Jack Balkin: jackbalkin at yahoo.com
Bruce Ackerman bruce.ackerman at yale.edu
Ian Ayres ian.ayres at yale.edu
Corey Brettschneider corey_brettschneider at brown.edu
Mary Dudziak mary.l.dudziak at emory.edu
Joey Fishkin joey.fishkin at gmail.com
Heather Gerken heather.gerken at yale.edu
Abbe Gluck abbe.gluck at yale.edu
Mark Graber mgraber at law.umaryland.edu
Stephen Griffin sgriffin at tulane.edu
Jonathan Hafetz jonathan.hafetz at shu.edu
Jeremy Kessler jkessler at law.columbia.edu
Andrew Koppelman akoppelman at law.northwestern.edu
Marty Lederman msl46 at law.georgetown.edu
Sanford Levinson slevinson at law.utexas.edu
David Luban david.luban at gmail.com
Gerard Magliocca gmaglioc at iupui.edu
Jason Mazzone mazzonej at illinois.edu
Linda McClain lmcclain at bu.edu
John Mikhail mikhail at law.georgetown.edu
Frank Pasquale pasquale.frank at gmail.com
Nate Persily npersily at gmail.com
Michael Stokes Paulsen michaelstokespaulsen at gmail.com
Deborah Pearlstein dpearlst at yu.edu
Rick Pildes rick.pildes at nyu.edu
David Pozen dpozen at law.columbia.edu
Richard Primus raprimus at umich.edu
K. Sabeel Rahmansabeel.rahman at brooklaw.edu
Alice Ristroph alice.ristroph at shu.edu
Neil Siegel siegel at law.duke.edu
David Super david.super at law.georgetown.edu
Brian Tamanaha btamanaha at wulaw.wustl.edu
Nelson Tebbe nelson.tebbe at brooklaw.edu
Mark Tushnet mtushnet at law.harvard.edu
Adam Winkler winkler at ucla.edu
once sued Yale for closing down its facilities. The year was
1984 and the University, in the midst of a 10-week clerical workers’ strike,
had closed its dining halls, stopped cleaning the dormitory bathrooms, shut
down the gym and moved hundreds of classes off-campus.
shut down is very different from Yale's current suspension of campus activities – this time due to concerns over the spread of coronavirus. For one
thing, the 1984 crisis was at least partly of Yale’s own making, as the
University President A. Bartlett Giamatti refused to budge week after week from his initial offer to
the clerical union. In contrast, colleges are obviously not responsible
for the coronavirus pandemic that is threatening our country.
differences in these disruptions also help show that service providers should
be relieved of the normal legal obligation to refund consumer prepayments in
many circumstances today.
across the country are confronting the difficult question of whether to pay
refunds when they cancel pre-planned events. Should gyms refund
membership fees? Should Broadway refund ticket prices? And closer
to home, should universities refund dormitory and dining charges?
universities around the country that have moved to online classes are
nonetheless keeping their dorms and dining halls open – in part this may be an
attempt to avoid the devastating financial burden of refunding millions of
dollars in room and board to their students. If institutions give
students the option of coming back to campus, then they won’t have to refund
course, it might be safer for some students whose homes regions are already
heavily impacted by coronavirus to remain on campus to shelter in place.
But avoiding refunds shouldn’t be part of the calculus on whether to keep
dining halls or concert halls open.
aversion that businesses have to paying refunds may be endanger public
ordinary circumstances, if a university closes its dormitories, it must refund
fees and deposits, but if a student decides it’s just not safe stick around,
then they must forfeit the fees and deposits already paid. This incentivizes an
irresponsible game of chicken – the party who cancels first bears the loss,
even though making the decision to cancel may be best for public health and
law already has a seven-syllable solution – the doctrine of
“impracticability.” Now is a good time to remind the market, that under
the common law tradition, promisors have a right to cancel contracts when their
performance becomes impossible or impracticable.
course, businesses shouldn’t be able to profit from cancelling their
services. One reason I sued Yale was that it was saving millions of
dollars a week in union salaries but was only refunding students a pro-rata
share of its dining hall revenue. Just as we prohibit “price gouging” during times of crisis, we should also force
sellers to disgorge profits if they fail to perform.
universities and other service providers that are continuing to pay their
workers and have substantially the same costs during this crisis should be able
to suspend their services without refunding revenue to their customers.
removing the legal obligation to pay refunds allows struggling organizations to
keep paying salaries to employees. On Twitter, artists are imploring patrons of
cancelled performing arts events to “consider donating your ticket rather than
requesting a refund.” For many non-profits and small businesses, COVID-19
represents an existential risk. When the alternatives to suspending
refunds are massive layoffs or folding shop, contract law wisely relieves
merchants of the duty to perform or pay damages.
consumers, it’s natural to balk at this result. Why shouldn’t I get my
money back if I can’t use the gym? Why shouldn’t the University pay me a
refund if my daughter can’t eat at the dining hall?
answer is that making sellers refund money distorts their incentives to do
what’s right for our safety.
is right that our government is picking up the cost of coronavirus testing
because we don’t want economics to play a role in whether someone decides to
get tested or treated. We should similarly eliminate refund costs from a
seller’s decisions about whether to go forward with a conference, concert or
Leff famously defined an “act of God” as an act that “no reasonable God would do.” But contracts
don’t have to have explicit “force majeure” clauses for the law to provide
relief. We would be wise to remember that contract law traditionally
excuses contractual performance rendered impracticable by natural disasters.
After the 1984 strike finally settled, the plaintiffs chose to dismiss their complaint before a court decided the merits. Still our suit had an impact on the University. The next year the undergraduate regulations included a new provision that still exists to this day expressly renouncing the university's obligation to pay any refund for strike related disruptions:
[N]o rebates of tuition or any other fees will be given to a student, nor may any room contract be rescinded, on account of the interruption, as the result of a strike, work stoppage, "job action," etc., of any services customarily furnished by the University or of any activities customarily conducted by or at the University.
The same regulations do, however, give the University discretion to make appropriate refunds:
In the unlikely event that public health or other significant safety or security concerns cause the University temporarily to suspend University programs and operations, the University will make arrangements for appropriate refunds, consistent with the principles enunciated in these Regulations, as may in its judgment be warranted in light of all the circumstances of the suspension and consistent with applicable law and regulations.
Given Yale's substantial endowment, it might be wise for it to chose to exercise its discretion to refund fees even if the law does not require it. Other non-profits and small businesses are not as well-healed and, if they are continuing to pay their employees, have a stronger rationale for cancelling contracts without refunds.
We as a society are just beginning to experience the manifold sacrifices from our efforts at socially distancing. Asking consumers to step up and bear some of the cost of cancellation offers a reasonable path forward that is consistent with our common law tradition.