Index to Sections on Contract Law
| Contractual Duties of a Professor | Shrinkwrap Licenses |
| The Ballad of Willie and Lucille Peevyhouse |
Each of your professors has a contract with his or her institution to teach, do research, and perform public service. But exactly what are the conditions on your professor's use of his or her time? For instance, has a professor adequately fulfilled her duties to the college if she meets her classes but then spends all the remainder of her time away from the college conducting a private consulting business? Many colleges and universities put restrictions on their faculty's ability to get additional income through consulting. A common restriction is to limit non-college or non-university employment to a fraction of one's total time -- typically, one day per week -- and to require a reporting of that activity to the college and that the outside employment not constitute a conflict-of-interest with the college or university. An interesting example of just how far a professor can go has recently arisen in the case of Professor Arthur Miller of the Harvard Law School and the Concord University School of Law.
The Concord University School of Law is the first on-line law school. It opened about one year ago and has about 180 students. Concord is backed by the Washington Post Company's Kaplan Educational Centers. Students can get a law degree from Concord for less than $5,000 per year. The dean of students is in Boston; the dean of the faculty lives in Denver. Lectures and other class materials are delivered entirely through the Internet. The school can be accessed at www.concordlawschool.com.
Justice Ruth Bader Ginsburg criticized the school in a speech at Rutgers University: “I am troubled by ventures like Concord. I am uneasy about classes in which students learn entirely from home, in front of a computer screen, with no fact-to-face interaction with other students or instructors.”
The American Bar Association, which accredits the nation’s law schools, does not sanction the Concord program. This creates some problems for Concord graduates because many states only allow graduates of ABA-sanctioned law schools to take the bar examination to qualify for practice. "For the most part, Concord graduates will be able to take the bar exam only in California, which permits unaccredited schools to operate in the state.” (“Concord students, like those at other nonaccredited school, must pass a first-year exam—known as the ‘baby bar’—to continue their legal education.”) See Howard Mintz, “Establishment Skeptical About Digital Law Degrees,” Knight Ridder Newspapers, December 6, 1999.
In order to attract as many students as possible, Concord seeks to offer courses by prominent legal scholars. Among them is the distinguished Professor Arthur Miller of the Harvard Law School. In the Summer of 1999 Professor Miller, one of Harvard's most famous names, agreed to deliver lectures on civil procedure for Concord. He videotaped 11 lectures, which were shown as part of Concord's core curriculum. Professor Miller was, of course, paid for his services by Concord. (You may see Professor Miller's letter to prospective law students at Concord at www.concordlawschool.com/faculty.htm.) At the same time he remained a tenured member of the Harvard faculty.
Harvard took deep exception to Professor Miller's affiliation with Concord. It finds the affiliation to be a conflict of interest that raises questions about Harvard's duty to retain Professor Miller as a tenured member of its faculty. In reply, Mr. Miller argues that he isn’t teaching at Concord. "He never meets, interacts, or exchanges e-mail with any of the Concord students. They are tested and graded by other faculty at the school." Moreover, Professor Miller finds Harvard's objections misplaced. "The university never objected to his high-profile forays into TV, including a stint as legal editor of ABC’s ‘Good Morning America.’ Indeed freelancing is a way of life at Harvard, and the university officially permits faculty members to do outside consulting as long as it accounts for no more than 20 percent of a professor’s ‘total professional effort.'"
"In the case of Mr. Miller, he made all of his videotapes during the summer academic break from Harvard, when he had no teaching responsibilities. Concord students can watch his lectures on the Internet and then participate in online discussion groups with actual Concord teachers. In his letter to the dean [of Harvard Law School justifying his continued affiliation with Concord], Mr. Miller argued that Internet ventures cannot be considered teaching for another school because 'the very fact that these lectures will be videotaped means that I—in the corporeal sense—will not be giving them 'at' another educational institution.'" "Mr. Miller sums up his case differently: 'How much of Arthur Miller does Harvard own?'" (See Amy Dockser Marcus, "Seeing Crimson: Why Harvard Law Wants to Rein In One of Its Star Professors," Wall Street Journal, A1, col. 6 (November 22, 1999).)
Question:
1. Do you think that Professor Miller has violated his contract with Harvard? Are there additional facts might you wish to know to resolve this matter?
2. Does the standard employment contract for professors contain an "implied duty of loyalty" or an "implied covenant not to compete"? What are the efficiency arguments for considering these as default or mandatory rules in the standard employment contract?
Back to Index on Sections on Contract Law
When you buy a piece of software, it typically comes wrapped in plastic called "shrinkwrap." You may have noticed that merely by breaking that shrinkwrap you agreed to the terms and conditions of license agreement with the software publisher. Most of us never read those terms. We simply tear open the package and start using the software. Are you bound to the terms of the license, even though you do not really read them? In ProCD v. Zeidenberg, 86 F.3e 1447 (7th Cir. 1996), Judge Frank Easterbrook (a distinguished law-and-economics scholar) held that "[s]hrinkwrap licenses are enforceable unless their terms are objectionable on grounds applicable to contracts in general." (at 1449)
Subsequent litigation has helped to establish some of those "objectionable grounds." For example, consider Brower v. Gateway 2000, Inc., 246 A.D.2d 246, 676 N.Y.S.2d 569 (1998). One of the terms in the shrinkwrap license limited the consumer to arbitration to settle any disputes with the company. (That is, the term excluded the possibility of bringing litigation against Gateway.] Moreover, the term required that the arbitration be conducted in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. Plaintiffs brought an action against Gateway in a New York court for relief on some matter to do with the computer they had purchased from the company. Gateway asserted the arbitration clause as an affirmative defense. The court held that these clauses are generally enforceable but that this one was substantively unconscionable. To make their arbitration claim, the plaintiffs would have had to follow this rule: a "claim of less than $50,000 required advance fees of $4,000 (more than the cost of most Gateway products), of which the $2,000 registration fee was nonrefundable even if the consumer prevailed at the arbitration." Moreover, the plaintiffs would have to travel to Chicago for the arbitration and were obliged to pay Gateway's legal fees if Gateway prevailed.
But the ProCD decision has also worked what some may consider to be harsh consequences. Consider M. A. Mortenson Company, Inc. v. Timberline Software Corp., 970 P.2d 892 (1999). Timberline distributed software to aid contractors in preparing bids for construction projects. The shrinkwrap license contained a term limiting damages to the amount paid for the software. That is, the term explicitly excluded consequential damages. There was a bug in the program that caused Mortenson to submit a bid that was $2 million less than what it should have bid. Mortenson lost the bid and sued to recover consequential damages, but the defendant asserted that he was insulated from any more than the paying a refund on the software purchase price by the term in the shrinkwrap license. The court held that the ProCD decision protected Timberline from consequential damages.
For economically informed analyses of shrinkwrap licenses, see Mark Lemley, “Intellectual Property and Shrinkwrap Licenses,” 68 S. Cal. L. Rev. 1239 (1995) and Michael J. Madison, “Legal-Ware: Contract and Copyright in the Digital Age,” 67 Fordham L. Rev. 1025 (1998).
Back to Index on Sections on Contract Law
The Ballad of Willie and Lucille Peevyhouse
One of the most famous United States cases on contract remedies is Peevyhouse v. Garland Coal & Mining Co., 382 P.2d 109 (Okla. 1962), cert. denied, 375 U.S. 906, excerpted on our Cases page. In the reported case the central issue is the appropriate remedy for the defendant-lessee's failure to restore the Peevyhouse farm after the company had finished strip-mining coal from the 60 acres it had leased for that purpose. The details of the case make for fascinating reading and have been very engagingly told in Judith L. Maute, "Peevyhouse v. Garland Coal & Mining Co. Revisited: The Ballad of Willie and Lucille," 89 Northwestern U. L. Rev. 1341 (1995). Among the many details that may be found in that article are these. The Peevyhouses were not naive about the terms of the lease. Their neighbors had entered into contracts with Garland for strip-mining, and the general terms were widely known around southeastern Oklahoma. The Peevyhouses chose to forego a customary $50 per acre reclamation fee payable at the time the parties executed the lease in favor of the reclamation clause. The decision by the Oklahoma Supreme Court was close -- 5-4. There were several petitions for rehearing by that court; there was vigorous discussion in the Oklahoma legal and legal academic community about the merits of the original opinion; and the court very nearly decided to hear the case. The justices of the Oklahoma Supreme Court who heard the case, contrary to law-school rumor, were apparently capable and honest men. We very highly recommend Professor Maute's article.
You might also look at Douglas Baird, Robert Gertner, and Randal Picker, Game Theory and the Law (1994), for a discussion of Peevyhouse. They consider -- at pages 150-53 and again at 224-32 -- the game theoretic aspects of the negotiations between the parties and conclude that an award of specific performance would have been a mistake.
Back to Index on Sections on Contract Law
© Copyright 2000, Robert D. Cooter & Thomas S. Ulen. All rights reserved.