Contracts Commons^™

Hoffman V. Red Owl Stores And The Limits Of The Legal Method, Robert E. Scott

Faculty Scholarship

According to the overwhelming majority view, promissory estoppel is not an appropriate ground for legally enforcing statements made during preliminary negotiations unless there is a “clear and unambiguous promise” on which the counterparty reasonably and foreseeably relies. Bill Whitford and Stewart Macaulay were among the first scholars to note the apparent absence of such a promise in the case of Hoffman v. Red Owl Stores. Several years ago, after studying the trial record, I concluded that the best explanation for the breakdown in negotiations was the fundamental misunderstanding between the parties as to the amount and nature of Hoffmann’s …

When Your Body Is Your Business, Mary P. Byrn, Morgan L. Holcomb

Faculty Scholarship

Surrogacy in the United States is a multi-million dollar industry in which well paid professionals seek out highly specialized women to fulfill the difficult job of being a surrogate. Surrogates enter lengthy contracts in which they agree, in intricate detail, to provide a service for significant compensation - surrogates are paid well over $22 million dollars a year. This article argues that surrogates are also professionals in this for-profit industry and are required to report surrogacy compensation as income. As a corollary, surrogates may deduct most of their surrogacy related expenses as business deductions. Being a surrogate is a highly …

Where Is Emily Litella When You Need Her?: The Unsuccessful Effort To Craft A General Theory Of Obligation Of Promise For Benefit Received, Edwin J. Butterfoss, Henry Allen Blair

Faculty Scholarship

No abstract provided.

Blame, Praise And The Structure Of Legal Rules, Lawrence Solan

Faculty Scholarship

No abstract provided.

Excuse Doctrine: The Eisenberg Uncertainty Principle, Victor P. Goldberg

Faculty Scholarship

The world is in a bit of a mess. Oil prices soared to more than $140 per barrel and within months plummeted to below $40. The pound fell from $2 to less than $1.40. Housing and stock prices crashed. Foreclosures, bankruptcies, and bailouts became newspaper staples. When things go awry like this, inevitably many people and firms regret having entered into contracts under more favorable circumstances. Many of them will be looking for ways to limit, or better yet, avoid the consequences. A preeminent contracts scholar, Melvin Eisenberg (2009), has provided them with considerable ammunition in a recent paper, arguing …

The New Price To Play: Are Passive Online Media Users Bound By Terms Of Use, Woodrow Hartzog

Faculty Scholarship

When individuals turn on the television, listen to the radio, or purchase newspapers, they are not forming contractual relationships. Yet, almost without exception, online readers, viewers and listeners are required to enter into "terms of use" contracts. These ubiquitous agreements are generally unfavorable for the user in areas of intellectual property rights and privacy. In addition, the terms often restrict users' behavior and their ability to litigate any disputes with a Web site. In analyzing the implications of contracts for Web site users, this article examines whether courts have recognized a distinction between online consumers, interactive users, and "passive media …

Braiding: The Interaction Of Formal And Informal Contracting In Theory, Practice, And Doctrine, Ronald J. Gilson, Charles F. Sabel, Robert E. Scott

Faculty Scholarship

This Article studies the relationship between formal and informal contract enforcement. The theoretical literature treats the two strategies as separate phenomena. By contrast, a rich experimental literature considers whether the introduction of formal contracting and state enforcement "crowds out" the operation of informal contracting. Both literatures focus too narrowly on how formal contracts create incentives for parties to perfom substantive actions, while assuming that informal enforcement depends on preexisting levels of trust. As a result, current scholarship misses the relationship between formal and informal contract mechanisms that characterizes contemporary contracting in practice. Parties respond to rising uncertainty by writing contracts …

Standardization Of Standard-Form Contracts: Competition And Contract Implications, Mark R. Patterson

Faculty Scholarship

Standard-form contracts are a common feature of commercial relationships because they offer the advantage of lower transaction costs. This advantage of standard contracts is increased when there is a second layer of standardization under which multiple firms agree on a standard contract. Trade associations and similar entities often effect standardization of this kind through collective agreement on a standard contract, sometimes under the aegis of state actors. Multifirm contract standardization can provide not only the usual transaction-cost advantages of standard-form contracts, but also increased competition among firms, because a standard contract makes comparison among firms’ offerings easier. But standardization among …

You Do Have To Keep Your Promises: A Disgorgement Theory Of Contract Remedies, Steve Thel, Peter Siegelman

Faculty Scholarship

Contract law is generally understood to require no more of a person who breaches a contract than to give the injured promisee the "benefit of the bargain." The law is thus assumed to permit a promise-breaker to keep any profit remaining from breach, after putting the victim in the position he would have been in had the promise been performed. This conventional description is radically wrong: across a wide range of circumstances, standard contract doctrines actually do require people to keep their promises, or to disgorge their entire profit from breach if they do not. Rather than protecting the expectation …

Echoes Of The Impact Of Webb V. Mcgowin On The Doctrine Of Consideration Under Contract Law: Some Reflections On The Decision On The Approach Of Its 75th Anniversary, Stephen J. Leacock

Faculty Scholarship

No abstract provided.

The Law And The Host Of The Canterbury Tales, Frederick B. Jonassen

Faculty Scholarship

No abstract provided.

Bargaining Power And Background Law, Nancy Kim

Faculty Scholarship

Power in contract law typically refers to the bargaining strength of each contracting party in relation to the other. In assessing the relative bargaining power of each party, courts and commentators often consider factors specific to the parties, such as socio-economic status and education level. In this Essay, I suggest another factor that affects the power of the parties in negotiating or modifying their agreement, one that I refer to as the "background law." The background law is the substantive law that governs the subject matter of the contract. This Essay focuses specifically on the background law of copyrights and …

Innovation After The Revolution: Foreign Sovereign Bond Contracts Since 2003, Mitu Gulati, Anna Gelpern

Faculty Scholarship

For over a decade, contracts literature has focused on standardization. Scholars asked how terms become standard, and why they change so rarely. This line of inquiry painted a world where a standard term persists until it is dislodged by another standard term, perhaps after a brief window of ferment before the second term takes hold. It also overshadowed the early insights of boilerplate theories, which described contracts as a mix of standard and customized terms, and asked why the mix might be suboptimal. This article brings the focus back to the mix. It examines the development of selected provisions in …

Contract Design And The Structure Of Contractual Intent, Jody S. Kraus, Robert E. Scott

Faculty Scholarship

Modern contract law is governed by a two-stage adjudicative regime – an inheritance of the centuries-old conflict between law and equity. Under this regime, formal contract terms are treated as prima facie provisions that courts can override by invoking equitable doctrines so as to substantially "correct" the parties' contract by realigning it with their contractual intent. This ex post judicial determination of the contractual obligation serves as a fallback mechanism for vindicating the parties' contractual intent whenever the formal contract terms fall short of achieving the parties' purposes. Honoring the contractual intent of the parties is thus the central objective …

In (Partial) Defense Of Strict Liability In Contract, Robert E. Scott

Faculty Scholarship

Many scholars believe that notions of fault should and do pervade contract doctrine. Notwithstanding the normative and positive arguments in favor of a fault-based analysis of particular contract doctrines, I argue that contract liability is strict liability at its core. This core regime is based on two key prongs: (1) the promisor is liable to the promisee for breach, and that liability is unaffected by the promisor's exercise of due care or failure to take efficient precautions; and (2) the promisor's liability is unaffected by the fact that the promisee, prior to the breach, has failed to take cost-effective precautions …

Personal Sovereignty And Normative Power Skepticism, Jody S. Kraus

Faculty Scholarship

In "The Correspondence of Contract and Promise," I claim that contract scholars have mistakenly presumed that they can assess the correspondence between contract and promise without first providing a theory of self-imposed moral responsibility that explains and justifies the promise principle. To illustrate the dependence of correspondence accounts of contract law on a theory of self-imposed moral responsibility, I demonstrate how a "personal sovereignty" account of individual autonomy explains how and why, contrary to existing correspondence theories, promissory responsibility corresponds to the rights and duties recognized by contract. Personal sovereignty recognizes the fundamental right of individuals not only to choose …

A Matter Of Trust: Should No-Reliance Clauses Bar Claims For Fraudulent Inducement Of Contract?, Henry Allen Blair

Faculty Scholarship

In this Article, Professor Allen Blair examines the enforceability of no-reliance clauses--contractual disclaimers designed to prevent parties from relying on extra-contractual representations to prove fraudulent inducement claims. Many courts are skeptical of such disclaimers and either refuse to enforce them or will enforce them only subject to substantial restrictions. These courts base their decisions on generic moral prohibitions against lying. This Article argues, however, that these courts reach their conclusion too easily. They presume that no-reliance clauses can serve no legitimate contract function and thus never provide value to parties. But, in at least some cases between sophisticated parties, no-reliance …

On Uncertainty, Ambiguity, And Contractual Conditions, Eric L. Talley

Faculty Scholarship

This article uses the recent Delaware Chancery Court case of Hexion v. Huntsman as a template for motivating thoughts about how contract law should interpret contractual conditions in general – and "material adverse event" provisions in particular – within environments of extreme ambiguity (as opposed to risk). Although ambiguity and aversion there to bear some facial similarities to risk and risk aversion, an optimal contractual allocation of uncertainty does not always track the optimal allocation of risk. After establishing these intuitions as a conceptual proposition, I endeavor to test them empirically, using a unique data set of 528 actual material …

A New Proposal For Loan Modifications, Christopher J. Mayer, Edward R. Morrison, Tomasz Piskorski

Faculty Scholarship

We propose a new three-pronged plan to address the recent harmful flood of foreclosures. Our plan would address the major barriers that inhibit the ability of third-party servicers to modify mortgages the way portfolio lenders are now doing with greater success. The plan provides greater compensation for servicers to perform their duties, removes legal constraints that inhibit modification, and addresses critical second liens that often get in the way of effective mortgage modifications. Our plan has more modest costs than competing plans and is likely to be the most effective while still protecting the rights of investors in mortgage-backed securities.

Ascertaining The Parties' Intentions In Arbitral Design, George A. Bermann

Faculty Scholarship

Supreme Court case law teaches us that the federal interest in arbitration does not consist of enforcing agreements to arbitrate according to some sort of abstract or ideal arbitral model, but rather according to the particular arbitral model upon which the parties had agreed. This body of law is driven by the same notions of party autonomy that underlie the law of arbitration generally. That parties may agree to forego access to national courts in favor of arbitration is an initial manifestation of that attitude. By logical extension, the parties also enjoy extraordinary latitude in determining the features that "their" …

Contracting For Innovation: Vertical Disintegration And Interfirm Collaboration, Ronald J. Gilson, Charles F. Sabel, Robert E. Scott

Faculty Scholarship

Rapidly innovating industries are not behaving the way theory expects. Conventional industrial organization theory predicts that, when parties in a supply chain have to make transaction-specific investments, the risk of opportunism will drive them away from contracts and toward vertical integration. Despite the conventional theory, however, contemporary practice is moving in the other direction. Instead of vertical integration, we observe vertical disintegration in a significant number of industries, as producers recognize that they cannot themselves maintain cutting-edge technology in every field required for the success of their products. In doing this, the parties are developing forms of contracting beyond the …

Contracts, Orphan Works, And Copyright Norms: What Role For Berne And Trips?, Jane C. Ginsburg

Faculty Scholarship

This Chapter addresses the extremes of private ordering, and the extent to which the principal multilateral copyright instruments, the Berne Convention and the TRIPs Accord, limit the range of State responses to the problems encountered at the far ends of the copyright-contract spectrum. At one end, we encounter private ordering at its most aggressive, in which private parties enter into agreements (or, more likely, the stronger party coerces the weaker parties, who may be mass market consumers) to protect subject matter or rights excluded from the ambit of copyright's exclusivity. At the other end, the difficulties arise not from overweening …

Contracts And Friendships, Ethan J. Leib

Faculty Scholarship

This Article aims to give the relational theory of contract new life, sharpening some of its claims against its competitors by refracting its theory of relational contracts through an analogy to friendship. In drawing the analogy between friendships and relational contracts and revealing their morphological similarities, this Article offers a provocative window into friendship's contractual structure--and into relational contracts' approximation of friendships. The analogy developed here is poised to replace the “relational contract as marriage” model prevalent among relationalists. This new model is more honest to relational contract theory and to marriage--and helps relational contract theory produce some new insights, …

The Correspondence Of Contract And Promise, Jody S. Kraus

Faculty Scholarship

Correspondence accounts of the relationship between contract and promise hold either that contract law is justified to the extent it enforces a corresponding moral responsibility for a promise or unjustified to the extent it undermines promissory morality by refusing to enforce a corresponding moral responsibility for a promise. In this Article, I claim that contract scholars have mistakenly presumed that they can assess the correspondence between contract and promise without first providing a theory of self-imposed moral responsibility that explains and justifies the promise principle. I argue that any plausible theory of self-imposed moral responsibility is inconsistent with a strong …

Umdenken Für Die Unidroit - Prinzipien: Vom Rechtswahlstatut Zum Allgemeinen Teil Des Transnationalen Vertragsrechts [Rethinking The Unidroit Principles: From A Law To Be Chosen By The Parties Towards A General Part Of Transnational Contract Law], Ralf Michaels

Faculty Scholarship

The most talked-about purpose of the UNIDROIT Principles of International and Commercial Contracts (PICC) is their applicability as the law chosen by the parties. However, focusing on this purpose in isolation is erroneous. The PICC are not a good candidate for a chosen law - they are conceived not as a result of the exercise of freedom of contract, but instead as a framework to enable such exercise. Their real potential is to serve as objective law - as the general part of transnational contract law.

This is obvious in practice. Actually, choice of the PICC is widely possible. National …

The French Subjective Theory Of Contract: Separating Rhetoric From Reality, Wayne Barnes

Faculty Scholarship

Most of the world, including Anglo-American jurisdictions, conforms to the objective theory of contract, which posits that contract formation is determined by reference solely to external evidence of manifestations of assent. On the other hand, France uniquely clings to the rhetoric of its “subjective” theory of contract, championing the freedom of the individual and the autonomy of the will. France’s association with a subjective theory of contract is widely recognized and assumed. One would initially assume that the French subjectivist philosophy would result in dramatically different outcomes in actual cases, when compared with the objectivist rules-based perspective that obtains in …

The Objective Theory Of Contracts, Wayne Barnes

Faculty Scholarship

The objective theory of contracts is the dominant approach for determining whether there has been mutual assent to the formation of a contract. Under objective theory, a party’s manifestation of assent will be held to mean what a reasonable person in the position of the other party would conclude that the manifestation meant. The objective theory is a sound approach for determining assent because: it reflects the pragmatic reality that the law must be largely based on externals rather than the whim of subjective perception, it protects the basis for economic exchanges in our commercial system by enforcing the expectations …

Construing The National Labor Relations Act The Nlrb And Method Of Statutory Construction, Daniel P. O'Gorman

Faculty Scholarship

No abstract provided.

The Software Licensing Dilemma, Nancy Kim

Faculty Scholarship

This Article makes two arguments. First, the dilemma posed by software transactions-sales or licenses?-should be answered by dynamic contract law. Dynamic contract law has as its objective effectuating the intent of the parties but weighs that objective against policy considerations. Second, the validity of a license grant should not be inextricably tied to the validity of the contract as a whole. The problem with relying on contract doctrine in the context of software licensing is that, too often, the application of that doctrine is static and formalistic. A new doctrine is not necessary to address software licensing issues; rather, the …

Mistakes, Changed Circumstances And Intent, Nancy Kim

Faculty Scholarship

The most common contract defenses are duress, unconscionability, incapacity, fraud, and the basic assumption. defenses4 of mutual mistake, unilateral mistake, impossibility, frustration of purpose and commercial impracticability. In this Article, I limit my discussion to basic assumption defenses. Several prevailing rationales explain why a party should be allowed to escape contractual liability despite the sufficiency of consideration where there has been a failure of a basic assumption material to the transaction. No single rationale or principle, however, unifies all basic assumption defenses. Several commentators have noted that similar fact patterns applying a given doctrine often yield inconsistent results. Parties’ employment …