contracts archive fall 2014
Review Session: Thursday December 4, 3.00-4.30 pm, F108.
Here is the Fall 2013 Contracts Exam
WEEK 15: November 24,25 On Monday we will begin with the issue we finished with in the last class: is the Florida Supreme Court’s guidance relating to waiver (as contrasted with promissory estoppel) in DK Arena Inc. V. EB Acquisitions I LLC just a matter of semantics or something else? For Monday’s class please also read AT&T Mobility v Concepcion (Supreme Court 2011), Knutson v Sirius XM Radio (9th Cir. 2014) and Howard v Ferrellgas Partners (10th Cir. 2014). We will begin to discuss these cases on Monday. On Tuesday we will finish discussion of these cases and talk about the themes of the course.
Here is my draft Appointments Calendar December 4-5, 2014. I have provided for 45 minute appointments except for the period of the review session. There are not quite enough time slots here for me to see each of you individually. If necessary I can add other times, but if you want to see me in groups I may not need to. If you would like to sign up for a particular time please email me. I will post updated versions of the calendar from time to time as people book appointment times.
Have a good weekend.
Statutes/Restatement list for the exam:
Restatement §§ 1, 4, 24, 25, 42, 43, 45, 71, 74, 79, 86, 87, 9, 205, 344, 347, 356.
UCC §§ 2-104, 2-105, 2-201, 2-204, 2-205, 2-206, 2-207, 2-306, 2-313, 2-314, 2-711, 2-712, 2-713, 2-714 and 2-716.
WEEK 14: November 17-21: On Monday we will cover the material to page 271. For Tuesday please read Siga v Pharmathene (Delaware Supreme Court 2013).
With respect to Siga v Pharmathene, a Mintz Levin Corporate and Securities Alert recommends specific terms in a letter of intent excluding any obligation to negotiate in good faith, such as this one:
The parties agree that this letter of intent does not constitute a binding commitment by either party with respect to any transaction, [with the exception of the confidentiality and exclusivity sections set forth above.] The non-binding provisions of this letter of intent reflect only the parties’ current understanding of the contemplated transaction, and a binding contract will not exist between the parties unless and until they sign and deliver one or more definitive agreements, which will contain material terms not set forth in this letter of intent. No obligations of one party to the other (including any obligation to continue negotiations) or liability of any kind shall arise from executing this letter of intent, a party’s partial performance of the terms of this letter of intent, its facilitating or conducting due diligence, its taking or refraining from taking any actions relating to the proposed transaction or any other course of conduct by the parties [other than breach of the confidentiality and exclusivity provisions set forth above]. The parties agree that neither party shall have a duty to negotiate in good faith and that either party may discontinue negotiations at any time for any reason or no reason. Any letters, drafts or other communications shall have no legal effect and shall not be used as evidence of any oral or implied agreement between the parties.
SIGA published a press release after the Delaware Supreme Court’s decision that stated:
SIGA Technologies, Inc. (Nasdaq:SIGA) reported today that the Delaware Supreme Court reversed the award of an “equitable payment stream” by the Court of Chancery in its May 31, 2012 Final Order and Judgment in PharmAthene, Inc. v. SIGA Technologies, Inc. and also remanded the case to the Court of Chancery for further proceedings to determine appropriate damages.
William J. Haynes II, SIGA’s General Counsel, commented, “We are pleased with the Delaware Supreme Court ruling issued on Friday. The Supreme Court’s decision states that PharmAthene may only obtain damages for its lost expectancy if it can prove them ‘with reasonable certainty.’ We intend to establish to the Chancery Court, consistent with that Court’s earlier conclusions, that PharmAthene’s evidence of expectancy damages is speculative and too uncertain, contingent, and conjectural to permit an award.”
November 20: In a press release in September 2014 Siga announced it was filing for a Chapter 11 reorganization. The press release states:
on August 8, 2014, the Delaware Court of Chancery issued an opinion in the litigation initiated against SIGA in 2006 by PharmAthene, Inc. In that opinion, which SIGA believes was wrongly decided, the Court of Chancery determined, among other things, that PharmAthene is entitled to a lump sum damages award in an as yet unspecified amount, with interest and fees, based on United States government purchases of SIGA’s smallpox drug allegedly anticipated as of December 2006. The amount of the total judgment to be decreed by the Court of Chancery is likely to be substantial, and enforcement of that judgment by PharmAthene would jeopardize SIGA’s viability and ability to produce and deliver Tecovirimat.
The commencement of the chapter 11 case will prevent PharmAthene from taking any enforcement action at this time and also will permit SIGA’s intended appeal to go forward.
For Thursday please read pages 273-281 of the casebook, UCC §2-201 and DK Arena Inc. V. EB Acquisitions I LLC (Supreme Court of Florida 2013).
I think you will find it very useful to watch the oral argument in DK Arena v EB Acquisitions here (but it’s a long recording).
DK Arena v EB Acquisitions holds that promissory estoppel does not solve a lack of compliance with the Statute of Frauds. We have seen that promissory estoppel often solves problems of formalities with respect to contracting (and in some jurisdictions will solve Statute of Frauds problems). Why is promissory estoppel not applicable in this context in Florida?
Thursday November 13: I will post next week’s assignments tomorrow.
WEEK 13: November 10-14 On Monday we will do the course evaluations (first 10 minutes of class). We will then finish up with ProCD and Hill v Gateway and move on to Hoffmann v Red Owl, the first case we will deal with on precontractual liability. As you read the case, think about how it is different from the other promissory estoppel cases we have studied. And please also read Precedent in Contract Cases and the Importance(?) of the Whole Story, a draft article by Robert A. Hillman. For the rest of the week please read to page 271 (to 258 for Tuesday).
In class I referred to Judge Easterbrook’s article, Cyberspace and the Law of the Horse (1996 U. Chi. Legal F 207) in which he wrote:
There is no reason to distinguish contract terms from any other aspect of a product’s composition. A buyer of a computer does not control the quality of the circuits; the seller arranges both product attributes and contract terms. Just as no one would think of saying that the buyer of a computer with a 500 MB disk really is “entitled” to a 750 MB disk, or a faster disk, on the ground that disk size and speed is a “contract of adhesion,” so it is foolish to complain about contract terms. These all are mediated by price. “Better” terms (as buyers see things) support higher prices, and sellers have as much reason to offer the terms consumers prefer (that is, the terms that consumers find cost-justified) as to offer any other ingredient of their products. It is essential to enforce these terms if markets are to work.
Previously I referred to the Treadmill Problem my family experienced. Here are links to the materials: Why I Do Not Have A Treadmill (Sears Can’t Deliver); Monday Treadmill Update; Tuesday Sears Update: Important Information About Your Treadmill; On the Treadmill Treadmill; Sears Treadmill Saga Notes; Sears Feels the Power of the Press; The Grand Finale (Probably).
Here is a Fall 2013 Sample Exam and my Fall 2013 Contracts Exam. These give you two examples of hypos to work through – though it may make sense for you to use at least the real final exam during your final review period. The essay questions though may be useful to think about now:
1. “The law has outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal. A promise may be lacking, and yet the whole writing may be “instinct with an obligation,” imperfectly expressed.” (Cardozo J. In Wood v Lucy, Lady Duff Gordon.)
Discuss. (Sample exam Fall 2013)
2. Discuss the imperfections of UCC §2-207. (Sample exam Fall 2013)
3. We have seen that contract law sometimes seems to focus on promoting certainty through an emphasis on formalities, whereas at other times contract law seems to focus on fairness. Discuss whether the cases you have read this semester balance these interests appropriately. (Fall 2013 exam)
4. Assess the role of good faith in contract law based on the materials you read for this class this semester. (Fall 2013 exam)
In Spring 2011 I asked the following essay question which you could answer based on the material we have read:
The materials we have studied this semester suggest that in contract law there is often a tension between efficiency and fairness. Do you agree?
WEEK 12: November 3-7 On Monday we will begin to discuss the UCC S 2-207 cases. I think that after our discussion of the statute we should be able to discuss the cases more effectively than would otherwise have been the case (we will see). Here is the Outline of UCC S 2-207 I distributed in class on 10/30/14. After we have finished discussing the cases we will discuss these Widgets Problems (UCC 2-207). This will take us into Tuesday and may well take up all of Tuesday’s class. But please also read to page 227 for Tuesday’s class. For Thursday please read to page 241.
WEEK 11: October 27-31 On Monday we will begin by finishing Corinthian v Lederle, look at the material on pages 176-7 and then look at revocable and irrevocable offers. Please read to page 193.
Here is an Offer and Acceptance Hypo.
For Tuesday please read to page 234 (this is the reading I am assigning for the rest of the week although I think it is a good idea to read it all at once). We won’t spend much time in class on pp 193-8 but move on to UCC § 2-207. If you are a visual learner you may want to draw up a flowchart to describe how the section works. It is complicated and contains some ambiguities which the courts try to resolve in the cases we will read.
Some of the issues about conflicting provisions in business standard forms relate to arbitration. and arbitration can be a trade practice. For example, the National Grain and Feed Association, a trade association, says:
Formally established in 1901, the NGFA’s Arbitration System has operated in some form since the formation of the Association on November 9, 1896. It is believed to be North America’s oldest industry-based arbitration system.
The Arbitration System provides a fair, cost-effective and timely way to resolve disputes involving grain, feed, barge and barge freight transactions. Its use is compulsory for resolution of disputes between Active members under the NGFA’s Bylaws. The Arbitration System is also available for resolving disputes with and between Associate/Trading members if the Arbitration Rules are referenced in the underlying contractual agreement or the parties otherwise consent The Arbitration System is kept current through the amendment process at the NGFA’s annual business meeting.
Here are some Widgets Problems (UCC 2-207) – we won’t get to these until next week.
Here is a Memo on the Fall Break Essay Assignment
WEEK 10: October 20-24: On Monday we have a make-up class at 9.30 am in Room E352. In that session we will discuss the midterm and some general issues about answering hypothetical and essay questions (I will post a memo on the midterm to this page over the weekend). In our usual class session on Monday we will continue with offers and acceptances. Please prepare to page 161 for Monday, to page 179 for Tuesday and 193 for Thursday.
Here is a Memo on the Fall Break Essay Assignment
WEEK 9: October 13-17: I will try to let you have your midterm exams back as soon as possible after the break. Meanwhile, next week we will begin the week by finishing up the material on restitution and then we will start on offer and acceptance. Please read to page 136 for Monday, 151 for Tuesday and 170 for Thursday.
October 14: Here is the video of the oral argument in Williams v Ormsby:
Here is the Pepsi ad:
WEEK 8: October 6-10: Fall Break. I hope you have a very good week. On Monday October 6 I will post assignments for the week after the break.
Here is my optional writing assignment for the break. If you want to send me your essay I will be happy to read and comment on it.
Please discuss the following statement in 2 pages or less with examples from the course materials to illustrate your answer: “Freedom of contract has two distinct dimensions: The first – freedom from contract – stipulates that persons should not have contractual obligations imposed on them without their consent. The second – freedom to contract – stipulates that persons should have the power to alter by consent their legal relations… a moral theory of promising, standing alone, would have courts enforcing purely moral commitments, which is tantamount to legislating virtue. Such an open-ended rationale leads to serious problems for the value of freedom of contract… it commits courts to enforcing promissory commitments that the parties themselves may never have contemplated as “contractual” or legally enforceable, thereby undermining the value of freedom from contract.”
Randy E. Barnett, Some Problems With Contract as Promise, 77 Cornell L. Rev. 1022, 1023-5 (1992)
WEEK 7: September 29-October 3 On Monday we will begin with Ricketts v Scothorn – please read to page 106 for Monday [corrected 9/28/14]. Please read to page 117 for Tuesday and 123 for Thursday.
At the beginning of the semester I suggested that there would be some themes running through the class. I think that one theme we are beginning to see develop is the contrast between an approach to contract law that focuses on formalities and one that is prepared to look beyond formalities – perhaps to fairness (e.g. promissory estoppel) or to the judges’ sense of the substance of the transaction (e.g. Cardozo in Wood v Lucy Lady Duff Gordon).
Here are two of the examples of courts characterizing promises relating to arbitration as illusory promises (leading to a conclusin there was no valid arbitration agreement):
1. Fortune Hi-Tech Marketing (FHTM) entered into agreements with people whereby they would sell products and services of different companies, promising that they would attain financial independence. The Federal Trade Commission took action against FHTM as a pyramid scheme:
To participate in the scheme, consumers paid annual fees ranging from $100 to $300. To qualify for sales commissions and recruiting bonuses, they had to pay an extra $130 to $400 per month and agree to a continuity plan that billed them monthly for products unless they canceled the plan. Those who signed up more consumers and maintained certain sales levels could earn promotions and greater compensation, but contrary to FHTM’s claims, the complaint alleged, its compensation plan ensured that, at any given time, most participants would spend more money than they would earn.
Some of the participants sued FHTM for for violations of Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1961 68, the Kentucky Consumer Protection Act, and Kentucky common law. FHTM invoked an arbitration agreement in its agreement. The 6th Circuit held in Day v Fortune Hi-Tech Marketing, Inc. in September 2013 that the arbitration agreement was invalid because a provision in the agreement that allowed FHTM to amend it at will meant that the agreement was illusory.
2. The 7th Circuit adopted a similar approach in Druco Restaurants v Steak n Shake in August 2014:
…the district court correctly found that the franchise agreements’ arbitration clauses were illusory because performance was “entirely optional” with Steak n Shake….Steak n Shake was free to exercise or not exercise the arbitration clause at its whim. The company also retained the discretion to determine the circumstances and procedures under which arbitration may take place, including deciding which types of claims will be subject to arbitration. Indeed, nothing in any franchise contract precludes Steak n Shake from instituting a new system of nonbinding arbitration at any time, changing the rules and procedures as the company sees fit… Under Indiana law, such a clause is illusory because performance is entirely optional with the promisor.
Here is the Contracts Midterm Fall 2013 and the Memo on the Fall 2013 Contracts Midterm
Please note that by Monday afternoon we will have had fewer classes than the students who took this midterm had had by the time of their test.
Have a good weekend!
September 28: In today’s New York Times, in the Social Qs column in the Style Section this question appears (registration required):
A decade ago, I moved to Silicon Valley, got a job with people much, much smarter than I am, and prospered. I decided to leave the largest portion of my estate to a friend; she asked its value, and I told her. Since then, I have decided to leave more money to charity. And sadly, our friendship has soured. Thus I have changed my will and removed her bequest. Should I tell her?
The answer given says there’s no real harm in informing the putative beneficiary and does not refer to promissory estoppel. What answer would you give?
Week 6: September 22-26: We will have our first make-up class at 9.30 am on Monday 22 September in Room E352 (the second is in the same room at the same time on Monday 20 October). For the make-up class please think about these Questions (September 2014). For our usual class time on Monday please read to page 90. We likely won’t be able to discuss all of these cases in the time available on Monday but in reading the cases I would like you to think of them as illustrations of the same problem: how to distinguish between words that constitute promises and words which do not.
With respect to Structural Polymer v Zoltek please read UCC §2-306 and the comments. As to the idea that illusory promises do not create a contract see also UCC § 2-204. The UCC is designed to recognize agreements as contracts even where there are missing terms. You will be thinking about indefiniteness in contracts (see, e.g., UCC § 2-204(3)) in Elements.The UCC provides some rules to deal with matters the contracting parties do not address in their agreement. So see, for example UCC § 2-308 which provides for rules about the place of delivery where the parties have not specified a place of delivery, and UCC § 2-309 which addresses issues of timing. Rules like this, which fill in gaps in agreements, may be described as gap-filling or default rules. But the UCC rules are flexible: UCC § 2-309 says that if the contracting parties do not specify a time for any action under the contract the time is a reasonable time.
For the rest of the week next week please read to page 112.
The midterm exam will be on Monday September 29 at 5.30 pm in Room F108. It will be a closed book one hour exam and you may answer either on a laptop or in a bluebook. I will not grade the exams but I will provide you with comments on your answers (a combination of a memo and some individualized comments). The exam will look more like my Contracts Midterm Fall 2013 than like the questions we will discuss on Monday. That means that part of what you will be doing will be figuring out how to think about the contracts implications of a complicated set of facts.
As I said Florida courts have followed the approach the majority took in Lake Land v Columber (for example in Open Magnetic Imaging Inc. v Nieves-Garcia (Fla. 3rd. DCA, 2002).
I mentioned that in Harris v Time, Inc. the court commented on the consideration issue but also disapproved of the litigation as a waste of resources. Here is an excerpt:
Although most of us, while murmuring an appropriate expletive, would have simply thrown away the mailer, and some might have stood on principle and filed an action in small claims court to obtain the calculator watch, Joshua’s father did something a little different: he launched a $15 million lawsuit in San Francisco Superior Court…. assuming (as we must at this juncture) that the allegations of the complaint are true, Time made an offer proposing a unilateral contract, and plaintiffs supplied adequate consideration for that contract when they performed the act of opening the envelope and exposing themselves to the sales pitch within…
This lawsuit is an absurd waste of the resources of this court, the superior court, the public interest law firm handling the case and the citizens of California whose taxes fund our judicial system. It is not a use for which our legal system is designed.
As a practical matter, plaintiffs’ real complaint is that they were tricked into opening a piece of junk mail, not that they were misled into buying anything or expending more than the effort necessary to open an envelope. If Joshua’s mother lost the initial skirmish in the battle of direct mail advertising by opening the envelope, she could have won the war by simply throwing the thing away. If she were angry she might even have returned Time’s business reply envelope empty, requiring Time to pay the return postage. If she felt particularly hostile, she might have inserted a nasty note or other evidence of her displeasure in the reply envelope. A $15 million lawsuit, filed in a superior court underfunded and already overburdened with serious felony prosecutions and complex civil litigation involving catastrophic injury from asbestos, prescription drugs and intrauterine devices, is a vast overreaction. The law may permit junk mail to be delivered for a lower cost than the individual citizen must pay. It does not require that the public subsidize junk litigation.
WEEK 5: September 15-19: On Monday we will begin with note 2 on page 51 and the problem on page 52. For Monday please also read the cases on pages 52-59. For Tuesday please consider the notes and problems on pages 59-61 and read to page 68. For Thursday please read to page 80.
Week 4: September 8-12 On Monday September 8th we will discuss White v Benkowski (briefly) and Hamer v Sidway, so please prepare to page 42. For Tuesday please read to page 48 and for Thursday to page 52. We will be moving on from thinking about damages to thinking about how to distinguish between the circumstances in which courts treat promises as constituting binding contracts and circumstances in which they don’t.
September 7: Here is my outline of the Superbowl Damages Issues.
Week 3: September 1-5: No classes (make-ups for 2 classes scheduled for 9.30 am on Monday 22 September and Monday 20 October in Room E352).
Think about the following facts:
A large number of ticketholders for Superbowl XLV were disappointed when they were either assigned to seating which was inferior to the seating they had tickets for or gave them a poor view of the video board. Some ticketholders were unable to sit in the stadium because the temporary seating installed for the game was unsafe. What damages should the ticketholders get? On a restitution theory? On a reliance theory? On an expectation theory?
Here is what the NFL offered (this information comes from the denial of class action certification in Simms v Jones (you are not required to read the linked document)):
1. $2,400 (three times the face value of the ticket) plus one free, transferable ticket for a non-temporary seat at the next NFL Super Bowl game;
2. One free, non-transferable ticket for a non-temporary seat at any future SuperBowl game of the fan’s choice, plus round trip airfare and hotel accommodations provided by the NFL; or
3. the greater of (i) $5,000 or (ii) an amount equal to the aggregate total of the actual, documented expenses incurred by the ticketholder, including (a) the actual price paid for the Super Bowl XLV game ticket, (b) airfare or other expenses incurred related to travel to/from the Dallas – Ft. Worth area, (c) a per diem for food, tips and ancillary charges at a daily rate of $100 a day for up to five days actually spent in the DFW area, (d) hotel lodging costs for room, internet, parking and tax for up to four nights, (e) ground transportation and parking costs incurred, and (f) expenses for renting a car in the DFW area and gas for up to a maximum of five days rental.
Compare this offer to your assessment of what a ticketholder could claim under any of the three theories of damages you have considered.
If you would like to write up an answer to this question for me to look at I would be happy to do so: write no more than 1 page and email it to me by the evening of Saturday 6 September. I will post an outline of how I think you should think about the issues to this blog after Saturday evening and probably before the morning of September 8th.
Think also about the contracts implications of the following statements a doctor might make:
I think you will be happy with your nose.
Most of my patients are happy after their surgeries.
I have been doing operations like this for years with no complaints.
I promise you will be happy with your new nose.
I promise after the surgery your nose will look like this picture.
Week 2: August 25-29
Aug. 27: There has been a room change for the Dean’s Fellow sessions. On Tuesdays they will be in Room F309 and on Thursdays in Room E265.
Aug. 25: I corrected a typo in the Class Policies document. The corrected version is on the class materials page.
Material that was previously on this page has been moved to the archive page.
For Monday’s class next week please re-read US Naval Institute v Charter Communications and also read UCC §§ 2-711, 2-712, 2-713, 2-714 and 2-716. These provisions are supposed to allow the purchaser of goods to obtain expectation damages (or even specific performance – the actual goods promised – in some circumstances) and we will work through them in class. Note that “cover” under UCC § 2-712 is what is referred to in note 3 on page 14 of the casebook as an example of putting breaching promisors (rather than promisees) in the position they would have been in had the contract been performed. We will think about this idea in class.
For Tuesday please read to page 34 and for Friday to page 42.
So far we have focused on Restatement §§ 1, [4 – mentioned in the book, though I did not specifically refer to the provision in class] and 344 and UCC §§ 2-105, 2-313 and 2-314.
Dean’s Fellow sessions with Lauren Gonzalez on Tuesday (Room F309) and Thursday (Room E265) from 3:30-4:20.
Here is the link to the discussion of Hawkins v McGee in The Paper Chase:
First class assignment (Monday August 18, 11.00 am) :
1. Read pages 1-4 of the Casebook, including the notes. Some aspects of the notes will likely not make much sense at this point. For example, note 2 on page 3 refers to tort as well as to contract. You do not yet know much about tort law. But you may already know that doctors are usually at risk of being held liable for failures to provide the standard of care which we expect of doctors: that is, they are usually liable in damages for negligence or malpractice rather than for failure to live up to their promises.
On page 2 the authors write “Of course, the primary sources relied on in most casebooks, including this one, are cases…” Why “Of course”? Does the excerpt from the judgment in Hawkins v McGee help to answer this question, or not? What does Hawkins v McGee decide?
2. By close of business (for the avoidance of doubt, this is 5.00pm eastern time) on Friday August 15 please send an email (subject line: Bradley Contracts Class) to my assistant, Adoracion Carrillo, at email@example.com describing two facts you would like me to know about you.
For the rest of the first week of class (August 18-22) please read to page 14 of the casebook. Please also read the Class Policies.
Lauren Gonzalez is the Dean’s Fellow for this class. Her sessions will be on Tuesdays and Thursdays from 3:30-4:20 in room F200 beginning next week.