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On unilateral contracts

In the common law of contracts much significance is attributed to the distinction between bilateral contracts (formed by an exchange of promises) and unilateral contracts (formed by the exchange of a promise for the completion of an act or acts stipulated by the promisor). The distinction is still writ large in the Restatement (Second) of Contracts: see, e.g. § 30 (offer may invite or require acceptance to be made by affirmative answer in words, or by performing or refraining from performing a specified act); § 32 (in case of doubt an offer is interpreted as calling either for acceptance by promise or performance at the offeree’s election); § 45 (where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it). As a conceptual category, unilateral contracts may have some limited practical value in making enforceable promises that unequivocally require the promisee to engage in acts and, by implication, to incur the associated expenditure of time and resources. The classic example is the “reward” contract: (“I promise to pay $100 to the person who finds my lost dog Fido and returns him to me”). If someone goes to the trouble of searching for Fido and succeeds in finding and returning him to his owner, I guess that most of us would think it only right that the law should compel the promisor to pay up. So the concept does do some useful work.

 

However, to my mind, the common law overemphasizes the importance of unilateral contracts in ways that are unhelpful from both a teaching and learning and a real-world perspective. The binary structural distinction between bilateral and unilateral contracts implies that both concepts have equal practical value. Accordingly, if we’re not careful, students begin to see unilateral contracts everywhere when, in truth, they are outliers. As it happens, contract law is structurally biased in favour of bilateral contracts and this makes sense from a practical perspective. Most parties want to be sure that they are legally bound before they begin performing rather than expend time and resources in performing acts that will only result in formation of a contract at some future point. Even so, I frequently see students confuse “performance” of an act leading to the formation of a unilateral contract after completion of the act with “performance” of a legally binding obligation under a bilateral contract, a much more important and practically significant concept.

 

I suspect that we law teachers remain beguiled by unilateral contracts because much of the case law on the topic is so weird and colourful.  The locus classicus of unilateral contract doctrine involved a late-nineteenth century English flu remedy, the carbolic smoke ball. More recent cases are equally off the wall. Examples include Leonard v. Pepsico, a case in which the plaintiff failed to enforce a Pepsi advert that jokingly suggested that Pepsi reward points could be redeemed for a harrier fighter jet.  Then there is Kolodziej v. Masonin which a law student plaintiff failed in his attempt to use unilateral contract theory to recover a million dollars from a criminal defense attorney having successfully demonstrated that it may have been possible for the attorney’s client, who was on trial for murder, to get from Atlanta airport to a specified hotel in less than half an hour, despite the attorney’s public statements to the contrary.

 

Don’t get me wrong.  Weird and colourful cases have their pedagogical uses.  But, to my mind, outlying cases are usually the product of outlying doctrine.  So I hope my students will forgive me for siding with the famous American scholar and jurist, Karl Llewellyn, who wrote more than seventy years ago in the Yale Law Journal that unilateral contracts are rare and unimportant and should be relegated to the “freak tent”. You won’t be spending too much time on them with me!

Bob Denney of Robert Denney Associates, Inc posted his annual “what’s hot and what’s not in the legal profession” state of the union recently on attorneyatwork.com. It provides a useful snapshot of growth practice areas and other market information. Among the areas that are hot right now are: intellectual property, technology, labor & employment, and compliance (especially Foreign Corrupt Practices Act compliance). I’m happy that Chicago-Kent students have opportunities to study in all of these areas: see herehere, here, and here.

It’s that time…

The end of semester is nigh and the exam period is upon us.  I’ve had a great semester working with another group of smart and engaged 1L contracts lawyers.  My main message to my students at this time may seem a little counterintuitive. It is this.  If you’ve kept up with the work along the way, now is not the time to start working any harder.  You have to trust yourselves that the work is done, look after yourselves, develop a sensible and manageable study schedule, stick with your ordinary routines, and maintain those circadian rhythms to maximize your energy and alertness levels.  Like most of the things I tell students, this all smacks of motherhood and apple pie.  But over twenty years of doing this job, I have seen many very good students crank themselves into a frenzy around exam time and under perform as a result.  As we say where I come from, don’t burn the candle at both ends.

For more similar and related advice see here, here, and here.

Hard on the heels of the advice I posted from Jordan Furlong, here is some more advice – this time from Ariel Salzer over at the Law School Toolbox site.  Ariel’s post is titled, “How Being a Law Student and Functional Human Don’t Have to be Mutually Exclusive – Finding Balance”.  Message to my 1Ls.  Consider this assigned reading.  Indeed, consider it the most important material I’ve assigned you to read this semester!!

Canadian lawyer and consultant Jordan Furlong has a great piece out this month in the American Bar Association’s  Student Lawyer publication. It’s titled, “Don’t Think Like a Lawyer”.  A “must read” for all 1Ls in my view!

Music for contracts

My students know all too well that I’m a music fan.  One of my teaching gimmicks is to associate material to be covered in class with particular songs.  I could make the pious claim that this is part of a calculated attempt to enhance student learning by creating what this source describes as a “soundtrack for a learning activity”.  But, for the most part… well, I just like music.

So far this semester, we’ve had Loudon Wainwright III’s “Down Drinking at the Bar” (in the class on Lucy v. Zehmer)

 

…Marvin Gaye’s “I Heard it Through the Grapevine” (in the class that covered indirect revocation of an offer)

 

…and Simple Minds “Promised You a Miracle” (in the classes on consideration)

 

I thought it might be difficult to come up with something for this week’s class on promissory estoppel.  One possibility is Jason Mraz’s, “You Can Rely on Me”.

 

A bit cheesy, maybe.  Then I stumbled across a character called Josh Keesan, a 2009 BerkeleyLaw graduate.  His website bio states:

 

“Josh Keesan, Boalt ’09, believes that there ought to be an alternative to the standard commercial study aids peddled to law students. He has toiled considerably in pursuit of this belief, and now, his selfless mission has borne fruit for law students everywhere: The Law of Rock, Vol. 1.

Put down your commercial outlines and treatises: here, for the first time, you can learn complex legal doctrines through these digestible pop-rock gems. Spend no more time puzzling over these once impenetrable concepts – the rock n’ roll antidote has arrived! On his first EP, he turns to the chestnuts of 1L year, pumps them through his infallibly infectious pop songwriting process, and ends up with songs guaranteed to boost your spirits AND your GPA.”

 

And, guess what, there’s a song on there that I will be urging all my students to add to their Spotify playlists and ITunes libraries… a song called “Promissory Estoppel”

Enjoy.

Back in June I posted about the American Bankruptcy Institute’s current efforts to reform Chapter 11 of the Bankruptcy Code. The University of Illinois Law Review has kindly agreed to post my very modest contribution to the ABI’s deliberations in which I try to articulate why I am sceptical about legislative attempts to dilute secured creditors’ rights in bankruptcy. The paper, accessible here, is entitled, “Statutory Erosion of Secured Creditors’ Rights: Some Lessons from the United Kingdom” and the abstract goes like this:

“Concerns about secured creditor capture of Chapter 11 are now part of the corporate bankruptcy reform conversation in the United States. So, for example, the American Bankruptcy Institute’s Commission on Chapter 11, scheduled to report and make recommendations for the reform of United States business reorganization law by the end of 2014, has the issue of secured creditors’ rights in bankruptcy squarely on its radar. The narrative is now well established and oft repeated. Whereas in the past, firms filing for Chapter 11 would come into the bankruptcy process with at least some unencumbered assets, modern firms tend to have capital structures that are entirely consumed by multiple layers of secured debt. And so, according to the prevailing conventional wisdom, Chapter 11 in the general run of cases has become little more than a glorified nationwide foreclosure process through which secured creditors can exit via a quick section 363 sale or an outright liquidation that is far from guaranteed to maximize the welfare of all creditors. But can concerns about the possible downside of secured creditor control of corporate reorganization be converted into effective reforms?

This paper (based on the author’s presentation at a symposium jointly sponsored by the American Bankruptcy Institute and the University of Illinois), offers insights from experience in England and Wales that, it is hoped, will assist reformers in the US to think through the possible consequences of certain types of reform proposal. The paper starts from the premise that lenders that are powerful enough to bargain for superior control and priority rights inside or outside of bankruptcy will be equally capable of adjusting to legal changes that affect, or are perceived as affecting, their interests.

Four ways in which lenders will adjust to “adverse” bankruptcy reform are identified: (i) meta bargaining; (ii) adjustments to pre-bankruptcy behaviour; (iii) transactional innovation; and (iv) shape shifting. The paper then illustrates how lenders in England and Wales have successfully adjusted to statutory attempts to undermine their bankruptcy priority and (via the abolition of administrative receivership) erode their control rights.”

I guess I may have to rethink the reference to the “United Kingdom” in the title if the Scots vote for independence on Thursday 18th September…

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