonable consumer that she was surrendering a constitutional or statutory right.  The plaintiff, Patricia Atalese, entered into a contract with U.S. Legal Service Group, L.P. (USLSG) for debt adjustment services.  Atalese paid USLSG approximately $5,000  for its services.  She alleged that USLSG did very little for her and further, that it failed to mention that it was not a licensed debt adjuster in New Jersey.  She sued, alleging that USLSG violated the Consumer Fraud Act and other consumer law.

The contract contained the following provision:

Arbitration: In the event of any claim or dispute between Client and the USLSG related to this Agreement or related to any performance of any services related to this Agreement, the claim or dispute shall be submitted to binding arbitration upon the request of either party upon the service of that request on the other party. The parties shall agree on a single arbitrator to resolve the dispute. The matter may be arbitrated either by the Judicial Arbitration Mediation Service or American Arbitration Association, as mutually agreed upon by the parties or selected by the party filing the claim. The arbitration shall be conducted in either the county in which Client resides, or the closest metropolitan county. Any decision of the arbitrator shall be final and may be entered into any judgment in any court of competent jurisdiction. The conduct of the arbitration shall be subject to the then current rules of the arbitration service. The costs of arbitration, excluding legal fees, will be split equally or be born by the losing party, as determined by the arbitrator. The parties shall bear their own legal fees.

 The NJ Supreme Court found that despite arbitration's "favored status," not every arbitration clause, "however phrased," will be enforceable.  NJ consumer law required that consumer contracts be written in a "simple, clear, understandable and easily readable way."  Arbitration clauses, like other contractual clauses, must also be phrased in "plain language that is understandable to the reasonable consumer."

Here, the arbitration clause was on page 9 of a 23 page contract.  It provided no explanation that the plaintiff was waiving her right to sue in court for breach of her statutory rights.  The provision also did not explain the meaning of arbitration or indicate how it differed from a court proceeding.  Finally, the court found that it was not written in plain language that would be "clear and understandable to the average consumer that she is waiving statutory rights."  The court concluded:

"In the matter before us, the wording of the service agreement did not clearly and unambiguously signal to plaintiff that she was surrendering her right to pursue her statutory claims in court.  That deficiency renders the arbitration agreement unenforceable."

Very nice work, Supreme Court of New Jersey, for recognizing that "reasonable consumers" should not be expected to sift through fine print and make sense of legal mumbo jumbo.

Arbitration: In the event of any claim or dispute between Client and the USLSG related to this Agreement or related to any performance of any services related to this Agreement, the claim or dispute shall be submitted to binding arbitration upon the request of either party upon the service of that request on the other party. The parties shall agree on a single arbitrator to resolve the dispute. The matter may be arbitrated either by the Judicial Arbitration Mediation Service or American Arbitration Association, as mutually agreed upon by the parties or selected by the party filing the claim. The arbitration shall be conducted in either the county in which Client resides, or the closest metropolitan county. Any decision of the arbitrator shall be final and may be entered into any judgment in any court of competent jurisdiction. The conduct of the arbitration shall be subject to the then current rules of the arbitration service. The costs of arbitration, excluding legal fees, will be split equally or be born by the losing party, as determined by the arbitrator. The parties shall bear their own legal fees. - See more at: http://caselaw.findlaw.com/nj-supreme-court/1678725.html#sthash.yAibodjp.dpuf
Arbitration: In the event of any claim or dispute between Client and the USLSG related to this Agreement or related to any performance of any services related to this Agreement, the claim or dispute shall be submitted to binding arbitration upon the request of either party upon the service of that request on the other party. The parties shall agree on a single arbitrator to resolve the dispute. The matter may be arbitrated either by the Judicial Arbitration Mediation Service or American Arbitration Association, as mutually agreed upon by the parties or selected by the party filing the claim. The arbitration shall be conducted in either the county in which Client resides, or the closest metropolitan county. Any decision of the arbitrator shall be final and may be entered into any judgment in any court of competent jurisdiction. The conduct of the arbitration shall be subject to the then current rules of the arbitration service. The costs of arbitration, excluding legal fees, will be split equally or be born by the losing party, as determined by the arbitrator. The parties shall bear their own legal fees. - See more at: http://caselaw.findlaw.com/nj-supreme-court/1678725.html#sthash.yAibodjp.dpuf

October 6, 2014 in Miscellaneous, Recent Cases | Permalink | Comments (2) | TrackBack (0)

Vis Problem Is Up

                                                                                             640px-Riesenrad_Vienna

The problem is up for the 22nd Annual International Commerical Arbitration Moot. Between now and early December, teams will write the brief for the Claimant.  In mid January the brief for the Respondent is due. And then, in March,  200-300 teams from law schools around the world will gather in Vienna for the competition. 

There is no limit to the  number of students on a team but they must argue in pairs. Typically one student handles the procedural issues and one the substantive or the CISG issues. There are 4 rounds to start with the 64 highest scoring teams moving on to a single elimination tournament.

The problems  identify an actual arbitration agency whose rules govern the procedures, This year the procedural issues center around whether the Claimant the right to make an emergency appeal to the arbitration agency and whether the Respondent may join the parent company of the Claimant for purposes of its counterclaim.  In one of those puzzles that charactizes the Moot, the parent company "endored" the contract at issue but claims not to be a party do it.

The substantive issue concerns a letter of credit which does not conform (or does it?) to what was called for in the contract. The buyer attempts to "cure" in a sense but the seller says "too late, we have already avoided the contract." Thus, it raises avoidance and cure isssues under the CISG.

This is, at best, a first cut on the problem. As the weeks pass, the problem will reveal itself as the layers are peeled off. 

I am happy to trade notes and views with other interested profs.   

[In the meantime, try to find the third man.]

 

 

October 6, 2014 in Conferences, Contract Profs, Film, Help Wanted, Law Schools, Meetings, Teaching | Permalink | Comments (0) | TrackBack (0)

Seventh Circuit Rejects Steak n Shakes' Motion to Stay n Compel

While we were busy with the virtual symposium, we got a bit behind on reporting on cases.  This one is from late August.

Steak n shake

Three Steak n Shake (SNS) franchisees brought suit against SNS seeking a declaratory judgment that, under the terms of their franchise agreements, they may set their own prices and are not required to participate in corporate promotions.  The case resulted from a corporate takeover in 2010, after which SnS initiated new pricing policies that plaintiff franchisees claim adversely affected their businesses.

The franchisees' agreements with SNS provided that the latter “reserve[d] the right to institute at any time a system of nonbinding arbitration or mediation.” One month after plaintiffs filed suit, SNS introduced an arbitration policy requiring franchisees to engage in nonbinding arbitration at SNS's request.  Pursuant to that policy, SNS filed a motion in the District Court to stay proceedings and compel arbitration.  The District Court denied the motion, finding the arbitration agreement "illusory" because one-sided and unenforceable.  In addition, the District Court found that the new arbitration policy could not apply retroactively to claims that had already been filed and that the Federal Arbitration Act (FAA) did not apply to non-binding arbitration.

In Druco Restaurants, Inc. v. Steak N Shake Enterprises, Inc., the Seventh Circuit agreed with the District Court's first ground for decision and did not reach its alternative grounds.  Applying Indiana law, the Seventh Circuit found the arbitration agreement illusory.  The Court noted that SNS was free to exercise or not exercise its right to arbitration at whim.  The company also retained complete discretion to determine venues where and procedures under which arbitration would take place.  Where so much is uncertain, the Seventh Circuit noted, the agreement is vague, indefinite and unenforceable.

 

October 6, 2014 in Food and Drink, Recent Cases | Permalink | Comments (0) | TrackBack (0)