Contracts Commons^™

Family Law And Entrepreneurial Action, D. Gordon Smith

Faculty Scholarship

In "The Contractual Foundation of Family-Business Law," Benjamin Means aspires to lay the groundwork for a law of family businesses. In this brief response essay, I suggest that a workable family-business law along the lines suggested by Means is consistent with an overarching policy in the United States of promoting entrepreneurial action, and I evaluate the proposal against this policy goal, with particular attention to Means’s arguments in favor of “family-business defaults” and his concern over the potentially disruptive role of fiduciary law.

Lack Of Marketability And Minority Discounts In Valuing Close Corporation Stock: Elusiveness And Judicial Synchrony In Pursuit Of Equitable Consensus, Stephen J. Leacock

Faculty Scholarship

No abstract provided.

Closing A Parol Evidence Rule Loophole: The Consideration Exception And The Preexisting Duty Rule, Daniel P. O'Gorman

Faculty Scholarship

No abstract provided.

When Lightning Strikes: Hadley V. Baxendale's Probability Standard Applied To Long-Shot Contracts, Daniel P. O'Gorman

Faculty Scholarship

No abstract provided.

Reasonable Standards For Contract Interpretations Under The Cisg, Donald J. Smythe

Faculty Scholarship

The United Nations ("UN") Convention on Contracts for the International Sale of Good ("CISG") offers the promise of harmonizing international sales law and facilitating international trade and global commerce. But there is a "homeward trend bias" that may encourage domestic courts to construe the gaps in the CISG broadly and fill them with non-uniform domestic legal rules. Questions about contract interpretation under the CISG raise the same concerns about a homeward trend bias as questions about the interpretation of express CISG provisions. The CISG has express provisions governing contract interpretation but their application may not provide an unambiguous interpretation. This …

The Common Law Of Contract And The Default Rule Project, Alan Schwartz, Robert E. Scott

Faculty Scholarship

The common law developed over centuries a small set of default rules that courts have used to fill gaps in otherwise incomplete contracts between commercial parties. These rules can be applied almost independently of context: the market damages rule, for example, requires a court only to know the difference between market and contract prices. When parties in various sectors of the economy write sales contracts but leave terms blank, courts fill in the blanks with their own rules. As a consequence, a judicial rule that many parties accept must be "transcontextual": parties in varied commercial contexts accept the courts' rule …

After The Golden Victory: Still Lost At Sea, Victor P. Goldberg

Faculty Scholarship

In The Golden Victory the House of Lords held that when determining damages for a repudiatory breach, in a conflict between the compensatory principle and finality, the former trumped. The decision was recently ratified by the Supreme Court in Bunge SA v. Nidera BV. The claim in this paper is that this was a mistake; properly conceived, there is no conflict. The contract should be viewed as an asset and compensation would entail determining the decline in value of that asset at the time of the breach. The value of the contract at that moment would reflect the possible effects …

Online Contracting, Nancy Kim

Faculty Scholarship

No abstract provided.

From British Westinghouse To The New Flamenco: Misunderstanding Mitigation, Victor P. Goldberg

Faculty Scholarship

Both the venerable British Westinghouse decision and the current New Flamenco case have been analyzed in terms of mitigation. Properly understood, in neither is mitigation relevant. Although in the former, the House of Lords came to the right result, the replacement of the substandard turbines with new superior ones was not to mitigate damages — the buyer would have installed the new turbines even had the Westinghouse turbines met the contractual specifications. Even if Westinghouse’s failure accelerated the replacement (which it almost certainly did not) it would have been a mistake to compensate the buyer for the cost of the …

Variation In Boilerplate: Rational Design Or Random Mutation?, Stephen J. Choi, G. Mitu Gulati, Robert E. Scott

Faculty Scholarship

Standard contract doctrine presumes that sophisticated parties choose their terminology carefully because they want courts or counterparts to understand what they intended. The implication of this “Rational Design” model of rational behavior is that courts should pay careful attention to the precise phrasing of contracts. Using a study of the sovereign bond market, we examine the Rational Design model as applied to standard-form contracting. In NML v. Argentina, federal courts in New York attached importance to the precise phrasing of the boilerplate contracts at issue. The industry promptly condemned the decision for a supposedly erroneous interpretation of a variant of …

Opinion Of Justice Katherine Franke In Obergefell V. Hodges, Katherine M. Franke

Faculty Scholarship

Professor Jack Balkin has assembled a group of 9 scholars and advocates to write opinions in the Obergefell v. Hodges case for a forthcoming volume, What Obergefell Should Have Said (Yale University Press 2017). Balkin writes for the majority of the Court and I provide a concurrence along with a short commentary explaining my approach and reasoning. In summary, I conclude that: Laws barring same-sex couples from eligibility for licensure as civil marriages violate the Equal Protection Clause of the Fourteenth Amendment because they find their origin in and perpetuate notions of heterosexual supremacy, and have the aim and effect …

Pricing Contract Terms In A Crisis: Venezuelan Bonds In 2016, Elena Carletti, Paolo Colla, Mitu Gulati, Steven Ongena

Faculty Scholarship

As of this writing in June 2016, the markets are predicting Venezuela to be on the brink of default. On June 1, 2016, the 6 month CDS contract traded at about 7000bps which translates into a likelihood of default of over 90%. Our interest in the Venezuelan crisis is that its outstanding sovereign bonds have a unique set of contractual features that, in combination with its near-default status, have created a natural experiment. This experiment has the potential to shed light on one of the long standing questions that sits at the intersection of the fields of law and finance, …

After Tackett: Incomplete Contracts For Post-Employment Healthcare, Maria O'Brien

Faculty Scholarship

This paper examines the recent U.S. Supreme Court retiree health care decision in Tackett v. M & G Polymers and focuses, in particular, on the ostensibly odd silence with respect to a critical contract term — whether the parties in fact agreed that these benefits were vested. Although the union in Tackett insisted these welfare benefits were clearly intended to vest and the employer now asserts they can be modified at any time, the collective bargaining agreement and supporting documents are ambiguous on this question. This paper examines how and why this “silence” persisted for so many decades and concludes …

The Way We Pay Now: Understanding And Evaluating Performance-Based Executive Pay, David I. Walker

Faculty Scholarship

Over the last ten years, performance-based equity pay, and particularly performance shares, have displaced stock options as the primary instrument for compensating executives of large, public companies in the U.S. This article examines that transformation, analyzing the structure and incentive properties of these newly important instruments and evaluating the benefits and risks from an investor’s perspective. Notable observations include the following: Although technically “stock” instruments, performance shares mimic the incentive characteristics of options. But performance shares avoid the tax, accounting, and other constraints that have led to uniform grants of non-indexed, at the money options. Performance share plans can be …

A Story Of Three Bank-Regulatory Legal Systems: Contract, Financial Management Regulation, And Fiduciary Law, Tamar Frankel

Faculty Scholarship

How should banks be regulated to avoid their failure? Banks must control the risks they take with depositors' money. If depositors lose their trust in their banks, and demand their money, the banks will fail. This article describes three legal bank regulatory systems: Contract with depositors (U.S.); a mix of contract and trust law, but going towards trust (Japan), and a full trust-fiduciary law regulating banks (Israel). The article concludes that bank regulation, which limits the banks' risks and conflicts of interest, helps create trustworthy banks that serve their country best.

The Pricing Of Non-Price Terms In Sovereign Bonds: The Case Of The Greek Guarantees, Stephen J. Choi, Mitu Gulati

Faculty Scholarship

In March 2012, Greece conducted one of the biggest and most brutal sovereign debt restructurings ever, asking holders of Greek government bonds to take net present value haircuts of near 80 percent. Greece forced acquiescence to its terms from a large number of its bonds by using a variety of legal strong-arm tactics. With the vast majority of Greek bonds, the tactics worked. There were, however, thirty-six bonds guaranteed by the Greek state, which, because of the weakness of the underlying companies, were effectively obligations of the Greek state. Yet, on these thirty six bonds, even though Greece desperately needed …

Culpable Participation In Fiduciary Breach, Deborah A. Demott

Faculty Scholarship

This essay makes a case for the salience of tort law to fiduciary law, focusing on actors who culpably participate in a fiduciary's breach of duty, whether by inducing the breach or lending substantial assistance to it. Although the elements of this accessory tort are relatively settled in the United States, how the tort applies to particular categories of actors-most recently investment bankers who serve as M&A advisors-provokes controversy. The paper also explores the less developed terrain of primary actors who breach governance duties that are not fiduciary obligations because the entity's organizational documents eliminate fiduciary duties, as Delaware law …

25 Years, Where Are We Now? Global Trade & Sovereign Debt, Steven L. Schwarcz

Faculty Scholarship

No abstract provided.

Contract Development In A Matching Market: The Case Of Kidney Exchange, Kimberly D. Krawiec, Wenhao Liu, Marc L. Melcher

Faculty Scholarship

We analyze a new transplant innovation — Advanced Donation, referred to by some as a kidney “gift certificate,” “layaway plan,” or “voucher — as a case study offering insights on both market and contract development. Advanced Donation provides an unusual window into the evolution of the exchange of a single good — a kidney for transplantation — from gift, to simple barter, to exchange with a temporal separation of obligations that relies solely on trust and reputational constraints for enforcement, to a complex matching market in which the parties rely, at least in part, on formal contract to define and …

Defining Agency And Its Scope (Ii), Deborah A. Demott

Faculty Scholarship

Fiduciary law necessarily raises issues of delineation and demarcation, which this paper demonstrates through examples involving common-law agents. Serving as an agent, and thus as a fiduciary, does not necessarily mean that agency law prescribes all duties that the agent owes the principal. The agent may have rights external to the relationship that the agent may exercise, distinct from the duty of loyalty owed the principal. When an agent acts outside the bounds of an agency relationship, the principal’s consent is not requisite to conduct that would constitute disloyalty within the bounds of the agency relationship. The paper illustrates the …

The Uniform Commercial Code Survey: Introduction, Jennifer S. Martin, Colin P. Marks, Wayne Barnes

Faculty Scholarship

The survey that follows highlights the most important developments of 2014 dealing with domestic and international sales of goods, personal property leases, payments, letters of credit, documents of title, investment securities, and secured transactions. Along with the usual descriptions of interesting judicial decisions in these areas, which are highlighted in the survey, there has also been important legislative progress. The 2010 amendments to U.C.C. Article 9 have been adopted in forty-nine states, the District of Columbia, and Puerto Rico, and introduced in Oklahoma. Those revisions were summarized in the Introduction to the 2009 survey. Additionally, the 2012 amendments to U.C.C. …

Banks, Break-Ins, And Bad Actors In Mortgage Foreclosure, Christopher K. Odinet

Faculty Scholarship

During the housing crisis banks were confronted with a previously unknown number mortgage foreclosures, and even as the height of the crisis has passed lenders are still dealing with a tremendous backlog. Overtime lenders have increasingly engaged third party contractors to assist them in managing these assets. These property management companies — with supposed expertise in the management and preservation of real estate — have taken charge of a large swathe of distressed properties in order to ensure that, during the post-default and pre-foreclosure phases, the property is being adequately preserved and maintained. But in mid-2013 a flurry of articles …

Payday Lenders, Vehicle Title Loans, And Small-Value Financing: The Cfpb's Proposal To Regulate The Fringe Economy, Christopher K. Odinet

Faculty Scholarship

The market for payday lenders, businesses that provide vehicle title loans, and other small-value financing players is rife with controversy. Some see them as predatory lenders that weave a web of never-ending debt designed to capture the weakest and most economically vulnerable of society. However, advocates of these financial institutions argue that for many Americans who are otherwise shut out of the conventional lending market, these players provide the only viable source of credit in times of economic hardship. Whatever the view, these businesses, their borrowers, and the credit markets that they together comprise are often referred to in legal …

Commerce, Commonality, And Contract Law: Legal Reform In A Mixed Jurisdiction, Christopher K. Odinet

Faculty Scholarship

This Article explores the tradition/reform dichotomy as it exists in certain jurisdictions that, because of their unique history and nature, are particularly susceptible to the struggle between legal tradition and legal reform — mixed jurisdictions. In order to more closely examine the tradition/reform dichotomy and its theoretical and practical effects, this Article analyzes the role that traditional legal institutions play in the legal reform process through the lens of America’s lone mixed jurisdiction — Louisiana.

By exploring Louisiana’s subtle, yet prevalent, anchor-like legal conundrum caused by the struggle between progress and tradition — the process of mooring oneself to existing …

Too Clever By Half: Reflections On Perception, Legitimacy, And Choice Of Law Under Revised Article 1 Of The Uniform Commercial Code, Mark Edwin Burge

Faculty Scholarship

The overwhelmingly successful 2001 rewrite of Article 1 of the Uniform Commercial Code was accompanied by an overwhelming failure: proposed section 1-301 on contractual choice of law. As originally sent to the states, section 1-301 would have allowed non-consumer parties to a contract to select a governing law that bore no relation to their transaction. Proponents justifiably contended that such autonomy was consistent with emerging international norms and with the nature of contracts creating voluntary private obligations. Despite such arguments, the original version of section 1-301 was resoundingly rejected, gaining zero adoptions by the states before its withdrawal in 2008. …

Duress As Rent-Seeking, Mark Seidenfeld, Murat C. Mungan

Faculty Scholarship

The doctrine of duress allows a party to avoid its contractual obligations when that party was induced to enter the contract by a wrongful threat while in a dire position that left it no choice but to enter the contract. Although threats of criminal or tortious conduct clearly are wrongful, under the doctrine of “economic duress” courts have held that other threats can be wrongful and hence the basis of a duress defense. Courts, however, have not developed a coherent understanding of what makes such non-criminal and non-tortious threats wrongful.

This Article proposes that a threat should be wrongful when …

Insuring Floods: The Most Common And Devastating Natural Catastrophes In America, Christopher French

Faculty Scholarship

Flooding is the most common natural catastrophe Americans face, accounting for 90% of all damage caused by natural catastrophes. Hurricanes Katrina and Sandy, for example, collectively caused over $160 billion in damage, but only approximately 10% of the Hurricane Katrina victims and 50% of the Hurricane Sandy victims had insurance to cover their flood losses. Consequently, both their homes and lives were left in ruins in the wake of the storms. Nationwide, only approximately 7% of homeowners have insurance that covers flood losses even though the risk of flooding is only increasing as coastal areas continue to be developed and …

The Social Life Of Blood, Milk & Sperm, Martha M. Ertman

Faculty Scholarship

No abstract provided.

Prove Me Wrong Cases And Consideration Theory, Daniel P. O'Gorman

Faculty Scholarship

No abstract provided.

Internet Giants As Quasi-Governmental Actors And The Limits Of Contractual Consent, Nancy Kim, D.A. Jeremy Telman

Faculty Scholarship

Although the government’s data-mining program relied heavily on information and technology that the government received from private companies, relatively little of the public outrage generated by Edward Snowden’s revelations was directed at those private companies. We argue that the mystique of the Internet giants and the myth of contractual consent combine to mute criticisms that otherwise might be directed at the real data-mining masterminds. As a result, consumers are deemed to have consented to the use of their private information in ways that they would not agree to had they known the purposes to which their information would be put …