Old cases with weird facts still define our law of contracts

May 25, 2006 11:30 AM

Modern contract law, which frames and defines our modern economy, is shaped by old and rather mundane disputes. Consider some of the seminal cases: Hadley v. Baxendale (1854); Hamer v. Sidway (1891); Carlill v. Carbolic Smoke Ball Co. (1892); Mills v. Wyman (1825). These cases, while minor in their actual factual footprint, still shape the world of contracts over a century later. (more about the cases inside)
posted by dios (32 comments total)

In Hamer v. Sidway, William Story promised his nephew $5,000 if he would refrain from drinking, using tobacco, swearing, and playing cards or billiards for money until he became 21 years of age. The nephew agreed to the deal and avoided those activities until he was 21. The nephew assigned his right to the money to Hamer, who then pursued the debt. The executor rejected the claim and argued that the contract lacked consideration. The Court sided with the nephew and put forth the rule that consideration may take the form either of some return benefit being received by the person making the promise (the promisor) or some detriment, forbearance, or loss being suffered by the person to whom the promise is made (the promisee). The nephew suffered a detriment by restricting his lawful freedom as requested by his uncle. This forbearance, regardless how slight, constituted a good and valuable consideration for the uncle’s promise.

Carlil v. Carbolic Smoke Ball is a case with facts that could have made PT Barnum proud: The defendants, the proprietors of a medical preparation called "The Carbolic Smoke Ball," issued an advertisement in which they offered to pay £100 to any person who contracted the influenza after having used one of their smoke balls in a specified manner and for a specified period. The plaintiff on the faith of the advertisement bought one of the balls, and used it in the manner and for the period specified, but nevertheless contracted the influenza. Carbolic attempted to argue that there was no contract because it lacked the typical offer and acceptance, but the Court ruled that the advertisement was an offer of a unilateral contract between the Carbolic Smoke Ball Company and anyone who satisfies the conditions set out in the advertisement. Once Mrs Carlill had satisfied the conditions she was entitled to enforcement of the contract; the notification of performance of the conditions formed part of the acceptance. (The rule form this case was the basis for the ruling in the famous Leonard v. Pepisco {Harrier} case).

Mills v. Wyman is a great story. Seth Wyman is the son of Capt. Ross Wyman who led an artillery detachment company on the march against the British at Lexington, April 19, 1775. Seth's son Levi runs off to join the Navy to be like his grandfather. In February of 1824, he washes ashore in Connecticut. Levi was very sick--likely from alcohol over-consumption--and is taken care of by Daniel Mills in Hartford. For several weeks, Mills feeds and nurses Levi back to health, as well as paying for the top physician to come in and take care of Levi. After Levi became well and left, Seth Wyman thanked Mills for being a good Samaritan and promised (maybe) to repay the costs of caring for Levi. However when Mills tried to collect, Wyman refused. Mills sued. From this case we get the rule that a moral obligation is not consideration sufficient to make a contract. Wyman didn't have to pay, although the Court did chastise him in print for all first year law students to read.

Perhaps the most famous contracts case of all is Hadley v. Baxendale, decided by the English Court of Exchequer in 1854. Priday's mill in Gloucester ground to a halt because of a cracked crankshaft. To get a new one made, it was necessary to send the old one, as a model, to the manufacturer of the mill's steam engine, in Greenwich. The miller sent one of his workers to a carrier's office to see how long the delivery would take; the worker told the carrier's clerk that the mill was stopped, and that the shaft must be sent immediately. The clerk replied that if the shaft was received by noon, it would be delivered the next day. The miller presented the shaft to the carrier before noon the next day and paid the fee to have it transported; but because of the carrier's neglect it was delivered several days late, with the result that several additional days passed before the mill got back in service. The miller sought, as damages for breach of the shipping contract, his lost profits for those days, which were of course many time what the carrier had received as the shipping charges. From this case, we get the rule that "the loss of profits here cannot reasonably be considered such a consequence of the breach of contract as could have been fairly and reasonably contemplated by both the parties when they made this contract"---or, the foreseeability of damages.

Of course, some of the cases are not as old, but even more strange such as the infamous Hawkins v. McGee, or as it is more well known as, "The Hairy Hand Case." (It was featured in The Paper Chase). Hawkins had injured his hand in an accident, and he went to Dr. McGee to get it fixed. Dr. McGee promised, "I will guarantee to make the hand a hundred per cent perfect hand or a hundred per cent good hand." The surgery was not successful, and Hawkins ended up with a hairy hand due to the skin used in the graft. Hawkins was rightfully angry, and he sued saying he was promised the value of a "perfect hand" and didn't get it. From this case, we get the rule of expectation interest.
posted by dios at 11:30 AM on May 25, 2006 [1 favorite]

Interestingly, some of these cases are being revisited through new eyes, informed by the law and economics revolution of the last 30 years or so. For example, until 1799 English judges were paid fees on a per case basis, and courts had overlapping jurisdictions. Some commentators [pdf] theorize that this administrative quirk resulted in pro-plaintiff rules as judges competed for plaintiffs' forum selections. Although all the cases were decided after the reform in English judicial fees, it's fun to go back and reread these cases and look for hidden biases and incentives.
posted by monju_bosatsu at 11:45 AM on May 25, 2006

Good point. I think the opinion in Hadley was wrong, despite the fact that the rule was correct. It always seemed to me that they Court was trying to protect the carrier. The Court seemed to land on the right rule and still wrongly rule in the carrier's favor:
Even based on the "new" rule--that only reasonably foreseeable damages are recoverable--the miller rather than the carrier should have won the case. The court's opinion simply overlooks the fact the carrier was informed that the mills was stopped; it must have been quite clear to the carrier's clerk that restarting the mill was the reason for the haste, and that profits would be lost while the mill was idle.

Of course, as has been said, that is the genius of the common law: the actual outcome of the case is irrelevant; the rule was right and the rules are what we follow and refine while facts can be distinguished and ignored.
posted by dios at 11:52 AM on May 25, 2006

It's not like those cases shape the world of contracts. It's more like they are the ones left standing. Plenty of contract cases in the past have been modified and overwritten. Compare the postal acceptance rule cases with the instantaneous communication rule cases for example.
posted by zaebiz at 12:00 PM on May 25, 2006

Very educational, thanks.
posted by IronLizard at 12:11 PM on May 25, 2006

I'm not sure exactly what you mean, zaebiz. It's certainly true that rules come and go as times and business change, indeed that's the very nature of the common law. Nonetheless, some of the rules embodied in these cases are still crucially important concepts, like foreseeability of damages, or forbearance as consideration. There is a reason these cases are still taught in law school.
posted by monju_bosatsu at 12:12 PM on May 25, 2006

Consider Carlill. If the exact same circumstances occurred today, would Carlill be invoked? No chance. Modern consumer protection law is far stronger and more applicable in this case. These cases are just the first coat of paint on a house that are still exposed after many years because they are too hard to get to. The current coat of paint is vastly different from the original.
posted by zaebiz at 12:25 PM on May 25, 2006

A) Excellent tags, dios.

B) I am very disappointed that, contrary to the promise on the front page, none of these cases involved semen. Well, one involved seamen. But that doesn't count.

C) These cases make me see the virtues of civil law over common.
posted by GuyZero at 12:27 PM on May 25, 2006

> until 1799 English judges were paid fees on a per case basis,

HEY, that reminds me of mandatory binding arbitration, except the defendant picks the "judge" firm. Nearly every consumer contract of adhesion, like your credit card, cell phone, and new home, requires you to "arbitrate" via a firm picked by the company, and paid by the company, in a location chosen by the company.

Arbitration seems like a company bought court system where decisions don't have to be explained, there is no case law, no discovery, and no appeal, and their own statute of limitations and limits on recovery.

I recently got a insert in one credit card bill where the company EXCLUDED an arbitration firm, presumably because they did not decide in the companys' favor often enough.

The latest trick is to require class arbitration. A company like Jamster could cram an extra $2 on a million cell phone bills and not be subject to a class action suit.
posted by dand at 12:38 PM on May 25, 2006

That's where you're wrong, zaebiz. While it's true that traditional contract law has been preempted in certain contexts, it's also quite true that the notion of acceptance by performance in unilateral contracts is still quite well rooted. Indeed, dios gives you an example of modern reliance on the Carlill case right in the post: the harrier case.
posted by monju_bosatsu at 12:39 PM on May 25, 2006

Consider Carlill. If the exact same circumstances occurred today, would Carlill be invoked? No chance.

Read the Leonard case I cited for you.

It's a 1999 case involving Pepsi' offer to (probably jokingly) to give a Harrier Jet Fighter to anyone who collected 7,000,000 Pepsi points.

Read the opinion. Carlill is extensively cited and quoted. Whether it is dispositive on the ultimate issue is irrelevant; the beauty and power of the common law is how it grows over time. To say that these cases haven't in many ways shaped our law of contracts is to be silly. As monju_bosatsu pointed out, there is a reason why they are the one's taught in contracts.
posted by dios at 12:39 PM on May 25, 2006

Danzig has a book where he investigates and presents the facts surrounding cases in more detail then the court has when they make decisions. His coverage of Hadley was amazing. He traced the legal professions treatment of the case over the years. The case is not seen as particularly noteworthy in England.

American Casebook writers adopted a specific court record of the case (Court records at the time were neither as carefully recorded nor as standardized in their presentation as they have become.) Hadley is probably not even the best old case for consequential damages, but it was what Langdell's early casebook authors had access too so they used it.
posted by BeerGrin at 12:56 PM on May 25, 2006

I hadn't heard about the suit until reading this thread, but I remember seeing that Pepsi ad and immediately thinking they were setting themselves up for one of the stupidest, most avoidable suits in a long time.
posted by aaronetc at 12:56 PM on May 25, 2006

I just wanted to point out that the Harrier case is also worth reading for the section where the judge explains to the Leonard why the commercial is funny.
posted by ROU_Xenophobe at 12:57 PM on May 25, 2006

What Pepsi should have done was simply have the commercial state that Harriers cost 700 billion points, so they'd make a profit on any Harriers that were demanded.

Also, he is presumably merely a Leonard, not the Leonard.
posted by ROU_Xenophobe at 1:00 PM on May 25, 2006

DanD:

Did you have Woodward for K's I and II at Temple too?
posted by BeerGrin at 1:00 PM on May 25, 2006

BeerGrin: That's not true - HvB is the foundation of damages for breach of contract in the UK and was the first case I learned in law school. It's used all the time.
posted by patricio at 1:14 PM on May 25, 2006

ergh - in England and Wales - UK law does not exist and Scots law is frequently different from English.
posted by patricio at 1:19 PM on May 25, 2006

Yay. I enjoyed reading this.
posted by beerbajay at 1:22 PM on May 25, 2006

Don't forget Lucy v. Zehmer.
In his testimony Zehmer claimed that he "was high as a Georgia pine," and that the transaction was just a bunch of two doggoned drunks bluffing to see who could talk the biggest and say the most."
posted by exogenous at 1:31 PM on May 25, 2006

I am surprised that nobody has mentioned Donoghue v Stevenson (1932), in which the finding of a decomposing snail in a bottle of ginger beer led to the decision that established the right of consumers to sue the company that made the ginger beer, rather than the shop that sold it.

Frequently called 'the snail case, the decision of the House of Lords founded the modern tort of negligence, both in Scots law and across the world in common law jurisdictions.

More on Wikipedia
posted by sindark at 1:44 PM on May 25, 2006

C'mon sindark, this is Contracts, not Torts! cool case, though
posted by exogenous at 1:50 PM on May 25, 2006

Founded the modern tort of negligence

There is your answer. I was exclusively looking at contract cases.

Tort cases are worthy of their own post!
posted by dios at 1:50 PM on May 25, 2006

Don't forget Lucy v. Zehmer.

Yes. That is a good one. I thought about it, and was going to post after the Hairy Hand case when I said "Of course, some of the cases are not as old..." but I ran out of time on my lunch break before I could get to Lucy v. Zehmer. But thanks for picking it up because it is a funny case (enforceability of drunk pissing match). There are lots of others that I could have put into it, and if I get time later, maybe I'll put them together in a comment.
posted by dios at 1:52 PM on May 25, 2006

C) These cases make me see the virtues of civil law over common.

Really? It's the opposite for me. Civil law has little continuity, is shaped by the whims of the time and is often rigid to the point of absurdity. Cases like this that stand the test of time highlight the value of precedent, until a logical legal argument can be made to overturn or modify them. In something as fluid and living as contract law (as opposed to say, the criminal code or a traffic act), do you really want lawmakers trying to conceive of every possible scenario and drawing up complex meandering legislation instead of establishing (relatively) loose guidelines and principles and having judges adapt as required by the environment?

Incidentally, when the "Anglo-Saxon work ethic" (or is it Protestant?) is discussed, I have a feeling that British/Australian/Canadian/American common law flexibility and dynamism has more to do with economic success than any inherent predilection towards effort or "style of capitalism".

(good post!)
posted by loquax at 2:06 PM on May 25, 2006

Whether it is dispositive on the ultimate issue is irrelevant

It is ok? Oh ok.

the beauty and power of the common law is how it grows over time.

A lot of old cars are beautiful pieces of machinery too but I wouldn't drive them on today's roads.

Anyway my point has been made I think. I thought the post was very interesting (hence my participation) and would like to see you and others post more like this.
posted by zaebiz at 2:22 PM on May 25, 2006

zaebiz: just because they're old, doesn't mean the concepts contained within are obsolete. your "old car" analogy is misleading.

a better analogy, what i think dios is trying to show, is that these cases are more akin to the wheels on the "car" that is modern day contract law.

i like Pierson v. Post. a fundamental property law case (i know, not contracts) that revolves around the killing of a fox.
posted by karson at 3:28 PM on May 25, 2006

[this is good]
posted by killdevil at 4:17 PM on May 25, 2006

If someone does a full post on torts, Palsgraf is a must (exploding fireworks via Rube-Goldberg-like chain reaction).
posted by exogenous at 4:43 PM on May 25, 2006

Does the Hairy Hand case mean I can sue Larry Flynt for my furry palm?

Interesting stuff!
posted by Alvy Ampersand at 8:38 PM on May 25, 2006

Heh. I spent the last year living with a 1L. My first thought was: DOUBLE. :-)
posted by anotherpanacea at 11:52 PM on May 25, 2006

I loved the Mills-Wyman story, and the Watson article about it was very well written. The conclusion about "moral obligation" was succinct and convincing:

Actions, too, might create moral duties. Even relationships can create moral duties. If Seth Wyman's words did not create such a moral duty, Seth may still have been morally responsible by virtue of his relationship to his son. Quite simply, it is impractical to enforce all moral duties; there are too many of them.

Conversely, there are some nonmoral duties that should be enforced because enforcement is efficient—that is, because the benefits of enforcement outweigh the costs. It is hard to imagine a moral system that demands that people drive on the right side of the road, or that acceptance be effective on dispatch, but legal systems routinely enforce such obligations. As H.L.A. Hart said, "[t]he rules of international law, like those of municipal law, are often morally quite indifferent." This is not to say that rules of law are always or usually morally indifferent. There must be some overlap between law and morality, even if that overlap is more complete in some areas than others. But some statements and actions should give rise to legal liability even if they do not involve moral obligations. Some division between law and morality is inevitable.

Great post!
posted by languagehat at 6:03 AM on May 26, 2006