Law and Economics Commons^™

The English East India Company And The Modern Corporation: Legacies, Lessons, And Limitations, Philip J. Stern

Seattle University Law Review

The English East India Company was first chartered in 1600, endured until the late nineteenth century, and, in a clever act of corporate resurrection, has even recently returned as a global, upmarket retail outlet selling fine foods and commemorative coins. It has also endured in the popular imagination and culture, churning out heroes and villains alike in film, television, and video games. The script writer for a forthcoming BBC miniseries, in which the East India Company stars as the prime antagonist, even noted recently that the Company was like “the CIA, the NSA, and the biggest, baddest multinational corporation on …

What Might Replace The Modern Corporation? Uberization And The Web Page Enterprise, Gerald F. Davis

Seattle University Law Review

The number of public corporations in the United States has been in decline for almost twenty years. Alternative forms of organization, from LLCs and benefit corporations to Linux and Wikipedia, provide robust competition to traditional corporations, while short-lived, project-based enterprises that assemble supply chains from available parts are increasingly cost effective. Yet our understanding of corporate governance has not kept pace with the new organization of the economy and we continue to treat the public corporation with dispersed ownership as the default form of doing business. Meanwhile, many of the corporations going public in recent years have abandoned traditional standards …

Notes On The Difficulty Of Studying The Corporation, Marina Welker

Seattle University Law Review

In the award-winning documentary The Corporation, public intellectuals and activists characterize corporations as “externalizing machines,” “doom machines,” “persons with no moral conscience,” and “monsters trying to devour as much profit as possible at anyone’s expense.” In other footage, people on the street personify corporations: “General Electric: a kind old man with lots of stories;” “Nike: young, energetic;” “Microsoft: aggressive;” “McDonald’s: young, outgoing, enthusiastic;” “Monsanto: immaculately dressed;” “Disney: goofy;” “The Body Shop: deceptive.” The documentary, like screenwriter and legal scholar Joel Bakan’s book The Corporation: The Pathological Pursuit of Profit and Power, imparts dissonant messages about corporations. On the one hand, …

The Theory Of Fields And Its Application To Corporate Governance, Neil Fligstein

Seattle University Law Review

My goal here is twofold. First, I want to introduce the theory of strategic action fields to the law audience. The main idea in field theory in sociology is that most social action occurs in social arenas where actors know one another and take one another into account in their action. Scholars use the field construct to make sense of how and why social orders emerge, reproduce, and transform. Underlying this formulation is the idea that a field is an ongoing game where actors have to understand what others are doing in order to frame their actions. Second, I want …

Benefit Corporations And Strategic Action Fields Or (The Existential Failing Of Delaware), Brett Mcdonnell

Seattle University Law Review

This Article analyzes the creation and growth of benefit corporations from the perspective of strategic action field theory in an attempt to shed some light upon both the subject and the methodology. It considers how the new legal field of benefit corporations responded to weaknesses in the existing fields of business and nonprofit corporations. Where major field participants such as directors, officers, employees, shareholders, or donors wish to pursue both financial and public-spirited goals that sometimes conflict without subordinating either type of goal to the other, both profit and nonprofit corporations may be unsatisfactory. Benefit corporations attempt not only to …

Remarks: The Declining Role Of Outside Counsel In Enhancing Ethical Conduct By Corporations, Jed S. Rakoff

Seattle University Law Review

Judge Rakoff’s remarks from the seventh annual Berle Symposium, held May 26–27, 2015 at Seattle University School of Law.

Bringing Continuity To Cryptocurrency: Commercial Law As A Guide To The Asset Categorization Of Bitcoin, Evan Hewitt

Seattle University Law Review

This Note will undertake to analyze bitcoin under the Uniform Commercial Code (UCC) and the Internal Revenue Code (IRC)—two important sources of commercial law—to see whether any existing asset categories adequately protect bitcoin’s commercial viability. This Note will demonstrate that although commercial law dictates that bitcoin should—nay must—be regulated as a currency in order to sustain its existence, the very definition of currency seems to preclude that from happening. Therefore, this Note will recommend that we experiment with a new type of asset that receives currency-like treatment, specifically designed for cryptocurrencies, under which bitcoin can be categorized in order to …

The Rhetoric Of Negative Externalities, Claire A. Hill

Seattle University Law Review

Negative externalities are costs imposed on third parties. The paradigmatic example is pollution. A firm manufactures a product that generates toxic waste, and dumps the waste; society pays for the associated cost, including, for instance, the community’s health problems caused by the waste. Profit is supposed to measure the firm’s revenues in excess of the associated costs; because this cost is not included, the firm’s profits are higher than they should be, and there is more pollution than there should be. What is privately optimal diverges from what is socially optimal. The concept of negative externalities is intuitively appealing. It …

Agency Theory As Prophecy: How Boards, Analysts, And Fund Managers Perform Their Roles, Jiwook Jung, Frank Dobbin

Seattle University Law Review

In 1976, Michael Jensen and William Meckling published a paper reintroducing agency theory that explained how the modern corporation is structured to serve dispersed shareholders. They purported to describe the world as it exists but, in fact, they described a utopia, and their piece was read as a blueprint for that utopia. We take a page from the sociology of knowledge to argue that, in the modern world, economic theories function as prescriptions for behavior as much as they function as descriptions. Economists and management theorists often act as prophets rather than scientists, describing the world not as it is, …

Bondholders And Financially Stressed Municipalities, Clayton P. Gillette

Fordham Urban Law Journal

No abstract provided.

The Exporting Process: Some Considerations For Practitioners, Albert Caproni Iii

Georgia Journal of International & Comparative Law

No abstract provided.

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 …

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 …

From Promise To Form: How Contracting Online Changes Consumers, David A. Hoffman

All Faculty Scholarship

I hypothesize that different experiences with online contracting have led some consumers to see contracts—both online and offline—in distinctive ways. Experimenting on a large, nationally representative sample, this paper provides evidence of age-based and experience-based differences in views of consumer contract formation and breach. I show that younger subjects who have entered into more online contracts are likelier than older ones to think that contracts can be formed online, that digital contracts are legitimate while oral contracts are not, and that contract law is unforgiving of breach.

I argue that such individual differences in views of contract formation and enforceability …

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

Faculty Scholarship

No abstract provided.

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 …

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 …

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 …

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 …

Laying Down The "Brics": Enhancing The Portability Of Awards In International Commercial Arbitration, Benjamin C. Mccarty

Benjamin C McCarty

The drafters of the 1958 New York Convention intended Article V(2)(b) to be interpreted narrowly, and while most pro-arbitration national courts do maintain narrowly defined areas of public policy that are sufficient for refusal of the recognition and enforcement of a foreign arbitral award, this is not always the case. Developing states and jurisdictions that maintain corrupt or inefficient judicial systems have shown a greater willingness to invoke the public policy exception for a broader, amorphous variety of reasons. This phenomenon has created a sense of unpredictability among international investors, arbitrators, and business executives as to the amount of deference …

Gandhi’S Prophecy: Corporate Violence And A Mindful Law For Bhopal, Nehal A. Patel

Nehal A. Patel

AbstractOver thirty years have passed since the Bhopal chemical disaster began,and in that time scholars of corporate social responsibility (CSR) havediscussed and debated several frameworks for improving corporate responseto social and environmental problems. However, CSR discourse rarelydelves into the fundamental architecture of legal thought that oftenbuttresses corporate dominance in the global economy. Moreover, CSRdiscourse does little to challenge the ontological and epistemologicalassumptions that form the foundation for modern economics and the role ofcorporations in the world.I explore methods of transforming CSR by employing the thought ofMohandas Gandhi. I pay particular attention to Gandhi’s critique ofindustrialization and principle of swadeshi (self-sufficiency) …

Contracts, Persons And Property: A Tribute To Margaret Jane Radin, Ruth L. Okediji

Michigan Telecommunications & Technology Law Review

In 2011, the United States was only just beginning to emerge from what some claimed to be the most significant economic crisis since the Great Depression. The devastation wrought by unregulated subprime mortgages unfolded as a political, legal, financial and social tragedy. Millions of homeowners had purchased homes for amounts they most certainly could not afford, with terms and conditions written on documents they even more certainly had never read. Many of those most severely affected were, as one might expect, racial minorities and underrepresented groups, but plenty of other members of society were also caught in the intricately woven …

With Marriage On The Decline And Cohabitation On The Rise, What About Marital Rights For Unmarried Partners?, Lawrence W. Waggoner

Articles

This article draws attention to a cultural shift in the formation of families that has been and is taking place in this country and in the developed world. Part I uses recent government data to trace the decline of marriage and the rise of cohabitation in the United States. Between 2000 and 2010, the population grew by 9.71 %, but the husband and wife households only grew by 3.7%, while the unmarried couple households grew by 41.4%. A counter-intuitive finding is that the early 21st century data show little correlation between the marriage rate and economic conditions. Because of the …

Health Care And The Balance Billing Problem: The Solution Is The Common Law Of Contracts And Strengthening The Free Market For Health Care., George A. Nation Iii

George A Nation III

A large and growing group of insured patients is being unfairly burdened by hospitals’ exorbitant chargemaster prices. The burden is brought to bear on these patients through a process known as balance billing. For a variety of reasons hospital networks are becoming narrower as hospital systems contract with fewer insurers, and as a result, more and more patients are receiving balance bills. The practice of balance billing puts upward pressure on health care prices in general. That is, this practice leads to higher prices across the board for the uninsured, the out-of-network insured and even the in-network insured. This article …

The Moral Hazard Of Contract Drafting, Eric A. Zacks

Florida State University Law Review

This Article identifies and examines the principal-agent problem as it arises in the context of contract preparation. The economic agency relationship, as it may be understood to exist for contract drafting, provides a superior framework for understanding and reforming the inability of the non-drafting party (the principal) to control the drafting party (the agent). As an economic agent, the drafting party faces a moral hazard when preparing the contract because of the differing interests of the parties as well as the information and control asymmetries that exists. For example, the use of standard form contracts in consumer transactions is an …

Tortious Interference And The Law Of Contract: The Case For Specific Performance Revisited, Deepa Varadarajan

Deepa Varadarajan

What is the role of contract law in remedying breach? The question of the appropriate legal remedy, specific performance versus money damages, has provided adequate fodder for three decades of debate in the law and economics discourse. In the legal discipline at large, the topic has spurred centuries of debate, as illustrated by Oliver Wendell Holmes's famous line: “The only universal consequence of a legally binding promise is, that the law makes the promisor pay damages if the promised event does not come to pass.” Holmes's approach to contractual remedy would evolve during the latter half of the twentieth century …

An Approach To The Regulation Of Spanish Banking Foundations, Miguel Martínez

Miguel Martínez

The purpose of this paper is to analyze the legal framework governing banking foundations as they have been regulated by Spanish Act 26/2013, of December 27th, on savings banks and banking foundations. Title 2 of this regulation addresses a construct that is groundbreaking for the Spanish legal system, still of paramount importance for the entire financial system insofar as these foundations become the leading players behind certain banking institutions given the high interest that foundations hold in the share capital of such institutions.

Consumer Protection Initiatives In The Eu Mortgage Market: A Behavioral Economics Based Critique And Proposal, 25 Temp. Int'l & Comp. L.J. 1 (2011), Debra Pogrund Stark, Jessica M. Choplin

Debra Pogrund Stark

No abstract provided.

Contrato, Operación Económica Y Equilibrio Contractual, Carlos Tamani

Carlos Tamani

Cloud Computing, Contractibility, And Network Architecture, Christopher S. Yoo

All Faculty Scholarship

The emergence of the cloud is heightening the demands on the network in terms of bandwidth, ubiquity, reliability, latency, and route control. Unfortunately, the current architecture was not designed to offer full support for all of these services or to permit money to flow through it. Instead of modifying or adding specific services, the architecture could redesigned to make Internet services contractible by making the relevant information associated with these services both observable and verifiable. Indeed, several on-going research programs are exploring such strategies, including the NSF’s NEBULA, eXpressive Internet Architecture (XIA), ChoiceNet, and the IEEE’s Intercloud projects.