Monday, October 5, 2015
Friday, September 25, 2015
Yonathan Arbel has a post over on the New Private Law blog about the publication of the 2d edition of Charles Fried's classic Contract as Promise.
The post also includes a video of a panel discussion on the publication, which is embedded below.
Monday, July 13, 2015
We have some news from the world of hockey, that is, the sport of the 2015 Stanley Cup Champion Chicago Blackhawks (logo pictured). While elite teams (like the Blackhawks) struggle to keep their rosters under the salary camp (Goodbye Patrick Sharp; Goodbye Brandon Saad -- thanks for the memories and the Cups!), as reported on ESPN.com, the L.A. Kings used an alleged "material" breach of contract to terminate center Mike Richards rather than buying him out to evade the cap. The alleged material breach was at first mysterious, but it has now bee reported, e.g., here on Forbes.com, that Richards was detained at the Canadian border in illegal possession of OxyContin. But the Forbes report also indicates that Richards' mere arrest is not grounds for termination, and even if he is convicted, the NHL's drug policy does not call for termination. It calls for substance abuse treatment. Go Blackhawks!
The Bangor Daily News reports that author Tess Gerritsen has dropped her $10 million law suit against Warner Bros. for breach of contract in connection with the film "Gravity." As we reported previously, a District Court in California dismissed her complaint but allowed her twenty days to amend and refile. The complaint is based on a $1 million contract Gerritsen signed in 1999 to sell the book’s feature film rights to a company that was eventually purchased by Warner Bros. Gerritsen has admitted that the film "is not based on" her book, but she asserts that the book clearly inspired the film.
Tuesday, July 7, 2015
‘Money Awards in Contract Law’ by David Winterton
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Money Awards in Contract Law
The quantification of money awards for breach of contract is a topic of both significant theoretical interest and immense practical importance. Recent debates have ranged from the availability of gain-based awards to the theoretical basis for principles of remoteness and mitigation. While these and other important issues, such as the recovery of compensation for non-pecuniary loss, are touched upon, the book's principal objective is to challenge the orthodox understanding of the expectation principle, as famously laid down by Parke B in Robinson v Harman. According to this understanding, the usual objective of money awards for breach of contract is to compensate for 'loss' suffered by reference to the position the innocent party would have occupied had the contract been performed. After challenging this orthodoxy, Dr Winterton proposes a new account of the money awards provided in response to breach of contract which draws an important distinction between substitutionary and compensatory awards. The book aims to provide a coherent picture of contractual rights and remedies and will be of interest to judges, practitioners and academics alike.
David Winterton is a Lecturer in Law at the University of New South Wales.
June 2015 9781849464574 244pp Pbk RSP: £50
20% Discount Price: £40
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Monday, June 29, 2015
Martha Ertman's new book, Love's Promises: How Formal and Informal Contracts Shape All Kinds of Families (Beacon Press 2015) is the subject an online symposium over at Concurring Opinions.
And in other publication news . . .
Robert Bejesky, Mercenaries, Myrmidons, and Missionaries, 37 U. Ark. Little Rock L. Rev. 45 (2014)
Gregory Crespi, Agreements to Alter the Limitation Period Imposed by U.C.C. Section 2-725: Some Overlooked Complications, 46 St. Mary's L.J. 199 (2015)
Royce de R. Barondes, Frictions and the Persistence of Inferior Contract Terms. 9 Va. L. & Bus. Rev. 257 (2015)
Bob Wessels, Contracting Out of Secondary Insolvency Proceedings: The Main Liquidator's Undertaking in the Meaning of Article 18 in the Proposal to Amend the EU Insolvency Regulation, 9 Brook. J. Corp. Fin. & Com. L. 236 (2014)
Eric A. Zacks, Contract Review: Cognitive Bias, Moral Hazard, and Situational Pressure, 9 Entrepren. Bus. L.J. 379 (2015)
Wednesday, June 10, 2015
Southwestern Law Review has published the proceedings of a symposium it held on Nancy's book, Wrap Contracts. Kudos to the Law Review for putting together such a stellar group of contributors and for bringing attention to Nancy's scholarship!
SOUTHWESTERN LAW REVIEW
Nancy Kim's Wrap Contracts Symposium
Robert A. Hillman
|215||Escaping Toxic Contracts: How We Have Lost the War on Assent in Wrap Contracts (PDF)
Daniel D. Barnhizer
|231||Norm Shifting By Contract (PDF)
Zev J. Eigen
|239||Against Contractual Authoritarianism (PDF)
|251||Form & Substance in Nancy Kim's Wrap Contracts (PDF)
Danielle Kie Hart
|265||Challenging the Law Online Southwestern Law Review Symposium on Nancy Kim's Wrap Contracts (PDF)
Allyson Haynes Stuart
|275||Notice, Assent, and Form in a 140 Character World (PDF)
Juliet M. Moringiello
|285||Wraps and Copyrights (PDF)
|297||Preserving Substantive Unconscionability (PDF)
|309||The Wrap Contract Morass (PDF)
Nancy S. Kim
Wednesday, April 8, 2015
Steven W. Feldman, Expanded Merchant Tort Liability, Democratic Degradation, and Mass Market Standard Form Contracts (Reviewing Margaret Jane Radin, Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law, Part II) 63 Clev. St. L. Rev. 163 (2014)
Avery W. Katz, Contract Theory -- Who Needs It? (Reviewing Douglas G. Baird, Reconstructing Contracts; Brian H. Bix, Contract Law: Rules, Theory, and Context; Melvin A. Eisenberg, Foundational Principles of Contract Law), 81 U. Chi. L. Rev 2043 (2014)
Young, Andrew T. and Daniel Levy. Explicit evidence of an implicit contract. 30 J.L. Econ. & Org. 804-832 (2014).
Eyal Zamir, Contract Law and Theory: Three Views of the Cathedral (Reviewing Douglas G. Baird, Reconstructing Contracts; Brian H. Bix, Contract Law: Rules, Theory, and Context; Melvin A. Eisenberg, Foundational Principles of Contract Law), 81 U. Chi. L. Rev. 2077 (2014).
Tuesday, March 31, 2015
My friend Ken Ford is enjoying his fifteen minutes of fame, courtesy of the Department of Energy (D0E), which is displeased with his memoir, Building the H-Bomb: A Personal History. According to this report in the New York Times, DoE officials told Dr. Ford to make cuts to his book that would have eliminated 10% of the text. DoE personnel flagged 60 separate passages in the book for editing.
This demand (and the DoE made clear that it was making demands not requests) came as a surprise to Dr. Ford, who had submitted the book for DoE review expecting the process to be a mere formality. In Dr. Ford's view, the book contains no secrets, as the information that he included in his book relating to the history of the hydrogen bomb either had been previously disclosed or was released to him through FOIA requests. The DoE sees things differently, but the agency is unlikely to respond to the publication of Dr. Ford's book, in large part because any action it takes would only draw attention to the information whose disclosure it regards as improper.
The Times articles covers the story well and provides some examples of material that the DoE regards as classified but Dr. Ford regards as public. We would like to focus on a couple of contractual issues. First, the Times references Ken's alleged contractual obligation arising from a non-disclosure agreement he signed in the 50s. Dr. Ford does not recall what that agreement said, but he provided this blog with a copy of a similar agreement dated from September 2014. The DoE asked Dr. Ford to sign this new non-disclosure agreement in connection with its review of his manuscript. That document provides the government with multiple remedies should Dr. Ford reveal any classified information, including:
- termination of security clearances and government employment;
- recovery of royalties and other benefits that might result from any sort of disclosure of classified information; and
- criminal prosecution under Titles 18 and 50 of the U.S. Code and the Intelligence Identities Protection Act of 1982.
Given this non-disclosure agreement, one would expect that Dr. Ford's publisher would be reluctant to publish the book, fearing that it too might become a target of government scrutiny. In order to protect his publisher against liability, Dr. Ford agreed to amend his publication agreement to expand the usual indemnification clause. The additional language in the contract provides that Dr. Ford will indemnify his publisher "against any suit, demand, claim or recovery, finally sustained, by reason of . . . any material whose dissemination is judged by the United States Government to have violated the Author's obligations regarding the handling of sensitive information."
Steven Aftergood provides further information on the Federation of American Science Secrecy blog here.
Dr. Ford provides an overview of the story that his book tells, as well as links to about a score of documents, eight of which are annotated with Dr. Ford's comments, on George Washington University's National Security Archives.
Monday, February 2, 2015
Giles Cuniberti, The International Market for Contracts: The Most Attractive Contract Laws. 34 Nw. J. Int'l L. & Bus. 455 (2014)
Robert W. Emerson, Fortune Favors the Franchisor: Survey and Analysis of the Franchisee's Decision whether to Hire Counsel, 51 San Diego L. Rev. 709 (2014)
Shelby D. Green, Contesting Disclaimer-of-Reliance Clauses by Efficiency, Free Will, and Conscience: Staving off Caveat Emptor, 2 Tex. A&M L. Rev 1 (2014)
Cameron S. Hamrick & Michelle E. Litteken, CICA Stay Overrides at the Court of Federal Claims: What Government Contractors Need to Know, 43 Pub. Cont. L.J. 687-713 (2014)
James W. Nelson, GAO-COFC Concurrent Bid Protest Jurisdiction: Are Two Fora Too Many? 43 Pub. Cont. L.J. 587 (2014).
Aaron S. Ralph, Transaction Management: A Systemic Approach to Procurement Reform, 43 Pub. Cont. L.J. 621 (2014)
Steven M. Seigel, War Claims and Private Security Contractors: The Strategic and Regulatory Benefits of Paying Host-Nation Claims against U.S. Contractors, 43 Pub. Cont. L.J. 653 (2014)
Heather K. Way, & Lucy Wood. Contracts for Deed: Charting Risks and New Paths for Advocacy. 23 J. Affordable Housing & Commun. Dev. L. 37 (2014)
Paul S Davies
Accessory liability in the private law is of great importance. Claimants often bring claims against third parties who participate in wrongs. For example, the ‘direct wrongdoer’ may be insolvent, so a claimant might prefer a remedy against an accessory in order to obtain satisfactory redress. However, the law in this area has not received the attention it deserves. The criminal law recognises that any person who ‘aids, abets, counsels or procures’ any offence can be punished as an accessory, but the private law is more fragmented. One reason for this is a tendency to compartmentalise the law of obligations into discrete subjects, such as contract, trusts, tort and intellectual property. This book suggests that by looking across such boundaries in the private law, the nature and principles of accessory liability can be better understood and doctrinal confusion regarding the elements of liability, defences and remedies resolved.
Paul S Davies is an Associate Professor in Law at the University of Oxford and a Fellow of St Catherine’s College, Oxford.
January 2015 9781849462877 302pp Hardback RSP: £55
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Wednesday, January 21, 2015
Martin Hogg & Larry A. DiMatteo (eds.), Comparative Contract Law: British and American Perspectives (Oxford University Press 2015) (forthcoming)
Mark Kesten, Collateral Damage: Will the 360 Deal Be the Next Victim of California's Talent Agencies Act, 43 Sw. L. Rev. 397 (2014)
Karen E. Sandrik, Formal but Forgiving: A New Approach to Patent Assignments, 66 Rutgers L. Rev. 299 (2014)
Lynn A. Stout, Killing Conscience: The Unintended Behavioral Consequences of "Pay for Performance," 39 J. Corp. L. 525 (2014)
Wednesday, November 26, 2014
Steven W. Feldman, Mutual Assent, Normative Degradation, and Mass Market Standard Form Contracts (a two-part critique of Margaret Jane Radin, Boilerplate: The Fine Print, Vanishing Rights and the Rule of Law (part I), 62 Clev. St. L. Rev. 373 (2014).
And, for our readers only!
Hart Publishing is delighted to offer you 20% discount on this title
English and European Perspectives on Contract and Commercial Law
Essays in Honour of Hugh Beale
Edited by Louise Gullifer and Stefan Vogenauer
The purpose of this book is to honour the influential and wide-ranging work of Professor Hugh Beale, who retires from full time teaching at Warwick University this year. It contains essays by twenty-five very distinguished authors, each of whom has worked with Professor Beale as a co-author, as a teaching colleague, during his time as Law Commissioner of England and Wales, or as part of the study groups working in Europe on contract and commercial law. The essays reflect different aspects of Professor Beale's interests. Some concentrate on English contract law, either from a historical or a current perspective, while others are focused on aspects of European contract law. There are four essays looking at current issues relating to security and financing, and, as befits a former Law Commissioner, three essays on law reform. The essays in the final section discuss trends in transnational and European commercial law. This book brings together the reflections of eminent writers from all over Europe on important issues facing contract and commercial law, and will be of interest to all scholars and practitioners working in these areas.
Louise Gullifer is Professor of Commercial Law at the University of Oxford, and is Fellow and Tutor in Law at Harris Manchester College, Oxford. She is an associate member of 3 Verulam Buildings and a Bencher of Gray's Inn.
Stefan Vogenauer is Linklaters Professor of Comparative Law at the University of Oxford, Director of the Oxford Institute of European and Comparative Law, and a Fellow of Brasenose College, Oxford.
October 2014 9781849465496 424pp Hardback RSP: £65
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Friday, October 10, 2014
This is the fourth in a four-part post by Robin Kar that serves as a sort of coda to our virtual symposium on the new book by Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure.
Part I, The Proverbial “Egg,” can be found here.
Part II, Breaking Out of the Shell, can be found here.
Part III, What Is This Emerging New Life? can be found here.
Part IV: Discarding the Last Remnants of the Old Shell
When reading More Than You Wanted to Know together with the reactions in the virtual symposium, I have been struck by two facts. First, we clearly know much more about how mandatory disclosure regimes work than ever before. Details aside, a consensus is emerging that these regimes do not always help consumers make better decisions. Second, despite this increase in knowledge and emerging consensus over the problem, there is even more uncertainty and even less consensus over how consumer protection should be reformed in light of these facts.
i. Diagnosing the Problem
How can more clarity about the empirical facts lead to less clarity about what the law should be? I believe that part of the reason is simple: many of the current debates over these issues are still insufficiently attentive to the rigorous types of argumentation needed to address the purely normative aspects of these questions. To be more specific, the third premise of the classical law and economics movement (see Part I) has not yet been replaced by rigorously developed lines of argumentation from the appropriate cognate fields—as has happened with the first two premises.
In saying this, I do not mean to suggest that rigorous argumentation on these topics is lacking. I mean to highlight a sociological fact about the current legal academy. I believe that the right lines of argument have not yet been sufficiently absorbed by contract law scholars who work in and around the law and economics paradigm. Because of the predominance and recent expansions of this paradigm within the study of contract law, this third premise is increasingly assumed or tacitly accepted by many other contract law scholars. This includes many scholars who do work predominantly in law and psychology or engage in straightforward empirical legal research.
In More Than You Wanted to Know, Ben-Shahar and Schneider are, for example, apparently willing to accept that the primary purpose of consumer protection law is to help consumers make better decisions. This is why they recommend better advice instead of more disclosure. But interestingly enough, almost all of the people who have responded critically in this symposium appear to accept—either explicitly or tacitly—either the same normative proposition or the alternative view that consumer protection laws should be set up to promote social welfare more generally. (The most notable exception is Aditi Bagchi’s response—though Steven Burton’s plea that the authors spend more time thinking about obligation may represent a similar thought.)
Hence, there is a normative assumption running through many of the current debates. The assumption is that consumer protection laws should be shaped to promote either better subjective choice or human welfare more generally. But is this normative premise true? And before we even get to that question: how might we determine whether it is true?
After the jump, I will pursue these questions. I will suggest that we cannot get clearer about the appropriate shape of consumer protection law, however, until we ask the right normative questions. And I will suggest that we are not yet doing that in major areas of contract law studies.
Thursday, October 9, 2014
This is the third in a four-part post by Robin Kar that serves as a sort of coda to our virtual symposium on the new book by Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure.
Part I, The Proverbial “Egg,” can be found here.
Part II, Breaking Out of the Shell, can be found here.
Part III: What IsThis Emerging New Life?
In Part II, I described how More Than You Wanted to Know seeks to answer psychological and empirical questions relevant to consumer protection law based not on ungrounded psychological premises or the kind of abstract theoretical reasoning that is typically associated with the classical law and economics paradigm but rather on actual psychological and empirical research. I suggested that these methodological moves explain the power of the book to take us much closer to the truth about use and sufficiency of mandatory disclosure regimes to cure a host of problems in consumer contracting.
As someone interested in methodology and the sociology of knowledge production in the legal academy, I find developments like these incredibly interesting. I am fascinated by the fact that they are often viewed as developments internal to the law and economics movement—even though they essentially dispense with some of its early guiding premises and draw on methodologies from other cognate fields.
The movement to replace classical economic assumptions about human decision-making with psychological facts is, for example, sometimes called “behavioral economics”. But what is really happening is that classical economic assumptions about human psychology are being replaced with direct psychological research into the relevant facts. Similarly, the move to replace economic modeling with rigorous empirical research is sometimes called “econometrics”. But what is really happening—at least within the legal academy—is that fewer law and economics scholars are making predictions about legal rules based merely on theoretical modeling and more are engaging in genuine empirical research. When they do this, they typically use statistical and other methods developed in the social sciences more generally—and not methods specific to the field of economics.
In my view, one of the greatest virtues of some parts of the law and economics movement is that it has been willing to revise many of its early premises and adopt methodologies from other fields when necessary to make its scholarship better track the truth. This willingness is also one of its greatest sources of continuing strength. Because of this willingness, the field has essentially been able to absorb a broad range of criticisms, while continuing to broaden in influence and produce scholarship that better tracks the truth. More Than What You Wanted to Know is a wonderful example of this development—at least when it come to curing distortions caused by the first two premises of the classical law and economics paradigm. (For a description of these 3 premises, see here.)
Still, as far as I know, there is not yet any name for the move to replace ungrounded economic assumptions about how to assess normative arguments (i.e., premise 3 from Part I) with rigorous thought developed by experts in the appropriate cognate fields. These are the fields of moral, legal and political philosophy, along with the field of meta-ethics. Corresponding to this fact, there is not yet as robust an acknowledgment of the need for this move within many influential contract law circles.
When I say I believe significant new life may be emerging in the study of contract law, I am nevertheless referring to the possibility that all three of the classical law and economics premises be replaced with rigorous lines of evidence and argumentation drawn from the correct cognate fields. I am referring to a highly interdisciplinary research program that draws on (1) our best contemporary psychological findings into decision-making and how humans operate with legal rules when asking psychological questions relevant to contract law, (2) rigorous empirical research into the consequences of different legal rules when adopted by groups with real human psychologies, and (3) philosophically well-grounded argumentation and debate over the normative propositions that are most relevant to contract law.
I am describing a hope, not an expectation—because it is we, as a field, who will decide whether this new life fully emerges.
For a range of historically contingent reasons, the classical law and economics movement may just end up serving as the early vehicle (or the proverbial “egg”) for this transition within the legal academy. I believe that would be an incredibly good thing for the study of contract law because it would essentially allow the legal academy to adapt a ready-made set of social and academic networks that are already studying this subject matter intensively and in highly influential manners. But this would also require a much greater appreciation by scholars who work within this paradigm of the need for more rigorous philosophical input on normative questions.
The result would, moreover, not just be an expanded sub-field of law and economics. It would be better described as a fully informed search for the truth. The proverbial “egg” will have given birth to something much, much better.
But we are not yet there yet. There is still too large a disconnect between moral and political philosophers and economists within the legal academy. Hence, a great deal of highly influential work on contract law still risks producing distortion. In Part IV, I will show how this problem still affects many discussions of consumer protection law. I will also make a plea that we work together to breath the right new life into contract law studies going forward.
This is the second in a four-part post by Robin Kar that serves as a sort of coda to our virtual symposium on the new book by Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure.
Part I, The Proverbial “Egg,” can be found here.
Part II: Breaking Out of the Shell
As we all know, the law and economics movement has proven a formidable force within the legal academy, especially in relation to subjects like contract law. As recently as 2012, even Charles Fried, the author of Contract as Promise, was forced to acknowledge that “the economic analysis of law may today be the dominant intellectual approach to legal institutions generally and contract law in particular.”
Because of Omri Ben-Shahar’s training and intellectual ties, many will view More Than What You Wanted to Know as a work that is partly internal to the law and economics movement. This affiliation should help the book because it will allow the book to speak credibly to a wide range of influential contract law scholars who currently share this affiliation. The book ultimately challenges one of the early dogmas of the classical law and economics paradigm, as described in my prior post, but—because of the book’s intellectual affiliations—the book can pose this challenge in an especially effective manner.
It should nevertheless be noted that the central insights in the book arise not from anything specific to the field of law and economics but rather from rejection of the field’s first two classical premises. With respect to human psychology (see premise 1 in Part I), Ben-Shahar and Schneider do not simply assume that consumers make more rational decisions whenever more facts are disclosed to them. Instead, they canvass a wealth of psychological evidence to the contrary. This evidence shows that consumers are especially likely to make poorer decisions as their choices become more complex and unfamiliar and when those terms are dictated by sophisticated contracting parties.
When determining the likely consequences of legal rules (see premise 2 in Part I), the authors similarly avoid abstract economic modeling and turn instead to direct empirical data. They draw this empirical data from a broad range of sources, and the facts suggest that mandatory disclosure regimes have increasingly begun to harm consumers in many contexts.
One reason for this is dynamic. Over time, mandatory disclosure regimes tend to lend increasing complexity and unfamiliarity to even the most banal of transactions. In one particularly poignant example, the authors describe the $.99 purchase of an iTunes song—which was accompanied by 32 feet of complex and often incomprehensible boilerplate (when printed out in a tiny font, as illustrated on the left). One of the underappreciated consequences of mandatory disclosure regimes is that they have increasingly begun to flummox consumers in even the simplest of transactions.
In highlighting facts like these, More Than You Wanted to Know takes us much closer to the truth about mandatory disclosure regimes than classical law and economics methodologies can. Speaking from a purely methodological perspective, it is able to do this because it is willing to abandon the first two premises of the classical paradigm and replace them with something better. It seeks to answer psychological and empirical questions relevant to consumer protection law based not on ungrounded premises but rather on actual psychological and empirical research.
This is an example of the emerging new life that I see in contract law studies. It is a better life because it is more likely to track the truth.
In my next post, I will nevertheless reflect more deeply on this new life. I will ask whether we have gone far enough as a field to make it really come to life. Have we—in other words—gone far enough yet to ensure that our collective research best tracks the truth?
Wednesday, October 8, 2014
This is the first in a four-part post by Robin Kar that serves as a sort of coda to our virtual symposium on the new book by Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure.
When an egg hatches, new life emerges. But it often takes its first steps into the world with some remnants of its newly discarded shell.
I believe that significant new life may be emerging in the study of contract law, but that too much of an old shell remains. Rather than hide the ball, let me just say that the proverbial “egg” is the classical law and economics movement. And More Than What You Wanted to Know takes us part—though only part—of the way toward that emerging new life.
Jeremy Telman has been kind enough to let me post a late addendum to this symposium so that I can explain these perceptions. I want to use this review to prompt more scholars in the field—including Ben-Shahar and Schneider—to acknowledge what we need to do as a field to get further toward the right destination in the study of contract law.
As other contributors have noted, More Than You Wanted to Know is a full-throated attack on mandatory disclosure regimes. These regimes have been widely used and accepted in many contexts for some time now. It is therefore interesting to note that almost all of the commentators here have voiced some agreement with the basic thrust of the book—even while arguing that its thesis is overly general. We are witnessing the tail end of a shift from what once seemed to be common knowledge (i.e., about the usefulness and sufficiency of mandatory disclosure to cure a host problems in consumer contracting contexts) to a very different shared understanding.
But how has this shift occurred? As someone interested in the sociology of the legal academy and how different interdisciplinary methods can combine to produce (or distort) knowledge, I want to delve further into this question. I also want to ask whether we have gone far enough, in our collective studies of contract law, in the right direction. (I should probably apologize in advance to Carl Schneider that I will focus more on contract than informed medical consent in these posts, given the nature of this blog.)
The Proverbial “Egg”
If the “egg” is the classical law and economics movement, then that is where we should start.
Interdisciplinary studies of law can obviously produce enormous insight. When methods from cognate fields are applied to the law without sufficient reflection on the validity or applicability of their guiding premises, they can, however, also produce significant distortion. In this particular case, I believe that faulty premises associated with the classical law and economics movement are part of the cause of overblown intuitions concerning the use and value of mandatory disclosure regimes.
To analyze the source of this distortion more concretely, I ask you to consider an approach to studying contract law that might seem fanciful at first. This approach combines three basic elements:
- Human Psychology. The approach starts with certain assumptions about how human psychology and decision-makings works. These assumptions are intuitively plausible to some but are not rooted in any rigorous psychological research.
- Predictions about Legal Rules. The approach then generates predictions about the consequences of legal rules by modeling interactions among hypothetical people with the psychologies presumed in premise 1 under different hypothetical legal rules. The approach thus relies on theoretical modeling instead of rigorous empirical research to make empirical predictions.
- Normative Questions. The approach is skeptical of any kind of value that is not reducible to the value of some state of affairs. Proponents of this approach are thus impatient with normative arguments that do not fit easily into the consequentialist (and/or welfarist or cost-benefit) frameworks that they best understand. People who adopt this approach are not, however, typically trained in moral or political philosophy—which are the fields that deal most directly and rigorously with normative questions. Nor are they trained in the field of “meta-ethics”—which is the study of the status or objectivity of normative judgments. People who adopt this approach are thus largely unversed in the considerations that might legitimately ground (or respond) to their skepticism. This prevents them from knowing whether their grounds for skepticism are valid. It also prevents them from knowing whether their skepticism can be limited to concepts they reject (like “rights” and “fairness”), or whether it equally affects the values they accept (like “welfare” and a person’s “good”).
On its face, an approach like this would appear to be a recipe for disaster. It studies contract law and makes numerous recommendations for legal reform, but it employs a methodology that is unmoored in the specific classes of evidence and types of argumentation that are most relevant to its professed subject matter.
But as anyone reading this blog will know, this description is far from fanciful. To make it describe something real, one need only clarify that the psychology referenced in premise 1 is homo economicus—or the classical, “rational actor” model. Then these three premises provide a pretty good description of the heart of the classical law and economics approach to studying contract law.
These three premises can also seem to lend support to the value and sufficiency of mandatory disclosure regimes to cure a host of problems with consumer contracting. Mandatory disclosure regimes purport to produce the precise information needed for rational consumers to make better choices for themselves. If people are rational actors (see premise 1), then economic modeling (as described in premise 2) can thus be used to show that these regimes should simultaneously produce overall gains for consumers who contract, overall gains in social welfare and a more efficient allocation of resources. These regimes should also work relatively automatically, or “as by an invisible hand”, in the following sense: they should produce these results without the need for any centralized state planner to know in advance which exchanges are better for specific parties. There is, moreover, nothing else to value (as per premise 3). Hence, there is nothing else that legitimately speaks to the appropriate contours of consumer protection law.
There is no doubt about it: mandatory disclosure regimes work incredibly well in (classical economic) theory. The question is whether they work in reality. In the posts that follow, I will explore that question. I will suggest that More Than You Wanted to Know takes us further toward the truth—but cannot, as it stands, take us all the way there.
Tuesday, October 7, 2014
Introducing our Guest Blogger, Robin Kar's Coda to Our Virtual Symposium on More That You Wanted to Know
Professor Robin Kar is a professor of law and philosophy at the University of Illinois College of Law. He is a faculty affiliate of the Illinois Law and Philosophy Program, the Beckman Institute for Science and Technology (in the Cognitive Psychology Research Group), the Illinois Program in Law, Behavior and he Social Sciences, and the Illinois Network for Neurocultures. He is Director of the Illinois Center for Interdisciplinary and Comparative Jurisprudence, and a Project Leader for the Illinois Program on Cultures of Law in Global Contexts. He has a PhD in philosophy, with a special focus on moral psychology, moral, legal and social philosophy, meta-ethics, rational choice and game theory, and the foundations of economics and the social sciences. Some of his work on moral psychology, the psychology of obligation, and the nature of law and legal obligation can be found in pieces like The Deep Structure of Law and Morality, The Psychological Foundations of Human Rights, Hart’s Response to Exclusive Legal Positivism, and The Two Faces of Morality.
Readers of the blog are also likely already familiar with Professor Kar’s recent SSRN Top Ten hits on contract law and theory, Contract as Empowerment: A New Theory of Contract and Contract as Empowerment Part II: Harmonizing the Case Law, along with his piece The Challenge of Boilerplate. Kar teaches contract law and wide array of jurisprudence and legal theory courses, including seminars like morals, markets and the law.
Professor Kar’s posts serve as a sort of coda to our our virtual symposium on the new book by Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure.
Professor Kar will present his argument in four parts:
Part I: The Proverbial “Egg” suggests that three ungrounded premises of the classical law and economics movement have often caused many people to think that mandatory disclosure regimes have an unwarranted degree of support.
Part II: Breaking Out of the Shell describes More Than You Wanted to Know as emerging from the classical law and economics paradigm but as able to challenge one of its central dogmas because it is willing to depart from two of the three core assumptions associated with that classical tradition. The book seeks to answer psychological and empirical questions based on real psychological and empirical research rather than ungrounded psychological premises and abstract theoretical modeling. This explains why the book is better able to track the truth about mandatory disclosure regimes.
Part III: What Is This Emerging New Life? outlines a better and even more broadly interdisciplinary paradigm that Professor Kar sees as potentially emerging from these developments. This research program would draw not only on psychological and empirical research to answer any psychological and empirical questions relevant to contract and consumer protection law but also on a broader range of philosophical methods of argumentation to answer any normative questions relevant to these topics. Part III argues that further development toward this interdisciplinary collaboration is needed for contract law studies to better track the truth.
Part IV: Discarding the Last Remnants of the Old Shell suggests that we still have a way to go in freeing ourselves from the limitations of the classical law and economics paradigm. It describes how this problem still causes many scholars to ask the wrong normative questions when asking how best to reform consumer protection law—as illustrated both by More Than You Wanted to Know and many of the responses to it in this symposium. This has led to an increase in knowledge about the psychological and empirical facts, but even more uncertainty and less consensus over how best to reform consumer protection law in light of them. This problem can only be fully addressed by attending better to the right normative questions.
So what are the right normative questions, you ask? Stay tuned to find out!
Tuesday, September 30, 2014
Below are links to the posts in our virtual symposium on the new book by Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure.
Introducing the Virtual Symposium on "More That You Wanted to Know" (The authors' introduction)
More Than You Needed to Know Symposium: The First Six (Introducing the first six contributors)
More Than You Needed to Know Symposium: The Next Five (Introducing the second group of five contributors)
Thanks to all who participated!
Monday, September 29, 2014
The NYT had an article about e-cigarette label warnings today that was eerily appropriate given our symposium on Omri Ben-Shahar and Carl Schneider's book, More Than You Wanted to Know: The Failure of Mandated Disclosure. The reporter must have been following our blog symposium and seems to have come up with an example that supports the arguments made by Ben-Shahar and Schneider. The article explains how big tobacco companies have been putting warning labels on their e-cigarette packages that are more extensive than those on their tobacco cigarettes. There are several possible explanations for why they are doing this, ranging from the least cynical (they want to be good corporate citizens) to the more cynical (they are trying to set up their smaller e-cigarette competitors for later regulation, possibly reduce demand for e-cigs to boost sales of tobacco cigs, and protect themselves from liability).
I tend to be in the more cynical camp. Big tobacco companies are both attempting to protect themselves from liability by setting forth as many potential dangers of their product as they can, and they are positioning e-cigarettes as "just as" dangerous, if not more, than plain old tobacco cigarettes. The article notes something that readers of the book and blog already know - the disclosures have little effect on consumer purchasing decisions because nobody reads them. The strategy of big tobacco supports the arguments made by Ben Shahar and Schneider that disclosure hurts rather than helps consumers except there's one crucial difference - the companies are putting these extensive disclosures on the labels themselves. They are not mandated. By voluntarily disclosing the harms of e-cigs, big tobacco companies both protect themselves from liability and avert regulation. Doing away with mandated disclosure wouldn't prevent this kind of strategic selective disclosure --selective and strategic in the sense that these companies are only forthcoming with certain products and with certain types of disclosure. It's revealing that one of the companies claiming that e-cigarettes warrant more extensive disclosure than their tobacco counterparts is RJ Reynolds, which succesfully sued the FDA to prevent mandated graphic warnings on cigarette packages.
So - the battle about disclosure continues to rage....
After reading our book and the blogs about it, you are surely in danger of hearing more than you want to know and even more surely apprehensive about a response in which we battle and bicker point by point. Our critics have described our thesis accurately: More Than You Wanted To Know does argue that mandated disclosure is the most common and least successful form of regulation today, that it cannot be fixed, and that it does more harm than good. But our critics puzzle us in some basic ways we will briefly explore.
Our objection to mandated disclosure is not an objection to information. People need information, seek it, and commonly use it wisely, especially when they want and even enjoy it. Advertising would not thrive were people indifferent to information, nor would libraries, newspapers, universities, or Google. But mandated disclosure is not just about information; it is a regulatory technique that directs quite particular kinds of information at quite particular times in quite particular ways. It aspires to give people information they did not seek and do not like to use. Information they often find irrelevant to their decision. Information that is often repellently complex and baffling. Information that thus requires training to use well. All this while people are contending with counterparties who are well informed and have interests of their own.
Our critics in this symposium and elsewhere widely acknowledge the strength of our core arguments that mandated disclosure’s record is poor and its challenges great. In area after area, mandated disclosure’s history is the same: high hopes that people will be liberated from ignorance, made at last truly autonomous, and led to improved decisions. In area after area, able and thoughtful people have labored decade after decade to realize these hopes. After all these years, those hopes are still thwarted. One might have expected, then, that all this thought and effort and ability would be turned to seeking better regulatory methods and persuading law-makers to use them. Instead, two responses are common: One is to argue that disclosure will work if only we can at last learn to do it better; the other is to shift the goals of disclosure from helping people make choices to more general benefits more indirectly achieved.
For example, immense creativity has been harnessed to solve the problem of conveying complex information to people ill-situated to interpret it. We devote a chapter in the book to arguing that simplification—the deus ex machina of contemporary disclosurism—has not only disappointed its advocates’ eager hopes, it has barely budged the meter. True, there are always more techniques to try, like Ryan Calo’s “visceral” disclosures, Bar-Gill’s “use pattern” disclosure, or Porat-Strahilevitz’ “personalized” disclosures. These might succeed where others failed, but let’s make sure we understand how formidable their task is and how discouraging the history of such efforts has been.
Take Lauren Willis’ example of the CARD Act’s simplified disclosure, a payment “nudge” invented in the era of “smart” disclosure to prompt debtors to pay balances faster. Willis—one the most sophisticated critics of disclosures in consumer law—calls this regime successful even while recognizing that its benefits are not “dramatic.” How undramatic can benefits be before we stop advocating simplified disclosure? A recent study based on government data finds few cardholders responded to this nudge, that those who did saved only $24 on average, and that the total effect of this disclosure reform was $71 million annualized savings. In a $750 billion market, this benefit is so undramatic that we doubt it’s worth its design costs. (Luckily, the CARD Act did more than simplify disclosure. It also limited fees and saved consumers—especially lower income people—many billions of dollars.)
Can disclosure serve other goals than improving people’s decisions? Can it “improve accountability”? Can firms be deterred from bad conduct even if disclosures go unread? If disclosure helps the government improve enforcement actions, then the answer is yes. But now we are talking about a different regulatory animal, where information is reported to the government and used as a baseline for command and control, like enforcing emission standards or collecting taxes. When, instead, disclosure is targeted at the public, does it improve accountability? Hospital report cards have almost no detectable effect on the quality of medical care, but hospitals worried for their reputation seem to be sending high-risk patients (especially minorities) away. How is that for accountability? What evidence is there that campaign-finance disclosure reduces money’s corruption of politics? Or that Miranda stops police coercion? Instead of sanitizing public life, disclosure is often a fig leaf to make disreputable behavior acceptable. The rich buy influence—and file their disclosures. Police, as Stuntz shows, use abusive tactics—and recite Miranda warnings. Lenders lure gullible borrowers into disastrous debt—and making everything kosher with their neat stack of disclosures.
While our critics are rich in new refinements on disclosure and in new purposes for disclosure to serve, they are not rich in responses to one of our central concerns: that mandated disclosure is incompatible with basic features of human nature, with the way that people live their lives and make their decisions. Unless human nature changes or people live differently, refinements in mandated disclosure can do little and new purposes for mandated disclosure will be increasingly peripheral.
So what do we propose instead? We propose a moratorium on mandated disclosure because we want real problems to be addressed with real solutions. Are credit card fees obnoxious? Regulate them. Are medical charges unconscionable? Face up to the perplexities of medical costs. Do firms cheat customers? Punish them. Do conflicts of interest distort incentives? Decide whether the distortion is great enough to justify prohibiting the conflict. All these solutions are politically hard, and some of them may be politically unattainable. But is that a good reason to encourage law-makers to persist in solutions that, while politically feasible, don’t work?
Thursday, September 25, 2014
Ben-Shahar & Schneider Symposium Part XI B: David Vladeck, Living in a Post-Disclosure World, Part B
This is the eleventh in a series of posts that are part of a virtual symposium on the new book by Omri Ben-Shahar and Carl E. Schneider, More Than You Wanted to Know: The Failure of Mandated Disclosure. Biographies for the second week's contributors can be found here. The authors' introduction to the symposium can be found here.
David C. Vladeck is a Professor of Law at Georgetown University Law Center, where he teaches federal courts, civil procedure, administrative law, and a seminar on First Amendment litigation. Professor Vladeck recently returned to the law school after serving for nearly four years as the Director of the Federal Trade Commission’s Bureau of Consumer Protection.
This is the second of a two-part post. The first can be found here.
My commentary on More Than You Needed to Know picks up where Ben-Shahar and Schneider’s critique of mandatory disclosure leaves off; that is, how to reform the process to move to less bad disclosure regimes.
I have three modest points: In yesterday’s post, I argued that there are disclosure regimes that work. We should explore them to see why. In today’s post, I will argue that there are tools that can be used to address some of the flaws that Omri and Carl rightly identify and criticize. They must be employed. Finally, my tenure at the FTC taught me that mandatory disclosures are often an effective way to ensure accountability. That virtue is worth exploiting.
2. Fix disclosures. As Omri and Carl point out, disclosures often fail because they are designed to fail. True, but that state of affairs is not inevitable. Legislatures and regulatory agencies can mandate that disclosures do just that: Convey important information to consumers concisely, in plain English, and at the right moment, and nothing more.
Let’s do a thought experiment with privacy policies, which are rightly the poster child for disclosures that go unread. Let’s assume that companies were forced to abide by the following simple rules:
(2) Tell consumers what they need to know and nothing else. Next, imagine that the policies stated clearly and concisely the uses to which one’s personal data would be put. No other statement would be permitted, especially the long prefatory comments about how much the company really “cares” about your privacy. And no prevarication would be permitted. If the data will be given or sold to a third party, that fact – along with the identity of the third parties (and affiliates) and the uses the third party would put the data – would have to be disclosed. If the company wants to reserve the right to sell the data as it sees fit, the company would have to disclose in bold letters: “We reserve the right to sell your personal data to whomever we want!”
(3) Make the legal disclaimers and boilerplate a separate “disclosure”. Most privacy policies are incomprehensible because they are written by lawyers expert in what Senator Elizabeth Warren calls the art of “wordbarf” (her term, not mine) and focus mainly on disclaiming legal liability, not on “disclosing” the key information.
(5) Make sure that there is a robust default. Disclosure regimes are too often stand-alone efforts to regulate, employed as a sop to beat back efforts to impose more stringent regulation. Default rules are often needed so that if the disclosure fails, the presumption should be that the default rule remains in place.
I could go on. But you see my point. Today most disclosures are carefully engineered by lawyers and experts on human behavior not to be read, or to be discounted because of other claims more prominently displayed. If you want to see how sophisticated these obfuscation efforts can be, take a look at FTC v. Commerce Planet, Inc., 878 F. Supp. 2d 1048, 1068-72 (C.D. Cal. 2012), a fraud case involving the adequacy of buried disclosures that were contradicted by other far more prominent claims.
If we are going to reclaim disclosures, those techniques will have to be reined in by more than enforcement cases by the FTC and state agencies. More important, we must focus on making disclosures comprehensible and addressing the “indifference” problem that Omni and Carl describe. Professor Oren Bar-Gill’s book, Seduction by Contract, argues that more effective disclosures could be designed to enhance consumer welfare. And the FTC’s work on disclosures holds some promise. Look at, for example, the FTC’s work on Dot.Com disclosures available here.
3. Disclosures to ensure accountability. There is a long history of mandatory disclosures in the United States. For instance, even before there was an FDA, Congress mandated that food labels identify the name of the food, the food’s ingredients, the net weight of the food, and the name and address of the manufacturer. The requirement was intended to aid consumers in making purchasing decisions. But more than that, the requirement was intended to give law enforcement agencies a hook to bring enforcement cases in the event that the food was misbranded. When Congress passed the Food, Drug and Cosmetic Act in 1938, it carried forward these requirements, and they remain in force today.
The same of course is true with the Federal Trade Commission Act’s longstanding prohibition on deceptive acts and practices. Without disclosure regimes, many mandated by law, the FTC’s enforcement authority would be a shell of what it is today, as would be the case for State Unfair and Deceptive Acts and Practices statutes.
My point here isn’t to claim that disclosure regimes should ordinarily be imposed to serve only as accountability mechanisms. How to inject greater accountability into the marketplace is an issue that extends far beyond the scope of Omri and Carl’s wonderful book. Instead, it is to make the more modest claim that even if, as Omri and Carl demonstrate, disclosure regimes generally fail to inform, they often serve the collateral purpose of enabling law enforcement agencies, and at times private parties, to hold sellers accountable for their claims.
* * *
Let me end where I began. The Failure of Mandated Disclosure is a must-read book for anyone who cares about consumer protection, contract law, and an informed marketplace. To me, the book throws down the gauntlet to anyone who is willing to defend the status quo. I doubt that anyone will pick that gauntlet up. But if we agree that the status quo is indefensible, we need to figure how either to live in a post-disclosure world or how to improve disclosures to the point that some of Omri and Carl’s criticisms no longer stick. That is our challenge. I for one am not ready to surrender to a post-disclosure marketplace, especially when we have not yet really focused on designing and enforcing effective disclosure mandates.