Friday, August 23, 2013
If you are reading this post, and if it is not the first post you have ever read on the ContractsProf Blog, then you have noticed that we have a new look. All of this is thanks to a global re-design at the Law Professor Blog Network (LPBN), headed up by Paul Caron (pictured).
This is our third day with the new look, and the impact on our readership has been dramatic! Of course, the uptick in our readership is also explained in part by the advent of a new semester, always a good time for people to check in, and by the very exciting symposium on the contracts scholarship of Stewart Macaulay, which ought to be attracting some new readers. Still, our daily readership has tripled since the re-design, and we have never had results like that either at the beginning of a new academic year or in connection with one of our virtual symposia. So, we think a great deal of the credit has to go to the re-design.
The re-design includes a bunch of new features with which we ourselves are not yet fully aware. We will tell you more about them as we play around with the platform and discover its nuances. Paul Caron has himself explained the purposes behind the redesign in this piece that is availabe on SSRN. Here is an excerpt from the abstract:
The re-design will (1) optimize each blog for viewing across a variety of platforms (desktop, laptop, tablet, and smart phone); (2) better integrate social media; (3) provide more robust analytics with richer and more accurate readership data; and (4) strengthen our partnership with Wolters Kluwer/Aspen Publishers and provide additional avenues for monetization
We here at the ContractsProf Blog cannot equal the expertise of the TaxProfs in money matters, but our interpretation of the last line of Paul's abstract is that the re-design is going to make us all rich!
Thursday, August 22, 2013
This is the fourth in a series of posts in our online symposium on the Contracts Scholarship of Stewart Macaulay. More about the online symposium can be found here. More information about this week's guest bloggers can be found here.
One Contracts Professor’s Preference for State Court Decisions
In the essay that I contributed to Revisiting the Scholarship of Stewart Macaulay: On the Empirical and the Lyrical, I gave vent to the frustration I experienced over the years reading decisions written by the 7th Circuit Judges Richard Posner and Frank Easterbrook. Stewart wrote to me recently and in two sentences, appropriately lyrical, summed up the source of my frustration: “In theory, of course, the court applies state law in a diversity situation. About the one thing that you can expect is that Judges Posner and Easterbrook will be off on a frolic of their own.”
I have a healthy respect these days, and a strong preference for, the decisions of state courts. I try to use the best of these to teach contract law to my students. I admire the tenacity of state courts that insist, for example, that the commentary to the UCC matters in interpreting that statute. See e.g. Simcala Inc. v. American Coal Trade, Inc. 821 So.2d 197 (Ala. 2001) (the word “center” in comment 3 to UCC section 2-306 means something when used to describe the way a stated estimate limits the “intended elasticity” of an output or requirements contract).
I am particularly gratified by the persistence of courts that have used the unconscionability doctrine to invalidate boilerplate arbitration clauses. Implicit in these cases is a duality. Oppression exists on two levels. The terms of the transactions are oppressive and unconscionable, and the terms of the arbitration agreement are oppressive. Two cases I discussed previously at the 8th Annual International Contracts Conference at Texas A & M University Law School.
In Brewer v. Missouri Title Loans, 364 S.W.3d 486 (Mo. 2012), the Missouri Supreme Court describes the terms of a loan agreement. Ms. Brewer borrowed $2,215 and paid back $2000, at which point she had reduced the principal balance on the loan by $.06. The interest rate on that loan was 300%. Ms. Brewer brought suit under the Missouri consumer protection statute, the Missouri Merchandising Practices Statute.
In Tillman v. Commercial Credit Loans Inc., 655 S.E.2d 362 (N.C. 2008), Ms. Tillman and Ms. Richardson, the named plaintiffs in a class action, purchased single premium credit insurance from a lender. Within a year the North Carolina legislature made this species of loan illegal, but the statute was not retroactive. Ms. Tillman and Ms. Richardson sued under the North Carolina Unfair and Deceptive Trade Practices Act. The North Carolina Supreme Court found the arbitration clause in the contract, which barred class actions, unconscionable in a 3-2-2 decision.
When the United States Supreme
Court vacated the decision in the Brewer
case and remanded it to the Missouri court for reconsideration in light of A.T.& T. Mobility LLC v. Concepcion,
131 S. Ct. 1740 (2011), Chief Justice Richard Teitelman
, responded that
the unconscionability doctrine in Missouri law was not an “obstacle to the
accomplishment of the act’s objectives.”
The arbitration agreement was unconscionable because there was expert
testimony that no consumer would pursue a claim against the Title Company. The cost was too high. The Tillman
court made much the same point. Of the
68,000 loans that Citifinancial made in North Carolina, no borrower ever
pursued arbitration of a claim.
Citifinancial on the other hand, had reserved its right to go to court
and had exercised that privilege over 3,000 times in civil suits and
foreclosure actions. The Tillman court also provided information
about the actual cost of arbitration, a factual discussion that is missing in a
lot of these cases. It turns out that
arbitration is cost prohibitive for most low income consumers.
Exploitive or predatory contracts saturate the market for credit, housing, furniture for the least well off in our society. The Montana Supreme Court recently held a payday loan and its arbitration provision unconscionable. Kelker v. Geneva-Roth Ventures, Inc., 303 P.3d 777 ( Mont. 2013)(780% APR was violation of Montana Consumer Loan Act) If the U.S. Supreme Court grants certiorari in Kelker, the decision in that payday loan case will probably meet the fate of its progenitors, Casarotto v. Lombardi, 886 P.2d 931 (Mont. 1994)(Casarotto I) and Casarotto v. Lombardi, 901 P.2d 596 (Mont. 1995)(Casarotto II). Justice Trieweiler maintained in Casarotto I that the Federal Arbitration Act had not pre-empted state laws addressing arbitration because the federal statute had not addressed every aspect or possibility with respect to arbitration agreements. In Casarotto II he argued that the U.S. Supreme Court’s decision to strike down an Alabama statute that made pre-dispute arbitration agreements unenforceable was irrelevant to the decision in Casarotto I. He was reversed in an opinion written by none other than Justice Ginsberg.
Justice Terry N. Trieweiler, the twice rebuked but unrepentant Montana Supreme Court jurist, actually wrote three Casarotto opinions. He penned a special concurring opinion in Casarotto I to address “those federal judges who consider forced arbitration as the panacea for their “heavy caseloads” and to single out for criticism Judge Bruce M. Selya, First Circuit Court of Appeals, who called the prevalence in state courts of “traditional notions of fairness” an “anachronism.” 886 P.2d at 940. Justice Trieweiler’s rejoinder was that some federal judges are arrogant. I think of it as hubris.
The number of cases challenging arbitration agreements has not diminished over time. I can think of at least two reasons for this phenomenon. One is ever expanding disparity in wealth and power in the United States in this post-industrial society. There are very few ways individuals can challenge those who have power over them or expose what they feel to be an injustice that has been done to them. We are conditioned to believe that there is “equal justice under the law” and to believe that a citizen may seek redress in court. The second reason is the failure of federal courts to recognize that the FAA is indefensible when it is applied in consumer cases. That was the subject of the last series of blog posts discussing Margaret Radin’s book, Boilerplate. The FAA is a statute frozen in time, applied to transactions almost ninety years after Congress held those hearings on the resistance of state courts to arbitration and used to enforce arbitration “agreements” in contracts that were not even dreamed of when the FAA was passed -- online, clickwrap contracts such as the contract in Kelker. Contract defenses that police agreements where there is no real consent and no real bargaining are rendered impotent by the FAA. It does not matter if Certiorari is denied in Kelker, because the 9th Circuit has already used a pre-emption argument to defeat the Montana court’s use of “reasonable expectations” and unconscionability doctrines to invalidate arbitration provisions. Mortensen v. Bresnen Communications, LLC, 2013 U.S. App. Lexis 14211.
This past weekend I had the pleasure of meeting the judge who wrote the plurality opinion in the Tillman case, Justice Patricia Timmons-Goodson (pictured), who retired from the North Carolina Supreme Court in December 2012. I did not plan this meeting. It was completely serendipitous. I was looking for the meeting room where the Task Force on the Future of Legal Education was discussing the end of law school as we know it. I asked her for directions, and then I glanced at her name tag. It took me a moment to realize who she was. I was told by Judge James Wynn, who is now on the 4th Circuit U.S. Court of Appeals, but who once served with Judge Timmons-Goodson on the North Carolina Court of Appeals and the Supreme Court, that she was a recent recipient of the Legend in the Law award at Charlotte School of Law.
I knew that Justice Timmons-Goodson was a black woman. I looked for background information when I decided to write about the case. I knew, courtesy of North Carolina’s Lawyers Weekly, that two lawyers from Raleigh, John Alan Jones and G. Christopher Olson, obtained a judgment in Tillman and two companion cases in the amount of $81.25 million. Of the borrowers represented in the Tillman case, 759 received approximately $31,291 each. Another 9,670 received $544 each.
Taking the admonition of Stewart Macaulay seriously, striving to do something that looks like empirical research, I asked Justice Timmons-Goodson if she would consent to an interview. She hasn’t agreed yet, but I hope she will. I would like to know more about the process that she used to reach a decision in the Tillman case; how she persuaded enough of her colleagues to agree that the contract and the arbitration clause were unconscionable, even if two of them relied on a “totality of the circumstances” analysis that they thought sufficiently different from her opinion to merit a separate concurring opinion. Two justices signed her opinion relying on substantive unconscionability; two joined in finding the arbitration clause unconscionable but stressed the importance of deference to the fact-finding of the trial judge under a “totality of the circumstances” approach, and two justices dissented.
The Justice writing the dissenting opinion, appears to believe that the unconscionabiity doctrine is somehow illegitimate. He noted that it had never been used in North Carolina to invalidate a contract or a term in a contract. If I do interview Justice Timmons-Goodman, I will ask her about her reaction to the most recent U. S. Supreme Court decisions. She has herself written about the importance of state court judges at every level, particularly in the trial courts.
I am not sure that she would call her own acts as a justice on the Supreme Court “resistance.” She might simply say that logic and adherence to an ethic of principled decision-making impelled her to write the decision in Tillman as she did. I cannot be sure that she believes, as I do, that the drafters of the FAA never intended to completely pre-empt state law, especially those contract doctrines that are designed to control avarice and unscrupulous behavior. I do think, however, she will enjoy discussing the decisions of Justice Trieweiler.
[Posted, on Deborah Post's behalf, by JT]
Wednesday, August 21, 2013
This is the third in a series of posts in our online symposium on the Contracts Scholarship of Stewart Macaulay. More about the online symposium can be found here. More information about this week's guest bloggers can be found here.
Kate O'Neill's is Professor of Law at the University of Washington School of Law. Her principal interests are contracts, copyright, legal rhetoric, and law school teaching.
These essays present enlightening, provocative, and well-written analyses of relational contract theory, contract doctrine, legal practice, and social justice. The editors have sequenced and grouped them skillfully so that the reader can clearly see how the authors’ ideas intersect and diverge. As a result, the collection is more than its parts.
I want to draw readers’ attention to a problem the collection suggests but doesn’t address directly. What are we going to do about the contracts course in law school?
Several essays suggest, and Robert Scott’s expressly argues for, an emerging consensus that Macaulay’s original insights remain valid and are foundational for both law & economics and law & society theorists and that these warring camps may have more in common than either has yet recognized. If Scott and Macaulay are right, then I would wager that most contract courses not only fail to reflect the consensus but camouflage its most promising lessons.
The consensus seems to include two major points of agreement. First, unmessy doctrine can be handy (“Messy,” of course, was Macaulay’s description of much contract doctrine). Some “sophisticated” contracting parties should be able to make binding commitments on precisely the terms that they negotiate and, in case of dispute, they should be able to limit a judge’s interpretative discretion to alter their allocations of risk. In particular, they should be able to preclude the judge from resorting to “context” to alter the (presumably) plain meaning of the terms.
Second, consumers and employees should not necessarily be bound by all of the commitments purportedly imposed upon them by adhesion documents. Here, we can see fruit borne from Macaulay’s distinction between the real deal and the paper deal. Terms that are reasonable, typical, or expected are part of the deal; terms that are not are not. The expected nature of the relationship dictates the real contract terms; the paper contract terms do not necessarily govern the relationship. We are freed from the mutually exclusive and entirely fictional alternatives that either a contract was formed on the paper terms or it was not formed at all.
On the other hand, the collection makes clear that a fundamental policy issue remains contested especially in the consumer context – how much contract law should intervene in the market. The familiar alternatives are reflected: 1) let the market discipline bad actors even if there are a few casualties before the market works its magic because there is no agency more capable than the market in determining best (read, efficient?) practices; 2) let judges intervene to strike down bad terms – especially those that limit access to courts and class actions – because doing so will hasten market discipline of bad actors and will also relieve hardship in at least a few cases; or 3) regulate certain kinds of terms out of existence.
All the authors think that empirical data could help resolve the policy dispute. Edward Rubin, in particular, suggests that we think of contract law as a management tool. If we were to focus on whether the tool works well to achieve whatever objectives we set, then the legal system could essentially be taught to treat empirical evidence as intrinsic to the development of law. This is encouraging stuff. A systemic devotion to empiricism within the legal system might enable us, and the body politic, to clarify debates about what laws are fair and efficacious.
So far, so good, but here is the question that keeps troubling me. If we all are relationists and empiricists now, and we could use data to make contracting law and practice both fairer and more efficient (or whatever other goals we might conceivably agree upon), what and how we should teach law students?
Macaulay has taught us that contract law has relatively little explanatory power for many of the actual practices involved in the formation, performance, and modification of exchanges, or even the practices involved in resolving disputes. Serious attention to the nature of exchange relationships makes it hard to characterize contract law as unified, coherent and consistent or if it is unified theoretically, the unity operates at such a high level of abstraction that will matter little to judges or practitioners.
We praise these and other insights from empiricism both for what they tell us about law and society now and what they might teach us about alternatives. Yet most lawyers and judges plod on, oblivious or dismissive. Are we in part responsible? Look at our casebooks, listen to our classroom discussions! Traditional doctrinal analysis is alive, well, and I suspect dominant. Economic analysis “lite” has crept in, but attention to empirical methods, much less data on context or consequences, is scant. I suspect that even those of us who assign “law & society” contracts casebooks, like the ones edited by Macaulay and Deborah Post, still devote the bulk of class time to doctrinal analysis.
Perhaps this must be. Perhaps doctrinal analysis is our discipline’s unique identifier and must be taught first because it is foundational; perhaps we need to train litigators to understand the elements of a claim for breach; perhaps there is some utility in using the same basic case method in all 1L courses; or perhaps we are simply boxed in by student expectations, bar examiners, tradition, or confusion about what else to do?
Although there certainly are barriers to changing what and how we teach, I wonder if the core problem is that the work that needs to be done is profoundly interdisciplinary, challenging, and time-consuming. Many of us lack the skills to do it alone, and the scholarship, promotion standards, and instructional traditions at many law schools still make collaborations difficult.
Contracts teachers may alert law students to Macaulay’s insights, but I don’t think we give students sufficient tools to help clients and or work effectively on big systemic problems. Stewart might say that’s because we kinda like the mess the way it is.
[Posted, on Kate O'Neill's behalf, by JT]
Contract Law – 2nd Edition
By John Cartwright
This book gives an introduction to the English law of contract. In this new and fully updated edition the book retains the primary focus of the first edition: it is designed to introduce the lawyer trained in a civil law jurisdiction to the method of reasoning in the common law, and in particular to the English law of contract. It is written for the lawyer-whether student or practitioner-from another jurisdiction who already has an understanding of a (different) law of contract, but who wishes to discover the way in which an English lawyer views a contract. However, setting English contract law generally in the context of other European and international approaches, the book forms an introductory text for the English student, who can see not only how English contract law works but also get a glimpse of different ways of thinking about some of the fundamental rules of contract law. After a general introduction to the common law system-how a common lawyer reasons and finds the law-the book explains the principles of the law of contract in English law covering all the aspects of a contract from its formation to the remedies available for breach, whilst directing attention in particular to those areas where the approach of English law is in marked contrast to that taken in many civil law systems.
John Cartwright is Professor of the Law of Contract at the University of Oxford, Tutor in Law at Christ Church, Oxford, Professor of Anglo-American Private Law at the University of Leiden, and a Solicitor.
August 2013 362pp Pbk 9781849464796
RSP: £25 / €33 / US$50
20% DISCOUNT PRICE: £20 / €26.40 / US $40
Order Online in the US
If you would like to place an order you can do so through the Hart Publishing website (link below). To receive the discount please mention ref: ‘CONTRACTSPROFBLOG’ in the special instructions field. Please note that the discount will not be shown on your order but will be applied when your order is processed.
Order Online in the UK, EU and Rest of World
If you would like to place an order you can do so through the Hart Publishing website (link below). To receive the discount please type the reference ‘CONTRACTSPROFBLOG’ in the voucher code field and click ‘apply’.
UK, EU and ROW website: http://www.hartpub.co.uk/BookDetails.aspx?ISBN=9781849464796[JT]
Tuesday, August 20, 2013
This is the second in a series of posts in our online symposium on the Contracts Scholarship of Stewart Macaulay. More about the online symposium can be found here. More information about this week's guest bloggers can be found here.
Alan Hyde is Distinguished Professor and Sidney Reitman Scholar at Rutgers University School of Law, Newark, where he writes mostly about labor, employment, and immigration law.
Stewart Macaulay, System Builder
I’ve often wondered whether Stewart Macaulay would have had even more influence if he had used his social science research into business practice to construct theories and systems. In most of his writing, Stewart used empirical research to debunk. Often, there is a specific target. For example, Stewart will take on the idea that business professionals want to be sure that the documents they sign constitute contracts that will be enforceable as such in court. As everyone knows (I hope), Stewart’s research showed, so long ago, that people who did deals cared little about formal enforceability. My impression is that most American contracts teachers know this, and ignore it in their actual teaching practice. The typical contracts class probably spends as much time today on the line between unenforceable agreement, and enforceable contract, as it did before Stewart began writing, or was born.
As a public service, I have synthesized the following Counterstatement (First) of Actual US Contract Law in Action, as Given by the Dealmakers of the US, Under the Interpretation of Stewart Macaulay (Tentative Draft No.1). Casebooks may now cite it—I grant permission-- as an alternative approach (though with precisely the same claim to legal authority as the product of that Institute in Philadelphia, the name of which I do not choose to recall, that is so often treated by contracts teachers today as if it were the Civil Code). Authors can argue with it. For sometimes it takes a system to beat a system. For convenience, I will synthesize this Counterstatement from Stewart’s fabulous casebook (with Kidwell, Whitford, Braucher, and sometimes others), Contracts: Law in Action, because I teach from it every year and thus get the benefit of hearing Stewart’s voice in my head as I teach.
Counterstatement (First) of Actual US Contract Law . . .
Chapter One: Remedies. [Since this is a Stewart Macaulay Counterstatement of Actual US Contract Law, it naturally begins with Remedies]
Section 1: Remedies expected and demanded for failures to meet promises shall reflect the expectations of the parties based on the norms of their industry, and their sense of fairness. Remedies shall not depend on technicalities of formal enforceability as discussed in Chapter Two of this Counterstatement, and in no case shall refer to decisions of courts of law except insofar as these have been incorporated into business norms, which, if parties are rational, would be never. For example, if a machine sold doesn’t work, “this is not something any lawyer could handle without putting you [Seller] out of business. This must be handled on a business basis by a salesperson and the person who bought the machine. We don’t look for legal loopholes to avoid obligations like this. After all, you are selling reliability and your reputation gets around.”
Section 2: Buyer’s cancellation of an order
- A Buyer under a formal or informal arrangement for the sale of goods, whether or not a law court would find it to be a “contract,” may cancel an order when its needs have changed.
- In such a case, the Buyer shall be liable to the Seller for cancellation costs, defined as expenses incurred by the Seller that have been turned to waste by Buyer’s cancellation. Such expenses include completed product scrapped or unsellable after Buyer’s cancellation, and raw materials purchased in order to fulfill Buyer’s order but that cannot be salvaged.
- A seller that sues a cancelling Buyer for profits it thinks it would have made from Buyer’s purchase is probably nuts, especially where that Buyer is a consumer. Such a Seller that sues for lost profits can hardly expect people to continue to deal with it.
- Lawyers can call cancellation of an order “breach of contract,” if they like, but that doesn’t mean that their clients will agree with this characterization.
- On notification by Seller that it is unable to fulfill Buyer’s order, Buyer may purchase any reasonable substitute and bill Seller for the difference.
- If Seller is going to be late, it should try to work things out with the Buyer. If Buyer had enough notice that the Seller would be late, and didn’t do anything to protect itself, nobody is going to give Buyer any damages.
Section 4: Miscellaneous remedies
- All parties understand that failure to keep your word in business is likely to result in people saying bad things about your reputation.
- When things go wrong, try to work things out with your contractual partner. This probably means keeping the lawyers out. “If business had to be done by lawyers as buyers and sellers, the economy would stop. No one would buy or sell anything; they’d just negotiate forever.”
- The party that drafts the documents will probably disclaim any liability, in vague, illegible gobbledy-gook, and courts that are there to protect wealth and privilege will probably let them get away with it, so really all this study of remedies is somewhat beside the point.
Chapter Two: Enforceability [like you care, anyway]
Section 5: Enforceability of promises and arrangements made in family settings
Courts should not hesitate to enforce promises made by one family member to another, if the situation permits the court to play a useful role in sorting things out and restoring harmony, which is rare.
Section 6: Contract formation in general
- Honest people keep their promises without worrying about any technicalities of contract formation. The so-called law of offer-and-acceptance is just a bunch of loopholes that lawyers use to get people out from promises that they plainly made but now feel like getting out of.
- When the parties’ documents do not appear to create what courts think is an enforceable contract, for example by reserving in one party such freedom of action as to raise the question whether it is even committing to anything, try to imagine that maybe they didn’t intend judicial enforcement, preferring to work things out.
- The idea that people have no commitments to each other, and then, after one magic moment (called contract formation), do, is just magical thinking. People should act like moral adults and work out the issues between them, without taking refuge in legal mumbo-jumbo, which is nearly always a very hostile step to take and interpreted by others as such.
Section 7: Consideration
There is no such doctrine. A plaintiff who seeks specific performance of a contract to sell valuable real estate in consideration of one peppercorn (tendered) has a great deal of explaining to do.
Section 8. Excuse.
If you owe $50,000 to a bank, and can’t pay, you are in trouble. But if you owe $50 million to a bank, and can’t pay, the bank is in trouble.
You get the idea, anyway. It’s time for Stewart Macaulay fans to move beyond mere debunking. That Institute in Philadelphia should support the Counterstatement (First) of Actual US Contract Law in Action, as Given by the Dealmakers of the US, Under the Interpretation of Stewart Macaulay. But who should be Chief Reporter?
[Posted, on Alan Hyde's behalf, by JT]
The summer fad for scholarship on multimodal bills of lading seems to have withered rather quickly. After its shocking debut two weeks ago with exactly 4000 downloads, interest in our top paper seems to have stagnated. Academia can be so fickle!
So, although Butakova put up a strong performance, we're going to have to go with our gut and name Daft Punk's Get Lucky our song of the summer:
RECENT HITS (for all papers announced in the last 60 days)
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal
June 20, 2013 to August 19, 2013
|1||4007||Multimodal Bill of Lading: The Problem of Party Liability
Nadezda Alexandrovna Butakova,
Russian Presidential Academy of National Economy and Public Administration (RANEPA)
Howard M. Wasserman, Dan Markel, Michael McCann,
Florida State University College of Law, University of New Hampshire School of Law, Florida International University (FIU) - College of Law
|3||61||Duties of Love and Self-Perfection: Moses Mendelssohn's Theory of Contract
McGill University - Faculty of Law
|4||58||The Law and Economics of Norms
Juliet P. Kostritsky,
Case Western Reserve University School of Law
Gus De Franco, Florin P. Vasvari, Regina Wittenberg Moerman, Dushyantkumar Vyas,
University of Toronto - Rotman School of Management, London Business School, University of Toronto - Rotman School of Management, University of Chicago - Booth School of Business
|6||56||A Theory of Contract Formation
School of Law, University of South Australia
|7||52||Carve-Outs and Contractual Procedure
Erin A. O'Hara O'Connor, Christopher R. Drahozal,
Vanderbilt University - Law School, University of Kansas School of Law
|8||41||State Contract Law and Debt Contracting
Gil Sadka, Sharon P. Katz, Colleen Honigsberg,
Columbia University - Columbia Business School, Columbia University - Accounting, Business Law & Taxation, Columbia University - Accounting, Business Law & Taxation
|9||37||Improving Contract Quality: Modularity, Technology, and Innovation in Contract Design
George G. Triantis,
Stanford University - Law School
|10||36||Revisiting the Efficiency Theory of Non-Contemplated Contingencies in Contract Law
IDC Herzliya - Radzyner School of Law
Monday, August 19, 2013
This is the first in a series of posts in our online symposium on the Contracts Scholarship of Stewart Macaulay. More about the online symposium can be found here. More information about this week's guest bloggers can be found here.
Jay Feinman is Distinguished Professor of Law at Rutgers School of Law‒Camden.
My contribution to Revisiting the Contracts Scholarship of Stewart Macaulay: On the Empirical and the Lyrical is a chapter entitled “Ambition and Humility in Contract Law.” The chapter focuses on several of Macaulay’s articles in the 1960s in which he presented an organization of the fundamental policies underlying contract law, the structures through which contract law acts, and some policies of the legal system that influence the fundamental and structural policies. The organization encapsulates in a remarkable 2x2 matrix the essential issues of contract law.
Here is the matrix, which separates the substantive policies that contract law serves (market and other-than-market goals) from the ways in which the legal system can realize those goals (through rules or case-by-case adjudication). (As Macaulay recognizes, the elements of the matrix are actually ends of continua rather than discrete categories.)
Generalizing approach (‘rules’)
social (or economic) planning policy
Particularizing approach (‘case-by-case’)
Macaulay’s organization clearly and powerfully expresses the underpinnings and operations of the field. For mainstream scholars, the identification of policies and approaches provides a framework that clarifies analysis in legislation, adjudication, and scholarship. But the matrix also contains the seeds of a critique that demonstrated that contract law is at best badly confused and at worst incoherent and largely ineffective. In that way, Macaulay’s work contributed to critical legal studies’ account of private law through its influence on Duncan Kennedy’s monumental “Form and Substance In Private Law Adjudication,” 89 Harv. L. Rev. 1685 (1976) and other works.
For contract law, the market is the primary social institution, so market goals predominate. Macaulay’s framing of market-promoting goals as primary and market-correcting goals as secondary correctly states the customary objectives of contract law as ambition tempered with humility. But that framing makes apparent why contract law needs to temper its ambition of serving the market with a large dose of humility.
First, the conflicting market and non-market goals need to be balanced, and the measures for doing so are controversial. The case law and literature offer a variety of mechanisms for carrying out this balancing. Courts employ different tropes including avoidance by doctrinal formalism, casual policy analysis, and ad hoc paternalism. The Restatement Second frequently lists factors to be balanced without specifying the techniques of balancing. Economic analysis aims for efficient results, variously defined and sought. In his later reflections on the systematic presentation of contract law policies, Macaulay recognized the inadequacy of these efforts and the difficulty, perhaps impossibility of this balancing process. There he entitles the matrix “The Contradictions of Contract Law” and comments that contract law “inconsistently rests on policies that both promote the market and those that attempt to blunt it.” Macaulay, “Klein and the Contradictions of Corporate Law, 2 Berkeley Bus. L. J. 119 (2005).
Second, the hierarchy and separation between market and non-market goals needs to be established in practice. Consider the choice between a rule-oriented market functioning policy and a case-by-case transactional policy. One of the substantive contract policies Macaulay identifies is self-reliance. In the conception of the market as private, individual, and self-actuating, self-reliance is crucial. Macaulay writes of promoting self-reliance by encouraging or requiring parties to look out for themselves, in a world in which the law will rigidly enforce apparent bargains they have made, through a market-functioning or transactional policy.
But implicit in this construction is the illogic of simply promoting the market by promoting self-reliance through a body of contract law that rewards initiative and punishes dependence. Instead, the law can further self-reliance in either of two opposite ways—by creating a minimal body of contract law that puts parties at risk or an aggressively interventionist body of law that provides parties with security. A body of contract that provides relief from one’s ill-informed or ill-fated promises encourages self-reliant action by assuring that the consequences of action will not be too severe. The risk of intervention or non-intervention in this way protects all economic actors, as all are potentially subject to bad decisions or bad luck, although the weak probably more so than the strong.
Third, as the theoretical conflict about self-reliance illustrates, it is problematic even to attempt to define market and non-market goals as separate. Inherent in the separation is the conception that market goals involve the facilitation of private activity, a process that is distinct from the imposition of public values such as redressing inequality. Private activity is fundamentally individual, whereas public goals are collective. Courts in private law cases are primarily a forum for the adjudication of private disputes; legislatures are the arena in which public goals are primarily enunciated. And so on.
But these dichotomies are exaggerated. There is no institution of the market separate from and preexisting non-market activity, just as there is no private law not constituted by public values. The exchange of goods may be a private activity, but the exchange of goods that the law has made the subject of property and which exchange is enforceable by law is an essentially public activity. Law constitutes the market for reasons of the public good, so supporting the market through contract law is only another way of advancing the public good, and not a particularly distinct way at that.
Because the market is not distinctively private, the hierarchy of market goals and the need for self-reliance in the service of those goals are not evident. The justification for contract law and its rules must rest elsewhere than on a claim that the market is distinctive and distinctively important. And that is a claim that is assumed but seldom justified in the case law or literature. Part of the power of Macaulay’s organization is the way in which it makes clear the great defects of contract law’s ambition.
[Posted, on Jay Feinman's behalf, by JT]
When I started graduate school in 1986, people were saying that the early 90s were going to be a great time for newly minted history Ph.D.s. Universities had exploded in the 60s, and a lot of tenured faculty members were due to retire. There were going to be a lot of openings in a lot of fields. And of course, none of us graduate students were worried in any case because we were young and indestructable -- all brilliant and all certain to continue to be at the top of our fields.
But the people who were hired in the 60s didn't retire, and many of those who did retire were not replaced or were replaced in non-traditional fields. The year I got my Ph.D. (1993) ended up being pretty dismal for newly minted Ph.D.s, and I never found a tenure-track job in history. I never came close. I was on the market for five years and never even got an on-campus interview for a tenure track job at any of the hundreds of universities, colleges, technical colleges and private high schools to which I applied.
When I tried repeatedly and failed repeatedly to get a job teaching history, there were structural problems with gradaute programs in history. Lots of programs were admitting far too many students. They were doing so because gradaute students were a cheap labor supply for teaching (or T.A.ing) undergraduate courses and because faculty members wanted to have graduate students to work with. History departments wanted to develop their Ph.D. programs because that enhanced the reputation of the program and of the university. But there weren't enough jobs, and history programs were not really training people to get jobs, since graduate students were either taking obscure upper-level courses or were working on their far more obscure dissertations that they were hoping to publish as scholarly monographs that only libraries would buy and only other professional historians in their narrow sub-field would read. That remains the model for doctoral programs in history, and the model remains broken. I have no idea why the typical history doctoral student in this country spends at least five years working on a book that almost nobody will read when they could just as easily devote their time to writing 3-5 historical essays of publishable quality which, when published, will eventually be in a database where they will be full-text searchable and actually of use to other scholars and laypeople alike. Harumph!
Contrast that with the feverish if not frenzied innovation that is currently underway in the legal academy. Schools are experimenting in every imaginable way -- reducing faculty and administrative staff, decreasing class size, and most importantly, adjusting the curriculum to better prepare today's students so that they can pass the bar and also be ready to start practice in a legal environment where more seasoned lawyers have very little time to train new attorneys. Those who criticize law schools for being slow to react to the new market for attorneys need some context. The legal academy has been incredibly responsive, and the only questions are whether they have resopnded in the right ways and whether they have correctly identified as either long-term or merely cyclical the problems in the market for attorneys.
My Law School (Valparaiso) is no different, but it is unique. That is, we have been scrambling to figure out better ways to serve our students (just like everyone else), but we have come up with a new curriculum that is unlike any other that I have heard about. On the blog, I just want to talk about how we are transforming the contracts course, but there is a lot more to our new curriculum.
I have already blogged about our LibGuide, which is being curated by our librarian, Jesse Bowman (pictured). I will have a great deal more to say about the LibGuide as it continues to develop, but today I want to talk about our new seven-week minimesters.
Today is the first day of our first minimester. We will be teaching a two-credit Contracts I course for seven weeks. We will then have a break for exams, to be followed by another two-credit, seven-week course, Contracts II. One purpose of the minimester system is to enable us to assess our students and give them meaningful feedback as early as possible in the course of their legal education. So, rather than having a huge exam at the end of the semester, with very little sense of their chances of success on the exam, our students will have frequent assessment throughout the minimester and an exam at the end. The final exam will still be important, but it will only account for part of their grade in a two-credit course, and they should have some notice, based on assessment throughout the semester of where they likely will fall relative to their peers. Since no minimester course counts for more than two-credits, we will not have the phenomenon that sometimes occurs at schools where Property or Civ. Pro are five-credit, one-semester courses, and students neglect other courses in favor of hunting the semester's big game.
At the same time, my doctrinal colleagues and I are working closely with our skills faculty (and there is a great deal of overlap) to coordinate exercises and assessments in doctrinal courses with the subject-matter of our skills courses. Those too have been re-conceived and re-configured from the ground up based on our assessment of where our students are in terms of their preparation for law school and what they need to get them ready for practice.
I will be blogging throughout the semester about the LibGuide and the minimester system. I am really excited about this experiment and eager to see how it works for our students.