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By Dave Hoffman

The Tomtit Theory of Consideration

I’ve been teaching contracts for a decade, and I thought I’d heard of everything.  Then I came across this squib from Corbin on the adequacy of consideration:

“The rule that market equivalence of consideration is . . . to be left solely to the free bargaining process of the parties, leads in extreme cases to seeming absurdities. When consideration is only a “peppercorn” or a “tomtit” or a worthless piece of paper, the requirement of a consideration appeared to Holmes to be as much of a mere formality as a seal…”

A peppercorn or a tomtit?  I know what the peppercorn theory of consideration is. Basically, consideration can be something of trivial value, so long as that value isn’t easily reducible to a certain sum, giving rise to the problem of inadequacy of exchange.  Some years I’ve brought in a peppercorn, suggesting that it could – in some law school hypothetical universe – have subjective value to a particular student.  (Perhaps a deity’s face is carved  on it?  Really.) Most law students have their semesters spiced up by reading about peppercorns in contracts.  It’s like the Erie doctrine: apparently iconic, mysterious, deeply bizarre law.

But has anyone else ever taught that consideration can be a tomtit?  A tomtit!  In case you were wondering, a tomtit is a small New Zealand bird. Where did Corbin come to rely on this small bird to illustrate the point?  An older (still) English case, Couldery v. Bartrum, 19 Ch. D. 394, 399 (1881), held that a creditor could take “a horse or a canary or a tomtit.”  Couldery was in turn cited and popularized by Ames in his 1899 HLR article, “Two Theories of Consideration.” But, excepting a few stray references in the law reviews in the last two generations, no one refers to tomtits anymore.  Peppercorns have replaced them in law school classrooms, though they are demonstrably less visually interesting, and wouldn’t give rise to the opportunity for a double lesson in tomtit gender identification.It’s time to bring tomtits back.

 

 

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The [Law School] Adjunct Problem

American higher education, under pressure on all fronts, has squeezed adjuncts. Adjuncts, in turn, have protested in a variety of public fora, and now seek government regulation to ameliorate the conditions of their employment. In general terms, the problem is this: universities have high fixed labor costs (TT faculty), weak manager oversight - and consequently spiraling costs, and increasing student demand for expensive facilities. Their ability to raise prices is constrained (at least more than it used to be.)  The result is that adjuncts, who typically aren’t organized and who have little job security, can be treated like workers in the rest of the economy – i.e., terribly so long as market conditions permit.  At a variety of schools – including mine – unionization movements are afoot.

One wrinkle concerns the “fate” of law school adjuncts. Law schools typically employ adjuncts to teach cutting edge areas in practice, and those adjuncts are almost always otherwise employed as full-time lawyers and judges. Those lawyers and judges provide students with opportunities to understand developments in practice that no full-time instructor could deliver (whether or not that instructor ever writes a law review article). They also can be sources for leads on jobs, and can model professionalism.  The networking and professional development street runs in both directions.  For many law school adjuncts, association with the school brings significant professional benefits, which are more likely to motivate taking the gig than the relative pittance adjuncts are paid. Lawyers routinely highlight their law school teaching expertise in advertising – “Teaches criminal advocacy at X…”, “Professor teaching ERISA at Y….”  (I can’t prove that clients care about this kind of puffing, but the prevalence of claims in the market suggests they might.) Adjuncts also can use the experience to deepen their knowledge of a field, thus improving their skills.  Or, as Eric Goldman once commented, “There are lots of good reasons to be an adjunct, but the pay is definitely not one of them.”

Now, like university adjuncts more generally, law school adjuncts can feel like second-class citizens. They are rarely if ever even mildly integrated into the faculty.  They usually teach in the evening (when their practices permit them to).  They don’t have offices on campus.  And teaching takes more time than many of them have to give. With that that said, mandating that law school adjuncts be treated like teachers in the rest of the university – and given higher benefits and salary –  is profoundly foolish and unwise.  I realize that that is very easy for me to say.  But  I have heard that at many schools, university-wide adjunct policies designed to make adjuncts’ lives better – some, of course, prompted by unionization - have had perverse effects when applied to law school adjunct faculty.   Law schools are already stretched thin, and there already is a secular trend against adjunct teaching given the reduced numbers of students.  When lumped in with & bumped up with the rest of the university’s adjuncts, law schools respond by employing many fewer adjuncts.

And even in a better law school market, law school adjuncts really are differently situated than their undergraduate counterparts.  Treating them like...

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Article Stub: Contracting into Federal Common Law

 

[I'm writing a series of posts I call article stubs - the germs of papers I'll likely never write. Here was the first, finding offerors under 2-207. Dan Markel might - or more likely might not - approve. I used to talk about these pre-draft ideas with him, and he mercifully steered me off most of them before they saw the light of day. In his honor, here's another bad idea. Feel free to tell me so.]

“There is no general federal common law.” We all know it, even though we sometimes, wrongly, qualify the statement “…in diversity cases.”  Though the decision’s constitutional roots are at best obscure, Erie teaches us that federal judges can’t create substantive rules of decision without constitutional or statutory sources. It’s an iconic case – and an ironic one, as it might be an example of the roving lawmaking that it abjures.

But what if you generally liked that set of precedents that followed Swift and preceded Erie?  What if you, as Justice Swayne once did, proudly hold that “We shall never immolate truth, justice, and the law, because a state tribunal has erected the altar and decreed the sacrifice.” What if you just wanted to empower federal judges hearing your contracts case to resort to their own intuitions – guided, no doubt, by the informed views of other federal courts.  Could you contract into a general federal common law framework? Under traditional conflicts principles, the answer is likely “no.”  See Restatement 187 cmt. f (“The forum will not, for example, apply a foreign law which has been chosen by the parties in the spirit of adventure or to provide mental exercise for the judge. Situations of this sort do not arise in practice.” ) But traditional conflicts principles needlessly discourage innovation and now motivate parties to choose  arbitration (where they can benefit ex ante by giving ex post discretion to decisionmakers.) Courts should accept a wider range of choice of law clauses, and should start by permitting parties to opt out of Erie.

Discuss.

 

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Article Stub: Finding Offerors under 2-207

[I'm planning to write a series of posts I'll call article stubs - the germs of papers I'll likely never write. Dan Markel might - or more likely might not - approve. I used to talk about these pre-draft ideas with him, and he mercifully steered me off most of them before they saw the light of day. In his honor, here's a bad idea. Feel free to tell me so.]

 

UCC 2-207, the battle-of-the-forms provision, is famously a mess.  White and Summers describe it as “an amphibious tank that was originally designed to fight in swamps, but was sent to fight in the desert.” That’d be even more accurate if you replaced “tank” with “Ford Pinto.”  Complexities about.  (Check out this fabulous flowchart produced by one of my students, which provides one path through the maze.) But even if you work  your way through the various intricacies of the provision, resolving debates about the meaning of “expressly made conditional,” and the “knock-out rule,” a deep policy problem lurks: who, exactly, is the offeror?

The question is important because, although the provision was designed to account for a flurry of forms, it clearly privileges those forms which come first-in-time, typically finding the first mover to be an offeror. Unfortunately for the second mover (which can be a nano-second slower online) the merchant offeree’s additional terms are incorporated into the contract only if they are immaterial. Most terms that you’d care to litigate about are material. Summers and White point out that avoiding first form favoritism is an important policy goal, but proceed by privileging that first form as the offer anyway.  (See the 4th edition of their Hornbook, p. 32, n.3)  We can see the importance of the choice clearly by pairing Hill (offeror is the firm) with Klocek (offeror is the consumer). But the cases stand uneasily against each other, because the key analytic move (who goes first and why) is buried — to be fair, less so in Klocek than in Hill. (I’m sweeping broadly here, and avoiding knock-out complications.)

At some level, this confusion is unavoidable – 2-207 is a badly drafted mess.  But in particular here, the problem is that although important consequences flow from making one or the other party the offeror, the Code provides no guidance in making that choice – it doesn’t even use the word offeror in the section.  Doctrine would be marginally  more clear if we made the decision as to who is the offeror explicitly a policy choice. Courts might, for example, make sellers offerors because they bear default liability burdens (warranty, nondelivery) under the UCC. Or courts could empower buyers because they typically initiate transactions, thereby spurring commerce.  Or make the choice depend on some kind of rough information-forcing default allocation.  The key realization is that 2-207 buries the lede, and that courts which simply follow the provision leave us in the dark.

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Evolving Contract Schemas

With co-authors, I’ve been working on a series of experimental papers about contract law that appear to be converging on a theme: what individuals think “contract” means has purchase in the real-world, and that contractual schema is evolving.

A schema is nothing more than a mental model – a framework – to help us organize and process information. A contract schema is the set of background assumptions that we fill in when we think about a legally operative bargain. For those of us who grew up in a largely off-line world, our contract schema involve “doing the paperwork,” “getting it in writing,” and “signing on the dotted line.” (See this article for details). Indeed although most contracts law professors make fun of the metaphor of meeting of the minds, it captures a real heuristic for a certain segment of society. That so even though form contracts have been part of modern life since the 50s, and almost none of of ever actually negotiate contracts that could end up in court. Indeed, when I started teaching in 2004, students routinely would say “she signed it, she must be bound to it,” even in cases like Specht.  Since this mental model is quite a ways from the reality of online contract, consumers may think they are in contracts when they aren’t, and visa versa.

But what happens when contracts widely explored in pop culture – and presented to you in your formative years – were never signed, never reduced to writing, never negotiated.  The cheerios arbitration debacle, facebook’s demystified terms, your cellphone contract, your cable company’s impossible-to-escape relationship.  What happens when every time you think “contract,” you don’t call up the mental image of a “signature on vellum” but instead “loki on steroids.”  And when companies, realizing this, increasingly pushed “no contract” plans that were actually contracts, just without penalty clauses attached.

Perhaps citizens born after 1980 will have dramatically different attitudes toward contract than those born before. If that’s true, we’ll increasingly find cohort effects in contracting behavior online, as lay intuitions about how to respond to “contract” increasingly turn on the age of the promisee. For those coming of age offline, “click to agree” calls up memories of signature, and consequently infuses bargains with personal honor; for those born digital, “click to agree” means “nothing good is about to happen to me.” Those attitudes toward contract will play out in behavior – in likelihood to breach, to shirk, and to behave opportunistically.

At some point we expect to have direct evidence worth sharing in support of this argument! For now, I thought start discussion by fast forwarding fifteen years, when many judges born in the digital age will have assumed the bench. What changes in contract doctrine follow from changes in contract’s schema? Then again, will there be any contract cases left to decide, or will they all been sucked into arbitration’s black hole?

 

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