8 Contract Law Basics
Ruth Dukelow
Note: Most of the contracts you encounter as a librarian or archivist will be governed by state law. The basic elements of contract law set forth in this chapter may differ from state to state.
Case Law
Fargo Public Library, Plaintiff and Appellant, v. City of Fargo Urban Renewal Agency, Defendant and Respondent, 185 N.W.2d 500 (S.Ct.N.D., 1971)
KNUDSON, Judge.
This is an appeal from the judgment dismissing the plaintiff’s action.
The Fargo Public Library entered into a written contract with the City of Fargo Urban Renewal Agency on June 8, 1961, after several months of negotiations, for the purchase of a tract of land within the Project Area of the North Dakota R-1 Urban Renewal Project located in an area in the city of Fargo, North Dakota, for the purpose of constructing a library building thereon.
As a part of said contract, by addendum, the Public Library was permitted to redevelop this property or lease it for the purpose of off-street parking, with the intention to eventually construct a library building on the property, but without any requirements as to the time of the beginning or completion of the construction of the library building.
A deed to the property, dated June 20, 1961, was subsequently executed by the Renewal Agency and delivered to the Public Library conveying the property to the Public Library. The contract was a printed form prepared by the Renewal Agency and used by it in its transactions with Public Library and others who desired to purchase tracts within the Project Area for the purpose of development under a program for the clearance and reconstruction of slum and blighted areas in the city of Fargo.
Some time prior to the making of this contract, three buildings wholly or partly upon the purchased property, known as the Berry Building, the Flamer Hotel and the Cliquot Club, were demolished by the Renewal Agency by a contractor during the course of the fall of 1960 and the winter of 1961, with the final payment to the contractor who demolished the buildings made in May of 1961. At the time the Public Library entered into the contract for the purchase of the property the old buildings had been demolished and the property had been leveled and graded to the surface of the surrounding property.
The property was thereafter used as a parking lot until April of 1967, when the first excavation was made for the footings and foundations for the construction of the library building. After removing a foot or two of topsoil, the contractor found that rubble and debris of brick, concrete, rotting wood, reinforcing rods, and other matter had been used as backfill in the basements of the old Berry Building, Flamer Hotel and Cliquot Club.
The plans for the library building called for a floating concrete slab poured on top of the ground as the first floor, with footings and foundation designed to hold the walls and roof structure. The type of building called for in the plans could not be built on the property without removal of this rubble and debris. Therefore, it was necessary to remove the rubble and backfill the basements with proper material.
Within a few days after the discovery of the rubble and debris in the basements of the old buildings, a member of the Public Library brought this matter of the rubble and debris in the basements to the attention of the executive secretary of the Renewal Agency, and inquired what the Renewal Agency was going to do about the removal of the rubble and debris. As the Renewal Agency made no effort to proceed to remove the rubble and debris and to backfill with the proper material, the Public Library caused the contractor for the construction of the library building to remove the rubble and debris from the basements of the razed buildings and to backfill with the proper material.
The Public Library, on June 2, 1967, sent a letter to the Renewal Agency demanding reimbursement for the cost of removing the rubble and debris and for the backfilling with a clean, well-compacted fill, estimated at the sum of thirty-five to forty thousand dollars, for the failure of the Renewal Agency to comply with the provisions of the contract relating to the removal of the rubble and debris from the demolished buildings. On June 5, 1967, the Public Library brought this action against the Renewal Agency demanding damages of $40,000 for breach of contract for the failure of the Renewal Agency to remove the rubble and debris from the property and for failing to backfill with proper material, as required by the contract.
At the opening of the trial of the case to the court, the Renewal Agency made a motion to dismiss the Public Library’s action on the grounds that the complaint failed to state a cause of action; that the parties to the contract knew that the buildings already had been razed and the basements already had been backfilled and leveled to grade; and for a further reason that in a previous case in the Cass County district court, before the Honorable Roy K. Redetzke, Judge, between the Fargo Chamber of Commerce and the Urban Renewal Agency, involving and construing the same form of contract, the court had held that the Renewal Agency was required only to remove and demolish the buildings down to the grade of the surrounding property. The motion was denied with leave to the Renewal Agency to renew the motion at a later time.
At the close of the presentation by the Public Library of its evidence, the Renewal Agency renewed its motion for a dismissal of the case upon the same grounds as in the original motion.
[ . . . ]
Although the Public Library made several specifications of error and raised several issues, these specifications and issues may be reduced to two issues:
1. Whether the Public Library may be relieved from the provisions of the contract calling for written notice to be given of any default or breach of the contract as a condition precedent to the bringing of any action for the failure to cure or remedy such default or breach within sixty days after receipt of such notice. 2. Whether the Renewal Agency was required under the terms of the contract to remove from the property the debris from the demolished buildings and by its failure to do so had breached the contract, for which breach it was liable to the Public Library in damages.
We will consider the issue whether or not the Public Library was relieved from giving the notice of the default or breach of the terms of the contract as a condition precedent to bringing this action for damages for the failure of the Renewal Agency to cure or remedy the default or breach within sixty days of such notice, the Renewal Agency having indicated that it would not do anything to remove the debris deposited in the basements.
The Renewal Agency had prior knowledge of the debris deposited in the basements of the razed buildings before the contract with the Public Library was entered into for the sale of the property to the Public Library. The minutes of the Renewal Agency of the meeting held February 1, 1961, disclose that at that time the Renewal Agency not only had knowledge that the contractor having the contract to demolish the three buildings had deposited steel, concrete and other debris from the demolished buildings in the basement openings, but did so with the consent of the Renewal Agency.
We conclude from these facts establishing the prior knowledge of the Renewal Agency of the debris deposited in the basement openings, and its refusal or indication that it would not remove the debris, that it had waived the requirement in the contract of a notice in writing of the default or breach. The notice of default or breach was required by the contract to be given in writing to give the Renewal Agency sixty days in which to cure or remedy the default or breach. This requirement was waived by the Renewal Agency.
[ . . . ]
We also held in McCaull-Webster Elevator Co. v. Stiles, 41 N.D. 135, 169 N.W. 577 (1918), such notice is not necessary where the demand would have been futile. The giving of such notice would have been a useless formality.
[ . . . ]
In this case it would have been fruitless for the Public Library to have given the sixty-day notice when the Renewal Agency had indicated it would not remove the rubble and debris.
We will next consider whether the Renewal Agency was required, under the terms of the contract, to remove the debris from the property, and by its failure to do so had breached the contract and was liable to the Public Library in damages for such breach.
To determine this issue we must look to the contract to find whether the contract requires the Renewal Agency to prepare the property for the purposes of the Public Library by the removal of the debris from the buildings that were demolished. If the contract did require the Renewal Agency to remove from the property the debris from the buildings that were demolished, and further required that the basement openings be backfilled with the proper material, then the Renewal Agency, by permitting the debris to be deposited and buried in the basement openings, was in default and in breach of the contract, and the Public Library would be entitled to recover from the Renewal Agency the cost of the removal of such rubble and debris from the property.
In order to determine whether such liability rests upon the Renewal Agency it will be necessary to interpret the provisions of the contract which we have set forth above.
Our statutes are explicit in interpreting a contract. The rules for interpreting a contract are simple.
The language of a contract is to govern its interpretation if the language is clear and explicit. Section 9-07-02, N.D.C.C.
A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting so far as the same is ascertainable and lawful. For the purpose of ascertaining the intention of the parties to a contract, if otherwise doubtful, the rules given in this chapter are to be applied. Section 9-07-03, N.D.C.C.
The whole of a contract is to be taken together so as to give effect to every part if reasonably practical. Section 9-07-06, N.D.C.C.
This contract was a printed form used by the Renewal Agency for the sale of property within the renewal area with others, as well as with the Public Library, who wished to redevelop certain parts of the area under the urban renewal program in which the city of Fargo, through the Renewal Agency, was redeveloping. This property was a part of a larger plan to redevelop blighted and slum areas in Fargo. The Renewal Agency had undertaken to remove and demolish existing buildings, structures and obstructions on the property, including the removal of any debris resulting from such demolition, and put the land into shape for redevelopment by redevelopers, including the Public Library.
The district court determined that the Renewal Agency was not required to remove the debris under the provisions of the contract, paragraph 2(a) and subparagraphs thereunder, (i) and (iii), “taken together.”
Paragraph 2(a) provided that the Renewal Agency shall, prior to conveyance of the property and without expense to the redeveloper, prepare the property for purposes of the redevelopment thereof by the redeveloper (Public Library), and that such preparation shall consist of [(i)] the demolition and removal to grade of all existing buildings, structures, and obstructions on the property, including the removal of any debris resulting from such demolition; and [(iii)] such filling and grading and leveling of the land as shall be necessary to make it ready for construction of the improvements to be made thereon by the redeveloper.
We do not agree with the interpretation placed upon these provisions in the contract by the district court. These provisions provide that the Agency prior to the conveyance of the property, shall prepare the property for the purposes of redevelopment by demolishing all existing buildings, and removing all debris resulting from such demolition, and to fill and grade the land “as shall be necessary to make it ready for construction of the improvements to be made thereon by the redeveloper.”
And this provision also provides that all expenses relating to buildings or structures demolished or to be demolished shall be borne by, and any income or salvage received from such buildings or structures shall belong to the Agency.
Applying the rules of law set forth applicable to the interpretation of contracts, it appears, and we so hold, that the Renewal Agency was required to remove from the premises the debris from the buildings that were demolished and to backfill the basement openings with proper material to make it ready for the construction of the improvements to be made thereon by the Public Library.
The contract sets forth the obligation of the Renewal Agency to make the property ready for construction of the improvements to be made thereon by the redeveloper by the demolition of the existing buildings and the removal of the debris resulting therefrom under a program for the clearance and reconstruction of slum and blighted areas in the city of Fargo.
Under the paragraph entitled Recitals, we read: [T]he Agency has undertaken a program for the clearance and reconstruction of slum and blighted areas in the City of Fargo.
Then, in the next paragraph of the contract: [T]he Agency has prepared a plan (herein called “the Urban Renewal Plan”) providing for the clearance and redevelopment of the Project Area and the future uses of the land comprising such Area.
In the next paragraph it is said: [I]n order to enable the Agency to achieve the objectives of the Urban Renewal Plan, and particularly to make the land in the Project Area available (after acquisition and clearance by the Agency) for redevelopment.
And, in paragraph 2(a) the Agency is enjoined to prepare the property for purposes of the redevelopment by subparagraph (i), “the demolition and removal to grade of all existing buildings, structures, and obstructions on the Property, including the removal of any debris resulting from such demolition;” and, in subparagraph (iii), “such filling and grading and leveling of the land as shall be necessary to make it ready for construction of the improvements to be made thereon by the Redeveloper (it being intended that such filling, grading and leveling conform generally to the respective surface elevations of the land prior to the demolition of the buildings and structures thereon).” We hold that these provisions of the contract set forth the obligation of the Renewal Agency to demolish the existing buildings, remove from the property the debris resulting from such demolition, and to make such property ready for the construction of the improvements to be made thereon by the Public Library.
We find that the Public Library has met its burden of proving a prima facie case, and we reverse the judgment of dismissal and remand the case to the district court for further proceedings to permit the Renewal Agency to offer evidence to rebut the prima facie case made by the Public Library.
Judgment reversed and case remanded for further proceedings in accordance with the directions in this opinion.
Commentary
Contracts are promises enforceable by law. LII defines a contract as an agreement between two or more parties “creating mutual obligations enforceable by law” (LII, www.law.cornell.edu/wex/contract). In the Fargo case at the beginning of this chapter, the court recognized the contract between the Fargo Public Library and the City of Fargo Urban Renewal Agency (“Renewal Agency”) to be legally binding on the two parties. Parties to a contract can be individuals, corporations, businesses, partnerships, organizations, government agencies, estates, or other legal entities.
Types of Contracts
There are three types of contracts: 1) contracts that result in a sale or transfer, 2) contracts to perform or not to perform, and 3) licenses of rights.
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Contract for sale or transfer.
In contracts for sale or transfer, ownership of tangible or intangible property is transferred from one party to another. In the Fargo case at the beginning of this chapter, the contract was an agreement for the sale of a tract of land. The Renewal Agency agreed to sell the Fargo Public Library a tract of land for the purpose of constructing a public library thereon, and pursuant to the terms of the contract, the Renewal Agency executed a deed to the property to the Library (Fargo 500). Other examples of types of library contracts for sale or transfer include agreements with book vendors, library supply companies, and library furniture suppliers where ownership of property is transferred from the seller to the library.
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Contract to perform or not to perform.
In a contract to perform or not to perform, one party agrees to provide a service, or otherwise do something or not do something, for the other party in exchange of consideration. For example, a public library may enter into an agreement with a landscaping company to maintain the library grounds. In exchange for payment (consideration) from the library, the landscaping company agrees to mow the library lawns, snowplow the library parking lot, and provide other landscaping services.
In a contract not to perform, one of the parties agrees not to do something. For example, a donor offering unpublished papers to an archives may require that the archives not make the papers available to the public for a specified number of years. [See the commentary on the Ahmad v. University of Michigan case in the Gift Agreements section below for discussion on gift restrictions.
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License of rights.
In a license of rights, the rights holder (the licensor) grants permission to the licensee to use the licensor’s property, subject to the terms of the license agreement. There is no transfer of ownership of the licensed property. For example, a library may enter into an agreement with a rights holder (or licensing company approved by the rights holder) to perform a copyright-protected play at a library program. The license confers only permission to perform the play at the program subject to the terms of the license and does not confer copyright ownership of the play to the library.
A common license of rights for libraries is a license for the library and its authorized users to access electronic resources content or to use copyrighted software. Electronic resources licenses are discussed in detail in the following chapter in this textbook at mlpp.pressbooks.pub/librarylaw/chapter/licensing-electronic-resources/ .
There may be a choice of the type of contract offered for software use. For example, contracts for library systems have traditionally been in the form of license agreements granting the library the right to use the vendor’s software, but a current trend in libraries is to contract for Software as a Service (SaaS) where the vendor hosts the service (Breeding 2). Library systems agreements for SaaS may be offered as contracts to perform rather than as license agreements (Tollen, www.techcontracts.com/2018/06/01/dont-use-licenses-saas-contracts/).
Elements of a contract
Five required elements of a contract are offer, acceptance, consideration, mutual assent, and enforceability.
Offer. An offer is the promise to enter into an agreement if the offer is accepted. The offer must identify clearly what is being offered. Ideally, an offer should specify a price, a method of acceptance, and the terms and conditions. The offer can be subject to a time limitation or indicate that the offer is open until revoked.
For example, a vendor sales representative contacts the collection development librarian of a small college library and offers to sell the library a one-year subscription to a full-text database for $20,000, a fifty percent discount from the list price, if the librarian accepts the offer before the end of the month. The sales representative provides the librarian with glossy brochures describing the database and a copy of the vendor’s standard license terms and conditions.
Acceptance. Acceptance of an offer must be done by the person to whom the offer was directed or that person’s delegate. In the example above, the collection development librarian, the library director, or other authorized staff at the college library would be able to accept the offer. If librarians at a large university heard about the offer to the small college library, they would not be able to accept the offer because the offer was not directed at them.
Acceptance can be express or implied. Express acceptance is an unequivocal “yes” that is either oral or written. In the example above, the librarian’s signing the license agreement and returning it to the sales representative before the end of the month would be express acceptance.
Implied acceptance is where the actions of the parties indicate that the offer has been accepted. For example, if a co-worker left a ten-dollar bill on your desk with a note saying, “If you buy me a sandwich and bring it to me before noon, you can keep the change,” your actions of taking the ten-dollar bill and bringing your co-worker a sandwich would constitute implied acceptance.
Often, the party to whom the offer is directed will make a counter-offer to the original offer. A counter-offer is not acceptance. In the example of the $20,000 database subscription offer to the college library, it is likely that the librarian would read the license agreement and ask the vendor for revisions, starting a back-and-forth process between the librarian and the sales representative. There is no acceptance until both parties have reached agreement on the revised terms.
Consideration. Consideration is the benefit that each party expects to receive from the contract (Stim 104). Consideration is something of value that is given in exchange for the other party’s performance of the contract. Consideration can be a monetary payment, transfer of property, giving up a right or valid claim, making a promise to do something (or forbear from doing something), or anything else of value.
In the example of the landscaping company and the public library, the landscaping company’s consideration is mowing the lawn and the library’s consideration is the money paid for the service. In the example of the database vendor and the college library, the vendor’s consideration is one year’s access to the content of a full-text database and the library’s consideration is the payment of the subscription price.
For a contract to be legally-enforceable, both parties must provide consideration. If only one party provides consideration, the transaction is usually considered a gift and not an enforceable contract. For example, a library patron offers to give the public library a rare signed first edition and the library director responds that the public library would be happy to accept the book. The library patron then gives the book to the state archives instead. The public library would not be able to claim breach of contract because there was no consideration promised by the library in exchange for the book. If, however, a “gift” is made subject to conditions, the conditions may constitute sufficient consideration. It is advisable to have gift agreements in writing. For further discussion, see the Gift Agreements and Loan Agreements sections in this chapter below.
A contract will not be legally-enforceable if the consideration offered is illegal. For example, it would be illegal for a library to offer to copy audiobook CDs from the library’s collection and sell them to library patrons at $5.00 per disk.
Mutual Assent. “Mutual assent” is when the parties to the contract understand the terms to which they have agreed. “Mutual assent” may also be expressed as “mutual agreement” or “meeting of the minds,” although under modern contract law, courts have moved away from “meeting of the minds” (what the parties were thinking) to the more objective standard of “mutual assent” (what the parties actually said and did)(Stim 297). If the parties have signed a written contract, the courts will be more likely to determine “mutual assent” from the terms of the contract, rather than what a party claims to have understood the agreement to be.
In your work in libraries and archives, most of your contracts will be in writing, and it is important to read through any contract before signing. Failure to read and understand a contract does not mean that there was no “mutual assent,” especially if a reasonable person could read and understand the contract. For example, most electronic resources licenses include an “entire agreement” clause stating that the license agreement is the complete agreement and supersedes all previous agreements and oral promises. This means that any promises made by the sales representative in oral discussions or emails are not enforceable unless included in the written agreement.
Mutual assent means that the parties clearly understand the details, rights, and obligations of the contract. There is no mutual assent if there is a material mistake as to the terms of the contract. A material mistake must relate to a basic assumption upon which a contract is made. In Sherwood v. Walker, 66 Mich. 568, 33 N.W. 919 (Mich. 1887), the classic contracts case illustrating mutual mistake, Sherwood agreed to purchase a barren cow, Rose 2d of Aberlone, from Hiram Walker & Sons for $80. When Sherwood tendered his $80, the Walkers refused to take the payment and deliver the cow to Sherwood. The Walkers had discovered that Rose was with calf, not barren as both parties had mistakenly believed, and as a fertile cow, Rose was worth $750. The Michigan Supreme Court ruled that a contract may be rescinded if there was a mutual mistake as to the substance of the agreement.
Enforceability. In determining the enforceability of a contract, courts consider the issues of capacity and legality. Capacity addresses whether the parties are competent to enter into the contract, and legality addresses whether the terms of contract are in compliance with state and federal law. Other factors of unenforceability include coercion (was the contract signed under duress?), misrepresentation and fraud, and terms contrary to public policy.
For capacity, the courts look at whether the parties were competent to enter into the contract. For example, a mentally competent adult is able to enter into an enforceable contract, but a contract signed by a minor (under the age of 18 in most states) is not enforceable if voided by the minor prior to the minor attaining the age of majority and if the contract was not for “necessities” as defined by state law (Stim 80). The question of library contracts with minors is an interesting one. When library patrons sign for a library card, they are entering into an agreement with the library to return materials and comply with library policies in exchange for the library continuing to allow the patrons to borrow materials. Some public libraries require a parent’s signature for a minor to obtain a library card. Others require a parent’s signature for minors up to a certain age (for example, 12 years old). Some do not require a parent’s signature for anyone. In adopting policies that do not require a parent’s signature for some or all minors, the library boards have balanced the risk of a minor voiding the contract against the library’s mission of providing information access to the library’s residents. For example, Hennepin County Library (HCL) has no age limits for getting a library card and does not require a parent’s signature for anyone. HCL’s patron services policy states, “Equity of access means that all people have the information they need – regardless of age, education, ethnicity, language, income, physical limitations or geographic barriers” (www.hclib.org/about/policies/patron-services-policy).
Another consideration of capacity is whether the individual signing the contract is legally authorized to execute contracts on behalf of the library. For example, the governing board of the library or institution may delegate the authority to enter into contracts to the library director and other specific staff. This delegation may specify limits, e.g., “contracts for amounts over $20,000 must be approved by the board executive committee.” Other library staff and volunteers might not have the authority to enter into enforceable contracts on behalf of the library.
For legality, any illegal terms in a contract would not be enforceable. For example, terms in an electronic resources license agreement would not be enforceable if they were in violation of the state’s library privacy act or FOIA.
Breach of contract
A material breach of contract is “a failure to do something that is so fundamental to the contract that the failure to perform that obligation defeats the essential purpose of the contract” (Lipinski 140n93, citing Horton v. Horton, 487 S.E.2d 200, 203, Va. 1997). Stim defines a breach as material “if it is so substantial that it defeats the purpose of making the contract in the first place. …[T]he breach must go to the very root of the agreement between the parties” (Stim 65).
If there is a material breach of a contract, the non-breaching party may terminate the contract (Stim 66). In the “contract to perform” example above of the public library contracting with a landscape company, the library’s failure to pay the company for services provided would be a material breach and the landscaping company could terminate the contract. Likewise, if the landscaping company never provided any promised services, the library could terminate the contract.
A breach of contract is not always material. One example of a non-material breach would be if the public library agreed to pay the landscaping company on the first of every month but was three days late with one month’s payment. Another example would be if the landscaping company agreed to clear the library parking lot within 24 hours if snowfall exceeded three inches but did not finish clearing the lot until 48 hours after the snowfall.
Courts asked to decide if a breach was material will consider a number of factors: whether a party is deprived of the heart of the bargain, whether a party could be compensated to mend the breach, what the breaching party will lose if the contract is terminated, whether there is any chance that the breaching party is ready, willing, and able to fix the problem, and whether the breaching party acted in bad faith (Stim 66-68). Courts will also look at the terms of the contract itself to determine whether a breach is material or not. A contract may include provisions specifying what will constitute a material breach for termination of a contract (Stim 68).
Terms of the contract
The terms of a contract are the who, what, when, where, and how of the agreement and define the binding promises of each party. Contract terms are also referred to as “provisions” or “clauses.” Parties to a contract negotiate, or bargain for, the contract terms.
In the example of the library contracting with a landscaping company, the terms would include who the parties to the contract are (the library and the landscaping company), what services the company will provide and the amount the library will pay for those services, when the company will provide the services and when the library will pay, the location of the library branches where the services will be provided, and any specifications of how the services will be provided or how payment will be made. The terms may also define material breach of contract and damages owed to a party by the breaching party.
In licenses for electronic resources, the collections librarian usually negotiates license terms with the vendor and the license is executed (signed) by the library’s legal representative after both sides agree to the negotiated terms. For a detailed discussion of electronic resources license terms, see the following chapter in this textbook, Licensing Electronic Resources, at mlpp.pressbooks.pub/librarylaw/chapter/licensing-electronic-resources/ .
Gift Agreements
Libraries receive donations in many forms: cash, real property, books, manuscripts, art and archival objects, and a variety of other in-kind donations. For the most part, the promise of a gift is not a contract due to the lack of consideration (Verkerke, chapter 6). For example, if owners of a valuable manuscript collection tell the librarian that they are going to donate the collection to the library but then turn around and sell the collection at auction, the library does not have grounds to sue for breach of promise.
Contract law does come into play, however, if the donor and the library execute a gift agreement. For example, a donor may offer to transfer ownership of real property to a library, but only if the library agrees to grant the donor naming rights to the library building and agrees to relinquish the property to the donor’s designees if the property ceases to be used for library purposes. Or, a donor may offer to give the library a valuable collection of manuscripts, but only if the library agrees to conditions relating to storage and access to the collection (Hoffmann 171). If the library accepts the offer, the parties may enter into an enforceable contract in the form of a written gift agreement. [See also the Scenarios sections in this textbook’s NAGPRA chapter at mlpp.pressbooks.pub/librarylaw/chapter/nagpra/ and the Copyright and Digitization chapter at mlpp.pressbooks.pub/librarylaw/chapter/copyright-and-digitization/ ]
Delmar notes, “there are issues with accepting large personal collections that could have considerable value but likely come with strings attached. Major donors are often concerned with collections they have spent substantial time and resources building and interacting with. This often leads to emotional attachments that result in costly stipulations such as a requirement to house a collection as a whole, without breaking it apart, or to house it in some other specific manner” (Delmar 202).
Hoffmann advocates for libraries to make decisions on what types of gifts the library will accept and under what conditions. “Whatever choices the library makes, it is imperative that they be codified in a written policy statement. … Step-by-step procedures should also be included” (Hoffmann 172). For example, a library’s or archives’ gift policy may require donors of manuscripts, photographs, and other unique materials to grant permission to digitize the materials and share them freely. [See Copyright and Digitization chapter, Permission section, in this textbook at mlpp.pressbooks.pub/librarylaw/chapter/copyright-and-digitization/ .]
The gift policy may also provide for gift agreements whereby the library or archives agrees to conditions specified by the donor, with failure to meet those conditions resulting in breach of contract. But what happens if the library or archives is unable to meet the agreed-to conditions because doing so would violate a state or federal law? For example, what if the donor requires that the entire collection be housed together at the archives, but an item in the collection falls under the federal Native American Graves Protection and Repatriation Act (NAGPRA) for repatriation? [See NAGPRA chapter, Scenarios section, in this textbook at mlpp.pressbooks.pub/librarylaw/chapter/nagpra/#scenarios.] The issue of gift agreement conditions conflicting with state law was recently addressed in Ahmad v. University of Michigan, No. 341299, unpublished (Mich. Ct. App. 2019); affirmed Ahmad v. Univ. of Mich., SC: 160012 (Mich. Apr. 9, 2021). [For the full-text of the Court of Appeals’ unpublished opinion, see mlpp.pressbooks.pub/librarylaw/chapter/foia/#caselaw . Ahmad v. Univ. of Mich., SC: 160012 (Mich. Apr. 9, 2021) is available at: casetext.com/case/ahmad-v-univ-of-mich-11]
In the case of Ahmad v. University of Michigan, No. 341299, unpublished (Mich. Ct. App. 2019), Dr. John Tanton donated 25 boxes of his personal writings, correspondence, and research (“the Tanton papers”) to the University of Michigan’s Bentley Historical Library. Pursuant to a gift agreement, boxes 15-25 were to remain closed for 25 years until April 6, 2035. Hassan Ahmad filed a Freedom of Information Act (FOIA) request with the University, seeking all of the Tanton papers, including those found in boxes 15-25 and marked as “closed.” The University denied Ahmad’s request, asserting that the Tanton papers were closed to research until April 2035 and were therefore not “public records” subject to FOIA disclosure because they were not “utilized, possessed, or retained in the performance of any official University function.” Ahmad filed suit, and the Michigan Court of Claims granted the University’s motion for summary disposition, concluding that the Tanton papers are not “public records.” On appeal, the Michigan Court of Appeals reversed the Court of Claims’ decision and remanded. The Michigan Supreme Court affirmed the Court of Appeals decision in Ahmad v. Michigan, No. 160012 (April 9, 2021). [For discussion of libraries and FOIA requests, see the FOIA chapter in this textbook at mlpp.pressbooks.pub/librarylaw/chapter/freedom-of-information-acts-foia/]
On September 30, 2020, an Amicus Brief was filed by the Association of Research Libraries, Association of College and Research Libraries, American Historical Association, American Council of Learned Societies, University of California Libraries, University of Illinois Library, and University of Iowa Libraries, in support of the University of Michigan, in Michigan Supreme Court Case No. 160012 (“ARL”). The Amicus brief explained libraries’ and archives’ concerns about the need for the Court to uphold gift agreements as follows:
The mission of any archives is to make material available to researchers. The researchers, for their part, need access to these materials in order to perform their research. Both the archives and the researchers rely on donors to provide the original materials, but the donors are often concerned about full immediate disclosure of the information in their records. Access restrictions for a defined period enable this ecosystem to stay in balance. Without honored access restrictions, many donors would withhold, censor, abandon, and even destroy papers, which would irreparably harm the research enterprise.
The Court of Appeals’ decision, if affirmed by this Court, would disrupt this ecosystem. Donors would reasonably fear that courts in other states might similarly treat private papers donated to state-run archives as public records. The flow of records into state-run archives would slow as the archives could no longer guarantee to donors that they could protect the sensitive information contained in these records. Moreover, with respect to already donated materials, archives would have to breach contractual obligations to maintain privacy and confidentiality, and archivists would have to violate their ethical duty to respect donor requests. This Court should reverse (ARL 4).
The Amicus brief also addressed the issue of breach of contract if archivists act against the agreed terms of the gift agreement.
Donors customarily convey title to papers by a deed of gift, “one of the most important legal documents the archivist will ever sign.” Frank Boles, Selecting & Appraising: Archives & Manuscripts (Society of Amer Archivists 2005) p. 139. It is a contract between the donor and the archives that typically is vetted by counsel. As one archivist wrote, “[w]hile developing a deed of gift, it is useful to remember that it is a contract in which both parties promise certain things: the donor to give, the archives to respect the conditions stipulated by the donor in the deed.” Trudy Huskamp Peterson, The Gift and the Deed, in A Modern Archives Reader: Basic Readings on Archival Theory and Practice (Maygene F. Daniels and Timoth Walch eds., Nat’l Archives Trust Fund Board, 1984) p. 144. Huskamp Peterson further explained that “once the conditions are agreed upon, if the archives fails to meet its obligations (for instance, not restricting one category of restricted materials) the contract could be determined to be void and the donor could reclaim the property; alternatively, the donor could sue the archives for damages which result from the breach of the contract.” Id. Archivists view this contract as inviolate: the archives “entered into a covenant with the donor: in return for the donor’s transfer of ownership of his papers, the archival repository would agree to certain restrictions on access to the papers. Once such a covenant was made and the conditions of access fixed, no further discussion of these conditions — whether between donor and repository, repository and researcher, or researcher and donor — was anticipated.” The Origins of Restrictions, p. 146 (ARL 18).
On April 9, 2021, the Michigan Supreme Court affirmed the Court of Appeals’ decision. As noted in the above quotations from the ARL Amicus Brief, the Court’s holding that a state institution’s library and archival collections are subject to FOIA could make it difficult for state and federal institutions to negotiate gift agreements with donors who require a “closed” time period prior to public disclosure. Enforceable contracts are key to librarians’ and archivists’ relationships with donors and their families.
Loan Agreements
A loan agreement is an alternative to a gift agreement. Unlike a gift agreement, there is no transfer of ownership. With a loan agreement, the lender retains ownership of the materials, art, or other artifacts that they are lending to the library, archives, or museum. A loan agreement is a contract between the owner and the institution where the owner agrees to lend works to the institution subject to specified conditions.
The loan agreement may be as basic as a “release of liability” where the owner of the work grants the library permission to display the work in the library building or on the library’s web page and agrees to release the library from any liability for loss or damage. Public libraries often have a standard form for lenders to sign prior to displaying their works at the library. For example, Hennepin County Library (HCL) requires lenders to sign a Release of Liability for Display that covers the library’s and lender’s responsibility for the loaned works (www.hclib.org/about/policies/community-art-display-policy).
ACRL’s Rare Books & Manuscripts Section (RBMS) has recommended guidelines for borrowing and lending special collections materials for exhibition. These guidelines recommend a number of provisions, including insurance, security measures, transportation, permissions for copying and display, handling requirements, scholarly use, and right of recall (RBMS 469). The loan agreement should include borrower and lender names and information, description of the works, and the time period of the loan. RBMS also suggests that museums take care to verify ownership of the works:
Finally, the lending institution must be careful that it has proper ownership of the item being lent. In some circumstances, it is possible for an item to be confiscated at the borrowing institution or by customs because of cultural patrimony laws or disputed title. Some care must also be taken to be certain that the object lent does not fall into other categories of problematic items, such as those made of ivory (RBMS 466).
[For a discussion of cultural patrimony laws, see the NAGPRA chapter in this textbook at: mlpp.pressbooks.pub/librarylaw/chapter/nagpra/]
Scenarios
Scenario 1:
You are the director of public library established by a state statute and governed by a library board elected pursuant to the state statute. A separate Library Friends organization that is incorporated under state law and is recognized as a 501(c)(3) by the IRS does fundraising for the public library. By written agreement, the library staff presents the Friends a wish list of items with prices at the Friends board’s quarterly meetings. The Friends board reviews the wish list, decides which items from the list it will fund that quarter, and writes a check to the library for the listed items chosen for purchase. In an unprecedented move, the Friends Board rejected the entire list this quarter and announced instead that they are using the Friends’ funds to purchase a collection of Civil War artifacts from a Friends board member and that they have contracted with two local carpenters to construct a large built-in display case in the lobby of the public library for a permanent display of the Civil War collection. On your advice, the library board rejects the Friends board’s offer, citing that the collection does not fit with the library’s mission and collection policies and that the proposed display case would block wheelchair access to the lobby in violation of the Americans with Disabilities Act. The Friends board purchases the collection and donates it to the local historical society. The carpenters send a bill to the library for the time and materials they have already expended in working on the project and threaten to sue the library for breach of contract if the bill is not paid. Discuss the contract issues presented in this scenario. What contracts are in place and who are the parties? Are the contracts legally enforceable? What other legal issues do you see?
Scenario 2:
You are the Head Media Specialist at a high school media center. At the annual state library conference, you visit the exhibit booth of a vendor specializing in K-12 databases and ask the sales representatives to show you the newest products. The sales representative gives you a brochure for a brand new database, “High School Science Resources,” that looks promising and is available at the low “conference” price of $500 for a one-year subscription if you sign an order form today. When you ask the sales representatives if the database is full-text, they reply, “We think so.” You fill in an order form with your school’s name as subscriber, and the school’s address and IP address range. The vendor’s name and address are pre-printed on the order form, and a sales representative fills in “High School Science Resources, $500” on the line for Product/Price and “One-year subscription, January – December 2022” on the Subscription Term line. You review the order form and sign it. When your school’s IP access to the database is activated on January 1, you discover that the database is citation-only, not full-text, and thus fairly useless for your students. Neither the brochure nor the order form mention “citation-only” or “full-text.” When you contact the sales representatives to complain, they commiserate and tell you, “The database was so new that we didn’t know much about it, and we thought it was full-text. Sorry.” What are the contract issues and what are your options?
Works Consulted
Ahmad v. University of Michigan, No. 341299, unpublished (Mich. Ct. App. 2019); affirmed Ahmad v. Univ. of Mich., SC: 160012 (Mich. Apr. 9, 2021).
Amicus Brief of Association of Research Libraries, Association of College and Research Libraries, American Historical Association, American Council of Learned Societies, University of California Libraries, University of Illinois Library, and University of Iowa Libraries, in Support of Defendant-Appellant, Ahmad v. University of Michigan, Michigan Supreme Court Case No. 160012, filed September 30, 2020. www.arl.org/wp-content/uploads/2020/09/2020.09.30-ahmad-v-university-of-michigan-amicus-brief.pdf
Breeding, Marshall, Ed. Library Technology Buying Strategies. ALA Editions, 2016.
Delmar, Nathan. “What Is Bought Is Cheaper Than a Gift: The Hidden Burdens of Gifts-in-Kind and Policies to Help.” Legal Reference Services Quarterly, Vol. 38, No. 4, 2019, pp. 197-231, DOI: 10.1080/0270319X.2019.1696070
Fargo Public Library v. City of Fargo Urban Renewal Agency, 185 N.W.2d 500 (S.Ct.N.D., 1971).
Hennepin County Library. Patron Services Policy, www.hclib.org/about/policies/patron-services-policy.
Hennepin County Library. Community Art Display Policy, www.hclib.org/about/policies/community-art-display-policy.
Legal Information Institute [LII]. Wex: Contract, www.law.cornell.edu/wex/contract.
Hoffmann, Frank W. and Richard J. Wood. Library Collection Development Policies: Academic, Public, and Special Libraries. Scarecrow Press, 2005.
Lipinski, Tomas A. The Librarian’s Legal Companion for Licensing Information Resources and Services. Neal-Schuman, 2013.
“Rare Books & Manuscripts Section (RBMS) Security Committee Guidelines for Borrowing and Lending Special Collections Materials for Exhibition, Approved by the ACRL Board, January 2005,” A&CRL News, Vol. 66, No. 6, 2005, pp. 466-473.
Sherwood v. Walker, 66 Mich. 568, 33 N.W. 919 (Mich. 1887).
Stim, Richard. Contracts: the Essential Business Desk Reference. Nolo, 2016.
Tollen, David. Don’t Use Licenses for Software-as-a-Service. Tech Contracts Academy, 2018, www.techcontracts.com/2018/06/01/dont-use-licenses-saas-contracts/
Verkerke, J. H. Contracts Doctrine, Theory and Practice, Vol.One. CALI eLangdell Press, 2012, verkerkecontractsone.lawbooks.cali.org/
Author
Ruth Dukelow (she/her/hers) is a graduate of The Catholic University of America (MSLS) and Duke University School of Law (JD). Prior to retirement, she was the Executive Director of CLIC-Cooperating Libraries in Consortium in St. Paul, MN. Previously, she was the Associate Director at Midwest Collaborative of Library Services/Michigan Library Consortium. Prior to that, she was the legal specialist in the Library Development Division at the Library of Michigan where she assisted all types of Michigan libraries with legal questions relating to library service. She has worked in public, academic, and law libraries, and she also worked in a law firm for two years practicing oil and gas law before returning to library work. In 2009, she received the Michigan Library Association’s Librarian of the Year Award. She is the author of The Library Copyright Guide (AECT 1992).