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Category: Contract Law & Beyond

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Modern Technology: A Disruptive Influence on Contract Doctrine?

In my view, modern technology has exacerbated the doctrinal tensions within contract law.  Currently, clickwraps and browsewraps stretch the notion of mutual assent to its extreme, perhaps warping it in the process.

The recent literature on form contracting online has been substantial.  While some of this literature sees online contracting as a natural inheritance to traditional contract law doctrine, other commentators have argued that contracting online has distorted the doctrine.

In Contracts in the Real World, Prof. Cunningham attempts to reconcile two recent cases, Specht v. Netscape and Pro-CD v. Zeidenberg, as part of his treatment of the theme of contract formation and mutual assent.  As much as he tries, to me the cases still seem to be in conflict.

And if that weren’t enough, two well-known additional cases that dealt with late-arriving terms inside a computer box, Hill v. Gateway and Klocek v. Gateway, blatantly contradict each other, with contrary holdings on virtually identical facts.

In my mind, these contradictions reveal a mismatch in the doctrine and the reality on the ground.  If there is no way for consumers to read or understand, or perhaps even see these clickwrap agreements, it hardly seems fair to bind consumers to them.  As seen above, however, this leads to contradictory rulings.

Inconsistent holdings create the appearance of an arbitrary justice system, and these disputes, which are governed by the Uniform Commercial Code, should turn out in a uniform manner.  When they do not, it only intensifies the debate about how to deal with online contracting and adhesion contracts online.

As we all continue to click our way through countless EULAs and are told that we are subject to “terms and conditions” that no reasonable consumer has had the time to read,  I do not believe that it is enough to hope that antiquated laws will handle new situations.

Instead, I would suggest that we need to continue to build on the wisdom of contract law.  While there is much to celebrate in the received wisdom of ancient doctrines, we must also recognize that it is the common law’s dynamism and adaptability that have led to its genius.

 

Miriam Cherry is Professor of Law at Saint Louis University School of Law.  Some of her scholarship can be found at this link on SSRN.

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Contracts Outside the Box

Let me start out with a criticism of Larry’s book: it is too much fun. I had a hard time breaking off just a chunk of Contracts in the Real World to write about and found myself spending several hours reading one interesting vignette after another on famous and infamous contracts.

The book will make a wonderful companion text to a traditional contracts casebook. Its value is not just in its engaging account of contract stories or in giving context to chestnut cases, but in providing a very intuitive framework for understanding contract law. The traditional contracts course, perhaps by virtue of having the doctrine of consideration at its heart, can be one of the most confusing in the One-L year. Students are often left to divine the inner structure (or lack thereof) of contract law on their own, likely while cramming for finals. Sometimes the epiphany comes. For many students it does not.

Larry has a real genius for laying out the doctrinal building blocks in a very thoughtful and accessible structure. He groups cases around a rough life cycle of contracts, with chapters devoted to “Getting In: Contract Formation,” to “Facing Limits: Unenforceable Bargains,” to “Paying Up: Remedies.” The layout of the book combined with its lucid writing demystifies contracts.

The layout may at first appear to make this book an ill fit as a companion text to many case books, because many of the cases appear in Contracts in the Real World under a different doctrinal heading than in a particular case book. For example, in the case book I currently use Batsakis v. Demotsis appears in the chapter on “consideration.” Larry places this classic next to cases on unconscionability. I also teach Lucy, Lady Duff Gordon in consideration, while Larry situates it in “Performing: Duties, Modification, Good Faith.”

These differences actually demonstrate a strength of the book. Some disconnect between the organization of a primary case book and a companion text forces students to move beyond a facile understanding of contract law in terms of rigid doctrines. Seeing cases in different contexts and fitting into different doctrinal boxes can help students see that lawyering involves more than memorizing black letter rules and putting issues into the right doctrinal box. Indeed, sometimes different doctrinal boxes can apply to the same problem and lead to the same result (witness rules on past consideration and duress). At other times, the choice of the doctrinal box makes a huge difference (see those same two doctrines). Accomplished students can move from memorizing blackletter law to seeing the possibility of creative lawyering. Larry’s organization – both intuitive and surprising – will help students at both stages.

One final strength of the book is Larry’s choice to include not only court cases but many contemporary contract disputes that never reached the courtroom (such as the dispute between NBC and Conan O’Brien). This brings into the classroom a wider panorama of how lawyers encounter and shape contractual problems in practice. After all, few contracts and few lawyers find their way into a courtroom. Most disputes are resolved in the shadow of law.

I also have a wish list for Larry’s next project (from personal experience, I can tell you how invigorating it is for an author who has just finished a book to be asked “what’s next?’). One of the limitations of the traditional contracts curriculum is how rarely students read and interpret – let alone negotiate or draft – actual contracts. It would be incredibly helpful as a professor to have some of the source contracts behind these stories. Although some of these contracts are already contained in a judicial opinion (Carbolic Smoke Ball) and many will not be public (Conan’s deal with NBC), others might be available with some digging. Having real and full contracts would allow professors to meet many of the items on Professor Collins’ wish list, such as transactional perspectives and drafting exercises. Although some lawyers litigate over failed contractual relationships, many more help parties plan prospectively – including by drafting and negotiating deals. For most attorneys, contracts are not an autopsy subject, to be dissected in a court opinion, but a living thing.

Professor Cunningham’s book provides a joyful reminder of the life in contracts.

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Contracts in the Real World – At Last, a Book for Modern Minds

In a world where contract law, as typically taught, has one foot in the quicksand of the past, Lawrence Cunningham’s Contracts in the Real World is a most welcome and liberating alternative.  Just consider the domain of what is commonly offered up:

* sales of “Blackacre” circa the 18th and 19th centuries,

* sailing ships destined for Liverpool circa 1864,

* carloads of Mason green fruit jars circa 1899,

* a promise to pay ₤100 to anyone who contracted the flu after using a “Carbolic Smoke Ball,” circa late 19th century,

* a 12-word “contract of sale” penned on the back of a “counter check,” circa early 1950s,

* a material breach case about a dispute over the brand of pipe (Reading or Cohoes) to be used in the construction of a home (circa early 1920s),

* representations made in 1959 in connection with a grocery “chain” begun in 1922 (by 2010 the “chain” was down to a lone store in Green Bay, Wisc.),

* promises re an option to buy a ranch, circa 1960s, and

* a 1965 contract involving the 78 year-old actress Shirley MacLaine (co-star of the 1960 movie The Apartment).

One need not be wed to Henry Ford’s maxim that “history is bunk” to appreciate that much of what is presented in contracts casebooks is past tense, past perfect, and past its time.  While such an approach to teaching contracts may be a boon to slothful professors averse to updating their class notes, it does little to prepare today’s law students for the challenges facing them in the 2012 marketplace of digital deals.

Given the yester-world of many contracts casebooks, it is refreshing to have a book that brings modernity onto the stage of legal education.  While Professor Cunningham pays due deference to the canonical cases (e.g., Lawrence v. Fox, N.Y., 1859), he does so in ways that reveal their contemporary relevance (e.g., as in how that precedent applied to a 2005 Wal-Mart dispute).  Moreover, what is so stimulating about his book is that Cunningham highlights the law relevant to current business dealings of everyone from Bernard Madoff and Donald Trump to Lady Gaga and Paris Hilton, and 50 Cent, too.  There is even a case involving a dispute over the rights to the HBO TV series The Sopranos.

Likewise, Cunningham both identifies and understands the real-world contexts of modern contract law involving everything from electronic transactions and confidentiality of information, to agreements re season tickets subscriptions for sports events, to entertainment contracts, to Amazon’s provider contracts, to any variety of contemporary non-disclosure agreements, et cetera.

In all of these ways and many others, Contracts in the Real World stands alone as a work that ushers the law of contracts into our times.

At the risk of sounding unduly laudatory, this book was a joy to read. Both stylistically and substantively, it is a work of admirable achievement without a real rival.  When one offers such acclaim, there is a corresponding obligation to justify it.  Hence, permit me to explain my evaluation, at least in summary fashion. Read More

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Dichotomies in Contract Theory and Doctrine

In this blog post, I would like to examine some of the dichotomies in contract theory and doctrine that are noted in Professor Cunningham’s Contracts in the Real World.  Some would claim that contract law is revolutionary; others would argue that it is reactionary.  Compared to the status relationships of the Middle Ages, in which economic power was primarily determined through feudal or family relationships, contract and market relations promised a more egalitarian alternative.

In the classic text Ancient Law, Sir Henry Maine described the radical transformation from a feudal society governed by custom and hierarchy to one transformed by the industrial revolution, in which socio-economic mobility was not only possible, but which was expected.  On the other hand, many today would argue that contract acts as a reactionary force, for enforcing bargains strictly as written could result in reinforcing the power imbalances that already exist in society.

Contracts in the Real World notes these dichotomies and strikes a middle ground between them.  Prof. Cunningham characterizes the schism in contract law as a dispute between formalists and realists.  This schism, he posits, applies even to foundational matters, such as the question of whether a contract has been formed.  Prof. Cunningham notes that extreme formalists would champion a return to the days of the seal and enforce only those deals that meet the strict definitions of offer, acceptance, and consideration.

Realists, on the other hand, favor scrutinizing the context of every bargain, accepting the most informal of deals and even enforcing promises to make gifts as contracts.  Thus the dichotomy between formalists and realists turns into a debate over the extent of government or court involvement in private ordering.

Throughout the book, Prof. Cunningham walks a tightrope between these positions, often making reference to contract law’s “sensible center,” and noting that with many common problems, the rules that have evolved over the years make a good deal of sense.  In essence, he makes a case for the status quo, eschewing reform in either the direction of more government interference in contract, or government withdrawal from contract.

Prof. Cunningham suggests that current law strikes the proper balance between two rather extreme positions.  The book extols the earthy pragmatism of old precedents and wise judges, and suggests that these doctrines will ultimately win out and reach a balance.  In my next blog post, I will question whether this assertion holds true in the context of technological change.

Miriam Cherry is Professor of Law at Saint Louis University School of Law.  Some of her scholarship can be found at this link on SSRN.

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Contracts in the Real World and Contracts in Law School

Thank you to our hosts at Concurring Opinions for inviting me to participate in this online book symposium.   It is a pleasure for me to discuss Larry Cunningham’s engaging new book on contracts.

The title of Larry’s new book is Contracts in the Real World.   Intentionally or not, the title suggests that there may exist another realm for contracts other than the real world, a realm that is perhaps more theoretical and not completely real.   The alternate universe that most readily comes to mind is law school.  Contracts in the real world exist in partial contrast to contracts in law school.

Contracts in the real world bind parties and counterparties to one another.  Contracts in law school bind students to casebooks and laptops.  Contracts in the real world frequently revolve around compensation, obligations, and duties.  Contracts in law school frequently revolve around precedents, arguments, and defenses.  Contracts in the real world are about contracts.  Contracts in law school are about cases about contracts.  Needless to say more, there exists a meaningful and significant gulf between contracts in the real world and contracts in law school.

Larry’s book serves a bridge across this gulf.  Through wide-ranging popular stories about the prominent and the pedestrian crafted in accessible language yet not devoid of legal doctrine, the book connects contracts in law school with contracts in the real world.  Law school concepts like offer, acceptance, mitigation, and assignment are illuminated by real world stories of popular contracts involving Pepsi ads, Dateline NBC, Redskins tickets, and Haagen-Dazs ice cream.

The conceptual meditations of contract scholars like Cardozo, Corbin, and Williston are expressed and explained in contract controversies involving well-known figures such as Michael Jordan, Maya Angelou, and Lady Gaga, and through common experiences like purchasing lottery tickets, signing mobile phone agreements, and buying football tickets online.  Given the accessible language and popular stories, it is easy for the reader to be lulled into forgetting that they are reading and learning about the law, much in the same way that Tom Sawyer lulled his friends into whitewashing a fence by making it seem more like a treat than a chore.

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Prosecutors, Gambling and Dead Horses

Should federal prosecutors who settled a tax fraud case with the New York Racing Association back in 2003 (amended in 2005) be kicking themselves? Besides commitments typical of criminal settlement agreements (called deferred prosecution agreements), to improve internal control and governance, this one required the NYRA to continue its best efforts to install gambling machines at the track. It finally did so last year and the results have included the deaths of 21 horses during the winter meet.

Gambling is a controversial topic and New York State politicians had in 2003 just begun a push to expand the kinds of gambling that are legal in the state, starting with video gaming machines at horse racetracks. Why federal prosecutors settling a criminal tax suit should have anything to say about the NYRA’s role in advancing this agenda is not clear. Prosecutors did not explain their reasoning when signing the DPA.

In any event, the NYRA worked earnestly to move its gambling program along amid growing political and legal controversy in the state over gambling. It finally prevailed, opening a gambling emporium at the Aqueduct track in Queens in October 2011. In the ensuing season, an astonishingly high number of horses — 21 — died while racing.

In March, Governor Andrew Cuomo formed a task force to investigate and in May took state control over the track from the NYRA. The task force released its report last week identifying numerous causes for the deaths and prescribing extensive reforms of the NYRA and Aqueduct operations. Among the culprits: casino funding was allocated to massively increase awards to owners of winning horses in lower-level claiming races. Read More

Lochner Boo Boo: Free Self-Exploitation?

American legal history has featured many battles over “freedom of contract,” often interpreted as the “right” of workers to sell their labor at any price, under any terms. Given the recent resurgence of extreme freedom of contract views, I thought this reflection on the reality TV show “Here Comes Honey Boo Boo” might interest readers:

Americans, it turns out, can’t get enough of Honey Boo Boo, mom June, and the rest of the clan . . . some of whom come with nicknames that seem straight out of a quaint novel about those colorful southerners, like Sugar Bear. That Here Comes Honey Boo Boo trafficked in and showcased the grossest of gross stereotypes about lower middle class southern white folk was deemed inconsequential. The family, led by matriarch June, was in on the joke. How could the family be exploited if they actively wanted to be exploited?

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The Unenforceability of Contracts to Abort

TMZ has a scoop.  (Yes, I read TMZ.  Every day.)  Tagg Romney (son of Mitt) and his wife Jen entered into a surrogacy contract which contained a clause purporting to require the surrogate to abort on demand given a particular set of contingencies:

We’ve learned Tagg and his wife Jen, along with the surrogate and her husband, signed a Gestational Carrier Agreement dated July 28, 2011.  Paragraph 13 of the agreement reads as follows:

“If in the opinion of the treating physician or her independent obstetrician there is potential physical harm to the surrogate, the decision to abort or not abort is to be made by the surrogate . . . In the event the child is determined to be physiologically, genetically or chromosomally abnormal, the decision to abort or not to abort is to be made by the intended parents.  In such a case the surrogate agrees to abort, or not to abort, in accordance with the intended parents’ decision . . . Any decision to abort because of potential harm to the child, or to reduce the number of fetuses, is to be made by the intended parents.”

It is a common error to think that contract terms are specifically enforceable as written.  I believe that there is literally not one judge in the country who would require a surrogate to abort on demand against her wishes notwithstanding this clause.  In part, this results from the law’s traditional reluctance to enforce specific performance of personal services contracts.  Here, that’s coupled with the constitutional interests in bodily integrity that the Baby M court discussed.  Thus, while TMZ translates the agreement as “Tagg and his wife, Jen, had the right to abort the fetuses if they felt they would not be healthy,” the better line would be “Tagg and his wife, Jen, have an exit right which they can exercise if the surrogate fails to abort.”

That is, failure to abort on demand would be a material breach by the surrogate, relieving the Romneys from their duty to pay.  Whether it would additionally then lead the Romneys to be able to sue – for costs incurred, probably – is unclear to me, as I think some judges would find an abort-on-demand clause against public policy.

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Welcome Contracts Students!

As new 1Ls begin to immerse themselves in the wonderful world of law, we welcomed them here on this blog recently with an overview of the first-year curriculum that has been in place for ages. It concluded with a particular reference to the course on Contracts, about which I’ve recently published a new book connecting its classic cases and doctrines to contemporary contract disputes in popular culture and covered in the media.

From that book, Contracts in the Real World: Stories of Popular Contracts and Why They Matter, the following continues to provide a gateway into that field by introducing two legends whose venerable work on the subject continues to define the boundaries of recognized debate on most of the issues. The legends are Samuel Williston and Arthur Corbin.

In 1920, Williston, a Harvard professor, published a monumental treatise on the entire law of contracts, and updated it until his death in 1963. In 1950, Arthur Corbin, a professor at Yale, promulgated an equally magisterial and comprehensive treatise, based on earlier writings throughout his career.

These works—still kept up-to-date by successor editors—influenced generations of lawyers and judges addressing contract disputes. Williston’s philosophy dovetailed with that of the eminent jurist, Oliver Wendell Holmes, Jr., and Corbin’s resonated with that of the esteemed judge, Benjamin N. Cardozo.

Williston epitomized a formalist approach to law and reflected what some call the “classical” school of contract. It looks to whether parties in a transaction were giving and getting something, emphasizing a concept called “consideration” as the signal of an enforceable contract. This school of thought held unenforceable not only promises to make gifts or attend dinner but promises merely inducing another party to take some action.

In this view, the remedy for breach of a bargain is to pay the injured party money to put them in the same economic position they would have enjoyed had the other performed. This classical conception of contract law dominated well into the twentieth century, and remains a force today.

Corbin took a realist approach to law and offered a more pragmatic conception of contract. Though agreeing with Williston on many points, Corbin recognized, as courts increasingly did in the twentieth century, a wider range of circumstances that create contractual obligations. Williston’s bargain model of consideration remained, but loosened so that even some promises to make gifts could be enforced, so long as there was an identifiable return, like naming a college endowment. It recognized reliance on a promise as a basis of contractual liability, in a novel doctrine commonly called “promissory estoppel.”

Compensation for disappointed expectations remains the primary measure of remedy. But recognizing promissory estoppel gave equal dignity to measuring remedies by out-of-pocket costs incurred relying on a promise.

These twentieth century developments that Corbin captured, and helped to shape, reflected broader social developments as well, moving law’s orientation from a formalist to a realist conception. For example, classical contract’s relative strictness, limiting the scope of contractual obligation, was accompanied by an equivalent strictness of enforcement: if a contract was hard to get into, it was also hard to get out of. People could be bound to contracts that were made based on mutually mistaken assumptions or even where performance became impossible.

But as the ambit of contractual obligation expanded, so did grounds for excusing it, like mutual mistake about the terms of a trade, or impossibility of performance, such as a power outage in a rented banquet hall. Similarly, classical contract law venerated written records, limiting the scope of obligation to what was plainly meant within a document’s four corners. Corbin and his realist descendants were more willing to consider evidence supplementing these written expressions. Read More

Crowdsourcing the Interpretation of Terms of Service Agreements

This is an interesting project:

“I have read and agree to the Terms” is the biggest lie on the web. We aim to fix that. We are a user rights initiative to rate and label website terms & privacy policies, from very good Class A to very bad Class E.

ToS;DR is a young project started in June 2012. The data is subject to important changes. This is your opportunity to help us fix the “biggest lie on the web”: join us if you have information to contribute related to specific terms or if you have a comment!

ToS;DR aims at creating a transparent and peer-reviewed process to rate and analyse Terms of Service and Privacy Policies in order to create a rating from Class A to Class E. We need more legal expertise, please also join the working-group. We also need people to contribute source code. Everything is JavaScript and JSON. The data is freely available (CC-BY-SA) and ready to be used for other tools, like browser extensions.

I think aspects of this could succeed, and others will not. I will be following it closely. Hey, if Intex can work, why not this? [Via Jane Hu]