Wednesday, April 12, 2017

What’s in the Contract?



Anyone who flies knows the drill: airlines overbook their flights.  They do this because some passengers will change plans and not take the flight.  Occasionally this practice by the airlines results in too many passengers and not enough seats.  At the gate the agent asks for volunteers, offering compensation for those willing to take a later flight.

You would do the same if you ran a business where unsold inventory could never be held for sale in a future period. 

Well, it didn’t go so well this time: after the flight was boarded, the gate agents decided that they needed four seats – four employees of United needed to take this flight to be in position to crew a flight originating elsewhere.

Then, it all went bad.

A video posted to Facebook Sunday evening showed what is becoming another public relations nightmare for United Airlines, which is owned by United Continental Holdings.

Dr. David Dao boarded a United flight at Chicago's O'Hare International Airport, headed to Louisville, not knowing he was about to be forced to leave a plane that was overbooked.

A nearly 30-second video clip, posted on social media by a fellow passenger, shows three security officers approaching Dao who was already seated, asking him to give up his spot on the plane. After the doctor refuses, he was eventually dragged by his arms and screaming toward the front of the plane.

It is easy to point to United as the bad guy in this situation; video, especially, has a way of burning this verdict on the mind.  Few would look to the passenger as the party at fault.

Several libertarian sites and posts have taken this path of completely ignoring the contract.  For example, Brian Doherty at Reason:

While there may be something to be said for the ability for private businesses to summon the help of the police to remove people from their premises if they refuse to leave peacefully and their presence is unwanted, there is no excuse for the police to cooperate when the reason their presence is unwanted is not "causing a disturbance" or being violent or threatening to other customers, or stealing goods or services, or doing anything wrong at all, but rather wanting to peacefully use the service they legitimately paid for.

No mention of the contract.  Sure, we can say that the airline should provide its own private police force, but we are in this world – and the issue really isn’t about the employment capacity of those who removed the passenger.  The issue is the contract.

What if the passenger “legitimately paid for” a service that included the possibility of being asked to get off of the airplane under certain circumstances?  It is always worth asking: what’s in the contract?  What if United followed the ticket contract to the letter, and it was the passenger that was in violation of his agreement with United?

Isn’t this the question?


Well, I was about to research this, but quickly found someone who did all of the heavy lifting for me.  Did United Airlines Violate Its Own Contract By Forcing That Passenger Off The Plane?

The author, Sean Davis, went line by line through United’s Contract of Carriage, its official contract with ticketed passengers.  To make a long story short, it seems United did not follow procedure according to its contract.

But what if it was the other way around?  What if it was the passenger in violation of the contract in force when he purchased the ticket?  What is the appropriate answer – in a libertarian or any other rational world?  Well, if the passenger didn’t move voluntarily…he got what the contract demanded.  I find no other libertarian answer.

I have found libertarians sometimes play fast and loose with “contract.”  For example, fractional reserve banking; for another example, specific performance – anything requiring the contracting party to perform that to which he agreed, in full. 

I find this a dangerous practice.  Who is to say the valid object for contract?  Only the parties involved, unless the contract inherently violates the NAP (which it inherently cannot do as regards the contracting parties).

We can opt for many possible methods to govern relationships between individuals: legislation, government regulation, custom, contract.  The first two of these clearly offer the initiation of aggression; custom is reasonably, but not absolutely, free from this defect.

Of these, only a contract between private parties is fully consistent with the non-aggression principle.  I have written before and offer again – a contract should be viewed as fully and legitimately binding on the contracting parties.  Libertarians should not take this lightly. 

If not contract…what?

Conclusion

Whatever the contract said – if United was right or wrong – this was a horrendous action.  Even worse, apparently the CEO of the company defended the action more than once before changing his mind.

United’s product is customer service to the extreme.  Treating customers like this who are otherwise peacefully seated is never a good idea no matter the contract – especially not in today’s age of video and social networking.

Apparently $800 was not enough to get volunteers on this particular flight.  Pay, pay, pay – if it took $5000 to get enough volunteers, so be it. 

On Tuesday, as the controversy surrounding the video failed to die down, shares dropped as much as 4.3%, or $3.10 per share, taking upwards of $950 million in market cap value away from the company based on 314 million shares outstanding.

Emphasis added, in case you missed it.

33 comments:

  1. None of the other passengers, nor any of the people viewing the video, signed a contract with United agreeing to not be outraged. Even assuming the Airline acted within its contractual agreement (it didn't), and pretending it is not a defacto government entity, the actions of its employees were wildly out of line with cultural standards. They are very lucky there wasn't a passenger revolt over the incident.

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    1. This. Every word of this. All day, this.

      Thank God for your conclusion, Mr. Mosquito...for most of this post, we were in danger of disagreeing (sort of). Your conclusion summed up the actual "matter", though.

      However, Mr. Bell here gets to the heart of the matter. Airlines are de facto state departments (yeah, I know, gray lines everywhere). So, I do not afford them the leeway of a "contract" any more than I do any other state actor.

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    2. It is difficult for me to identify an industry that is not significantly regulated by the government - some slightly more, some slightly less.

      One can say the same for the auto industry or food industry; one can say the same for universities and baseball teams.

      Airlines face significant competition; this is enough for this purpose.

      The gray lines are everywhere; does this mean we have license in all cases, everywhere, to ignore contract?

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    3. No, of course not. Before I go on, I must apologize. I let my back get up about this situation, and my tone came through much too strongly in the comment.

      My "disagreement" line was said tongue-in-cheek, due to my anger. One thing you will learn about me is that I cannot abide a bully. The state is a bully. The more closely aligned any organization/person is with the state, the more like a bully it will act.

      Examples of behavior like these are quintessentially state-like. So, I got mad.

      You are, of course, right about the sacrosanct nature of contract - or at least that they should be.

      However, as your conclusion, and Jeff Bell's comment, pointed out - in this situation - the contract is neither here nor there. This action was so far outside the (traditionally) "culturally" accepted bounds, there was little need to investigate the legal weasel words that nobody has ever read.

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    4. Ron, no need for apology; I cannot imagine being on a plane (or anywhere else) and being witness to seeing a man beat up for sitting quietly in his seat.

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    5. Nor can I.

      He that hath wife and children hath given hostages to fortune, for they are impediments to great enterprises, either of *virtue* or mischief.
      —Francis Bacon

      How would I react (in any situation like this)? Do I stand up for what is right, come what may? Or, do I sit quietly, hoping not to be noticed, so that I might get back home to my family? Do I even have enough courage to film the situation?

      I do not know, and I...I hope never to find out...

      Am I a small man living a small life? Do I rage at the stars, about which I can do nothing...but merely accept smaller impediments, which I might reasonably be able to remove from my path? What is meekness? What is right? What (truly) does it mean to wage a spiritual battle, but not a natural one? Where is *that* line?

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  2. Where United screwed up was in seating the customers and, then, trying to enforce the tandom selection.
    If United needed their employees that bad, United knew their schedules and screwed up their operations, and needed those employees to make a profit flying other aircraft elsewhere, United should have offered a bigger incentive to the seated customers.

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  3. The "contract" is a classic example of an adhesion contract. It is not the product of a give and take negotiation; to the contrary, it is a take it or leave it proposition by and between a de facto government construct associates of which grope and grab and prod and poke the ticket purchaser's usufruct of the "services" he purchased.


    Given that airline passengers do not draft the contracts, it is axiomatic in contract law that any ambiguities in the contract must be construed against the drafter. There are no provisions in the contract that enable UAL to remove passengers AFTER they have boarded and been seated to in order to accommodate other UAL employees. The language is just not there.

    Thus, applying contract law to this situation, UAL breached the terms of the contract. In furtherance of its breach, it employed force. It also negligently enlisted the aid of the state's privileged purveyors of violence and no private business has the right to do so in furtherance of its contractual breaches.

    Liberty Mike

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    1. Thank you for raising the point about how any ambiguity would be adjudicated given which party drafted the contract. This is a key point.

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  4. Here is where the contract is secondary to the business and that is the way it should be. The specifics in the passenger's contract with United will only be of consequence in a hearing in civil court or in a criminal proceeding against the passenger (Which you can believe will be covered by Alt Media if not MSM.).

    The two issues here in my mind are:
    1. That the employees of United don't have the incentive, wisdom or ability to make the offer to any passenger at some price to avoid a particularly obstinate passenger from being forcibly removed from the plane.

    2. The airline does not pay directly for the police to come and forcibly remove the passenger nor is not totally liable for any damages by the police nor is it financially responsible for prosecuting the offender if necessary. This makes the managers at United use far less caution in doing something that might/is the contractual power to do so.

    The articles I have read said that the passengers were offered $800 of vouchers, what about $8000 cash? Do you think that the whole mess here will cost that much in lost revenue and public relations?

    What if a flight attendant shouted out that they would start a Dutch Auction to get the next passenger to leave at $2000 and go up.

    Something similar happened to me where the Delta Computer overlooked the runway weight limitation and I was pulled out of line waiting to get on the plane. I received a check for over $1300 instead of the voucher. And I would have left the plane for about $800 as I could get a flight from another nearby airport easily.

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    1. Even if United was technically right under contract - they were not - they would likely lose in any court proceeding that involved a jury.

      Such a bad look cannot win in court.

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  5. "he got what the contract demanded"

    Now THAT sounds like today's culture. What kind of culture is necessary for a libertarian future? This one:

    "if it took $5000 to get enough volunteers, so be it."

    We have nuclear bombs, but we hope to never use them. Just because a contract has certain stipulations doesn't mean they should ever be used except in very extreme circumstances, which this wasn't.

    One could argue that people would then "squat" for ever more monies, but this would add incentive not to overbook. Maybe get the employees a private jet? Maybe just let the plane sit and be way late until enough passengers lose patience and disembark? Maybe the passengers start making deals with one another? All better, imo, than thuggery and its attendant image.

    Customers can, by their nature, be insatiate. But what is reasonable here? Where was the experimentation? Where was the flexibility? Where was the restraint when considering use-of-force? Had it occurred, we might have shown no interest.

    Are there better resolution examples from other airlines? If so, they should be shared and promoted. If this is the best that can be done, then I don't particularly care for the cultural signal, nor the possibility of new reactionary law.

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  6. Nick Badalamenti, I think your comment intended for this post ended up here:

    http://bionicmosquito.blogspot.com/2017/04/the-takeover-of-trump-timeline.html

    Just so you don't feel I am ignoring you!

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  7. I had the same question when I first heard the story.

    In another life I used to fly quite a bit(pre 9/11 thankfully) and I remember back when they were still issuing paper tickets I actually bothered to read the contract that I implicity agreed to by purchasing the ticket(which at that time used to be spelled out in small writing on the back of the ticket)while bored and in an airport during waiting for a connection- and I was astounded at some of the things in the contract at the time I had never been previously aware of.

    There are times in life we all agree to contracts, either implicity or explicitly, and don't know all the terms. (many times knowingly, we don't know the terms)

    For example, I have yet to meet one person that ever read every page of their home mortgage(that includes myself) during the closing.

    It's an interesting "fact" of life...

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  8. Here the market has offered governance in line with cultural norms over and beyond what was contracted. A great example.

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    1. Yes regarding "market governance." And yet, to demonstrate the complete denseness of politicians, we have Chris Christie:

      "To have somebody pay for a ticket, reserve a seat, be seated and then dragged off the plane physically by law enforcement officers at the direction of United (Airlines) -- it's outrageous," Christie told CNN's "New Day" on Wednesday.

      "That's why I've asked the Trump administration to stop the overbooking until we set some more, different rules about how the airlines can conduct themselves."

      http://www.cnn.com/2017/04/12/travel/united-passenger-pulled-off-flight/

      As if United - and all airlines – haven’t learned a lesson already.

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    2. Chris Christie is jumping in front of a parade and of course his brilliant solution is to stop "overbooking" of airline flights? He obviously does not fly that much in commercial airlines with real planes, real people and real weather to understand that "overbooking" is what the customers and airlines want.

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  9. Do you suppose all passengers participated equally in the 'lottery', including first and business class? Or was the reallocation only for the poorer people? So that, even under terms favorable to UAL, was the contract equally protective of all passengers?

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    1. I don't know how they did the lottery, but using a lottery as the means to remove passengers isn't in the contract.

      As to treating all passengers equally, the contracts has a clause that any reasonable person would expect to see, if other means do not result in enough volunteers:

      "The priority of all other confirmed passengers may be determined based on a passenger’s fare class, itinerary, status of frequent flyer program membership, and the time in which the passenger presents him/herself for check-in without advanced seat assignment."

      The best customers get treated as if they were the best customers.

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  10. Since a huge lawsuit will be the outcome of this incident, maybe United's marketing talent can spin the ensuing public relations nightmare to the company's advantage. "Random beatings for all. Fly United and win the lottery", can be the new corporate slogan!

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  11. Making the rounds. I do not know if truly from Southwest Airlines but funny:

    "We beat the competition, not you."

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  12. The same United Airlines that allegedly saw one if its planes flown into the South Tower of the WTC buildings causing freefall collapse?

    These guys just cant get a break.

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  13. No, the managers of business have to make their own breaks. There really isn't luck involved and certainly not in this case. There is in the end just human judgement and having the confidence in managers to make critical decisions.

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  14. Should someone owe me $25 and not pay in accord therewith, may I physically attack and take the amount owed. My thought is that breach of contract is a license to sue, not authority for violent self-help in perfecting the contract.

    Are we dealing with something other than “a contract” here? For the sake of nonaggression I hope so.

    TomO

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    1. Have a talk with Wenzel. It will be intetesting at which point throwing the debtor off the plane will be appropiate.

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  15. JamieInTexas,

    I actually tried to comment on Wenzel's site to the effect of "in your PPS United Airlines would have thrown the passenger out of the airplane mid-flight" and I linked to his article about how it is OK to throw people out of airplanes mid-flight. Wenzel chose to censor me and did not publish my comment.

    Wenzel is a derivative thinker. To the extent that he cleaves to real thinkers like Rothbard, he is good. But all of Wenzel's original ideas like shooting kids, legalized pedophilia on private property, throwing people off planes mid-flight, IP rights that last millennia, et al, are shit-tier.

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  16. It sounds like the staff arrived late and demanded seats from people who had got there on time and been checked in and seated. In other words, "it's all about us". "We don't have to plan ahead or get there early, we have priority over the proles."

    Imagine the plane had to ditch in the ocean. The staff should assist the passengers but would they ? Methinks it might be "all about us" again.

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  17. > If not contract…what?

    Incidentally, the answer is very easy---self answering, in fact, if one is willing to think: Knowledge and personal responsibility. With these, the usual "contract" bs is irrelevant, and without these any notion of "contract" is absurd.

    As an example, the third sentence of the United "contract" says that "the airline" can change or modify the conditions of the contract in any way at any time. So, in fact, according to your reasoning, the contract was followed and all is well. The problem is knowledge and responsibility. When you pay for an airline ticket (within the absurd context you have decided to create and accept) you have no expectation of anything. If some thugs beat you senseless, according to contract, it just serves you right. But that's the world you want to live in.

    Keep up the good work.

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    1. "Keep up the good work."

      Thank you, Sonja!

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  18. In terms of the contract, surely the airline's obligation to provide the service of taking the customer to X destination eventually becomes binding? I would think that if you are seated on the plane, that this is past the point of it becoming binding. At that point you can only try to incentivize customers, not forcibly remove them.
    I think the other point about this is how state intervention in markets corrupts private enterprise. The airline industry is so regulated and its operations so intertwined with the state that they have lost their focus to provide customer service. There were different options that could have been considered like driving the employees there or buying them tickets on a competing airline. The cost of tickets on another airline would surely become attractive at a certain point in relation to asking a customer to give up a seat.
    It is clear now that the airlines see customers as cattle. Priority one is meeting state requirements and keeping Uncle Sam happy. Then probably employees. Customers are last.

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  19. I don't accept any and all contracts as permissible, regardless of the willingness of the contracting parties. This is where our views diverge, BM.

    I don't accept contracts that would lead to societal dysfunction on a large scale, such as slavery contracts which Walter Block says is OK. Now someone might object that someone wouldn't sell themselves into slavery, but that not true. There are vast numbers of people in history that sold themselves into slavery, and some of these self-selling slaves no doubt ended up in the Americas.

    Without getting into digressions about how some of these slaves were kidnapped, lets just say for argument that all these slaves were contractual. Now you have these slave owners bringing in black African slaves. No one else's business right? Wrong! The non-slave owning majority of America are suffering TODAY for the contracts of slave owners yesterday. The slave owners planted a biological weapon in America, and they should have be told no, they are not allowed to do this in the first place.

    Not to mention that self-selling is a performative contradiction. If you are selling yourself then you don't have the agency to form contracts in the first place.

    Kids can't form contracts, right? But then the question arises, why not? Why carve out an unprincipled exception for kids? If you don't carve out an unprincipled exception for kids, you can expect sexual contracts between adults and children. Or if you say that a guardian can form contracts for kids, maybe the guardians will do it.

    Contracts must be respected and enforced, but what kinds of contracts that are allowed to be formed in the first place must be determined by society in general. No contract should ever impose a cost on a non-contracting third party, like slavery did to non-slave owning white Americans.

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