dissecting the bargain contracts – prof. merges jan. 20, 2011
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Dissecting the Bargain
Contracts – Prof. Merges
Jan. 20, 2011
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Kirksey v. Kirksey
• Procedural History
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Kirksey v. Kirksey
• Procedural History
• What is the “agreement of the parties” with respect to the appeal?
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• “If you will come down and see me, I will let you have a place to raise your family”
–Is this a request for return performance?
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“Williston’s tramp”
• “If you will meet me at J. Press on Mt. Auburn Street, I will give you a new overcoat.”
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“If you will come down and see me . . .”
• Note 2., page 57
–“Lunchtime at Tiffany’s”
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Breakfast at Tiffany’s (1961)
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Which one resembles Kirksey?
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The key issue in Kirksey
• Is the return performance “sought in exchange for” the promise?
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Which one resembles Kirksey?
• Is the return action requested to make possible a gift?
• How can you tell?
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• What is the promisor’s motive?
• Is the return performance what the promisor wanted, or is it merely necessary to carry out the promisor’s true intention?
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Rest. 2d, § 71: Requirement Of Exchange; Types Of Exchange
(1) To constitute consideration, a performance or a return promise must be bargained for.
(2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise AND is given by the promisee in exchange for that promise.
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It’s simple: “reciprocal mutual inducement,” that’s the key!
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Employment Agreements
• What is an “at-will” employee?
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At Will
“Those whose employment agreements are terminable by either party at any time and for any reason, or for no reason at all.”
-- P. 58
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History
• Who sued whom, for what?
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History
•Who won?
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Court of appeals
• Result?
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Court of appeals
• “Certified question” (teeing up a Supreme Court decision)
• “Is subsequent employment alone sufficient consideration to support a promise” not to compete after termination?
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What does Lake Land Employment argue in the
Ohio Sup Ct?
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• There is consideration
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Agreement
• What was the key provision?
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Noncompete
“Columber will not engage in in any business within a 50mile radius of Akron, Ohio for three years following termination of employment”
-- P. 58
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Facts surrounding the signing
• When signed?
• What was said or promised?
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Hypothetical . . .
• What if Lake Land had said “if you sign this you get a raise tomorrow?”
• Or: “we promise not to fire you the rest of today”?
• Or: “not for the next three minutes”?
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Compare these promises with at-will employment
• What is the basic deal in an at-will arrangement?
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Ohio Sup Ct opinion
• History of common law reception of covenants not to compete
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Basic attitude . . .
• Quite negative
• Agreements “in restraint of trade”
• Guilds, royal privileges, “engrossing,” monopolies
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Blackstone, Adam Smith
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But in today’s modern economy . . .
•What is the rationale for enforcing covenants not to compete?
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Basic rationale
“Trust and cooperation . . . Share confidential information and secrets . . . Encourage productivity increases . . .”
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Judge Richard Posner
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Enforceability may be desirable, but . . .
• Where is the consideration?
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Employer Employee
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Employer Employee
Can a “covenant not to compete” be part of the consideration provided by the employee at the outset of employment?
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Employer Employee
What about after employment has commenced?
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Employer Employee
Staring salary
Agreement to work
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According to critics of noncompetes --
• What is the problem with enforcing them?
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According to supporters of noncompetes, where is the
consideration?
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According to supporters of noncompetes, where is the
consideration?
• Continued employment for a substantial time
• Additional compensation
• Additional training
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Employer
Employee
Raises, promotions, etc.
Agreement not to compete after leaving
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Employer
Employee
Raises, promotions, etc.
Agreement not to compete after leaving
T1
T2
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Employer
Employee
Same fixed term salary
Agreement not to compete after leaving
T1
T2
Fixed term salary
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What is the holding?
• There is consideration for the agreement not to compete; it is the continued employment of the employee
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Does this make sense?
• As described, was there consideration for the noncompete?
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Judge Resnick Dissent
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Resnick Dissent
• Where is the consideration?
• What has the employer bound itself to do that it was not bound to do before?
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Judge Pfeiffer
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Pfeiffer Dissent
• If this holding is good in one direction, it holds in both
• Thus standard at-will employment is converted at some point to something more: agreement by employer not to discharge for – how long? Open question
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Cal.Bus. & Prof.Code § 16600
Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.
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Employee Handbook cases
• Do they state implied employment terms different from “at-will”?
• Can the terms of employment be changed without formal revision of the contract, or without additional consideration?