Thursday, January 27, 2005
The UNCITRAL Working Group on Electronic Commerce is holding a teleconference next Wednesday (February 2), to discuss its proposed new Convention on the Use of Electronic Communications in International Contracts. The group is looking for input. Click on the links for details and the invitation.
It’s intuitive to most of us that the law and legal institutions play a role in shaping the form of contracts. But how, and how much, has been much more talked about than studied.
Into the breach comes a new paper from the National Bureau of Economic Research. In How Law and Institutions Shape Financial Contracts: The Case of Bank Loans, Philip Strahan takes a look that sounds interesting:
We examine empirically how legal origin, creditor rights, property rights, legal formalism, and financial development affect the design of price and non-price terms of bank loans in almost 60 countries. Our results support the law and finance view that private contracts reflect differences in legal protection of creditors and the enforcement of contracts. Loans made to borrowers in countries where creditors can seize collateral in case of default are more likely to be secured, have longer maturity, and have lower interest rates. We also find evidence, however, that "Coasian" bargaining can partially offset weak legal or institutional arrangements. For example, lenders mitigate risks associated with weak property rights and government corruption by securing loans with collateral and shortening maturity. Our results also suggest that the choice of loan ownership structure affects loan contract terms.
98: The first of the "five good emperors" of Rome, Marcus Cocceius Nerva, dies of natural causes. His is succeeded by his adopted son, Trajan.
1606: The trial of Guy Fawkes and the disenfranchised Catholics who were charged with plotting to blow up Parliament and King James I in the Gunpowder Plot begins. They are executed four days later.
1756: Wolfgang Amadeus Mozart is born at Salzburg. Contrary to popular belief, he did not die a penniless unknown, but will enjoy a well-paid court position and receive many lucrative commissions. He'll just spend too much.
1785: The Georgia General Assembly incorporates the University of Georgia as the first state-chartered institution of higher learning in the U.S. It is endowed with 40,000 acres of land.
1801: The United States Senate confirms John Marshall as Chief Justice of the U.S. Supreme Court.
1861: "America’s greatest bridge builder," Ralph Modjeski, is born at Bochnia, near Krakow, Poland. The Ben Franklin Bridge in Philadelphia is considered his masterpiece, although he also built bridges across the Mississippi, San Francisco Bay, and between the U.S. and Canada.
1870: The first college sorority, Kappa Alpha Theta, is formed at DePauw University. It is called a "fraternity for women" at first because the word "sorority" has not yet been developed.
1872: Billings Learned Hand is born in Albany, New York. Today's question: Would he have become as famous if he’d used his first name?
1880: Thomas Edison receives the patent for his newfangled incandescent lamp.
1888: One of the nation’s premier direct-marketing entities, the National Geographic Society, is founded in Washington, D.C.
1948: Home voice recording becomes practical for the first time, as Wire Recording Corp. of America introduces the first wire recorder. Price: $149.50, or about $1,100 in 2003 dollars.
1950: Charles Pfizer & Co. comes up with the first product developed by its own researchers: the antibiotic terramyacin. Pfizer's oddball belief is that useful organisms can be found in soil; his folks find this one in some Indiana dirt.
1964: E.I. du Pont de Nemours & Co. introduces one of the all-time great business flops: Corfam. The porous plastic leather substitute for shoes will be made and marketed for seven years before DuPont gives up, having lost $100 million.
1998: On the NBC Today show, First Lady Hillary Clinton says that her husband’s problems are part of a "vast right-wing conspiracy."
Wednesday, January 26, 2005
If so, ContractsProf is looking for bloggers. The only qualifications are (1) interest in stuff related to contracts, and (2) willingness to invest a couple of hours a week. Junior faculty are particularly encouraged to get involved, as are those who teach outside the U.S. Our goal is to have a web site that reflects a broad range of interests and viewpoints. For the technologically impaired—like the author of this post, who doesn't know what "WiFi" is and can’t even use PowerPoint—you should know that the software takes no more than five minutes to master and that blogging can be done from any place with access to the Internet.
So get involved! If interested, send an e-mail to Frank Snyder. The first 25 persons who respond will get a free drink at the summer Section conference in Montreal.
1340: A legal squabble that has already led to war escalates, as King Edward III of England has himself declared King of France. Under English law his mother Isabella would have been the heir of the dead King Philip V, but under the Salic law—invoked by French nobles—the French crown cannot pass through a female. It will take a hundred years of war to resolve the dispute.
1699: The end of Islamic expansion into Europe is signaled by the Treat of Karlowitz, the first in which the Ottoman Empire is forced to give back some of its European conquests, and the first in which the Christian powers (Austria, Poland, Venice, and Russia) are able to deal on terms of equality with the Turks.
1763: One of the very few lawyers’ sons to become a king, Jean Baptiste Bernadotte (left) is born at Pau, France. While serving as one of Napoleon’s top marshals, he is, although a commoner, unexpectedly elected by the Swedes and Norwegians to become the heir to their throne. Taking the name of his adopted father, he will succeed as Charles XIV.
1802: The U.S. Congress votes to establish a Capitol library; it becomes known as the Library of Congress.
1837: Michigan enters the Union as the 26th state.
1841: The United Kingdom formally occupies Hong Kong, which has been ceded to the British by China.
1886: Lawyer David Rice Atchison dies at Plattsburg, Missouri. As president pro tem of the Senate, some claim he was technically President of the United States for one day on March 4, 1849, between the administrations of James K. Polk and Zachary Taylor. He spent the day in bed, recovering from a hangover, and later said that his "presidency" was the "most honest administration this country ever had."
1905: The Callinan Diamond, the largest rough gem-quality diamond ever discovered (at 3,106 carats, or 1.4 pounds), is found at the Premier Mine near Pretoria, South Africa.
1921: Akio Morita (left) is born in Nagoya, Japan, to a family of sake brewers. At age 25, he will in 1946 co-found Tokyo Tsushin Kogyo K.K. in a bombed-out department store, with $375 in start-up capital. Its first product will be a rice boiler. It will later change its name to Sony.
1934: The Apollo Theater in Harlem opens. Its famous amateur nights will launch the careers of such stars as Ella Fitzgerald, James Brown, and Michael Jackson.
1962: The U.S. National Aeronautics and Space Administration launches the Ranger 3 moon probe. It misses the moon, though, by 22,000 miles.
1962: Charles "Lucky" Luciano, the Sicilian-born mobster who made the mob an organized "business" by dividing territories and creating cooperation among various families, dies of a heart attack in Naples, Italy.
1983: Lotus Software releases a new "spreadsheet" program called "Lotus 1-2-3" that will help make the new personal computer a must-have for financial users.
1998: President Bill Clinton goes on national television to claim, "I did not have sexual relations with that woman, Miss Lewinsky."
1998: Two former high-tech darlings turned computer dinosaurs try to see if cross-breeding will help them ensure their survival, as Compaq buys Digital Equipment Corp. Compaq itself is later subsumed into Hewlett-Packard.
Rolling Stone magazine has reversed its field and says it will, too, honor its contract to run a half-page ad (left) promoting a new Bible from Zondervan Publishing. The magazine had previously refused to accept he ad, saying it had an "unwritten policy" that it did not accept "religious" advertising.
Fiji’s government sacks its finance head one year into his five-year contract for refusing to deliver a plan detailing what the agency is supposed to do.
Iowa's secretary of state issues $4.1 million contract to revamp the state's voter registration system.
The Charles Stark Draper Lab in Cambridge, Massachusetts, wins a $62 million cost-plus-incentive-fee contract for upgrades to the Trident II missile guidance system.
A would-be real estate developer who lost his purchase option on property because a business associate failed to keep its promise to make the required option payment sees his jury verdict affirmed, but will have to face a retrial on his $10 million jury award.
In a reverse outsourcing move, Dallas's Texas Instruments wins a contract to provide processing chips to South Korea’s Samsung Electronics for four new camera phones. TI makes about half the chips used in the world's cell phones.
The pricing and payment structure of a contract is relevant to determining the agreement of the parties, says Judge Richard Posner in a new decision from the Seventh Circuit, applying Illinois law.
A software development agreement calling for a large "base" payment with much smaller fees for each subsequent "line of business" application supports the claim that the developer committed itself to delivering more than one application, even though the contract named only one. The text of the opinion is here.
The difficulties that arise when agents who negotiate contracts have different interests than the principals they represent is a staple of agency and corporate law. The issue is particularly acute where the agent has more knowledge relating to the transaction than the principal—as is often the case with professional advisers.
A new paper from the National Bureau of Economic Research, Market Distortions when Agents are Better Informed: The Value of Information in Real Estate Transactions, by Steven D. Levitt and Chad Syverson demonstrates the effect in an ingenious way. Here’s the abstract:
Agents are often better informed than the clients who hire them and may exploit this informational advantage. Real-estate agents, who know much more about the housing market than the typical homeowner, are one example. Because real estate agents receive only a small share of the incremental profit when a house sells for a higher value, there is an incentive for them to convince their clients to sell their houses too cheaply and too quickly. We test these predictions by comparing home sales in which real estate agents are hired by others to sell a home to instances in which a real estate agent sells his or her own home. In the former case, the agent has distorted incentives; in the latter case, the agent wants to pursue the first-best. Consistent with the theory, we find homes owned by real estate agents sell for about 3.7 percent more than other houses and stay on the market about 9.5 days longer, even after controlling for a wide range of housing characteristics. Situations in which the agent's informational advantage is larger lead to even greater distortions.
A contract dispute between a Chicago real estate developer and the town of Wheat Ridge, Colorado, may turn out badly for the home team. A Colorado court has expressed "distaste" for the town redevelopment agency’s "thumbing its nose" and "refusing to level" with a developer trying to build a Walgreen’s drug store.
The Cornerstone Group signed a contract with the Wheat Ridge Urban Renewal Authority in 2003, after the local city council approved the deal. WRURA was supposed to use its sovereign power to take property by eminent domain that would then be turned over to Cornerstone, which would build the store. The project was contentious, and local residents and businesses fought hard. WRURA eventually backed out of the deal. The developer sued.
Cornerstone says that the issue is whether WRURA’s contract with Cornerstone is enforceable; the agency claims that Cornerstone "didn’t understand" the steps that would have to be taken to finish the deal.
Cornerstone won the first round, convincing a Colorado state judge that it would likely win its contract claim and gaining an injunction against spending by the agency to preserve assets for a damages award.
The processes of the law can be strange. That’s a lesson that California wine distributor Ken Jacques is learning, after he bought 125,000 bottles of good quality Australian wine for $100.
Jacques's purchase is just the latest round in a legal brangle that started in 2002 when an Australian winery, James Estate, hired Jacques’s company, Evaki, Inc., to sell its wine in the U.S. A few months later James Estate stopped paying and sued. It also wrote nasty letters to Evaki’s clients claiming that Evaki was being prosecuted for theft. Evaki countersued, and eventually won some $400,000 in damages. James Estate refused to pay, saying it didn't have the money.
Jacques discovered that the winery had 10,000 cases of wine in a warehouse in Sonoma, and had the court put a levy on it. At the sheriff's sale, Jacques bid $100—and there were no other offers.
Jacques still hasn’t recovered his damages, but believes he will recoup about $250,000 from sales of the wine, which goes for $9 to $15 a bottle at retail.
One of the delightful things about teaching Contracts is that you almost never have to think about the jurisprudence of Justice Harry Blackmun. (Or, to be fair, any of his colleagues.) Yet there is a certain train-wreck fascination with the Nation's HIghest Court that sometimes transfixes even commercial law types.
For those jealous of the hordes of students who always seem to trail after the Con Law teachers, there’s an upcoming conference at the University of Missouri–Columbia School of Law, Reflections on Judging: A Discussion Following the Release of the Blackmun Papers, to be held Friday and Saturday, Feb. 25-26.
Tuesday, January 25, 2005
Via our new colleagues at Wills, Trusts & Estates Prof Blog, the story of Canada’s Great Stork Derby, in which a wealthy lawyer leaves a fortune to whichever woman in Toronto who can bear the most children in the ten-year period after his death . . . .
The U.S. Government Accountability Office has released its 2005 list of 25 government programs that are at "high risk" of vulnerability to waste, fraud, and mismanagement. The good news is that three areas have been removed from the list, including (among others) the Student Financial Aid program. The bad news is that four areas have been added; the biggest seems to be the government’s practice of using government-wide "supply schedule" contracts.
The GAO considers a total of 25 areas to be "high risk," including such things as Medicare, Medicaid, procurement at NASA, DoD, and DoE, air traffic control modernization, HUD mortgages, tax collection—in other words, pretty much any part of the government where money changes hands. Many of these programs have been on the list since it started in 1990. Of 41 different areas that have appeared on the GAO list, six were resolved before 2001, and 10 since. The GAO document itself is here.
If you want to report waste, fraud, or mismanagement on a federally funded program at your own institution, click here, but don't do it unless you've got tenure.
But what, asks Diane Holmes-Curtice, who as a law student rebelled against authority and demanded to know what Rose had to be ashamed about? The whole contretemps was not exactly her fault, was it? Herewith, her answer poem defending the great heifer's honor . . . .
Tuesday, February 15, is the deadline for submitting papers for the Fourth Annual Meeting of the Israeli Association of Law and Economics, which will be held in Haifa on May 26, 2005. Papers from more junior scholars are particularly encouraged, and some limited travel money may be available. Click the link for the announcement.
The ABA’s Standing Committee and Professionalism and the Conference of Chief Justices are looking for nominations for the "National Award for Innovation and Excellent in Teaching Professionalism." If you know somebody who deserves the award, act quickly; the deadline is Monday, February 7. Click on the link for the announcement.
Widener University School of Law has announced that Russell Hakes (left) has been named Vice Dean of the Delaware campus. Hakes, a U.C.C. specialist, teaches Sales & Leases, Secured Transactions, and Payment Systems, along with Property. He has taught at theWilmington school since 1988.
He’s probably best known to law students for his The ABC's of the UCC—Article 9: Secured Transactions.
The idea that contract terms are often used to apportion the risks among parties is something we often try to impress on our students. Every contract, of course, carries risk with it, but some carry more than others.
Elizabeth Winston (Whittier) points us to a story in the Los Angeles Times about insurance agents who write the policies for economically pointless and dangerous activities, like a vacation trek across Antarctica or a solo around-the-world cruise. Balancing physical hazards and moral hazard is a tough job, particularly when dealing with people who think taking a cell phone along on a mountain climb is cheating.
George Washington University has got a pair of upcoming programs of interest to those who do government contract law. This Friday is Contractors on the Battlefield: Learning from the Experience in Iraq. It seems to offer an unusually good collection of academics, military experts, and contractor representatives, and should be interesting. The keynote speaker is Director of Defense Procurement and Acquisition Policy Deidre E. Lee. It’s free.
A week or so later is a half-day colloquium, Organizational Conflicts of Interest: New Challenges, which GW is sponsoring in conjunction with the Boards of Contract Appeals Bar Association and the National Contract Management Association.
Cool name, although Buffalo wings ordinarily should be consumed with beer or whiskey, not vodka. A great advertising opportunity for law firms trying to appear hipper than they are.
Left, entirely gratuitous picture of singer Jessica Simpson, solely because she once thought that Buffalo wings came from bison.