Thursday, April 10, 2025
NY Court of Appeals Sends Claims of Injured Uber User to Arbitration
Writing for the 5-2 majority in the case, Judge Cannataro begins, "On this appeal, we apply centuries-old principles of contract law to a web-based 'terms of use' update containing an arbitration agreement.” Ay, there’s the rub. Maybe courts should consider the context in which parties manifest their agreement to terms of service rather than treating clicking a box on an app the same as assent in a negotiated transaction, manifested through a signature, a handshake, and perhaps a glass of absinthe or a tincture of laudanum.
In July 2020, Emily Wu make use of Uber’s services. Her driver allegedly discharged her in the middle of the roadway, where she was struck by another vehicle immediately upon exiting her Uber car. In November 2020, she commenced an action in New York state court, which included a claim against Uber for negligence. Uber, distracted by COVID, did not respond to the complaint within 30 days, as required under New York law. However, it did update its terms of service, and Ms. Wu, apparently dependent on Uber’s services, agreed to the new terms. The new terms provided for arbitration of any claims relating to the use of the service, even if the claims occurred prior to the user’s agreement to Uber’s new terms.
When Ms. Wu moved for a default judgment in March, 2021, Uber responded with a motion to compel arbitration. Her attorney responded (and I love this move!) by seeking sanctions against Uber because its updated terms constituted direct communications with Ms. Wu, a represented party. New York’s Supreme Court rejected the call for sactions and ordered arbitration. The Appellate Division affirmed.
In Wu v. Uber Techologies, Inc., New York’s Court of Appeals affirmed. The default judgment argument was not Ms. Wu’s only ground for challenging the motion to compel arbitration, but of course Uber’s terms provide that all threshold issues relating to arbitrability are for the arbiter to decide. After laying out the standard rules and policies governing courts’ application of the Federal Arbitration Act (FAA), the Court begins its substantive discussion by observing,
There is no sound reason why the contract principles described above should not be applied to web-based contracts in the same manner as they have long been applied to traditional written contracts.
The Court obviously does not read this blog or the work of Nancy Kim, Peggy Radin, Andrea Boyack, and myriad others. It would be one thing to consider and reject arguments for why web-based contracts should not be treated like traditional contracts. To refuse to even acknowledge that such arguments exist or to contend that they are not “sound” is far less than I would expect from the high court of the great state of New York.
Ms. Wu received notice that Uber would be sending her updated terms. The next time she opened the app, she saw the screen at left. Undoubtedly, she checked the box. Undoubtedly, she did not click on the links or read paragraph 5, which contained an arbitration agreement. Nor is it likely that she would have understood the consequences of that agreement had she read it. As we noted last week. Roseanna Sommers' empirical research suggests that 99% of people think they have never entered into an arbitration agreement, even though north of 97% of people actually have done so. I did not dig up the 2021 version of Uber’s terms of service. The arbitration clause in the current version is nearly 5000 words long, running to ten pages, single-spaced in 12-point font. It is ludicrous to expect someone to read and understand such terms in order to take the equivalent of a cab ride, especially as the terms are frequently updated, and so one would have to spend hours studying the terms on a quarterly basis, give or take.
Judge Rivera, joined by Chief Judge Wilson, dissented. Judge Rivera found that Ms. Wu had never agreed to arbitrate the claim that she had already brought before she received Uber’s updated terms. The update that she received did not provide to her adequate notice that by agreement to a new arbitration provision she was agreeing that it would be given retroactive effect to her pending claim.Unexpected terms do not become part of an agreement unless the party agreeing to such terms had inquiry notice of those terms. Here, Ms. Wu had inquiry notice of an arbitration agreement but not of its retroactive effects. The update makes no reference to pending litigation or to the arbitration agreement's effect on the venue of such litigation. The dissent concludes:
Uber would have this Court believe that by simply clicking a box on the Uber app while waiting for the car service, plaintiff, without benefit of counsel’s advice, forfeited her right to litigate her claims before the judiciary of the state of New York. That is nonsense.
There is a bitter irony to the outcome of this case. A plaintiff who has alleged that she was injured by the negligence of a company valued in the range of $100 billion is expected to read and understand a complex arbitration agreement before using a ride-sharing app. The company is excused from not having timely answered a complaint. We have to read documents that a layperson could not possibly understand. The company does not have to respond to straightforward legal documents that it has the personnel and expertise to handle. It’s excuse? COVID. That’s just lame. Uber should be laughed into court.
April 10, 2025 in Contract Profs, Recent Cases, Recent Scholarship, Web/Tech | Permalink | Comments (0)
Wednesday, April 9, 2025
(Belated) Tuesday Top Ten - Contracts & Commercial Law Top SSRN Downloads for April 9, 2025
A day late, but not a dollar short! Apologies to our regular readers for being out of pocket yesterday, but we bring you the Wednesday stats from SSRN as a peace offering.
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 08 Feb 2025 - 09 Apr 2025| Rank | Paper | Downloads |
|---|---|---|
| 1. | 4,310 | |
| 2. | 1,168 | |
| 3. | 299 | |
| 4. | 282 | |
| 5. | 281 | |
| 6. | 159 | |
| 7. | 152 | |
| 8. | 145 | |
| 9. | 139 | |
| 10. | 99 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 08 Feb 2025 - 09 Apr 2025| Rank | Paper | Downloads |
|---|---|---|
| 1. | 4,310 | |
| 2. | 1,168 | |
| 3. | 281 | |
| 4. | 151 | |
| 5. | 135 | |
| 6. | 99 | |
| 7. | 95 | |
| 8. | 59 | |
| 9. | 56 | |
| 10. | 53 |
April 9, 2025 in Recent Scholarship | Permalink
Friday, April 4, 2025
Severance-Inspired Post: Non-Consensual Sex at the ORTBO (☠️SPOILERS!☠️)
In the fourth episode of season 2 of the Apple + series, Severance, the main characters, or at least their Innies (so we think), visit Woe’s Hollow during an Outdoor Retreat Team Building Occurrence (ORTBO). Innies Mark S. and Hellie R. kissed towards the end of Season 1. We also learned at the end of Season 1 that Hellie R’s Outie is Helena Egan, scion of the Egan family and heir apparent to the leadership of Lumon Industries, where they all work. I know this all sounds crazy. Just watch the show. If you don’t have an Apple + subscription, befriend someone who does. We are evangelists for this show. If you can’t find a friend, just give me a call. I don’t mind watching it again.
In Season 2, we follow the Innies as they work out the consequences of their experiences during the Overtime Contingency (OTC), which we touched upon here. Among the plot lines is the burgeoning love affair between Mark S. and Hellie R., which is made more complex because Mark is implicated in multiple thruples. His Innie’s boss who is also his Outie’s next-door neighbor is alleged to have designs on both his Innie and his Outie. Moreover, during the OTC, Innie Mark learned that Outie Mark’s wife, Jemma, is alive and confined to a severed existence as Miss Casey, a Lumon wellness counselor. So another plot line in Season 2 is that both Marks are working to liberate Miss Casey/Jemma while Mark S.’s attachment to Hellie R.is intensifying.
Or so we think. But it turns out that Helena Egan, played by Britt Lower (left), has insinuated herself among the Innies and is impersonating Hellie R., also played by Britt Lower. Can you tell if the image to the left is Helena or Hellie? I sure can’t, and neither can Mark S.
And then comes the ORTBO, during which Mark S. and Helena Egan have sex. Mark S. thinks he is having sex with Hellie. He has not consented to sex with Helena Egan. There is a fascinating scene where Helena confronts Outie Mark in a diner. He does not know that he has had sex with her. He does not know that his Innie is in love with her Innie. They alternate between being wary of each other and flirtation. Mark is terrified of her. Here’s the scene.
So, what Helena has done is unspeakable. It is a complicated crime, because she is emotionally stunted, and seems confused about her feelings for Mark, but it is a gross violation of Mark’s rights and his personhood. One would not expect an Egan to care for such things, but she likely is not used to doing Lumon’s wet work herself.
I bring all this up because consent is key component of contract formation. Increasingly, there is scholarly interest in comparative notions of consent across doctrinal areas. Gregory Crespi posted just last week on Daryl Levison and David Pozen’s Disconsents, recently posted on SSRN. We also wrote three years ago about Roseanna Sommers (below right) and her important cross-doctrinal and cross-disciplinary work on Commonsense Consent. That article contains a detailed evaluation of a scenario much like the non-consensual sex depicted during the ORTBO. Professor Sommers’ work evaluates peoples’ responses to a situation in which a twin impersonates his brother and has sex his brother’s partner. Respondents find that this kind of deception negates consent more than does either lying about HIV status or marital status. Respondents are also far more likely to characterize deception as to identity (the twin case) as rape than they are to view the other forms of sex by deception as rape.
Discontents addresses consent in the sexual context on pages 28-32 of their manuscript. They cite to Jed Rubenfeld for the interesting insight that although consent achieved through deception is deemed invalid in many other contexts, deception in order to persuade a person into sex does not make the sex a crime. Susan Estrich attributed this incongruity in the law to a sympathy for the “right to seduce.” The authors suggest that we might broaden the inquiry into non-consensual sex beyond the current parameters, in which sex crimes require either physical violence or the threat of physical violence. Robin West has catalogued myriad situations in which in which women trade sex for “economic security, affection, status, physical protection, money, promises . . . , or . . . in-kind compensation.”
Commonsense Consent begins by using the Bill Cosby case to illustrate how lay people struggle with the meaning of consent. Professor Sommers' central goal in that piece is to establish that "one cannot craft an effective jury instruction or a transparent criminal statute without taking into consideration the commonsense understanding of consent.” We commonly understand that fraud defeats consent, but in many contexts, people think that deceived people have given consent or have waived their right to object. In Contract Schemas, Professor Sommers finds that consumers often view the law in formalist terms and think that they will be found to have consented to legal obligations when the law would in fact excuse them from those obligations.
It may be that our insistence on consent in the contractual context is out of step with common sense notions of what it means to consent. Or perhaps vice versa. Perhaps we need to educate people that deception negates consent, whether the deception relates to, e.g., marital status, being a carrier of STDs, the purposes of police investigations or searches, or the riskiness of surgical procedures. Professor Sommers’ work raises the question of whether it ought to be a goal of the law to adjust folk morality about what constitutes consent.
Our focus on this blog is on the narrower subject of contractual consent. In this realm, our co-blogger Nancy Kim remains the pioneer. Her book Consentability provides a comprehensive framework for thinking about these issues. While others assess consent across doctrinal areas, Nancy’s work also explores the limits of consent-based interactions. There are things, Nancy argues, to which we cannot legally give our consent.
Contracts law and the courts still have a lot of work to do in the area of consent. What happens when we check boxes and agree to terms and conditions unseen, unread, often unimagined, and often beyond the imagination of the typical consumer is not violent or shocking. Far from shocking, it occurs innumerable times daily. But it also isn’t consent in any meaningful sense of the term. It is the mere verisimilitude of consent. The shock comes later when you learn that you are bound by an arbitration clause or a warranty disclaimer or a limitation on damages or a choice-of-venue clause even though you don’t really understand what any of those things mean. Another Roseanna Sommers piece reports on survey results that 99% of respondents think they have never agreed to arbitration, but over 97% have opened an account with a company that subjects them to mandatory arbitration clauses.
Which brings me back to Lumon. Helena’s sex with Mark S. provides a rough analogy to what happens when we enter into form contracts, except that for Mark S. this is first-time, once-in-a-lifetime experience. We enter into intercourse with companies based on deception every day. We sign up for social media, thinking it is a way to connect with other people, when in fact it is a way to offer up our personal data to the social media companies, which will then sell it to other businesses. At the same time, we have relinquished rights with respect to, not only the transaction we think we have entered into, but also with respect to innumerable transactions with related entities that we may enter into in the future.
We are all leading severed existences. There is the conscious part of us, that makes choices every day about our interactions with others, and there is the severed part of us created through form contracting. Our severed bits live separate, constrained lives, but the nature of those constraints only affects the non-severed part of our consciousness in ways we do not recognize as emanating from severance. We get targeted ads, spam, and junk mail. Meanwhile our data is feeding corporate engines that slowly transform our non-severed lives and our non-severed selves.
April 4, 2025 in Commentary, Recent Scholarship, Television | Permalink | Comments (0)
Tuesday, April 1, 2025
Tuesday Top Ten - Contracts & Commercial Law Top SSRN Downloads for April 1, 2025
Despite the calendar, no foolishness graces this week's Top Ten list! We serve nothing here but the most genuinely hottest in recent scholarship, courtesy of our friends at SSRN. That said, let's roll the tape and see what we've got on this fine first day of April 2025:
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 31 Jan 2025 - 01 Apr 2025| Rank | Paper | Downloads |
|---|---|---|
| 1. | 4,007 | |
| 2. | 909 | |
| 3. | 563 | |
| 4. | 351 | |
| 5. | 320 | |
| 6. | 272 | |
| 7. | 270 | |
| 8. | 135 | |
| 9. | 127 | |
| 10. | 126 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 31 Jan 2025 - 01 Apr 2025| Rank | Paper | Downloads |
|---|---|---|
| 1. | 4,009 | |
| 2. | 909 | |
| 3. | 367 | |
| 4. | 133 | |
| 5. | 129 | |
| 6. | 98 | |
| 7. | 93 | |
| 8. | 80 | |
| 9. | 51 | |
| 10. | 48 |
April 1, 2025 in Recent Scholarship | Permalink
Monday, March 31, 2025
Reviewing Larry DiMatteo, Principles of Contract Law and Theory, Part XVI: Recap
This is the sixteenth and final post in my series on Larry Di Matteo's Principles of Contract Law and Theory (Principles). The aim is to call some attention to this book while using it to stimulate my thinking as I once again consider how to teach contracts law to first-year students. Principles is a scholarly textbook addressing advanced topics at a very high level of sophistication.
I highly recommend this book for advanced students, especially those with an interest in comparative commercial law, and for contracts instructors. The book provides a comprehensive review of contracts doctrine, but it also delves deeply into the historical development of doctrine, with frequent excursions into the law of contracts in the United Kingdom and in civil law jurisdictions. This breadth of perspective gives Professor DiMatteo’s understanding of contract law unique qualities. He is more inclined that I am to blur the lines between contracts and torts and to insert normative ethics into commercial legal norms, but these are just matters of degree. He is, from my perspective, refreshingly blunt about the advantages of the contextualism we associate with legal realism over formalism. I think he is a bit too sanguine on that front. Judge Cardozo predicted the hegemony of contextualism in Jacob & Youngs v. Kent over one hundred years ago:
Those who think more of symmetry and logic in the development of legal rules than of practical adaptation to the attainment of a just result will be troubled by a classification where the lines of division are so wavering and blurred. Something, doubtless, may be said on the score of consistency and certainty in favor of a stricter standard. The courts have balanced such considerations against those of equity and fairness, and found the latter to be the weightier. The decisions in this state commit us to the liberal view, which is making its way, nowadays, in jurisdictions slow to welcome it.
And yet, Judge Cardozo’s own New York State retains its decidedly Willistonian take on the parol evidence rule and extrinsic evidence more generally.
I feel condemned to never rise above the level of dabbler in comparative law. When I read the work of someone with deep knowledge of a legal tradition in multiple jurisdictions, I am awed. As a dabbler, I take some solace in Professor DiMatteo’s message that we all end up in roughly the same place, although the different legal traditions take different paths to get there. Many of the book’s comparative excursions explain how differences in terminologies mask subterranean commonalities. Sometimes seeming doctrinal differences disappear when one departs from the realm of law on the books and learns of the law in action.
From the teaching perspective, Principles offers numerous fresh insights. I found Professor DiMatteo’s discussion of contracts' “regulatory” function highly illuminating. In his view, contracts doctrine plays a role in regulating freedom of contract, sometimes overtly through affirmative defenses and excuses, sometimes more covertly through the wiles of interpretation and judicial discretion. In addition, you only have to think about matters for a moment to realize the truth of Professor DiMatteo’s observation that contracts often have unenforceable express terms, and all contracts have enforceable invisible terms. Stating the matter this boldly is a powerful way to combat some students’ ardent attachment to a bloody-minded textualism. We can all be grateful for the courts’ power to imply terms, as their ability to do so significantly reduces transaction costs. Complementing implied terms, part of the courts' regulatory function, is to refuse to enforce penalties and unconscionable provisions inserted for their in terrorem effect.
Finally, on the subject of legal theory, Professor DiMatteo provides a wonderfully broad survey of different theoretical approaches to contracts law, and he takes pains to present them in their best light. As would be expected from a comparativist with an interest in the historical development of the law, he is a pluralist. He is sympathetic to legal realism and to critical theories, although I think he has his doubts about the ability of the latter to influence doctrine. On the other hand, I think he underestimates the impact of law and economics on legal doctrine, especially in the areas of form contracting and electronic contracting. One senses his deep affection for the progressive contextualists, especially Lord Denning and Judge Cardozo and for the work of the Wisconsin School of relational contracts theory. It is thus fitting that his book concludes with a chapter on law in action.
The first post in this series, providing an introduction, covering history, law and equity, justifications for contract law, rules principles, and standards, specialized rules, and boundaries of contract, can be found here
Part II, a foray into comparative contracts law, is here.
Part III, a discussion of freedom of contract and five tensions through which contract law navigates, is here.
Part IV, on formalism, is here.
Part V, about substantive elements of contract, is here.
Part VI, remedies, excuse, and privity, is here.
Part VII, about defenses, is here.
Part VIII, on interpretation, is here.
Part IX, about standard terms and form contracting, is here.
Part X, on legal history and theories of legal development, is here.
Part XI, about classical contract theory, is here.
Part XII, about reliance and fault, is here.
Part XIII, about legal theory, is here.
Part XIV, on critical theory, is here.
Part XV, on law in action, is here.
March 31, 2025 in Books, Commentary, Recent Scholarship | Permalink | Comments (0)
Thursday, March 27, 2025
Gregory Crespi, Thinking About Consent
Today, we are happy to share with you a guest post by Gregory Crespi (right), who holds the Homer R. Mitchell Endowed Professorship in Commercial and Insurance Law and Professor of Law at SMU’s Dedman School of Law
Thinking about Consent
Gregory Crespi
Daryl Levison (below left) and David Pozen (below right) have recently posted on SSRN a draft of their excellent new article “Disconsents.” (January 27, 2025).
As noted on this ContractsProf Blog website this article had already been downloaded 532 times by March 25, and surely will receive many more viewings and downloads. Those of us who teach and do research in the area of contract law are well aware of the dramatic erosion of actual, meaningful consent in a world of standardized consumer contracts, and of increasingly online contracting where offers are generally accepted by the offeree simply clicking on an “I Accept” button without understanding of or often even awareness of the many one-sided “Terms and Conditions” of such offers, such as mandatory arbitration clauses, class action waivers, unilateral modification clauses, various liability waivers and attorney’s fees provisions, etc., etc. We are also aware of the difficulties both courts and legislatures are having in trying to properly balance the need to require mutual consent to enforce contractual terms with the business realities of standardized contracting and especially of online contracting.
Levinson and Pozen do a fine job in drawing upon the literature to discuss this contract law problem. However, their real contribution in this article is in broadening the discussion of the erosion of consent beyond its more obvious contract law implications to its wider significance in numerous other crucially important legal and social contexts. These other contexts they discuss include the need to better define and protect the role of consent with regard to: data privacy rights, unwanted sexual advances, employment contracts, intellectual property rights, and criminal law procedures (especially plea bargaining). They also reflect broadly upon the importance of and erosion of consent with regard to maintaining the proper Constitutional balance between the several branches of government, a matter of some immediate concern, and in the context of global governance arrangements.
They conclude their article by posing several potential alternative or overlapping solutions to the problem of the erosion of meaningful consent, specifically either defining consent more permissively, abandoning the use of consent altogether as a legal principle, strengthening consent-protecting rules, or, most ambitiously, creating the background conditions that would allow for meaningful consent in more social contexts. They are not, however, overly optimistic than any of these approaches are likely to be adopted anytime soon.
I have assigned this fine article to all of my current Advanced Contracts students at Southern Methodist University, and I recommend that other faculty read it and then do the same.
March 27, 2025 in Commentary, Contract Profs, Recent Scholarship, Teaching | Permalink | Comments (0)
Tuesday, March 25, 2025
Tuesday Top Ten - Contracts & Commercial Law Top SSRN Downloads for March 25, 2025
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 24 Jan 2025 - 25 Mar 2025| Rank | Paper | Downloads |
|---|---|---|
| 1. | 3,270 | |
| 2. | 1,786 | |
| 3. | 612 | |
| 4. | 532 | |
| 5. | 334 | |
| 6. | 315 | |
| 7. | 252 | |
| 8. | 234 | |
| 9. | 133 | |
| 10. | 93 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 24 Jan 2025 - 25 Mar 2025| Rank | Paper | Downloads |
|---|---|---|
| 1. | 3,271 | |
| 2. | 1,786 | |
| 3. | 612 | |
| 4. | 236 | |
| 5. | 165 | |
| 6. | 121 | |
| 7. | 104 | |
| 8. | 93 | |
| 9. | 76 | |
| 10. | 68 |
March 25, 2025 in Recent Scholarship | Permalink
Monday, March 24, 2025
Reviewing Larry DiMatteo, Principles of Contract Law and Theory, Part XV
This is the fifteenth post in my series on Larry Di Matteo's Principles of Contract Law and Theory (Principles). The aim is to call some attention to this book while using it to stimulate my thinking as I once again consider how to teach contracts law to first-year students. Principles is a scholarly textbook addressing advanced topics at a very high level of sophistication.
Principles’ final chapter is devoted to contracts law in action. Professor DiMatteo (below, right) begins the chapter with a rumination on the possible virtues of lag — that is, the phenomenon in which the law lags behind developments is commercial behaviors or technology. Sometimes, there is no catching up to do. Common law categories can address new problems. Moreover, Professor DiMatteo sees some advantages in lag. Using the Internet as as example, he argues that it is folly to regulate a new technology before it is fully evolved. Doing so is not only a fool’s errand, but it could hamper innovation. The libertarian ethos should prevail. Professor DiMatteo seems to think the same model should apply to AI, and he is sanguine that we will not all become slaves to sentient programs. (346-48)
But Professor DiMatteo also recognizes that the virtues of lag are a hard sell these days, as the traditional law has left consumers vulnerable to what Shmuel Becher and Uri Benoliel have called “dark patterns.” (348-49) We still teach contracts law as though transactions take place in the realm of what Peggy Radin called “World A,” the world of agreement, involving actual consent. In fact, World B, the world of boilerplate agreements, dominates commercial and especially consumer transactions, and objective manifestations of assent suffice in circumstances where at least one party has no idea of the contents of the contract beyond a few salient terms. Vendors and service-providers leverage our extremely limited requirements for indicia of consent to lard agreements with one-sided terms and to tether consumers and employees to broad arbitration provisions that expand vertically to all interactions with the seller/service provider/employer and horizontally to all interactions with related business entities. At the same time, commercial transactions are increasingly automated, posing challenges of digital agents, decentralized autonomous organizations, and entities that claim to exist everywhere and nowhere, thus claiming that no court has jurisdiction over them. By the time we work out how to regulate new technology, that technology has been superseded, and our legal constructs are outmoded.
The problem is not new. Professor DiMatteo’s draws on Roscoe Pound’s work highlighting the problems of law’s under-enforcement. One of the aims of legal realism as a movement for law reform was to bring law on the books more in line with experience. (350) Sometimes, the disconnect between the law and the books and the law in action is a product of judges applying legal rules differently in different contexts — e.g. strict enforcement of the parol evidence rule in commercial contexts but liberality in consumer contracts.
But sometimes the law on the books simply does not provide the best way to explain the outcome of cases. (351) Even so, law is not irrelevant. Parties work out their differences in the “shadow of the law;” legal norms lurk in the backgrounds as the parties work other their deals and the differences. (351-52) That said, Professor DiMatteo also uses the work of Stewart Macaulay, Ian Macneil, and Lisa Bernstein to illustrate how certain industries operate largely on a relational basis, dispensing with law courts, developing specialized contracts that are enforced through non-legal means, or as a last resort, through private arbitral bodies. (352-55)
Blockchain and smart contracts provide another mechanism whereby parties can conduct business seemingly without the need for legal intervention. But the law cannot be avoided altogether. Professor DiMatteo describes blockchain and other smart contracts as unilateral contracts. Once there has been performance, funds are automatically released. Because everything is automated, there is no possibility of breach. But there remains the possibility of allegations of fraud, mistake, duress, incapacity, etc. One solution is to tinker with the structure to have human safeguards on the automaticity, but even so blockchain and other smart contracts create problems for which existing doctrine has no easy solution, such as problems of privity and the difficulty of tracking down a counterparty to an executed contract that might be challenged based on an affirmative defense. (355-57)
The last few sections of the chapter sum up some of the themes of the book. First, Professor DiMatteo notes the considerable convergence of common law and civil law in action despite some seeming doctrinal divergence. Specifically, he addresses specific performance and enforcement of penalties. Civil law countries are supposed to favor specific performance, but courts prefer the “one-and-done” remedy of damages. Common law courts are not supposed to allow penalties, but the area is a often litigated and courts sometimes find justifications for enforcement. (358-59) He next reviews the CISG and uses it as an opportunity to compare civil law and common law approaches. (359-61) In this context, a comparison of the CISG and the UCC might also have been instructive, but Professor DiMatteo uses the CISG as a guide to continuing divergences between civil law and common law approaches, providing “an interesting exercise in comparative contract law.” (361)
Professor DiMatteo notes that contract scholarship, once a driver of doctrine, has had diminished influence since the early twentieth century. (362-63) He reiterates his view, following P.S. Atiyah, that there is no master theory that explains the entire realm of contracts law. (364-65) Finally, Professor DiMatteo returns to the theme of relational contracting. (365-67) Here, the prescription is not so much doctrinal as transactional. Parties who understand the relational nature of contracting can draft contracts with the flexibility necessary to both strengthen a partnership and allow it to develop without the resort to adversarial modes of dispute resolution.
I will return next week with some final thoughts out Professor DiMatteo’s work, summing up his themes and reflecting on how I will adjust my own approach to teaching contracts based on what I have learned from reading his book.
The first post in this series, providing an introduction, covering history, law and equity, justifications for contract law, rules principles, and standards, specialized rules, and boundaries of contract, can be found here
Part II, a foray into comparative contracts law, is here.
Part III, a discussion of freedom of contract and five tensions through which contract law navigates, is here.
Part IV, on formalism, is here.
Part V, about substantive elements of contract, is here.
Part VI, remedies, excuse, and privity, is here.
Part VII, about defenses, is here.
Part VIII, on interpretation, is here.
Part IX, about standard terms and form contracting, is here.
Part X, on legal history and theories of legal development, is here.
Part XI, about classical contract theory, is here.
Part XII, about reliance and fault, is here.
Part XIII, about legal theory, is here.
Part IV, on critical theory, is here
March 24, 2025 in Books, Commentary, Contract Profs, Recent Scholarship | Permalink | Comments (0)
Tuesday, March 18, 2025
Tuesday Top Ten - Contracts & Commercial Law Top SSRN Downloads for March 18, 2025
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 17 Jan 2025 - 18 Mar 2025| Rank | Paper | Downloads |
|---|---|---|
| 1. | 2,446 | |
| 2. | 1,782 | |
| 3. | 596 | |
| 4. | 523 | |
| 5. | 305 | |
| 6. | 305 | |
| 7. | 229 | |
| 8. | 207 | |
| 9. | 164 | |
| 10. | 124 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 17 Jan 2025 - 18 Mar 2025| Rank | Paper | Downloads |
|---|---|---|
| 1. | 2,446 | |
| 2. | 1,782 | |
| 3. | 596 | |
| 4. | 209 | |
| 5. | 154 | |
| 6. | 101 | |
| 7. | 99 | |
| 8. | 80 | |
| 9. | 69 | |
| 10. | 54 |
March 18, 2025 in Recent Scholarship | Permalink
Monday, March 17, 2025
Reviewing Larry DiMatteo, Principles of Contract Law and Theory, Part XIV
This is the Fourteenth post in my series on Larry Di Matteo's Principles of Contract Law and Theory (Principles). The aim is to call some attention to this book while using it to stimulate my thinking as I once again consider how to teach contracts law to first-year students. Principles is a scholarly textbook addressing advanced topics at a very high level of sophistication.
The fourteenth chapter of the Principles is about critical theory. Appropriately, the chapter begins with an extended discussion of legal realism, which provides the foundation for the various forms of critical theoretical approaches to private law that developed starting in the 1970s. (322-330) Legal realists undertook the fundamental critique of classical contracts theory, which sought to establish contracts law as a set of neutral rules of general applicability binding on willing participants in a commercial bond. Realists countered that any set of facts could produce multiple legal outcomes, and in fact, judges ruled based on their personal response to the facts rather than giving effect the one applicable legal rule. (324) Realism also anticipated critical legal theory in exposing the degrees to which contracts law reinforced existing social hierarchies and in proposing state regulation of private contracting to achieve aims of distributive justice or socio-economic fairness. (325) And yet, Professor DiMatteo notes, realism was tamed along the way. Karl Llewllyn, radical realist, recognized that the common law was not so much a system of uniform rules as a set of decisions made by judges driven to legal conclusions based on the facts before them. However, that same Karl Llewellyn was the pick of the legal establishment to lead the drafting process for a uniform commercial code that somehow has managed to guide commercial transactions, with amendments, for nearly three-quarters of a century. (328-29)
The critical legal theory (CLT) movement calls such codification efforts into question, as all legal reasoning tends towards self-contradiction and indeterminacy. (330-31) Classical contract theory had faith that freedom of contract would generate fair rules. Legal realism saw that formal rules may not always be applied fairly but thought that judges could, with careful guidance, apply rules on a more equitable basis in context. CLT takes power as its point of departure and recognizes that we do not generally enter into contractual agreements on a fair and equitable basis, and legal rules tend to reify existing socio-economic structures. (331-33) The critique is powerful. However, Professor DiMatteo concludes, CLT could construct no new edifice on the ruins of existing legal theory, and so it petered out by the 1980s, while laying the foundations for critical race theory (CRT) and feminist jurisprudence. (333-34)
As Professor DiMatteo’s discussion makes clear, CLT may have offered too ambitious a program. If all contracts are exercises of power, how can you critique any particular contract. CRT has the advantage of focusing on how bias, prejudice, and power imbalances lead to inequalities that map onto racial differences. This is one area where empirical legal studies, discussed in a prior chapter, and the deployment of testers, have been useful in proving the impact of race and gender on common transactions, but Professor DiMatteo also highlights how CRT uses narrative to illustrate the ways in which the classical understanding of contract law as neutral can conceal ways in which the law discriminates against racial minorities. (334-36)
The discussion of LatCrit is very brief, and I’m not sure I understand the point. Much of the section is taken up with a discussion of a case that I teach, White City Shopping Ctr., L.P. v. P.R Rests., LLC. (336-37) That’s one of many cases adjudicating whether a burrito is a sandwich. In this case, the court held that a was not a sandwich. Professor DiMatteo treats the decision as evidencing the Anglo judge’s lack of appreciation of the role of burritos as Mexican sandwiches. However, in holding that burritos are not sandwiches, the judge allowed the burrito restaurant to win its case. There are many explanations for the outcome; anti-Mexican bias seems pretty low on the list of likely hermeneutic keys.
Professor DiMatteo’s discussion of feminist jurisprudence reminds us of the great movement in contracts law since the coverture regime of the nineteenth century. (337-38) He then contrasts Hamer v. Sidway and Kirksey v. Kirksey as illustrating how gender can effect legal outcomes. (338) Again, I’m not sure gender is the key to unlocking why those two cases, separated by more than four decades and decided in different states, came out differently. There follows a discussion of Deborah Threedy’s Dancing around Gender (338-40), which we have discussed here.
There follows a very brief discussion of Grant Gilmore’s The Death of Contracts and Stewart Macauley’s work indicating that formal contracts are rarely important to the people who engage in commercial transactions. (340-41) As I indicated before, I regard Professor Macaulay’s work, like that of Ian Macneil, as an important contribution to the sociology of law. I’m not sure it has much impact on doctrine. I think Gilmore’s book may be a historical curiosity at this point. The convergence of contracts and tort that he predicted has not come to pass, perhaps because his book put us on notice, and he forestalled it. More likely, he mistook a movement on the periphery of contracts doctrine for a threat to its core.
The chapter concludes with an interesting account of the law and literature movement (LLM). (341-44) Professor DiMatteo does an excellent job bringing coherence to a set of writings that I had always thought defies categorization. He divides LLM into the study of law in literature, which he illustrates with Dickens’ Bleak House and the law reform movement that it spawned, and law as literature, which involves the deployment of the techniques of literary analysis to legal texts. One insight from LLM that informs both CRT and feminist jurisprudence is the recognition that law involves the creation and manipulation of narratives. Fittingly, this leads to the chapter’s conclusion, which highlights the marriage of literary style with law in the opinions of Judge Cardozo and his epigones who make their view of the law compelling because they express it with such artistry. (343-44)
The first post in this series, providing an introduction, covering history, law and equity, justifications for contract law, rules principles, and standards, specialized rules, and boundaries of contract, can be found here
Part II, a foray into comparative contracts law, is here.
Part III, a discussion of freedom of contract and five tensions through which contract law navigates, is here.
Part IV, on formalism, is here.
Part V, about substantive elements of contract, is here.
Part VI, remedies, excuse, and privity, is here.
Part VII, about defenses, is here.
Part VIII, on interpretation, is here.
Part IX, about standard terms and form contracting, is here.
Part X, on legal history and theories of legal development, is here.
Part XI, about classical contract theory, is here.
Part XII, about reliance and fault, is here.
Part XIII, about legal theory, is here.
March 17, 2025 in Books, Commentary, Recent Scholarship | Permalink | Comments (0)
Friday, March 14, 2025
Reminder, Zoom Panel on James Gordley’s Foundations of American Contract Law
For those of you free to attend, here’ s a reminder that there will be a Zoom panel today at 11:00 AM Eastern Time on James Gordley’s Foundations of American Contract Law.
If you would like to participate virtually, contact the organizers for a link.
March 14, 2025 in Books, Conferences, Contract Profs, Recent Scholarship | Permalink | Comments (0)
Monday, March 10, 2025
Reviewing Larry DiMatteo, Principles of Contract Law and Theory, Part XIII
This is the Thirteenth post in my series on Larry Di Matteo's Principles of Contract Law and Theory (Principles). The aim is to call some attention to this book while using it to stimulate my thinking as I once again consider how to teach contracts law to first-year students. Principles is a scholarly textbook addressing advanced topics at a very high level of sophistication.
Chapter 13 is about legal theory. Professor DiMatteo begins with Steven Smith’s taxonomy of perspectives on law: historical, prescriptive, dsescriptive, and interpretive. (292) Professor DiMatteo takes a catholic approach, positing that no grand theory can account for all of contracts law’s diversity. He rejects any theory that would exclude broad swaths of doctrine from the realm of contract law because they do not conform to the theory. (293-94, 296-97). Instead, he offers a menu of descriptive, normative and interpretive theories to cover the realm.
The concept of autonomy leads to theories of contract based on will, bargain, promise, or consent. Professor DiMatteo treats bargain theory as addressing gaps in will theory, which could not account for defenses or for damages flowing from executory contracts. But bargain theory does not account for why illegal bargains are unenforceable or for recovery based on reliance. (297) Professor DiMatteo associates Charles Fried’s contract as promise approach with German civil law, which provides for specific performance as a default remedy because it regards the keeping of a promise as an obligation. By way of contrast, Steven Smith gives voice to the positivist impulse which informs the common law: keeping promises is a virtue; not a legal obligation. (298)
Professor DiMatteo credits Richard Posner’s 1971 book on Law and Economics as launching a movement. (299). Guido Calibresi might object. He credits Judge Holmes with foreseeing the rise of economics, but Learned Hand did more than foresee things when he introduced his economic formula for determining negligence in 1947. Professor DiMatteo’s assessment of the Law and Economics (L&E) approach is that it has failed to “explain the general theory of contract law in a descriptive or normative way.” (301) Nor does he think it provides a model for the reform of contract law. (302) This seems a damning indictment of the most powerful theoretical model developed in the academy since legal realism. Compare, for example, impact of L&E to that of critical legal theory (CLT) or critical race theory (CRT). Judge Easterbrook (left) developed an L&E approach to consumer contracting. It has been embraced with only minor adjustments in the Restatement of Consumer Contracts Law, as Nancy Kim argued here. Thus L&E theory is made law. However, given Professor DiMatteo’s position, which I share, that no one single theory can account for contracts law in all its diversity, it is unsurprising that there are elements of contracts law for which L&E cannot provide a satisfying account.
I am of two minds regarding Professor DiMatteo’s ultimate assessment of the success the L&E theory of contracts law. On the one hand, I think he understates the extent to which L&E has helped us appreciate how common law approaches often produce efficient results, and thus it is not necessarily a critique of L&E when Eric Posner posts that “no one seems to think there is anything wrong with the system of contract law that we have.” (303) Somehow, Eric Posner manages to be completely blind to CRT, CLT, and feminist jurisprudence and to miss the point of a lot of L&E scholarship. A typical opinion by Judge Posner carefully works out the proper economic solution to a common law problem and then often concludes that economics and the common law arrive at the same position. L&E often comes to praise the common law, not to bury it. Professor DiMatteo points out that L&E theorists have not reached a consensus on the best economic models for calculating damages. (302) If lack of consensus is evidence that a theoretical approach has failed, then all of have failed. On the other hand, I think the behavioral law and economics critique does pose fundamental challenges to the L&E movement, at least in its early iterations. That said, behavioral law and economics could also be seen as a second-generation L&E approach. (304-07)
After a tantalizing, brief discussion of transfer theory, a property-based theory of contract (307-08), Professor DiMatteo then provides an introduction to relational contract theory. (308-12) Drawing on Ian Macneil’s work, Professor DiMatteo aptly describes relational contract theory both as a descriptive theory and as a means of problem solving in business planning. Parties can leverage relational contracts to offset distrust in arms-length agreements. (311-12) I appreciate the insights of relational contract theory, but it seems to me a theory of legal sociology rather than a theory of law as such. It explains why parties often have recourse to extra-legal mechanisms of dispute resolution, but I don’t see that relational contract theory has had much impact on the development of legal doctrine. I would be very interested to hear from people who think otherwise.
The last form of descriptive or normative theory that Professor DiMatteo explores is empirical legal studies (ELS). (312-14) I regard ELS as a methodology rather than a theoretical approach, as ELS can be informed by any theoretical modality. But the topic is worthy of discussion, and perhaps this chapter is as good a place as any for it.
In discussing interpretation, Professor DiMatteo focuses on Ronald Dworkin’s work. (314-16) The choice is idiosyncratic, as I noted in discussing Chapter 11, but it is interesting to read Professor DiMatteo’s attempt at an application. In discussing “law’s inner morality,” (317), Professor DiMatteo links Lon Fuller’s work to John Rawls’s Theory of Justice in that both posit that procedural fairness is a predicate to substantive fairness. In the chapter’s penultimate section, Professor DiMatteo quickly notes that contracts theories may be utilitarian or deontological. Both approaches seem necessary, and neither can account for the whole of contract doctrine. (317-18) Echoing Robert Hillman, the chapter concludes by celebrating the richness of contract law, and predicting that contract law and theory will continue to adapt as new technological and regulatory challenges arise. (319)
The first post in this series, providing an introduction, covering history, law and equity, justifications for contract law, rules principles, and standards, specialized rules, and boundaries of contract, can be found here
Part II, a foray into comparative contracts law, is here.
Part III, a discussion of freedom of contract and five tensions through which contract law navigates, is here.
Part IV, on formalism, is here.
Part V, about substantive elements of contract, is here.
Part VI, remedies, excuse, and privity, is here.
Part VII, about defenses, is here.
Part VIII, on interpretation, is here.
Part IX, about standard terms and form contracting, is here.
Part X, on legal history and theories of legal development, is here.
Part XI, about classical contract theory, is here.
Part XII, about reliance and fault, is here.
March 10, 2025 in Books, Commentary, Contract Profs, Recent Scholarship | Permalink | Comments (0)
Wednesday, March 5, 2025
What’s All the Fuss About? Bankrupt Crypto Organizations
It has been a while since our last installment of our “What’s All the Fuss About?” feature. That’s because it is rare that a article about commercial law creates such a stir that it prompts one to wonder what all the fuss is about. Today’s installment features an article by three authors, two of whom collaborated on a prior article reviewed in this forum. If you review the past columns in this series, you will detect pattern. Articles that address new technology, especially crypto or AI, find a lot of readers, or at least a lot of downloaders. For the rest, I offer this tl;dr.
Every once in a while, I get a hankering to understand quantum theory. I tried A Brief History of Time, but once Stephen Hawkings started asking me to imagine four-dimensional space, my brain broke. Maybe if he dumbed it down a bit, I’d be okay. I tried A Briefer History of Time. Same problem. A friend, Ken Ford, wrote a book for the “general reader” called 101 Quantum Questions. Thanks Ken, now there’s another thing I will never understand: sub-atomic particles with characteristics like “spin” but no mass.
I have given up on understanding quantum physics. But will anybody write about blockchain-based business entities in a way I can understand?
Thank goodness, Kara Bruce (left), Christopher K. Odinet (below right), and Andrea Tosato (bottom left) (the Authors) have made understanding crypto organizations possible, even for people like me tethered to the brick-and mortar world. They know that readers will come to their Bankrupt Crypto Organizations for the crypto. They should stay for the Authors’ exploration of the challenges of conventional bankruptcy to the ethos of the decentralized autonomous organizations (DAOs) about which they write and for their description of a possible path towards building bankruptcy frameworks based on distributed ledger technology (DLT), which would be more consistent with that ethos.
DAOs leverage blockchain networks, smart contracts, and digital assets to create new forms of collective action and resource management. Some DAOs have recently gone bankrupt, but interacting with our current bankruptcy regime inserts a centralizing authority into a “crypto anarchist” ecosystem. The Authors explore the tensions between the theoretical underpinnings of DAOs, which are based on autonomy, egalitarianism, and decentralization, and the “centralized requirements of court-supervised insolvency proceedings.” While the Authors propose an alternative based in private ordering, BrokeDAO, they acknowledge that some of the limitations on what can thereby accomplished are insurmountable.
Part I of the paper describes the birth of DAOs out of a heady brew of cypherpunks, crypto-anarchy, and cryptoeconomics. These movements coalesce around a shared opposition to government regulation and a belief that autonomous organizations could self-regulate through a system of digital protocols. Today, there are over 20,000 DAOs, with 3.2 million participants and assets in excess of $20 billion. DAOs are as diverse in their internal structures and governance mechanisms as they are in purpose. What unifies them is their commitment to individual autonomy and decentralized collective governance through technologies designed to incentivize some decisions while disciplining others.
The Authors next identify four key features of DAOs that are relevant in the context of insolvency. First, DAOs can adopt any corporate form, but many choose to ignore legal formalities. They do so at their peril, as the failure to incorporate can subject entities to default rules that treat them as partnerships, with two dramatic consequences. Any partner can bind the entity as to ordinary business matters, and the partners enjoy no shield from personal liability. Some states have granted statutory recognition to make it easier for DAOs to enjoy the advantages of LLCs, but many DAO founders prefer to operate outside of such structures. Principled anarchy. They don’t want officers or directors; they don’t want disclosures.
Second, with respect to the management structure of DAOs, the Authors create a 2x2 matrix, dividing entities along axes of automation and decentralization. DAOs that maintain a centralized management structure do not raise special challenges in the context of bankruptcy, and the Authors hesitate to even consider them DAOs, as they fail to conform to the techno-anarchy that informs the ideal structure for these entities. The real challenges in bankruptcy arise when the DAOs operate in a decentralized manner.
Third, the assets of a DAO are mostly tokens, including cryptocurrencies, stablecoins, NFTs, and governance tokens. A court faces unique challenges in determining who has a property interest in those tokens, as between the DAO and its members, and the governing law may be hard to identify. In particular, the redeemability of stablecoins and the determination of rights in tokenized assets present daunting difficulties. Finally, there is the ever-present danger of hacks, bugs, and software glitches, all of which can both precipitate a bankruptcy and complicate it.
Finally, because of the broad way in which the bankruptcy code defines creditors, token holders in a DAO might qualify as creditors rather than equity holders. DAOs do not very often rely on traditional financial institutions for loans. Nonetheless, they may have other creditors, including service providers, other DAOs or blockchain-based business entities, governmental entities to which they may owe taxes, fees, or penalties, as well as tort or crime victims to which the DAO may owe compensatory damages or restitution.
Bankruptcy is an attractive option for distressed DAOs because of all the benefits that bankruptcy provides to debtors, including the possibility of reorganization. The Authors identify three drivers of DAO bankruptcy: the volatility of decentralized financing can lead to a “bank run”; litigation threats; and involuntary bankruptcy forced by tokenholders or other creditors.
While Bankruptcy is attractive to the entity, it also undercuts some of the ideals or principles that made DAOs an attractive form for participants. In order to avail themselves of bankruptcy proceedings, DAO’s must first establish domicile or property within the United States and that they are “persons” subject to the Bankruptcy Code. The Authors think DAOs should be able to do so. Some DAOs may be ineligible for bankruptcy protections if they qualify as regulated financial institutions. The Authors think it unlikely that most DAOs will have much trouble establishing that they exist outside of regulatory schemes.
However, DAOs and bankruptcy proceedings are a bit of an odd couple. The key features of bankruptcy include centralized control by a human agent. These elements are antithetical to the principles that guide DAOs. Bankruptcy proceedings are also transparent in ways that run contrary to the high value DAO participants place on privacy. Moreover, bankruptcy proceedings require fillings and appearances by a representative of the entity, forcing DAOs to adopt aspects of the centralization that they reject.
The Authors use the first bankruptcy of Hector DAO to illustrate the problems. Everything that could go wrong did go wrong with HectorDAO, including security breaches and a collapse in cryptocurrencies that led its assets to decline in value from $100 million to just over $9 million. A tokenholder brought suit, and the entity sought receivership. The receivers commenced bankruptcy proceedings. Doing so was possible because HectorDAO had centralized leadership, which facilitated swift decision-making. A more ideologically rigorous DAO might lack such structures, and by design, it might be incapable of availing itself of bankruptcy, especially because participants would not welcome the disclosures that are necessary to such a proceeding.
However, as DAOs grow more complex and sophisticated, they tend towards more centralized organization, rendering bankruptcy a more attractive option should they become distressed. Cost-benefits analsyis prevails. DAOs will abandon their philosophical commitments if bankruptcy proceedings maximize recovery. But some DAOs won’t have a choice about whether they enter bankruptcy proceedings. Their creditors or tokenholders, who could be treated as creditors, might force the entity into involuntary bankruptcy.
Okay, the ride has been wild enough already, but in the final section, the Authors imagine a bankruptcy system suited to the needs of DAOs. Building on DAOs that already provide alternative dispute resolution, the Authors sketch the characteristics of a bankruptcy apparatus that would mirror the anonymized, decentralized, non-hierarchical structure of DAOs. DAO-based alternative dispute resolution services already exist. They replicate the structures of DAOs and are organized in a manner consistent with the values that attract people to DAOs.
The Authors walk through various iterations of such an imagined DLT-based bankruptcy entity, dubbed BrokeDAO. The entity could oversee liquidation of the assets of a distressed DAO, manage dispute resolution, ferret out waste and mismanagement, and assist DAOs in finding human-mediated professional services that can help maximize the value of assets. In its most advanced iteration, BrokeDAO could help DAOs that function as something more than investment vehicles reorganize so that people who have come to depend on the DAO’s functions can continue to benefit. Its automatic responsiveness could achieve efficiencies that would improve on existing insolvency frameworks.
And yet, the Authors are aware of the limits and vulnerabilities of their BrokeDAO framework. Lacking the coercive power of a bankruptcy court, private mechanisms depend on voluntary cooperation and coordination. Private ordering might replicate the effects of centralized control through a system of incentives and penalties that encourage collective action and discourage conduct that aids one creditor at the expense of the entire web of stakeholders. BrokeDAO can exercise leverage over tokenholders, but it will have to create some enticement to get outside creditors or vendors to give up their standard legal claims in exchange for some tokenized stake. Its ability to do so will be most limited with respect to tort claimants and regulatory bodies like the SEC. In the end, the Authors conclude, BrokeDAO may have a limited shelf life, in that it is workable only so long as the DLT community remains closed. The BrokeDAO model will only work if it provides an alternative to traditional bankruptcy that creditors find superior.
As someone who tries to avoid thinking about such things, my assessment is that the Authors have persuaded me that their topic is important. It is also big and terrifying. I understand just enough about the ideology that underpins DAOs to know that I don’t share it, and I worry about people so driven by selfishness and mistrust of human agents that they think it necessary to set up powerful economic entities, free from human agency. The very lack of belief in principled conduct should suggest that these entities will be subject to sophisticated hacks by people who act aggressively on their lack of principle. Ultimately, the costs of securing the system might exceed its benefits.
Whether or not I like it, DAOs are everywhere, and their growth is likely unrelenting. The legal culture has to be flexible enough to accommodate them and also to make them want to accommodate it. If we cannot work out some sort of modus vivendi between law and crypto organizations, there will be a lot of financial carnage, and not very much accountability.
If you missed our previous columns in the series and still don't know what the fuss was about, here's what you missed:
- Generative Interpretation byYonathan Arbel and David Hoffman
- Lawyering in the Age of AI, by Jonathan Choi, Amy Monahan, and Dan Schwarcz
- Debt Tokens, by Diane Lourdes Dick, Chris Odinet, and Andrea Tosato
- Governing AI Agents by Noam Kolt
- The Great Scrape by Daniel Solove and Woodrow Hartzog
March 5, 2025 in Contract Profs, Recent Scholarship, Web/Tech | Permalink | Comments (0)
Tuesday, March 4, 2025
Tuesday Top Ten - Contracts & Commercial Law Top SSRN Downloads for March 4, 2025
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 03 Jan 2025 - 04 Mar 2025| Rank | Paper | Downloads |
|---|---|---|
| 1. | 1,767 | |
| 2. | 775 | |
| 3. | 569 | |
| 4. | 488 | |
| 5. | 297 | |
| 6. | 215 | |
| 7. | 167 | |
| 8. | 156 | |
| 9. | 129 | |
| 10. | 126 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 03 Jan 2025 - 04 Mar 2025| Rank | Paper | Downloads |
|---|---|---|
| 1. | 1,767 | |
| 2. | 776 | |
| 3. | 569 | |
| 4. | 160 | |
| 5. | 145 | |
| 6. | 144 | |
| 7. | 129 | |
| 8. | 94 | |
| 9. | 72 | |
| 10. | 70 |
March 4, 2025 in Recent Scholarship | Permalink
Uber Eats Order Leads to Compelled Arbitration After Uber Car Accident
We have been commenting regularly lately on what I have called arbitration clause bootstrapping and David Horton (right — updated but still youthful) has alternatively called Infinite Arbitration Clauses and Accidental Arbitration. There was the case of Disney invoking arbitration with respect to an incident at a Disney-owned restaurant based on a family member’s prior registration for a trial subscription to the Disney + streaming service. Disney eventually abandoned that argument after it generated a lot of negative attention. There was Airbnb’s attempt to compel arbitration in a suit brought by a man injured in a fall at a party at a house that the party’s host had rented on Airbnb. The injured man was a guest, not a party to the rental agreement, but he had once registered on Airbnb’s site, although he never used the site. Airbnb’s motion was denied, but there was a dissent.
Third time’s the charm. In McGinty v. Zheng, a New Jersey appellate court granted Uber’s motion to compel arbitration. The McGintys got in an Uber on March 31, 2022. Their driver ran a red light and hit another car. The McGintys suffered serious injuries. Georgia McGinty was unable to work for one year. John McGinty suffered broken bones and sill suffers from diminished use and sensation in his left wrist. They sued the driver and Uber. Uber filed a motion to compel arbitration.
As Uber users know, when Uber updates its terms of use, you get a warning on the welcome screen. There is no way to use the app unless you agree to the updated terms, and the terms relevant to the McGinty’s use of the app included a conspicuous arbitration clause. So an easy case.
But not so easy. It turns out, there is just one app for both Uber rides and Uber Eats, and the McGintys claimed that it was not them but their twelve-year-old daughter who manifested asset to Uber’s terms when she ordered take-out on her mother’s account with her mother’s consent. In addition, the McGintys pointed out that Uber’s updated terms made no mention of a waiver of the right to a jury trial.
As to the latter issue, New Jersey requires no “magic words” when assessing whether an arbitration clause effects notice that one is waiving the right to a jury trial. Here Uber’s emphatic language that disputes were to be settled in arbitration and not in a court of law sufficed. Cases like this cause me to muse on the cavalier ways in which courts allow for the shedding of some constitutional rights but not others in some contexts but not others. So, would a court be as blasé about the boilerplate click-through and, to borrow David Horton’s language, infinite and accidental relinquishment of 1st or 2nd Amendment rights? And as we know from the Jarkesy case, the right to a civil jury matters when the alternative is proceedings before an administrative tribunal, but for some reason, not here.
As to the child, the Court treated that as an agency issue and left that for the arbiter to resolve. The arbiter should also determine whether John is bound as a third-party beneficiary to the terms of service to which Georgia (or her daughter) agreed.
This all seems right under existing law, but the law is an ass. There is no good reason why a party should be bound to arbitrate claims against Uber for a car accident because one once ordered delivery through Uber Eats. The transactions are unrelated; the businesses are not at all alike. The risks from car accidents are likely much higher than the risks from food delivery services. And there is no reason why courts can’t demand separate agreements for each entity or for each transaction. If people don’t want to be asked whether they want to arbitrate each time they use the app, give them the option to click a box and not be given the menu each time. They can click a box and be bound until the next version of the Terms of Service come out.
I had successfully resisted getting the Uber app until last year. I went to a conference in Tallahassee. I always use cabs to get around when public transportation is unavailable and I don’t have a car. I don’t like ride-share companies because I don’t like having another app on my phone tracking my every move and action. I don’t think such companies are a force for good in the universe, so I prefer alternatives. But in Tallahassee, I learned, there were no alternatives. No public transport from the airport to the city center, no cabs, at least none at the airport.
So I got the app and was confronted with the same screen that the McGinty’s saw. The only way to get to my hotel from the airport involved agreeing, now and forever, that I would not sue Uber in court. That is not freedom of contract. It’s not freedom. We, and our courts, have built cages in which we are confined.
But there are ways out. Other countries don’t do things this way. Because courts have federalized arbitration law, states are powerless to intervene. We need national consumer protection legislation to combat arbitration-clause bootstrapping. I don’t see it happening any time soon, but the party that undertakes this reform will be doing something that is actually popular. They just need to make it seem populist, even as billionaire tech-bros denounce it as an act of the nanny state.
March 4, 2025 in Commentary, In the News, Recent Cases, Recent Scholarship, Web/Tech | Permalink | Comments (0)
Monday, March 3, 2025
District Court Finds White House Cannot Fire Independent Counsel by Executive Order
On Saturday, we posted a brief note that a District Court in California found that the Federal Office of Personnel Management had no authority to fire federal workers in other agencies. That is undoubtedly true. It may not be very significant, however, as it would just be a matter of the Administration finding the right bagman to do the bidding of the President or Elon Musk or whoever is really calling the shots these days. The tough question in that case was whether the court had jurisdiction to hear the claim. Statutory schemes provide that federal workers must bring their wrongful termination claims to the Merit Systems Protection Board, and appeals are channeled to the Federal Circuit. The unions' claims in that case were dismissed on that basis, but plaintiffs also included organizations with standing that were not federal employees and thus were not subject to channeling of their claims through the Merit Systems Protection Board.
Bessent v. Dellinger has already made its way to the shadow docket of the U.S. Supreme Court (SCOTUS). A District Court entered a temporary restraining order (TRO) enjoining the government from firing Mr. Dellinger (right), who is the Special Counsel in the Office of Special Counsel, which protects federal whistle blowers. TROs are generally not appealable. The government brought an emergency motion to stay that TRO, first before the D.C. Circuit Court and then, citing the All Writs Act, before SCOTUS. After providing a procedural history of the case, Chief Justice Roberts, writing for the majority, decided “in light of the foregoing,” to hold the case in abeyance, pending further action from the District Court. Two liberal Justices would have denied the application for review. Two conservative Justices dissented from the “holding in abeyance” because the District Court did not provide adequate explanation of the equitable grounds for its grant of relief.
As Will Baude and Dan Epps hilariously point out in the most recent episode of their podcast, Divided Argument, the typical complaint about the shadow docket is that, in that abbreviated format and without the benefit of full briefing, SCOTUS decides cases without giving its reasons for doing so. In short, it does something for no reason. In this case, the Court did nothing for no reason.
And it was still 5-4.
This is peak shadow docket. The two liberal Justices who wrote separately would have done something for no reason. The two dissenting conservative Justices would have done something else because the District Court did something for no reason. “That’s our move!” cry the dissenters.
Well, over the weekend, the District Court gave its reasons in Dellinger v. Bessent, permanently enjoining the Administration from firing Mr. Dellinger, who by statute may only be removed for "inefficiency, neglect of duty, or malfeasance in office.” The curt letter that notified Mr. Dellinger of his immediate dismissal gave no reason at all. This doing something for no reason thing is contagious.
We are interested in this case as it touches on statutory protections for employees of the federal government, and so there is not much more to say that is of interest from the perspective of contracts law. This is the tip of the iceberg as far as the litigation goes. The Administration’s legal argument that it is entitled to remove employees of the executive branch notwithstanding statutory protections rests on the Unitary Executive Theory, recently discussed by Cass Sunstein in The New York Times. My own humble contribution on this subject can be found here. Ultimately, the Court will decide whether it is consistent with the structural Constitution for Congress to require the President to give some reason for sacking the person tasked with protecting federal employees who allege wrongdoing within the federal bureaucracy from retaliatory conduct, perhaps by the alleged wrongdoers.
The District Court in Dellinger v. Bessent does not address the Unitary Executive Theory by name. Rather, the Court writes as follows:
In sum, it would be antithetical to the very existence of this particular government agency and position to vindicate the President’s Article II power as it was described in Humphrey’s Executor: a constitutional license to bully officials in the executive branch into doing his will.
The citation to Humphrey’s Executor is ominous. As Cass Sunstein notes, the Administration’s Acting Solicitor General has already put Congress on notice of the Administration’s intention to challenge that case. This may be the first case to make it to SCOTUS that will give the Administration a shot at removing all statutory protections of workers at federal agencies. The argument, in short, is that because the Constitution's Article II vests “all executive power” in a single President, the President must be empowered to both appoint and dismiss any employee within the executive branch. Not all scholars, and not even all originalists, agree that the laconic Article II Vesting Clause demands to be read in that way and that way alone. But if you think that result makes sense or that we are bound by it whether or not it makes sense because . . . originalism, Jonathan Gienapp wants a word.
In my view, this is one of those cases where appealing to original meaning just doesn’t make sense. Eighteenth-century sources tell us nothing about a federal bureaucracy grown vast beyond the Framers’ imagining. In such circumstances, we are left to our own devices. It is appropriate for courts to defer to the constitutional solutions devised by the political branches (see Hamilton in Federalist #78) empowered to liquidate constitutional meaning in practice (see Madison in Federalist #37). In an organization as large as the modern executive branch of our government, it makes sense to have internal ombudsmen, like the Special Counsel, who can check against abuses of power. It also makes sense to insulate those people from arbitrary removal by those whose conduct they review. That has been our practice for decades, and courts bowed to such practices, even when they disagreed with them, going back to Stuart v. Laird (1803).
March 3, 2025 in Books, Commentary, Government Contracting, Recent Cases, Recent Scholarship | Permalink | Comments (0)
Reviewing Larry DiMatteo, Principles of Contract Law and Theory, Part XII
This is the Twelfth post in my series on Larry Di Matteo's Principles of Contract Law and Theory (Principles). The aim is to call some attention to this book while using it to stimulate my thinking as I once again consider how to teach contracts law to first-year students. Principles is a scholarly textbook addressing advanced topics at a very high level of sophistication.
Chapter 12 of Principles covers reliance, fault, agency, and preliminary agreements. Professor DiMatteo emphasizes the role of fault in understanding remedies for the breach of a promise. He regards reliance as the best explanation of contracts defenses, including misrepresentation, mistake and undue influence. (269)
I find Professor DiMatteo treatment of reliance pretty confusing. First, he states that the common law recognizes a cause of action for promissory estoppel, while England does not. (269) Then he says that detrimental reliance is “an alternative basis for finding a contract,” which I think is incorrect, but then he repeats his statement, which I regard as accurate, that Section 90 recognizes a cause of action for promissory estoppel. (270) If detrimental reliance were a basis for finding a contract, there would be no need for a separate cause of action. The remedies for breach of contract and promissory estoppel can also differ. He then describes a 1947 Lord Denning opinion as showing that the principle of promissory estoppel “can be used to substitute for the requirement of consideration in that reliance on a promise can make an agreement binding.” (273) That would explain why England would not need to recognize promissory estoppel as a separate cause of action. Such a cause of action would be unnecessary if a party can just enforce a contract based on reliance. But I’m not sure that is Professor DiMatteo’s point.
I am better able to follow if not entirely agree with Professor DiMatteo’s discussion of the role of fault in contract law. (276-78) The subject is complex, and Professor DiMatteo touches on it in other parts of Principles. I sense a bit of conflation between notions of moral and legal fault. We have legal rules that place the burden of liability on the party best positioned to avoid the loss. Such parties are legally at fault because they “failed to act reasonably” or did not act based on information that they “should have known.” The language sounds moralistic but can also be understood in economic terms. Damages for breach of contract are set up to be, for the most part, neutral as to moral culpability. Legislators jump to provide punitive damages for breach of contract in a variety of contexts, but their censorious nature is not attributable to the common law, which still is set up to provide that a contract is a promise to either perform or pay damages.
Other cases, where notions of moral culpability seems to apply occur at the margins of contracts law. As Professor DiMatteo appropriately notes, claims for insurers’ bad faith refusal to pay claims (276) or for agents’ refusals to use best efforts (279-83) are on the margins where contracts meet fiduciary duties. In the next chapter, Professor DiMatteo will criticize theories of contract that cannot account for parts of doctrine and therefore deems them to be outside of the realm of contract law. Yet he also acknowledges that we have no master trope that can unlock all of the mysteries of contracts doctrine. I’m pretty comfortable accounting for the vast majority of contract doctrine as a system of economic incentives, while acknowledging that we supplement that incentive-based system with moral opprobrium borrowed from related doctrinal areas, such as tort or fiduciary law.
Professor DiMatteo next provides a detailed discussion of preliminary agreements. (285-90) It is a challenging subject matter because courts have articulated different tests for determining whether such agreements can be enforced, and the analyses tend to be very fact-specific. Consistent with the chapter’s theme, Professor DiMatteo explores the possibility that parties can be bound to negotiate in good faith (288-90) in the context of what courts have called “Type II preliminary agreements. (286) Lord Denning is persuasive on the inherent repugnance of the notion from the perspective of freedom of contract, but Professor DiMatteo notes the tension in situations when consideration has been exchanged. (288) My difficulty with the problem is more practical. If ordered to negotiate in good faith, a party can put on a good show and still escape any legal commitment. Professor DiMatteo proposes promissory estoppel as a means of providing a remedy to disappointed counter-parties. (289) Perhaps. My sense is that the old chestnut, Hoffman v. Red Owl Stores, remains in our syllabi because it is so unusual. Courts are reluctant to grant a remedy to a commercial party that did not manage to get a written commitment from its counterparty.
The first post in this series, providing an introduction, covering history, law and equity, justifications for contract law, rules principles, and standards, specialized rules, and boundaries of contract, can be found here
Part II, a foray into comparative contracts law, is here.
Part III, a discussion of freedom of contract and five tensions through which contract law navigates, is here.
Part IV, on formalism, is here.
Part V, about substantive elements of contract, is here.
Part VI, remedies, excuse, and privity, is here.
Part VII, about defenses, is here.
Part VIII, on interpretation, is here.
Part IX, about standard terms and form contracting, is here.
Part X, on legal history and theories of legal development, is here.
Part XI, about classical contract theory, is here
March 3, 2025 in Books, Commentary, Contract Profs, Recent Scholarship | Permalink
Tuesday, February 25, 2025
Tuesday Top Ten - Contracts & Commercial Law Top SSRN Downloads for February 25, 2025
Top Downloads For:
Contracts & Commercial Law eJournalRecent Top Papers (60 days)
As of: 27 Dec 2024 - 25 Feb 2025| Rank | Paper | Downloads |
|---|---|---|
| 1. | 1,746 | |
| 2. | 539 | |
| 3. | 466 | |
| 4. | 291 | |
| 5. | 178 | |
| 6. | 151 | |
| 7. | 149 | |
| 8. | 127 | |
| 9. | 120 | |
| 10. | 108 |
Top Downloads For:
Law & Society: Private Law - Contracts eJournalRecent Top Papers (60 days)
As of: 27 Dec 2024 - 25 Feb 2025| Rank | Paper | Downloads |
|---|---|---|
| 1. | 1,746 | |
| 2. | 539 | |
| 3. | 141 | |
| 4. |
Human Rights and Global Supply Chains: European Trends and Developments |
137 |
| 5. | 136 | |
| 6. | 127 | |
| 7. | 88 | |
| 8. | 77 | |
| 9. | 71 | |
| 10. | 69 |
February 25, 2025 in Recent Scholarship | Permalink
Monday, February 24, 2025
Reviewing Larry DiMatteo, Principles of Contract Law and Theory, Part XI
This is the eleventh post in my series on Larry Di Matteo's Principles of Contract Law and Theory (Principles). The aim is to call some attention to this book while using it to stimulate my thinking as I once again consider how to teach contracts law to first-year students. Principles is a scholarly textbook addressing advanced topics at a very high level of sophistication.
Chapter 11 of Principles covers classical contract theory. In the previous chapter, Professor DiMatteo reviewed various accounts of the history of law. Here, while Professor DiMatteo mentions 1870-1920 as the purported heyday of formalism (254), he is not committed to any periodization. Rather, in his chapter, he aims to describe the characteristics of the classical period. He associates the classical period with formalism and with the valorization of written expression over the inquiry into the intent of the parties. (248) The twin guiding principles of the classical era were freedom of contract and sanctity of contract. The former valorizes the power of private legislation; the latter calls for strict enforcement of written terms. (254) This formalism seems to have been a natural response to the uncertainty of the common law prior to the rise of comprehensive treatises. There being no one authoritative account of the law, contract law was riddled with inconsistencies and contradictions. (249)
Legal positivism informed legal formalism. (250) The positivist’s separation of law and morality enables the judge to apply legal rules without regard to moral complexities, as the development of consistent rules that secured finality in commercial relations had priority over the interests of doing justice in a particular case. (251-52) The judge had authority because he followed the legal rules, not because he had special expertise in moral affairs.
Professor DiMatteo’s brief section on contract as promise illustrates the complexities of the relationship between law and morality. (258-59) In the classical period, expectation became the standard measure of damages even for purely executory contracts. A party to an agreement is entitled to their expectation, even if they have suffered no harm in reliance on a promise. On the one hand, this seems like a legal stricture for a moral failing — the broken promise. On the other hand enforcing a promise the breach of which has caused no harm also seems unjust. Professor DiMatteo resolves the difficulty by drawing on Steven Smith’s account of contracts as giving rise to a property right. (259)
Another aspect of classic contracts formalism was its empirical bent. Christopher Langdell's 1871 casebook opens the era in which legal scholars attempted to derived legal principles through the case method. Joseph Beale’s 1935 Treatise on the Law of Conflicts marked an end or highpoint (259), although of course the on-going projects of restatements, treatises, and uniform laws continues the tradition. Yet the modern movement towards codification or classification is now free from the rhetoric of scientism in which legal scholars of the classical era indulged. That scientism rendered context irrelevant to the formalists. They were not seeking intents; they were enforcing legal principles attendant to the breach of promises. As Professor DiMatteo puts it, “[C]ontract interpretation was a purely conceptual inquiry into the words of the promise and not a contextual inquiry of what the parties meant by those words.” (261)
But the formalism of the classical period became untenable, Professor DiMatteo tells us, in the modern economy. Legal realists exposed the inevitable gaps in legal rules and the propensity of factual circumstances to fall between legal norms. Judges had to exercise discretion in deciding which norm was dispositive. (252-53) Moreover, the legal realists abandoned commitment to abstract principles in favor of legal rules embodied in the day-to-day customs of commercial practices. The bright-line rules of the classical period were displaced, in part, by the reasonableness standards with which the UCC abounds. (262-63) For legal realists, facts drive law, and this was both their description of how judges decided cases and their prescription for what the law ought to be. (263-64)
However, Professor DiMatteo emphasizes, the modern era did not sweep away all formalism. Modern law combines elements of both realism and formalism (264-65)
This chapter has some puzzling features. It does not proceed linearly. Rather, it toggles between discussions of the classical period, in which formalism prevails, and legal realism. Some repetition is inevitable. In the middle is a short excursus on Ronald Dworkin, in which Professor DiMatteo claims that Dworkin’s theory of interpretation "is the most influencial model of legal positivism" (253-54). I would have characterized Dworkin as among the most insightful critics of Hartian positivism, but I do not regard him as a positivist. I don’t have candidates for theories of interpretation that could best Dworkin’s as most influential, but I can’t say that I’ve ever seen him cited in a contracts case. I studied with Dworkin, and I found much of interest in his work, which did not persuade me, especially on the subject of interpretation. Having spent quite a lot of time in graduate school studying literary theory, Dworkin’s approach struck me as untethered from any serious tradition of interpretation, either in law or elsewhere. Perhaps I move in the wrong circles, but it seems to me his influence is fading extremely quickly.
The first post in this series, providing an introduction, covering history, law and equity, justifications for contract law, rules principles, and standards, specialized rules, and boundaries of contract, can be found here
Part II, a foray into comparative contracts law, is here.
Part III, a discussion of freedom of contract and five tensions through which contract law navigates, is here.
Part IV, on formalism, is here.
Part V, about substantive elements of contract, is here.
Part VI, remedies, excuse, and privity, is here.
Part VII, about defenses, is here.
Part VIII, on interpretation, is here.
Part IX, about standard terms and form contracting, is here.
Part X, on legal history and theories of legal development, is here.
February 24, 2025 in Books, Commentary, Contract Profs, Recent Scholarship | Permalink | Comments (0)
Thursday, February 20, 2025
Online Workshop on James Gordley’s Foundations of American Contract Law
If you would like to participate virtually, contact the organizers for a Zoom link.
February 20, 2025 in Books, Conferences, Contract Profs, Recent Scholarship | Permalink | Comments (0)
