Outline: Contracts - X - Damages (Legal Remedy)

Contracts (Spring 2006, Hull)

X. DAMAGES (LEGAL REMEDY)

1. Expectancy vs. Reliance
   1. Monetary damages
      1. Reliance – Out-of-pocket expenditure; restore plaintiff to original position
      2. Restitution – Make breaching party disgorge any benefit conferred; prevents unjust enrichment
      3. Expectation – Put injured party in position it would have been in if contract had been performed
   2. R.2d 347 – Measure of Damages in General
      1. loss in value to injured party of breaching party’s performance, plus
      2. any other loss, including incidental or consequential loss, caused by the breach, less
      3. any cost or other loss that injured party has avoided by not having to perform
   3. R.2d 349 – Reliance Damages – As an alternative to R.2d 347, injured party has right to damages based on reliance, including expenditures made in preparation for performance or in performance, less loss that breaching party can prove with reasonable certainty injured party would have suffered had the contract been performed
   4. Sullivan v. O’Connor – Victim of botched nose job entitled to out-of-pocket expenditures, worsening of condition, and pain and suffering beyond that "contracted for" (which she had waived).
      1. "Values"
         1. Promised nose = $15
         2. Original nose = $5
         3. Botched nose = $4
         4. "Contracted for" pain and suffering = $3
         5. Additional pain and suffering = $2
         6. Doctor's fees = $1
      2. Expectation = ($15 - $4) + $2
      3. Reliance = ($5 - $4) + $2 + $3 + $1
      4. Restitution = $1
      5. Court = ($5 - $4) + $2 + $1
   5. Role of Certainty [Gruber v. S-M News Co. - Card manufacturer whose distributor did not exercise "diligence" (contract term) in distribution entitled to difference between actual payment and payment given reasonable "diligence" (which manufacturer must prove); distributor has burden to prove actual payments would have resulted in loss]
2. Time of Measuring Value - Measure of damages for breach of land sale contracts is increased value, if any, of land at time of breach, in excess of contract price. [Bachewicz v. American Nat. Bank & Trust Co. – Where date of breach and date originally contracted for performance are close, market value of property not likely to have been far off contract price, so damages are nominal.]
3. Right to Sue for Payments Not Yet Due
   1. If duties remain on both sides, injured party can sue for everything now, as long as damages are foreseeable and terms are certain
   2. If the only duty on part of repudiating party is to pay money, injured party must wait until money is due before suit (majority). [R.2d 243] [Greguhn v. Mutual of Omaha Insurance Co. – Although insurance company is not relieved of payment obligations, insured may continue to file disability claims, but only as they are breached by insurance company]
4. Limitations on Damage Recovery
   1. General limitations
      1. No emotional distress damages (R.2d 353)
      2. No punitive damages (needs tort) (R.2d 355)
      3. Must be reasonably certain (R.2d 352 – factor willfulness)
      4. Must be foreseeable (R.2d 351)
      5. No disproportionate compensation (R.2d 351)
      6. Mitigation (R.2d 350)
      7. "Economic waste" (R.2d 348)
      8. Prejudgment interest (generally limited to liquidated sums) (R.2d 354)
      9. Lawyer’s fees (Cal. Civil Code 1717)
   2. Foreseeability – Where there are special circumstances, defendant only liable for foreseeable losses unless informed of those circumstances by plaintiff. [Hadley v. Baxendale – Carrier who could not have known of production stoppage at miller due to broken shaft not responsible for lost profits]
   3. Mitigation
      1. R.2d 350 – Avoidability as Limitation on Damages – No recovery for loss injured party could have avoided without undue risk, burden or humiliation, except to the extent he has made reasonable but unsuccessful efforts at avoidance.
      2. George v. School District No. 8R – Teacher/coach who was unaware he could not be reinstated did not fail to mitigate when he declined full-time job at another district.
   4. "Economic Waste"
      1. Possible damages
         1. value as promised to plaintiff less value as performed to plaintiff (preferred; closest to placing plaintiff in position he would have been in had contract been performed)
         2. cost of repair to make as promised
         3. cost of repair to make of same value as promised
         4. diminution in market value caused by breach
      2. R.2d 348 – Alternatives to Loss in Value of Performance
         1. Uncertain loss of value from delay of property use: recovery based on rental value or interest on value of property
         2. Uncertain loss of value from defective or unfinished construction: recovery based on a) diminution in market price caused by breach; b) reasonable cost of completing performance or remedying defects if not clearly disproportionate to probable loss in value
         3. Breach of promise conditioned on fortuitous event which was not certain to have occurred in absence of breach: recovery based on value of conditional right at time of breach
      3. County of Maricopa v. Walsh & Oberg Architects, Inc. – Where defects in completed structure could not be physically remedied without tearing down and rebuilding at imprudent and unreasonable cost, damages may be awarded for difference in value of building completed in accordance with contract and value of building actually erected, rather than for reasonable cost of completion.
5. Liquidation of Damages Provisions
   1. Analysis
      1. Reasonable alternative performance?
      2. If liquidated damages, is amount reasonable?
      3. At what point to examine reasonableness?
         1. time of contract?
         2. after the breach?
   2. Ridgley v. Topa Thrift and Loan Association – Liquidated damages clause conditioned on prepayment conditioned on late interest payments unenforceable because charge unrelated to purported function as alternative performance.
   3. Blank v. Borden – Withdrawal-from-sale clause stipulating 6% of “price of property” set elsewhere in exclusive-right-to-sell contract valid where parties freely negotiated, and contract reserved to homeowner power to make realistic and rational choice.
   4. Schrenko v. Regnante – Sellers who profited on sale of property after first buyer defaulted, and who retained first buyer’s deposit but demanded more costs, have made deposit into minimum charge rather than liquidated damages, and are not entitled to retain deposit.

Outline: Contracts - IX - Specific Performance (Equitable Remedy)

Contracts (Spring 2006, Hull)

IX. SPECIFIC PERFORMANCE (EQUITABLE REMEDY)

1. Prerequisites for Specific Performance
   1. Inadequate legal remedy
      1. Unique property (land presumed unique)
      2. Inability to pay damages
   2. Administratively feasible
   3. Certain terms
2. Inadequacy of Legal Remedy
   1. Severson v. Elberon Elevator, Inc. – Specific performance available when contract involves property which is unique or possesses special value, such as real estate.
   2. R.2d 360 – Factors Affecting Adequacy of Damages
      1. difficulty of proving damages with reasonable certainty,
      2. difficulty of procuring suitable substitute performance by means of monetary award, and
      3. the likelihood that award of damages could not be collected
   3. R.2d 361 – Effect of Provision for Liquidated Damages – Specific performance or injunction may be granted to enforce duty even if there is a provision for liquidated damages for breach of that duty
   4. R.2d 363 – Effect of Insecurity as to the Agreed Exchange – Specific performance or injunction may be refused if substantial part of agreed exchange for performance to be compelled is unperformed and performance not secured to court’s satisfaction
   5. UCC 2-719(1)(b) – Contractual Modification or Limitation of Remedy – Resort to remedy as provided is optional unless remedy expressly agreed to is exclusive, in which case it is sole remedy
3. Problems with Specific Performance
   1. Judicial burden
   2. Deters efficient breaches (sometimes, society benefits from certain kinds of breaches, because it incentivizes better allocation of resources, and everybody basically wins; compensation still available to injured party)
   3. Distate for compulsion
4. Construction and Employment Contracts
   1. R.2d 365 – Effect of Public Policy – No specific performance that would entail compulsion contrary to public policy [Petry v. Tanglwood Lakes, Inc. – Court will not compel specific performance of developer’s promise to homeowner to build lake because it counters developer's promise to HOA not to build lake, especially where developer financially unable to build lake]
   2. R.2d 362 – Effect of Uncertainty of Terms – No specific performance unless the terms of contract are sufficiently certain [Goldblatt Bros., Inc. v. Addison Green Meadows, Inc. – Developer’s failure to pave access road justifies specific performance; but failure to provided explicitly stated number of parking spaces is not, if a sufficient number has been provided]
   3. R.2d 367 – Contracts for Personal Service or Supervision [Nassau Sports v. Peters – Hockey player who signed on to competing league in violation of contract not compelled to play for original league, but enjoined from playing for new league]
      1. promise to render personal service will not be specifically enforced
      2. promise to work exclusively for one employers will not be enforced by injunction against serving another if result will compel performance involving personal relations that are undesirable if continued, or to leave the employee without other reasonable means of making a living
5. Equitable Defenses
   1. Balance of hardships [Goldblatt]
   2. Unfair price
   3. "Unclean hands" - Party seeking equity must be acting equitably
   4. "Laches" - Unreasonable delay in asserting rights against other party

Outline: Contracts - VIII - Termination and Rescission

Contracts (Spring 2006, Hull)

VIII. TERMINATION AND RESCISSION

1. Termination, Rescission, Setoff, and Suspension
   1. Termination - Affirms existence of contract, discharges injured party from performance, and grants injured party right to recover damages
   2. Rescission - Disaffirms contract; arose from equity court
   3. Rescission may occur only by mutual consent or in case of material breach. [Woodruff v. McClellan – Where buyer in real property refused to sign closing papers despite repeated extensions, there is no mutual consent, thus no rescission, so attorney’s fees applicable]
   4. Courts are merging termination (law) and rescission (equity), and sometimes confuse terms.
   5. Setoff - Similar to dependency of obligations [GTM Investments v. Depot, Inc. – Dispute over placing of sign in business lease does not entitle tenant to withhold rent, particularly where lease explicitly provides against setoffs]
   6. Suspension of Performance [Romig v. De Vallance – Where real estate buyer discovered defect and refuses to finish payment, and agreement requires seller to deliver clear title upon full payment and not before, buyer’s potential remedy to be determined based on:]
      1. Did buyer have reasonable grounds for insecurity with respect to seller’s performance?
      2. If so, and buyer demanded adequate assurance of performance, and such was not provided, buyer’s failure to pay is not breach. [2-609 – Right to Adequate Assurance of Performance – Failure to perform is not breach without adequate written assurance of due performance.]
      3. If seller’s failure to provide adequate assurance was repudiation, seller is in breach. [2-610 – Anticipatory Repudiation]
2. When Can a Party Terminate or Rescind?
   1. Express Conditions – If there is a condition, it hasn’t been met, and it hasn’t been excused, there is a termination.
      1. Elements
         1. Is there a condition to performance?
         2. If so, has the condition been satisfied?
         3. If not, has the condition been excused?
      2. Haymore v. Levinson – Term “satisfactory” in construction contract where purchase price is held in escrow conditioned on “satisfactory completion” must be reasonable.
      3. ARD Dr. Pepper Bottling Co. v. Dr. Pepper Co. – Where contract spells out method of determining satisfactory conditions, contract is not otherwise illegal, and injured party has made good-faith determination of breach, termination is proper.
      4. Waiver of condition
         1. No consideration required to enforce waiver.
         2. Waiver may be inferred from conduct. [Burger King Corp. v. Family Dining, Inc. – Where franchiser has not demonstrated history of holding franchisee to literal interpretation of development plan, it has waived terms, and is not entitled to termination]
         3. Waiver of one right does not waive other rights. [American Continental Life Ins. Co. v. Ranier Construction Co., Inc. – Where both parties have deviated from formal requirements in other terms, builder’s obligation to issue final certificate for payment to secure buyer’s payment has not been waived]
      5. Language of promise, condition, or both? [see R.2d 227]
         1. Language of promise: Non-breaching party may still be required to perform, but has cause of action for breach.
         2. Language of condition: Failure of condition means that party whose performance was conditional need not perform unless condition is excused.
         3. Language of promise & condition: Party whose performance is conditioned need not perform and can sue for breach.
   2. Implied Conditions [Jacob & Youngs v. Kent – Builder who used different brand of pipe entitled to payment despite contractual requirement to use original brand of pipe, where branding is only difference, and buyer already occupies house; implied condition was one of substantial completion]
   3. Material breach
      1. Walker & Co. v. Harrison – Seller’s delay in maintaining sign as stipulated in contract, while annoying, is not sufficiently material to warrant repudiation by buyer.
      2. R.2d 241 – Factors of Material Breach
         1. extent to which injured party will be deprived of reasonably expected benefit
         2. extent to which injured party can be adequately compensated for part of benefit deprived of
         3. extent to which failing party will suffer forfeiture [policy to avoid forfeiture]
         4. likelihood failing party will cure failure, taking account of circumstances including any reasonable assurances
         5. extent to which behavior of failing party comports with standards of good faith and fair dealing
   4. Anticipatory Repudiation
      1. R.2d 250 – A repudiation is:
         1. by words – statement that party will commit breach
         2. by conduct – act renders party unable or apparently unable to perform
      2. R.2d 253 – Effect of Repudiation
         1. Repudiation alone makes repudiator liable for damages for total breach
         2. Injured party relieved of remaining duties to perform
      3. Stonecipher v. Pillatsch – Buyer entitled to restitution or rescission when seller manifested intent to repudiate through, and is not obliged to wait until original date of performance.
      4. R.2d 256 – Nullification of Repudiation
         1. Repudiation by statement may be nullified by retraction if injured party notified of retraction before materially changing position in reliance or indicating to breaching party that he considers repudiation final
         2. Repudiation by action may be nullified if injured party notified that events have ceased to exist before materially changing position in reliance or indicating to breaching party that he considers repudiation final
3. Effect of Rescission and Restitution
   1. R.2d 373 – Restitution When Other Party is in Breach
      1. Breach by non-performance, or repudiation, entitles injured party to restitution for benefits already conferred in reliance.
      2. Injured party has no right to restitution if he has finished performance and no performance remains due by breaching party other than payment.
   2. Ennis v. Interstate Distributors, Inc. – Although rescission usually granted only to restore status quo ante, inability to return to former position where there has been material breach (loss of consideration paid for covenant which was breached) which, though partial, goes to the essence of the contract, makes rescission proper.
   3. Divisible Contracts – If a contract is divisible into corresponding pairs of equivalent performances, breach of one pair does not excuse breach of another. [R.2d 240]
      1. Siemans v. Thompson – Where salary promise and stock purchase promise were dependent, failure to pay salary obviated obligation to purchase shares.
      2. Rudman v. Cowles Publishing – Promise to employ in return for acquisition was independent of promise of “number one man” position, supported by fact that promises were independently signed, so breach of one was adequately compensated by damages, and restitution is impracticable as acquisition was complete.
   4. Delay as Bar to Rescission
      1. 2-607(3)(b) – Where tender has been accepted, if claim is for infringement [2-312(3)], and buyer is sued as a result, he must notify seller within reasonable time after notice of litigation, or be barred from remedy for that litigation.
      2. R.2d 381 – Loss of Power of Avoidance by Delay – Party which does not manifest intention to avoid within reasonable time loses power to avoid. [Snyder v. Rhoads – Buyer of dry cleaning business that continued to operate it despite claims of profitability by seller and to make payments cannot after such unreasonable delay bring counterclaim for both rescission and affirmance [R.2d 380], but may bring suit for damages under fraud after counterclaim for affirmance]
   5. Restitution
      1. R.2d 374 – Restitution for Breaching Party – Reasonable value of services provided, capped at contract price minus damages from breach
         1. Injured party must get what it bargained for – e.g., if one pays $3000 for a project built to certain specifications, one should not pay more than that. [Kutzin v. Pirnie – Where real estate purchase contract did not contain liquidated damages clause, buyer who paid deposit then decided not to buy is entitled to recover portion of deposit in excess of loss caused to seller by buyer’s breach]
         2. Breaching party should recover reasonable value of work done, as long as injured party gets what it bargained for.
      2. Innocent Party’s Action for Restitution [see R.2d 373]
         1. Reasonable value of services provided, no cap unless work is entirely performed (capped at contract price), if injured party elects rescission
         2. United States v. Western Casualty & Surety Co. – If rescission is proper, supplier entitled to value of goods supplied, not percentage of price equivalent to percentage of contract performed.
   6. Hypos – Restitution for Breaching Party
      1. Hypo 1
         1. Facts: contract price = $3000; FMV of work completed = $3000; cost to complete = $500
         2. Restitution = $2500
         3. Damages = $2500
      2. Hypo 2
         1. Facts: contract price = $3000; FMV of work completed = $1500; cost to complete = $500
         2. Restitution = $1500 (value conferred)
         3. Damages = $2500 (assuming substantial completion and no material breach)
   7. Breach of Accord
      1. Terminology
         1. Executory accord - Original contract is dischargeable only upon performance of accord; if accord is breached, injured party may sue on original contract
         2. Substitute contract - Original contract discharged by making of substitute agreement; upon breach of substitute, injured party may sue only on substitute, not original contract [R.2d 279]
         3. Novation - Substitute contract where 3rd party is substituted to perform obligations of one of original parties
      2. Bradshaw v. Burningham – Where modified agreement in well-drilling contract stipulates that original contract was "still effective except for changes mentioned herein", and terms were not defined in original contract, new contract is substitute contract, not executory accord.

Outline: Contracts - VII - Unenforceability

Contracts (Spring 2006, Hull)

VII. UNENFORCEABILITY

1. Misunderstanding - Related to ambiguity exception to PER. [Frigaliment Importing Co. v. B.N.S. International Sales Corp. – Where buyer has not established narrower meaning of "chicken", contract is unenforceable with narrower meaning]
2. Mistake of Fact
   1. Mutual Mistake
      1. R.2d 152
         1. Mutual mistake regarding basic assumption
         2. Materiality
         3. No risk assumption under R.2d 154
      2. Reilley v. Richards – Where buyer and seller both mistaken as to character of land which was material (FEMA designation which prevented building), rescission is proper.
      3. Woyma v. Ciolek – Signature of release for personal injury may be set aside in case of latent injuries, which neither side would have known about (so no assumption of risk on her part), and which was material to release.
   2. Unilateral Mistake
      1. R.2d 153
         1. Unilateral mistake regarding basic assumption
         2. Material
         3. Non-mistaken party had reason to know of mistake or enforcement would lead to unconscionable result
         4. No risk assumption under R.2d 154
      2. Donovan v. RRL Corporation – Rescission is proper where typo in ad in one of many local papers establishes good-faith unilateral mistake on part of car dealer, which was not assumed because typo was made at newspaper.
   3. R.2d 154 – When Party Bears Risk of Mistake
      1. Risk is allocated by agreement of parties; or
      2. Party is aware of its limited knowledge but treats it as sufficient; or
      3. Risk is allocated by court on grounds of reasonability
3. Impossibility
   1. Impracticability - Seller's excuse
      1. Impracticable performance
      2. Caused by event which contract assumed would not occur [Mishara Construction Co. v. Transit-Mixed Concrete Corp. – Labor strikes which disrupt delivery of concrete subject to jury determination of foreseeability]
      3. Event not caused by party seeking excuse
      4. Party seeking excuse did not assume risk
   2. R.2d 266(1) - Where a party’s performance under a contract is impracticable without his fault at time of formation because of a fact he has no reason to know, and whose non-existence is assumed, there is no duty to perform. [Sunflower Electric Co-Op. v. Tomlinson Oil Co. – Where gas reserves were exhausted, provider should have known that reserves are inherently unknowable, and use of word "guarantee" assumed risk, for which provider is liable]
   3. Foreseeability
      1. Economic Theory (Posner) – Supplier in better position to anticipate and prevent loss of production due to strikes by its employees, so should incorporate them in contracts
      2. Relational Contract Theory – Risk should be distributed to prevent burdening one party and to minimize loss, so parties should compromise/adjust to continue contractual relationship
   4. Frustration of Purpose - Unusual, not readily available; buyer’s excuse, because when purpose is gone, no sense for buyer to continue to perform [Chase Precast Corporation v. John J. Paonessa Company, Inc. – Government deletion of order for concrete was beyond buyer contractor’s control, seller provider was aware of the risk, and buyer paid for concrete already produced, contract had no more purpose, and is unenforceable]
      1. Event causes substantial frustration of principal purpose of contract
      2. Contract made assumption that event would not occur
      3. Event not caused by party seeking excuse
      4. Party seeking excuse did not assume risk
4. Adhesion Contracts and Unconscionability
   1. Adhesion Contracts – An adhesion contract is not enforceable if it [Graham v. Scissor-Tail, Inc. – Reasonably expectable arbitration clause in concert promotion contract was unconscionable for designating arbitrator with identical interests]:
      1. Does not fall within reasonable expectations of weaker or adhering party
      2. Is unduly oppressive or unconscionable, even if expectations are reasonable
   2. 2-203 – Unconscionability Analysis [Williams v. Walker-Thomas – Contract which redistributed balance of payment so that buyer would always have balance until every item is paid off is subject to UCC analysis]
      1. Purpose - prevent oppression and unfair surprise
      2. Procedural element - Problems in bargaining process, lack of meaningful choice, need of person bargaining, vitality of service, alternatives, lack of education, sophistication, legalese, fine print, deceptive sales practices
      3. Substantive element – Terms unreasonably favorable to one party
      4. Determination - At time of contract
      5. Decision for judge - May enforce clause to some extent or not at all
   3. R.2d 208 - Unconscionable Contract or Term – Court may refuse to enforce contract, or may enforce without unconscionable term, or limit application of unconscionable term to avoid unconscionable result.
   4. Price Unconscionability
      1. Jones v. Star Credit Corp. – Mathematical disparity between $300 retail price and $900 purchase price, fact that welfare buyer already paid $600 of an estimated $1200 in installments, weigh in favor of reforming contract to amend payment to amount already paid.
      2. Remco Enterprises, Inc. v. Houston – Use FMV retail price to figure ratio; limit contract-to-retail ratio ~ 5:2; where ratio is low (108%), and buyer need not maintain good, no price unconscionability.

Outline: Contracts - VI - Parol Evidence Rule

Contracts (Spring 2006, Hull)

VI. PAROL EVIDENCE RULE

1. The Rule – If two parties have made a contract and expressed it in a writing to which both have assented as the complete and accurate integration of that contract, evidence, parol or otherwise, of prior agreements and negotiations will not be admitted for the purpose of changing or denying the writing.
2. Analysis
   1. Is there a written contract?
   2. Is there evidence of prior agreement or contemporaneous oral agreement? Note: PER does not apply to modifications.
   3. Did parties intend writing to be final expression of terms in agreement (partial integration)?
   4. Did parties intend writing to be final expression of all terms of contract (complete integration)? [W.W.W. Associates v. Giancontieri – Extrinsic and parol evidence inadmissible to create ambiguity in written agreement which is complete and clear on its face]
3. Integrated Writing
   1. Detail of contract
   2. Sophistication of parties
   3. Merger clause
   4. Do parties in such circumstances frequently leave things out of written contract?
   5. Form contract
4. Exceptions to Rule
   1. Contracts not even partially integrated
   2. Condition precedent [Scott v. Wall – Contract conditional on obtaining acceptable 3-year lease not enforceable without lease]
   3. Consistent additional term (not completely integrated) [Masterson v. Sine – Where contract is not explicitly integrated (deeds don’t usually cover all details, especially when family involved) and does not address assignability of personal option on real property, PER does not apply]
      1. R.2d 216(2)(b) - Parol evidence is permissible if the unwritten term is such "as in the circumstances might naturally be omitted from the writing."
      2. UCC 2-202, comment 3 – "If the additional terms are such that, if agreed upon, they would certainly have been included in the document in the view of the court, then evidence of their alleged making must be kept from the trier of fact."
   4. Ambiguity – [Frigaliment Importing Co. v. B.N.S. International Sales Corp. – Buyer’s burden to prove narrower meaning of "chicken"]
   5. Course of performance, course of dealing, usage of trade [Columbia Nitrogen Corp. v. Royster Co. – Despite merger clause, evidence of trade usage of “gentlemen’s agreements” admissible where not specifically negated in contract]
   6. Misrepresentation [Keller v. A.O. Smith Harvestore Products, Inc. – Existence of disclaimer does not preclude finding of reliance; evidence of negligent misrepresentation admissible as tort]
      1. R.2d 164 - Misrepresentation
         1. Contracts induced by misrepresentation by one party are void.
         2. Contracts induced by misrepresentation by third party are void unless non-assenting party in good-faith did not know, and gives value for or relies on transaction.
      2. R.2d 196 – Consequences of Misrepresentation – A term unreasonably exempting a party from consequences of misrepresentation is unenforceable.
      3. R.2d 214 – Non-Fraudulent Misrepresentations – Evidence of prior or contemporaneous agreements admissible to establish
         1. Integration of writing
         2. Degree of integration
         3. Meaning (explanatory)
         4. Illegality, fraud, duress, mistake, lack of consideration, or other invalidating cause
         5. Ground for granting or denying rescission, reformation, specific performance, or other remedy
   7. Mistake – "scrivener’s error" – Extrinsic evidence not allowed to contradict terms of contract, but to show contract was not final. [Thompson v. Estate of Coffield – To obtain reformation, seller must show (1) instrument representing prior agreement to be reformed, (2) mutual mistake or mistake by one and inequitable conduct by other, resulting in instrument not reflective of what either intended, and (3) proof of these by clear and convincing evidence.]

Outline: Contracts - V - Statute of Frauds

Contracts (Spring 2006, Hull)

V. STATUTE OF FRAUDS

1. What's Covered
   1. One Year Term
      1. Performance cannot be completed by one year
      2. Time runs from making of contract
      3. Impossibility does not take contract out of Statute of Frauds
         1. Personal service
         2. Employment – Definite terms covered; lifetime employment subject to contingencies less than one year not covered [Burton v. Atomic Workers Federal Credit Union – Employer’s oral promise not to fire employee except for just cause until retirement age is unenforceable because not in writing, but equitable estoppel may be available.]
         3. Furnishing support
   2. Land Sales [Jolley v. Clay – Despite oral contract for land sale, payments, substantial improvements to land, and payment of taxes constitute partial performance sufficient to compel specific performance.]
   3. Goods >$500 – UCC 2-201
2. Functions
   1. Evidentiary - Writing shows that contract exists
   2. Cautionary - Attestation forces signers to think twice
   3. Channeling - Notarization shows intent to be bound
3. Statute of Frauds under Restatement
   1. R.2d 131 - Type of writing required
      1. Signed by or on behalf of party to be charged
      2. Reasonable identification of subject
      3. Indication of existence of contract
      4. Reasonably certain essential terms
   2. R.2d 132 - Memorandum may consist of several writings [Hoffman v. Sun Valley Co., Inc - An unsigned writing may be considered a part of the memorandum only where express reference to it is made in a signed writing.]
   3. Exception - R.2d 139 - Reliance
4. Statute of Frauds under UCC [2-201]
   1. 2-201(1) – Transactions involving sales of goods over $500 must be in writing, signed by the party to be charged, and need only reflect the quantity of goods sold even if it omits or incorrectly states a term.
   2. 2-201(2) – Merchant’s Exception – Silence is acceptance if reasonable, written contract is received, unless there’s an objection by writing within 10 days. [Bazak International Corp. v. Mast Industries, Inc. - Annotated purchase order forms that had been signed by a buyer, sent to a seller, and retained without objection, qualify as sufficient writing.]
   3. 2-201(3) - A contract which does not satisfy (1) but is otherwise valid is enforceable if:
      1. (a) - Special Goods - Goods specially manufactured and not suitable for sale to others, if seller has substantially begun manufacture before notice of repudiation is received
      2. (b) - Admissions - If the party charged admits, there is a contract
      3. (c) - Partial Performance - Acceptance of goods or of payment validates a contract that otherwise violates Statute of Frauds. [Allied Grape Growers v. Bronco Wine Company – Where there is no partial performance under 2-201(3)(c), a separate oral contract may still be enforceable by promissory estoppel when one party changes its position to its detriment in reliance on the contract.]
5. Restitution - Restitution is a middle ground between enforcement and invalidation. R.2d 375 – A contract otherwise invalidated by the Statute of Frauds is not exempt from resolution by restitution.
6. Oral Modifications under Restatement (complicated)
   1. R.2d 149(1) – No oral modifications for contracts under statutes of fraud.
   2. R.2d 150 – Reliance trumps R.2d 149

Oral Modifications under UCC (see Modifications under UCC)

Outline: Contracts - IV - Express and Implied Promises

Contracts (Spring 2006, Hull)

IV. EXPRESS AND IMPLIED PROMISES

1. Express Promises – Promise must be reasonably definite (i.e., provide a basis for finding breach and rendering remedy) to be enforceable. R.2d 33. [Abrams v. Illinois College of Podiatric Medicine – A vague and indefinite promise prevents the creation of a binding and enforceable oral contract.]
2. Exception – Facts can overcome express promises. [Payne v. Sunnyside Community Hospital – Inconsistent representations and/or contradictory practices may negate an express disclaimer.]
3. 2-313(1)(b) – Express Warranties – Any description of [the quality, character, or condition of] the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
   1. UCC 2-313(2) - Formal words not required. [Carpenter v. Chrysler Corporation – Statements of fact (i.e., conveying sufficiently definite information about the quality of a product) create an express warranty. Implied warranty of merchantability.]
   2. Puffery – Exaggerations by the seller do not create an express warranty unless they are statements of fact. [Scheirman v. Coulter – Seller’s statement that a product has been discontinued is puffery; express warranties do not include price.]
4. Inchoate Agreements
   1. Traditional View – An agreement to agree is not enforceable.
      1. Cottonwood Mall Company v. Sine – An agreement to extend or renew lease without specifying rate and duration of the lease is not enforceable.
      2. Exception – promissory estoppel [Hoffman v. Red Owl Stores, Inc. – A promise unenforceable for lack of definite terms may still be enforced under promissory estoppel if injustice would otherwise result because defendant’s conduct induce plaintiff to act to his detriment.]
      3. Unjust enrichment [Dursteler v. Dursteler – Buyer in failed mink farm deal without adequately comprehensive contract entitled to restitution for reasonable value of benefits conferred.]
   2. R.2d 27 - Where parties clearly intend to agree, but have not have filled out every detail, the court may attempt to fill in the gaps. [Berrey v. Jeffcoat – In a failure to agree to rental amount for a renewal of an existing lease, a court can determine reasonable terms for renewal.]
5. Implied Terms
   1. Good Faith
      1. R.2d 205 - Good Faith and Fair Dealing - Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.
         1. Carrico v. Delp – Where induced by promise to extend credit, extra collateral is consideration, making agreement enforceable, with implied good faith obligation to exercise reasonable discretion.
         2. Triangle Mining Co., Inc. v. Stauffer Chemical Co. – Absent special elements of reliance and unequal bargaining power, no implied good faith limitation on a contract with unambiguous terms of termination.
         3. Casa D’Angelo, Inc. v. A & R Realty Company – Burden on plaintiff to demonstrate bad faith; where base rent is substantial, there is no implied covenant to generate percentage rent.
      2. 2-203 - Obligation of Good Faith [Brewster of Lynchburg, Inc. v. Dial Corporation – A requirements contract allows a buyer to reduce the quantity demanded to any amount, including zero, so long as it does so in good faith.]
   2. 2-314 – Implied Warranty of Merchantability – A merchant’s wares carry an implied warranty of merchantability.
   3. 2-315 - Implied Warranty of Fitness - If a seller has reason to know particular purpose of purchase, there is an implied warranty that the goods are fit for that purpose.

Outline: Contracts - III - Modifications and Mutuality of Obligation

Contracts (Spring 2006, Hull)

III. MODIFICATIONS AND MUTUALITY OF OBLIGATION

1. Modification – An agreement to amend a prior agreement must be supported by consideration. [Jole v. Bredbenner – An adjustment in grace period does not modify a rental agreement because there was no consideration.]
   1. R.2d 73 – Prior Promise – Promising to perform a prior promise is not consideration. [Gilbert Steel Ltd. v. University Construction Ltd. – Oral agreement to modify contract not enforceable because promise to “give a good price” is not consideration.]
   2. R.2d 89 - Modifications Without Consideration – A promise modifying a duty under a contract not fully performed on either side is binding
      1. Fair and equitable (good faith)
      2. Statute
      3. Promissory estoppel
   3. NOM Clauses are not enforceable. [Wagner v. Graziano Construction Company – Even where the contract specifically states no oral modification will be recognized, the parties may yet alter their agreement by parol negotiation.]
2. Duress
   1. R.2d 175(1) - Duress; R.2d 176 - Improper Threat
   2. 1-103 - Duress among factors that can be considered.
3. Settlement of Claims - Settlement requires consideration. [Mathis v. St. Alexis Hospital – A promise to forbear pursuit of a legal claim can be sufficient consideration to support a contract when the promisor has a good faith belief in the validity of the claim.]
4. Mutuality
   1. R.2d 79 - If there is no consideration, mutuality of obligation ("promise for promise") will do. [Weiner v. McGraw-Hill – Mutuality is not required where there is valid consideration.]
   2. Requirements Contracts – The seller promises to supply the buyer for a certain period of time at an agreed price, and the buyer promises that he will buy exclusively from the seller.
      1. Requirements contracts require mutuality. [USAA v. Schlang – Where the seller doesn’t promise to supply the buyer during a certain time, and the buyer doesn’t promise to buy only from the seller, there is no valid requirements contract.]
      2. Mutuality may be implied. [Laclede v. Amoco – Required 30-day notice negated buyer’s unilateral right to cancel, and hooking pipes up to seller’s system implicitly bound buyer to buy only from seller.]
5. Modifications under UCC [2-209]
   1. 2-209(1) - "An agreement modifying a contract . . . needs no consideration to be binding."
   2. 2-209(2) - NOM Clauses - Enforceable; but between merchants, the other party must sign.
   3. 2-209(3) - Original Contract in SoF - If original contract is within statute of frauds (UCC 2-201), need writing. [Wixon Jewelers, Inc. v. Di-Star, Ltd. – Where one was in breach of the original contract, the other did not have to honor the contract or oral modifications of it.]
   4. 2-209(3) - If original contract is not within statute of frauds, and quantity increased in sales case, need writing.
   5. 2-209(4) - If modification doesn’t meet (2) or (3), it can operate as a waiver (of own rights). (Oral waivers are allowed.)
   6. 2-209(5) - A waiver under (4) may be retracted by reasonable notification unless the other party has relied on the waiver.
6. Settlement of Claims under UCC
   1. 1-107 - Settlement of Claims - No consideration needed if signed and delivered by aggrieved party.
   2. 2-209(1) - "An agreement modifying a contract . . . needs no consideration to be binding." Implies requirement of good faith (per 1-203).
   3. 3-311 - Payment in Full - Cashing a "payment in full" check is acceptance of settlement. [County Fire Door Corporation v. C.F. Wooding Company – Any sum paid toward dispute is sufficient consideration; creditor may not cross out "payment in full" and cash check as partial payment. "You can’t eat your cake and have it too."]

Outline: Contracts - II - Contract Formation

Contracts (Spring 2006, Hull)

II. CONTRACT FORMATION

1. Offer - An offer must be sufficiently definite and made in such a manner that a reasonable person receiving the offer would believe that all he must do is accept the offer in order for a contract to be formed (or that acceptance will form a contract).
   1. Leonard v. Pepsico - An advertisement is not an offer, but an invitation to begin negotiations, unless it has words of limitation, or is otherwise “clear, definite, and explicit, and leaves nothing open for negotiation.”
   2. The offeror is the master of the offer
   3. Revocation - Offer can be revoked at any time before acceptance [R.2d 42, Allen R. Krauss Co. v. Fox – Arizona land deal, seller took property off market before buyer closed escrow] unless:
      1. Option supported by consideration. R.2d 45.
      2. Firm offer rule - UCC 2-205
      3. Option contract - R.2d 87 applies (purported consideration, fair terms, reasonable time) [Newberger v. Rifkind – Stock option agreements constituted enforceable contracts in consideration of the continued employment.]
      4. Promissory estoppel - R.2d 87(2) [S.M. Wilson & Co. v. Prepakt Concrete Co. – Because the two parties remained in communication after the expiration of the original proposal, the original proposal is enforceable.]
   4. Revocation learned "through the grapevine" still counts. R.2d 43.
2. Acceptance - A manifestation of assent of the terms made by the offeree in a manner invited or required by the offer.
   1. Forms of acceptance – R.2d 50
      1. Bilateral - By promise. R.2d 50(3).
      2. Unilateral - By performance. R.2d 45.
         1. No revocation once performance begins. R.2d 45(1).
         2. No enforcement until performance completed. R.2d 45(2).
      3. Where unspecified, offeree chooses. R.2d 32
      4. Where unspecified, and offeree begins performance, (1) he has chosen acceptance by performance, with (2) a promise to render complete performance. R.2d 62.
   2. Mailbox Rule - Acceptance is complete once the mail is posted. R.2d 63(a).
      1. Henthorn v. Fraser – When it is reasonable to communicate by post, an acceptance is complete as soon as it is posted.
      2. Worms v. Burgess – If the acceptance is lost in the mail, it is still effective.
   3. Expiration of Offer
      1. Lapse of time – If no expiration time specified, reasonable time. R.2d 41. 3 months max. 2-206(3).
      2. Death/Incapacity – No power of acceptance if either party is dead or incapacitated. R.2d 48.
   4. Rejection is effective when offeror learns of it. R.2d 40.
   5. Acceptance by Silence
      1. Generally, silence does not equal acceptance. [Curtis v. Mason]
      2. Exceptions (R.2d 69):
         1. Offeree takes benefit with reasonable opportunity to reject.
         2. Offer gives notice that silence equals acceptance, and offeree intends to accept.
         3. Prior dealings create reasonable expectation that offeree will object unless he intends to accept.
      3. Contrast UCC 2-206(1)(b)
3. Formation under UCC
   1. 2-204 – In General
      1. 2-204(1) - Any manner sufficient to show agreement, including conduct.
      2. 2-204(2) – Sufficient agreement may be found even if moment of making it is unknown.
   2. 2-205 - Firm Offer (no consideration required)
      1. In signed writing
      2. Explicit assurance to hold offer open
      3. Irrevocability cannot exceed 3 months
   3. 2-206 - Acceptance
      1. (1)(a) General – Acceptance can be in any reasonable manner unless offer specifies mode of acceptance. (Silence can be acceptance.)
      2. (1)(b) Prompt Shipout – For offers including prompt shipment, acceptance is manifested by prompt shipment or prompt promise to ship.
      3. (2) Time Lapse Rule - If there has been no notification to offeror within a reasonable time, the offer may be voided.
4. Discrepancy Between Offer and Acceptance
   1. Common Law
      1. "Mirror Image Rule" – Acceptance must mirror offer. Discrepancies mean “acceptance” is really a rejection and counteroffer. R.2d 39.
      2. "Last Chance Doctrine" - Performance indicates acceptance of counteroffer. Terms in the counteroffer thus “win” the battle of the forms. R.2d 50.
   2. Change of Terms – Acceptance invalidates contract only if proposals make contract dependent on changed or additional terms. R.2d 61.

      UCC

   3. 2-207 - Additional Terms
      1. 2-207(1) - An acceptance can contain additional terms unless the acceptance expressly limits assent to those terms. [Brown Machine v. Hercules, Inc. – The order acknowledgement did not make acceptance of indemnification clause a condition for shipment, therefore indemnification is not a term of the contract.]
      2. 2-207(2) - Additional terms are proposals for addition to the contract; between merchants, they become part of the contract unless:
         1. (a) Offer expressly limits acceptance to terms of offer.
         2. (b) Proposals materially alter terms (there is surprise or hardship to offeror). [Ohio Grain Co. v. Swisshelm – Agricultural commodities are typically subject to conditions, so proposal to add terms are not material alterations.]
         3. (c) Party proposing additional terms reasonably notified of objection.
      3. 2-207(3) - If the writings do not establish a contract, conduct by both parties consistent with existence of a contract establishes a contract.
      4. Contrast “Rolling Contract Theory” – “money now, terms later”. If you buy it, and you keep it, you have accepted the terms of the contract. [ProCD – Shrinkwrap license is an ordinary contract. UCITA § 209. UCITA view on software license is in the minority.] This approach is favorable to manufacturers, not consumers.
   4. Proposed 2-207 - If there’s a contract, the terms are:
      1. terms that appear in the records of both parties;
      2. terms, whether in a record or not, to which both parties agree; and
      3. terms supplied or incorporated under any provision of this Act.
   5. 2-208(2) - Practical Construction - If the following are not reasonably consistent with each other, construction follows this order of priority:
      1. express terms
      2. course of performance
      3. course of dealing
      4. usage of trade (1-205)
      5. other implied terms (e.g., good faith obligation)

Outline: Contracts - I - Basics

Contracts (Spring 2006, Hull)

I. BASICS

1. Promise - A contract is a promise for a promise (bilateral) or a promise for performance (unilateral). R.2d 32.
2. Consideration - A promise is unenforceable without consideration. R.2d 71.
   1. Act - Benefit to promisor [Cash v. Benward – Promise to fill out insurance form is not a benefit to the promisor, as general niceties are not enforceable promises.]
   2. Forbearance - Detriment to promisee
      1. Hamer v. Sidway – Promise to pay in return for refraining from vices until turning 21, and subsequent compliance, is a detriment to promisee because he gave up what would have been a legal right.
      2. Kirksey v. Kirksey – Sister-in-law who moved did not have detriment because she did not give up a legal right.
   3. California Civil Code § 1605 – "Any benefit conferred, or agreed to be conferred, upon the promisor, by any other person, to which the promisor is not lawfully entitled, or any prejudice suffered, or agreed to be suffered, by such person, other than such as he is at the time of consent lawfully bound to suffer, as an inducement to the promisor, is a good consideration for a promise."
3. Exceptions
   1. Moral Obligation/Past Consideration – Promise for a benefit previously received. R.2d 86.
      1. Webb v. McGowin – Promisee who prevented bricks from falling on promisor was entitled to payments promised by promisor, who had kept paying during his life.
      2. Harrington v. Taylor – Promisor who did not pay in full for saving him from an axe was not compelled to pay remainder, because promisee had not acted with expectation of compensation.
   2. Promissory Estoppel - Where there is no contract, courts will still enforce a promise where justice requires. R.2d 90.
      1. Ricketts v. Scothorn – Granddaughter who relied, to her detriment, on grandfather’s wish for her not to work was entitled to promised money despite lack of consideration.
      2. Hayes v. Plantations Steel Company – Employee who announced his own retirement before the promise did not rely on that promise.
      3. Other situations (R.2d 90, comment b)
         1. Definite and substantial character of reliance
         2. Reasonableness of reliance
         3. Formality of promise
   3. Reliance - R.2d 139(a)
      1. Reasonable expectation to induce action or forbearance
      2. Actual induction of action or forbearance
      3. Injustice can be avoided only by enforcement
4. Implied-in-Fact Contract - Obligation to pay for goods or services implied from facts (i.e., flagging down a taxi implies an obligation to pay)
5. Quasi-Contract/Implied-in-Law Contract
   1. Schott v. Westinghouse Electric Corporation – Company who offers employees rewards for improvement ideas, then uses submitted ideas without payment, is unjustly enriched, and has entered a quasi-contract.
   2. Restitution – Where there is a quasi-contract, restitution is a measure of recovery: Reasonable value of goods or services (cost saved or benefit conferred).
   3. Officious intermeddler – A person who voluntarily enriches someone else.
      1. The law does not require compensation here.
      2. Exceptions: Emergency medical care rendered to someone incapacitated so that he is incapable of soliciting such care.
   4. Matter of Estate of Milborn – Couple who helped non-relative decedent had an implied-in-fact contract.
   5. Palimony - When people live together, some services may be legally compensable. On the same facts you can argue either that the service provided were gratuities, or were legally compensable services.
6. UCC Basics
   1. 1-103 - UCC to be supplemented by general principles of law
   2. 1-203 - Obligation of Good Faith (always applicable)
   3. 2-104 - Merchant
   4. 2-105 - Goods - Services under Restatement; Goods under UCC; Mixed:
      1. Majority - Predominance Test
      2. Minority - Gravamen test

Outline: Contracts

Contracts (Spring 2006, Hull)

1. BASICS
2. CONTRACT FORMATION
3. MODIFICATIONS AND MUTUALITY OF OBLIGATION
4. EXPRESS AND IMPLIED PROMISES
5. STATUTE OF FRAUDS
6. PAROL EVIDENCE RULE
7. UNENFORCEABILITY
8. TERMINATION AND RESCISSION
9. SPECIFIC PERFORMANCE (EQUITABLE REMEDY)
10. DAMAGES (LEGAL REMEDY)

Copyright vs. Freedom of Expression

Cathy Young explores the tension between intellectual property and free expression in the context of the "sequel" to Cather in the Rye:

The U.S. Constitution authorizes Congress to enact copyright laws "to promote the progress of science and useful arts"; the Copyright Act of 1790 mentions "the encouragement of learning." Yet copyright law in its present form often seems to do the exact opposite. A few years ago, Margaret Mitchell's estate tried to stop the publication of a novel called The Wind Done Gone retelling Gone with the Wind through the eyes of a black slave. The grandson of James Joyce, Stephen Joyce, has used his position as administrator of the writer's estate to terrorize scholars, block the staging of a play by Joyce and readings from his work at a festival, and kill a multimedia project based on his grandfather's famous novel, Ulysses.

Borrowing is an essential part of the creation of culture. If we eliminated all derivative works, we would lose, among other things, Shakespeare's Romeo and Juliet (based on a story by an Italian writer), and Jean Rhys's acclaimed novel Wide Sargasso Sea, the story of Mr. Rochester's mad wife from Charlotte Bronte's Jane Eyre. Of course, classics have also inspired mediocre sequels or reimaginings, such as third-rate novels that continue the story of Elizabeth and Mr. Darcy from Jane Austen's Pride and Prejudice. But that's for readers to decide.

Copyright terms of protection have certainly extended, thanks in no small part to the efforts of the Mouse House, and reflects a trend toward protecting established producers of culture, effectively raising the barrier of entry into the creative space. Some of the arguments are understandable, such as a desire on the part of authors to protect their characters, much like the rationale behind the doctrine of droit d'auteur in European systems.

The question is, at what point does the protection cease to reward innovation, and ends up rewarding those who rest on their laurels?

RIAA Settles Suit Against Luddite

In an action brought against Mavis Roy for sharing music online, RIAA member Universal Music Group was forced to settle because Ms. Roy did not even have a computer at the time of the alleged infractions.

The label dropped its case after evidence provided by anti-piracy snooping firm MediaSentry was successfully challenged by the defense's expert witness Dr. Sergey Bratus. Among other key problems with the data, the defense pointed out that Roy didn't own a computer at all at the time of the supposed infringement and that it wasn't until a letter appeared that she was aware of any possible action.

Somebody is probably losing their job for this!

AdSense Enabled

Law Law Stud is among those enduring the economic recession, and as a result has finally decided to enable AdSense. If this unduly bothers any readers, please shoot me an e-mail or leave me a note. Thank you for your cooperation.

February 2009 California Bar Exam Results

The California State Bar has posted the stats for the February 2009 bar exam (PDF). The examinees have all discovered whether or not they have passed. The full list of those who passed will be made public on Sunday morning.

The pass rate for this last administration was 33.5%. To put that in perspective, the pass rate for the February 2008 exam was 39.6%; for the February 2007 exam, 36.8%; and for the February 2006 exam, 39.0%. This year's pass rate is the lowest since the 33.4% in February of 2002, and the second lowest since the 28.1% in the Spring of 1987.

Generally, the February bar exam is calibrated to compensate for the July bar exam of the previous year: if the July exam was too "easy", the February exam is made "harder"; if the July exam was too "hard", the February exam is made "easier". Since the July 2008 exam had a passage rate of 61.7%, which is the highest since the 62.9% of July 1997, that may have been an incentive to make this past February administration harder.

On the other hand, the February 1998 exam had a pass rate of 40.0%, so what gives? Perhaps, then, the exams are controlled for number of passing examinees. The July 1997 + February 1998 exams had, respectively, 4,581 and 1,558 people passing, for a total of 6,139 qualifications. The two most recent administrations produced 5,330 passes in July 2008, and 1,368 in February 2009, for a total of 6,698 qualifications. This indicates an increase of less than 9% in the number of qualifications, which seems to track the population growth of California.

Congratulations to those who passed!

Doc Review Tales

From Above the Law's "Notes from the Breadline" column comes this account of doc review life:

After five minutes, I am reasonably certain that the receptionist's beverage offer has been rescinded. After twenty minutes, Elisa appears in the reception area. Although there is no one chasing her, she looks harried, as though she was pursued from her office by a pack of foxhounds. She also sounds cranky. "I'm Elisa," she says, barely looking up from her BlackBerry. "I don't know why they told you to ask for the partner," she scoffs derisively. "I'm handling the document review." She turns around and starts to walk away. Though she has neglected to use one of the common expressions indicating as much, such as "Come with me" or "Right this way," I deduce that I am supposed to follow her.

I can tell that Elisa is younger than I am, but it takes me a moment to realize just how much younger she is. She has a hardness that makes her seem older, and her clothes -- while clearly expensive -- look as though they were picked out by her overly conservative grandmother. She also appears oddly mismatched, like her features were gathered from a collection of spare parts. Her lips are thin and fixed in a sour expression, which feels oddly familiar to me, although I can't quite place it. When we stop to wait for an elevator, another female associate, who is young and pretty, wanders up and stands silently nearby. Elisa looks her over with a disgusted glance, and it hits me: Elisa resembles Dick Cheney.

We get off the elevator and I follow her into the warren-like hallway. "Actually," she continues seamlessly, as though we had been talking the entire time, "I'm basically handling this entire case. I'm, like, unbelievably busy. And we've had one problem after another with these temp attorneys, so it's been, like, such a nightmare." She sighs irritably. "I had to fire one last week because he was, like, totally incompetent."

"How so?" I ask, hoping to learn how not to cross Elisa. But she looks at me strangely, and I realize that we are not having a conversation; Elisa is just thinking out loud. She shifts gears. "Have you done document reviews before? You've done document reviews before, right?" she says. It is more of a command than a question. "Because they told me that you had experience doing document reviews, and I really don't have time to hold anyone's hand."

Something about her severity makes me want to compensate, to offset her total lack of geniality. "So, Elisa," I ask her in the singsong tone I might use with a shy puppy, "it sounds like you're running the show here. Can you tell me about the case?" I expect her to seize the opportunity to show off her expertise, delight in the details she has mastered, display the familiarity that most overly-involved associates flaunt with pride. Instead, she grunts impatiently. "I'll give you a binder that explains the coding," she says. "You don't really need to know more than that."

Finally, we arrive at a closed door. Elisa opens it, revealing a windowless room filled with computer screens. Most of them are manned by attorneys, some of whom spin around, blinking dazedly at the interruption. Others appear catatonic, registering no response. I almost expect someone to shout "Close the door!" like the old patrons on Cheers did when reality threatened to penetrate their cocoon. No one does. They are docile and glassy-eyed, and turn back to their screens before I finish saying "hello."

"Okay," Elisa says brusquely, grabbing a binder from a stack in the corner. "This is the review protocol. You're going to be tagging for these 32 categories. Read through it, and if you have any questions after that, you can e-mail me." She scrawls her e-mail address on a piece of paper. "You know how to use Kroll Ontrack, right?" I do, but I'm not sure I would admit it if I didn't. "It's been a while," I say. "Do you want to just do a quick run-through?"

Elisa exhales wearily, making a sharp hissing sound that causes me to cringe involuntarily. Clearly, she does not want to do a quick run-through. Nonetheless, she plops down at an open computer and clicks into the database, whizzing through its features so quickly that I realize I will have to look through it on my own later, when I have time to reacquaint myself with the "review tool," as she calls it. While Elisa zips through the program, I study the room and its occupants.

...

Elisa finishes her lightning review and stands up abruptly. "Okay," she says. "All set?" It doesn't sounds like a question, but I nod anyway. She turns to leave, but spins around just before she reaches the door. "Don't redact anything yet," she says sternly. "If you find something that needs to be redacted, put it aside and let me know. I don't want you to redact anything until I see how you're doing with the review."

"Got it," I say. "Thanks." She closes the door, and I sense a collective sigh of relief. No one says anything. After a few minutes, an older man, who is wearing carpal tunnel braces on both wrists, looks at the door, as if to make sure that Elisa is gone.

"Bitch," he mutters, and turns back to his computer.

The Stud has been fortunate not to have had quite the same experience. However, while the staff at the firm the Stud is occasionally placed at has been, for the most part, pleasant to work with and for, there are far fewer projects in Los Angeles than in New York, whence "Notes from the Breadline" hails.

Ah, doc review life.

Open Book Exams? What Are Those?

Above the Law discusses administrative procedures to cut down on cheating at Syracuse University, and seems rather shocked that a law school would have closed book exams.

Loyola Law School switched to a closed book exam format just in time for the Class of 2008, figuring that it would be better preparation for the bar exam. While it is true that LLS's bar passage rates went up for the July 2008 exam, the same was true of all other law schools. In fact, bar passage rates went up significantly across the nation. The Stud has heard it said that the reason was that the multiple-choice Multistate Bar Exam (MBE), which is identical for all jurisdictions, had a very high passage rate. That, in turn, may be due to the fact that so many experimental questions ere thrown out.

In any case, the jury is still out on whether or not closed book exams improve bar exam performance.

Above the Law does make one good point, though:

Clients generally don't need you to be able to quote statutes and regulations off the top of your head (bar examiners, that's a different story).

The parenthetical sentiment is exactly why many schools have switched to such a format. Higher bar passage rates help a school's ranking, and are thus an important goal for many competitive law schools, particularly in the second tier.

Arizona v. Grant

In Criminal Procedure, the "automobile exception" is one of the exceptions to the "requirement" that a person may not be searched, or his possessions seized, without a warrant. The history of the Fourth Amendment shows that the point was not so much to require a warrant, but to make sure there is probable cause. The warrant requirement is designed in part to require pre-enforcement judicial review. However, there are certainly situations in which obtaining pre-enforcement judicial review may unreasonably hinder law enforcement. The 20th Century has been particularly productive in terms of the development of exceptions to the so-called "warrant requirement".

The "automobile exception" to the "warrant requirement" states that when an officer stops a vehicle and arrests the driver, he may search the passenger compartment, including all containers even if closed. New York v. Belton (1981).

Now, in Arizona v. Grant (2009), the United States Supreme Court pares back the scope of permissible searches.

There's just one problem.

According to the Supreme Court, inventory searches, as administrative proceedings, do not require probable cause. So long as an inventory search is conducted in good faith and follows a standardized procedure, it is permissible, and evidence turned up during such a search is admissible against a suspect in court.

So, if police want to search your car, and they already have enough probable cause to arrest you, all they have to do is arrange for your car to be transported to an impoundment yard, where a very thorough inventory search, for the purpose of making sure that everything is accounted for when you are released and get your car back, is then to be conducted.

Advice for New Bankruptcy Lawyers

So you've heard that bankruptcies are on the rise, and you want to be a bankruptcy attorney. You might want to think twice, says Harley Caudle.

Unintended Consequences: Bankruptcy Reform

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) was supposed to clean up the bankruptcy scene. Even in 2005 it was clear that the effect of the act would not be to limit lending, but to increase penalties for failures to repay debts. I suppose one rationale would have been that, fueled by the dot-com craze, people had become profligate and unwise in their spending, such that bankruptcy abuse was becoming common--hence the stiffer penalties. What about the other half of the name of the bill, consumer protection? I haven't heard a lot about that.

And now, there may have been an unintended circumstance: bankruptcies are soaring, possibly pushed along by all those who waited and tried to hold out for as long as possible.

Also, the law's test of a person's ability to pay off debts appears to have failed at one of its goals: steering debtors from Chapter 7, which allows people to sell off their assets to repay what they can and start again debt-free, and into Chapter 13, which places the filer in a repayment plan that can last for years. Chapter 7 cases accounted for 69 percent of all filings in the past year, compared with 71 percent in 2004.

So far for America being the Land of Second Chances.

Above the Law: Loyola Law School Being Shady?

Above the Law asks: Are Top Loyola Law Students Getting Poor Services?

Any current Loyola students care to comment?

Los Angeles District Attorney: New Deputies Start in June

Like big law firms, the Los Angeles District Attorney's Office has instructed those to whom it had just extended offers a week or two ago that they will be starting in June. This is starting to sound as if the D.A.'s Office may not in fact be able to follow through with hiring these individuals; they seem to be playing for time to get funds to honor the offers.

At least this is not Sacramento, where not only have recently hired deputies been laid off, but so have those hired a year before them. In a mirror image of Los Angeles, Sacramento's deputies have been told their positions will disappear in June.

Solo Practice: Learning the Law

Most people end up in jobs that have nothing to do with their undergraduate degree. As it turns out, lawyers also end up specializing in areas they may not have studied in law school.

As a case in point, I went down to the U.S. Bankruptcy Court for the Central District of California today, to see what I could absorb by osmosis. I also got to talk with a couple of the lawyers representing the principal secured creditor. The lead representative, who did all of the presentation during the hearing, assured me she had not studied bankruptcy in law school either, and yet she's been in bankruptcy law for about 15 years now.

So the important thing is knowing where to go to learn the law, and, of course, finding clients. Everything else should take care of itself.

Solo Practice: Business License

Today, the Stud took the first real step toward starting his own practice: filing for a business license with the City of Los Angeles. In the State of California, the only license required to open a law practice is one's bar license. However, the City of Los Angeles requires that entities that do business in the City, including the practice of law, obtain a business license.

The Stud went to one of the offices of the City of Los Angeles Office of Finance. For those similarly interested in starting up, please see the FAQ provided by the Office of Finance. To obtain your own license in person, visit the Office of Finance at one of eight locations.

The Stud felt an queasy excitement in his stomach as he stared at the piece of paper which declares him open for business as a solo practitioner. It's a huge step!

How Bad Is It?

Above the Law reports that O'Melveny & Myers LLP has cut 90 attorneys and 110 staff across the firm. This follows on last month's news that Latham & Watkins LLP cut 190 attorneys and 250 staff.

Now, the Stud has heard a rumor that the Santa Clara Law School career services office has begun encouraging the Class of 2008 to look for jobs consistent with their undergraduate degrees. Further, the week after Valentine's Day, the office of career services at Loyola Law School of Los Angeles held a panel on starting a solo practice.

That's how bad this economy is.

Bar Tips

As the time grows closer for the Class of 2009 to graduate and think about the bar exam, here are a few bits of advice I shared with a few friends:

Break down
The bar exam is on the last Tuesday, Wednesday, Thursday of July. On Tuesday and Thursday, you spend 3 hours in each morning doing essays (3 each morning), and 3 hours in each afternoon doing 1 performance test. On Wednesday, you get 3 hours in the morning to do 100 multiple choice questions, and another 3 hours in the afternoon to do another 100 multiple choice questions. Essays and multiple choice questions are familiar formats to us all. The performance test is basically some sort of task, whether it's a memo, a points and authorities, a letter, drafting deposition questions or interrogatories, or the like.

The Essays
This is what BarBri is best at. There are other courses that will teach you the law pretty darn well, and some probably even better; your options include LECC and Flemings, and I believe Prof. Levensohn is hawking Emanuels. I found BarBri's material enough. As long as you stick pretty well to their schedule, you'll get your eyes on enough material to get you ready. Don't feel frustrated if you don't get everything in the model answer; or at least don't let frustration get the better of you. Let it be a motivation to you. You can also look up old questions at the Cal Bar site, which should have model answers as well. They go back quite a few years; you really don't need much past 2000 if anything. The goal by the last few weeks before the bar is to get your eyes on at least 4 essays a day; better is to do 2 essays and outline 3-4 more.

Multiple Choice
The multiple choice section is called the Multistate Bar Exam (MBE), and the MBE for the July 2008 exam was hard. It almost made me want to give up on the bar exam ... almost. BarBri does not prepare you for how hard the MBEs are. However, for some reason the passage rate on the MBE portion of the july 2008 exam was the highest in recent years, and as a conequence all jurisdictions saw increased passage rates on their local bar exams. So don't feel too frustrated when you take them; by the same token, don't get too confident when you take the BarBri mock MBE. Definitely look into the 3-day PMBR if you can afford it. I didn't take PMBR and I passed, but like I said, I was scared stiff by the actual MBE. Some others say that the PMBR questions were harder than the actual MBE; reasonable minds can differ. Again, I don't know that taking PMBR will help, but it couldn't hurt.

Performance Test
The performance test is really a test of how well you follow directions. You'll be given a fact pattern to read, along with instructions, statutes,and case law. You will not need all of the case law, especially as the cases sometimes cite each other. Your best bet is to figure out what the format is, set up accordingly, and fill in the blanks. The July 2008 exam's PTs were memos, so we were lucky. The other thing about the PTs is time management, just as with the essays. It's easier to forget that with the PTs, though, because you may find yourself thinking as you fill in the blanks that you set it up wrong. Resist the urge to restructure the whole thing or replace your reasoning; simply refer to the mistaken exposition and say, "but that does not satisfy the standard, because ..." You'll see this in real practice anyway, especially in court. The examiners don't care if you get the law right or get the right conclusion. They want to see you reason it out, and they want to see that you understand the opposing position, so in a sense, getting something wrong at first is doing it right, as long as you don't do a wholesame replace of whatever you've already got down.

Preparation
Here are a few things I did that helped me, personally:

• I forced myself to stay at the library for very long hours, but I didn't force myself to work all the time. I made sure I had time for meals, and I took breaks if I felt too confused.
• I refilled my large bottle of Smartwater every night and drained it every afternoon, after lunch, while I was in the library. (Coffee ruled the mornings.)
• I made sure I had time to go to the gym at least twice a week.
• I always took at least one day off on the weekends, during which I would follow an old personal custom, which is to go to a bookstore and read magazines to catch up on the real world in some small fashion.
• I also drew up my own master outline, which I've attached. I compiled it from my skeleton outlines for each subject, and for me, the process of whittling it down to fit on fewer and fewer pages would a terrific learning process. Each skeleton outline was compiled after the lectures; but note that some of the subjects ran 2-3 days.
• I was lucky to have my dad drive me to the test center each day. Depending on where you take the exam, be sure you have rehearsed your drive or walk so you know the timing.
• Have an analog timepiece with you.
• Make sure the last day before the bar exam, Monday, is relatively light. If you feel comfortable enough to take the whole day off, so much the better. Even if you do a half day, don't do substantive work. Instead, do your printing, and skim your outlines or flash cards or what have you.
• I never did do flash cards. For me I guess doing the outlines after each lecture was my equivalent.
• Prepare your food, or at least scout out your testing center to know where you can find food. Don't do anything exotic--go with food you know won't induce a reaction.
• Don't worry about anybody else. Last summer I sat at a particular desk in the LLS library, right in front of the map of the United States, near the double doors upstairs. People thought I was crazy to be near a high-traffic area, but it trained me to ignore ambient noises. It also made me easy to find if people had questions, or if they wanted to go on break. Learning how to handle yourself when you're not the only one in control is very important for another reason: just before the end of the morning session on the first day of the July 2008 exam, there was an earthquake--we felt it all the way out in Century City, although the epicenter was 10 miles east of Ontario--and I just kept going, pausing just long enough to let the earthquake finish up.

Anyway, that's all I've got for now. If you have any questions, let me know, and if you know anyone who can benefit from this, pass it along. Good luck! :)

Wit of Mandamus V

On Friday 20 February 2009, at 7pm in the Student Lounge at Loyola Law School, Law Law Stud returned for the latest installment of a tradition: Wit of Mandamus V. The Stud proudly performed at and reported from past Wits of Mandamus: Wit of Mandamus IV (his last as a student), Wit of Mandamus III (which he also produced) and Wit of Mandamus II (his first, in which was the assistant producer). Now, with the aid of a Canon Elura 85 DV camcorder, as well as a Canon PowerShot SD870IS, the Stud brings you reportage from the leading edge of LLS social life.

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Setting Up

Scott Burstein was sound man for the night:

Catering courtesy of Antreas Hindoyan (center) and Burger Continental in Pasadena, CA:

The stage is prepared ...

... the instruments await ...

... and Amanda begins to let guests in:

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On With the Show!

The show began with "Just Another Day in the Student Lounge", a collaborative act to introduce the talent:

Next up, Prof. Allan Ides ('79), with son Joel Ides, Prof. Dougherty, and the House Band, played a song he wrote for "the beautiful blonde back there" (quipped Prof. Dougherty: "and also to Mrs. Ides!"), "Beautiful Night":

Showing that the students were also no slouch, Scott Burstein (who also came through as the night's sound man), with Desiree Fowler and John Fowler (no relation), performed Eric Johnson's "Cliffs of Dover":

Showing off again the Loyola Law School student body's collaborative spirit, Sri Panchalam and Seth Weiner joined forces to bring us "Yashantin/Unending Love":

Charisse Castroverde, a last-minute sign-on to the show, brought along friend Jason Johnson to accompany her in a performance of Ida Maria's "Stella":

Bringing a taste of classical music to the night was Casey Levental, who performed a piece by Sergei Rachmaninoff:

The first completely non-musical act of the night was John Fowler's "Secret Act: Part II". Since it's secret, the Stud will not show the video.

The next act, Andrew Walsh on the piccolo bass, will also not be shown. Andrew played an original song which he performed as a special treat for the live audience only.

The next performance, by Bill Shafton, has been polished for some time: it is the song with which he proposed to his wife. Get the story and the song in the video of "The Way That I Love You":

The Stud, with the support of the wonderful House Band, performed of Coldplay's "Viva la Vida", unplugged:

Next, for his third and final performance in Wit of Mandamus, Mike Hanna once again roused the crowd with his excellent beatbox, which gets even better toward the end:

Music Director Zack Domb then performed two pieces. First, he played an original composition, "Waiting" (go to 2:15 if you want to skip the lengthy introduction):

The second piece is a reprisal of the first time he performed with Bill Shafton at Wit of Mandamus III, in Jason Mraz's "I'm Yours":

That reprisal led to Seth's own update of his poetry reading:

Returning to a musical milieu, Meryl Chambers performed a spoof on a popular John Mayer song; unfortunately, it may be inappropriate for some audiences, and will not be posted. You had to be there!

Next, Prof. Dougherty renewed his encouragement and support for the Loyola community's artistic endeavors with his original composition, "Pushed Me To It":

The song is available at the MySpace site of Prof. Dougherty's alter ego, JD DeRavin.

The next performance was by Keith Kim, who performed two classical songs, "Nacht und Träume" by Franz Schubert, and "Amor ti Vieta" by Umberto Giordano. The camera had been left unattended while the Stud went on a nature break during the transition between pieces, so while the music had been captured, Keith is nowhere to be found in the frame. Thus, there is no viable video of Keith's performance.

Fortunately, the Stud returned in time to capture the performance of Adrian Rodriguez, who with the House Band brought us Carlos Santana's "El Farol":

Closing out the night, Prof. John Nockleby reminded the audience of the hard-working life of a lawyer in "Professional Responsibility Blues":

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As last year, this was a wonderful Wit of Mandamus, and amazing props go to the producers, Dan Ediger, John Fowler, and Julien Kern, and Music Director Zack Domb for pulling it together. Thanks also to Mike Hanna as Master of Ceremonies; Terry Miller on percussion; and Scott Burstein on sound. The turnout was about 160 people or more, surpassing last year, and raising the most money for the Public Interest Law Foundation of any Wit of Mandamus ever. Thank you so much to the audience for the energy and enthusiasm you brought!

The Stud hopes to continue attending these shows, and invites all readers in the Los Angeles area next year about this time to look into attending!

Barbri Girl

Loyola Law School is not, of course, the only law school to have a talent/variety show (called Wit of Mandamus at LLS--see previous years' posts for 2006, 2007, and 2008). From the NYU Bar Revue, here is Barbri Girl, a salute to the most successful and well-known bar review course in the nation:

Remember to come out to Wit of Mandamus V on Friday, 7pm at the Student Lounge at Loyola Law School. And good luck to February bar takers!

Space Salvage Laws?

In the wake of the collision of a defunct Russian satellite with a live US commercial communications satellite, Popular Mechanics explores the legal angle of cleaning up space debris. Of note is this observation:

Finally, current space law doesn't allow another solution to the space-junk problem: Salvage. Under the 1967 Outer Space Treaty, nations retain "jurisdiction and control" over their spacecraft even when they are inoperable, meaning that a salvage operator wouldn't be able to take title or claim an award for recovering a defunct craft as is done on earth. Space lawyers (yes, there are space lawyers) have been arguing for years that the proliferation of space junk makes some sort of salvage law necessary, but up to now there has been little progress. The technology for recovering defunct satellites is there, though cleaning up smaller debris fragments would be much, much harder. That's a reason to try to get a handle on the problem sooner, rather than later. A space salvage law might even give a shot in the arm to commercial space efforts, by providing yet another money-making option.

Of course, a law per se might not have to be developed if some sort of contractual agreement can be had.

July 2008 California Bar Exam Results for Loyola Law School

Of the members of the Class of 2008 from Loyola Law School that took the California Bar Exam, 87% (or about 323 students) passed. This represents a 9% increase over July 2007. However, that still puts LLS behind Pepperdine Law School, which had a pass rate of 89%. Passage rates were up statewide, according to the California State Bar.

While LLS has definitely improved its bar passage rate, it still has some work cut out. The Stud hopes the Class of 2009 will keep LLS bar passage numbers strong.

Law School an "Education Hoax"?

Those of you who have been following the exploits of Loyola 2L are familiar with his refrain that law school is a scam. In this economy, that's getting ever more exposed, and according to a recent article in the ABA Journal, people are starting to get it (emphasis mine):

Many educators tout the statistic that college graduates will earn $1 million more than high school grads. The magazine examines the claim and says the statistic doesn’t account for some facts.

First, the higher salary figure may reflect the fact that college graduates are smarter and work harder—characteristics that could boost salaries for such people even if they don’t attend college. Second, the cost of a college degree has risen at twice the rate of inflation, coming to nearly $100,000 for a private school. Third, college students give up about $125,000 in pay for the four years they are in school.

The story cites a College Board study that found one in four college grads earns considerably less than the top quartile of high school grads.

One law school dean, Richard Matasar of New York Law School, says law schools are "exploiting" students who don't succeed in life, according to an account of his remarks at a recent program by TaxProf Blog.

Matasar said registrations for the law school admissions test are flat or below the norm for this year. “That's never happened in a downturn in the economy before,” he said. “They're catching on. Maybe this thing they are doing is not so valuable. Maybe the chance at being in the top 10 percent [helpful in landing a good job] is not a good enough lottery shot in order to effectively spend $120,000 and see it blow up at the end of three years of law school.”

Exactly. The Stud has heard that legal careers are a bubble. If so, this recession is bursting that bubble.

On the plus side, if you can hang on for a few years, there will be fewer competitors from the dwindling class of 2012.

(Hat-tip: The Lene Machine)

Criminalizing Speech in the Netherlands

The open, accommodating Netherlands of renown is gone. Now, not only can you expect to be murdered for creating a controversial documentary questioning aspects of "Islamic culture" (RIP Theo van Gogh); now, calling for a ban on the Koran can expose you to criminal prosecution:

Freedom Party leader Geert Wilders made headlines around the world in March 2008 with his film "Fitna," which juxtaposed Koranic verses against a background of violent film clips and images of terrorism by Islamic radicals.

In 2007, Wilders called for a ban on the Koran "the same way we ban 'Mein Kampf."' He said both Adolf Hitler's work and the Muslim holy book contain passages that contradict Western values.

The Amsterdam Appeals Court called Wilders' statements in his film, newspaper articles and media interviews "one-sided generalizations ... which can amount to inciting hatred."

...

The three judges said they had weighed Wilders' anti-Islamic rhetoric against his right to free speech, and ruled he had even gone beyond the normal leeway given to politicians.

Because Wilders has not yet been charged, it is not clear what maximum penalty he could face if convicted.

While judges in the Netherlands generally are loathe to become involved in public debate, the court said it was making an exception in the case of Wilders' comments about Islam.

"The court considers this so insulting for Muslims that it is in the public interest to prosecute Wilders," a summary of the court's decision said.

Gerard Spong, a prominent lawyer who joined Islamic groups in pushing for Wilders' prosecution, welcomed the decision.

"This is a happy day for all followers of Islam who do not want to be tossed on the garbage dump of Naziism," Spong told reporters in Amsterdam.

First of all, banning Mein Kampf is problematic in and of itself. It is this very book-banning which lends support to calls for any other books to be banned. If Mein Kampf is bannable because it promotes intolerance, why not ban religious books? For example, the Old Testament clearly promotes intolerance of non-Hebrews; why not ban the Old Testament? If Mein Kampf is bannable because it advocates a purportedly universal ideology, why not ban the Koran, which advocates a world united in Islam? Why exactly is Mein Kampf bannable, and who decides what the grounds are for a ban?

Second, all that Geert Wilders has done is call for a ban. This is far more peaceful than strident street demonstrations calling for the sacking or killing of editors who publish "sacrilegious" cartoons. Where are the calls for criminal prosecution of those people?

In our view, freedom of expression gives us the transparency by which we can identify stupidity, ignorance, intolerance, and hatred. It takes much, indeed, for an expression to amount to "incitement", and "inciting hatred" is nowhere near imminent enough to be a "clear and present danger." We are reminded of the wisdom of Justice Brandeis' concurrance in Whitney v. California, 274 U.S. 357 at 377 (1927):

To courageous, selfreliant men, with confidence in the power of free and fearless reasoning applied through the processes of popular government, no danger flowing from speech can be deemed clear and present, unless the incidence of the evil apprehended is so imminent that it may befall before there is opportunity for full discussion. If there be time to expose through discussion the falsehood and fallacies, to avert the evil by the processes of education, the remedy to be applied is more speech, not enforced silence.

If a person is so easily incited to act on his hatred that he would take action "so imminent it may befall before there is opportunity for full discussion", Law Law Stud believes such a person is not reasonable at all. The fact that Islamic groups have taken the time to protest Geert Wilders' provocative suggestions is clear evidence that they are not so unreasonable as to be incited to imminent action by such insults.

Is the Amsterdam Appeals Court really suggesting, then, that Muslims are not reasonable? In a society that prides itself on tolerance, such low expectations are nothing if not soft bigotry most intolerant.

[Adapted from Between Worlds]