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Thursday, May 26, 2005

The uniformity paradox in sales law

Commercial parties tend to like clear rules because they allow for more accurate planning.  Those who are trying to gain uniformity in contract law like flexible (or vague) standards, because it's easier to get agreement across jurisdictions.  Thus, growing uniformity paradoxically creates more uncertainty.

That's the thesis of Clay Gillette (NYU) and Bob Scott (Virginia) in a provocative new paper, The Political Economy of International Sales Law.  They focus their attention on the Convention on Contracts for the International Sale of Goods, using its development as an illustration of the process.  Click on the "continue reading" link for the abstract.

ABSTRACT

The United Nations Convention on Contracts for the International Sale of Goods, or CISG, has been adopted by more than 60 countries in an effort to harmonize the law that applies to international sales contracts.  In this paper, we argue that the effort to create uniform international sales law (ISL) fails to supply contracting parties with the default terms they prefer, thus violating the normative criterion that justifies the law-making process for commercial actors in the first instance.  Our argument rests on three claims.  First, we contend that the process by which uniform ISL is drafted will dictate the form that many provisions take.  Second, we contend that the legal form dictated by the drafting process has significant substantive consequences,  particularly for the policy objectives of uniform ISL.  That leads to our third claim.  We predict that in order to achieve uniform ISL that is widely adopted, those involved in the drafting process will systematically promulgate many vague standards that contracting parties would not choose for themselves.  These defaults cannot be justified as the inevitable cost of achieving an optimal level of uniformity.  If the products of a uniform ISL are default terms that parties do not want, then the underlying justification for the law-making function—reduction of contracting costs—vanishes.

We find significant correspondence between our predictions about the drafting of uniform international sales law and the CISG.  The CISG was drafted by parties whose objectives did not necessarily coincide with those of the commercial actors whose conduct the treaty was intended to regulate.  The result is a variety of vague standards and compromises that appear inconsistent with commercial interests.  We also illustrate the ways in which the CISG avoided potential correctives to these problems.  We conclude by suggesting that commercial actors involved in international sales would prefer to choose governing law from among legal regimes that compete to supply parties with more desirable substantive terms.

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