ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Saturday, June 18, 2016

Gender Bias and Ageism in Hollywood

OK, so this post is more about employment law than pure contract law, but for me at least, the issues overlap. Besides, the following is just plain interesting “summer Hollywood” news… who doesn’t need a tiny dose of that from time to time!

Racial bias in Hollywood hiring practices has been discussed widely recently. Now, the U.S. Equal Employment Opportunities Commission (“EEOS”) is expanding its investigations into gender discrimination in Hollywood entertainment contracts. http://www.latimes.com/entertainment/movies/la-et-mn-0512-aclu-women-directors-update-20160509-snap-story.html If the EEOS finds out that there is indeed a pattern of discrimination, it could take legal action or seek mediation. However, the highly complex Hollywood hiring processes make it very difficult to identify any deliberate wrongdoing. Images-1

The problem:

Of the top-grossing 100 films of 2013 and 2014, only 1.9% of the directors were women.

Of 25 Paramount Pictures films that have been announced through 2018, not a single one has a women director. The same is true of the 22 Twentieth Century Fox films that have been announced.

Some women directors have taken action against this problem, but have noticed a backlash for their activism. Says one source: “There has been much lip-service paid to furthering opportunities for women, but few definitive steps and no serious movement in the number of women directors hired. We are confident that the government will corroborate our work and push industry leaders to address the ongoing violations of the legal and civil rights of these directors and of all women in the film and television industries." Images-2

This adds to the problem of ageism against women. In 1962, two women over 50 were still able to topline a major studio film. That does not happen today. According to a 2015 USC study, not one of 2014's 100 highest-grossing films featured women over 45 in a leading role. Between 2007 and 2014, women made up less than a quarter of film characters between ages 40 and 64. Images

June 18, 2016 in Commentary | Permalink | Comments (0)

Friday, June 17, 2016

Scholarship Spotlight: Noncompete Agreements as Thirteenth Amendment Violations (Ayesha Bell Hardaway - Case Western)

Non_Comp_AgreementsCovenants not to compete have long been recognized as a species of contract raising a host of public policy concerns, but at what point do these concerns rise from being issues of policy to being constitutional concerns? The Thirteenth Amendment often makes a brief appearance in the contracts curriculum in discussions of why specific performance is usually not available for personal services or employment contracts. That is, the notion of an employee being compelled by law to work in a job from which she has resigned raises uncomfortable analogues to slavery and other forced labor. In her recent article, "The Paradox of the Right to Contract: Noncompete Agreements as Thirteenth Amendment Violations," Ayesha Bell Hardaway (Case Western) raises the Thirteenth Amendment in a different setting, the enforcement of noncompetition agreements against at-will low-skilled employees. Here is her abstract:

There is a growing trend across the nation for employers to require low-level, unskilled workers to execute noncompete agreements as a condition of being hired to work as an at-will employee. The application of noncompete agreements in low-wage positions occupied by unskilled workers is outside of the original scope and purpose of such agreements. These individuals lack both bargaining power and protection from being terminated without cause. Moreover, upon termination of their employment, the executed noncompete agreement can legally prevent these workers from securing employment with another company.

Ayesha_bell_hardaway ) Case WesternThe enforcement of noncompete agreements in these circumstances may require low-level, unskilled workers to choose between lengthy bouts of unemployment or what would essentially amount to “wage slavery.” The Reconstruction Era debates reveal that the Thirteenth Amendment’s prohibition against slavery and indentured servitude was intended to prevent such injustices. Though Section 1 of the amendment contains only thirty-two words, the debates held before, during and after the ratification of the amendment provide a full illustration as to what Congress deemed to be “fair and just labor relations” in America. That original notion of “fair and just labor relations” provides timeless and substantive guidance on how to identify and rectify power imbalances in employer-employee relationships.

This paper will argue that contemporary noncompete agreements between employers and unskilled, low-wage workers is a violation of the Thirteenth Amendment. Part I discusses the original intent of the Thirteenth Amendment to protect both African Americans and working-class white Americans. Part II identifies the types of imbalanced work conditions denounced by the Reconstruction Era Congress as “perpetuations of slavery” as well as benefits of free, or non-enslaved, labor identified by Congress and illustrates why contemporary noncompete agreements between employers and unskilled workers is outside of that original purpose. Part III discusses Bailey v. Alabama and Ford v. Jermon to illustrate that, at one point, the judiciary correctly interpreted and applied the laws to employment-related disputes as the legislature intended. The paper concludes by suggesting that courts should re-examine the Thirteenth Amendment and its historical context to void noncompete agreements for low-wage, at-will unskilled employees.

Contracts professors are not the most frequent residents ofthe realm of Constitutional Law, so an article like Professor Hardaway's that successfully occupies space in both areas is well worth noting.  "The Paradox of the Right to Contract: Noncompete Agreements as Thirteenth Amendment Violations" is available at 39 Seattle U. L. Rev. 957 (2016) and is available for SSRN download here.

June 17, 2016 in Recent Scholarship | Permalink

Thursday, June 16, 2016

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

Top-ten-green

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

Rank Downloads Paper Title
1 575 What We Buy When We 'Buy Now'
Aaron Perzanowski and Chris Jay Hoofnagle
Case Western Reserve University School of Law and University of California, Berkeley - School of Information
2 112 Immoral Promises
Enrique Guerra-Pujol
University of Central Florida
3 96 Current Trends in Consumer Junk Debt Buyer Litigation
Peter A. Holland
University of Maryland Francis King Carey School of Law
4 76 Nudging and Autonomy. A Philosophical and Legal Appraisal
Philipp Hacker
Humboldt University of Berlin
5 63 EU Legislation in Progress: Contracts for Supply of Digital Content to Consumers
Rafał Mańko
European Parliamentary Research Service
6 61 Once Upon a Transaction: Narrative Techniques and Drafting
Susan Chesler and Karen J. Sneddon
Arizona State University (ASU) - Sandra Day O'Connor College of Law and Mercer Law School
7 63 The Contract Clause during the Civil War and Reconstruction
James W. Ely
Vanderbilt University - Law School
8 70 Assessment of Damages: Three Specific Problems – The Draft Common European Sales Law in Context
Reinhard Zimmermann
Max Planck Institute for Comparative and International Private Law
9 70 Reining in the Big Promise of Big Data: Transparency, Inequality, and New Regulatory Frontiers
Philipp Hacker and Bilyana Petkova
Humboldt University of Berlin and European University Institute
10 64 Contracts Governing the Use of Websites
Eliza Karolina Mik
Singapore Management University

 

SSRN Top Downloads For SSRN Logo (small)
LSN: Contracts (Topic)

This list does not contain a current update by SSRN.

June 16, 2016 in Recent Scholarship | Permalink

Wednesday, June 15, 2016

Using Your Insurance Policy's Appraisal Process? You May Still Have Tort Claims Left

I've seen a few cases now come across with people trying to sue their insurance companies after using the appraisal process in their policies to resolve a dispute, so I thought I'd blog about one of them. This one is Clark v. Pekin Insurance Co., Case No. 3:15CV2272 (behind paywall), out of the Northern District of Ohio. 

The fact patterns for all these cases is basically the same: Plaintiff makes a claim under an insurance policy. The insurance policy pays less than the plaintiff desires. Plaintiff utilizes the appraisal process found in the insurance policy, in which each side chooses an appraiser and, if they can't agree, an independent umpire then makes a finding. Plaintiff wins the appraisal process and the insurance company promptly pays plaintiff the extra money owed. 

However, plaintiff is not pleased--probably because of having had to go through a whole song-and-dance to get the money--and sues anyway. That's what happened in this case. 

Breach of contract claims are tricky after the appraisal process has been invoked. Most insurance policies prohibit the insured from recovering damages beyond that awarded through the appraisal process, as the policy did here. Because Clark received what the umpire stated she was entitled to, exactly as required under the policy, the court found there was no breach of the contract.

However, the appraisal process doesn't bar tort claims, and Clark was still alleging that the insurance company had acted in bad faith toward her insurance claim. However, the court found that the insurance company had behaved in a timely fashion and that disagreement over the amount to be paid didn't constitute bad faith on its own, and there was no other evidence on the question, so Clark lost that claim as well. So the appraisal process might still leave you with tort claims, but they would be challenging to establish, I think. 

June 15, 2016 in Recent Cases, True Contracts | Permalink

Tuesday, June 14, 2016

Non-Disparagement Clauses in Employment Termination Agreements

A few days ago, I blogged here about a German employee’s national origin discrimination lawsuit against Abbott Laboratories. The company also made legal headlines for firing its American workers in order to farm out the work to cheaper labor overseas. This article describes an interesting argument advanced by some of the terminated workers: national origin discrimination for being … American!

A less juicy, but no less legally interesting, issue is whether non-disparagement clauses are desirable for public policy and other reasons. Disparagement clauses are very commonly used as a tool for preventing former employees for criticizing their former employers after the discontinuation of employment (whether voluntary or not.) “’It’s a very, very common practice,’ said Sheena R. Hamilton, an employment lawyer at Dowd Bennett in St. Louis who represents companies in workplace cases. ‘I’ve never recommended a settlement that didn’t have a clause like that.’”

So what’s the problem with these clauses? “’It is very frustrating that you can’t share your story with the public,’ said one former Abbott manager, who had worked for the company for 13 years, rising to an important supervisory position. He had prepared a 90-page manual for his foreign replacements showing how to perform every detail of his work. With a disabled child who requires medical care, he said he had to take his severance and its nondisparagement clause, since it extended his medical benefits.”

Leading members of Congress from both major parties have questioned the nondisparagement agreements, which are commonly used by corporations but can prohibit ousted workers from raising complaints about what they see as a misuse of the temporary visas known as H-1Bs for foreigners with “a body of specialized knowledge” not readily available in the American labor market. “I have heard from workers who are fearful of retaliation,” said Senator Richard Blumenthal, Democrat of Connecticut. “They are told they can say whatever they want, except they can’t say anything negative about being fired.” This raises the ugly, yet to us familiar, question of whether the American educational system is becoming so mediocre that foreigners simply have better skills than American professionals. (For full disclosure, I should note that I myself was born, raised and educated overseas with a J.D. from this country, so I see these issues from both an American and a “foreign” angle).

From a contract law point of view, the case raised an interesting debate on the AALS Contracts Law listserv. For example, are these kinds of in terrorem clauses unconscionable under § 208 of the Restatement (Second) of Contracts (which, ironically, is said to be derived from German law)? If so, wouldn’t severance packages simply be discontinued, arguably leaving employees even worse off? Is unfairness a tolerable tradeoff for the benefits of severance pay? Are these types of clauses simply thrown in for good measure on the “what can it hurt” principle as employers will almost never be able to prove damages from an alleged breach? Even recovery of the severance in restitution is, it has been noted, a game not worth the candle for the vast bulk of American employers.

Thanks to my colleagues for interesting comments. I invite them and other readers to comment more below.

June 14, 2016 in Commentary | Permalink | Comments (0)

Monday, June 13, 2016

Airlines Not Required to Honor Pricing Glitches

Stories such as this [https://www.washingtonpost.com/lifestyle/travel/i-flew-to-abu-dhabi-for-265-round-trip-heres-how-you-can-do-the-same/2016/06/07/fc33cbea-29a3-11e6-b989-4e5479715b54_story.html] about finding incredibly cheap airlines to both national and international destinations because of airline computer pricing mistakes (real or otherwise…) have become commonplace. In 2012, the Department of Transportation established clear rules against changing the price of a ticket after purchase.  But in a new decision by the U.S. Department of Transportation, that rule will no longer be enforced:

“As a matter of prosecutorial discretion, the Enforcement Office will not enforce the requirement of section 399.88 with regard to mistaken fares occurring on or after the date of this notice so long as the airline or seller of air transportation: (1) demonstrates that the fare was a mistaken fare; and (2) reimburses all consumers who purchased a mistaken fare ticket for any reasonable, actual, and verifiable out-of-pocket expenses that were made in reliance upon the ticket purchase, in addition to refunding the purchase price of the ticket.

Images

Travelers’ websites thus now recommend that people hold off making further travel plans until a ticket and confirmation number have actually been issued. Some have further said about the glitch fares that “[t]ravel is not something that is only for the elite or [people] from certain economic brackets.” Of course, it shouldn’t be, but with the deregulation of the airline industry and steadily increasing prices and fees, history seems to be repeating itself: air travel is, for many, becoming unaffordable. This in spite of record-breaking profits for the airline industry benefiting from low oil prices and, I want to say of course, fares increasing, holding steady or certainly not decreasing very much.  Airline executives say they are sharing the wealth with passengers by investing some of their windfalls into new planes, better amenities and remodeled terminals. They're also giving raises to employees and dividends to investors.  Right… And whereas some years have been marked by bust, many more have been booming for the airlines.

Given that, why would the DOT be amenable to help out the airlines, and not passengers? Under contract law, mistakes that are not easily “spottable” have, traditionally, not been grounds for contract revocation. If one considers the contract to have been executed when the airline accepts one’s online offer, why should the airline, absent a clear error or other mitigating factors, not be expected to follow the common law of contracts as other parties will, depending on the circumstances, of course, likely have to? That beats me.

Some airlines are, however, choosing the honoring the mistake fares. Others don’t. Bad PR, you say? That also does not seem to matter. The most hated airline in the U.S. a few years back – Spirit Airlines – was also (at least then) the most profitable.

Hat tip to Matt Bruckner of Howard University School of Law for bringing this story to my attention.

June 13, 2016 in Current Affairs, E-commerce, Legislation, True Contracts, Web/Tech | Permalink | Comments (0)

Standard Contract Advice, Of Course: Be Careful What You Agree To

Why? Because a court is probably going to hold you to it. 

This case, Frick Joint Venture v. Village Super Market, Inc., Docket No. A-1441-15T1, out of New Jersey, is a complicated case with a lot of history between the parties which no doubt colors the court's decision but it's also a case that just makes logical sense.  

Village Super Market was the anchor tenant of Frick Joint Venture's shopping center. By the terms of the lease, Village had the right to approve certain changes to the shopping center. One of the changes involved a gas station that had gone out of business. Frick desired to set up a Starbucks in the footprint that had been occupied by the gas station; Village refused to provide its consent. 

The parties went back and forth trying to resolve the issue, but eventually Frick requested AAA arbitration pursuant to the lease agreement. Through respective counsel, Village responded requesting the choosing of a private arbitrator instead, to avoid AAA fees. The parties agreed on a succession of private arbitrators, and, eventually, to a mediator instead, over the course of several months. However, Village never provided Frick with any dates for the arbitration (later mediation), despite repeated requests on Frick's part to get the thing scheduled. Eventually, ten months after first discussing arbitration with Village, Frick contacted AAA to demand arbitration. AAA contacted Village to set dates, and at that point Village contended that it was not required to go to arbitration under the terms of the lease and thus rejected the arbitration demand. 

The court thought that the relevant portion of the contract was "not a model of clarity" but was also comfortable in making its decision regardless of what the lease agreement required, because there had been multiple communications over the course of many months in which Village agreed to arbitration. Therefore, the lease agreement's terms was unimportant in the fact of this ongoing agreement by Village. Even if these communications didn't rise to the level of a contract, Village was estopped from arguing otherwise because Frick had relied on Village's representations about arbitration to its detriment: During the delay in making the arbitration demand, the gas station portion of the shopping center continued to sit vacant. 

The court finally concluded that Village's behavior from the very beginning appeared to indicate that it understood the matter should be arbitrated, and so Frick was permitted to demand arbitration. 

June 13, 2016 in Recent Cases, True Contracts | Permalink | Comments (0)

Friday, June 10, 2016

Scholarship Spotlight: "Is Rule of Law an Equilibrium Without Private Ordering?" (Gillian K. Hadfield, USC & Barry R. Weingast, Stanford)

Rule-of-lawEnforceability of promises by ultimate resort to governmental power is a cornerstone of contract doctrine. If you don't believe that statement, go re-read section 1 of the Restatement (Second) of Contracts. Nonetheless, Professors Gillian Hadfield (University of Southern California, Law) and Barry Weingast (Stanford, Political Science) take a different approach to theorizing about law generally, an approach suggesting--among other things--that the law of contracts does not hinge first and foremost upon the role of government at all. Hadfield and Weingast instead assert that a "legal system cannot achieve rule of law . . . unless there is an essential role for private, decentralized, enforcement of law." Here is the authors' abstract:

Gillian Hadfield (Southern Cal)Almost all theorizing about law begins with government. In a series of papers we challenge this orthodoxy. Our “what-is-law” approach places private enforcement at the center of a theory of law. The critical public component that distinguishes legal from social order is not public enforcement but rather a public, common knowledge, and stewarded normative classification institution that designates what is and what is not acceptable conduct in a community. Law emerges, we argue, to better coordinate and incentivize decentralized collective punishment (that is, private ordering: sanctions imposed by individuals not in an official capacity.)

Our work to date shows that the social order produced by a centralized classification institution supported exclusively by decentralized enforcement is characterized by several normatively attractive features. We call these features legal attributes. They include features routinely understood in the legal philosophical literature as characteristic of the rule of law: generality, published, clear, prospective, and stable.

Barry Weingast (Stanford-PolySci)Importantly, the legal attributes we identify do not arise from normative claims about law. Rather, they arise from our positive analysis sustaining an equilibrium based on centralized classification when enforcement requires the voluntary participation of ordinary citizens. These legal attributes are necessary to secure coordination and incentive compatibility in a regime of fully decentralized enforcement. Without them, the effort to sustain an equilibrium based on centralized classification fails. A regime characterized by rule of law is only an equilibrium, we argue, when enforcement of public classifications includes an important component of private enforcement. Without the discipline imposed by the need to incentivize and coordinate private enforcers, a government cannot succeed in sustaining law.

"Is Rule of Law and Equilibrium Without Private Ordering?" is a fascinating piece of interdisciplinary scholarship addressing both political science and legal philosophy perspectives on a topic of immense interest to contracts scholars (among many others). Hadfield and Weingast's article is available for SSRN download here

June 10, 2016 in Recent Scholarship | Permalink | Comments (0)

Thursday, June 9, 2016

Unilateral Contracts: “… Never Pay for Gas Again!”

Relying on the win-a-car-for-a-hole-in-one case where a Pennsylvania court found that a car dealership was obligated to honor its offer for a unilateral contract posted at the ninth tee when a golfer finally aced a hole-in-one despite the dealership’s subjective intent to end the promotional offer two days earlier, a Third Circuit Court of Appeals court found a unilateral contract to exist under the following circumstances.

Ie85f5630164711e6a4af010000000000

A brochure distributed to the customers of Giant Eagle – a chain of retail supermarkets, gas stations, etc. – promised its customers that they could “Earn free gas – it’s easy!” and “You may never pay for gas again!” as long as they spent $50 on supermarket purchases. (See the true images posted here in this blog). The brochure, however, also included fine print provided, among other things, that “discounted fuel cannot exceed 30 gallons and discounts must be used in full on one vehicle in one transaction,” “the promotion is valid for a limited time and may end at any time without prior notice,” and “fuelperks! discounts expire 3 months after the last day of the month in which they’re earned.” However, the court found that none of the published program parameters suggested that Giant Eagle reserved the right to retract rewards that customers had already accrued. In fact, in the entire history of the Giant Eagle fuel program, no such retroactive termination ever occurred.

Said the court, “[l]ike the golfer who teed off with a promise of reward in mind, a customer anticipated the promised fuel discounts when deciding to shop at Giant Eagle in the first place—and thus deciding not to shop at a different store. Because she was then aware that she could apply the discounts as advertised if she spent fifty dollars on supermarket purchases using her Advantage Card, she was indeed a party to a unilateral contract with Giant Eagle. Liability therefore attached upon her performance, i.e., at checkout.”

A fair win for consumers, it seems.

June 9, 2016 in Current Affairs, Miscellaneous, Recent Cases, Travel, True Contracts | Permalink | Comments (3)

Weekly Top Ten SSRN Contracts Downloads (June 9, 2016)

Top-ten-books

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

Rank Downloads Paper Title
1 2,737 Contract as Empowerment
Robin Bradley Kar
University of Illinois College of Law
2 564 What We Buy When We 'Buy Now'
Aaron Perzanowski and Chris Jay Hoofnagle
Case Western Reserve University School of Law and University of California, Berkeley - School of Information
3 141 (In)Efficient Breach of Contract
Daniel Markovits and Alan Schwartz
Yale Law School and Yale Law School
4 126 Illegality as a Defence in Contract
Andrew Burrows
University of Oxford - Faculty of Law
5 104 Understanding Privacy Policies: Content, Self-Regulation, and Markets
Florencia Marotta-Wurgler
New York University School of Law
6 104 Immoral Promises
Enrique Guerra-Pujol
University of Central Florida
7 86 Current Trends in Consumer Junk Debt Buyer Litigation
Peter A. Holland
University of Maryland Francis King Carey School of Law
8 74 Nudging and Autonomy. A Philosophical and Legal Appraisal
Philipp Hacker
Humboldt University of Berlin
9 72 The Enforceability of Agreements to Negotiate in Good Faith: The Impact of Bhasin v Hrynew and the Organizing Principle of Good Faith in Common Law Canada
Tamara Buckwold
Faculty of Law, University of Alberta
10 70 The Implications of Modern Business-Entity Law for the Regulation of Autonomous Systems
Shawn Bayern
Florida State University - College of Law

 

SSRN Top Downloads For SSRN Logo (small)
LSN: Contracts (Topic)

Rank Downloads Paper Title
1 412 Major League Soccer as a Case Study in Complexity Theory
Steven A. Bank
University of California, Los Angeles (UCLA) - School of Law
2 147 Algorithmic Contracts
Lauren Henry Scholz
Yale University - Information Society Project
3 136 The Logic of Contract in a World of Treaties
Julian Arato
Brooklyn Law School
4 125 Contracts Without Terms
Tess Wilkinson‐Ryan
University of Pennsylvania Law School
5 115 (Mis)perceptions of Law in Consumer Markets
Oren Bar-Gill and Kevin E. Davis
Harvard Law School and New York University School of Law
6 114 Contract as Empowerment
Robin Bradley Kar
University of Illinois College of Law
7 111 Illegality as a Defence in Contract
Andrew Burrows
University of Oxford - Faculty of Law
8 89 The Rise of the Platform Economy: A New Challenge for EU Consumer Law?
Christoph Busch, Hans Schulte-Nölke, Aneta Wiewiórowska-Domagalska and Fryderyk Zoll
University of Osnabrück - European Legal Studies Institute, European Legal Studies Institute Osnabrueck / Radboud University Nijmegen, Universität Osnabrück - European Legal Studies Institute and Universität Osnabruck
9 76 Farewell to Unjustified Enrichment?
Nils Jansen
University of Muenster
10 75 The Common Law of Contract and the Default Rule Project
Alan Schwartz and Robert E. Scott
Yale Law School and Columbia University - Law School

June 9, 2016 in Recent Scholarship | Permalink

Wednesday, June 8, 2016

"Any Property Owner" Could Be Almost Anyone in the World

Words are tricky things, as contracts remind us every day. When I teach contract ambiguity, a lot of the cases seem to revolve around insurance contracts, with the doctrine of contra proferentem coming into play. A recent case out of Michigan, Atlantic Casualty Insurance Co. v. Gustfason, No. 325739, provides another example. 

Gustafson operated a landscaping business. While one of his employees was clearing brush on a homeowner's property, the homeowner was watching off to the side and was struck with debris and injured. The homeowner sued Gustafson, and Gustafson contacted his insurance agent. Atlantic Casualty reported that the loss to the homeowner was excluded from the insurance policy, so Gustafson sued Atlantic Casualty, contending that the loss was covered by the policy. 

The relevant clause in the policy stated that it didn't apply to bodily injury to any "contractor," and then defined "contractor" using a long string of examples: including but not limited to

any independent contractor or subcontractor of any insured, any general contractor, any developer, any property owner, any independent contractor or subcontractor of any general contractor, any independent contractor or subcontractor of any general developer, any independent contractor or subcontractor of any property owner and any and all persons providing services or materials.

The emphasis there is added, because Atlantic Casualty sought to exclude the homeowner's injuries by asserting that he was "any property owner."

The court pointed out that the phrase "any property owner" was extraordinarily broad and would include almost everyone in the world "except perhaps for a newborn baby," because most people can be found to at least own the clothes they're wearing, which would make that person a property owner. Such a broad reading, excluding virtually the entire planet, would render the policy illusory. 

Atlantic Casualty apparently acknowledged that the phrase was broad as written and instead argued that what it really meant was "the owner of the real property upon which the insured is performing work." The court, however, found that it made sense, given the other items in the list, to interpret "any property owner" to mean "those who are being compensated, or who otherwise have a commercial interest, for being on the job site." In that case, "any property owner" would cover not the real property owners whose land was being worked on but owners of any equipment being used (possibly rented) to work on the real property. 

Because "any property owner" is an ambiguous term and the court found itself with two reasonable interpretations, it employed contra proferentem and interpreted the contract against Atlantic Casualty, who had drafted the contract. Therefore, it stated that "any property owner" did not include those "without a commercial interest in the project," and therefore did not include the residential homeowners, which meant the policy covered the homeowner. 

While I generally like the court's reasoning and interpretation in this case, I do find it slightly odd to decide that a property owner doesn't have a commercial interest in the project being performed on his own land. Presumably he is paying for the work and therefore does have a commercial interest in making sure that the work is being done properly. Even if he's not paying for it, the improvement to his land will likely increase its value, also giving him a commercial interest in what's happening. I think the better phrasing is to interpret it as someone who is being compensated for their presence on the job site. 

June 8, 2016 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Tuesday, June 7, 2016

This One Again: Handwritten Contracts Really Are Binding (but Mediation Transcripts Are Highly Recommended)

The Seventh Circuit just reconfirmed the fact that handwritten contracts are enforceable as long as they contain all the material terms of the contract.

In the relevant case,Martina Beverly brought suit against her former employer, Abbott Laboratories, for discrimination and retaliation against her because of her German nationality (not a lot of anti-German discrimination going on in this country these days, one might think, but that was nonetheless the allegation) as well as on the basis of her disabilities. The case went to mediation. A day before the mediation took place, Abbott’s attorney sent Beverly’s attorney a “template settlement agreement in order to avoid any surprises in the event that [the parties] are able to resolve the matter.” That document also stated that Beverly had twenty one days to review it and seven days to revoke any possible acceptance.

Images

During the fourteen-hour mediation session the next day, both parties were represented by counsel. At the end of the session, both parties and their counsel signed a very brief handwritten agreement that, at bottom, stated that Abbott would pay the cost of mediation and “$200,000+” with Beverly demanding $210,000. The parties were probably and understandably tired after such a long session, but still: a quarter million-dollar settlement, and no one had the energy or took the time to type up one measly paragraph?...

Next day, Abbott emailed a typed agreement to Beverly’s specifying the amounts to be paid ($46,000 to Beverly and a relatively whopping $164,000 to her attorneys!). The emailed response from Beverly’s attorneys: “Oh happy days!.. You are a gem.”

Soon after that, Beverly – perhaps for good reason – got cold feet and sought to rescind from the deal, arguing that additional terms were needed for a contract to have been formed, that the twenty one days mentioned in the pre-meeting template (which was never used in its original form) were applicable to her settlement offer, and that a “more formal future writing” was anticipated.

The appellate court struck down each of these arguments. First, additional terms such as any future cooperation between the parties and Beverly’s future employment with the company were nonessential details. The language in the original template pertaining to a cool-down period was never actually used. The fact that parties anticipate a more formal writing does not nullify an otherwise binding agreement.  The court found the happy exclamation by Beverly’s attorney dispositive of the parties’ intent to enter into a contract when they did (one might also say it was simply an indication of the attorneys’ happiness with a large payment, not their clients’ mood).

Perhaps most importantly, the court pointed out that “[i]t bears mentioning that a transcript (or some other recording) of the private mediation session here may have provided important clarity regarding the parties’ beliefs and intentions relating to the handwritten agreement and the draft proposal. We encourage future litigants to record any communications that directly relate to final settlement agreements.”

Sound advice in days of, apparently, little or no secretarial assistance even when relatively large sums of money are at stake. An assistant could have typed up the agreement in less than one minute. So could an attorney. In the end, though, the handwriting argument did not prevail, but having something in writing or at least an audio recording would have precluded even more costly lawyering.

June 7, 2016 in Commentary, Labor Contracts, Miscellaneous, True Contracts | Permalink | Comments (2)

Monday, June 6, 2016

Scholarship Spotlight: Narrative Techniques and Drafting (Susan M. Chesler - Arizona State & Karen J. Sneddon - Mercer)

OnceUponATimeCan storytelling have anything useful to inform contract drafting? Perhaps surprisingly, according to Susan Chesler (Arizona State) and Karen Sneddon (Mercer), the answer is yes. As is befitting scholars of narrative, the authors make a persuasive case.  In Once Upon a Transaction: Narrative Techniques and Drafting, Chesler and Sneddon argue that techniques usually associated with legal analysis and persuasion have a place in facilitating more effective transactional drafting. Here is their abstract:

Susan Chesler (Arizona State)A granddaughter joins the family business as a partner. An entrepreneur licenses his newest product. Two parties decide to settle a dispute. A charitable idea materializes as a private foundation. A parent's belief in the power of education is perpetuated by a trust agreement. Each of these events forms a narrative. A transaction is more than the scratch of pens across signature pages or the click of keys to email an executed document. A transaction is itself a story. These stories, made with provisions and clauses, result in the formation of contracts, agreements, and wills. Conceptualizing transactions as narratives benefits the negotiation, drafting, implementation, interpretation, and, ultimately, enforceability of the transactional document.

Karen Sneddon - MercerThis article showcases the use of narrative techniques applicable to the drafting of transactional documents. Tethered to the fundamental principles of good drafting, the article will highlight the use of stock stories, plot and narrative movement, character, point of view, narrative setting, themes, and motifs across a spectrum of transactional documents.

After working through drafting examples utilizing narrative methods such as stock stories, point of view, and setting, the authors ultimately conclude that "[r]ather than injecting uncertainty or bloating a document with unnecessary information, narrative techniques can spur innovation while remaining grounded within the principles of good drafting," and that effective drafting can "draw upon narrative techniques to facilitate conceptualization, construction, and ultimately implementation of the transaction."

The potential toolkit for transactional lawyers described in Professors Chesler and Sneddon's article provides a fascinating way to think outside the box for effective drafting. Once Upon a Transaction was recently published in the Oklahoma Law Review and is available for SSRN download here.

 

 

 

June 6, 2016 in Recent Scholarship | Permalink | Comments (0)

"Facebook Addendums": Does Your Landlord Want to Be Your Friend?

I'm one of those apparently rare people who doesn't really use Facebook. But Facebook was evidently very important to City Park Apartments in Salt Lake City, whose management company presented all of the tenants with a "Facebook addendum" to their lease. The addendum allegedly stated that all residents had to befriend the complex on Facebook or be found in breach of their lease agreement. 

This seems like an alarming development that I hope is going to be very limited. Is a Facebook account going to start being like a telephone number or an e-mail address, something it's assumed by everyone that you have and should hand over access to in exchange for goods or services? The reason I stopped using Facebook was because of privacy concerns. I wouldn't be thrilled about being told that I'm required by my lease to make sure my landlord can watch my Facebook activities (which often correspond, as we all know, to our real-life activities; if your landlord asked to follow you around through your daily life, or to get e-mailed your vacation photos, I would think many people would consider that a weird request).

And, since I don't do anything on Facebook, does that mean that I wouldn't be allowed to rent an apartment there unless I opened an account? Many people have legitimate, important, in some cases necessary reasons to limit their online presence. Let's hope "Facebook addendums" don't start sweeping the nation. 

June 6, 2016 in Current Affairs, In the News, True Contracts, Web/Tech | Permalink | Comments (1)

Thursday, June 2, 2016

Trump “University” - Fraud in the Inducement?

Donald Trump is currently attacked on many fronts, one of which for the potential re-launch as President of his now-defunct for-profit real estate training classes. The “playbook” used by the corporate recruiters for the business unit required them, among other things, to use such arguably despicable and potentially fraudulent recruiting language as the following:

“As one of your mentors for the last three days, it’s time for me to push you out of your comfort zone. It’s time for you to be 100% honest with yourself. You’ve had your entire adult life to accomplish your financial goals. I’m looking at your profile and you’re not even close to where you need to be, much less where you want to be. It’s time you fix your broken plan, bring in Mr. Trump’s top instructors and certified millionaire mentors and allow us to put you and keep you on the right track. Your plan is BROKEN and WE WILL help you fix it. Remember you have to be 100% honest with yourself!”

and

“Do you like living paycheck to paycheck? ... Do you enjoy seeing everyone else but yourself in their dream houses and driving their dreams cars with huge checking accounts? Those people saw an opportunity, and didn’t make excuses, like what you’re doing now.”

(Can you imagine reading those statements allowed for a living?)

Does promising potential students too much constitute fraud in the inducement? In a not entirely dissimilar case in our own field, law student Anna Alaburda recently lost her lawsuit against Thomas Jefferson School of Law.  Ms. Alaburda had argued that the law school had committed fraud by publishing deceptive post-graduation employment statistics and salary data in order to bait new students into enrolling. Alaburda claimed that despite graduating at the top of her class and passing the California bar exam, she was unable to find suitable legal employment, and had racked up more than $150,000 in student loan debt. An attorney for the school rejected the claims and said Alaburda never proved them. The attorney also reminded jurors that she had turned down a job offer, and that many Thomas Jefferson alumni have had successful careers. The verdict in that case was 9-3 in favor of Thomas Jefferson.

The cases are of course not similar, yet similar enough to remind us of the importance of not promising too much in the for-profit educational field (in Thomas Jefferson’s case, the school won, but a dozen other lawsuits have allegedly been filed against other schools). This makes sense from both an ethical and business risk-avoidance angle.

What about the use of the very word “University”? The media seems to stubbornly – probably for “sound bite” reasons – continue using the phrase even though the business was, in effect, forced to change its name to “The Trump Entrepreneur Initiative” after government pressure around 2010.   The business was just that, and not a certified university.

If Trump decides to start up the business again, does the media not help him do so again by using a much too favorable term? It seems like it. Linguistics matter in the law and beyond. May media PR inadvertently (or not) contribute to a potential fraud? Comment below!

June 2, 2016 in Commentary, Current Affairs, Famous Cases, In the News, Law Schools, Recent Cases, Teaching | Permalink | Comments (0)

Weekly Top Ten SSRN Contracts Downloads (June 2, 2016)

Top10DeskSign

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

Rank Downloads Paper Title
1 2,725 Contract as Empowerment
Robin Bradley Kar
University of Illinois College of Law
2 533 What We Buy When We 'Buy Now'
Aaron Perzanowski and Chris Jay Hoofnagle
Case Western Reserve University School of Law and University of California, Berkeley - School of Information
3 134 (In)Efficient Breach of Contract
Daniel Markovits and Alan Schwartz
Yale Law School and Yale Law School
4 124 Illegality as a Defence in Contract
Andrew Burrows
University of Oxford - Faculty of Law
5 98 Understanding Privacy Policies: Content, Self-Regulation, and Markets
Florencia Marotta-Wurgler
New York University School of Law
6 94 Immoral Promises
Enrique Guerra-Pujol
University of Central Florida
7 73 Noncompetes in the U.S. Labor Force
Evan P Starr, Norman Bishara and J.J. Prescott
University of Maryland Robert H Smith School of Business, The Stephen M. Ross School of Business at the University of Michigan and University of Michigan Law School
8 68 The Implications of Modern Business-Entity Law for the Regulation of Autonomous Systems
Shawn Bayern
Florida State University - College of Law
9 67 The Enforceability of Agreements to Negotiate in Good Faith: The Impact of Bhasin v Hrynew and the Organizing Principle of Good Faith in Common Law Canada
Tamara Buckwold
Faculty of Law, University of Alberta
10 64 Nudging and Autonomy. A Philosophical and Legal Appraisal
Philipp Hacker
Humboldt University of Berlin

 

SSRN Top Downloads For SSRN Logo (small)
LSN: Contracts (Topic)

Rank Downloads Paper Title
1 412 Major League Soccer as a Case Study in Complexity Theory
Steven A. Bank
University of California, Los Angeles (UCLA) - School of Law
2 147 Algorithmic Contracts
Lauren Henry Scholz
Yale University - Information Society Project
3 136 The Logic of Contract in a World of Treaties
Julian Arato
Brooklyn Law School
4 125 Contracts Without Terms
Tess Wilkinson‐Ryan
University of Pennsylvania Law School
5 115 (Mis)perceptions of Law in Consumer Markets
Oren Bar-Gill and Kevin E. Davis
Harvard Law School and New York University School of Law
6 114 Contract as Empowerment
Robin Bradley Kar
University of Illinois College of Law
7 111 Illegality as a Defence in Contract
Andrew Burrows
University of Oxford - Faculty of Law
8 89 The Rise of the Platform Economy: A New Challenge for EU Consumer Law?
Christoph Busch, Hans Schulte-Nölke, Aneta Wiewiórowska-Domagalska and Fryderyk Zoll
University of Osnabrück - European Legal Studies Institute, European Legal Studies Institute Osnabrueck / Radboud University Nijmegen, Universität Osnabrück - European Legal Studies Institute and Universität Osnabruck
9 76 Farewell to Unjustified Enrichment?
Nils Jansen
University of Muenster
10 75 The Common Law of Contract and the Default Rule Project
Alan Schwartz and Robert E. Scott
Yale Law School and Columbia University - Law School

June 2, 2016 in Recent Scholarship | Permalink | Comments (0)

Wednesday, June 1, 2016

Settlement Agreements: On the Other Hand...

I just blogged about a settlement agreement that the court found unenforceable because there was no meeting of the minds. As always, these cases revolve around the particular circumstances, as an opposite conclusion in a recent case out of the Eastern District of Tennessee, Hira v. New York Life Insurance Company, No. 3:13-cv-527 (behind paywall), illustrates.

In that case, the attorneys had agreed on the basic terms of the settlement (money in exchange for a release and waiver). Defendant's counsel sent a draft agreement to plaintiffs' counsel, and over the next few months counsel continued to correspond about the agreement. Eventually, plaintiffs' counsel informed defendant's counsel that one of the plaintiffs had traveled to India, fallen "gravely ill," was in no state to sign any settlement agreement, and had left no power of attorney to permit anyone else to sign the settlement agreement on his behalf. Defendant asked the court to enforce the settlement agreement, notwithstanding plaintiff's lack of signature. 

And the court agreed. It found that there was no dispute regarding the settlement agreement and it did not matter that plaintiff had never signed the draft document. Therefore, the court ordered that the settlement agreement be enforced. 

June 1, 2016 in Recent Cases, True Contracts | Permalink | Comments (0)

Monday, May 30, 2016

Terms and Conditions: You Agree to What You've Agreed To

Watching terms and conditions litigations continue to play out is an interesting exercise. One of the things we learn is that the terms and conditions mean what they say, which should be obvious, but of course ignores the fact that basically nobody reads what they say. Consumers seem to be consistently caught off-guard by some of the terms. A recent Ninth Circuit decision, Geier v. M-Qube Inc., No. 13-36080, reinforces this (you can watch the oral argument here).

Geier sued m-Qube based on a mobile game it marketed called Bid and Win. m-Qube was not the provider of the game; rather m-Qube merely marketed the game. The other defendants in the case were all similarly removed from the actual content of the game, serving as "intermediaries" and "gateways." The game's actual content provider, Pow! Mobile, was not sued by Geier. 

The dispute in the case was over whether m-Qube and the other defendants were third-party beneficiaries of the terms and conditions of the game. Allegedly, when signing up for the game, subscribers, under the terms and conditions, waived all claims against Pow! Mobile's "suppliers." Despite this clause, Geier was attempting to sue m-Qube, et al., over text message abuses in violation of Washington law. (Geier, incidentally, was not alone in suing over this. A class action in the District of Nebraska was complaining about the same behavior.)

The Ninth Circuit's decision in this case is a matter of straightforward contract law: If you are an intended third-party beneficiary of the contract, you can enforce the contract. There is no real surprise there, except maybe to the consumer here, because it may sink Geier's entire case, which now hinges on whether m-Qube and the other defendants are Pow! Mobile's "suppliers." If they are, then they are intended third-party beneficiaries of the terms and conditions' waiver clause and can seek to enforce it. We may not be reading those terms and conditions, but we may be waiving lots of our rights nonetheless.  

May 30, 2016 in E-commerce, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (1)

Friday, May 27, 2016

Scholarship Spotlight: What We Buy When We 'Buy Now' (Aaron Perzanowski - Case Western & Chris Jay Hoofnagle - Cal-Berkeley)

BuyNowButtonBlueContracts in the digital age continue to raise novel issues of mutual assent and interpretation, and misunderstanding by individual users crosses over into consumer law as well.  In What We Buy When We 'Buy Now, authors Aaron Perzanowski (Case Western) and Chris Jay Hoofnagle (California - Berkeley) generate and analyze empirical data on consumer understanding of contracts for digital wares, concluding that this area is ripe for action by the Federal Trade Commission. Here is the authors' abstract:

Retailers such as Apple and Amazon market digital media to consumers using the familiar language of product ownership, including phrases like “buy now,” “own,” and “purchase.” Consumers may understandably associate such language with strong personal property rights. But the license agreements and terms of use associated with these transactions tell a different story. They explain that ebooks, mp3 albums, digital movies, games, and software are not sold, but merely licensed. The terms limit consumers' ability to resell, lend, transfer, and even retain possession of the digital media they acquire. Moreover, unlike physical media products, access to digital media is contingent — it depends on shifting business models, the success and failure of platforms, and often on the maintenance and availability of DRM authentication systems years after the consumer clicked “buy now.”

This article presents the results of the first-ever empirical study of consumers' perceptions of the marketing language used by digital media retailers. We created a fictitious Internet retail site, surveyed a nationally representative sample of nearly 1300 online consumers, and analyzed their perceptions through the lens of false advertising and unfair and deceptive trade practices. The resulting data reveal a number of insights about how consumers understand and misunderstand digital transactions. A surprisingly high percentage of consumers believe that when they “buy now,” they acquire the same sorts of rights to use and transfer digital media goods that they enjoy for physical goods. The survey also strongly suggests that these rights matter to consumers. Consumers are willing to pay more for them and are more likely to acquire media through other means, both lawful and unlawful, in their absence. Our study suggests that a relatively simple and inexpensive intervention — adding a short notice to a digital product page that outlines consumer rights in straightforward language — is an effective means of significantly reducing consumers’ material misperceptions.

Sales of digital media generate hundreds of billions in revenue, and some percentage of this revenue is based on deception. Presumably, if consumers knew of the limited bundle of rights they were acquiring, the market could drive down the price of digital media or generate competitive business models that offered a different set of rights. We thus turn to legal interventions, such as state false advertising law, the Lanham Act, and federal unfair and deceptive trade practice law as possible remedies for digital media deception. Because of impediments to suit, including arbitration clauses and basic economic disincentives for plaintiffs, we conclude that the Federal Trade Commission (FTC) could help align business practices with consumer perceptions. The FTC’s deep expertise in consumer disclosures, along with a series of investigations into companies that interfered with consumers’ use of media through digital rights management makes the agency a good fit for deceptions that result when we “buy now.”

Professors Perzanowski's and Hoofnagle's article is forthcoming in the University of Pennsylvania Law Review in 2017, but you can download their current draft here.

May 27, 2016 in E-commerce, Recent Scholarship | Permalink | Comments (1)

Thursday, May 26, 2016

Book Review: Drafting and Analyzing Contracts: A Guide to the Practical Application of the Principles of Contracts Law

Carolina Academic Press has just released the fourth edition of the above title by Professor Scott J. Burnham. I got a chance to review it and, although I have not used it in a classroom setting yet, share my impressions with you here.

The book is well organized into twenty clearly defined chapters. Each chapter boils the relevant contract law into nicely terse “blackletter” law segments with no cases (a plus!) or irrelevant matter. This may serve the dual function of reminding students taking a contract drafting class about the applicable law for purposes of such a class, but also to refresh their memories again before taking the bar.

The exercises alter between reading/understanding-style problems and actual drafting problems. For example, some problems will ask the students pointed questions about contract clauses (“Is nonperformance excused?,” “What does the company have to pay [an injured worker],?” “Which of the following clauses are enforceable?” Many more, though, ask for more student involvement and deeper analysis while drafting. For example, several exercises give students a range of objectives to be accomplished and ask the students to draft the appropriate language, others ask students to identify ambiguities and improving them, some deliberately provide overly complicated “legalese” clauses, asking students to modernize them without compromising the legal objectives, and yet others ask students to rely on certain passages in the book in order to draft certain clauses, taking into consideration certain concerns.

The book also asks students to address various ethical concerns, which is a plus.

The only activity that I saw that I personally do not care for is one asking the students to “research the law in your jurisdiction” to be draft a certain problem. For me, that is too open-ended. I would fear questions about substantive law provisions with which I am not personally familiar and the potential surprise when students find out that we do not know “everything” about the law. However, that was just one of many great, diverse exercises.

In short: this book contains much good substantive information and features a wealth of different types of exercises. I highly recommend that you examine this book for your potential classroom or other use.

May 26, 2016 in Books, Commentary | Permalink