November 11, 2011
From Our Far-Flung Correspondents: A New EU Sales Law on the Way?!?
Tadas Klimas, a contracts (among other things) prof in Lithuania and a friend of the blog has shared with us a link to his blog, Civitatus in which he reports on a new opt-in sales law for Europe. His introductory content is pasted in below, but you can get the full story on his blog:
“The train has left the station.” These were the words of Viviane Reding, Vice-President and Commissioner for Justice, Fundamental Rights and Citizenship, spoken at the ECR European Contract Law Hearing held at the European Parliament in Brussels on May 3rd, 2011 (which I attended). This is how the question of whether there will or will not be a pan-EU Contracts Code was answered. The “Commisar” was trying to convey the idea that a political decision has been made and that there indeed will be an EU Contracts Code.
Commissioner Reding did not speak with forked-train. It’s been a slow train coming, but the official proposals have now been made. In words more understandable by American standards, the bill has now (just about a month ago – October 11) been proposed and is in committee.
- Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law (includes the text of the new Sales Law)
- Impact Assessments
- Executive Summary
Here is an alternate link to the EU Sales Law
Among the highlights of the new trans-European code are these:
- It is an opt-in code. This is the reverse of the CISG, which is opt-out.
- It is both Business To Business and Business to Consumer.
- It affects all cross-border trading, including online sales.
- It is applicable to cross-border trading and is not applicable to internal (within-country, national) sales. Thus the regime it imposes is one in which consumers purchasing from a seller within the country the consumer resides in will find their contracts governed as per usual by the national law. But consumers from another EU country, if the contract so states, will find the contract (and their consumer-protection laws) governed by this new opt-in EU UCC (Art. 2) (EU Common Sales Law).
- Supposedly this regime will lower information-costs and enhance, encourage, and expand cross-border trading.
- And my favorite: it contains a facilitative section enabling the new code’s adoption by EU Member States for national (within-border) sales.
The rationale for the code is more or less the standard iteration in defense of such legal regimes (such as the CISG).
November 10, 2011
Engler and Heyman on Contract Damages
In this article, we juxtapose two classic contract doctrines to expose a subtle, but dramatic, anomaly of damage law. The Jack Dempsey case heads one leading line of contract law. After Dempsey breached a contract to pursue another championship boxing match, the spurned promoter sued for his costs. The court limited the promoter’s recovery to costs incurred after the contract signing, thereby wiping out his pre-contract expenses. Separately, a promissory estoppel line of cases, headed by Red Owl, would allow promoters who never finalize a contract to recover their costs if reasonably incurred in reliance on a pre-contractual promise. While Dempsey and Red Owl have been independently analyzed at length, our linkage of them uncovers the striking possibility that an aggrieved party on a finalized contract might receive less than if he had failed to successfully negotiate the deal!
Beyond this first anomaly, our critical analysis of a Judge Posner opinion reveals a second unrecognized inconsistency. We show how an aggrieved party recovers pre-contract and fixed overhead costs on final contracts that provide in advance a fixed return, but not on those with variable or less certain returns. In other words, the aggrieved party of a contract without a fixed return, like the spurned Dempsey promoter, is treated worse than an aggrieved party of a set-return contract. Yet Judge Posner curiously defends the current law as providing - symmetrical results.
In response to the undercompensation problem, some scholars have proposed that the breaching party should be required to give all his gains from the breach to the aggrieved party. We utilize the movie Rocky to demonstrate why this disgorgement remedy goes too far. Suppose Dempsey had to breach a small fight contract to accept Gene Tunney’s unique offer to fight for the heavyweight championship. Why deprive Dempsey of all his hard-fought revenue regardless of the promoter’s harm?
Finally, we propose an innovative solution in lieu of disgorgement for contracts without a set return: a presumptive recovery of all costs plus a reasonable risky rate of return for the investment period. Our proposal essentially extends the well-established presumption that the aggrieved party can recover his post-contract costs when he does not seek recovery of his lost revenue. Our default presumption could be rebutted in litigation upon a proper showing of additional (or lesser) value by the aggrieved party (or the breaching party).
The paper is fortchoming in the Temple Law Review, for now you can download and read the blow by blow here.
[Meredith R. Miller]
GW Government Contracts Group Gets New Associate Dean
As announced in this GW Press Release and this White House (OMB) Press Release, parts of which are pasted below, Daniel Gordon (pictured) has been named Associate Dean for Government Procurement Law Studies :
From George Washington Univesrity:
GW Law is pleased to announce the appointment of Daniel I. Gordon, Administrator for Federal Procurement Policy in the Office of Management and Budget, as its new Associate Dean for Government Procurement Law Studies. He will assume the newly created position on January 1, 2012.
“Dan Gordon has long been one of the worldwide leaders in this important field, and he is that rare person who can translate his experience and knowledge into learning and action,” said Paul Schiff Berman, Dean and Robert Kramer Research Professor of Law. “Our students will greatly benefit from his ‘insider’ perspective and his practical know-how. I am confident that the creation of this position signals to Washington and the world that now more than ever, GW Law is the premier place to study government procurement law and policy.”
Mr. Gordon says he is looking forward to his new position, and shares Dean Berman’s enthusiasm for the groundbreaking role.
“While GW Law has a long history of excellence in the area of government contracts, adding the position of associate dean should provide opportunities for building on that history to take the Law School even further,” said Mr. Gordon. “Ultimately, we will want to find new ways to reach students, including potentially nontraditional frameworks, and new ways to explore connections between government contracts law and other disciplines, such as corporate, public international, and anti-trust law.”
Mr. Gordon added that his recent career experience will shape his approach to knowledge-sharing and program development at GW Law.
“Procurement policy is intertwined with procurement law, but seeing things from the policy side has enriched my understanding of the importance and the impact of procurement law,” said Mr. Gordon.
Mr. Gordon was confirmed as the Administrator for Federal Procurement Policy in November 2009. In that role, he developed and implemented acquisition policies supporting more than $500 billion of annual federal spending. Previously, he spent 17 years at the Government Accountability Office in various roles including managing associate general counsel in the Procurement Law Division, deputy general counsel and acting general counsel.
Today, Dan Gordon, the Administrator for Federal Procurement Policy, announced that later this year he will be leaving the post to serve as Associate Dean for Government Contracts Law at the George Washington University Law School.
President Obama appointed Dan Gordon as the Administrator for Federal Procurement Policy in 2009 in order to turn around the explosive contracting growth of the last decade and re-instill accountability, drive fiscal responsibility, strengthen the acquisition workforce, cut out waste and rebalance the relationship between the federal government and the contractors that support our agencies. In Dan, he selected someone with decades of experience working with the federal procurement system, in private practice and at the U.S. Government Accountability Office. When Dan began at the White House, he brought with him a commitment to openness and integrity, combined with a strong sense of what we needed to do to improve the federal acquisition system, after too many years of neglect.
[JT h/t Steven Schooner]
November 9, 2011
Relational contracts and new business models
A few posts back, I referred to Apple's business model as incorporating relational contracting on a mass consumer scale which made me wonder whether relational contract theory is due for a revival (not that it ever went away). I didn’t attend the conference at Wisconsin honoring Stewart Macaulay although I wish I had. Relational contracting should be the subject of renewed interest given the new business models that incorporate goods, services, and information. On the radio yesterday morning, I heard someone talk about Google's business as being more than a series of searches - it was about services and relationships with its customers. (Okay, maybe those weren't the exact words, but they're close enough). A few weeks ago, a NYT article discussed new technology companies that are assisting musicians in managing their relationships with their fans. In order to survive, many businesses (especially those in the creative industries) will have to reboot for the evolving marketplace. Not all businesses (and by “businesses," I mean musicians, writers and artists who want to get paid and are not backed by large corporate conglomerates) are equipped to do this. Well, make way for companies like Topspin, Bandcamp, FanBridge and ReverbNation, to assist them. These companies help musicians run a band's online business which means they sell music, manage fan clubs and calculate royalty payments. They have found a way to bundle physical and digital goods. How much you want to bet that those digital goods are protected by contracts?
Which brings me to relational contract law. The purpose of these companies is to enable the musician to survive (and even thrive) without being backed by a record company. Now, the musician can directly manage the relationship with the fan. In the past, a fan joined a fan club, bought a ticket to a concert from one vendor, a record from a retailer, a tee shirt from another retailer - you get the picture. With the exception of the rules on the back of the concert ticket and the fan club membership rules, the other transactions were not governed by contract. The fan can now buy everything she or he wants that's band-related from that band's website, subject to the terms and conditions of the website and the licenses that accompany the digital products. Shouldn't the terms of those contracts be considered in light of the existing relationship between the musician and the fan? Wouldn't a relational contracts approach be helpful in analyzing the terms and how they should be interpreted and enforced?
Apple is relevant in this discussion for another reason. If it weren't for iTunes, it's likely that
none of these businesses would exist. (Fun note - the NYT article mentions that the chief executive of Topskin has a tattoo of the logo for NeXT Computer, which was Steve Job's old company).
November 8, 2011
Hitler's Take on the Chicken Case
Ever wonder how the facts and primary arguments in Frigaliment, a.k.a. The Chicken Case, could be illustrated via a humorous video clip involving Hitler? Yeah, me neither. Until now.
Last night, a former student of mine sent me a link to a "Hitler Rant" on this very case. For those who, like me, are too old and boring busy to have heard of HItler Rants before, they are an internet meme in which various "authors" craft humorous captions on all sorts of topics and insert them into the same clip from the critically-acclaimed German film, Downfall. For those who, like me, are children of the '80s, think Mad Libs for movie trailers. (Our fearless leader, Jeremy Telman, previously blogged about the phenomenon, and its application to contract doctrine, here.) As you likely recall, in Frigaliment, the core of the dispute was whether an agreement to purchase "chicken" should be interpreted as applying to only "young" chicken or any chicken. As for the Hitler Rant regarding Frigaliment? Well, you just have to see it for yourself.
[Heidi R. Anderson, h/t anonymous student]
Weekly Top Tens from the Social Science Research Network
RECENT HITS (for all papers announced in the last 60 days)
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal
September 3, 2011 to November 2, 2011
November 7, 2011
Unlicensed Subcontractor Can Sue General Contractor Despite Maryland's Home Improvement Law
In Stalker Brothers, Inc. v. Alcoa Concrete Masonry, Inc., Maryland's high court, the Court of Appeals granted certiorari to address the following question"
Whether an unlicensed subcontractor’s claim for non- payment should be honored by a Maryland court in view of more than ninety years of Maryland Court of Appeals precedent refusing to honor claims of unlicensed entities under regulatory licensing requirements[?]
The basic facts of the case are as follows: Alcoa did work for Stalker Brothers for a few years. Homeowners paid Stalker Brothers and then Stalker Brothers paid Alcoa for its part. But Stalker Brothers soon ran into financial difficulties and got behind on its payments to its subcontractor. But Stalker Brothers made promises that it would soon get caught up on its payments, and Alcoa was thus lured into continuing to serve as Stalker Brothers' subcontractor. Then Stalker Brothers told Alcoa that it was going bankrupt. It still made representations that it would pay Aloca through the proceeds of a building it was selling, but although the building was sold for over $2 million, Alcoa was not paid and claims that it is owed over $50,000. It also appears that Stalker Brothers never entered bankruptcy.
Stalker Brothers then sought refuge in the fact that Alcoa was unlicensed and argued that under Maryland's Home Improvement Law, "contracts made by an unlicensed entity such as an unlicensed home improvement contractor or subcontractor (i.e. Alcoa Concrete and Masonry, Inc.), are 'illegal' 'and will not be enforced.'” But the Court of Special Appeals ruled that the law only bars suits by unlicensed contractors against property owners and does not apply in suits between contractors and their subcontractors. The Court of Appelas embraced the conclusion of the intermediate appellate court:
We find no indication in the [Maryland Home Improvement Law] or in the Maryland cases that a policy of the Act is to protect general contractors from unlicensed subcontractors. Consequently, the fact that the Act is a regulatory measure does not bar Alcoa from recovering on its subcontract with Stalker.
The Court of Appeals noted that this reading of the Act protects the public from unlicensed contractors by reducing the incentive for general contractors to hire them.