Law Commons^™

The Economics Of Class Action Waivers, Albert H. Choi, Kathryn E. Spier

Articles

Many firms require consumers, employees, and suppliers to sign class action waivers as a condition of doing business with the firm, and the U.S. Supreme Court has endorsed companies’ ability to block class actions through mandatory individual arbitration clauses. Are class action waivers serving the interests of society or are they facilitating socially harmful business practices? This paper synthesizes and extends the existing law and economics literature by analyzing the firms’ incentive to impose class action waivers. While in many settings the firms’ incentive to block class actions may be aligned with maximizing social welfare, in many other settings it …

Making Employment Arbitration Fair And Accessible, Theodore J. St. Antoine

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Mandatory arbitration agreements require employees, as a condition of employment, to agree to arbitrate all employment disputes instead of filing court suits. The Supreme Court has approved such agreements but many labor experts oppose them. The U.S. House of Representatives has passed a bill to prohibit pre-dispute agreements, the common form for mandatory arbitrations. This article argues that the House bill would have the practical effect of virtually eliminating employment arbitration. Instead, proposals are presented for either legislative or judicial steps to ensure that employment arbitration is fair and accessible. Requirements would include: (1) voluntary agreements on the part of …

Designing And Enforcing Preliminary Agreements, Albert H. Choi, George Triantis

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Preliminary agreements—variously labeled as memoranda of understanding, letters of intent, term sheets, commitment letters, or agreements in principle—are common in complex business transactions. They document an incomplete set of terms that the parties have agreed upon, while anticipating further negotiation of the remaining provisions. They often create legal obligations, particularly a duty to negotiate in good faith. This duty has been the subject of a substantial number of judicial opinions over the past few decades and yet continues to be regarded as a confusing and unpredictable issue in contract law. Legal scholarship is hamstrung in its analysis of the case …

Contracts Ex Machina, Kevin Werbach, Nicolas Cornell

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Smart contracts are self-executing digital transactions using decentralized cryptographic mechanisms for enforcement. They were theorized more than twenty years ago, but the recent development of Bitcoin and blockchain technologies has rekindled excitement about their potential among technologists and industry. Startup companies and major enterprises alike are now developing smart contract solutions for an array of markets, purporting to offer a digital bypass around traditional contract law. For legal scholars, smart contracts pose a significant question: Do smart contracts offer a superior solution to the problems that contract law addresses? In this article, we aim to understand both the potential and …

Understanding Noncompetition Agreements: The 2014 Noncompete Survey Project, J. J. Prescott, Norman D. Bishara, Evan Starr

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In recent years, scholars and policymakers have devoted considerable attention to the potential consequences of employment noncompetition agreements and to whether legislatures ought to reform the laws that govern the enforcement of these controversial contractual provisions. Unfortunately, much of this interest—and the content of proposed reforms—derives from anecdotal tales of burdensome noncompetes among low-wage workers and from scholarship that is either limited to slivers of the population (across all studies, less than 1%) or relies on strong assumptions about the incidence of noncompetition agreements. Better understanding of the use of noncompetes and effective noncompetition law reform requires a more complete …

Mandatory Arbitration In Consumer Finance And Investor Contracts, Michael S. Barr

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Mandatory pre-dispute arbitration clauses are pervasive in consumer financial and investor contracts—for credit cards, bank accounts, auto loans, broker-dealer services, and many others. These clauses often ill serve households. Consumers are typically presented with contracts on a “take it or leave it” basis, with no ability to negotiate over terms. Arbitration provisions are often not clearly disclosed, and in any event are not salient for consumers, who do not focus on the importance of the provision in the event that a dispute over the contract later arises, and who may misforecast the likelihood of being in such a dispute. The …

On The Stickiness Of Default Rules, Omri Ben-Shahar, John A. E. Pottow

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It was once perceived, and still is commonly taught, that default rules in contract law must mimic efficient arrangements. Otherwise, these rules impose needless transaction costs upon parties who seek to opt out of them to reach more efficient positions. In settings where these costs are high, parties might find themselves "stuck" in a default, unable to reach the outcome that they prefer. The strong version of this account-that the only factor that can make an inefficient default rule stick is the direct cost of drafting a tailored provision-has been gradually reappraised. It is by now recognized that factors beyond …

Boilerplate And Economic Power In Auto Manufacturing Contracts, Omri Ben-Shahar, James J. White

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This Article is structured as follows. Part I compares the terms and conditions in the purchase orders of the Original Equipment Manufacturers (OEMs) and highlights important differences in the substance of these boilerplate provisions. It argues that these differences cannot be easily reconciled with the prediction that sophisticated parties draft the most efficient boilerplate terms. Part II examines how these forms are drafted, how their terms are negotiated, and how the OEMs guard their terms from erosion. It provides some insight on how tailoring occurs and how the internal organization of a party to a deal affects the terms that …

Foreword [To Boilerplate: Foundations Of Market Contracts Symposium], Omri Ben-Shahar

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It is tempting to open this symposium with yet another "boilerplate" salute to the challenge that standard-form contracts pose for contract law doctrine. You may have seen many tributes to this fundamental problem. If I were to offer my own variation on this familiar introduction, I would have perhaps tried to come up with an original spin to induce you to read forward another paragraph or two. I would probably have talked about a major divide within contract law between the "law of negotiations" and "product regulation." The former is the body of doctrines that determine the legal consequences of …

Contracting Under Amended 2-207 (Freedom From Contract Symposium), James J. White

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Amended Section 2-207 of the Uniform Commercial Code1 (the Code) states new contract rules. I call these "contract rules" to avoid the labels of contract formation and contract interpretation. These new rules cure many of the problems presented by current Section 2-2072 and remind courts that the purpose of Section 2-207 is to interpret a contract that has been made, not to see if a contract exists. One is tempted to label current Section 2-207 as a contract formation provision-and to some extent that would be right-but most of this Section's work has been in contract interpretation, not in contract …

Contracts Without Consent: Exploring A New Basis For Contractual Liability, Omri Ben-Shahar

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This Essay explores an alternative to one of the pillars of contract law, that obligations arise only when there is "mutual assent "--when the parties reach consensus over the terms of the transaction. It explores a principle of "no-retraction," under which each party is obligated to terms it manifested and can retract only with some liability. In contrast to the all-or-nothing nature of the mutual assent regime, where preliminary forms of consent are either full-blown contracts or create no obligation, under the no-retraction regime, obligations emerge gradually, as the positions of the negotiating parties draw closer. Further, the no-retraction liability …

'Agreeing To Disagree': Filling Gaps In Deliberately Incomplete Contracts, Omri Ben-Shahar

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Incomplete contracts have always been viewed as raising the following challenge for contract law: does the incompleteness-or, "indefiniteness," as it is usually called-rise to such a level that renders the agreement legally unenforceable? When the indefiniteness concerns important terms, it is presumed that the parties have not reached an agreement to which they intend to be bound. This "fundamental policy" is the upshot of the view that "contracts should be made by the parties, not by the courts."' When, in contrast, the indefiniteness concerns less important terms, courts supplement the agreement with gap fillers and enforce the supplemented contract.

Forward [To Freedom From Contract Symposium], Omri Ben-Shahar

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This Symposium explores freedom from contract. When I was preparing to travel from my home in Ann Arbor to the University of Wisconsin where this Symposium was to be held, my 9-year-old son asked where I was headed. I explained that a bunch of people and I were going to meet and talk about freedom from contract, but the boy seemed unsure what this exchange was going to be about. I tried to translate: "It is about making promises that you don't really have to keep." This sounded surprising to him. He raised an inquisitive brow, and I knew he …

A Footnote For Jack Dawson, James J. White, David A. Peters

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Jack Dawson, known to many at Michigan as Black Jack, taught at the Law School from 1927 to 1958. Much of his work was published in the Michigan Law Review, where he served as a student editor during the 1923-24 academic year. We revisit his work and provide a footnote to his elegant writing on mistake and supervening events. In Part I, we talk a little about Jack the man. In Part II, we recite the nature and significance of his scholarly work. Part III deals briefly with the cases decided in the last twenty years by American courts on …

The Tentative Case Against Flexibility In Commercial Law, Omri Ben-Shahar

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Well-rooted in modern commercial law is the idea that the law and the obligations that it enforces should reflect the empirical reality of the relationship between the contracting parties. The Uniform Commercial Code ("Code") champions this tradition by viewing the performance practices formed among the parties throughout their interaction as a primary source for interpreting and supplementing their explicit contracts. The generous recognition of waiver and modifications, as well as the binding force the Code accords to course of performance, course of dealings, and customary trade usages, effectively permits unwritten commercial practices to vary and to erode explicit contractual provisions.

Form Contracts Under Revised Article 2 (Symposium: Consumer Protection And The Uniform Commercial Code), James J. White

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The current draft of section 2-206 in Revised Article 2 of the Uniform Commercial Code ("UCC") entitled "Consumer Contract: Standard Form"1 presents a unique and threatening challenge to the drafters of consumer form contracts. In earlier drafts, one part of the section applied to both to commercial contracts and consumer contracts. It required that "one manifest assent" to any form contract, commercial or consumer, in order for it to be binding.2 Bowing to commercial opposition in the most recent version, the drafters have omitted all reference to commercial contracts. As the section stands, it applies only to consumer contracts.

Use And Non-Use Of Contract Law In Japan, Whitmore Gray

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This article first defines the scope of enquiry, then surveys some of the existing literature, and finally, presents the results of my preliminary survey interviews and questionnaire. It is my hope that it will serve as a basis form discussion leading to better definition of the problems for research in this area, and will suggest ways to proceed to gather the information necessary for more sophisticated exposition and commentary.

Enforcement Of A Promise In Modern American Law (Gendai Amerikaho Ni Okeru Yakusoku No Kyosei), Whitmore Gray

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A series of seminar lectures given by Whitmore Gray in Tokyo, Japan during October 1968. Six articles were subsequently published in “Kaigai Shojihomu” (The International Business Law Bulletin) between July 1969 and May 1970.

The sixth and final installment describes the history of contractual enforcement in the U.S. and highlights changes introduced through adoption of the UCC.

Remedies For Breach Under The Uniform Commercial Code (Ucc Ni Okeru Keiyaku Furiko Ni Taisuru Kyusai), Whitmore Gray

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A series of seminar lectures given by Whitmore Gray in Tokyo, Japan during October 1968. Six articles were subsequently published in “Kaigai Shojihomu” (The International Business Law Bulletin) between July 1969 and May 1970. The fifth installment discusses the difficulty of remedies and various methods of enforcement.

Contract Interpretation And The Uniform Commercial Code (Ucc Ni Okeru Keiyaku No Kaishaku), Whitmore Gray

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A series of seminar lectures given by Whitmore Gray in Tokyo, Japan during October 1968. Six articles were subsequently published in “Kaigai Shojihomu” (The International Business Law Bulletin) between July 1969 and May 1970. The third installment introduces the basic principles of contract interpretation.

Contract Interpretation Under The Uniform Commercial Code (Ucc Ni Okeru Keiyaku No Kaishaku), Whitmore Gray

Articles

A series of seminar lectures given by Whitmore Gray in Tokyo, Japan during October 1968. Six articles were subsequently published in “Kaigai Shojihomu” (The International Business Law Bulletin) between July 1969 and May 1970.

The fourth installment discusses further considerations and principles that impact contract interpretation.

Contract Formation Under The Uniform Commercial Code (Ucc Ni Okeru Keiyaku No Seiritsu), Whitmore Gray

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A series of seminar lectures given by Whitmore Gray in Tokyo, Japan during October 1968. Six articles were subsequently published in “Kaigai Shojihomu” (The International Business Law Bulletin) between July 1969 and May 1970.

The second installment discusses issues related to requirements compelling completion of a contract or pushing the issue to court.

Effect Of An Agreement By One Person To Supply Another's 'Requirements' Of A Given Commodity, Grover C. Grismore

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The cases show that the kind of agreement indicated by the heading of this note has become an established part of business usage. In normal times such an agreement is likely to be carried out to the entire satisfaction of both parties, without question, but, in a period of changing business conditions and abnormal price flctuations such as we have witnessed during the last few years, nice questions of interpretation are likely to arise, as is well illustrated by the recent case of Oscar Schlegel Mfg. Co. v. Peter Coopers Glue Factory, (1920) 179 N. Y. S. 271.

Subsequent Impossibility As Affecting Contractual Obligations, Ralph W. Aigler

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Where the law creates a duty or charge and the party is disabled to perform it without any default in him, and hath no remedy over, there the law will excuse him. * * * But where the party by his own contract creates a duty or charge upon himself, he is bound to make it good, if he may, notwithstanding any accident by inevitable necessity, because he might have provided against it by his contract. Paradine v. Jane, Aleyn, 26, a case not really involving a question of impossibility. Most discussions of the effect of subsequent impossibility of performance …