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contracts archive 2019

Week 10: October 14-18

I hope you are enjoying Fall Break. My assistant, Caridad, moved to a new job, and Andrea Roca (amr365@miami.edu)  is now assisting me.

For Monday please read to page 237.

Here is the Pepsi ad referred to in question 2 on page 236:

For Wednesday, please read to page 276.

Please note that the material in the casebook on Blumenthal v Brewer at pages 272-3 has been superseded by the decision of the Illinois Supreme Court in 2016 (you are not required to read the full judgment). The Court held that the appellate court did not have the jurisdiction it claimed and could not overrule Hewitt. So Hewitt is still good law in Illinois. Here is an excerpt from the judgment – please read this: Blumenthal v Brewer) The Illinois Supreme Court again emphasized in Manago v Cook County (I give the link here in case you are interested and not because you are required to read the judgment) that the Court “is not tasked with evaluating and setting public policy” because that is a matter for the legislature. The Court said:

Our duty in this case is properly limited to determining the intent of the legislature based on the plain and unambiguous statutory language and construing the relevant statutes consistent with that intent.

Marriage rates in the US have declined in recent years, and people of higher socio-economic status are more likely to be married than people who are less well educated and less well off. (e.g. As U.S. marriage rate hovers at 50%, education gap in marital status widens).

In a recent article, Emily J. Stolzenberg, (The New Family Freedom, 59 B.C.L. Rev.1983 (2018)) writes:

Recent Supreme Court pronouncements suggest that family relationships help individuals to achieve freedom. Obergefell v. Hodges recognized the right of same-sex couples to marry in part because “choices concerning . . . family relationships” “define personal identity and beliefs.” Calling such “intimate choices” “central to” and “inherent in the concept of individual autonomy,” the opinion forged a tight positive link between family relationships and freedom. But the link need not be positive. Against Obergefell, modern family law increasingly understands autonomy also to require freedom from other family members. This “new family freedom” rejects as illegitimate any attempt to redistribute resources between intimates unless the richer party “chose” to take on family obligations ex ante by ceremonially marrying or formally contracting. But as more people conduct their intimate lives outside legal institutions, this libertarian vision collides with another, more fundamental, family law principle: the imperative to “privatize dependency,” i.e., to redistribute resources between intimates in lieu of the state providing resources to meet dependents’ needs. The new family freedom and privatized dependency both pervade modern family law, and yet.. they are often mutually exclusive (footnotes omitted).

Hewitt is one of the cases used in the article.

For Thursday’s class please read to page 296.

Please note for later that I do not propose to cover pages 346-363 in any detail.

Have a good weekend.

October 15: Here is a link to the recording of class on Monday 14 October.

October 16: Here is my Memo on the 2019 Contracts Midterm.

Week 8: September 30-October 4

We will not have class on Monday September 30. But I plan to be in my office in the period when we would have class.

On Wednesday and Thursday we will discuss the review problems at pages 216-220. 

Here are a couple of examples of my past midterm exams:

Contracts Midterm 2017 (Memo on 2017 Contracts Midterm)

Fall 2011 Midterm (Memo on the Fall 2011 Contracts Midterm)

Have a good weekend.

Week 7: September 23-27  In Paffhausen v Balano the Maine Court holds that the remedies for quantum meruit and unjust enrichment are available in different circumstances.  In class I mentioned an 11th Circuit decision that states that in Florida the requirements for quantum meruit and unjust enrichment are the same (and they are 1. conferral of benefit by plaintiff on defendant; 2. with the knowledge of the defendant; 3. acceptance or retention of the benefit and 4. it would be inequitable for the defendant to retain the benefit without paying for it).  The case is Merle Woods v Trinity Yachts (11th Cir. 2013). 

We will take up restitution again on Monday – please read to page 186. We will work through the example in illustration 11 on page 177.

On Wednesday we will discuss Peevyhouse, so please read to page 202. And please read to page 216 for Thursday.

You will be taking the midterm at the designated time at the Law School. I understand you will be receiving exam 4 training on Tuesday next week. The Law Registrar will administer the exam. It will be a one hour closed book essay exam, and it will not be graded. I understand the Registrar’s plan is to give you the relevant information a couple of days before the scheduled time.

Week 6: September 16-20 On Monday we will begin with reliance damages.  Please read to page 148.  For Wednesday please read to page 168 and for Thursday to page 186.

On Monday September 9 I have to be somewhere else between 2pm and 3.15 pm but will be in my office for an hour or so after class if you want to drop in. If that doesn’t work for you please email me and we can arrange to meet at another time.

Week 5: September 9-13 On Monday we will begin where we left off with Copylease and move on to Lake River.  After Lake River we will discuss this Liquidated Damages Question.

Here is a reminder of my earlier note on liquidated damages: 

In construction contracts a clause may specify an amount to be paid per day where completion of construction is delayed. In Boone Coleman Construction, inc. v. Village of Piketon in 2016 the Ohio Supreme Court wrote:

the benefits of liquidated-damages provisions in building and construction contracts are well documented…. The provisions create firm expectations and allow the parties to allocate damages caused by delays in completing construction.. The ability to agree about damages is particularly important in public-works-construction contracts because “[i]t is uniquely difficult to calculate damages to the general public interest caused by a contractor’s breach of its agreement to provide public improvements.”

The Court noted that cases suggest that a per diem amount seems more like liquidated damages than a lump sum (which might look like a penalty).

In franchise agreements it is common to have a liquidated damages provision for payment of some multiple of the franchsie fees. For example in La Quinta Corp. v. Heartland Props. LLC (6th Cir. 2010) the clause stated:

[i]f the inn ceases to be operated under the system for any reason … Licensee shall pay [Baymont] within 30 days following the effectiveness of such event, as “liquidated damages” (to compensate [Baymont] for lost revenues in an amount difficult to ascertain, and not as a penalty) an amount equal to 100% of the aggregate recurring fees which accrued with respect to inn operations during the immediately preceding 36 full calendar months.

The Court stated that the thirty-six-month formula, based on recurring fees that actually accrued, was at the time of contracting not an arbitrary calculation, but a “reasonable forecast” of the damages Baymont would sustain in the event of Heartland’s breach. The formula was based on common business practices and the parties’ recent historical performance under the license agreement, resulting in ascertainable losses in the event of breach.

In Days Inn Worldwide, Inc. V. Yamuma Kunj LLC (District of New Jersey, 2015) the Court refused to enforce a provision for 8 years of recurring fees:

Calling a figure “actual damages” does not make it so…I find that the $199,808.15 sum claimed by DIX is grossly disproportionate to the actual damages resulting from Yamuna’s breach. DIW has not established that Recurring Fees would have been similar for the next eight years. DIW has not established that it made any efforts to, for example, find a replacement licensee, or otherwise mitigate its projected “actual damages.”… To enforce Section 4 for the unexpired eight years of a fifteen year agreement would be excessive. It amounts to a license for DIW to sit on its hands and extract its full measure of profit from a failed business…. DIW’s calculation is excessive for another reason. In accelerating eight years of future payments, Days Inn does not discount them to present value. And on top of that, it actually seeks interest, running from November 2, 2011, on future payments, which, but for the default, would not have even come due until years in the future. That does not line up with any reasonable expectation of profit that DIW may have had when it entered into the agreement.

Consider this approach to the liquidated damages issue by the Utah Supreme Court in Commercial Real Estate v Comcast of Utah 285 P. 3d 1193 (2012):

We now hold that liquidated damages clauses should be reviewed in the same manner as other contractual provisions. “Persons dealing at arm’s length are entitled to contract on their own terms without the intervention of the courts for the purpose of relieving one side or the other from the effects of a bad bargain.”… “It is not our prerogative to step in and renegotiate the contract of the parties.” … Instead, unless enforcement of a liquidated damages clause would be unconscionable, “we should recognize and honor the right of persons to contract freely and to make real and genuine mistakes when the dealings are at arms’ length.”… liquidated damages clauses are not subject to any form of heightened judicial scrutiny. Instead, courts should begin with the longstanding presumption that liquidated damages clauses are enforceable… A party may challenge the enforceability of a liquidated damages clause only by pursuing one of the general contractual remedies, such as mistake, fraud, duress, or unconscionability.

On Wednesday we will discuss Hadley v Baxendale (please read to p 115 of the casebook). Because contracting parties often exclude liability for consequential damages (e.g. Fedex provision page 113) it can be important to distinguish between direct and consequential damages. For example, consider the example of In Re Rust-oleum Restore Marketing, Sales Practices and Products Liability Litigation (N. D. Ill. 2016) (the case settled in 2017). Plaintiffs claimed that a paint product was defective, and that they should be able to recover damages, for example for costs of removing the paint or replacing damaged structures. Rust-Oleum argued that they had limited liability to customers to either a refund of the original purchase price or replacement with a product of equal value (the exclusive remedy provision) and that they had specified that they would not be liable for consequential damages. The court said that the damages might be able to be characterized as direct, rather than consequential, damages:

Taking all the reasonable inferences in Plaintiffs’ favor, they have alleged factual support for a finding that the damages resulting from application of Restore to surfaces following the instructions, constitute direct damages which were bargained for as expressly embodied in Rust-Oleum’s own warranty provision. Accordingly, Plaintiffs have sufficiently alleged a factual basis supporting a finding of direct damages which precludes dismissal of their claim at this early stage.

In a 2014 case, Biotronik, A.G. v. Conor Medsystems Ireland, Ltd, which involved a distributorship agreement, the New York Court of Appeals said that damages that flow directly from the agreement are general or direct damages and not consequential damages. In some cases lost profits would be seen as flowing directly from the agreement. There’s a distinction between lost profits from collateral agreements and lost profits from the contract itself. In this case the contract did not specifically preclude recovery for lost profits, or explicitly define lost profits as consequential damages (it excluded liability for consequential damages).

For Thursday please read to page 142.

From the aftermath of Chung (note 1 on page 123) we learn that you don’t generally get non-economic damages for breach of contract. And see Restatement §353. But David A. Hoffman and Alexander S. Radus, Instructing Juries on Noneconomic Contract Damages. 81 Fordham L. Rev. 1221 (2012) examined pattern jury instructions and the reactions of lay people to these instructions to discover how they might impact juries’ findings with respect to damages. They write:

The conventional story of noneconomic contract damages is too simple. In that story, almost no contract cases will end with an award of noneconomic damages….We accept that in most jurisdictions, judges will deny most forms of noneconomic damages, if the right motion is presented at the right moment in the life of the case. But litigations that result in considered appellate opinions are not just rare: they are exceptional. Most cases settle in the shadow of an expected jury verdict. And those expected jury verdicts relate to pattern instructions. As we have demonstrated, contract pattern instructions are significantly less restrictive of noneconomic losses than the treatises would have led us to believe. Controlled testing found that almost no experimental subjects awarded the promisee’s bare economic expectation. Rather, they usually awarded more when provided with information about emotional losses

Audiorecording of class on September 4

Audiorecording of class on September 5

Week 4: September 2-6  The original schedule for the semester is for us to have 2 classes this week, and if Dorian doesn’t cause us too much trouble that is what we will have. I hope you have a good weekend.

On Wednesday we will begin with any questions you may have about Neri (and here is my Note on Neri ) and please read to page 108.

Consider this comment of Reuben Hasson on Lord Denning (cf. Note 5 on page 84 of the Casebook):

The attempts made over the years to thrust greatness on Lord Denning fail. From 1970 until his retirement in 1982, I do not think he deserved even to be called a good judge.

The casebook describes Denning as one of the most famous judges of his day. Hasson’s comment is useful for us as it invites us to think about what makes a judge a good judge or even a great judge. It surely isn’t just about fame, but something else. A good judge might be someone whose opinions are respected and followed many years after they are given. Might there be other characteristics that would make a judge a good judge?

Here is a note on liquidated damages:
In construction contracts a clause may specify an amount to be paid per day where completion of construction is delayed. In Boone Coleman Construction, inc. v. Village of Piketon in 2016 the Ohio Supreme Court wrote:

the benefits of liquidated-damages provisions in building and construction contracts are well documented…. The provisions create firm expectations and allow the parties to allocate damages caused by delays in completing construction.. The ability to agree about damages is particularly important in public-works-construction contracts because “[i]t is uniquely difficult to calculate damages to the general public interest caused by a contractor’s breach of its agreement to provide public improvements.”

The Court noted that cases suggest that a per diem amount seems more like liquidated damages than a lump sum (which might look like a penalty).

In franchise agreements it is common to have a liquidated damages provision for payment of some multiple of the franchsie fees. For example in La Quinta Corp. v. Heartland Props. LLC (6th Cir. 2010) the clause stated:

[i]f the inn ceases to be operated under the system for any reason … Licensee shall pay [Baymont] within 30 days following the effectiveness of such event, as “liquidated damages” (to compensate [Baymont] for lost revenues in an amount difficult to ascertain, and not as a penalty) an amount equal to 100% of the aggregate recurring fees which accrued with respect to inn operations during the immediately preceding 36 full calendar months.

The Court stated that the thirty-six-month formula, based on recurring fees that actually accrued, was at the time of contracting not an arbitrary calculation, but a “reasonable forecast” of the damages Baymont would sustain in the event of Heartland’s breach. The formula was based on common business practices and the parties’ recent historical performance under the license agreement, resulting in ascertainable losses in the event of breach.

In Days Inn Worldwide, Inc. V. Yamuma Kunj LLC (District of New Jersey, 2015) the Court refused to enforce a provision for 8 years of recurring fees:

Calling a figure “actual damages” does not make it so…I find that the $199,808.15 sum claimed by DIX is grossly disproportionate to the actual damages resulting from Yamuna’s breach. DIW has not established that Recurring Fees would have been similar for the next eight years. DIW has not established that it made any efforts to, for example, find a replacement licensee, or otherwise mitigate its projected “actual damages.”… To enforce Section 4 for the unexpired eight years of a fifteen year agreement would be excessive. It amounts to a license for DIW to sit on its hands and extract its full measure of profit from a failed business…. DIW’s calculation is excessive for another reason. In accelerating eight years of future payments, Days Inn does not discount them to present value. And on top of that, it actually seeks interest, running from November 2, 2011, on future payments, which, but for the default, would not have even come due until years in the future. That does not line up with any reasonable expectation of profit that DIW may have had when it entered into the agreement.

Consider this approach to the liquidated damages issue by the Utah Supreme Court in Commercial Real Estate v Comcast of Utah 285 P. 3d 1193 (2012):

We now hold that liquidated damages clauses should be reviewed in the same manner as other contractual provisions. “Persons dealing at arm’s length are entitled to contract on their own terms without the intervention of the courts for the purpose of relieving one side or the other from the effects of a bad bargain.”… “It is not our prerogative to step in and renegotiate the contract of the parties.” … Instead, unless enforcement of a liquidated damages clause would be unconscionable, “we should recognize and honor the right of persons to contract freely and to make real and genuine mistakes when the dealings are at arms’ length.”… liquidated damages clauses are not subject to any form of heightened judicial scrutiny. Instead, courts should begin with the longstanding presumption that liquidated damages clauses are enforceable… A party may challenge the enforceability of a liquidated damages clause only by pursuing one of the general contractual remedies, such as mistake, fraud, duress, or unconscionability.

For Thursday please read to page 115.

Hypothetical practice: At this time I think it is useful to begin thinking about answering hypotheticals. I have added two past questions to the materials page, together with memos I wrote about the questions. I think it should be useful to look at the questions first and then use the memos to see how well you identified and analyzed the issues. As we progress through the semester I will give you other questions to think about. Here is my Labor Day Hypo 2018.  And I plan to add a new hypothetical over the weekend.

 

Week 3 – August 26-30 I moved the material previously on this page to the archive page.

For Wednesday’s class please read to page 74. In thinking about Neri you should focus on the interaction of UCC §2-718 and §2-708. Please read the provisions very carefully. It’s a more complicated interaction than you may expect (and we will think in some detail about incidental damages and overhead). Think about how the court calculates the dollar number for damages. Would there be a different calculation that would make sense given the drafting of the relevant UCC provisions?

For Thursday’s class please read to page 85 although it is likely that we will not get this far.

Week 2- August 19-23 I moved the material previously on this page to the archive page. Each week I will move current material to the archive page.

On Monday we will begin with fraud.  Here are the 3 fraud hypos  I assigned last week (which we will discuss on Monday). Please read pages 1-29 of the Casebook, although I will not go over these pages in detail in class at this point. Please also read pages 31-44, and the provisions of UCC Article 2 or of the Restatement referred to in the Casebook (e.g. at the top of page 43) in your Source Materials book. Be prepared to discuss the questions on pages 43-44.

For Wednesday’s class please read pages 45-47 (and focus on the hypothetical on page 47).

Here are two different approaches to the issue raised in part 4 of the question:
In Coast Trading Company v Cudahy Company (9th Cir. 1979) the court said:

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

In contrast, in Peace River Seed Co-op. v Proseeds Mktg. (Oregon Supreme Court 2014), the court said that the plaintiff was entitled to recover its market price damages, even if those damages exceeded plaintiff’s resale price damages.

Also think about this hypothetical:

Alpha, a painter, contracts to sell a painting to Beta for $10,000. The painting is to be delivered to Beta on September 30th and Alpha has hired Deltaco, a firm which specializes in fine art deliveries, to carry out the delivery for $500 (the terms of the delivery contract allow Alpha to cancel delivery on 48 hours’ notice). On September 20th Beta calls Alpha and says that the client who had been intending to buy the painting from Beta had changed her mind because she was getting divorced. Beta did not have any other clients who would be interested in buying Alpha’s painting and therefore did not want Alpha to deliver the painting. Alpha cancels the delivery contract. On September 22nd Gamma offers to pay Alpha $9,500 for the painting. If Alpha accepts Gamma’s offer what damages can Alpha obtain from Beta?

For Thursday’s class please read to page 61. Notice that the actor in this case is Shirley MacLaine. Parker is her husband’s family name.

The authors of the Casebook we are using spend a lot of time explaining their perspective on contract law. Here is another take on why the perspective a casebook adopts matters. It is from Mary Joe Frug, Re-Reading Contracts: A Feminist Analysis of a Contracts Casebook, 34 Am. U. L. Rev 1065 (1984-5) at p. 1069:

I do not believe that a casebook is simply a neutral reflection of what students need to know to practice law, to pass the bar, to think like lawyers, or to become law teachers. I maintain that, even within the constraints of professional necessity,’ editors have a wide range of choice in their case selections, their comments, their notes, their problems, and their questions, and the choices they make are not inevitable. The choices could be different and, indeed, choices about content do differ among casebooks within particular subject areas. I also believe that a casebook is a powerful document. The editorial choices within a casebook determine how many readers think about the law of a doctrinal area, about lawyering in that field, about clients, and about legal reasoning… Because a casebook has such power, and because its contents are subject to editorial choice, analyzing the biases of a particular casebook could challenge the effect of the casebook on its readers.

In the article, Frug critiques the treatment of the Parker case in the casebook she is discussing (not the one we are using) because it does not encourage the reader to think about the issues the authors of our casebook raise with respect to Shirley Maclaine’s likely preference for the Bloomer Girl project. At p. 1125 of the article, Frug writes:

Understanding MacLaine as a powerful actress whose feminist politics are respected by the California Supreme Court could also stimulate readers to draw connections between social contexts and legal decisions, between the experiences of parties in a case and the experiences of readers themselves.

You may be interested in this list of Fierce Female Roles in Westerns  and perhaps think about female characters in Westworld or Deadwood.

In A Theory of Self-help Remedies in Contract (89 B.U.L. Rev. 1397 (2009)), Mark Gergen writes (at page 1403):

The interest in remedial simplicity explains why the law tolerates waste and windfall in this situation. There is reason to believe that MacLaine genuinely preferred the role in Bloomer Girl to the role in Big Country, Big Man. To protect MacLaine from a loss in performing the less desired role, while avoiding waste, the law might require her to take the role in the Western while giving her damages for her loss. This the law does not do. Had MacLaine taken the role, she would have been denied damages for her artistic, political, or reputational loss, as any estimate of the loss would be speculative. The only way MacLaine could avoid suffering an uncompensated loss was to do what she did, which was to reject the role in Big Country, Big Man and get a judgment for the contract price.

August 20: If you didn’t see Above the Law’s advice for 1Ls, you should go read it now (I saw this via Professor Froomkin’s blog).

First class assignment (for Monday August 12): Please read the Class Policies document, Introduction to Contracts (2019) pages 1-5, and Cullinane v Uber (1st Cir 2018).

By close of business (for the avoidance of doubt, this is 5.00 pm eastern time) on Monday August 12 please send an email (subject line: Bradley Contracts Class) to my assistant, Caridad Dalama, at cdalama@law.miami.edu describing two facts you would like me to know about you.

Arbitration under Uber’s current  US Terms of Use (which provide for arbitration under the American Arbitration Association’s Consumer Arbitration Rules)  is not expensive, many claims are resolved on documents and the arbitration does not require the User to travel far. The AAA is a well established organization. One empirical study of consumer arbitrations carried out under AAA rules found that there probably was not a repeat player effect, or to the extent there might be it could be because the repeat players were better at screening cases (Christopher R. Drahozal and Samantha Zyontz, An Empirical Study of AAA Consumer Arbitrations, 25 Ohio St. J. on Disp. Res. 843 (2010).) But Cynthia Estlund in The Black Hole of Mandatory Arbitration ( 96 North Carolina Law Review 679 (2017 ) has argued that not only does arbitration involve less transparency than litigation in courts, but (at p. 682):

the great bulk of disputes that are subject to mandatory arbitration agreements… simply evaporate before they are even filed. It is one thing to know that mandatory arbitration draws a thick veil of secrecy over cases that are subject to that process. It is quite another to find that almost nothing lies behind that veil. Mandatory arbitration is less of an “alternative dispute resolution” mechanism than it is a magician’s disappearing trick or a mirage.

For Wednesday’s class please read Introduction to Contracts (2019) pages 6-15.

For Thursday please think about these 3 fraud hypos (and footnote 4 in the Introduction to Contracts document at page 2).

Monday August 12, Note on today’s class (I include citations to the articles for your information but you are not required to read them): We  focused on H.L. A Hart’s hypothetical rule prohibiting vehicles in the park (H.L.A. Hart, Positivism and the Separation of Law and Morals, 71 Harv. L. Rev. 593 (1958)). Hart says “A legal rule forbids you to take a vehicle into the public park. Plainly this forbids an automobile, but what about bicycles, roller skates, toy automobiles? What about airplanes? Are these, as we say, to be called “vehicles” for the purpose of the rule or not?'” He argues it makes sense to think in terms of a core of settled meaning and a penumbra of debatable cases (Fred Schauer later suggests a distinction between easy cases and hard cases (Frederick Schauer, A Critical Guide to Vehicles in the Park,  83 N.Y.U. L Rev. 1109 (2008) ). Fuller argued that interpretation of rules should focus on the purpose of the rule, and asked: “What would Professor Hart say if some local patriots wanted to mount on a pedestal in the park a truck used in World War II, while other citizens, regarding the proposed memorial as an eye-sore, support their stand by the “no vehicle” rule? Does this Truck, in Perfect Working Order, Fall Within the Core or the Penumbra?” (Lon L. Fuller, Positivism and Fidelity to Law, 71 Harv. L. Rev. 630 (1958))

I also mentioned Pierre Schlag who wrote: “We are not just talking about parks and vehicles here; we are talking about parks and vehicles in a legal rule in a legal system in a particular culture… as a general word in a legal rule, the term draws its meaning from the interweavings of all manner of webs – webs that are often described as linguistic, cognitive, moral, political, institutional, or cultural. In the rule, the meaning of the term “vehicle” is inscribed in tacit understandings of parks; legal rules; the effects of legal rules; the roles and possibilities of legal rules within the hierarchies of sources of law; the “public” meaning of legal rules for citizens and public officials; and the meaning of legal rules in light of juridical concepts of excuse, justification, prosecutorial discretion, and much more” (Pierre Schlag, No Vehicles in the Park, 23 Seattle U. L. Rev. 381 (1999) .

This was an introduction to the idea of ambiguity in law: legal rules and contracts rely on words, but those words may be ambiguous, allowing lawyers to make arguments for their preferred interpretation.