Contracts

Smith on Newman on Bailments — Henry Smith

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Post by Henry Smith

Chris Newman has a new draft paper on SSRN on bailments (“Bailment and the Property/Contract Interface”).  The paper is provocative (yes, that is possible in a paper on bailments!) and deeply insightful.  Newman argues that much of the confusion about bailment contracts, and especially strict liability for deviation from such contracts, stems from a lack of understanding of which baseline is operative in various cases.  The article provides compelling reasons to think that the property baseline governs more than people usually think – and should do so. Like a license (a subject of Newman’s previous work), a bailment is a legal relation that can be created or shaped by contract, but it should not be identified with the contract. Indeed, in involuntary bailments (most prominently with finders), there is no contract at all.  But even where there is one, the bailment itself is just a giving of possession without a transfer of ownership.  The bailee has a license to do certain things with the thing, and if the bailee exceeds the scope of that license, then the bailee violates the in rem rights of the owner, just as other converters and trespassers might.

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Interpretation and construction 3: Arthur Linton Corbin — Greg Klass

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Post by Greg Klass

In this third post on the interpretation-construction distinction, I introduce the hero of my story: Arthur Linton Corbin. Corbin builds on Francis Lieber’s and Samuel Williston’s work (which I have discussed here and here) to articulate more perspicacious conceptions of interpretation and construction. Whereas both Williston and Lieber viewed construction as supplementing interpretation, Corbin sees the two activities as complementary. He gets there by collapsing Williston’s three categories of rules into two.

Corbin’s 1951 treatise on contract law provides, as far as I know, the first clear articulation of the complementary conception. Corbin describes interpretation and construction as interlocking activities, both necessary to determine what the law requires. It is worth quoting the relevant passage in full:

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Interpretation and Construction 2: Samuel Williston — Greg Klass

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Post by Greg Klass

In my last post on the interpretation-construction distinction I described Francis Lieber’s supplemental view of construction, which can be found in his 1839 book, Legal and Political Hermeneutics. Lieber’s view is characterized by two claims. First, construction is supplemental: it steps in only when interpretation runs out. Second, the activity of construction is for the most part continuous with that of interpretation. “Construction is the building up with given elements, not the forcing of extraneous matter into a text.” (144) That said, Lieber also recognizes that sometimes construction departs from the spirit of the text, such as when the text yields to a superior legal principle.

It would be interesting to trace the influence of Lieber’s distinction between interpretation and construction throughout the next century of legal thought. Theophilus Parsons, for example, discusses the categories in his 1855 Law of Contract. James Bradley Thayer, in his 1898 Treatise on Evidence, expressly declines to adopt Lieber’s distinction, arguing that “neither common usage nor practical convenience in legal discussions support [it]”. (411 n.2) For my purposes, things get interesting with the 1920 first edition of Samuel Williston’s The Law of Contracts. In section 602, “Construction and interpretation,” Williston makes what I view as two improvements on Lieber’s theory.

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Interpretation and Construction 1: Francis Lieber — Greg Klass

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Post by Greg Klass

In several posts on DIRECTV v. Imburgia (here, here and here), I suggested that the interpretation-construction distinction illuminates some of the Supreme Court’s recent arbitration cases. The interpretation-construction distinction has recently been receiving more attention from con law theorists than from contract theorists. (See, e.g., here, here and here.) I’ve been working on a larger project on contract interpretation and construction, and want to use a few posts here to share some of what I’ve learned about the history and development of the distinction. What I have only scratches the surface. The history is a rich vein waiting to be mined. These posts describe only the outlines of the story as I currently understand it. In my telling, it has three protagonists: Francis Lieber, Samuel Williston and Arthur Linton Corbin.

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North American Workshop on Private Law Theory — Eric Claeys

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Post by Eric Claeys, George Mason University

Before we get too far into November, some friend of this blog should say a word about the third North American Workshop on Private Law Theory.  (“NAWPLT”). NAWPLT is an annual workshop organized by Henry Smith, John Goldberg, Andrew Gold, Steve Smith and Paul Miller (McGill), and Dennis Klimchuk (Western Ontario).  The NAWPLT organizers usually select eight or nine papers, diversified to cover each of the four major fields of private law: tort, contract, property, and restitution-plus-remedies.  The papers are also diversified to show off a wide range of methodologies—analytical methods, different traditions of normative philosophy, and on occasion conceptually-respectful economic analysis.   I always enjoy going because NAWPLT is refreshing for me.  As an American scholar, most of the private law scholarship I encounter at conferences tends to be reform-oriented or economic in focus.  At NAWPLT, I get reminded that, in some parts of the English-speaking scholarly community, analytical and philosophical methods are taken seriously and applied well to private law.  

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SCOTUS, Arbitration and Contra Proferentem — Greg Klass

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Post by Greg Klass

The Supreme Court heard oral argument yesterday (October 6th) in DIRECTV v. Imburgia (full transcript here). The case involves the meaning of “the law of your state” in an arbitration clause. DIRECTV argues that it means “the law of your state as limited by preempting federal law,” whereas the plaintiffs argue that it means “the law of your state without regard to any preempting federal law.” Because the phrase does not appear in a choice of law clause, the plaintiff’s have a decent argument for their reading—or that the words read in light of the contract as a whole are at least ambiguous. The reasons are complicated, but if the phrase means what DIRECTV says, then the arbitration clause kicks in and the plaintiffs lose their class action. If it means what the plaintiffs say, their class action remains in state court.

DIRECTV has argued that if the words “the law of your state” are ambiguous, the presumption in favor of arbitration means that they win. That would be a very weird result.

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Charles Fried, Contract as Promise, 2.0 — Yonathan Arbel

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Post by Yonathan Arbel

The second edition of Charles Fried’s foundational book ‘Contract as Promise’ is now out in print, and to celebrate the event, Harvard Law School held a special panel comprising of Charles Fried himself as well as other HLS professors.

The event itself was filmed and the YouTube link is appended at the bottom of this post. The panel discussion was great and Charles Fried untied many of the hard knots in the earlier edition of his book. His approach is neatly summarized in a new concluding chapter to his book, aptly titled ‘Contract as Promise in the Light of Subsequent Scholarship—Especially Law and Economics’, which clearly and fairly describes many of the critiques launched at his book, and presents his version of things.

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What Commonwealth Jurists Can Learn from the New Private Law — Malcolm Lavoie

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Post by guest blogger, Malcolm Lavoie, University of Alberta Faculty of Law

It is impossible to explain the “new private law” to non-American jurists without first describing a little bit of history: the rise of legal realism in the 20th century, with its hostility to formal doctrine, and the subsequent emphasis the American legal academy has placed on looking beyond private law doctrine to understand what is really going on, in economic, political, or other terms. As alluded to by Henry Smith in a recent post, the dominance of “external” approaches to law in private law scholarship has been a uniquely American phenomenon. In civil law jurisdictions, as well as in the Commonwealth, private law scholarship has retained its focus on legal doctrine, though it is sometimes complemented by functionalist approaches of various stripes. If the central aim of the “new private law” is to encourage approaches to scholarship that “take law seriously”, one might rightly ask what it has to offer to jurists from, say, England and the Commonwealth, where scholars never really stopped taking law seriously.

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Private Law in the Digital Age – Dan Kelly

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Post by Dan Kelly

Private law aficionados enjoy teaching, and discussing, many of the classic common law cases, Hawkins v. McGee (in contracts), Pierson v. Post (in property), and Vosburg v. Putney (in torts).  But, of course, private law is still relevant for, and able to provide insights into, new legal issues emerging in the twenty-first century.  One of these issues is fiduciary access to digital assets.

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Can We Contract For Fiduciary Loyalty? – Andrew Gold

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Post by Andrew Gold

Some of the more interesting puzzles in private law involve the boundaries between subfields.  Here is a recent example that implicates contract law and fiduciary law.  In 2013, the Delaware Supreme Court expressly recognized a contractually created fiduciary duty of good faith.  See Gerber v. Enterprise Products Holdings, LLC, 67 A.3d 400, 418 (Del. 2013).  From different perspectives, several theorists have recently argued that there are qualitative differences between contractual and fiduciary duties.  See Daniel Markovits, Sharing Ex Ante and Sharing Ex Post: The Non-Contractual Basis of Fiduciary Relations, in Philosophical Foundations of Fiduciary Law 209 (Gold & Miller, eds.) (2014); Stephen R. Galoob & Ethan J. Leib, Intentions, Compliance, and Fiduciary Obligations, 20 Legal Theory 106 (2014).  See also D. Gordon Smith, Contractually Adopted Fiduciary Duty, 2014 U. Ill. L. Rev. 1783, 1792 (arguing that a duty arising from the language of a contract should be considered a contractual duty).  Which view is right?

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Impairing State Contractual Commitments – How Sacred Should Contracts Be? — Aditi Bagchi

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Post by Aditi Bagchi

In early May, the Illinois Supreme Court unanimously struck down a 2013 state pension reform law.  That statute reduced various public pension benefits in an effort to reduce overwhelming debt in the public pension system.  The Court affirmed a lower court ruling that the bill violated the pension protection clause in the Illinois state constitution, which provides that “Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”  The Court read the clause to prevent the legislature from any downward revision of a public employee’s pension benefits after the first day of her employment.

Illinois argued that the clause should be read to subject its public pensions to the same limitations as other contractual relationships, including modification or elimination by the state’s police power.  The Court rejected that argument, holding that, especially where the state is itself a party to the contract in question, the hurdle for a substantial impairment of contract is very high and had not been met in this case.

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Private Law Consortium, Day 2 part a — Yonathan Arbel

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Post by Yonathan A. Arbel

Continuing Janet Freilich‘s post covering the first day of the consortium, here follows my take on the second day, which was also very successful. I will divide my summary to two separate posts, so wait for updates… In this post I cover the contributions of John Goldberg, Stephen Smith, and Robert Caso and Guilia Dore.

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Private Law Consortium, Day 1

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Post by Janet Freilich

 

On July 6-7, McGill University’s Faculty of Law and Center for Intellectual Property Policy hosted the Third Annual Private Law Consortium, organized by David Lametti. Participants at the Consortium came from Bar-Ilan University, Harvard University, McGill University, the University of Oslo, the University of Pennsylvania, and the University of Trento. The Consortium spanned a wide variety of private law topics, including property, torts, contracts, and intellectual property.

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We’re all connected! Regulating Contracts for Electricity — Aditi Bagchi

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Post by Aditi Bagchi

The Supreme Court has agreed to review a federal appellate court decision overturning demand response regulation from the Federal Energy Regulatory Commission.  The issue on appeal is not one of private law but of federal jurisdiction.  The federal agency has authority to regulate the wholesale market but states retain authority over retail markets.  The problem is that there is no clear line between those markets.  The FERC regulation is designed to reduce wholesale prices but it does so by way of rebates for reduced retail demand.  The question is whether the regulation technically governs wholesale sales (whose prices are reduced) or retail sales (that don’t happen as a result of its incentives).

The jurisdictional lines in the Federal Power Act force the analytically unfortunate question of whether FERC Rule 745 governs wholesale or retail markets.  But the exercise of jurisdictional line-drawing may offer a lesson for common law regulation of contract as well.

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ISNIE 2015 — Dan Kelly

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Post by Dan Kelly

The International Society for New Institutional Economics (ISNIE), soon to be renamed The Society for Institutional and Organizational Economics (SIOE), is hosting its 19th Annual Conference this weekend, June 18-20, at Harvard Law School.  The conference website includes details on this year’s program and papers.

The conference is sponsored by Harvard Law School through the Project on the Foundations of Private Law.  In addition to keynotes by Martin Nowak (Harvard) on “The Evolution of Cooperation” and Michael Whinston (MIT) on “Property Rights and the Efficiency of Bargaining,” the program includes a number of panels that intersect with private law topics, including agency and fiduciary law, contracts, intellectual property, and property rights.     

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A Frolic Of His Own — Anthony J. Sebok

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Post by Anthony J. Sebok

As I noted in my last post, some common law jurisdictions are still guided by an anachronistic hostility to the sale of lawsuits to strangers.  But some, like Wisconsin, are much more liberal.  For a proponent of the free alienability of litigation, liberal regimes pose a special challenge, which has to do with limits.  When should the sale of lawsuits be limited?  How should the rules governing limitations be designed?

Recently Judge Richard Posner decided a case where he found, under Wisconsin law, a reason to set aside the sale of a lawsuit.  The facts led him to quote Karl Marx and William Gaddis, and the case, Carhart v. Carhart-Halaska Int’l, LLC, 2015 U.S. App. LEXIS 9497 (7th Cir., June 8, 2015), is worth reading for Posner’s sly commentary on what appears to be at first just another example of lawyering that is, as the British say, too clever by half.

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Private Law is Happening — John Goldberg

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Post by: John Goldberg

Kudos to NPL blogger Daniel Markovits for assembling and hosting last week an excellent two-day conference at Yale Law School as the capstone to his Spring ’15 Private Law Seminar. (It is surely a good sign for the field that Harvard and Yale now both have established programs on private law.) 

Here was the line-up of panelists and readings, which encompassed an appropriately diverse yet overlapping set of topics and methodologies, and gave rise to excellent discussions.

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Should There be a Federal Policy on Arbitration? — Aditi Bagchi

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Post by Aditi Bagchi

The Federal Arbitration Act can be read merely to protect arbitration clauses from hostile judges.  That is, it may merely require neutrality with respect to arbitration.  Alternatively, it can be understood, together with the slew of federal cases overturning allegedly ‘hostile’ state decisions, as affirmatively friendly to arbitration.

In the recent 7th Circuit decision, Andermann v. Sprint Spectrum L.P, Judge Posner takes the former view.  He observes that it is not clear that arbitration should be preferred, but more importantly, there is no reason to treat arbitration terms differently than other contract terms.  Whatever Posner’s ultimate view about the utility of arbitration, he appears more committed to a strong default of neutral enforcement of contract without reference to public policies that might favor or disfavor particular terms.  As long as parties formally agree on arbitration, arbitration carries the mantle of freedom of contract.

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The Acrobatics of Usury — Yonathan Arbel

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Post By Yonathan Arbel

Perhaps one of the most plastic of all private law rules is the prohibition on usury. Judges and religious scholars have been pirouetting around this issue more-or-less gracefully for thousands of years. A recent interesting case in this regard is Bisno v. Kahn, 225 Cal. App. 4th 1087, 170 Cal. Rptr. 3d 709 (2014).  This case raises a question that is rarely asked: can a judgment-creditor charge any amount in exchange for delaying the execution of a judgment?

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Naked Came the Assignment — Anthony J. Sebok

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Post by Anthony J. Sebok

Here is a simple question: why should it matter who brings a valid claim in private law?  Standing, of course, is an important mechanism that insures that courts spend their time only on cases that matter to someone, especially in public law.  But what if the party who was the victim of a genuine harm chooses to assign that claim to a stranger, in order (let’s assume) to let them bring it to the courts.  Why not let that happen?

It is commonly assumed that almost all legal rights are freely assignable:  contract rights, property rights, and even certain causes in action for damages.  But the law in both the United States and England is grappling with how far to take the principle of fee assignability when it comes to “naked” assignments – that is, the assignment of causes of action for the redress of a wrong, not the collection of a debt or the performance of a contract.

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