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Monday, March 4, 2002 (Class 21) (Assignments 16-17)

Johnson Farms v. McEnroe?

(continued)

[568 N.W.2d 920] 1997 North Dakota Supreme Court (cb285)

• Statue of Frauds exception--UCC § 2-201(3)(a): if seller has custom made goods for buyer, can get around statute of frauds.

Monarco v. Lo Greco

[220 P.2d 737] 1950 California Supreme Court (cb291)

• Castiglias purchased farm in California. Natale and Carmela tell Christie he will get farm if he doesn't get education and stays and works on farm for life.
• Natale and Carmela each executed a will for land to go to Christie--thus this part was in writing. But Christie's consideration (of staying on farm) was not in writing.
• Plaintiff is Natale's grandson (Monarco). Before Natale died, he changed his will to give property to his grandson Monarco. Monarco is bringing suit to force Carmela and Christie off land; they counterclaim that Christie should have land; Monarco claims statute of frauds.
• Justice Traynor finds reliance and unjust enrichment to justify lifting the bar of the statute of frauds.
• Traynor finds that Monarco cannot bring statute of frauds defense on basis of estoppel.
• Previous estoppel cases relied on party making representation that statute of frauds does not apply (or would not be used)--this element not present in this case.
• Traynor explains, however, that basis of earlier estoppel cases is reliance on promise (i.e., where that promise includes statement about statute not applying).
• Why does Traynor use estoppel rather than unjust enrichment as basis of decision?
  • Unjust enrichment would require restitution damages, very hard to calculate--how much was Monarco benefitted by Christie working on farm for life?
• Why not say Natale's will was consideration for Carmela's will?
• UCC § 2-201 (3)(b): resembles estoppel; can't claim there was no contract, once you have admitted in pleadings that there was a contract for sale but not beyond the quantity of goods admitted.
• UCC § 1-103: traditional equitable principles apply (including estoppel) unless displaced by other provisions of UCC. So: can broader principles of estoppel be applied under UCC, beyond that provided by § 2-201 (3)(b)? Does § 2-201 (3)(b) displace estoppel principle?

Halstead v. Murray

[547 A.2d 202] 1988 New Hampshire Supreme Court (cb296)

• Halstead sued Murray for zoning violation on his property. Settlement was made where Murray would sell property to Halstead. Halstead signs contract, then Murray refuses, wants more money for land.
• Murray claims statute of frauds--contract for sale of land needs to be in writing.
• Writing was only executed by Murray's attorney, and there is no writing authorizing Murray's attorney to act as Murray's agent.
• Substantially all statutes of fraud require agent authorization to be in writing if represented person does not sign contract himself.
• Court suggests unity theory--no need for written authorization in this case. If Murray doesn't like decision of his agent, he can sue his attorney.
• Dissent: suggests floodgate of litigation against people's attorneys. Unlikely to really happen, though.

Capacity to Contract

• Barriers to Contract--you either have the right to contract or not
  • Analogous to Civil Procedure: either have standing or not.
  • Constitutional Law: citizenship barriers. Graded (resident aliens, etc..), but sets up right to 'enter' legal system vs. not.
  • Criminal Law: capacity to commit a crime.

Kiefer v. Fred Howe Motors, Inc.

[158 N.W.2d 288] 1968 Wisconsin Supreme Court (cb301)

• Kiefer, under 21 and married with child, wants to recover price of car he purchased after it malfunctioned. Contract had statement that he represented himself to be 21.
• Void vs. voidable contract. Voidable contract allows minor to terminate contract (once he is of majority) at his option. Voidable contract gives option to minor. Party dealing with minor assumes risk that contract may be reversed. If contract is void, then either side can argue that there is no contract.
• Minor was emancipated--how does interact with capacity to contract?
• General exception to minor's lack of capacity: necessities.
• Court wanted to find way to disaffirm the contract since the car was defective, thus interprets necessary in very narrow way.

Tomorrow: finish capacity to contract and do next section. Read assignment 18. Justin Calverone's group is 'on'.

Tuesday, March 5, 2002 (Class 22) (Assignments 17-18)

Kiefer v. Fred Howe Motors, Inc.

(continued)

[158 N.W.2d 288] 1968 Wisconsin Supreme Court (cb301)

• Court suggests a legislative solution would be better.

Ortelere v. Teachers' Retirement Board

[250 N.E.2d 460] 1969 New York Court of Appeals

• Ortelere, close to death, change benefits to receive increased pension compensation, in turn giving up death benefits for her spouse. Died two months later.
• Husband sues, claiming election was invalid, because decedent lacked mental capacity to make change in policy.
• Court reverses lower court, allowing husband to claim benefits, saying the Retirement Board knew or should have known that Ortelere did not have capacity to make decision.
• Test is not whether person knew what they were doing, but whether they had capacity to do otherwise. Borrowed standard from criminal law 'capacity to crimes'.

Cundick v. Broadbent

[388 F.2d 157] 1967 10th Circuit Court of Appeals

• Cundicks claim that he was mentally incompetent; he sold his property for much less than it was worth.
• Court not convinced.

McKinnon? v. Benedict

[157 N.W.2d 665] 1968 Wisconsin Supreme Court

• Benedicts promised to McKinnon? not to cut down trees, make any improvements close to McKinnon?'s property, in return for small loan ($5,000) to start resort.
• Benedicts' resort failed, then while McKinnons? were aware Benedicts decided to build trailer park.
• Supreme Court is reversing trial court's injunction, based on equities of parties.
• Court finds inadequate consideration, disparate bargaining power. Benedict was retail jeweler, McKinnon? had worked for the government.
• Court seems to be manipulating certain facts in defendant's favor.
• Suit for equitable relief--thus court 'weighs the equities'.

Tuckwiller v. Tuckwiller

[413 S.W.2d 274] 1967 Missouri Supreme Court

• Mrs. Tuckwiller agreed to take care of Mrs. Morrison for the rest of her life in return for will of estate.
• Mr. Tuckwiller is Mrs. Morrison's nephew.
• Mrs. Tuckwiller quits job to take care of Mrs. Morrison for the rest of her life, but it turns out Mrs. Morrison doesn't live very long, died before new will was executed with attorney, although Mrs. Morrison said she wanted agreement to be followed on the way to hospital.
• Court wants to look at situation prospectively--how fair it was at the time, not in retrospect (when they knew how short Mrs. Morrison would live.)

Read 401-402 and 409-413 in casebook as additional material.

• Read assignment #19 (chapter 4-3-a). Ryan Polk's TA group will be 'on' for Friday.

Friday, March 8, 2002 (Class 23) (Assignments 17-18)

Unconscionability

• Anterior vs. posterior evaluation of fairness. Tuckwiller court looked

§ 2-302. Unconscionable contract or Clause.

(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.

• Eisenberg (cb402): Two different tracks for unconscionability, one being fairness, the other efficiency. Eisenberg would classify something as unconscionable if it is neither fair nor efficient.

Jones v. Star Credit Corp.

[298 N.Y.S.2d 264] 1969 New York Superior Court (cb409)

• Travelling salesman sold freezer for $900 to couple on welfare (up to $1234 with taxes). Couple had already paid about half at time of suit. Freezer only had value of $300.
• Return on investment tends to be lower in city than in suburbs, hence argument for charging higher price in city.
• Unconscionability might have been remedied had saleman informed couple of lower price of freezer in suburbs.

Black Industries, Inc. v. Bush

[110 F.Supp. 801] 1953 United States District Court New Jersey (cb320)

• Hoover had contract with United States government during Korean War, contracting with Black Industries for parts who subcontracted with Bush to produce the parts.
• Black billed Hoover, but parts were shipped from Bush to Hoover.
• Black claims that Bush was receiving excessive profits, against public policy since costs would be passed on to federal government in time of war.
• Middleman in this case performs some risk assumption/risk shifting function, also puts buyer and seller together.
• Absent fraud, there is no reason not to enforce this contract between two parties.

Duress

• Why is duress a problem? We want to know people actually agreed to contract of their own free will. (either under subjective or objective theory). Also violates pareto superior economic model, where at least one of the parties is better off and the other is at least not worse off.
• Pre-existing duty: no consideration, since you've already agreed to do what is supposed to serve as consideration.
• Corbin: suggests we should allow courts to separate honest from dishonest party rather than trying to fit into the pre-existing duty rule.

Alaska Packers' Ass'n v. Domenico

[117 Fed. 99] 1902 9th Circuit Court of Appeals

• Group of workers to go to Alaska for $50 for season, workers demand $100 or they will go home.
• Workers were told they would get $100, but at end of season only got $50. Lower court awarded packers $100, court of appeals overturns, because they were already obligated under pre-existing contract to work for $50.

Watkins & Son v. Carrig

[21 A.2d 591] 1941 New Hampshire Supreme Court

• Watkins & Son (plaintiff) agreed to excavate a cellar for Carrig, then discovers there is rock rather than stone under house, asks for higher price which Carrig agrees at that point to pay but later reneges.
• Carrig agrees pre-existing duty rule--Watkins had already agreed to excavate cellar, thus argues that there was no consideration.
• Wouldn't the contractor have assumed the risk that there might be rock under house?

Monday: complete pressure in bargaining (assignment 19) and finish concealment & misrepresentation (assignment 20).

Monday, March 11, 2002 (Class 24) (Assignments 19-20)

• Review of duress/pre-existing duty rule. UCC does away with consideration for contractal modifications, but preserves defenses of duress, etc..
• Court in Watkins and Sons was essentially saying pre-existing duty rule comes from the principle of duress. In this case, even though there was a pre-existing duty of some sort, the new agreement was not arrived at under duress, thus court will upheld contract modification absent additional consideration.
• 'Legal' solution (rather than equitable/justice-based) would be to suggest that there was a brand new contract, although court rejects this reasoning.
• Pre-existing duty rule provides form of 'self-help' specific remedy. By agreeing at the time and then challenging it later, the party gets specific performance that for irreplaceable contract, and later recovers any damages.
• UCC rules for specific performance:
  • § 2-716. Buyer's Right to Specific Performance or Replevin.
  1. Specific performance may be decreed where the goods are unique or in other proper circumstances.
  2. The decree for specific performance may include such terms and conditions as to payment of the price, damages, or other relief as the court may deem just.
  3. The buyer has a right of replevin for goods identified to the contract if after reasonable effort he is unable to effect cover for such goods or the circumstances reasonably indicate that such effort will be unavailing or if the goods have been shipped under reservation and satisfaction of the security interest in them has been made or tendered.

Austin v. Loral Corporation

[272 N.E.2d 533] 1971 New York Court of Appeals

• Loral had contract with Navy for radar sets, subcontracted with Austin to manufacture gear component. Loral won second navy contract, asked for bids. Loral wanted only those parts on which Austin was the lowest bidder from Austin; Austin refused to follow through on first contract unless it was awarded contract to make all parts, not just ones on which they were lowest bidder. Austin also demanded increased price on earlier contract.
• Loral agreed to Austin's demands as it was unable to find replacement subcontractor who could provide parts on time.
• Loral was subject to penalties (liquidated damages) if it did not make deliveries on time.
• Likely that a majority of Loral's business was with government, thus risk was not only this contract, but most of its business.
• Court discusses issue of economic duress--it finds that Loral did not have another option for contract, thus it had no choice but to submit, thus this was not a valid modification. UCC § 2-209 does permit modification absent consideration, as long as party has free will to make decision.
• Dissent (following lower courts): found against Loral on the basis that it had not proved it had no other choice.

Foakes v. Bear Problem

• Problem of someone who pays part of debt with note 'paid in full' and party accepts amount but then sues for remaining debt. Accord and satisfaction.
• UCC § 1-207: party can write "without prejudice" or "under protest" in accepting payment without giving away rights. But--amendment says this section does not apply to accord and satisfaction--in this case go to common law or § 3-311 in case of negotiable instrument.
• § 3-311: If party is tendering lesser amount is in good faith, and amount owed is unliquidated or subject to bona fide dispute, and claimant obtained payment of instrument (i.e., other party cashed check), then party is discharged from debt.
• Unliquidated means exact amount cannot be determined, or there is a dispute about amount. Thus, by accepting payment, B is getting benefit of settling the matter.

Undue Influence

Odorizzi v. Bloomfield School District

[246 Cal. App. 2d 123] 1966 California Court of Appeals

• Teacher had been charged with homosexual activity, school district threatened to publicize his arrest if he didn't resign. Thus, he resigned but was later acquitted of charges, and seeks to have position restored.
• Court found school board exerted excessive pressure on teacher to force him to resign--exerted overpersuasion.
• Court discusses patterns of undue influence, finds many of the elements present.

Concealment and Misrepresentation

Vokes v. Murray

[212 So. 2d 906] 1968 Florida Court of Appeals

• Elderly widow was convinced to sign up for and pay for many extra classes at dance studio after telling her that she was making great progress and was very talented.
• Although case in categorized as misrepresentation case, it seems that fact that she had signed up for many years of dance lessons was important in court's decision. Perhaps this should be categorized as undue influence rather than misrepresentation.

Tomorrow: do two legitimate cases on concealment and misrepresentation and go on to assignment #21 (up to page 400). Ryan Schiff's TA group is 'on'.

Tuesday, March 12, 2002 (Class 25) (Assignments 22-23)

• Read to end of assignment 23 (page 450) for Friday.
• After Assignment 23, skip to assignment 29 (finding the law of contract--page 555).

• Ideally, when A contracts with B, there is equal knowledge, skill, status, no bad behavior, and consideration. How far away from this idealistic paradigm must we get before a court will intervene?

• Swinton and Kannavos Cases: Both deal with situation where parties have different knowledge. Issue of default rule.
• Ideal world might have rule of disclosure. Arguments both for and against disclosure exist.
• Caveat Emptor: suggests an autonomy principle--buyer beware.
• Difficulty of having workable rule -- where do you circumscribe disclosure requirements?
• Advantage of having default rule for disclosure
• Property right of having information--person should not be forced to give it away
• Behavioral theories: what will encourage the most efficient/good work (i.e., gathering useful information)
• Another consideration: Which rule would have the least cost?

Swinton v. Whitinsville Sav. Bank

[42 N.E.2d 808] 1942 Massachusetts Supreme Judicial Court (cb354)

• Bank sold Swintons house that was infested with termites without revealing the defect.
• Question was whether Bank had duty to disclose presence of termites--although there was no disclosure otherwise.
• Termites are not common in Massachusetts, thus court thinks Swintons would not be likely to ask.
• Sensible default rule: whether information known to one side would be suspected by other side.
• If there had been a fiduciary duty, court would be more likely to find duty to disclose.
• Court thinks duty to disclose is too idealistic--rules that contract was valid.
• There does not really seem to be a disincentive for seller to discover termites; they would have other reasons other than for setting price to sell house.
• Possible difference for new home builders: duty to disclose--resembles implied warranty of merchantability.

Kannavos v. Annino

[247 N.E.2d 708] 1969 Massachusetts Supreme Judicial Court (cb357)

• Apartment building, in violation of zoning code, is sold, advertised as having $9,600 yearly rental income.
• Recognizes autonomy principle--anyone can find out law--but still finds duty to disclose that house is in violation of zoning.
• Case can be distinguished from Swinton in that this is not a case of bare nondisclosure--in fact, there was some disclosure.
• Once there is some disclosure, it can't be misleading.
• Disclosure needs to be material: would person have made same decision had information been disclosed?

Fina Supply, Inc. v. Abilene Nat. Bank

[726 S.W.2d 537] 1987 Texas Supreme Court (cb362)

• Sometimes statements made, even after purchase has been made, can become express warranties.

Adhesion Contracts

• Reasons for Standardized Contracts
  • Standardized contracts allow learning from past mistakes
  • Reduce uncertainty (increased level of certainty)--saves time and trouble
  • Simplify planning, make superior drafting skills widely available
• Disadvantages
  • Take-it-or-leave-it proposition
  • Can advantage one party who has time/expert advice in preparing form
  • Standardize contracts as private law

For next class, Ryan Schiff's group is 'on', then in afternoon, Karen Goldenberg's group is 'on'.

Friday, March 15, 2002 (Class 26) (Assignments 21-22)

• Different continua for deciding whether or not courts will intervene:
  • Competition
  • Necessity
  • Disclosure
  • Bargaining Power
  • Choice
  • Reasonableness

O'Callaghan v. Waller & Beckwith Realty Co.

[155 N.E.2d 545] 1958 Illinois Supreme Court (cb370)

• Tenant fell while crossing paved courtyard, sued for negligence. Lease included exculpatory clause, plaintiff wants court to find contract unconscionable.
• Court holds for defendant landlord--found tenant made no effort to find other apartment with other lease.
• Case for government intervention in common carrier cases is much stronger, since government is giving carrier a monopoly but granting a license. Housing market is not regulated in the same way as common carriers.
• Exculpatory clause (similar to forum-selection clause in Carnival Cruise Lines, Inc. v. Shute) can benefit customer too: risk is reduced, expected return is increased, customer (tenant) can benefit from lower cost.
• Dissent: because of housing market (shortage), demand will not go down nor will price go up--rent control is in effect at this time.
• Does exculpatory clause promote negligence? Judge Schaefer's response: this is exactly what insurance does.
• Difference with insurance:
  • Premiums can increase if you are negligent
  • Insurance company can manage risk, which individual tenant cannot
• Currently, most states will strike down exculpatory clauses, either by statute or judicial decision.

Tickets

• Generally expect a ticket, for example, in return for a coat check, to be a receipt. But company wants ticket to count as contract.

Graham v. Scissor-Tail

[171 Cal.Rptr. 604] 1990 (cb377)

• Question as to whether arbitration provision should be enforced, based on breach of contract and losses from a concert
• Graham, producer of concert, files suit, since only one of four concerts made money. Graham probably wanted declaratory judgment since he is party not paying money.
• Graham had entered into this sort of contract many times, thus he must have been familiar with it.
• Key is not that this is adhesion contract, but that forum would be union's Executive Board, thus not likely to be fair to Graham.

Henningsen v. Bloomfield Motors, Inc.

[161 A.2d 69] 1960 New Jersey Supreme Court (cb380)

• Plaintiff was injured after steering mechanism failed in Chrysler, defendant claims fine print provision of purchase limited liability to period of 90 days.
• UCC requires exclusion of implied warranty to be conspicuously noted.
• UCC § 2-719: if remedy falls short of essential purpose, remedy may be provided by UCC.
• Consequential damages may be limited unless unconscionable--particularly if limitation applies to injury to the person.

Continue at 12pm with question of whether disclosure really works.

Friday, March 15, 2002 (Class 27) (Assignments 22)

(make-up class)

• Magnuson-Moss Warranty Act (cb385): administered by Federal Trade Commission, regulates warranty. Almost no warranty says full warranty under Magnuson-Moss Act.
• Disclosure discussion.

Carnival Cruise Lines, Inc. v. Shute

[499 U.S. 585] 1991 United States Supreme Court (cb389)

• Different from Hennigton Case in that this is not a necessity -- cruise.
• Court found that there could be a legitimate business purpose in forum-selection clause.
• Majority assumes Shutes had notice before they even bought a ticket, thus it was fair. Or: didn't have notice before they purchased tickets, but did when they purchased tickets and had ability to return tickets for refund.
• 'Provided you have proper notice of what you're buying', then forum selection clause is part of what you're buying.

Note 1 (cb396): forum selection clause says action needs to happen in Greece. Court upheld forum selection clause. No showing that Greek law wouldn't have been fair law.

Views on Unconscionability

• Leff
  • Procedural unconscionability is okay, but not substantive unconscionability. Judges should not go into details of deal, just make sure the process was okay.
• Eisenberg
  • Leff's distinction is not tenable. Sets forth continuum of conscionability.
• Epstien
  • Makes Posner seem like a 'flaming liberal', University of Chicago faculty.
  • Freedom to contract--anything that interferes, includig unconscionability norm, is carried too far

Williams v. Walker-Thomas Furniture Co.

[350 F.2d 445] 1965 DC Circuit Court of Appeals (cb403)

• Provision in sales contract that says that whenever new item is purchased, payments are credited on all outstanding items, making it difficult to pay off any single item.
• Buyer only gets title when they've paid for every thing they've purchased; until then seller has security to take back item.
• Payment was allocated with respect to the unpaid portion of the purchase price, in ratio that reflected outstanding balance of each. Thus there is no point at which you've paid up any item until you've paid up all of the items.
• UCC allows for case law to determine how secured transactions work in consumer context; allows for this sort of allocation in business context.

---

Monday, March 18, 2002 (Class 28) (Assignments 22-23)

Armendariz v. Foundation Health Psychcare Services, Inc.

[6 P.3d 669] 2000 California Supreme Court (cb416)

• As condition of employment, employee had to sign contract requiring arbitration of wrongful termination disputes.
• Plaintiff employees claims sexual harassment/discrimination and want to sue in Court.
• Disagreement between trial and appeals court on whether arbitration provision is severable.
• Agreements now tend to have severability clause. Still depends on how integral provision is to agreement.
• Agreements included ceiling on damages to back-pay, part of unconscionability.
• Issue of procedural vs. substantive unconscionability. If one is particularly strong, the other doesn't need to be as present, but both should be present in some degree.
• Employer wasn't required to arbitrate while employee was. Lacks fairness and mutuality to some degree.
• Advantages of arbitration: more efficient. But when only available to one party, suggests that efficiency is not the motivation.
• Employee could argue that she signed contract for arbitration because she expected she might be terminate for performance rather than sexual harrasment. Would expect to arbitrate performance disputes, but not harrasment.
• Employer might be suing for trade secrets; could then be suing more than just former employee, thus arbitration would not work.
• Foundation claimed they would bring wrongful termination case to arbitrator as well. Not explicit, however, thus court discounted this claim.
• Problem with arbitration and sexual harrasment: often need multiple plaintiffs.
• To revise contracts, would want to have arbitration bind both parties on similar issues.

Public Policy

• Not unique to these cases--at some level, court takes into account public policy in all cases.
• Grounds for Public Policy Rulings:
  • Violation of statute

Bovard v. American Horse Enterprises, Inc.

[201 Cal.App.3d 832] 1988 California Court of Appeals (cb425)

• Plaintiff was to sell 'American Horse Enterprises' to James Ralph, which manufactures marijuana paraphenelia.
• Ralph wrote promisory note to Bovard, Bovard conveyed business to Ralph.
• Ralph wants to invalidate promisory note on basis that business manufactures illegal products
• Gambling contracts often invalidated because they are illegal
• Plaintiff claims contract doesn't violate public policy, because manufacturing drug paraphenelia itself was not illegal when contract was made, precedent Moran v. Harris [182 Cal.Rptr. 519] where particular rule in agreement was not prohibited until after contract was made.
• No unjust enrichment by leaving parties where they stand--by self help, Bovard took back a lot of what he sold.

• In Pari Delicto: when both parties are at fault, defendant is in better position.
• Example: broker tells clients they should purchase company's stock because company has discovered gold but market doesn't know yet. Turns out to be false, clients sue broker. Defense: In Pari Delicto--clients shouldn't have been trading on insider information to begin with.
• Court didn't find players at equal fault in this case: broker is repeat player who you more likely want to penalize.

• Clean Hands: Traditional doctrine that 'if you have unclean hands, you can't come into a court of equity'. Intent of doctrine is to maintain legitimacy of court/government.

X.L.O. Concrete Corp. v. Rivergate Corp.

[634 N.E.2d 158] 1994 New York Court of Appeals (cb429)

• X.L.O., subcontractor plaintiff, is suing Rivergate, contractor plaintiff, claiming Rivergate failed to pay X.L.O. for subcontract work.
• Public policy defense is that this would violate Donnelly Act (bid-rigging anti-trust statute). Plaintiff's behavior Donnelly act, and Plaintiff's agreement with defendant implicated this public policy.
• Plaintiffs were last concrete contractors to join 'the club'. Thus plaintiffs are actually 'trying as best they can'--court is not believing characterization of plaintiffs as 'all bad'.
• Not per se case of public policy violation--unlike jurisdictions where gambling is illegal.

Tomorrow: assignment 29 -- 'determining subject matter to be interpreted'.

Tuesday, March 19, 2002 (Class 29) (Assignments 23, 29)

• Where does Court get its source for public policy?
  • Hierarchy of sources:
  • Constitutional, statutory, and administrative law
  • Common law policies. Historically, policy was more enshrined in case law that in legislation; balance has shifted towards legislation today.
• Issue of covenants not to compete

Hopper v. All Pet Animal Clinic

[861 P.2d 531] 1993 Wyoming Supreme Court (cb436)

• All Pet Animal Clinic sued for injunction and damages against vet (Hopper) for violating covenant not to compete.
• Court considers two competing goals: freedom to contract vs. freedom to work.
• Court holds that neither policy is dominant, but rather that both are valid and modifies agreement to respect both policies.
• Competing Interests
  • Interests of employer
    • Needs to be valid business reason apart from wanting to cut off competition.
    • Employer has property interest in its customers.
    • Hopper was new vet when employed by clinic, thus firm should be rewarded for their investment in person without risking that their investment will be jeopardized by immediate competition.
  • Interests of employee: Could enforce covenant without unfairly limiting employee's choices, because there are a great number of animal practices (i.e., large animal practice) in Wyoming that wouldn't violate agreement.
  • Interests of public
    • Free competition, keeps costs down
• Court found it was not reasonable to restrict competition for three years, thus reduced duration to one year.
• One year had already lapsed, however, thus defendant 'won'.
• Court finds one year to be reasonable balance of three interests. Empirical judgment.
• Implied reasoning: if customers continue to take their small animals to vet for one year after vet leaves, they are unlikely to change once the agreement expires.

Central Adjustment Bureau, Inc. v. Ingram

[678 S.W.2d 28] 1984 Tennessee Supreme Court (cb442)

• Earlier in course, we dealt with issue of whether there was consideration for covenant not to compete, for employees who had signed covenant after beginning employment. Now question is whether lower court was correct in revising covenant to reduced time period.
• Original covenant said employees could not take any client that had been client of firm ever, court revised agreement to include only clients that had been with firm at time employees left.
• Court also narrowed geographic scope of agreement (previously nationwide).
• Public interest: competition, efficiency of allowing people with skills to work in their industry.
• Court just enforces agreement to the degree it is 'reasonable'--i.e., rewrites agreement as judge thinks would be reasonable.
• Alternative solution: 'Blue pencil' technique--simply eliminate unreasonable provisions. Very difficult to do within same clause of contract.

DeMuth? v. Miller

[652 A.2d 891] 1995 Pennsylvania Superior Court (cb440)

• Non-compete clause includes provision for former employee to pay 125% of previous 12 month's charges, so as to present disincentive from violating agreement (otherwise people might violate agreement and hope not to get caught, since worst result would be lose gains otherwise).
• Miller was fired for appearing on television representing a gay and lesbian coalition. 'Cause' in non-compete agreement included homosexuality.
• Court would not recognize protection of discrimination against gays and lesbians and would not enforce covenant.
• Case suggests that there are hierarchies of sources of public policy. The higher the source, the more likely the court will recognize it in making decision.
• Today case might be decided differently--even public opinion counts in court's hierarchy of 'public policy'.

Simeone v. Simeone

[581 A.2d 162] 1990 Pennsylvania Supreme Court (cb445)

• 23-year-old nurse involved with 39-year-old neurosurgeon. They sign pre-nuptial agreement limiting what wife could get in divorce to $25,000
• 7 years later, they are separated, then divorced. Wife sues for alimony. Question is whether pre-nuptial agreement is enforceable by the court.
• Majority opinion empathizes with men, concurrence empathizes with women, dissent likes marriage.
• Public policies: unconscionability, protection of spouses, freedom to contract, preservation of marriage and family relationship.
• Dissent believes people are less likely to get divorced if court won't honor prenuptial agreements.
• Majority: prenuptial agreement is contract and should be treated as such.
• Courts are now recognizing that both parties are served by prenuptial agreement. Given high divorce rate and multiple marriages with multiple children from different marriage, prenuptial agreements can serve to protect other children.
• Concurrence: wife had access to counsel.

Assignment for Friday: Parole Evidence.

Friday, March 22, 2002 (Class 30) (Assignment 29)

• Justifications for Parol Evidence Rule
  • Prevents fraud
  • Check on juries that are too sympathetic to underdog
  • Behavioral effect -- incentive to put in writing
  • Responsibility

Gianni v. R. Russell & Co.

[281 Pa. 320] 1924 Pennsylvania Supreme Court (cb556)

• Tenant in office building renewed lease; new lease did not allow tenant to sell tobacco. Tenant claimed that he was offered exclusive right to sell soda, although this was not in the lease agreement.
• Court finds evidence of exclusive right to sell soda is barred by Parol Evidence Rule.

Materson v. Sine

[436 P.2d 561] 1968 California Supreme Court (cb560)

• Dallas and Rebecca, husband and wife, own ranch as tenants in common, convey ranch to Medora and Lu (Medora = Dallas' sister) with option to repurchase ranch for particular price plus value of improvements minus depreciation.
• Dallas is now bankrupt. Trustee is acting to protect unsecured creditors. Rebecca is siding with trustee, because she will get half of property.
• Defendants claim that option provision is 'too uncertain to be enforced'--i.e., depreciation is not clearly defined. Other argument is that court didn't allow enough evidence--that option was 'personal' to keep ranch within family.
• Dissent: this is form of fraud on creditors.
• UCC test: as liberal towards admitting evidence as any parol evidence test.
• Fact finder is this case is not a jury but lower court, thus 'subjective jury' justification for parol evidence rule doesn't apply (although since the rule is being changed here, it will be changed also in cases with a jury).
• Generally with land transfers, law especially requires written record, even though Traynor is allowing non-written evidence here.
• Inconsistency with Traynor's opinion: options are, by default, assignable, thus the fact that parties did not include provision as to whether or not option was assignable doesn't necessarily mean they didn't contract one way or the other on it--rather, you would assume they meant in the contract that the option was assignable.

• Integration or merger clause: provision in contract to state parties' intention that everything be embodied in this writing.
• Lots of cases where integration clauses work, lots of cases where they don't, but it does increase the probability substantial that a court will not allow in parol evidence.

For Monday, finish up Parol Evidence, will do Assignment 30. Shawn Farrell's group is 'on'.

Monday, March 25, 2002 (Class 31) (Assignments 29-30)

• Tuesday, April 2, and Tuesday, April 9, class will start at 1:30pm to accommodate presentations from decanal candidates.
• UCC Parol Evidence Rule:
  • Is contract 'final' writing?
  • If so, it can't be contradicted, but it can be supplemented. (thus, in Gianni, evidence as to the promise of the exclusive right to sell beverages would be admissible).
  • Under Materson v. Sine, however, the UCC rule would be a closer call. On one hand, the restriction on the option that the property had to stay within the family could be seen as supplementing the option. On the other hand, could argue that an option is, by default, alienable, thus the restriction would be considered contradictory.
• Parol Evidence rule continues, however, with the exception if writing was intended to be complete and exclusive terms of agreement.
• Merger/integration clauses are often sloppily written and don't answer the questions as to whether the writing is final and complete and exclusive terms of agreement.
• Collateral agreements are exempt from this rule--that is, agreements which deal with a 'completely separate' subject matter.

MCC-Marble Ceramic Center v. Ceramica Nuova d'Agostino

[144 F.3d 1384] 1998 11th Circuit Court of Appeals (cb566)

• Contract was done in Italian, American buyer did not speak Italian.
• Buyer, plaintiff, is suing under breach of warranty, probably breach of express warranty, breach of failure to deliver.
• Seller relies on clause on back of standard forms, requiring complaints to be made by certified mail not more 10 days after receipt of tiles and that seller had right to cancel for default in payment.
• Plaintiff claims he subjectively did not intend to agree to these clauses.
• CISG -- International Guidelines for Commercial Contracts -- allow party's subjective intent to be considered. Most international transactions, however, go to arbitration rather than a jury, thus less of a justification for parol evidence rule.

Bollinger v. Central Pennsylvania Quarry Stripping and Construction Co.

[229 A.2d 741] 1967 Pennsylvania Supreme Court (cb567)

• Plaintiff was getting paid so defendant could dump construction waste on his land.
• Plaintiff alleges that under original oral argument consturction waste would be buried under topsoil. Originally defendant was doing this, but eventually stopped, presumably to save money.
• Defendant was also removing and replacing topsoil with neighboring landowners.
• Evidence suggests that agreement to replace topsoil was omitted by mutual mistake (or worse, by defendant's fraud), in either case not favorable to defendant.
• Court rules for plaintiff, saying evidence could supplement written agreement.

• UCC allows for no-oral modification clauses. § 2-209(2): A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded...
• No-oral modification clause helps reduce uncertainty, particularly with agents of business who might be saying different things out in the field.
• Ambiguous and vague terms--different issue, but similar question as to how much extrinsic evidence is admissible in interpretting terms of a contract.

Frigaliment Importing Co. v. B.N.S. International Sales Corp.

[190 F.Supp. 116] 1960 United States District Court SDNY (cb574)

• Plaintiff, buyer of chickens in Switzerland, defendant is seller of chickens in United States.
• Disagreement as to what 'chicken' means in contract for sale. Buyer claims it means young chicken for broiling and frying, seller claims it means any chicken that meets other terms of contract.
• In this case, seller already has money, thus buyer needs to come to the United States and sue for breach of warranty.
• 1.5-2 pound birds were young anyway, issue was whether heavier birds needed to be young as well. Plaintiff argues that chickens were supposed to be the same type in lower and heavier weight.
• Defendant responds that contract for apples that includes lighter and heavier apples does not necessarily imply that they will all be the same type of apple. Furthermore, argues that agreement incorporates USDA standards, which do not specify that 'chicken' needs to be 'young chicken'.
• Plaintiff argues that trade usage is for 'chicken' to mean 'young chicken', introduces witnesses who contradict themselves.
• Plaintiff has burden to prove breach of warranty, Court is not persuaded that young chicken was meant in contract.

Raffles v. Wichelhaus

[159 Eng.Rep 375] 1864 Court of Exchequer (cb582)

• Contract for sale of cotton that was to be delivered by Peerlees ship sailing from Bombay. Buyer refused to purchase, seller is suing for damages.
• There were two Peerless ships sailing from Bombay, buyer claims he contracted to purchase earlier ship, seller claims later ship.
• Court finds there was ambiguity as to which term, thus there is 'no meeting of the minds' and no contract.

For tomorrow, finish off this section of the chapter (p604). Michael Haven's TA group is 'on'.

Tuesday, March 26, 2002 (Class 32)

Oswald v. Allen

[417 F.2d 43] 1969 2d Circuit Court of Appeals (cb584)

• Swiss coin collector intended to purchase all of Allen's Swiss coins, while she in fact had two collections, the 'Swiss Coin Collection' and the 'Rarity Coin Collection', and she only intended to sell the former.
• Court holds that there is no contract because parties did not mean the same thing in referring to the collection.

Principles for Allocating Loss -- Decreasing Principles of Culpability

• Intention Principle
  • Played out through fraud doctrine. Pin loss on party who commits fraud.
• Knowledge
  • If one party knows that they should not do something, they will be assigned loss.
• Negligence
• Strict Liability
  • Where neither of the two parties has acted intentionally, knowingly, or negligently, then allocate to loss to party who with least cost could have avoided the loss.

W.W.W. Associates, Inc. v. Giancontieri

[566 N.E.2d 639] 1990 New York Court of Appeals (cb586)

• Buyer suing seller of real property. During negotiations, clause was added stating that if litigation was unresolved by June 1, 1987, then contract could be cancelled by either party. Defendants cancelled contract on June 2.
• May 13, buyer said they were willing to go through with purchase regardless of pending litigation.
• Plaintiff claimed that clause was inserted for protection of the plaintiff, thus they could waive their rights to cancellation, therefore eliminating option.
• Contract included merger clause, however, and evidence that clause was added for the benefit of plaintiff was not material to contract.
• Contract was complete and final on its face, thus judge doesn't not go beyond the 'four corners' of the document.
• With real property in particular, it is important that writings be accurate and followed.
• Other paragraphs of contract suggest that parties gave absolote rights to one party or the other in some cases, they could have done it in this case.
• Parties were both sophisticated business people, not using form contract.
• Other arguments: rewards careful drafting, may reduce litigation.
• Arguments for plaintiff: if real benefit was supposed to flow to plaintiff, then plaintiff had right to waive it. Response: clause benefits both parties.

Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co.

[442 P.2d 641] 1968 California Supreme Court (cb592)

• Plaintiff's property was damaged while defendant was doing work on turbine. Contract for work included provision that defendant would work "at its own risk and expense" and "indemnify" plaintiff "against all loss, damage, expense and liability resulting from injury to property, arising out of or in any way conected with the performance of this contract."
• Issue is whether contract covered plaintiff's property or just indemnified the plaintiff against lawsuits from third parties, which is usually how this sortof clause is used.
• Traynor argues against 'four corners' or 'plain meaning' rule, takes into account evidence of how indemnity is usually used.
• Doesn't believe that verbal precision is actually possible.
• If you don't look at context of words, won't be true to the intent of the parties, since the parties are using the words 'in context'.

Hurst v. W.J. Lake & Co.

[16 P.2d 627] 1932 Oregon Supreme Court (cb601)

• Defendant contract to purchase 350 tons of horsemeat scraps from plaintiff. Included provision for discount on tons with less than 50% protein.
• Defendant contends that less than 50% protein has trade usage meaning less than 49.5%.
• Court allowed evidence of trade usage, even though word was 'nonambiguous upon its face'.

• Ejusdem generis: of the same kind--if there is a generality followed by a number of specifics, interpret the generality on basis of specifics
• Exclusio alterius: expression of one thing is exclusion of the other. ('negative implication').
• Noscitur a sociis: it is known from its associates.

Tucker v. Forty-Five Twenty-Five

[199 So.2d 522] 1967 Florida Court of Appeals (cb603)

• Cantor was hired for seder, with contract requiring cantor to work for second night if there were a second seder.
• Ended up being no second seder, Cantor, who was orthodox, where there is always second seder, but service was reform, thus second seder was not assumed.
• Since contract was a union form, more likely used by musicians rather than hotel, perhaps reason court interpretted it 'against its author'.

By next Monday, read through 638.