ContractsProf Blog

Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Monday, December 16, 2013

Consumer Financial Protection Bureau Preliminary Report on Arbitration

KirgisUPDATE: Paul Kirgis (pictured) provides a synopsis on the ADR Blog here.

Section 1028(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 instructs the Consumer Financial Protection Bureau (the “Bureau”) to study the use of pre-dispute arbitration contract provisions in connection with the offering or providing of consumer financial products or services, and to provide a report to Congress on the same topic.  This document, dated December 12, 2013, presents preliminary results reached in the Bureau’s study to date. 

Below are excerpts, with emphasis added, from the Executive Summary of the Bureau's preliminary findings:

  • In the credit card market, larger bank issuers are more likely to include arbitration clauses than smaller bank issuers and credit unions. As a result, while most issuers do not include such clauses in their consumer credit card contracts, just over 50% of credit card loans outstanding are subject to such clauses. (In 2009 and 2010 several issuers entered into private settlements in which they agreed to remove the arbitration clauses from their credit card consumer contracts for a defined period. If those issuers still included such clauses, some 94% of credit card loans outstanding would now be subject to arbitration.)
  • In the checking account market, larger banks tend to include arbitration clauses in their consumer checking contracts, while mid-sized and smaller banks and credit unions do not. We estimate that in the checking account market, which is less concentrated than the credit card market, around 8% of banks, covering 44% of insured deposits, include arbitration clauses in their checking account contracts.
  • In our [General Purpose Reloadable] GPR prepaid card sample, for which data are more limited than for our credit and checking account samples, arbitration clauses are included across the market.  Some 81% of the cards studied, and all of the cards for which market share data are available, have arbitration clauses in their cardholder contracts.
  •  Nearly all the arbitration clauses studied include provisions stating that arbitration may not proceed on a class basis. Around 90% of the contracts with arbitration clauses— covering close to 100% of credit card loans outstanding, insured deposits, or prepaid card loads subject to arbitration—include such no-class arbitration provisions. . . .
  • The AAA is the predominant administrator for consumer arbitration about credit cards, checking accounts, and GPR prepaid cards.
  • From 2010 through 2012, there was an annual average of 415 individual AAA cases filed for four product markets combined: credit card, checking account, payday loans, and prepaid cards.23 The annual average was 344 credit card arbitration filings, 24 checking account arbitration filings, 46 payday loan arbitration filings, and one prepaid arbitration filing. These numbers do not indicate the number of cases in which the filing was “perfected” and the matter proceeded to arbitration. . . . 
  • Not all these arbitration filings were made by consumers. For the three product markets combined, the standard AAA “claim form” records consumers filing an average of under 300 cases each year.  The remaining filings are recorded as mutually submitted or made by companies.
  • From 2010 through 2012, around half the credit card AAA arbitration filings were debt collection disputes—proceedings initiated by companies to collect debt, initiated by consumers to challenge the company’s claims in court for debt collection, or mutual submissions to the same effect. More than a quarter of these debt collection arbitrations also included non-debt consumer claims. . . . 
  • In contrast, very few of the checking account and payday loan AAA arbitration filings from 2010 through 2012 were debt collection arbitrations.
  • From 2010 through 2012, a slight majority (53%) of consumers were represented by counsel in the AAA arbitrations that we reviewed for these three product markets. For non-debt collection disputes, 61% of consumers had a lawyer at some point in the arbitration proceeding. For debt collection arbitrations, 42% of consumers had legal representation at some point in the proceeding. Companies were almost always represented by outside or in-house counsel in both debt collection and non-collection arbitrations.
  • From 2010 through 2012, almost no AAA arbitration filings for these three product markets had under $1,000 at issue. . . . There were an annual average of seven arbitrations per year filed with the AAA that concerned disputed debt amounts that were at or below $1,000. 
  • From 2010 through 2012, for arbitration filings before the AAA involving these three products, the average alleged debt amount in dispute was $13,418. The median alleged debt amount in dispute was $8,641. Looking only at filings that did not identify a disputed debt amount, and excluding one high-dollar outlier, the average amount at issue was $38,726, and the median $11,805.
  • Most arbitration clauses that we reviewed contain small claims court carve-outs. In 2012, consumers in jurisdictions with a combined total population of around 85 million filed fewer than 870 small claims court credit card claims—and most likely far fewer than that—against issuers representing around 80% of credit card loans outstanding.
  • Credit card issuers are significantly more likely to sue consumers in small claims court than the other way around. In the two top-30 counties by population in which small claims court complaints can be directly reviewed by electronic means, there were more than 2,200 suits by issuers against consumers in small claims court and seven suits by consumers against those issuers. . . .

 [JT]

December 16, 2013 in Current Affairs, Legislation | Permalink | TrackBack (0)

The Lady Duff of Audio Components

SDNYTo judge by the numerous cases that remind one of Wood v. Lucy, Lady Duff-Gordon, one might have the impression that parties never abide by their exclusive distribution agreements.  This month, the District Court for the Southern District of New York issued its memorandum and order on defendant's partial motion to dismiss in Ciamara Corp. v. Widealab, Inc., in which Ciamara sued Widealab for breach of an exclusive distribution agreement relating to high-end audio equipment.

According to the complaint, the parties agreed in September 2011 that Ciamara would be the exclusive North American distributor of Widealab's products for two years.  Ciamara alleges that it had significant expenses as a result of this agreement.  In November 2011, Widealab removed all references to Ciamara from its website and instead listed a Ciamara competitor as its  North American distributor.  Ciamara sued on a number of theories, and Widealab moved to dismiss claims for fraudulent inducement, tortious interference, quantum meruit, and unjust enrichment. Widealab also moved to dismiss plaintiff's request for loss-of-future-profits, harm-to-business-reputation, and loss-of-goodwill damages related to its breach-of-contract claims.

After a nifty review of New York law relating to fraud, quantum meruit/unjust enrichment and damages (Ciamara abandoned its tortious interference claim), the District Court granted Widealab's motion in all respects, leaving Ciamara with a simple claim for breach of contract, which restores to the case its original dignity.  No more slumming in torts and equity!

[JT]

December 16, 2013 | Permalink | TrackBack (0)

Sunday, December 15, 2013

GLOBAL K: SANCTIONS APPLIED, LESSONS IMPLIED

London, UK: Current events smiled on GLOBAL K last week and offered an example of how contemporary economic sanctions programs interact with transnational contract activity. (See last week’s Global K.)  While I was lecturing at the Centre for Commercial Law Studies in London, the news broke about possible sanctions violations by a British bank in its payment transfer practices.

 

On December 11, 2013, the British press was full of the news that Royal Bank of Scotland plc (RBS) had agreed to pay £62 million ($100 million) to settle charges by U.S. state and federal banking authorities that it had violated U.S. sanctions against Iran, Burma, Libya and Sudan, and possibly Cuba according to some news accounts. The three agencies involved – the Office of Foreign Assets Control (OFAC) in the Treasury, the Federal Reserve Board, and the New York State Department of Financial Services – coordinated their investigation with the UK Financial Conduct Authority. According to OFAC, from 2005 to 2009 (the Daily Mail asserted it was 2002-2011), RBS payment practices impeded U.S. economic sanctions. References to critical information about certain payment transfers that would have triggered a blocking of funds and payments – such as the fact that an Iranian party might be interested in one end or the other of the transfer – were excluded from documentation covering payments sent to or through U.S. financial institutions. By some accounts, these payment transfer practices involved more than 3,500 US dollar transactions worth £320 million ($523 million) routed through US banks. Two aspects of this situation are worthy of specific comment.

 

First, the nature of the claimed violations varies somewhat as you look from one sanctions program to the next, even if the payment activities were essentially the same. For example, under the Iran sanctions, foreign financial institutions such as RBS are quite specifically targeted by prohibitions in the sanctions program. A foreign financial institution would be prohibited from knowingly “[f]acilitat[ing] the activities of ... a person subject to financial sanctions” under U.N. sanctions against Iran,” engaging in “money laundering to carry out” such an activity, or facilitating “efforts by the Central Bank of Iran or any other Iranian financial institution to carry out” such an activity. 31 C.F.R. 561.201 (2013). Under the Burmese Sanctions Regulations, the focus would be on transactions and transfers involving “property and interests in property” of the direct targets of the sanctions, which would be prohibited where the property or interest was “in the United States, ... hereafter [came] within the United States, or … [came] within the possession or control of U.S. persons.” 31 C.F.R. 537.201 (2013). The Sudanese Sanctions Regulations contain a similar prohibition on transactions and transfers (31 C.F.R. 538.201 (2013)), but its facilitation prohibition applies on its face only to “U.S. persons.” 31 C.F.R. 538.206 (2013). Likewise, the Cuban Assets Control Regulations would prohibit transactions and transfers involving “property and interests in property” of any Cuban national. (31 C.F.R. 515.201 (2013).) However, beyond this basic sanction, if RBS were considered to be acting on behalf of a blocked Cuban national in these transfers, then it might be deemed to be a “specially designated national” of Cuba and as such it would itself be a direct target of the Cuban sanctions, See 31 C.F.R. 515.302,515.306 (2013) (defining “national,” “specially designated national”). Hence, given the incidence of significant variation as one moves from one sanctions program to the next, it becomes more difficult in managing risk in transnational contract activity to generalize as to the risks and appropriate risk management strategies.

 

Second, the likely implications of transnational contract activity on domestic contract activity may also vary significantly as our attention shifts from program to program. Take, for example, the situation of a U.S. citizen who is a holder of a credit card issued by RBS NA, a national bank subsidiary of RBS. In many of the sanctions situations identified above, the impact of the RBS violations on her contractual relationship would be adventitious. The substantial fine might marginally raise the cost of doing business with the card issuer, assuming that the bank chose to pass some portion of this indirect cost of doing business throughout the enterprise. Even at $100 million, it is unlikely that the credit card holder would even feel the effects of the event. However, if aggressive action were taken against RBS under the Cuban sanctions – a contingency that is essentially eliminated by the bank’s settlement, one would imagine – the effect on the credit card holder would be quite dramatic. As an ongoing contract party of a specially designated national, she herself would be potentially committing a direct violation of the Cuban Assets Control Regulations, because U.S. persons are prohibited from entering into contracts with Cuban nationals – even with specially designated nationals – in the absence of a license. So unless you are a great humanitarian like Beyoncé and hence above the law, avoid entering into contracts and other transactions with specially designated nationals of Cuba.

 

 

Michael P. Malloy

December 15, 2013 in Commentary, Current Affairs | Permalink | TrackBack (0)

Thursday, December 12, 2013

Contracts Research: The Actors and the Audience

Kareem-Abdul-Jabbar_LipofskyI happen to agree with the recent New York Times article on the usefulness of legal research.  As many will recall, the basic idea was that a great deal of what is published is only that -- it exists in print and is largely unread or impractical. Part of the problem is that writing is a bit like hazing. Young people must do it to join the fraternity even if they have little new to say.  Another problem is the actor and audience problem. Law professors appear are both. As writers they are the actors and as readers they are the audience  -- the only audience. So they  play their part and then rush back to the audience to applaud the "acts" of  others. In these instances the work may be so theoretical that it is only of interest to very few, if any,  and perhaps useful to no one at all. This is related to or the same as  the skyhook problem as described by Monroe Freedman. As I understand it,  work that is too theoretical and too burdened by assumptions is comparable to engineers talking about the impossible.  Monroe H. Freedman, A Critique of Philosophizing About Lawyers' Ethics," 25 Geo. J. Legal Ethics 91 (2012).

That was how an Article by Daniel Markovits and Alan Schwartz, "The Myth of the Efficient Breach: New Defenses of the Expectancy Interest," 97 Va. L. Rev. 1939 (2011), struck me.  Why write anything further about the efficient breach?  Of course, as always the joke was on me. I immediately set out to write yet another article about efficient breach which essentially says it does not exist, and Markovits and Schwartz are covering ground that is in large part both old and irrelevant. And with that I became the actor, the audience, and an actor acting out the roles of the actor an audience. I think this means my article, "A Nihilistic View of the Efficient Breach" 2013 Mich St.L. Rev. 167 , was a skyhook for skyhooks. If any of this interest to you and I hope not. Here is the link.

I realized why we do much of our writing. It's fun and we are addicted to ideas. It's a pretty good job! But are we at times too self indulgent?

Jeff "Jake" Harrison

December 12, 2013 in Commentary, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 11, 2013

Congressional Study Finds that Violation of Federal Labor Laws Is No Bar to the Award of Federal Contracts

As reported here in The New York Times, a new congressional study found that the U.S. government continues to enter into contracts with firms that have been assessed heavy penalties for violating fundamental labor laws.  According to the report (unfortunately the Times provides no link and I could not find one through a quick Google search), 18 companies that received federal contracts were among the recipients of the 100 largest fines issued by the Occupational Safety and Health Administration.  Thirty-two federal contractors were among the leading companies in the amount of back pay owed to employees for wage violations.  

OSHA
There were about 50 companies that, among them, totalled nearly 1800 violations.  These companies were awarded $81 billion in contracts and paid nearly $200 million in fines and other assessments.  

The congressional committee that produced the report called for higher standards but did not go so far as to recommend that companies with major violations of labor law be considered ineligible for the award of government contracts.

[JT]

UPDATE:

Thanks to our anonymous tipster (see comments below), we have been able to find the full study.  Below is the Executive Summary:

Executive Summary

Each year, the United States pays out over $500 billion in taxpayer dollars to private companies for goods and services, much of which is used to pay the salaries of millions of workers. Taken together, companies that receive government contracts employ an estimated 22 percent of the American workforce, approximately 26 million workers.

Some of the nation’s largest federal contractors fail to pay their workers the wages they have earned or provide their employees with safe and healthy working conditions. The analysis found that almost 30 percent of the top violators of federal wage and safety laws are also current federal contractors.

Specifically:

  • Eighteen federal contractors were recipients of one of the largest 100 penalties issued by the Occupational Safety and Health Administration (OSHA) of the Department of Labor between 2007 and 2012. Almost half of the total initial penalty dollars assessed for OSHA violations were against companies holding federal contracts in 2012.
  • Forty-two American workers died during this period as a result of OSHA violations by companies holding federal contracts in 2012.
  •  Thirty-two federal contractors received back wage assessments among the largest 100 issued by the Wage and Hour Division of the Department of Labor between 2007 and 2012.
  • Thirty-five of these companies violated both wage and safety laws.
  • Overall, the 49 federal contractors responsible for large violations of federal labor laws were cited for 1,776 separate violations of these laws and paid $196 million in penalties and assessments. In fiscal year 2012, these same companies were awarded $81 billion in taxpayer dollars.

Federal law is intended to prevent taxpayer dollars from increasing the profits of companies with a record of violating federal law in two ways: by requiring contracting officers to assess a prospective contractor’s responsible compliance with federal law prior to awarding a contract, and by allowing agencies to suspend or debar contractors for certain behavior, including violations of federal law, in order to protect the integrity of taxpayer dollars.

In recent years, the federal government has increasingly used the contracting process to procure employee-based service work such as cleaning, security, and construction. However, a new analysis shows that taxpayer dollars are routinely being paid to companies that are putting the livelihoods and the lives of workers at risk. Many of the most flagrant violators of federal workplace safety and wage laws are also recipients of large federal contracts.

Almost half of the total initial penalty dollars assessed for OSHA violations were against companies holding current federal contracts.Unfortunately, this report demonstrates that the officials responsible for determining if a prospective contractor is a responsible entity prior to awarding a contract lack access to information on labor violations and lack the tools to evaluate the severity or repeated nature of these types of violations.

This is true even though the Clean Contracting Act of 2008 specifically required that a database be established to help agencies evaluate violations of federal law in making a responsibility determination. Some of the many incidents of misconduct that are not currently available to contracting officers in this database include:

  • The death of a 46-year-old father of four, who was working as a washroom operator at a Cintas Corporation facility in Tulsa, Oklahoma. He was killed after being swept into an industrial dryer when he attempted to dislodge a clothes jam. The dryer continued to spin with him inside for 20 minutes at over 300 degrees. Cintas received $3.4 million in federal contracts in fiscal year 2012.
  • The death of two employees of a Mississippi shipbuilding and ship repair company owned by ST Engineering Limited, who were killed when highly flammable materials being used to prepare a tugboat for painting ignited, leading to an explosion and fire. Findings of the investigation included failure to properly ventilate a confined space and lack of a rescue service available for a confined space. ST Engineering received $1.9 million in federal contracts in fiscal year 2012.
  • The deaths of seven workers at an Anacortes, Washington refinery owned by Texas based Tesoro Corporation, who were killed when a heat exchanger ruptured and spewed vapor and liquid that exploded. The workers who died were standing near the area of the rupture specifically to attempt to stop leaks of the volatile, flammable gases in the facility which had not been inspected for 12 years prior to the rupture. Tesoro received $463 million in federal contracts in fiscal year 2012.

The federal government is not required to contract with the private sector. Indeed, many of the functions that private contractors carry out for the government could be done equally well or better by government employees. But, when the government does solicit work from the private sector, it should use taxpayer dollars in a way that promotes compliance with federal law and improves the quality of life for working Americans.

Ensuring that the government contracts with actors who do not engage in serious or repeated violations of federal labor law is one important step to further that goal. Recommendations that will better protect taxpayer dollars and promote compliance with laws that protect the lives and livelihoods of American workers by those who receive taxpayer money include:

  • Improvements in the quality and transparency of Department of Labor information regarding violations of federal law.
  • Publication of an annual list of federal contractors that were assessed penalties or other sanctions, and as well as additional information concerning contractor compliance with labor law by the Department of Labor.
  • Improvement of contracting databases administered by the General Services Administration including increasing public transparency and expanding the amount of misconduct information included in those databases.
  • Issuance of an Executive Order requiring contracting officers to consult with, and obtain recommendations from, a designated official at the Department of Labor about violations of federal labor law when making responsibility determinations.
  • Issueance of an Executive Order to establish additional tools – beyond the existing responsibility determination and suspension and debarment process – that contracting officers, in consultation with the Department of Labor, can use to ensure that contractors comply with federal labor law.

 

 

December 11, 2013 in Government Contracting, In the News | Permalink | Comments (1) | TrackBack (0)

New in Print

Pile of BooksJennifer Camero, Zombieland: Seeking Refuge from the Statute of Frauds in Contracts for the Sale of Services or Goods, 82 UMKC L. Rev. 1 (2013)

James B. Helmer, Jr., False Claims Act: Incentivizing Integrity for 150 Years for Rogues, Privateers, Parasites and Patriots, 81 U. Cin. L. Rev. 1261 (2013)

Alan S. Kaplinsky & Mark J. Levin, Consumer Financial Services Azrbitration: What Does the Future Hold after Concepcion? 8 J. Bus. & Tech. L. 345 (2013) 

Nicole F. Munro & Peter L. Cockrell, Drafting Arbitration Agreements: A Practitioner's Guide for Consumer Credit Contracts, 8 J. Bus. & Tech. L. 363 (2013)

Alexander A. Reinert & Lumen N. Mulligan, Asking the First Question: Reframing Bivens after Minneci, 90 Wash. U. L. Rev. 1473 (2013)

[JT]

December 11, 2013 in Government Contracting, Recent Scholarship | Permalink | TrackBack (0)

Tuesday, December 10, 2013

GLOBAL K: ECONOMIC SANCTIONS AND TRANSNATIONAL CONTRACTS

In late November 2013, negotiators reached agreement on a temporary accord under which Iran would halt much of its nuclear program and roll back some existing elements of it, and  the United States agreed to $6 billion to $7 billion in sanctions relief, including releasing approximately $4.2 billion in oil revenue “frozen” in banks outside the United States. (The United States would continue to enforce other substantial sanctions that remain in place.) Recent coverage and commentary about the six-month U.S.-Iran deal calls to mind the fact that economic sanctions have become a pervasive feature of the transnational contract environment. (See this Table)

Source: M. P. Malloy (ed.), Economic Sanctions (Cheltenham, UK: Edward Elgar Publishing, forthcoming).

 

 

Two things are noteworthy about this situation. First, there is such a considerable array of sanctions in place – unilateral and multilateral, trade and financial, direct and indirect – that a state negotiating with Iran has an extensive menu from which to choose when it starts horse-trading. Second, it is probably not safe, as many casual observers still do, to view economic sanctions as unusual or “exigent,” rather than a commonplace feature of contracting in the transnational market.

 

It could be a year or more before we know the outcome of the ongoing maneuvering between Iran and the “P5-plus-1 countries” – the permanent members of the U.N. Security Council plus Germany – but contracts practitioners and commentators should learn one thing right now. The immediate lesson to be drawn is that the potential impact of sanctions is an increasingly pervasive risk factor in transnational contracting. The risk factor arises from three distinct circumstances in contemporary transnational practice. 

 

First, the resurgence of U.N. mandatory sanctions practice under Chapter VII of the U.N. Charter. Prior to 1990, U.N. sanctions practice was limited and ineffective – the classic example being the curiously stunted trade sanctions against the break-away Southern Rhodesian regime in the1960s. In response to the Iraq invasion of Kuwait in 1990, however, and largely under the leadership of the George H.W. Bush Administration, U.N. mandatory sanctions broadly and effectively isolated the occupied Kuwait and stymied the Iraqi Government, as a prelude to the first Gulf War. The success of this program led to frequent and pervasive application of mandatory sanctions as the primary U.N. Security Council response to many crises over the decades that followed. This development means that there is now a formidable array of sanctions programs in which implementation is mandatory for all U.N. member states, actively monitored by the Security Council through sanctions committees. As a result, moving contract activities off-shore – a typical maneuver in many pre-1990 sanctions situations (including the Southern Rhodesian sanctions) – is no longer an easy and viable option. In addition, many states – and principally the United States – have continued to promulgate unilateral sanctions programs, often paralleling multilateral sanctions, and these have benefited from the newly pervasive incidence of sanctions as a risk factor in transnational contract practices.

 

Second, the emergence of “smart sanctions” strategies in the design of sanctions programs. Contemporary sanctions are often more carefully targeted, and include specific and distinct sanctions against intermediaries – e.g., business brokers, freight forwarders, purchasing agents, banks and other financial intermediares – which means that the direct and indirect costs of sanctions avoidance and evasion have grown significantly for indirect and secondary contract actors who would not have otherwise viewed themselves as “targets” of sanctions programs. 

 

Third, the existence of licensing authority within sanctions programs. Ironically, the existence of authority within participating member states to license activities and transactions otherwise affected by a sanctions program, subject to oversight by U.N. sanctions committees, has increased the ongoing compliance and enforcement impact of sanctions programs. This feature has resulted in greater accountability for transnational contract parties.

 

The casual observer might respond that generally applicable contract doctrines of impracticability (or impossibility) and frustration would ameliorate the impact of these developments in sanctions practice. To the contrary, I believe that the interaction of these doctrines with current practice in transnational business may be more complicated than one might expect at first glance. 

 

It is true that, under Restatement of the Law - Contracts (Second) § 261, a party to a contract affected by sanctions might claim that performance has been rendered “impracticable,” thus discharging its duty to perform. However, § 261 is grounded on the occurrence of an event “after a contract is made” that occurs “without his fault.” The pervasiveness and persistence of an array of sanctions programs challenges both of these premises. There is no end of sanctions already in place, and in the typical sanctions program the party bears the burden of demonstrating that it did not know, nor had no reason to suspect, that the subject transaction was prohibited or restricted. As comment d to § 261 observes, “If the event that prevents the obligor's performance is caused by the obligee, it will ordinarily amount to a breach by the latter. ... If the event is due to the fault of the obligor himself, this [§ 261] does not apply. As used here ‘fault’ may include not only ‘willful’ wrongs, but such other types of conduct as that amounting to breach of contract or to negligence.” Of course, this dilemma exists quite aside from any administrative or criminal consequences that might be visited on the parties by a sanctions-enforcing state. Goods or services that are the subject of the contract may be susceptible to being “blocked” or “frozen” by the enforcing state.

The same problem would exist for a contracting party who attempted to invoke the doctrine of discharge by a supervening frustration under Restatement (2d) § 265. This may be a particular concern for indirect or intermediary parties, a point that is neatly demonstrated by Illustration 5 under § 265:

 

A contracts to sell and B to buy a machine, to be delivered to B in the United States. B, as A knows, intends to export the machine to a particular country for resale. Before delivery to B, a government regulation prohibits export of the machine to that country. B refuses to take or pay for the machine. If B can reasonably make other disposition of the machine, even though at some loss, his principal purpose of putting the machine to commercial use is not substantially frustrated. B's duty to take and pay for the machine is not discharged, and B is liable to A for breach of contract.

 

Furthermore, given the typical licensing regime that is included in sanctions programs, “impracticability” may be even less apparent in a particular contracting situation. As comment d to § 261 goes on to note, “ ‘impracticability’ means more than ‘impracticality.’ A mere change in the degree of difficulty or expense . . . unless well beyond the normal range, does not amount to impracticability since it is this sort of risk that a fixed-price contract is intended to cover.” 

 

One might respond, however, that if performance of a duty is made impracticable by having to comply with a domestic or foreign governmental regulation or order, then the regulation or order is “an event the non-occurrence of which was a basic assumption on which the contract was made,” according to Restatement (2d) § 264. Comment a to § 264 undercuts this argument, however, because “[w]ith the trend toward greater governmental regulation, however, parties are increasingly aware of such risks, and a party may undertake a duty that is not discharged by such supervening governmental actions, as where governmental approval is required for his performance and he assumes the risk that approval will be denied. ... Such an agreement is usually interpreted as one to pay damages if performance is prevented rather than one to render a performance in violation of law.” This problem is underscored by Restatement (2d) § 266, dealing with existing impracticability or frustration. In a situation in which, at the time a contract is made, the party's performance is impracticable without his fault “no duty to render that performance arises,” but only if this fact is one which it had “no reason to know,” a difficult position to maintain in an environment of persistent and pervasive sanctions programs.

 

All of this suggests a need for caution and proactive monitoring of contract activity in the transnational market. It is extremely naïve – if not outright disingenuous – to assume that one can casually rely on traditional doctrines of impracticability (or impossibility) and frustration in transnational commerce. Over-reading these doctrines can result in bitter lessons, and embarrassment, in the modern environment of transnational contract practice.

 

 Michael P. Malloy

 

December 10, 2013 in Commentary, Current Affairs | Permalink | Comments (0) | TrackBack (0)

Weekly Top Tens from the Social Science Research Network

SSRNRECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal 

October 11, 2013 to December 10, 2013

RankDownloadsPaper Title
1 669 The Paper Chase: Securitization, Foreclosure, and the Uncertainty of Mortgage Title 
Adam J. Levitin
Georgetown University - Law Center,
2 190 Unconscionability in American Contract Law: A Twenty-First Century Survey 
Charles L. Knapp
University of California - UC Hastings College of the Law
3 167 Contract Law and Theory -- Three Views of the Cathedral 
Eyal Zamir
Hebrew University of Jerusalem - Faculty of Law
4 163 The No Reading Problem in Consumer Contract Law 
Ian AyresAlan Schwartz
Yale University - Yale Law School, Yale Law School
5 112 Protecting Consumers from Zombie-Debt Collectors 
Neil L. Sobol
Texas A&M University - School of Law
6 108 Deutsche Bank and the Use of Promises in Islamic Finance Contracts 
Jon M. TrubyKarim Ginena
Hamad Bin Khalifa University, Qatar University - College of Law
7 104 The Concept of 'Vindication' in the Law of Torts: Rights, Interests and Damages 
Jason N. E. Varuhas
University of Cambridge - Faculty of Law
8 97 Boilerplate: A Threat to the Rule of Law? 
Margaret Jane Radin
University of Michigan Law School
9 97 Contract and Property Law: Distinct, but not Separate 
Sjef van Erp
Maastricht European Private Law Institute, University of Maastricht - Faculty of Law
10 81 Le Nouvel Article 3.3.1 Des Principes Unidroit 2010 Sur Le Contrat Violant Une Règle Impérative: Un Regard Critique Du Point De Vue Du Droit International Privé (A Critical Appraisal of Article 3.3.1 of the PICC on Contracts Infringing Mandatory Rules) 
Gilles Cuniberti
University of Luxembourg

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic)  

October 11, 2013 to December 10, 2013

RankDownloadsPaper Title
1 190 Unconscionability in American Contract Law: A Twenty-First Century Survey 
Charles L. Knapp
University of California - UC Hastings College of the Law,
2 167 Contract Law and Theory -- Three Views of the Cathedral 
Eyal Zamir
Hebrew University of Jerusalem - Faculty of Law,
3 108 Deutsche Bank and the Use of Promises in Islamic Finance Contracts 
Jon M. TrubyKarim Ginena
Hamad Bin Khalifa University, Qatar University - College of Law
4 97 Boilerplate: A Threat to the Rule of Law? 
Margaret Jane Radin
University of Michigan Law School
5 97 Contract and Property Law: Distinct, but not Separate 
Sjef van Erp
Maastricht European Private Law Institute, University of Maastricht - Faculty of Law
6 65 Renegotiation of Work Contract and Work Agreement of Coal Mining Undertaking in Indonesia: Legal Aspect of Renegotiation vs Pacta Sunt Servanda Principle 
Ahmad Redi
University of Indonesia (UI) - Faculty of Law
7 62 Dissenting Statement Pertaining to the Name of an Individual Debtor on a Financing Statement — Appendix to Report on the Amendments to Article 9 of the Uniform Commercial Code 
Kenneth C. KetteringAmelia H. Boss
Temple University - James E. Beasley School of Law, University of Miami - School of Law
8 58 Formalizing Gratuitous and Contractual Transfers: A Situational Theory 
Adam J. Hirsch
University of San Diego
9 55 Sovereign Immunity and Enforcement of Awards in International Commercial Arbitration 
Faizat Badmus-Busari
Tulane University - Law School
Last Revised: October 25, 2013
10 48 An Experimental Test of the Effectiveness of Terms & Conditions 
Zev J. Eigen
Northwestern University School of Law

[JT]

December 10, 2013 in Recent Scholarship | Permalink | TrackBack (0)

Monday, December 9, 2013

FIRM OFFERS or firm offers

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Like others writing or reading this blog, my students are currently toiling away on their final exam. This means the last several days have been filled with questions. Sometimes the questions are so good I think the questioner should be teaching the course and not me. On the other hand, sometimes the questions are so worrisome that I wonder whether or not I have actually been teaching anything at all. One of my favorite sources of questions is 2-205 of the Code. In the context of essay questions I have presented all manner of issues based on 2-205. Are initials sufficient as a signature? (The Comments say yes.) What constitutes an assurance? What is a reasonable time? When I enter "2-205" into westlaw I am surprised at how few cases seem to turn on a 2-205 question.

Most of us have probably asked a question based on something like this. "Please let me know whether you accept within 7 days." Is that an assurance? If not, it's not a firm offer. Or is it? Suppose it is "I will hold the offer open for you. Please led my know your answer within seven days." How long is the offer open? Seven days or even longer if that is reasonable? And what does reasonable depend on? Should the reasonable offeree [btw is there an official correct spelling of offeree?] really expect the offer to be available on day 10.

And there are the questions dealing with a firm offer that is rejected or when there is a counter offer. Does it matter if the offeree has relied on the rejection? After all, the firm offer is a very thin concept and mere limits the rationale for a revocation. Which raises the question what are the other rationales for revocation?

If we fall back to common law answers what we know, or seem to know, is that firm offers can be open for longer than the time stated, although they become "soft" after that time, and if rejected or met with a counteroffer, can end before the time stated.

On the other hand, if the drafters only meant to take the consideration requirement out of option contracts (which the Restatement almost does), are these answers right?

2-205 is like a box of choclates.

Jeff "Jake" Harrison

December 9, 2013 in Television | Permalink | TrackBack (0)

A Humorous Take on Email Disclaimers

By James Sinclair in McSweeneys, titled "Alright, Fine, I'll Add a Disclaimer to My Emails."  Here's a taste:

The purpose of this disclaimer, in theory, is to protect the sender from whatever liability may result from the sender’s own failure to communicate clearly or properly send an email, even though the sender, having obtained a formal legal education, is well aware that a generic email disclaimer, even one written with that ominous language of which lawyers are so fond, is unlikely to be enforced against a party lacking a sophisticated understanding of the legal principles surrounding said disclaimer, and that in the case of a party who does understand the legal principles surrounding said disclaimer, the disclaimer merely restates what said party already knows. This disclaimer is a catch-22.

For a little Monday humour, check out the full disclaimer here.

[Meredith R. Miller]

December 9, 2013 in Miscellaneous | Permalink | Comments (0) | TrackBack (0)

Breach of a Promise to Marry

RingEvery once in a while, a student will send me a story about contracts, but when multiple students send me the same story, you know they must be desparate for a study break -- and that there is some rather comical contracts story in the news.

And so it is with this story about a woman who won a $50,000 judgment on her claim that her fiance had breached his promise to marry her.  A Georgia appellate court upheld the judgment, which included an award of attorney's fees, on appeal.   The court more or less treated the couple as married and upheld an award of roughly half the property acquired during the relationship, which was a house valued at $86,000.   The couple had co-habited for ten years and had a child together.  The woman had looked after the child, as well as one she had from a previous relationship.  

The man had had sexual relationships with other women both before and after he led his live-in partner to believe that he would marry her and gave her a ring worth $10,000.  For what it's worth, the woman also had other sexual relationships. 

According to media reports, the defendant's argument on appeal was that his alleged promise arose in the context of a meretricious relationship and was therefore unenforceable. Moreover, he denied any intention to marry.  He claims he never said "will you marry me" or words to that effect. He just gave her a ring.

The meretriciousness argument is rather confusing, as a defense to the claim that he broke a promise, since the promise was to cleanse the relationship of its meretriciousness.  As the appellate court noted, according to FoxNews, “the object of the contract is not illegal or against public policy.”  If we still live in a world in which courts think they can pass judgment on people's long-term relationships (and we seem to), then a court is likely to uphold an agreement that will "make an honest woman" of the plaintiff.  

The award of damages is also confusing.  the effect of the ruling seems to be to treat the couple as married even though they weren't.  In effect, the court is recognizing a common law marriage where such marriages do not seem to be recognized.  I suppose the court could do so as a mechanism of giving the woman her expectation for the broken promise.  The California Supreme Court endorsed such an approach in Marvin v. Marvin, but other courts have rejected marriage by judicial decree where the legislature has expressed its disapproval of recognition of common law marriages.

[JT]

December 9, 2013 in Commentary, In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Sunday, December 8, 2013

Good Luck 1Ls

CloverMy contracts students have their exam tomorrow.  I held office hours today, since classes just ended on Thursday, and I had quite a bit of traffic.  My students seem primed for the exam -- their knowledge of contracts law is approaching an all-time high.  

In case any of my students that I didn't get to see today are looking at the blog, I just want to wish you good luck.

[JT]

December 8, 2013 in Teaching | Permalink | Comments (0) | TrackBack (0)

Saturday, December 7, 2013

Will Tough Mudder's Liability Waiver Hold Up?

Tough Mudder hosts extreme 10-mile obstacle course challenges.  If you are unfamiliar with the company, this video should give you a sense of the challenges Tough Mudder creates: 

Before a participant may enroll in an event and run the course, he/she must agree to an assumption of risk, waiver of liability and indemnity agreement.

Outdoor magazine has a story this month about the tragic death of Avishek Sengupta at a Tough Mudder event in Maryland.  He jumped into the deep, muddy pool at the "Walk the Plank" obstacle and did not emerge.  His tragic death is recounted in harrowing detail in the Outdoor magazine article, which mentions that Avishek's family has sued Tough Mudder and Amphibious Medics, a subcontractor that was onsite to provide rescue services.  

Central in the case will be the enforceability of the waiver of liability.  The parties weren't too fortchoming with litigation strategy but the article does provide:

Tough Mudder won't discuss its strategy for the Senguptas' legal action—nor will anyone from Amphibious Medics—but if the suit goes forward, its lawyers will likely stress the fact that Avi signed what Tough Mudder calls a Death Waiver, exculpating the company of liability for certain acts of "ordinary negligence" and "inherent risks," such as "inadequate or negligent first aid and/or emergency measures" and "errors in judgment by personnel working the event."

But the Boston-area firm Gilbert and Renton, representing Avi's estate, will likely argue that such waivers do not relieve Tough Mudder of the legal "duty of care" that exists whenever a business knowingly creates predictable hazards for the public. In the case of Walk the Plank, the predictable hazard—drowning—is clear enough. Hence the presence of a rescue diver and lifeguards at the obstacle on the day Avi drowned.

This will be an important and interesting case for liability waivers.  Worth following.

[Meredith R. Miller]

 

  

December 7, 2013 in Games, In the News, Sports | Permalink | Comments (0) | TrackBack (0)

Thursday, December 5, 2013

New in Print

Pile of BooksAndreas Abegg, The Legitimacy of the Contracting State, 76 Law & Contemp. Probs. 139 (2013)

Marc Amstutz, Contract Collisions: An Evolutionary Perspective on Contractual Networks, 76 Law & Contemp. Probs. 169 (2013)

Alexis J. Bernstein, Price Realism Analysis in Fixed-Price Contracting: Improving the Evaluation Process, 42 Pub. Cont. L.J. 793 (2013)

Eli Bukspan, Trust and the Triangle Expectation Model in Twenty-First Century Contract Law, 11 DePaul Bus. & Com. L.J. 379 (2013)

Hugh Collins, The Vanishing Freedom to Choose a Contractual Partner, 76 Law & Contemp. Probs. 71 (2013)

Hanoch Dagan, Autonomy, Pluralism, and Contract Law Theory, 76 Law & Contemp. Probs. 19 (2013)

Pasquale Femia, Desire for Text: Bridling the Divisional Strategy of Contract. 76 Law & Contemp. Probs. 151-168 (2013)

Veronica J. Finkelstein, Dollars and Horse Sense: Why Prudent Buyers and Sellers Should Account for Article 2 of the Uniform Commercial Code in Their Equine Sales Contracts, 5 Ky. J. Equine, Agri., & Nat. Resources L. 181 (2012-2013)

Daniel P. Graham, et al., Federal Circuit Year-in-Review 2012: Guarding the Gates of Government Contracts Litigation, 42 Pub. Cont. L.J. 695 (2013)

Thomas Gutmann, Some Preliminary Remarks on a Liberal Theory of Contract, 76 Law & Contemp. Probs. 39 (2013)

Lorenz Kahler, Contract-Management Duties as a New Regulatory Device, 76 Law & Contemp. Probs. 89 (2013)

Bertram Lomfeld, Contract as Deliberation, 76 Law & Contemp. Probs. 1 (2013) 

Michael Ian Morrison, The Acquisition Supply Chain and the Security of Government Information Technology Purchases, 42 Pub. Cont. L.J. 749 (2013)

Douglas R. Richmond, The Consent Judgment Quandary of Insurance Law, 48 Tort Trial & Ins. Prac. L.J. 537 (2013)

Florian Rodl, Contractual Freedom, Contractual Justice, and Contract Law (Theory), 76 Law & Contemp. Probs. 57  (2013) 

Alessandro Somma, Private Law as Biopolitics: Ordoliberalism, Cocial Market Economy, and the Public Dimension of Contract, 76 Law & Contemp. Probs. 105 (2013)

Dan Wielsch, Relational Justice, 76 Law & Contemp. Probs. 191 (2013) 

Peer Zumbansen, Transnational Private Regulatory Governance: Ambiguities of Public Authority and Private Power, 76 Law & Contemp. Probs. 117 (2013)

[JT] 

December 5, 2013 in Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Recap of Oral Arguments in BG Group PLC v. Republic of Argentina

SCOTUS 2010As we noted last week, on Monday, the U.S. Supreme Court heard arguments in the first investment arbitration case ever to be placed on the Court's docket.  That transcript from oral argument can be found here.  

Diane Marie Amann, the Emily and Ernest Woodruff Chair in International Law at the University of Georgia School of Law, provides a synopsis of the case on SCOTUSblog here.

Other links related to the case, BG Group PLC v. Republic of Argentina, can be found on SCOTUSblog.

[JT]

December 5, 2013 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 4, 2013

Unconscionability Shui

RatUnconscionability and the Contingent Assumptions of Contract Theory, 2013 Mich. St. L. Rev. 211  (2013), by Dr. M. Neil Browne and Lauren Biksacky, argues that basic assumptions of liberal contract theory – for example, that contracts are made by rational and informed parties – don’t hold. Therefore, courts should find more contracts unconscionable.

This short article would be a nice primer for law students on basic liberal contract theory, especially in conjunction with some Judge Posner readings. The authors argue that people often yield to irrational motives. They get in bar fights. They have road rage. They buy books on feng shui. Judge Posner might respond that the human rationality economists speak of is that of pigeons or rats, not angels. Dr. Browne, himself an economist, seems to take exception to that conception of human beings.

The article argues courts can do better than simply making people keep their ratty promises. Courts can allow people to be their best, most-informed selves by invalidating “irrational” promises made under distorting influences like advertising and cognitive biases. Courts can and should step in like adults over wayward children and guide them toward eudaimonia.

Yet the article notes that despite research showing people are often irrational and ill-informed, courts are not finding more contracts unconscionable. Why? The article doesn’t answer, but the reason is probably that to do so seems unworkable. If human irrationality were grounds for invalidating a contract, how many contracts would be secure? The law tends to be a great guardian of the status quo, and apparently some people like books about feng shui.

[Kenneth Ching]

[Image by Vicky TGAW]

December 4, 2013 in Commentary, Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Supreme Court Hears Oral Argument on Frequent Flyer Contracts

We have previously reported on Northwest Inc. v. Ginsberhere and here.  SCOTUSblog's Ronald Mann provides a preview of oral arguments here

For those who don't want to click on the links, here is our earlier summary of the facts of the case:

Plaintiff, Rabbi, S. Binyomin Ginsberg had been a member of Northwest's frequent flyer program, WorldPerks, since 1999.  By 2005, he was such a macher, Northwest granted him Platinum Elite Status (oy, what nachas!).  In 2008, Northwest revoked his membership. Ginsberg claims that Northwest took this action because he was a kvetch. . . .

The official reason provided for the termination was that Northwest had discretion "in its sole judgment," to cancel a member's account due to abuse of the program. Apparently, such judgment includes the ability terminate a membership if complaints persist after the "Enough with the complaining already!" warning.   Ginsberg sued, asserting four causes of action, but Northwest moved for dismissal, arguing that the Airline Deregulation Act (ADA) preempted all of Ginsberg's claims.

SCOTUS 2010According to the The New York Timessynopsis of oral argument, Justices Ginsburg and Sotomayor expressed concern that the airline's frequent flyer program was either an illusory contract or subject to the airline's "whim and caprice."  Justice Breyer, however, seemed inclined to think that claims sounding in breach of contract are preempted by the federal Airline Deregulation Act of 1978, which was supposed to allow airlines to compete based on, among other things, price.  Since frequent flyer programs are price discounts, Breyer suggested that such programs are governed by the Deregulation Act and cannot be subject to claims based on state laws aimed at regulating the airlines.  However, in 1995, the Court exempted contracts claims from federal preemption in American Airlines v. Wolens

The distinction between regulating airlines through state law and regulating airlines through breach of contract claims is a subtle one.  It seems to turn on whether Rabbi Ginsberg's claim is construed as a breach of contract claim or a claim that the airline breached a duty of good faith and fair dealing.  Paul Clement, arguing for the airline (on page 13 of the transcript) claimed that to permit a claim based on the duty of good faith and fear dealing would "enlarge the bargain."  Since the contract gave the airline discretion to terminate Rabbi Ginsberg's membership, Clement argued, invoking the implied duty of good faith and fair dealing takes his claim outside of the contract.  The claim implicates state policies because in some states the implied duty is not merely a rule of construction but a means of imposing public policy standards of "fairness and decency" on private agreements.  

The Solicitor General joined the case as amicus curiae on behalf of the airline and attempted to clarify the federal uniformity concerns implicated in the case.  Counsel for the Solicitor General contended that state contracts law is fine to help adjudicate the intent of the parties, but where states impose public policy concerns in areas such as implied covenants and the unconscionability defense, there preemption is necessary.  

This is very strange territory, and it was clear that Justices and counsel alike struggled to work out how to put such fine distinctions into place.  It is odd for the Court to say in Wolens that contracts claims are not preempted by the Deregulation Act but for the Court to now say that certain types of contracts claims, like breach of the implied covenant of good faith and fair dealing or unconscionability defenses are still preempted.

And what about Federal Arbitration Act (FAA) preemption?  One of the few ways that parties can get out of arbitration clauses is by arguing that such clauses are unconscionable, because the FAA does not preempt defenses sounding in common law contracts doctrine.  But since unconscionability doctrine varies from state to state, parties seeking to enforce arbitration clauses could argue that the same uniformity concerns that govern preemption in the Deregulation Act context should also apply in the FAA context.  If so, good-bye unconscionability challenges to arbitration clauses.

The Times provides this link to the transcript of oral argument.

[JT]

December 4, 2013 in Commentary, Recent Cases, Travel | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 3, 2013

Weekly Top Tens from the Social Science Research Network

SSRNRECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal 

October 4, 2013 to December 3, 2013

RankDownloadsPaper Title
1 586 The Paper Chase: Securitization, Foreclosure, and the Uncertainty of Mortgage Title 
Adam J. Levitin
Georgetown University - Law Center
2 185 Unconscionability in American Contract Law: A Twenty-First Century Survey 
Charles L. Knapp
University of California - UC Hastings College of the Law
3 161 Contract Law and Theory -- Three Views of the Cathedral 
Eyal Zamir
Hebrew University of Jerusalem - Faculty of Law
4 146 The No Reading Problem in Consumer Contract Law 
Ian AyresAlan Schwartz
Yale University - Yale Law School, Yale Law School
5 103 The Concept of 'Vindication' in the Law of Torts: Rights, Interests and Damages 
Jason N. E. Varuhas
University of Cambridge - Faculty of Law
6 98 Deutsche Bank and the Use of Promises in Islamic Finance Contracts 
Jon M. TrubyKarim Ginena
Hamad Bin Khalifa University, Qatar University - College of Law
7 95 Contract and Property Law: Distinct, but not Separate 
Sjef van Erp
Maastricht European Private Law Institute, University of Maastricht - Faculty of Law
8 92 Boilerplate: A Threat to the Rule of Law? 
Margaret Jane Radin
University of Michigan Law School
9 80 Le Nouvel Article 3.3.1 Des Principes Unidroit 2010 Sur Le Contrat Violant Une Règle Impérative: Un Regard Critique Du Point De Vue Du Droit International Privé (A Critical Appraisal of Article 3.3.1 of the PICC on Contracts Infringing Mandatory Rules) 
Gilles Cuniberti
University of Luxembourg
10 74 Protecting Consumers from Zombie-Debt Collectors 
Neil L. Sobol
Texas A&M University - School of Law

 

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic)  

October 4, 2013 to December 3, 2013

RankDownloadsPaper Title
1 185 Unconscionability in American Contract Law: A Twenty-First Century Survey 
Charles L. Knapp
University of California - UC Hastings College of the Law
2 161 Contract Law and Theory -- Three Views of the Cathedral 
Eyal Zamir
Hebrew University of Jerusalem - Faculty of Law,
3 98 Deutsche Bank and the Use of Promises in Islamic Finance Contracts 
Jon M. TrubyKarim Ginena
Hamad Bin Khalifa University, Qatar University - College of Law
4 95 Contract and Property Law: Distinct, but not Separate 
Sjef van Erp
Maastricht European Private Law Institute, University of Maastricht - Faculty of Law
5 92 Boilerplate: A Threat to the Rule of Law? 
Margaret Jane Radin
University of Michigan Law School
6 64 Renegotiation of Work Contract and Work Agreement of Coal Mining Undertaking in Indonesia: Legal Aspect of Renegotiation vs Pacta Sunt Servanda Principle 
Ahmad Redi
University of Indonesia (UI) - Faculty of Law,
7 60 Dissenting Statement Pertaining to the Name of an Individual Debtor on a Financing Statement — Appendix to Report on the Amendments to Article 9 of the Uniform Commercial Code 
Kenneth C. KetteringAmelia H. Boss
Temple University - James E. Beasley School of Law, University of Miami - School of Law
8 57 Formalizing Gratuitous and Contractual Transfers: A Situational Theory 
Adam J. Hirsch
University of San Diego
9 52 Sovereign Immunity and Enforcement of Awards in International Commercial Arbitration 
Faizat Badmus-Busari
Tulane University - Law School
10 47 An Experimental Test of the Effectiveness of Terms & Conditions 
Zev J. Eigen
Northwestern University School of Law

[JT]

December 3, 2013 in Recent Scholarship | Permalink | TrackBack (0)

Monday, December 2, 2013

GLOBAL K: BRAZIL AND THE CISG

The United Nations Convention on Contracts for the International Sale of Goods (“CISG”) continues to collect state parties. The CISG will enter into force for Brazil on 1 April 2014, and for Bahrain on 1 October 2014. With that, Brazil and Bahrain will become the 79th and 80th States Party to the CISG, respectively. 

 

The delay in entry into force is built into CISG art. 99, and does not suggest any particular caution on the part of either state. What may require some explanation, however, is why it took almost 25 years after Brazil approved the final text of the CISG and signed the Final Act of the Conference, before it finally acceded to the convention on 5 March 2013. According to local commentators, a large part of the delay is due to extraneous political considerations. Legislative inaction on this front was common under a previous authoritarian political system, as the regime was skeptical of – if not outright hostile to – multilateral initiatives to advance private international law. Efforts by Brazilian academics, the Bar Association of Brazil, and business interests progressively pressed for Brazil to engage in such initiatives, and the end result was that Brazil rejoined the Hague Conference on Private International Law in 2001 and began the internal process for accession to the CISG in 2011.

 

Brazil’s accession is a particularly significant development. Brazil’s economy is the largest among Latin American states, and the second largest in the Western Hemisphere. The existence of a common set of default rules governing trade in goods, irrespective of the significant differences in U.S. and Brazilian legal traditions, creates potential efficiencies for the future of economic relations between the two states. Furthermore, from the perspective of economic development policy, the existence of modern, uniform framework for contracts for the sale of goods involving one of the fastest-growing major economies in the world is a positive feature.

 

The increasing likelihood that regional contract activity in the Americas may implicate the CISG underscores the need for U.S. academics to ensure that our students at least understand that the convention exists as part of U.S. contract law. This generally applicable source of federal contract law constitutes the default rules that apply to an expanding range of regional contract situations. It has been a commonplace that parties can always make a contractual choice of law that would remove the CISG from the mix. However, what you don’t know can’t be planned against, and who is to say that local law – as opposed to the CISG default rules – is necessarily optimal for a given contracting situation? 

 

Michael P. Malloy

December 2, 2013 in Commentary, Current Affairs | Permalink | Comments (0) | TrackBack (0)

Privacy Invasion? Facebook Has an App for That

Over at the Huffington Post, Sam Fiorella takes note of the egregious terms in Facebook Messenger's Mobile App Terms of Service.  These terms include allowing the app to record audio, take pictures and video and make phone calls without your confirmation or intervention.  It also allows the app to read your phone call log and your personal profile information.  Of course, an app that can do all that is also vulnerable to malicious viruses which can share that information without your knowledge.  But, of course, this is allowed only with your "consent."

 

[Nancy Kim]

December 2, 2013 in Current Affairs, E-commerce, Miscellaneous, True Contracts, Web/Tech | Permalink | Comments (0) | TrackBack (0)