ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, September 26, 2016

Lack of Formal Executed Contract Haunts Promissory Estoppel Analysis

This recent case out of the Western District of Pennsylvania, Landan v. Wal-Mart Real Estate Business Trust, 2:12cv926 (behind paywall), is sort of a try-try-again case, although the "try again" part has as negative an outcome for the plaintiffs as the "try" part did. The plaintiffs' breach of contract claim had already failed here because the court found there was no oral agreement between the parties and the parties' signed letter of intent indicated that the parties did not wish to be bound until a final formal contract was executed (as never happened).

In the face of the failure of their breach of contract claim, the plaintiffs turn here to promissory estoppel. But the lack of a final formal contract haunts the promissory estoppel analysis, too. The court finds the plaintiffs were unable to explain what promises had been made to them and characterizes the plaintiffs' stance as "unclear, inconsistent, constantly shifting, and ultimately unavailing." Given the confusion about the statements at issue, the court concludes that any reliance on such vague statements on the plaintiffs' part was unreasonable. A lot of the courts' characterization of the statements and the reasonableness, though, seem to revolve around the fact that the parties never reached a final formal contract: It would be hard for the plaintiffs to allege definite promises, the court says, because the parties were negotiating and hadn't entered into a formal deal yet; maybe Wal-Mart did make some statements but, the court says, in the context of the ongoing negotiations it would have been unreasonable for the plaintiffs to rely on those statements. 

Granted, there seem to definitely be issues with the plaintiffs' promissory estoppel claim here. The court points out that the plaintiffs themselves behaved sometimes as if they did not understand Wal-Mart to be making any promises to them, apparently negotiating with other parties over the same piece of land because of their skepticism about the Wal-Mart deal going through. And there was the letter of intent between the parties that did seem to make it less reasonable that the plaintiffs would rely on indefinite negotiating statements that hadn't been reduced to writing the way others of the statements had been. But it also seems like, once the court decided that the letter of intent wasn't binding because it contemplated a subsequent agreement, the plaintiffs' promissory estoppel claim was likewise doomed. Without a formal executed agreement, there was nothing for the plaintiffs to do to save their claim. 

September 26, 2016 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Friday, September 23, 2016

Scholarship Spotlight: Is Privacy Policy Language Irrelevant to Consumers? (Lior Strahilevitz - Chicago & Matthew B. Kugler - Northwestern)

Privacy PolcyAuthors' Abstract:      

Consumers almost never read privacy policies, but if they did read such policies closely how would they interpret them? This article reports the results of two experiments in which census-weighted samples of more than a thousand Americans read short excerpts from Facebook, Yahoo, and Google’s privacy policies concerning the use of facial recognition software and automated content analysis on emails. The question of what consumers have consented to under these policies has been central in recent high-stakes class action lawsuits. Experimental subjects were randomly assigned to read language from either the current policies, which explicitly describe Facebook, Yahoo, and Google’s controversial practices, or language from policies that were adjudicated to be insufficient to notify consumers about the companies’ practices. Despite evidence that many experimental subjects read these privacy policy excerpts closely, subjects who saw the explicit policy language and those who saw the ambiguous/vague policy language did not differ in their assessment of whether their assent to that language would allow Facebook, Yahoo, and Google to engage in the practices at issue. More surprisingly still, even though consumers rated both Facebook’s use of facial recognition software and Google and Yahoo’s use of automated content analysis as highly intrusive, they generally regarded their assent to even vague privacy policy language as allowing the companies to engage in those practices. Also, only a little more than a third of the participants expressed a willingness to pay any money to avoid automated content analysis of their emails. A replication study that included strong measures of participant attention confirmed the results from the first experiment and suggests that those reading the policies more carefully were not more likely to draw distinctions between them.

Our study shows that courts and laypeople can understand the same privacy policy language quite differently. Taken together, these results provide important evidence for the propositions that (1) social norms and user experiences with technological applications, not privacy policies, will drive users’ understanding of the nature of their bargain with firms, that (2) this is the case even when users read those policies reasonably carefully, that (3) most users of email and social networking sites believe that Facebook, Yahoo, and Google are authorized to engage in controversial and invasive practices implicating user privacy, and that (4) there is presently little reason to expect the development of a robust market for premium privacy-protective email and social networking applications in the United States.
 

 

September 23, 2016 in Recent Scholarship | Permalink | Comments (1)

Thursday, September 22, 2016

Weekly Top Ten SSRN Contracts Downloads (September 22, 2016)

Top-10-gold-logo

SSRN Top Downloads For SSRN Logo (small)
Contracts & Commercial Law eJournal

Rank Downloads Paper Title
1 328 Choice of Forum Agreements Under the Brussels I Recast and Under the Hague Convention: Coherences and Clashes
Matthias Weller
EBS Universität für Wirtschaft und Recht
2 174 The Myth of Free
John M. Newman
University of Memphis - Cecil C. Humphreys School of Law
3 161 The Puzzle of PDVSA Bond Prices
Paolo Colla, Anna Gelpern and G. Mitu Gulati
Bocconi University - Department of Finance, Georgetown University Law Center and Duke University School of Law
4 139 Sizing up Private Law
Andrew S. Gold and Henry E. Smith
DePaul University College of Law and Harvard Law School
5 102 Causa and Consideration – A Comparative Overview
Dimitar Stoyanov
New Bulgarian University, Department of Law
6 100 Discussion Draft of a Directive on Online Intermediary Platforms
Christoph Busch, Gerhard Dannemann, Hans Schulte-Nölke, Aneta Wiewiórowska-Domagalska and Fryderyk Zoll
University of Osnabrück - European Legal Studies Institute, Humboldt University of Berlin - Faculty of Law, European Legal Studies Institute Osnabrueck / Radboud University Nijmegen, Universität Osnabrück - European Legal Studies Institute and Universität Osnabruck
7 86 Coverage Information in Insurance Law
Daniel Schwarcz
University of Minnesota Law School
8 86 Consumer Protection in the Age of Big Data
Max N. Helveston
DePaul University - College of Law
9 104 Tort Reform through the Backdoor: A Critique of Law & Apologies
Yonathan A. Arbel and Yotam Kaplan
Harvard Law School and Hebrew University of Jerusalem
10 91 Is Privacy Policy Language Irrelevant to Consumers?
Lior Strahilevitz and Matthew B. Kugler
University of Chicago Law School and Northwestern University - Pritzker School of Law


SSRN Top Downloads For SSRN Logo (small)
Law & Society: Private Law - Contracts eJournal

Rank Downloads Paper Title
1 328 Choice of Forum Agreements Under the Brussels I Recast and Under the Hague Convention: Coherences and Clashes
Matthias Weller
EBS Universität für Wirtschaft und Recht
2 206 Trophy Hunting Contracts: Unenforceable for Reasons of Public Policy
Myanna F. Dellinger
University of South Dakota Law School
3 174 The Myth of Free
John M. Newman
University of Memphis - Cecil C. Humphreys School of Law
4 102 Causa and Consideration – A Comparative Overview
Dimitar Stoyanov
New Bulgarian University, Department of Law
5 90 The Role of Contract: Stewart Macaulay's Lessons from Practice
Brian Bix
University of Minnesota Law School
6 86 Coverage Information in Insurance Law
Daniel Schwarcz
University of Minnesota Law School
7 82 The Expanding Circle of Contract Law
Jan M. Smits
Maastricht University Faculty of Law - Maastricht European Private Law Institute (M-EPLI)
8 79 Evolution or Intelligent Design? The Variation in Pari Passu Clauses
Stephen J. Choi, G. Mitu Gulati and Robert E. Scott
New York University School of Law, Duke University School of Law and Columbia University - Law School
9 62 Ordinary Contract Principles
Robert A. Hillman
Cornell Law School
10 55 The Enforceability of Escalation Clauses Providing for Negotiations in Good Faith Under English Law
Oliver Krauss
Latham & Watkins

September 22, 2016 in Recent Scholarship | Permalink | Comments (0)

Wednesday, September 21, 2016

Your Apartment May Have a Leak, But You Still Have to Prove Damages

We are just about to start discussing damages in my Contracts class, so this recent case out of the District Court for the District of Columbia, Parham v. Cih Properties, Inc., Case No. 14-cv-1613 (GMH) (behind paywall), caught my eye. And then I realized that, wait a second, these are the same parties from one of my very first cases I ever blogged! Small world! They're still fighting with each other!

And the plaintiff is still looking for a real win, because even though she wins here, she only wins nominal damages of $1.00. 

The plaintiff alleged that water leaked into her apartment and damaged a number of items, including a mink coat, a cape with mink tassels, five designer bags, a leather trench coat, two suede suits, snakeskin boots, a box of ivory china, and various other clothes, accessories, and glassware. The court agreed with the plaintiff that the leak had occurred and found that the defendant landlord had breached the warranty of habitability. However, the court found that the plaintiff had failed to provide the court with any reasonable basis on which to base a damages award. The court noted that the plaintiff asserted the loss of a number of unique, designer items that required some sort of expert testimony (not provided) to settle the value. The court further noted that, even for the non-unique items, the plaintiff's testimony as to their value was the only piece of evidence she provided. She had no receipts, appraisals, or even surveys of prices of comparable items, and the court found her personal estimates unpersuasive because she was "an easily confused witness" whose estimated values of the items (if she provided them) were inconsistent and sometimes appeared to be "conjur[ed] out of thin air." Even plaintiff's counsel said in court, "I don't think we really proved damages."

The court agreed with this assessment, finding that the plaintiff provided no reasonable basis for the court to determine damages. The court did,  however, agree that she was entitled to nominal damages, given that the landlord had breached the warranty, and so awarded her $1.00. 

September 21, 2016 in Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Tuesday, September 20, 2016

Epipen and Potentially Anti-competitive Clauses

New York Attorney General Eric Schneiderman has launched an investigation into whether now-notorious EpiPen manufacturer Mylan inserted potentially anticompetitive terms into its EpiPen sales contracts with numerous local school systems. Unknown-1

EpiPens are carried by those of us who have severe allergies to, for example, bee stings. The active ingredient will help prevent anaphylactic shocks that can quickly result in death. In 2007, a two-pack of EpiPens sold for $57. Today, the price is $600. The company touts various coupons, school purchase programs and the like, but in my experience, at least the coupons are mere puffery unless you are very lucky to fit into a tiny category of users that I have not been able to take the time to identify.

ImagesHowever, there is finally hope for some real competition in this field: Minneapolis doctor Douglas McMahon has created an EpiPen alternative that he is trying to market. This doctor claims that Mylan and companies like it have lost sigh of patient needs and are catering to investors. In his opinion, that is the true reason for the skyrocketing prices. Well said.

The doctor is even resorting to something as unusual as a fundraising website to raise money for the required FDA testing and other steps.

Another contractual issue seems to be why customers have to buy at least two Epipens at a time. The active ingredient only lasts for one year. Those of use who carry EpiPens hope never to have to use them, but if we will, it is extremely unlikely that we will have to do so twice in a year! But alas, in the United States at least, you have to buy this product in a two-pack (EpiPens are sold individually in countries such as Canada and the UK). It may be a regulatory and not a pure contractual issue, but if the company truly sticks to its current story that it is on the up-and-up in all respects in this context, they should at least enable people to offer to buy only what they need, which in many cases would be only one EpiPen at a time.

Hat tip to Professor Carol Chomsky of the University of Minnesota School of Law for the information on the Minnesota doctor.

September 20, 2016 in Commentary, Current Affairs, In the News, Miscellaneous, Science, True Contracts | Permalink | Comments (0)

Monday, September 19, 2016

Teacher loses breach of contract action against school district

A now formerly tenured teacher with the Saint Paul Public School District http://www.spps.org/domain/1235 had several complaints lodged against him by students. The teacher was alleged to have been racially discriminative towards certain students and to have exhibited “other inappropriate conduct towards students.”

The story continued as follows: the district placed the teacher on paid administrative leave pending further investigations. The teacher obtained legal representation from a union attorney. The school’s investigations uncovered “additional issues” in relation to the teacher and notified the teacher that his termination would be proposed at a school board meeting. The teacher’s attorney advised him that he could (1) acquiesce in the termination, (2) negotiate a separation, or (3) attend a hearing.

The teacher subsequently testified that he felt like a gun had been placed to his head and that he had been forced to resign. Prior to the district taking any action against him, he sent a draft resignation letter to the district, requesting that in exchange for his resignation, he would be allowed to take his sick days, would receive a clean employment file, a letter of recommendation, and an opportunity to continue teaching driver’s education.

The dispute took some other twists and turns, but ended up with the teacher being upset that he could not continue as a driver’s ed teacher and attempting to withdraw a resignation letter that he had submitted. The district declined this. The teacher filed suit for duress and misrepresentation.

As for the duress, the teacher claimed that the district didn’t have the actual intent to fire him and no grounds to do so either. He also alleged that the district had promised not to report him if he resigned, which was a violation of Minn. Stat. § 122.A.20. He also claimed economic duress.

Strangely, economic duress is not recognized in Minnesota. Only “when an agreement is coerced by physical force or unlawful threats … which destroys the victim’s free will and compels him[/her] to comply with some demand of the party exerting the coercion” may suit lie. Bond v. Charlson, 374 N.W.2d 423, 428 (Minn. 1985); Wise v. Midtown Motors, 42 N.W.2d 4040, 407 (1950).

As for the regular duress, the court found that the teacher could not demonstrate that his free will had been destroyed. The court found that doing so requires more than “a scintilla of evidence” and that the teacher simply had not presented enough evidence of any wrongdoing by the district. The court also emphasized the fact that the teacher was represented by and received counsel from a union attorney skilled in these very matters. The court found no misrepresentations made by the school district.

Intimidating procedures or not: if one wishes to retain a chance to keep a job even in times of severe allegations, it becomes necessary to stand by one’s rights at all times until, perhaps the bitter end. The duress claim does indeed seem very weak here - almost fabricated after the fact.

What seems more surprising is the fact that Minnesota does not recognize economic duress. In times when the employment situation for many is still not the easiest (understatement), that’s a tough limitation on the legal rights of employees. This is exacerbated by the fact that employees have recognized property interests in both their jobs and teaching licenses. But of course, “where there’s smoke, there’s [often] fire.” At least in this case, it does seem that there was underlying wrongdoing by the teacher, so it’s a bit difficult to feel too sorry for him as well.

The case is Olmsted v. Saint Paul Public Schools, 2016 WL 4073494.

September 19, 2016 in Commentary, Current Affairs, Government Contracting, True Contracts | Permalink

Political Ads, Free Speech, and Tortious Interference with Contracts

An interesting recent case out of Texas, Deuell v. Texas Right to Life Committee, Inc., No. 01-15-00617-CV (behind paywall), deals with political advertisements, cease-and-desist letters, First Amendment free speech rights, and yes, contract. 

In the case, Deuell was a candidate for state senate. Texas Right to Life Committee (TRLC) ran some radio ads stating, among other things, "Bob Deuell sponsored a bill to give even more power to . . .  hospital panels over life and death for our ailing family members. Bob Deuell turned his back on life and on disabled patients." Deuell's lawyers sent cease-and-desist letters to the radio stations stating that the ads were defamatory and "respectfully demand[ing]" that the radio stations cease airing the ads. The radio stations, upon receipt of the letters, contacted TRLC and told it they were suspending the ads. TRLC then produced a new advertisement that the radio stations found acceptable to air, and also contracted "for additional airtime to compensate for the lost advertising time." TRLC then sued Deuell for tortious interference with contract and sought recovery of the amount it expended to produce the new ad and buy more airtime. Deuell moved to dismiss, arguing that the Texas Citizens Participation Act (TCPA) protected his cease-and-desist letter as free speech and that TRLC's allegations were not sufficient to overcome this. 

The court disagreed and denied the motion to dismiss. The court found that TRLC had adequately alleged the existence of contracts with the radio stations and that the cease and desist letters were "clear and specific evidence" (the relevant standard under the TCPA) that Deuell had intentionally and willfully interfered with these contracts that proximately caused TRLC to suffer the damages it alleged. The TCPA and Deuell's free speech rights therefore did not operate to prohibit TRLC's cause of action. 

Deuell did attempt to argue other things, including that TRLC's ads were illegal under the Texas Election Code, rendering TRLC's contracts with the radio stations to run the ads illegal contracts that could not result in tortious interference, as "a defendant cannot be held liable for tortiously interfering with an illegal contract." The court concluded, however, that there was no basis for declaring the contract illegal because the section of the Texas Election Code at issue had actually been declared unconstitutional.

There was a dissent in this case that would have held that Deuell's cease-and-desist letter implicated free speech rights under the TCPA and that TRLC did not provide the "clear and specific evidence" that would permit its case to survive in the face of those free speech implications. 

September 19, 2016 in Current Affairs, In the News, Recent Cases, True Contracts | Permalink | Comments (0)

Friday, September 16, 2016

Contracting by Robots

A British start-up company called Luminance, which is also the name of its flagship due diligence analysis, “promises” to read documents and speed up the legal process around contracting, “potentially cutting out some lawyers.” (See here and here).

Luminance says that its software “understands language the way humans do, in volumes and at speeds that humans will never achieve. It provides an immediate and global overview of any company, picking out warning signs without needing any instruction.” Really? When I was working in the language localization things more than a decade ago, I heard the same promises then… but they never come to fruition. We’ll see how this program fares.

The software is said to be “trained by legal experts.” Talk about personification of an almost literary-style. We see the same trend in the United States, though. Just think about phone and internet programs that pretend to be your “assistant” and use phrases such as “Hi, my name is [so-and-so], and I’m going to help you today…”

Meanwhile, if a law firm used software to analyze documents, would it not be subject to legal malpractice if it did not discover contracting or other issues that a human would have, in this country at least? It would seem so… and for that reason alone perhaps also be a breach of contract unless clients were made aware that cost-cutting measures include having computers analyze documents that attorneys normally do.

September 16, 2016 in Commentary, Current Affairs, E-commerce, In the News, Labor Contracts, Science, Web/Tech | Permalink | Comments (0)

Weekly Top Ten SSRN Contracts Downloads (September 16, 2016)

A day late this week, but just as good as (or better than!) ever:

Top10-speech bubble


SSRN Top Downloads For SSRN Logo (small)
Contracts & Commercial Law eJournal

Rank Downloads Paper Title
1 313 Choice of Forum Agreements Under the Brussels I Recast and Under the Hague Convention: Coherences and Clashes
Matthias Weller
EBS Universität für Wirtschaft und Recht
2 160 The Puzzle of PDVSA Bond Prices
Paolo Colla, Anna Gelpern and G. Mitu Gulati
Bocconi University - Department of Finance, Georgetown University Law Center and Duke University School of Law
3 160 The Myth of Free
John M. Newman
University of Memphis - Cecil C. Humphreys School of Law
4 134 Sizing up Private Law
Andrew S. Gold and Henry E. Smith
DePaul University College of Law and Harvard Law School
5 97 Causa and Consideration – A Comparative Overview
Dimitar Stoyanov
New Bulgarian University, Department of Law
6 89 Are Validation Notices Valid? An Empirical Evaluation of Consumer Understanding of Debt Collection Validation Notices
Jeff Sovern and Kate E. Walton
St. John's University - School of Law and St. John's University - Department of Psychology
7 87 Discussion Draft of a Directive on Online Intermediary Platforms
Christoph Busch, Gerhard Dannemann, Hans Schulte-Nölke, Aneta Wiewiórowska-Domagalska and Fryderyk Zoll
University of Osnabrück - European Legal Studies Institute, Humboldt University of Berlin - Faculty of Law, European Legal Studies Institute Osnabrueck / Radboud University Nijmegen, Universität Osnabrück - European Legal Studies Institute and Universität Osnabruck
8 82 Consumer Protection in the Age of Big Data
Max N. Helveston
DePaul University - College of Law
9 82 Coverage Information in Insurance Law
Daniel Schwarcz
University of Minnesota Law School
10 79 Will the Supreme Court Agree with the NLRB that Pre-Dispute Employment Arbitration Provisions Containing Class and Collective Action Waivers in Both Judicial and Arbitral Forums Violate the National Labor Relations Act – Whether There is an Opt-Out or Not?
Christine Neylon O'Brien
Boston College - Carroll School of Management

 

SSRN Top Downloads For SSRN Logo (small)
Law & Society: Private Law - Contracts eJournal

Rank Downloads Paper Title
1 313 Choice of Forum Agreements Under the Brussels I Recast and Under the Hague Convention: Coherences and Clashes
Matthias Weller
EBS Universität für Wirtschaft und Recht
2 196 Trophy Hunting Contracts: Unenforceable for Reasons of Public Policy
Myanna F. Dellinger
University of South Dakota Law School
3 160 The Myth of Free
John M. Newman
University of Memphis - Cecil C. Humphreys School of Law
4 97 Causa and Consideration – A Comparative Overview
Dimitar Stoyanov
New Bulgarian University, Department of Law
5 86 The Role of Contract: Stewart Macaulay's Lessons from Practice
Brian Bix
University of Minnesota Law School
6 82 Coverage Information in Insurance Law
Daniel Schwarcz
University of Minnesota Law School
7 76 The Expanding Circle of Contract Law
Jan M. Smits
Maastricht University Faculty of Law - Maastricht European Private Law Institute (M-EPLI)
8 55 Ordinary Contract Principles
Robert A. Hillman
Cornell Law School
9 53 Evolution or Intelligent Design? The Variation in Pari Passu Clauses
Stephen J. Choi, G. Mitu Gulati and Robert E. Scott
New York University School of Law, Duke University School of Law and Columbia University - Law School
10 52 The Enforceability of Escalation Clauses Providing for Negotiations in Good Faith Under English Law
Oliver Krauss
Latham & Watkins

September 16, 2016 in Recent Scholarship | Permalink | Comments (0)

Wednesday, September 14, 2016

Scholarship alert: the use of virtual property in secured credit transactions

From Christopher Odinet, a friend of the blog: In the past several years the growth of virtual property in today’s economy has been explosive. The everyday use of virtual assets ranging from Twitter and Facebook to YouTube and virtual world accounts is nearly absolute. Indeed, by one account Americans check social media over 17 times per day. Further, a growing number of savvy virtual entrepreneurs are reporting incomes in the six and seven figure range, derived solely from their online businesses. Nevertheless, although the commercial world has come to embrace these newfound markets, commercial law has done a poor job of keeping up. Scholars have argued that laws governing everything from taxation, to bankruptcy, to privacy rights have not kept pace with our ever-changing virtual world. And nowhere is this truer than in the law of secured credit. Doubtlessly virtual property has come to represent significant wealth and importance, yet its value as a source of leveraged capital remains, in large part, untapped. This unrealized potential is not without good reason; the law — specifically Article 9 of the UCC and the law of property more broadly — suffers from a number of deficiencies and anomalies that make the use of virtual property in secured credit transactions not only overly complex and expensive, but almost entirely untenable. This Article shines light on these shortcomings, and, in doing so, advances a number of guiding principles and specific legislative recommendations, all geared toward a reformation of the law of secured credit in virtual property.

See entire article here.

September 14, 2016 | Permalink

The Great Nut Caper

 Blanched pistachios

I'm cheating a little because, while this case has a breach of contract claim in it, it doesn't really have anything interesting to say about contract law, mostly because the claim fails because the complaint didn't identify any contract, any terms to the contract, or any facts about the formation of the contract. 

But this case out of the Northern District of New York, Golub Corp. v. Sandell Transp., Inc., 1:15-CV-0848 (LEK/CFH) (behind paywall), has an amazing set of facts relayed by the judge in a playful way, and sometimes you just want to read about a good pistachio heist, you know? 

Because yes, that's what happened in this case. Golub in New York ordered some pistachios from Wonderful in California. Sandell was arranged to ship the pistachios. Sandell sought to subcontract out the job by posting on an industry job board and hiring a company called GM EXPRESS. In the court's words: 

But appearances can be deceiving, and it turns out that "GM EXPRESS" was not actually GM EXPRESS. Unknown to Sandell, the identity of GM EXPRESS had been stolen by criminals who were set on pilfering Golub's pistachio shipment. . . . In this shell game of trucking companies, the pistachio thieves provided Sandell with stolen yet still valid bona fides, including insurance information, tractor and trailer license plate numbers, and a driver's license number (which Sandell claims was valid despite its conspicuously sequential numbering of B7890123). . . . Through this scheme, Sandell and Wonderful would become the thieves' unwitting insiders, happily loading the nuts directly onto the getaway vehicle.

As I said, the breach of contract claim doesn't amount to much in this case, but I enjoyed reading this opinion nonetheless and felt I had to pass it on, so you too can now ponder the disappearing truck of pistachios whose fate remains unknown. 

September 14, 2016 in Commentary, Food and Drink, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, September 12, 2016

Ordering Subject to Seller's Terms and Conditions Makes You Subject to Seller's Terms and Conditions (Even If You Claim You Never Saw Them)

 

Blueberries in market, close-up.jpg
By atul666 from Portland, USA - blueberries, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=4112199

A recent case out of Michigan, Naturipe Foods, LLC v. Siegel Egg. Co., No. 327172, affirmed a high six-figure jury verdict against Siegel Egg Co. in the case of an alleged breach of contract over blueberries. Naturipe sent Siegel an offer to sell Siegel blueberries. Siegel specified in writing on the received offer that the blueberries in question were to be Grade A. Siegel than signed the offer. Underneath the line provide for Siegel's signature (where Siegel in fact signed) was the pre-printed phrase, "Subject to Seller's Terms and Conditions." Naturipe sent Siegel two shipments of the blueberries ordered. The blueberries, according to Siegel, were not Grade A. Siegel therefore never paid for the blueberries it received nor did it ever order the rest of the blueberries that were supposed to be shipped under the contract. So Naturipe sued and won over $700,000 in damages, costs, and fees after a jury trial. 

On appeal here, Siegel's main argument centered around the trial court's decision that Naturipe's terms and conditions did indeed apply to the contract. The terms and conditions at issue specified that Siegel's only remedies for breach of the contract were replacement of the blueberries in question or a credit of the price paid for those blueberries. Furthermore, Siegel was required under the terms and conditions to provide Naturipe with thirty days' notice of any breach of contract. Siegel failed to provide notice and sought cancellation of the entire contract as its remedy, in violation of these terms and conditions. 

However, Siegel argued, Naturipe's terms and conditions should not have been considered part of the contract between the parties binding on Siegel because, according to Seigel, it was never given a copy of the terms and conditions, nor were they ever explained to Siegel. But, the court said, it was Siegel's duty to ask for an explanation and obtain a copy of the terms and conditions, because they were referenced in the offer Siegel signed. Therefore, Siegel was on notice that there were other contractual obligations in play and Siegel should have asked what those were. The court noted that Siegel had annotated the offer to require Grade A blueberries, and so was plainly capable of crossing out the "Subject to Seller's Terms and Conditions" phrase if it had so desired. Because it failed to, the court found that it was clear and unambiguous that the parties intended their contract to be subject to those terms and conditions. 

I'm sure Siegel probably never gave a second thought, either at the time it was ordering or the time it received the shipments, to Naturipe's terms and conditions. That said, this case stands as a lesson that it's probably always a good policy to call someone up when you're dissatisfied with the product they have provided you. You don't necessarily have to know the law to give people an opportunity to cure; sometimes it seems like it could, in most circumstances, be the most efficient first option. 

September 12, 2016 in Commentary, Food and Drink, Recent Cases, True Contracts | Permalink | Comments (1)

Saturday, September 10, 2016

Strongarming Car Renters to Buy Insurance

In an 8/27 article, the New York Times (paid access only) reports how Payless Car Rental, owned by Avis Budget, basically forces at least some of its customers to buy personal liability insurance whether or not they want it. Here’s how the story reports it done – well worth repeating on this website to show the blatant disregard for contract law displayed by Payless Car Rental: Images

A client states repeatedly to the car rental company that he or she does not want insurance. When returning the car after the rental period is over, guess what shows up on the receipt: of course, the declined insurance – in one case $222. When the renter complains, the car rental agency representative snatches the contract that had been initialed by the renter, who apparently thought he or she indicate that they did not want the insurance. Instead, although orally and repeatedly stating that, the initials indicated that he or she did want the insurance (fine print probably not read by renter at airport counter).

ImagesAfter not getting the reimbursement requested, he or she disputed the charge with credit card provider American Express. The amount was refunded, the renter thought… until Payless sent a letter titled “Debit notice” which indicated that the amount would now be sent to collection by a company located on, I kid you not, “32960 Collection Center Drive, Chicago, Ill.” The problem with that is that no such address exists! Try in Google Maps. At least I and the New York Times reporter could not bring it up.

Payless also told the renter that if he or she did not react, his/her “rental privileges” would be suspended(!). Not sure why they would think that their renter would ever want to rent from that company again…

A Payless PR representative did not, when contacted about this incident, offer any explanation or apologies. She simply stated that the issue had been resolved and that “we will reinforce with our associates … the importance of ensuring that our customers clearly understand which services and options they are selecting.” It seems like they should also train their associates to accept the contractual choices then made by the customers.

September 10, 2016 in In the News, Miscellaneous, Travel, True Contracts | Permalink | Comments (0)

Thursday, September 8, 2016

Weekly Top Ten SSRN Contracts Downloads (September 8, 2016)

Top10DeskSign

 

SSRN Top Downloads For SSRN Logo (small)
Contracts & Commercial Law eJournal

Rank Downloads Paper Title
1 289 Choice of Forum Agreements Under the Brussels I Recast and Under the Hague Convention: Coherences and Clashes
Matthias Weller
EBS Universität für Wirtschaft und Recht
2 213 The Mystery of Mutual Insurers in Lawyers Professional Liability Insurance
Tom Baker and Rick Swedloff
University of Pennsylvania Law School and Rutgers Law School
3 187 Trophy Hunting Contracts: Unenforceable for Reasons of Public Policy
Myanna F. Dellinger
University of South Dakota Law School
4 156 The Puzzle of PDVSA Bond Prices
Paolo Colla, Anna Gelpern and G. Mitu Gulati
Bocconi University - Department of Finance, Georgetown University Law Center and Duke University School of Law
5 120 Sizing up Private Law
Andrew S. Gold and Henry E. Smith
DePaul University College of Law and Harvard Law School
6 90 Causa and Consideration – A Comparative Overview
Dimitar Stoyanov
New Bulgarian University, Department of Law
7 88 Are Validation Notices Valid? An Empirical Evaluation of Consumer Understanding of Debt Collection Validation Notices
Jeff Sovern and Kate E. Walton
St. John's University - School of Law and St. John's University - Department of Psychology
8 80 Sovereign Debt: Now What?
Anna Gelpern
Georgetown University Law Center
9 92 Form and Substance in Equitable Remedies
Stephen A. Smith
McGill University - Faculty of Law
10 141 The Myth of Free
John M. Newman
University of Memphis - Cecil C. Humphreys School of Law

 

SSRN Top Downloads For SSRN Logo (small)
Law & Society: Private Law - Contracts eJournal

Rank Downloads Paper Title
1 289 Choice of Forum Agreements Under the Brussels I Recast and Under the Hague Convention: Coherences and Clashes
Matthias Weller
EBS Universität für Wirtschaft und Recht
2 187 Trophy Hunting Contracts: Unenforceable for Reasons of Public Policy
Myanna F. Dellinger
University of South Dakota Law School
3 141 The Myth of Free
John M. Newman
University of Memphis - Cecil C. Humphreys School of Law
4 92 Form and Substance in Equitable Remedies
Stephen A. Smith
McGill University - Faculty of Law
5 90 Causa and Consideration – A Comparative Overview
Dimitar Stoyanov
New Bulgarian University, Department of Law
6 85 The Role of Contract: Stewart Macaulay's Lessons from Practice
Brian Bix
University of Minnesota Law School
7 76 Coverage Information in Insurance Law
Daniel Schwarcz
University of Minnesota Law School
8 68 Justice Scalia's Jiggery-Pokery in Federal Arbitration Law
David S. Schwartz
University of Wisconsin Law School
9 63 The 2016 Rules of the Australian Centre for International Commercial Arbitration: Towards Further ‘Cultural Reform’
Malcolm Holmes, Luke R. Nottage and Robert Tang
Eleven Wentworth, University of Sydney - Faculty of Law and Allen & Overy LLP
10 61 Taking Stewart Macaulay and Hugh Collins Seriously
John Gava
Adelaide Law School

September 8, 2016 in Recent Scholarship | Permalink | Comments (0)

Wednesday, September 7, 2016

Ambiguous Insurance Policy Blocks Insurer's Summary Judgment Motion

I really like this Eastern District of Pennsylvania case, Ionata v. Allstate Insurance Company, Civil Action No. 15-6561, because I think it illustrates really nicely the contractual ambiguity at issue and the consequences of that ambiguity. I might use it as an example in class. 

Ionata and her then-husband bought the property at issue together and it was insured with a standard Allstate Homeowner's Policy, which Ionata kept current through the relevant time period. In 2011, Ionata and her husband divorced. Ionata continued to use the house as her mailing address and also continued to keep her stuff there but seems to have slept on a nightly basis somewhere else. In 2014, Ionata had allowed a close family friend to live in the house. During this time period, the house was destroyed by a fire. 

The policy covered a "Dwelling," defined as a building "where you reside."Allstate argued that residence required "physical occupation" of the house by the policyholder. Therefore, it argued, the house was no longer covered by the homeowner's policy because Ionata was no longer "residing" in it. 

The court noted that Allstate's argument made perfect sense in isolation, but it was inconsistent with other clauses within the policy. So, for instance, the policy contained a clause that permitted the house to "be vacant or unoccupied." As the court succinctly put it, "Logically, it is difficult to reconcile Allstate's position that the policyholder must be living on the premises with a clause that provides the Property may be vacant or unoccupied for any length of time." 

Nor was this the only clause that raised the ambiguity. There was another clause that explicitly permitted the occasional renting of the entire property for residential purposes. If a policyholder was allowed to rent the entire property to others, then the policyholder couldn't simultaneously be required to live in the property herself. 

The court therefore denied Allstate's motion for summary judgment, calling out "the artificial and often arcane structure and language of insurance policies" in making the decision. 

September 7, 2016 in Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Tuesday, September 6, 2016

KCON XII Keynote Event: O'Melveny on the LaGuardia Project - Register and Book for February 24-25, 2017

Southwestern-law-school-logo  KCON12-Logo

Our friends at Southwestern Law School are ramping up the next edition of this blog's favorite conference, The 12th Annual International Conference on Contracts, better known as KCON XII, to be held on February 24-25, 2017 at the Art Deco Landmark in Los Angeles.

O'Melveny LogoAlready on the schedule for this year's conference are two keynote presentations. The first event will be on Friday, February 24, when O'Melveny & Myers LLP will give a panel presentation entitled, Drafting Complex Contracts: Behind the Scenes of the LaGuardia Project. The high-stakes legal issues involved should make for an intriguing and instructive tale of contract law:

O’Melveny represented the LaGuardia Gateway Partners consortium in its winning bid to assume operational control of New York LaGuardia Airport’s central terminal building and to build, finance, operate, and maintain a replacement terminal.  O’Melveny represented LGP throughout the two-and-a-half year bidding process for the project, as well as during the exclusive negotiation period to consummate the transaction that followed.  The US$4 billion project is the largest public-private partnership to be undertaken anywhere in the world.

Booking your hotel early at the  Omni Los Angeles Hotel at California Plaza is especially important to ensure that you have incredible accommodations at a discounted rate in the conference block of rooms.

In addition to the special hotel deals, conference registration is also now open for business. If you register for KCON XII now, you can get the early-bird rate of $250 for conference registration.

Stay tuned for more KCON XII information in the coming days, including information on another keynote event, as well as the opportunities for you to submit a proposal for presentation or panel.

September 6, 2016 in Conferences | Permalink | Comments (0)

Vast Majority of Consumers Prefer Court Procedure over Arbitration

Vast Majority of Consumers Prefer Court Procedure over Arbitration

We have discussed arbitration clauses in this blog several times. Now, a Pew Charitable Trust survey of more than 1,000 individuals shows that 95% of consumers prefer judge or jury trials regarding questionable bank fees and similar practices over arbitration clauses. 89% want to be able to join a class action lawsuit. At the same time, no less than 93% of banks include jury (but not bench) trial waivers in their checking account agreements.

What about the argument that the only thing that consumers get out of this is higher fees and fewer services to cover increased litigation costs? First, consumers are not prohibited from choosing arbitration, it’s the option to have class action suits that is at issue here. And as the Los Angeles Times reported, “if banks keep their noses clean, they won’t end up in court” in the first place. Besides, it’s not so much consumers that choose to litigate, businesses file four times as many lawsuits as individuals. Maybe this is for good reason: arbitrators ruled in favor of banks and credit card companies 94% of the time in disputes with California consumers.  Maybe it is not: since banks are the ones who pay for the arbitration process, a recurring concern is that arbitrators may be reluctant to find against the banks.

Of course, class action lawsuits is the only feasible way for consumers to have their legal rights vindicated because of the small individual amounts involved. For the banks, however, this is big business – literally: In April, the Supreme Court let stand a decision that Wells Fargo had deliberately arranged checking-account payments in order to “maximize the number of overdrafts” resulting in fees of $25-35. http://www.scotusblog.com/wp-content/uploads/2016/03/13-16195.pdf

September 6, 2016 in Commentary, Current Affairs, Famous Cases, In the News, Miscellaneous, True Contracts | Permalink | Comments (0)

Monday, September 5, 2016

More on Alleged Property Shark Amtrak

A few days ago, I posted a blog here on Amtrak raising the rent on backyard lots neighboring Amtrak's railroad lines in New York.  The rent in some cases went up by 100,000% (!) according to the website of Congressman Joseph Crowley

Professor Bruckner posed the relevant question of whether the now hotly contested leases are truly new leases or the renegotiation of existing ones.  I've been trying to find out, but not having seen the actual letter from Amtrak (yet), I've dug through news reports and website of legislators.  This is the upshot as best as I can find out right now: It looks like Amtrak is upping the price on _existing_ leases after having had very low prices for years.  See, e.g., these statements: "For decades, Amtrak has leased the property underneath the trusses to homeowners for a nominal fee which releases the agency from the burden of maintaining the premises. Residents were given a 30-day notice to accept an unconscionable annual rent increase – in some cases as much as 100,000 percent or tens of thousands of dollars" and "[i]n a letter addressed to homeowners, Amtrak argues that a review of the lease and the premises it covers, indicates the lease is substantially undervalued. For some, the rent will go up from $25 annually to over $26,000 annually. Failure to approve the new rental amount would result in the termination of the lease 30 days from the notice."

To me, that does indeed seem if not outright unconscionable, then certainly in violation of reasonable contractual expectations and the contractual terms what appears to be an already existing contract. 

As mentioned, Amtrak does have a good argument in its prices having been exceptionally low for decades, but perhaps market prices should be introduced over time as the lessees get replaced over time with the existing leases somehow being grandfathered in?  Granted, the turnover in the NYC real estate market may  not be high in the case of lucrative deals, but on the other hand, nobody lives in any home forever.  Underlying this story does seem to be the fact that Amtrak got upset not so much about the low rents per se, but the fact that some renters were making profits off them.

September 5, 2016 in Commentary, Contract Profs, Current Affairs, In the News, Miscellaneous, True Contracts | Permalink | Comments (0)

One-Year Nationwide Non-Compete Found Reasonable in Organic Product Market

I always think it's interesting to see how courts judge the reasonableness of non-competition provisions. In this recent case out of the Eastern District of New York, Grillea v. United Natural Foods, Inc., 16-CV-3505 (SJF)(SIL) (behind paywall), a judge declined to preliminarily enjoin the employer from enforcing the former employee's non-compete and blocking him from accepting his new position, finding that the former employee had not shown a likelihood of success that the non-compete wasn't enforceable. 

The plaintiff and former employee was one of the top executives at the defendant, United Natural Foods. He had signed a non-competition agreement that prohibited him from working anywhere in the United States for one year for any of United's direct competitors. After a few years, United terminated the plaintiff's employment. There was a lot of negotiation about when the termination would take place, which stock options were going to vest, which benefits would keep accruing, how the plaintiff would be categorized, etc., but for purposes of this blog entry, eventually the termination became effective and the plaintiff left United's employ. 

Plaintiff received a job offer from a division of another company called Threshold. Plaintiff spoke to people at United about the job offer. They expressed concern that it would violate his non-compete. Plaintiff said he disagreed because he would be dealing with manufacturing, which was not what his responsibilities had been at United. Plaintiff put people at United down as references and Threshold called and spoke to them. They claimed they informed Threshold they thought what plaintiff was doing was a conflict of interest. 

This dispute followed, with plaintiff seeking a preliminary injunction that United not enforce the non-compete so that plaintiff can accept his new position. The court, however, denied plaintiff's motion. The court found that the one-year time period of the non-compete was reasonable and also that the fact that it had no geographic limitation was reasonable because United is a nationwide company (the geographic limitation thing was important to plaintiff's argument because he was switching coasts for the new job). 

What I found most interesting about this case was that the judge emphasized several times that United had stated that the non-compete only prevented plaintiff from working for twenty-nine companies (of which Threshold was one). That was clearly a detail that was compelling to the court. 

September 5, 2016 in Commentary, Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Register Now: Thursday, September 8 – Web-Based Panel Discussion on Microsoft v. US

From our friends at the ASIL-IL Tech IG:

On July 14th, the Second Circuit Court of Appeals ruled in the Microsoft v. US  case that the U.S. government cannot use a warrant issued under the Stored Communications Act to compel Microsoft to disclose the contents of emails stored on a server in Ireland – because the pertinent “seizure” of data would take place in Ireland, and the Stored Communications Act does not have extraterritorial effect.  Instead, the U.S. government must rely on the lengthy Mutual Legal Assistance Treaty (MLAT) process to obtain the data from the Irish authorities.  
 
Commentators disagree whether this decision is a win for privacy, has significant public safety implications, serves as an incentive for data localization mandates, or is a boon for the U.S. technology industry.  Many argue that Congressional action is necessary. A legislative proposal by the Department of Justice would allow allies like the United Kingdom to circumvent the MLAT process when seeking data that is within their jurisdiction but located in the United States.  
 
The American Society of International Law Interest Group on International Law and Technology (ILTechIG) and George Washington University School of Law will host a web-based panel discussion on this significant case on Thursday, September 8th from 12:00 noon-1:30 EST.

Speakers will include Jennifer Daskal, Assistant Professor of Law at American University School of Law; Richard Downing, Deputy Assistant Attorney General of the Computer Crime and Intellectual Property Section of the Department of Justice; and James Garland, a partner at Covington & Burling, who has represented Microsoft in the Second Circuit litigation.
 
Registration is required on the ASIL site under "Events" in order to receive sign-in details for the call.  There is no cost for participation.

September 5, 2016 | Permalink