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contracts archive fall 2011

This is the page for Caroline Bradley’s Contracts Class at the University of Miami School of Law.

We will be using the following books: Macaulay, Braucher, Kidwell & Whitford, Contracts: Law in Action, Vol. 1 (3rd. Ed. 2010) and Byrne (ed.) Restatement 2nd Contracts, UCC Article 2, CISG (4th ed. 2008).

Review session: November 29th 10:00AM – 12:00PM in room F109.

Statutes List:
UCC SECTIONS
2-105, 2-107
2-201, 2-204, 2-206
2-313, 2-314, 2-315, 2-316, 2-317, 2-508, 2-601, 2-602, 2-606, 2-608, 2-703, 2-704, 2-706, 2-708, 2-709, 2-710, 2-711, 2-712, 2-713, 2-714, 2-715, 2-716, 2-718, 2-719

In reviewing for the exam you may find it useful to read the following sections of the restatement:
22, 45, 71, 72, 73, 77, 81, 87, 90, 344, 346, 347, 348, 349, 350, 351, 352, 370, 371.

WEEK 15: Nov. 22 I am not going to assign further reading from the Casebook. On Tuesday we will finish our discussion of the shrinkwrap/clickwrap issues and then consider the hypo on page 630-631. Please also read my Spring 2011 Contracts Exam. Note the exam instructions. I plan to spend time on Tuesday talking about the exam instructions and some of the themes we have seen over the semester.

WEEK 14: Nov. 14-18 On Tuesday we will finish discussing The Selmer Company v Blakeslee-Midwest. We finished on Friday by noticing the sentence at the top of page 544 which reads:

It is a detriment, not a benefit, to one’s long-run interests not to be able to make a binding commitment

Do you agree with this statement?

Next we will consider Florida Statute s. 542.335 (valid restraints of trade or commerce) and compare the rules in this statute to the approach in Fullerton Lumber. Which is the better approach?

Please also read to page 582 for Tuesday. For Thursday please read pages 599-616 (omit note 1 on page 612). For Friday please read pages 629-659.

WEEK 13: November 7-11 Until the end of the semester we will be working on the social control of free contract materials. On Tuesday we will focus on pages 491-510 of the Casebook. For Thursday please read pages 491-541 and for Friday pages 541-565. For the future please note that we will be omitting pages 583-598.

Nov. 8: Please read this complaint In John Singleton v Paramount. I mentioned that I would find a complaint for you to read and this is an interesting one. It also helps to show how many different types of claim can be made based on one set of facts. Notice how the complaint begins with a claim of fraud and then moves on to claims to be able to rescind the contract and to damages for unjust enrichment. These are restitutionary claims and they come first in the complaint. Why do you think this is? The breach of contract claim, and the claim of breach of the implied covenant of good faith and fair dealing are included at the end.

Nov. 9: Some notes on Florida law relating to contracts and minors. Child labor is regulated under the Fair Labor Standards Act and state statutes (see, e.g., the Department of Labor’s page on Youth in the Workplace) such as Florida Statutes Ch. 450, Part 1).

Florida Statutes Chapter 743 contains a number of provisions which remove the disability of minors with respect to contracts. For example, minors over 16 are allowed to borrow money for educational purposes:

Fla. Stat. ch. 743.05 Removal of disabilities of minors; borrowing money for educational purposes.-For the purpose of borrowing money for their own higher educational expenses, the disability of nonage of minors is removed for all persons who have reached 16 years of age. Such minors are authorized to make and execute promissory notes, contracts, or other instruments necessary for the borrowing of money for this purpose. The promissory notes, contracts, or other instruments so made shall have the same effect as though they were the obligations of persons who were not minors. No such obligation shall be valid if the interest rate on it exceeds the prevailing interest rate for the federal Guaranteed Student Loan Program.

Fla. Stat. ch. 743.08 : The Child Performer and Athlete Protection Act provides for court approval of contracts relating to professional artistic and sports activities of minors. Under common law parents were able to enter such contracts on behalf of their children and were allowed to treat the child’s earnings as their own. But parents do not always act in their children’s best interests. The statute allows for court approval of such contracts, if the contract is in the best interests of the minor. A minor’s earnings under an approved contract belong to the minor, and the contract once approved by the court is binding on the minor. However, the statute is permissive and does not require parties to contracts for the services of child performers and athletes to obtain court approval.

In Wilson v. Griffiths, 811 So. 2d 709 (Fla. 5th DCA 2002) the court said:

The inherent power that Florida courts have to protect minor children and their property extends to contracts with minors or their guardians for legal services… In order to determine whether a contract for legal services will be binding on the minor, the court must determine that 1) it was reasonably necessary to employ an attorney on behalf of the minor; 2) the contract was fair and reasonable at the time it was entered into; and 3) the contract is fair in relation to the legal services actually rendered on behalf of the minor.

Nov 10: Here is the Florida Statute s. 542.335 (valid restraints of trade or commerce). Compare the rules in this statute to the approach in Fullerton Lumber. Which is the better approach?

WEEK 12: October 31-November 4
On Tuesday we will begin by reviewing the Contracts Midterm (2011). I wrote a Memo on the Fall 2011 Contracts Midterm. If you did not take my midterm I recommend you look at the exam on its own before reading the memo. Or you could wait to look at the memo until after the class.

On Tuesday we will also finish up discussing McIntosh v Murphy. Note that in City of Orlando v West Orange Country Club (Fl. 5th DCA 2009) the West Orange Country Club tried to enforce rights to receive reclaimed water for no charge for 20 years. No contract was signed by the City:

Here, it is undisputed that Plaintiff seeks to enforce a contract that called for performance for more than a year, and which was not signed by or on behalf of either party which Plaintiff seeks to hold liable for performance. Therefore, the statute of frauds plainly bars enforcement of the contract. Id. With respect to the trial court’s determination that the Defendants can be held liable for performance of the contract under an estoppel theory, the law is well-settled that “[t]he doctrine of promissory estoppel cannot be used to circumvent the statute of frauds.”

After discussing whether partial performance could help the Court said:

As explained in Collier, “If Florida is to move toward enforcing oral promises intended to be performed beyond one year, or towards compensating those who enter into such agreements, it is the proper function of the Florida Legislature to announce that public policy change, not the function of a district court of appeal.”

Compare this with Hewitt v Hewitt, Casebook pp 276-280).

We may have time to begin discussing employment at will on Tuesday. So please also read to page 465 for Tuesday. For Thursday please read to page 499 and for Friday to page 521.

October 24: Here is my Memo on the Fall 2011 Contracts Midterm.

WEEK 11: October 24-28
On Tuesday we will discuss the problem on pages 344-5 of the Casebook, review the material on pages 365-376 (briefly) and move on to Hoffmann v Red Owl Stores. Please read to page 395. For Thursday please read to page 417 and for Friday to page 436.

On promissory estoppel consider the following:
In Cosgrove v Bartolotta (7th Cir. 1998) (noted in the Casebook at pp 393-4) Judge Posner wrote:

If there is a promise of a kind likely to induce a costly change in position by the promisee in reliance on the promise being carried out, and it does induce such a change, he can enforce the promise even though there was no contract. … Buried in our capsule summary of the law of promissory estoppel is an important qualification: the reliance that makes the promise legally enforceable must be induced by a reasonable expectation that the promise will be carried out. A promise that is vague and hedged about with conditions may nevertheless have a sufficient expected value to induce a reasonable person to invest time and effort in trying to maximize the likelihood that the promise will be carried out. But if he does so knowing that he is investing for a chance, rather than relying on a firm promise that a reasonable person would expect to be carried out, he cannot plead promissory estoppel.

And, with respect to the issue of a cost to the promisee:

Cosgrove was a professional rendering professional services. And, if nothing else, the pledge put Cosgrove at risk, since he would have been bound-by the very doctrine of promissory estoppel that he invokes-had Bartolotta relied, and since, as the subsequent course of events proved, Bartolotta was likely to enforce the pledge only if he couldn’t get better terms elsewhere, which would be a sign that the venture might be riskier than it had appeared to be originally.

In Gordian Ndubizu v Drexel University et al (E.D. Penn. 2011) the court faced a claim by an accounting professor that he had been promised he would be appointed to an endowed chair, and that he suffered detrimental reliance on the promise. The court found that rejecting other opportunities of employment that would be available to the promisee could constitute detrimental reliance, but that working harder could not:

any action taken in reliance on a promise must be detrimental before a plaintiff can prevail on a promissory estoppel claim. Under the facts at hand, any increase in work was not to Plaintiff’s detriment. Plaintiff has stated that he published articles and engaged in scholarly activities at a voracious pace,.. increased his production, writing a steady stream of top-flight articles .. intensified, concentrated his entire life on generating high-powered research in top-tier journals .. did extraordinarily more work than he had ever done or will ever do .. and worked extraordinary long overtime with no immediate remuneration .. However, any detriment caused by these actions is not apparent. Rather, Plaintiff has introduced evidence revealing the extent to which he benefited from his efforts and publications; numerous professors congratulated him on his accomplishments and commented on his increased prestige.

In Florida the sale and lease of business opportunities are regulated by statute (the statute does not apply to franchises regulated under the FTC’s business opportunity rule.). The statute requires (§ 559.803) that the offeror of a business opportunity make disclosures to prospective purchasers which include the following language:

The State of Florida has not reviewed and does not approve, recommend, endorse, or sponsor any business opportunity. The information contained in this disclosure has not been verified by the state. If you have any questions about this investment, see an attorney before you sign a contract or agreement.

FL. Stats. § 559.811 provides:

Contracts to be in writing; form; provisions.—
(1) Every business opportunity contract shall be in writing, and a copy shall be given to the purchaser at least 3 working days before signing the contract.
(2) Every contract for a business opportunity shall include the following:
(a) The terms and conditions of payment, including the total financial obligation of the purchaser to the seller.
(b) A full and detailed description of the acts or services that the business opportunity seller undertakes to perform for the purchaser.
(c) The seller’s principal business address and the name and address of its agent in the state authorized to receive service of process.
(d) The approximate delivery date of products, equipment, or supplies which the business opportunity seller is to deliver to the purchaser.

Does the requirement of writing exclude promissory estoppel?

Look at the Florida Statute of Frauds

In City of Orlando v West Orange Country Club (Fl. 5th DCA 2009) the West Orange Country Club tried to enforce rights to receive reclaimed water for no charge for 20 years. No contract was signed by the City:

Here, it is undisputed that Plaintiff seeks to enforce a contract that called for performance for more than a year, and which was not signed by or on behalf of either party which Plaintiff seeks to hold liable for performance. Therefore, the statute of frauds plainly bars enforcement of the contract. Id. With respect to the trial court’s determination that the Defendants can be held liable for performance of the contract under an estoppel theory, the law is well-settled that “[t]he doctrine of promissory estoppel cannot be used to circumvent the statute of frauds.”

After discussing whether partial performance could help the Court said:

As explained in Collier, “If Florida is to move toward enforcing oral promises intended to be performed beyond one year, or towards compensating those who enter into such agreements, it is the proper function of the Florida Legislature to announce that public policy change, not the function of a district court of appeal.”

Compare this with Hewitt v Hewitt, Casebook pp 276-280).

WEEK 10: October 17-21

I hope you had a good break.

On Tuesday we will finish discussing Marvin v Marvin. We have fallen behind the syllabus slightly. For this week the syllabus states: CB pp 282-345; 365-376. Omit sections 7 and 8 at pages 345-365. I think this is overambitious so for Tuesday’s class please read to page 294, for Thursday to page 315 and for Friday to page 345. Note that we will omit pages 345-365.

October 7, 2011 : Here is my Contracts Midterm (2011).

I will update the blog with assignments for the week of October 17th at the end of next week. I hope you have a good fall break.

Here is:
the link to the recording of the class on Thursday September 29
the link to the recording of the class on Friday September 30

Class Policies and Outline Syllabus

WEEK 8: October 3-7: On Tuesday we will finish discussing the review problems. Please also read to page 246. For Thursday please read to page 281 (we may begin discussing Marvin v Marvin on Thursday, but we likely won’t finish discussing it then – nevertheless I would like you to read the notes after the case before we begin to discuss it).

That Pepsi commercial can be accessed here (you will find it useful to read this entire post).

WEEK 7: September 26-30
Next week we will be finishing up the remedies material, starting with the next 2 cases on Tuesday and moving on to the review problems. Please be sure to look at problems 1-3 for Tuesday in case we get to them then.

Have a good weekend.

WEEK 6: September 19-23
On Tuesday we will finish our discussion of Albert v Armstrong Rubber, consider the question on pages 155-6, then move on to Colonial Dodge v Miller, so please read to page 174. For Thursday please read to page 195 and for Friday to page 210.

September 21: Contracts news: Sony Adds Class Action Waiver to PlayStation User Agreement

When subscribers attempt to log into the network with their PlayStation consoles, they will be prompted to agree to the revised terms via clickwrap. If subscribers do not agree, they are denied access to the network. However, according to the New York Times and BBC, subscribers may “opt out” of the class action waiver by sending a written letter to Sony headquarters in the next 30 days requesting not to be included in the agreement.

WEEK 5: September 12-16
According to the syllabus, this week we should cover pp 119-161 of the Casebook. For Tuesday please read to page 136: we will begin on Tuesday with finishing up Hadley v Baxendale, then move on to considering the need to prove damages with reasonable certainty. For Thursday please read to page 148, and for Friday to page 161.

In class I said that franchise agreements often contain liquidated damages provisions. Here is a liquidated damages provision from a Showbiz Pizza Time Inc. Franchise Agreement:

14.2 Liquidated Damages Franchisee acknowledges that its uncured breach of any of the terms of this Agreement will materially and adversely affect Franchisor and that the quantum of such damages may not be easily ascertainable. Accordingly, Franchisee agrees that, as liquidated damages for the non-performance of its obligations under this Agreement, in addition to any other remedy available to Franchisor, Franchisee shall pay to Franchisor US$— initially and US$— per month per violation for so long as each such violation remains uncured; provided, however, that this provision will only be operative upon material breaches of this Agreement which are in Franchisee’s or Franchisee’s Principals’ control.

Here are provisions from the Radisson Franchise Agreement:

Article 5.2 — Royalty Fee: During Agreement Years 1 and 2, Licensee will pay Radisson a Royalty Fee equal to the greater of 3.75% of daily Gross Room Revenues or $ 150,000 Minimum Royalty Fee per Agreement Year.
Article 17.4 — Liquidated Damages: If Radisson terminates this Agreement for Licensee’s fault, the actual damages that Radisson would suffer for the loss of prospective fees and other amounts payable to Radisson under Article 5 would be difficult if not impossible to ascertain. . . . [Liquidated damages] is calculated as the lesser of two times the amount payable to Radisson under Section 5.2 for the immediately preceding 12 months, or the number of months remaining until the commencement date of a Termination Window provided herein or expiration of the Term, whichever is sooner, times the average monthly Royalty Fees payable to Radisson under Section 5.2 for the immediately preceding 12 months….

The Radisson provision was found to be a valid liquidated damages provision in Radisson Hotels v. Majestic Towers, Inc., 488 F. Supp. 2d 953 (2007) and Radisson Hotels v. Kaanam, LLC 2011 U.S. Dist. LEXIS 3208 (2011).

Notice how these clauses recite the likely difficulty of ascertaining damages and include a formula for calculating liquidated damages. Think about these provisions as you read the next two cases.

WEEK 4: September 6-9
On Tuesday we will finish up discussing the Worldcom case. The outline syllabus says that next week we should cover pages 89-107 and 113-119 of the Casebook, and omit notes 4-7 on pages 107-112. So please read pages 89-100 for Tuesday, 100-107 for Thursday and 113-119 for Friday. We will speed up a bit later.

Have a good weekend.

September 7: The conventional view that specific performance is a common remedy in civil law jurisdictions may not be completely accurate. One study found that specific performance was rare in Denmark, Germany and France and in contracts to which the CISG applies. The authors applied the term specific performance to cases where the sanction for non-performance was greater than the amount of damages for the cost of non-performance. For example, in Denmark, where a judge orders specific performance by one party who does not comply with the order, the other party has the right to bring a private criminal suit. In practice such suits do not happen. In the one recent case the authors found the plaintiff lost. They wrote:

We argue that for specific performance to be an attractive remedy to the conforming party, a costly system of enforcement must be set in place, which authorities have been reluctant to do. The costs have been regarded as out of proportion to the gain of applying specific performance rather than damages. Our main argument is that as a consequence of less than fully rigorous and effective enforcement, specific performance has (when available) become an unattractive remedy for plaintiffs.

(Henrik Lando & Caspar Rose, The Enforcement of Specific Performance in Civil Law Countries, 24 International Review of Law and Economics 473-487 (2004))

WEEK 3: August 29-September 1
For this week the outline syllabus asks you to read to page 89 of the Casebook. On Tuesday we will discuss Parker v Twentieth Century Fox (please be sure to read the notes after the case carefully). On Thursday we will discuss Neri, and on Friday the Worldcom decision.

Note: The last hypothetical we looked at on Friday involved a resale arguably not in compliance with § 2-706, and the question was whether the seller should be able to recover damages based on market price, which would allow for higher recovery than if the seller’s damages would be fixed by reference to the resale price. In Coast Trading Company v Cudahy Company (9th Cir. 1979) the Court said:

..as noted in White and Summers’ treatise, the plaintiff-seller should not be allowed to obtain a greater amount in Section 2-708 damages than the seller actually lost..

In thinking about UCC §2-706 we saw that the seller is subject to the requirement to “give the buyer reasonable notification” of his intention to resell via a private sale (§ 2-706(3)) and with respect to a public resale there is an obligation to “give reasonable notice of the time and place” (§ 2-706(4)(b)). Please read UCC § 1-202 which deals with notice and knowledge, especially § 1-202(d): a person gives a notification “by taking such steps as may be reasonably required to inform the other person in ordinary course, whether or not the other person comes to know of it” and (e): a person receives a notice or notification when it comes to their attention or “it is duly delivered in a form reasonable under the circumstances at the place of business through which the contract was made or at another location held out by that person as the place for receipt of such communications”.

August 31, 2011: A question arose about the way in which judges are chosen in California. Here is a link to the American Judicature Society’s California page.

WEEK 2, August 22-26:

I have transferred the material which previously appeared on this page to the Fall 2011 archive page.

On Tuesday 23 August we will finish our discussion of the first 29 pages of the Casebook. Here are the questions I suggested to organize our discussion:
1. Why do you think the authors of the case book began the book this way?
2. Did you find anything surprising in this section of the book?
3. How does what you have been doing in class (in all your courses) this week fit with this section of the book (or not)?
4. Do the first 29 pages of the casebook explain why we began the course by reading some agreements (for example, rather than by reading a case)?

Then please read pages 31-64 of the Casebook. On Tuesday we will focus on the problems on pages 46-48. For Thursday please be prepared to discuss the problems on page 50 and to begin discussion of Parker v Twentieth Century Fox.

Note. You can find the Florida version of the UCC online:
Article 1
Article 2

Scope of UCC Art. 2

Have a good weekend.

First class assignment:

1. Read this Physician-Patient Arbitration Agreement. Imagine that you have had a long relationship with this doctor, and that on visiting the doctor’s office you are presented with this document and told that the doctor will only see you if you sign the document. You are also told that the doctor would prefer you initial the part of the document that states “Effective as of the date of first medical services”. Would you sign the document? Would you also initial the provision for retrospective effect? Would it make a difference whether you were at the office for an urgent issue or for a regular checkup? Does the long relationship make a difference here?
2. Read this Sample Patient Contract for Using Opioid Pain Medication in Chronic Pain. Why would a doctor give such a contract to a patient? Do you think such an agreement is likely to achieve its objectives?
3. Read the facebook Statement of Rights and Responsibilities (2011)

For August 18:
Update August 16, 2011: On Thursday we will continue to examine the Physician-Patient Arbitration Agreement and then move on to the Sample Patient Contract for Using Opioid Pain Medication in Chronic Pain; the facebook Statement of Rights and Responsibilities (2011) and the Learning Contract Maker.
With respect to this last agreement consider whether the learning contract this program would generate is the same sort of contract as the ones you read before? How is it similar or different? Do you think it would be a good idea to adopt learning contracts for this class?

In looking at the agreements we will consider what they provide with respect to the rights and obligations of the parties, and what effects the agreements are designed to produce. Is what is most important the question of what the legal rights and obligations of the parties are or are the agreements designed to affect behavior apart from enforcement by the courts?

We will also consider issues of ambiguity and drafting.

In Woebse v Health Care and Retirement Corporation of America in 2008 the 2nd. District Court of Appeal (DCA) of Florida invalidated an arbitration agreement because it was both procedurally and substantively unfair:

Ms. Wright has demonstrated that there was procedural unconscionability in relation to the signing of the arbitration agreement.   During the five-minute meeting which took place between Ms. Wright and Ms. Tomei, there was no attempt to inform Ms. Wright of the existence of the arbitration agreement, much less to explain the document to her and the rights she would be waiving on behalf of her father.
In Bland this court reviewed the identical arbitration agreement as is involved in the present case.   However, in that case the arbitration agreement was “worded clearly, conspicuously and separate from other [admissions] documents.” .. In the present case, the arbitration agreement was included as pages thirty-three through thirty-seven of the thirty-seven page sequentially numbered document.   Ms. Wright was not given the opportunity to read the thirty-seven page document prior to signing but was merely directed where to sign.   Additionally, because Ms. Wright was never provided with a copy of the agreement, she did not have a chance to review the agreement at any time after this five-minute encounter.
With regard to another determinative factor-equal bargaining power-it did not exist.   Ms. Wright was never informed that she was not required to sign the arbitration agreement in order for her extremely ill, incapacitated father to be allowed to remain at the facility.   In her deposition Ms. Wright testified that she was told by Ms. Tomei that “they were admission papers that were required to be signed for [her father's] continued stay.”…
…chapter 400 was designed to protect the rights of nursing home residents and .. the law provides an award of punitive damages for gross or flagrant conduct or conscious indifference to these rights.  We … hold that this arbitration agreement would not vindicate a nursing home resident’s statutory rights in any manner because it specifically deprives the resident of those rights.   In the present case, the trial court erred when it applied the law to the facts and determined that the arbitration agreement was not substantively unconscionable.

Please read this document clearly?:

For Friday August 19:
2. Read pages 1-29 of the Case Book.

By close of business (for the avoidance of doubt, this is 5.00pm eastern time) on Friday August 19 please send an email (subject line: Bradley Contracts Class) to my assistant, Sandra Hernandez (shernandez1@law.miami.edu) with two facts you would like me to know about you.

For class on Friday August 19th please consider the following questions:

1. Why do you think the authors of the case book began the book this way?
2. Did you find anything surprising in this section of the book?
3. How does what you have been doing in class (in all your courses) this week fit with this section of the book (or not)?
4. Do the first 29 pages of the casebook explain why we began the course by reading some agreements (for example, rather than by reading a case)?

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