Archive for the ‘Contract Law & Beyond’ Category
Prediction Correct in NY Damages Case
posted by Lawrence Cunningham
As I predicted last month, the New York Court of Appeals last week reversed an Appellate Division decision denying any damages to buyers of real property from sellers who admitted breach of contract to purchase and sell real property. The Appellate Division had denied sought damages measured by lost profits, the contract-market differential and reliance expenses. The Court of Appeals agreed as to lost profits and contract-market differential but reversed as to reliance expenses.
It did so, however, in an opinion void of any analysis of the lower court opinions. As to the lost profits claim, in particular, the Court of Appeals merely said it agreed with the lower courts that the assertion was “speculative.” It did not explain why and did not confront or correct patently erroneous statements in those opinions that the buyers could not recover because they were pursuing a new business enterprise. More responsibly, though still without analysis, the Court rejected the contract-market claim, by referencing evidence showing that the property value at breach did not exceed the contract price.
Most important, on the reliance branch, the Court of Appeals reversed the lower court rulings that simply failed to see that reliance damages are a standard alternative to expectancy damages (whether lost profits or the contract-market differential), especially when the latter cannot be determined with reasonable certainty. The Court cited Section 349 of the Restatement (Second) of Contracts, and numerous New York Court of Appeals cases, including the classic Freund v. Washington Square Press, all of which allow recovery of reliance losses incurred in preparing to perform a contract, so long as these are foreseeable and ascertainable.
But what of those incorrect lower court statements about lost profits? Should the Court not have addressed them? Affirming by saying it agreed that the lost profits claim was ”speculative” does not exactly reject erroneous statements in the lower court opinion, such as that new businesses face a different burden or hurdle in recovering lost profits. Reversal as to reliance damages does not disturb them. While I concur with the Court on all its results in all three damages holdings, does it promote judicial economy to leave clearly erroneous lower court statements about a recurring issue in contract law uncorrected?
October 27, 2009 at 5:40 pm
Posted in: Contract Law & Beyond
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What Factors Correlate With Veil Piercing Success?
posted by Dave Hoffman
When Does This Get Pierced?
If you’ve made it through the content of complaints, some data about who gets sued, and descriptive statistics about wins and losses, you basically are pot committed to this veil piercing project. In this post, I’m going to exploit that commitment by describing the results of our statistical analysis of two different kinds of success that plaintiffs may achieve in veil piercing cases: (1) on motions; and (2) at the case level. If you don’t care to follow me beyond the jump, here’s the bottom line (from our abstract):
“Voluntary creditor causes of action promote veil piercing; LLCs are in very limited circumstances better insulated from veil piercing claims than corporations; undercapitalization is strongly associated with success while conclusory grounds like “façade” and “sham” are not; and defendants’ legal sophistication is predictive of plaintiff failure. Extra-legal factors play a more striking and counterintuitive role. Plaintiffs suing companies with few employees are much more likely to win veil piercing motions, and obtain relief in cases, than plaintiffs suing companies employing many workers. This results holds even when controlling for legally-relevant variables. Contrary to both theory and previous empirical work, we also find that judicial liberalism is inversely related to the likelihood of plaintiff success.”
October 9, 2009 at 6:51 am
Posted in: Contract Law & Beyond, Corporate Law, Economic Analysis of Law, Empirical Analysis of Law, Law School (Scholarship)
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What Does Veil Piercing Success Mean Anyway?
posted by Dave Hoffman
If you look at opinions, winning in a veil piercing case is pretty easy to define: did the court agree to pierce the veil, reaching through an entity to its shareholders. If you were inclined, you could model success at those terminal moments in cases, asking which factors (described in the opinions) correlated with courts agreeing to pierce.
There’s value in this approach, not least because opinions shape reality. But there’s a problem too. Not only are opinions unrepresentative, but they come late in cases. The result is an extreme form of selection. It’s not clear (to me, anyway) what the null hypothesis regarding the effect of independent variables ought to be for late-stage dispositions.
Dockets offer the promise of a different approach: asking which factors correlate with success or failure early in cases. Further, assuming that adjudicated motions teach the parties about the strength of their cases, and that they settle strategically, we can even start to learn from the timing and incidence of settlement.
In this post, I’m going to relay some descriptive statistics about the veil piercing successes that plaintiffs achieved in our data. (I’m continuing to pull the data and some text from our paper.) To those who are getting annoyed by all of these posts, I’m sorry! I’ve been living with this project for a long time — I’m excited to finally share it publicly.
October 8, 2009 at 7:24 am
Posted in: Contract Law & Beyond, Corporate Law, Economic Analysis of Law, Empirical Analysis of Law, Law Practice, Law School (Scholarship)
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“Wages of Spin” (Some Contract Law Issues)
posted by Lawrence Cunningham
Suppose the host of a show like American Idol insisted that, in exchange for putting participants on air and gaining publicity, participants had to sign agreements transferring copyright and all future royalties from songs they perform on the show to the host. Suppose further that these participants signed such contracts, and ensuing royalty streams generated millions of dollars for the host, nothing to the performer. Would these agreements be enforceable? Under what legal theories could they be challenged?
Facts like these appear at the heart of longstanding, though little known, allegations against Dick Clark, host of the wildly popular arbiter of successful commercial music decades ago, American Bandstand. Though Clark faced Congressional hearings over such allegations back in the 1960s, they never went anywhere and legal claims do not appear to have been pursued. This quiescent state of affairs may reignite amid the new documentary on the subject, Wages of Spin, which suggests that artist and producer reticence to pursue legal claims is due to lack of knowledge or capacity or to how the power Clark wields in the industry has made many potential witnesses and other adversaries reluctant to challenge him.
The film, made by Shawn Swords (who, in the interest of full disclosure, is a friend of mine and high school classmate), is not so much an expose of Clark’s moral compass as an exploration of the tactics he used to run the show. As a documentary, it adopts an objective tone and viewpoint, though undoubtedly does not provide the adversarial forum to explore or test all assertions and counter-assertions that adjudication of disputes provides.
Accordingly limited, the skeletal facts may permit considering, in broad outlines, issues from the common law of contracts concerning the enforceability of such agreements. I mention four below: lack of consideration, unconscionability, illegal bargain and duress. Comments are open to add to this list—or subtract from or qualify it. (Of course, any inquiry like this skirts potentially applicable statutes of limitations, which raise additional issues concerning tolling, discovery, diligence and others that would require considerably more facts to evaluate.)
October 5, 2009 at 9:29 am
Posted in: Contract Law & Beyond
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Are Cell Service Early Termination Fees Too High or Too Low?
posted by Lawrence Cunningham
What happened to debate about cell phone subscriber contracts containing early termination fees? Companies and subscribers sign multi-year term contracts, exchanging service for monthly and other fees. Contracts provide that customers terminating early breach and owe damages, usually a flat fee of between $150-225. Companies claim these fees partly compensate them for costs like subsidizing handsets to customers, but customers assert these fees coerce them to continue in an unwanted relationship.
Debate manifested in numerous class action lawsuits, state attorney general investigations under state consumer protection laws, federal legislators circulating bills to curtail the fees, and July 2008 Federal Communications Commission hearings and suggestions for compromise. Much of this energy has dissipated, perhaps partly because some companies have modified some of their contracts, including by adjusting the fee according to when in the term a customer terminates. But not all companies have adjusted and not all contracts have been changed.
Lawsuits continue to wind their way through courts, involving issues ranging from subscriber assertions of unjust enrichment to violation of consumer protection laws. A particularly interesting issue concerns whether the clauses are enforceable under the general common law of contracts. One of the few cases to have resulted in a judicial opinion on the merits grappled extensively with this issue, which turns out to be more complex than one may suppose. Ayyad v. Sprint Spectrum (Cal. Super., Alameda County 2008.)
The court, in a class action, found the clauses unenforceable, though not because they charged subscribers too much, but mainly because the company’s losses from breach by early termination were greater (plus, more generally, the fees did not reflect a compensatory impulse, shown further by how they did not vary with the time of subscriber breach).
This result may be surprising for two reasons. First, as a matter of traditional contract law, concern focuses more on stipulated damages that overcompensate and thus penalize breach rather than those that under-compensate. Second, as a matter of fact, is it likely that company losses from subscriber breach exceed $150-225 per subscriber, on average or on particular contracts?
October 3, 2009 at 2:00 pm
Posted in: Contract Law & Beyond
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Amendable, Illusory, Contracts
posted by Dave Hoffman
A set of golf club membership contracts provide that they “may be amended from time to time.” Signatories, who plunked down $185,000 refundable deposits to join once the clubs were operational, want to exercise the refund clause. The clubs respond that they can exercise their amendment ability and keep the deposits. Lawsuits result.
This seems clearly wrong. The amendment clause should be interpreted in light of commercial reasonableness, or the contracts are voidable as illusory. If “may be amended from time to time” means that the Club has the sole discretion to change both signatories’ obligations to the detriment of the members, then we’ve got a pretty clear example of a contract in name only. Rather, I imagine that the amendment language, reasonably interpreted in light of commercial norms, is limited to non-material terms -which would not include the refundability of the deposits. Indeed, the members argue that refundability was a “relatively unusual stipulation [that] was a big part of the appeal of joining.”
What do you think?
(H/T Atrios)
September 27, 2009 at 10:26 am
Posted in: Contract Law & Beyond
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Hot Contract Damages in New York
posted by Lawrence Cunningham
Suppose a partnership of two individual real estate developers agrees to buy raw land from a local government authority to develop a retail factory outlet in a special trading zone of upstate New York across the St. Lawrence River from Canada. A trial court found that the Seller breached this contract “in bad faith.”
To what damages is the Buyer entitled? According to an intermediate appellate court in New York, which affirmed that Seller breached in bad faith, Buyer is entitled to neither expectancy damages (lost profits) nor reliance damages (as a matter of summary judgment).
Is this likely to be upheld by the New York Court of Appeals, which heard oral argument in the case last week? For the following reasons, I doubt it, but either way look forward to the Court’s opinion.
September 22, 2009 at 4:05 pm
Posted in: Contract Law & Beyond
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Remedies for Breach of Season Ticket Contracts
posted by Lawrence Cunningham
Nationally, and lately here in Washington, DC, sports fans are learning hard lessons in contract law. When franchises, like the Washington Redskins football team, built expensive new stadiums during the economic boom of the mid-2000s, they supported funding with multi-year ticket sales. Partly to get long-term construction loans, teams sold season tickets for up to 10 years, promising designated season tickets in exchange for fan promises to make stated annual payments during the term.
Amid today’s economic recession, many fans, unable to afford the luxury they promised to pay for in flusher times, breached those promises, not paying for tickets. In response, teams have taken self-help measures and sued fans, for breach of contract, seeking damages.
Self-help includes reselling this season’s tickets to other fans, usually at lower prices or, when tickets cannot be sold, using seats for other purposes, like promotional or charitable events. Teams also resold future seasons’ seats, again usually at lower prices, or hold them, hoping for future increases in market price. Measured today, what are a team’s damages?
September 12, 2009 at 12:36 pm
Posted in: Contract Law & Beyond
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UCLA Law Review 56:6 (August 2009)
posted by UCLA Law Review
Volume 56, Issue 6 (August 2009)
Articles
Overcoming Overdisclosure: Toward Tax Shelter Detection (pdf)
Joshua D. Blank
First Amendment Enforcement in Government Institutions and Programs (pdf)
Gia B. Lee
Ezra Pound’s Copyright Statute: Perpetual Rights and the Problem of Heirs (pdf)
Robert Spoo
Comments
Nonwaiver Agreements After Federal Rule of Evidence 502: A Glance at Quick-Peek and Clawback Agreements (pdf)
Jessica Wang
Narrowing the Definition of “Dwelling” Under the Fair Housing Act (pdf)
Karen Wong
Addressing Youth Bias Crime (pdf)
Jordan Blair Woods
September 2, 2009 at 3:17 pm
Posted in: Constitutional Law, Contract Law & Beyond, Corporate Law, Intellectual Property, Law Rev (UCLA), Race
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A Breach Born Every Minute
posted by Dave Hoffman
An Advertisement for the Greatest show on Earth"
In the Spring, I asked you folks for some help thinking of examples of true Holmesian agreements, “contracts which, when breached, have a similar psychological profile to a speeding ticket.” It turned out to be pretty hard to identify such agreements, since most people believe breach to be a morally wrongful activity – not simply an option to pay damages at will. As Jonathan Baron and Tess Wilkinson-Ryan previously have found, the degree to which individuals find breach to be “bad” is quite manipulable: breaches to gain are worse than breaches to avoid loss, liquidated damages ameliorate feelings of reprehensibility, etc. Missing from this research has been a psychological theory of what makes breach so aversive.
Tess and I came up with a working hypothesis: breach is seen as a form of interpersonal exploitation that makes the breachee a sucker. We’ve put together a paper that reports on a series of experiments supporting this hypothesis, titled (naturally) “Breach Is For Suckers.“ Check out the abstract, after the jump.
August 15, 2009 at 9:41 am
Posted in: Behavioral Law and Economics, Contract Law & Beyond, Law and Psychology
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BestBuy’s $9.99 HDTV Contracts
posted by Lawrence Cunningham
On Wednesday morning, BestBuy.com, the consumer products seller, advertised 52-inch Samsung HDTVs, usually sold for thousands of dollars, for sale at $9.99. Many buyers ordered at that price, with the seller processing the orders and charging respective credit cards.
Later that day, the seller called the ad a mistake, withdrew it, cancelled associated orders and reversed the credit card charges. It credibly denies any binding agreements were formed.
But is that stance air tight? Basic principles of contract law generally support the seller’s bottom line, though not exactly its reasoning, providing some basis for a buyers’ contract claim.
August 14, 2009 at 8:26 am
Posted in: Contract Law & Beyond
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Latvian Twist on Faust
posted by Lawrence Cunningham
Is a usurious cash loan secured solely by the borrower’s immortal soul enforceable, as a matter of mortal law?
Fantastic as it seems, a report proliferating on the Web says a new company in Latvia is using that business model, successfully. Two-month old Kontora Loan Company of Latvia, brainchild of a 34-year old entrepreneur, offers cash loans up to about €700 (about $500) with daily interest rates of 1% (and some opacity on the frequency of compounding).
The soul part aside, requirements are modest: borrowers must be Latvian residents and provide name and signature. The company has low overhead, foregoing collection staff or policy, reasoning the soul is security enough. Business is off to a good start, with 200 customers on board, a demographic heavily populated by poor drunks recently in bar room brawls.
Regulators in Latvia reportedly do not object, except that its Consumer Rights Protection Center questions the business from “a humanistic standpoint.” It would not take our nascent Consumer Financial Product Safety Commission much effort to find the loans objectionable in the US, although mere excuse from mortal legal obligation may leave risks that human judges cannot exonerate.
July 13, 2009 at 4:53 pm
Posted in: Contract Law & Beyond, Humor
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On Spec: Corporate Waste and Contract Law
posted by Lawrence Cunningham
Extravagant corporate expenditures are among salacious details revealed during the economic crisis, from executive compensation, celebratory parties, office renovations and naming sports stadiums. A few courts, even in Delaware, indicate willingness to police extravagance under the hoary corporate law doctrine of waste, and some observers call for reinvigorating that doctrine.
Reinvigoration would be necessary because use of the doctrine of waste to upset corporate transactions is nearly as rare as hen’s teeth. Students of contract law, when beginning to study corporate law, find this rarity strange. They are told corporate law is anchored in fiduciary principles that contrast with contract law’s operating assumption of arms’-length transactions warranting extraordinary judicial deference.
True, standard talk in corporate law jurisprudence concerning both fiduciary duty and waste expresses similar interest in judicial deference, though emphasizing greater willingness to review corporate transactions to evaluate whether officials act in good faith, with due care, and without promoting self-interest over corporate interest. It may be odd, then, that judicial willingness to police corporate transactions under the doctrine of waste is weaker than within traditional law of contracts, such as its doctrine of substantive unconscionability.
Put differently, the issue can be expressed as what kinship exists or should exist between corporate law’s doctrine of waste and contract law, especially substantive unconscionability. The following notes some familiar ways the two show remarkable kinship and the surprising ways they depart from one another. For those looking to corporate law’s doctrine of waste to promote greater corporate accountability, a modest way would simply take more meaningful lessons from the law of contracts.
June 26, 2009 at 8:47 am
Posted in: Contract Law & Beyond, Corporate Law
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I’ll Pay You $1,000,000 if this Blog Post is Wrong
posted by Dave Hoffman
Contract professors are excited by this lawsuit out of Texas, in which law student Dustin Kolodziej sued Orlando attorney Cheney Mason for failing to pay up on a boast he made while being interviewed on Dateline.
NBC’s Ann Curry asked whether there was enough time for [Mason's client] to commit [a crime]. An unidentified person said, “The defense says no.”
“I challenge anybody to show me,” Mason said. “I’ll pay them a million dollars if they can do it.”
Kolodziej did it, though some quick driving, and he now wants his million dollar reward, under a theory of a breach of a unilateral contract.
The case isn’t frivolous per se, but it is unlikely that Kolodziej will make it past summary judgment. This seems like a textbook example of a boastful puff which no reasonable person in Kolodziej’s shoes would believe constituted an offer. As in the new casebook classic Leonard v. Pepsico, Inc., 88 F. Supp.2d 116 (S.D.N.Y. 1999), a judge will likely note that the setting (directed at the world, not to a particular person), the offeror’s role (hyperbolic advocacy), the nature of the communication (a “challenge”), and the amount involved (disproportionate to any gain to the offeror) all combine together to destroy the requisite seriousness & formality that distinguish offers from puffs.
Throwing the case out is the right result. Ordinarily courts rely puffery doctrine too often – harming consumers who have relied to their detriment on sellers’ optimism. But here, as in Pepsico, Kolodziej seeks to force a contract on Mason, or at least a settlement. Gotchya contracts like this don’t fit well in any theory justifying enforcement. As an extra weight on the scale here, contractual enforcement would chill a defense lawyer’s efforts on behalf of his client.
This isn’t to say that all publicized rewards are unenforceable. Kodak has just offered $5,000 to some poor kid who failed to meet Megan Fox. Unlike Kolodziej’s case, there is only one potential offeree, the offer is accompanied by a way to communicate acceptance, the amount is reasonable, and Kodak’s goal (to document how a “photograph can connect and change the lives of two complete strangers”) is commercial and understandable.
In the event that you do disagree with me, either about the specifics of the post or about puffery more generally, you are on notice that the title of this post is a joke.
June 24, 2009 at 7:22 pm
Posted in: Contract Law & Beyond, Weird
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Contracts, Confidentiality, and Speech: Connecticut Supreme Court Upholds Agreement Not To Speak
posted by Deven Desai
I am sure that free speech, First Amendment gurus/junkies will have more to say about this one, but a recent case out of the Connecticut Supreme Court, Perricone v. Perricone, seems to merit a mention here. As the title of the case indicates, it is a divorce case. Apparently the husband runs a skin care company and millions of dollars are at stake. According to The Connecticut Law Tribune, the New York Post covered the divorce. Nonetheless, during the case Ms. Perricone “signed a confidentiality agreement to prevent pretrial discovery documents from being publicized. In it, she agreed that Perricone’s lucrative skin care business ‘may be severely harmed’ if she made disparaging or defamatory statements about him.” When she wanted to talk to 20/20 about the case, however, Mr. Perricone obtained an injunction by arguing that the confidentiality agreement controlled and that an integration clause in the final settlement did not supersede that agreement. In short, Ms. Perricone was still prevented from talking about the divorce. The court agreed with Mr. Perricone.
As First Amendment matter, the Connecticut Supreme Court held that the agreement was not a prior restraint on speech. I am sure that there are articles about the problem of what is state action in this context and whether one can waive First Amendment rights via contract. The court in this case relied on Cohen v Cowles Media Co. and held: “that a party’s contractual waiver of the first amendment’s prohibition on prior restraints on speech constitutionally may be enforced by the courts even if the contract is not narrowly tailored to advance a compelling state interest.”
As I am not a First Amendment guru and/or junkie, all I can say here is that it seems that there are some continuing problems here. The idea “that a judicial restraining order that enforces an agreement restricting speech between private parties [does not] constitute[] a per se violation of the first amendment’s prohibition on prior restraints on speech” appears correct if non-disclosure agreements and other confidentiality agreements are to work. Indeed, as our own Dan Solove and Neil Richards discuss in Rethinking Speech and Civil Liability:
Since New York Times v. Sullivan, the First Amendment requires heightened protection against tort liability for speech, such as defamation and invasion of privacy. But in other contexts involving civil liability for speech, the First Amendment provides virtually no protection. According to Cohen v. Cowles, there is no First Amendment scrutiny for speech restricted by promissory estoppel and contract. The First Amendment rarely requires scrutiny when property rules limit speech. Both of these rules are widely-accepted. However, there is a major problem – in a large range of situations, the rules collide.
Although I am not sure I agree with the paper’s solution, I recommend the paper as a way to think not only about the Perricone case but the problems encountered when free speech and private law intersect.
June 24, 2009 at 2:50 pm
Tags: contract, divorce, First Amendment, free speech, Perricone
Posted in: Contract Law & Beyond, First Amendment
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Immutable Terms?
posted by Dave Hoffman
The ALI Delegates at Work
Bob’s opening post about the ALI Principles of Software Contracts project alludes to commentators who criticized Section 3.05(b)’s purported immutability. As a commentator to Bob’s post noted, a joint letter between rivals Linux and Microsoft is the most prominent example of this critique. According to lawyers representing the software concerns, a “far better way” of addressing the implied warranty of no material hidden defects would be to make it disclaimable, since implied warranties are ordinarily disclaimable under the UCC.
As Bob’s post points out, 3.05 isn’t strictly speaking immutable at all: the vendor can “contract out” by simply disclosing the defect! And even were that not true, contracts transferring goods with defects that are (i) material; (ii) known to the seller at the time of sale; and (iii) hidden would create a serious problem of good faith, which is not generally disclaimable under the common law or under the UCC. Providing a good that the seller knows is materially defective — when the buyer can not learn that fact before the purchase is completed – would very likely be bad faith. But why not permit such bad faith conduct to be disclaimed? Can’t Microsoft simply come out and say
“There is an implied warrant out there that promises you that the copy of Windows you are about to buy isn’t materially defective. Without admitting, or denying, that this particular copy of windows contains a material, hidden, defect, we hereby disclaim that warranty. Go pound sand.”
June 2, 2009 at 9:20 pm
Posted in: Contract Law & Beyond, Cyberlaw, Economic Analysis of Law
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American Law Institute approves the Principles of the Law of Software Contracts
posted by Bob Hillman
Thanks to Dave Hoffman, who just completed a very successful visit at Cornell Law School, for inviting me to be a guest blogger for the month. Maureen O’Rourke, the Associate Reporter on the Principles of the Law of Software Contracts, and I are posting the following to acquaint readers with the Principles and also to respond to some criticism of one section of the Principles that creates, under certain circumstances, an implied warranty of no known material hidden defects in the software.
On May 19, the membership of the American Law Institute unanimously approved the final draft of the Principles of the Law of Software Contracts. As the Introduction to the project states, the Principles “seek to clarify and unify the law of software transactions.” The Principles address issues including contract formation, the relationship between federal intellectual property law and private contracts governed by state law, the enforcement of contract terms governing quality and remedies, the meaning of breach, indemnification against infringement, automated disablement, and contract interpretation.
The Introduction to the Principles explains further that “[b]ecause of its burgeoning importance, perhaps no other commercial subject matter is in greater need of harmonization and clarification. . . . [T]he law governing the transfer of hard goods is inadequate to govern software transactions because, unlike hard goods, software is characterized by novel speed, copying, and storage capabilities, and new inspection, monitoring, and quality challenges.” Many of the rules of Article 2 of the UCC therefore apply poorly to software transactions or not at all, and the Principles are intended to fill the void.
The Principles are not “law,” of course, unless a court adopts a provision. Courts can also apply the Principles as a “gloss” on the common law, UCC Article 2, or other statutes. Nor do the Principles attempt to set forth the law for all aspects of a transaction, but instead rely on sources external to the Principles in many areas.
The Principles apply to agreements for the transfer of software or access to software for a consideration, i.e., software contracts. These include licenses, sales, leases, and access agreements. The project does not apply to the exchange of digital media or digital databases. It applies a predominant purpose test to determine applicability to transactions involving embedded software or software combined in one transfer with digital media, digital databases, and/or services.
We are the Reporter and Associate Reporter of the software principles. We have been greatly aided by our advisors, consultative group members, ALI Council members, liaisons from the National Commissioners on Uniform State Law, Business Software Alliance, and the American Bar Association, and many additional lawyers from industry and other groups who, over the last five and one-half years, have met with us, talked with us on the phone, and exchanged e-mails with us. We believe the project moved along smoothly largely because of the efforts of all of these groups and individuals.
Nevertheless, in the two weeks leading up to approval in May, we received communications from a few software providers evidencing concern largely with one section of the Principles. Section 3.05(b) creates a non-excludable implied warranty that the software “contains no material hidden defects of which the transferor was aware at the time of the transfer.” The section only applies if the transferor receives “money or a right to payment of a monetary obligation in exchange for the software.” Because the section may be the most controversial provision, we devote the rest of this post to the issue.
June 2, 2009 at 8:12 am
Tags: American Law Institute, software contracts
Posted in: Consumer Protection Law, Contract Law & Beyond, Cyberlaw, Intellectual Property, Law Talk, Technology, Uncategorized
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The Price of an Under-age Human Bomb
posted by Nate Oman
In the category of horrendous contracts, the BBC World Service has a haunting story today about the production of child suicide bombers in Pakistan. Children as young as 9 years old are frequently kidnapped, subjected to intensive indoctrination for a few months, and then sent forth as human bombs. Indeed, it seems that the Taliban in Pakistan has become so good at creating suicide bombers that they have turned into into a revenue device. Pakistani television is reporting that a family paid roughly $400 for a child suicide bomber to take out a rival family with whom they had some sort of dispute. The child’s handlers informed him that he was carrying out a jihad mission and pocketed the money paid for the hit.
May 26, 2009 at 9:53 am
Posted in: Contract Law & Beyond
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A Rumble in the Wiki/Licensing World: Wikimedia Foundation Moves from GNU to Creative Commons
posted by Deven Desai
Slashdot reports that “The Wikimedia Foundation has resolved to migrate the copyright licensing of all of its wiki projects, including Wikipedia, from the GNU Free Documentation License to the Creative Commons Attribution-Share Alike 3.0 License. Here is the WikiFoundation site explanation for the change:
The Wikimedia Foundation (WMF) has proposed that the copyright licensing terms on the wikis operated by the WMF — including Wikipedia — be changed to include the Creative Commons Attribution-ShareAlike (CC-BY-SA) license in addition to the current GNU Free Documentation License (GFDL). This will affect all text and rich media (images, sound, video, etc.) currently licensed under “GFDL 1.2 or later versions”. This change is meant to advance the WMF’s mission by increasing the compatibility and availability of free content. Further details and motivation for this change are explained in the licensing update proposal and the associated FAQ.
There is a fair amount to unpack here. For example why use the phrase “in addition to”? It could be that this language is supposed to reflect a transition period such that old content may have legacy licenses under GNU and new material is all CC licensed. The background information on why change at all sheds some light on the issue, but there is enough to discuss that I will get to that in a post tomorrow. At bottom it is a big shift and indicates that CC may be better for sharing content.
Perhaps just as interesting is the process behind the change. The Foundation aired the topic for some time and took a vote. For “Yes, I am in favor of this change” there were 13242 votes or 75.8% of the total votes; for “No, I am opposed to this change”, 1829 votes, 10.5% of the total; and for “I do not have an opinion on this change”, 2391 votes, 13.7% of the total. The 17,462 total votes were cast and certified. This process reminds me of Dave Hoffman and Salhil Mehra’s paper Wikitruth Through Wikiorder in that the Wikifoundation seems to find ways to organize and direct a rather large and disparate group rather well. (The details of the voting process are set out here under Certification. They seem to track the paper’s finding that the system wishes to keep people in the system even if they misbehave.) Yet, the vote total seems quite small.
The site explains that suffrage was offered to “All users (excluding bots) who have made at least 25 edits to any Wikimedia project prior to March 15, 2009 are welcome to participate in this vote.” So perhaps there are not that many folks who have more than 25 entries or perhaps not that many chose to participate. Or it could be that the grand and glorious Wikipedia is run by around 17,000 people in total if one takes “run by” to mean 25 or more edits. (Wikipedia editors accounted for 16,785 or 96.1 percent of the vote.)
A quick glance at the stats pages for active users is not that helpful. If I am reading the stats page for active wikipedians correctly, as of 2006 (no idea why the English edits are not listed after that date) a total of 57,500 people were active with 5 contributions per month and very active wikipedians (100 or more per month) had a total of 7779. The new wikipedians (defined as Increase in wikipedians who edited at least 10 times since they arrived) is 17,437 as of April 2006 (again the data stops there). That number is awfully close to the total 17,462 certified votes. Given the gap in data it may be that one is seeing a leveling off in participation at the slightly active range. In addition, it may be that those who have put it in the 25 edits at anytime are engaged enough to vote with an astonishing participation percentage. So yet again there is more to learn about Wikiland and how it works.
May 21, 2009 at 6:29 pm
Tags: creative commons, GNU license, wikimedia foundation, wikipedia
Posted in: Contract Law & Beyond, Intellectual Property, Technology, Web 2.0
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Does Law and Economics Destroy Law Students’ Sense of Justice?
posted by Dave Hoffman
Richard Posner. Founder. Latter-Day Apostate?
A draft paper by Raymond Fisman (Columbia Business), Shachar Kariv (Berkeley Economics) and Daniel Markovits (Yale Law) has gotten surprisingly little attention given its potentially radical implications. Maybe it’s the title: Exposure to Ideology and Distributional Preferences. I would have gone with something different. Perhaps “Law and Economics Eats Law Students’ Hearts.”
The authors looked at first-year students at Yale Law School taking contracts and torts. They labeled the students’ professors by their purported tendency to emphasize economic and “humanist” rhetoric in class.* They then used the natural experiment of law school sorting to determine the effect that exposure to economic ideology had on law students’ distributional preferences in the dictator game. That is, did students taught by economically-minded professors behave differently than those taught by professors disposed toward humanism or critical-legal studies?
The bottom line: students taught by economically-minded professors were both more selfish and more likely to see fairness as a form of kaldor-hicks efficiency. By contrast, students taught by humanists were more generous and also likely to see fairness as a matter of equity.
These are important results for those interested in legal education.
- First, and most obviously, it suggests that our preferences for altruism and the content of fairness are highly manipulable — one semester of teaching by a professor – at Yale, no less – can affect them. I admit to being a bit surprised by the size of the effect, given the mixed results from earlier work on the relationship between economics and altruism. It’s also surprising that Yalies are so impressionable! I wonder whether the effect persists past a semester, and whether better coding of actual classroom discussion would have changed the results.
- Second, it suggests yet more reasons for researchers to think hard about the effect that law school teaching has on the content of legal doctrine. As I’ve argued, it’s quite likely that some law school professors who never published a lick have had more effect on substantive legal doctrine than those who’ve written reams, simply by influencing how their students (who went on to be lawyers and judges) thought about the content of rules and the byways of arguments. We should do more work like this!
- Third, and most personally, this makes me nervous. I’m a highly socratic teacher who places lots (and lots) of emphasis in the first-year on efficiency-arguments and on the need to look beyond questions about distributional equality in the present case. I thought that by doing so I was helping students to think critically about the dynamic nature of contract law – the relationship between contract rules and market price; the usefulness of an intelligent system of defaults; the importance of getting beyond gut intuitions. But maybe I’m also indoctrinating the students to grab more of the pie for themselves. Nuts.
*The method they used to code economic preferences was, to be frank, a little mystifying. They gave points for PhD’s in economics, but had to make exceptions for Alan Schwartz, PhDless but L&E to the bone, Guido, for obvious reasons, and both Robert Gordon and Carol Rose, who are similarly off-set. Why not simply ask the professors themselves how much they emphasized economic rhetoric in class? Or the students?
May 18, 2009 at 6:17 pm
Posted in: Behavioral Law and Economics, Contract Law & Beyond, Economic Analysis of Law, Empirical Analysis of Law, Law School, Law School (Scholarship), Law School (Teaching), Law Student Discussions
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