Promises Promises: De Los Santos vs. Great Western Sugar Co.

Welcome back to your favorite contracts podcast. My name is Tess Wilkinson Ryan and I'm here with my colleague Dave Hoffman at the University of Pennsylvania. Today we're talking about what kind of promises you maybe don't have to keep, or if they're promises at all. In Deilo Santos versus Great Western Sugar Company. Let's get started. We are recording and today's case is Deilo Santos versus Great Western Sugar Company. A 1984 Supreme Court of Nebraska. Amazing. Tour de force. Tour de force of both rhetoric and comprehensible facts. You know, yes, let's talk about the facts because this is a case in which I think we need to explain the facts. It's, it's, it's real facts specific and involves some trucking minutia that might not be easy to discern. Okay, just as an unfold disclosure, I think we asked our teaching assistants for help in thinking about what are the cases that are either the best or the most confusing for you guys. And they gave us a list and it's pretty obvious that this is not one of the best cases in the semester. And so we're going to talk about it. I don't think either, either of us are super excited in the way that maybe we would have been excited to talk about tangush because of the intellectual garden of the lights. Or we were certain excited to talk about Jacob parenthesis S and young apostrophe S parenthesis S. Yes, because of the amazing writing. This case is neither well written nor interesting and yet it does contain a whole case about what's probably a drafting error. Yeah, that's right. Yeah. All right, so let's just let me give the factual summary because it's probably, you know, I'll just get that out of the way. So you've got the plaintiff who is a contractor who hauls stuff. He holds lots of different things, but he makes a contract with great Western in which he's going to haul beats for great Western. And they're obviously sugar beats, which is why it's great Western sugar company. And the contract basically says that the plaintiff, De La Santos is going to haul such ton of beats as maybe loaded by the company from piles at the beat receiving stations of the company. And unload them wherever the company wants them to go. And the contract is a little bit more than five months long. So it's during the beat that well known Nebraska beat hauling season season. Do you mind if I, do you mind if I read the term in question? No, I don't mind which comes up so often. Yeah, in the case not in life. The contractor, IE the plaintiff shall transport in the contractors trucks such tonnage of beats as maybe loaded by the company, IE the defendant from piles at the beat receiving stations of the company. And unload said beats at such factory or factories as maybe designated by the company, the term of this contract shall be from October 1, 1980 until February 15, 1981. That's the term we're fighting about. Yeah, yes, although to be fair, the contractor also promised some other things. So the contractor promised he would get insurance, he would have some modifications done to his trucks. I've always assumed that he put like large beat looking structures on the back of his structs that made them seem particularly beatish. However, that might just be not true. And he's going to get all the required certifications in order to get to haul agricultural produce. So he makes some promises to be able to, yeah, to be a food hauler. He makes, he makes this sort of the downstream promises that one needs in order to be a sort of a registered food hauler. And we know something else about the arrangement here, because we know something we know and we know that De Los Santos, the trucker knows that the sugar company also has similar arrangements with other truckers. Correct. Which turns out to be a fact that the court is very interested in. I think I would agree with that characterization precisely. Great. Okay. And so then historically, what happens? So two months in. Two months in. So we're now in in early December. Yes. And Great Western Sugar Company calls De Los Santos up and says, we don't need your services any longer. No more beats for you. That's right. Do not haul any of our beats. Is it because De Los Santos was a bad beat holder? Did he, did he bruise the beats? Did he, did he, did he sugar them for some particular reason? Not to our knowledge. Did he, did he say bad words to the beats? Did he make them feel bad about their, their beatness? I don't think he said bad words to anybody. In fact, he was a perfect caller of beats. Yeah. You kind of holler of beats. You'd want to hire this guy at a hall, even your radishes. Yes. And what he says is. I'm not talking about vegetables. He says is. I'm not saying I get to haul all the beats. I'm saying I am entitled to continue to haul until all the beats have been transported and some of your beats remain unhauled. Well, he's also saying that he had to sell his specialized beat trucks at a loss. And of course, he'd have themselves ready to perform so he didn't take other contracts. He says, I've really been hurt by the fact that you didn't let me fulfill the essence of our bargain. Although, yeah, but that's just a matter of proving the damages. That's not going to be so right. I'm just trying to make us feel better for his side of the case before we're going to probably make fun of his side of the case, right? Oh, I feel bad for him. Okay. Good. Yeah. It's terrible. I mean, I think, yeah. I mean, think about it. You walk around with your beat trucks like the other people in the street are making fun of you. His understanding is that he had a deal through February 15th, 1981. Right. December 1st, 1980. I will say that like many law students have a problem with the result of this case, which I take it is, there's no contract, no contract, no long term contract. What there are instead is every time he shows up, the company gets to decide to put the beats on a struck. And if they put the beats on a struck, he gets paid for that delivery. It's a series of spot contracts. Yep. And I think many law students say like, well, what was the point of this whole rigmarole about requiring him to do this stuff and have it in writing and say it's until February 1st, if you didn't mean those things. Yes. And so one way I think about it is it's drafting her. And the other way I think about it is it's exploitation by great, the big, by big beat sugar. Yes. Big beat, as everyone knows, is always looking to sneak these contractors into bad deals. And so the contractor presumably gave them a little bit of a better price because they thought they were going to be in a long term relationship because the contractor is just a sort of the earth person. But big beat knows that actually there's something called the illusory contract action and you can walk away from your contracts if they lack consideration. So let's do talk about this consideration issue because it feels like this is not what should be a consideration case. It does feel that way. Because usually, so many of our students will have, in fact, many of the students who read this case at all, will have recently read a case, a consideration case involving basically some family member promising to give money to some other family member. Yep. And those are cases in which the court says, we're not going to enforce that promise. There's no consideration because what's the bargain here? Let's say people aren't in it for any kind of bargain. This is just some kind of gift, right? Right. And there's no way that either Daniel Santos or great Western trigger company are in this deal for gift giving. You don't haul beats for love. Correct. This is a service for money transaction. Regular commercial transaction. And if you think that consideration is a doctrine that basically comes out of the industrial revolution in order to make, wait, do you think that I'm just excited to hear what you're going to say now. That basically just like ratifies the purpose of contracts as sort of financial instruments. These people are doing that exact thing. These are people in the middle of a stream of commerce, exactly participate and making a deal in order to get the best price on beats for beats. Yeah. This is not some, this is not some like, you know, sort of idiosyncratic family deal on the side. This is like a regular commercial transaction between two repeat plates. And it's obviously the case that if you were to ask Dela Santos, why did you go out and buy the model at the special beat modifications on your truck? Why did you go out and get insurance? Why did you forego those the radish hauling contract? You would say I was motivated by their counterperformance to give me a shot by money, by money, by the promise to be able to go give it a shot. And if you asked Great Western, why did you agree to allow him to pick up, you know, they would say, well, part of it was he promised to modify his trucks, he promised to show up, he promised to haul with reasonable diligence. And so if you think about it, and we like this price, right. And if we, so if we think about the whole point of consideration doctrine, are the promises mutually engaged, are the parties, usually engaged in counter promising, that rationale satisfied. - Yes, thanks. - And so. And then the court's like, yeah, but actually, you know, great Western only seemed to promise. It makes a promise, but it's not a real promise. It's an illusory promise. It's a promise that doesn't actually have content. I promise to do something for you if I want to. And the thing that's harder about that is the law seems to say, even if a reasonable normal person, sorry, a normal person would be motivated by that promise by great Western. A reasonable person would have looked with sort of like a like a squinty eye and said, like, I don't know that you're really promising that I can do this through February. Are you really? What would happen if there's no beats to pick up? Do I get paid? And so, and what's hard about the cases, so we just recorded, I don't know what the order that people are going to listen to is we just recorded this, the Jacobson Young case, you're probably going to listen to it later in the semester. And there we have this case in which Cardozo, who's also the writer of Lucy the Lady Duff, says, you know, contracting parties should be behaving in good faith and we should be assuming that they do and the law should sort of stand behind good faith intuitions. And here, the law does the exact opposite. Yes. You know, the court's like, well, looks like great Western, you got him, you got him this time. I'm going to actually read the course language here because I think it's helpful to unpack it a little bit. Great. So the court says, it is apparent that the right of the defendant to control the amount of beats loaded onto the plaintiff's trucks was in effect a right to terminate the contract at any time. In this rendered the contract as to its unexecuted portions void for want of mutuality. Let me just explain what that means first. Yeah, okay. "Want of mutuality" means lack of consideration. The unexecuted portions are the parts that you have that haven't happened yet. What's going to happen in the future? It is okay. So let me start with, is apparent that the right of the defendant to control the amount of beats loaded onto the plaintiff's trucks. Now, let's, can we talk about that for a second? Because it's kind of the case that like everyone in possession of stuff controls how much of that stuff is going to get loaded onto various trucks. I control the extent to which I'm going to load my possessions onto a U-haul or any given time. And since I've been stuck in this house for five months, that time might be really soon. Why here would the defendant's right to control the amount of beats loaded onto De Los Santos' trucks operate as a right to terminate the contract? So the deal says we great western sugar are going to pay you based on how much beats we put on your trucks. But we're not promising to ever allow you to do any beat homing at all. Exactly. So they say, so the courts basically saying insofar as they could have loaded zero beats. Well, insofar the parties have contracted for a spectrum. No, a time. They contracted for a time, but not for an amount. No, sorry, but I mean, but I'm in a range, a range of amounts. And if you could see if this was video for our listeners, you'd see that I'm holding my hands up to show range. Yeah, they're wide apart. I see it now. Yes. The idea is the court basically says the range in this term includes zero. And as long as it includes zero, we say that's basically just a right to sort of push the to sort of like push the button and say no deal. Is that how you read it? I don't think they're saying necessarily. I mean, I think there's one way to read what they're doing in early December as they say, you know what, we're not going to have any beats from you between now and February. And the court basically says, yeah, you can, you can make that choice. Zero can be an answer from now until the end of the contract term, because you never promise to make any particular amount available. And the thing that, I mean, there's two things to say about that. The first one is, you know, is that the right reading of the contractual exchange and the the counter argument is this wood versus lady death case. And also, of course, it's going to be Jacob's and young later, which is this is just not what the parties really intended. And what we should do is we should use the facts of the case to try to help us understand what they really intended in here. He did promise all this stuff that kind of implied that he was going to have something to haul. He fixed up the trucks. He bought the insurance. That is evidence that he anticipated, and they anticipated, because they made him make those promises, that there was going to be something to haul. If zero was on the ranges and acceptable answer, why would they make him do the insurance buying and the truck modification? And the the uniform commercial code, which doesn't apply to this case, because this is not a sale of goods, but rather a hauling of goods. Right. To service. The uniform commercial code says, if you have something called a requirements contract, which means I'm going to take from you or deliver to you everything up to my requirements or your requirements, I'm going to have a undefined supply, but I'll satisfy your needs. Pretty obvious. The great example is a gas station says, I would like to buy gas from the supplier, fill my tank every time. I don't know how much it's going to take to fill my tank, but you have to fill my tank every week. That's a requirements contract. The uniform commercial code says, under those circumstances, if you're settling goods under conditions where the amount is not defined, you have to look for reasonable estimates based on past practice. You can't go to zero. You have to buy a reasonable amount based on past practice. Now, the question that I've always asked students is, what would have happened had this been not a hauling of goods contract, but a sale of goods contract? If it would happen if the uniform commercial code would have gotten me, what would have happened if the commercial code would apply? And the answer is, it's not obvious to be different. And why? Because the, and this is sort of the fact that you focused on earlier, because Deilo Santos, because it is, in fact, the case, and Deilo Santos knows it's the case, this is not an exclusive dealing relationship. And the uniform commercial code says, in order to find a way to make a number out of nothingness, the parties have to be kind of bound to each other. Because that's sort of the cost of having an exclusive relationship is, you can't exploit each other. But if Deilo Santos knows, he's not an exclusive relationship with Great Western. He knows that they can exploit him. And that's, that's sort of a key fact about their relationship is he knows that there are other breed haulers out there. And therefore, he's sort of on notice that maybe they get to the hauling station first. And so it's not unfair to give him no deal. Great. So this is exactly how I teach this case. And I, and maybe what I should, maybe what we should, maybe the question that we should ask that I don't typically ask in class, which maybe a mistake I'm thinking now is, is that right that having no exclusivity actually means you have no sense of how this contract is going to unfold. Right. So basically with the courts and the rest, and the rest of the statement has a similar outputs, requirements rule, right. This is he says, if it's an exclusive deal that just said that with the unspecified quantity, we're going to say, you parties can figure out what that is. Right. But if it's not exclusive, it's, if it's, if there's three truckers all with basically concurrent contracts with great Western sugar, the sounds like the beginning of like an algebra problem from 9th from 9th grade. Or I can else that problem or like an else that problem. What great memories those were. Oh, geez. But if that's the case, then is it really, is it really true that none of those three trucker, none of those three trucking companies can possibly have sort of fleshed out into expectations about what this deal looks like. And, and now I sort of regret not pushing that previously because that doesn't seem right. I can take a ball manner of situations in which you have, in which among, among other things, because of the relationships that you have with with the people involved. I mean, I'm guessing that these people are all, for example, Nebraska companies. Right. Yeah, but they're part of a, my guess is De Los Santos maybe even has knowledge about the capacity for hauling of the other companies have. Right. Has knowledge of how many beats. Great Western typically has a need for looking at last year's beat production. It's not like it varies tremendously year by year. I mean, you know, it might be there's some beat harvest problem, but there's no beat harvest problem discussion in the facts. So we sort of have to assume this year look like last year, this year's beats look like last year's beats everything the same. He did nothing wrong, but then they say, ah, you know, you're out of luck. And it's a bit of a Lucy with the flip ball kind of feeling to the case. Kind of think of I could think of a similar of like a more of a more intuitive and at like a fact pattern that would work here. The only way I could think of was something for like babysitting services maybe. Um, but then that seems the problem with babysitting services, they're so personal that you can imagine different lots of reasons why you might stop using a particular babysitter, but yeah, dog walking services maybe. Yeah. Hases in which you in which you have a deal and the, and the, the, um, the service provider knows that there's a couple concurrent deals. But then the service provider might rightly ask, listen, I basically know that you have, you know, three people, all of whom have part time jobs, who sometimes engage in dog walking services for you. I know that your dog needs needs 21 walks a week, and you've said you've given me dates during which we have a deal. So why are you calling and telling me that we have no deal anymore? I mean, the case is tough. So if you want the holding of the case, the holding of the case is where the parties are not an exclusive relationship and the party knows that they're not an exclusive relationship and they don't set an amount, then it's not reach of contract to sort of set the amount to be zero, to refuse to allow them to pick up for the remainder of the contract term. And the reason is lack of neutrality of exchange, which is also called lack of consideration. And if you tweak any of those, so the obvious law school exam question is, what if it's exclusive, I'm sorry, what if it's not exclusive, but Deilo Santos doesn't know it. Interesting. You know, then you sort of say yourself, well, was it knowledge that, was it knowledge that mattered? And you know, what if he reasonably could have known, but didn't subjectively know that it wasn't an exclusive relationship, maybe, you know, last year it wasn't exclusive relationship. And this year he didn't read the contract, but he could have. And you know, for me that, I mean, the case is a hard case because I don't, it doesn't feel like the other consideration cases. It's an odd way to introduce the requirements contract concept or this idea that you have these output contracts without numbers attached. And basically every other time we see one of these contracts in the case book, which we see them repeatedly, they're all over the place, the court managed to find a way to give a remedy. And here, even though I have a very strong suspicion that Deilo Santos is a less sophisticated party than Big B. And even though I do think he's got very high relational specific costs that he spent, the court gives nothing. And it apparently would give nothing, even if his suit would have been merely to recover his out of pocket, like, truck costs. I mean, one, it's an interesting question, right, to try to do this as a promissory and stop-a-case. Yeah, exactly. Is there a claim, especially where he has been led to rely, specific, great Western closure, wants him to rely by fitting his trucks out in a particular way, leads, yes, and leads just, of course, the problem would be that there's no promise. What the court is saying here is, there's not a promise. If your promise is, I'll do it if I want to, that's not a promise. And the thing about that, of course, is that the promises that we see in these cases are never so as explicit as that. I mean, every time I've tried to lose your repromising, I've often said, I'll do it if I want to. Well, everyone's like, yeah, that's not a promise. I totally understand that's not a promise. That feels like, you know, I'll give you a reason if I want to to your children. You know, it's sort of a super clear. But in the actual cases, this feels really like a promise. And, you know, it is hard to say. I mean, this is a real law view about what promises are. Promises have to sort of commit you in a way to a concrete thing, and they don't take on any of the associated social meaning that the promise has. It is the case that most lay people, when they would hear this, would be like, of course, they promise to let them, you know, pick up reasonably. And this is a real moment where the laws version of the world and the lay people's version of the world really diverges. And so it's a tough case. It's a real, I mean, it's a, it's a hard case to teach, and it's a hard case to sort of understand why this is the book. Well, so let me ask you if you think there's a piece of the drafting, which raises a question every year, which says, which is the contractor, shall transport in the truck such times of beats as may be loaded by the company. Does that mean that if Daniel Santos got the call instead, I'm ready and waiting with these beats? So Daniel Santos can say, you have it on out. Even though that language is clear, right, the other language, the language with respect to the sugar companies obligation says, as such as may be loaded, right, which is to say, like, we get to sign how much we load. There's not that kind of language for Daniel Santos, but the, yeah, well, I mean, I do, I do think that there's one way to read the cases that, that it's like a, a series, it's the court says this contract, even though it seems like a long term contract is really a series of options that can be exercised, only by great big, by great Western sugar. And if they exercise those options, Daniel Santos would be in breach if he refused to perform. Right. So it's a series of acceptances. A series, it's a series of acceptances. And once they accept, he's bound, yeah, and it's tough. That is a tough outcome. And part of it is, you know, do you think that they use, they should use shall in both places? Is that what they meant? Do they, you know, do they mean may in both places? Or maybe, I mean, they're really deep through this. It's probably very likely that the great Westerns lowered. And they meant exactly this, you know, they meant to give themselves optionality, nothing better than optionality, if you're going to try to, you know, farts. And maybe what they did is they had another deal with someone else, exact same price, December came. I mean, the majority of the beat harvest is over, and they say that his competitor, you know, hey, how about if we give you 10 cents less per beat, why don't we really negotiate? Yeah. He says, yes, all the beats, but you got to do all the beats, right? You do all the beats. And so great Western wins. And it's a hard case for, I mean, it's a hard case if you're the kind of person who says that the law ought to fit with ordinary intuitions. And the law ought to generally get the outcomes that seem ex ante and ex-posts fair. This is a case where you have to really have a view that like, well, maybe this is about teaching people a lesson about protecting themselves. And the next time that, you know, Deilo Sanchez is of the world, you know, go to contract, they'll think about this case. Right. Yes. They're going to be like, well, I know what the Supreme Court in Nebraska is going to say. They're going to say, this is an illusory contract, so I better protect myself more. Right. But the way you might, right? But the question you want to ask about what they actually intended is, did great Western pay for this option? Enough. Yeah. No, that's what I mean. Like pay for it to be an option rather than for it to be a, right? Do they pay for that? Do they pay for their, do they pay for the, what's the college you can get out and put optionality? Oh, the put option, let's just say, let's just say put option. Yeah. I mean, this is probably one of those other things. Yeah. Yeah. Yeah. We had like, if we had actually like high quality editing of these, probably edit this part out. Yeah. No, we would. No, we would. We have like a intermission. Exactly. For music. For music. If you don't think that Great Western Sugar Company promised a little price this in, the fact that they were going to be allowed to cancel or that Delo Santos priced it in, that might make you concerned about the outcome here. Right. So like, if you were writing a brief on behalf of Great Western Sugar, a great fact would be that last year he got paid less per hauling deal. In this year, we paid him 25% more, but you know what? We retained the ability to walk away from him at any time. That would be an amazing fact. Now, the fact that it's not in the case suggests it's not true. And it's an interesting question for law students, like how much can you play with these cases? How much can you play with the facts you don't see? It is the case that the opinion does not mention a fact that would have been extremely helpful to Great Western Sugar, it would have made us feel really good about the result. And I think it's therefore fair to believe that that is not true. Like, I don't think it is true that Great Western paid more for this option. Even how formal the languages of the term, you have to think that this case comes out making the Great Western Sugar Company's council feeling great. Oh, they feel so good. Right, this came out exactly how they hoped. They are like our long, our long, said factories, like our long, laid plans have come to harvest. And we have now, take it, they've taken root, they've taken root, you know, they've born a sweet fruit. It's a tough case. That's what I got. Can I say one more thing about this case that comes up a ton for my students and so maybe this may be having it be in a recorded form, we'll have value. Yeah. This case talks about mutuality. Yeah. In fact, I would like, I don't know that this case actually talks at all about consideration. If you have it digitally, you can tell me I do, but I, so let me try to do that while you talk. So what I end up saying to students is that mutuality and consideration are doctrionally the same thing. That mutuality is a way of talking about whether or not there's a bargain for, or whether or not there's a bargain in the sort of consideration text. It uses the word consideration. It does? Yeah. It uses it in the middle of the quote paragraph, speaking generally. And then it uses it where, in the long paragraph that starts where promisor agrees, the agreement does not furnish the consideration necessary to require the promisor exception services. Yes. Okay. Great. The interesting thing here is that there are references to the doctrine are about mutuality and they're using the word consideration, at least in the quote paragraph, in consideration of the act, almost in a way, anyway, I find it, I find it a little bit unclear, not imprecise about the weight, about the relationship. between mutuality and consideration. My only point to students on this is, doctrinally, these mean the same thing. But sometimes when courts talk about mutuality, because mutual or mutuality has a meaning in a set of implicit reference for most people, mutuality can be confusing, and it leads the courts, and it leads the parties down some strange paths when they get confused in later cases. They say, "Well, wait, our obligations aren't mutual. "I have to do this one thing, you don't have to do it back." - Yep, that's what I'm saying. - And it seems like that's what mutuality means, but mutuality is not what's required. It's not in the sense of a vernacular. - Right. - Or common meaning of shared. - Exactly. - Well shared, reciprocal. - Reciprocal. What they really just mean by this is at the very moment of formation. - Exactly, both parties make a real promise or undertaking towards each other. And the court said, even though it sounded like it, and even though you might have thought it, actually, it's not true. - Yes. - Great, you know, great Western promise, nothing. It said the words, but it didn't say the right words exactly. And I mean, I think if you find this case distasteful, which I do, I mean, I don't like the result. I don't like the way it's written. I find the whole thing tough. I guess what I would say is it's a pretty limited number of cases they're gonna look like this. So again, you need a non-exclusive, but the party has to know it. And you have to have a promise that has this sort of peculiar set of qualities. And, you know, who would enter that? Well, probably it's a very short-term supply contracts because in the long-term supply contract, you would require something like reciprocity. And so it's a relatively small set, but every case in this set does end up feeling kind of exploitative. And that's what I end up feeling about the cases that it just is the law standing behind exploitation in the name of, you know, teaching them a lesson. - That's your mentor, exactly. - Copy it, copy it after, teach you a lesson next time, do better. - It's not like you could, it's not the case that Deilo Santos was coerced or manipulated in some way they couldn't possibly have anticipated, right? If you read this and you are Deilo Santos and your goal is beat-hauling, right? That's what you want, it's consistent work. - Yep. - It does seem like that would be a great time for you to speak up and be like, wait a minute. Is there some minimum here? - Right. - On the other hand, you can imagine, especially if you've had a whole bunch of conversations or if you have some sense of what the normal expectations are, that you don't speak up because you're trying to just get on with your business. I mean, we don't know the real backstory here and it's pretty plausible that there's two different back stories. One of them is there's all kinds of oral conversations and when she's told, we can walk away from you in any time. And he knows it. But they can't bring that into evidence because the contract prohibits for reasons that we'll talk about later in the semester, sort of this like oral sets of promises. And so he's like, he's the one behaving badly by making something out of something. Everyone else knew. Everyone knew that if you have all these beat-haulers, you might not get the deal. And that's okay because next season you will. That's possible. And the other possibility is there's some really bad conduct in which they're trying to get him for reasons that are undisclosed in the record but are not good reasons, nefarious reasons. Maybe they're giving the contract to the son-in-law or their daughter-in-law or maybe they're racist in ways or maybe they're xenophobic. We don't really know anything about the relationship and that's also not in the record. And so we have kind of like this really weird case that the party's motivations just don't seem to make sense. - Yep. - Who would do this? - Yep. - And we have a contract that is interpreted by the court in the most sort of superficial legalistic way possible. - Yep. - And we have a result that's like, I guess it's a pretty narrow target that we're aiming at and the result is it's on our most confusing list and so that's why we had to have a podcast about it. - All right, I think that's it. - Awesome. - The Santos. Thanks everyone.