Is Equitable Contract Law a Pipe Dream? — Henry Smith

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Post by Henry Smith

At last month’s American Law and Economics Annual Meeting, I attended a very interesting session on Commercial Law and Contracts, at which the first two papers were in tension with each, as were their authors – in a polite way!  The first was “The Common Law of Contract and the Default Rule Project,” by Alan Schwartz and Bob Scott.  They argue that the program over the last century by academics, codifiers, and Restaters (“drafters”) to supply transcontextual defaults rules that apply in a wide variety of contracts was doomed to fail. Common law contract supplied a limited number of defaults that do have this feature, such as expectations damages for breach of contract.  Going beyond these traditional rules faced the drafters with a dilemma.  They did not have knowledge enough to supply defaults that would make sense for particular industries.  So they chose the transcontextual route, but to create additional defaults here required them to fudge the content, opting for fuzzy or underspecified standards based on custom and reasonableness, and commercial parties have not been receptive to these efforts, often opting out of them. 

Source: http://firstyearcontracts.blogspot.com/2010/03/estate-of-mr-george-edward-kent-man-who.html

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Samuelson on Merger in Copyright Law and Questions of Redundancy in Legal Design — John M. Golden

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Post by John Golden

In the forthcoming article Reconceptualizing Copyright’s Merger Doctrine, Pamela Samuelson of Berkeley Law provides an extended review of copyright law’s merger doctrine.  Courts have periodically invoked this doctrine in restricting the extent to which copyright protections apply to the expression of an idea when, as Samuelson puts it, “that idea is incapable of being expressed, as a practical matter, in more than one or a small number of ways.”  Samuelson’s article seeks to quash a number of “myths” about the doctrine, touching on aspects of its substantive scope, the frequency of the doctrine’s applicability, and its history as a creature of “common law adjudication.”  Samuelson concludes, among other things, that (1) the doctrine serves as an important “limiting principle of U.S. copyright law”; (2) the doctrine can affect copyrightability as well as copyright scope; and (3) courts should avoid an overly narrow view of the doctrine, thereby helping it realize its potential as a means for “mediating conflicts between and among the interests of first and second-generation authors, of third parties affected by those disputes, and of the public.”

This blog post focuses on another aspect of Samuelson’s article, its discussion of how the merger doctrine relates to other limiting doctrines in copyright.  These other doctrines include the following: (1) the scènes à faire doctrine, which limits the extent to which copyright covers standard or indispensable elements of expression (such as conventional poses in portraits, see William W. Fisher III et al., Reflections on the Hope Poster Case, 25 Harv. J.L. & Tech. 243, 259 (2012)); (2) copyright law’s originality requirement; (3) exclusions of facts, ideas, and other functional subject matter from copyright protection.  At one point, Samuelson suggests that courts’ relative lack of confidence in their mastery of copyright law’s content or justifications might explain some of the apparent proliferation of doctrinal overlaps.  She writes, “Courts sometimes perceive the other doctrines as overlapping with merger, but in some cases, courts invoke multiple doctrines when seemingly unsure which doctrine would provide the soundest grounding for the court’s decision.”

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The Second Circuit Polices the Contract-Tort Boundary — Greg Klass

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Post by Greg Klass

On Monday the Second Circuit released its decision in US ex rel. O’Donnell v. Countrywide Home Loans. This is a major case—in terms of dollar amounts (the trial court had assessed a $1.27 billion penalty against Countrywide), for understanding the law’s ability to deal with the wrongs that caused the subprime mortgage crisis, and with respect to the legal question of where to draw the line between contracts and torts. There’s much more going on in the case than I can summarize here. But here are some initial thoughts on it. Some of them also appear in Dan Fisher’s excellent piece in Forbes.

The legal framework is a little complex, but the basic thrust of the decision is that there was no evidence that Countrywide ever made a false representation to Freddie Mac and Fannie Mae about the quality of the mortgages it was selling. The initial contract of sale promised to deliver “investment quality mortgages,” but that was just a promise. There was no evidence that at the time Countrywide made it the company intended to do anything else—that it committed promissory fraud. It is clear that Countrywide subsequently intentionally breached that promise by delivering lots and lots mortgages that it knew were crap. (If you haven’t seen or read The Big Short, you might be shocked by Judge Rakoff’s post-verdict summary of the bullshit Countrywide trafficked in.) But, according to the Second Circuit, there was no evidence that it ever made any additional representations—after the initial contract to sell—as to the quality of those mortgages. No lie, no fraud.

A few observations:

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Party Autonomy to Choose a Forum: Philosophical and Historical Justification — Milana Karayanidi

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Student post: Milana Karayanidi

On March 18-19, the Young Comparativists Committee (YCC) of the American Society of Comparative Law (ASCL) hosted its fifth annual global conference at Tulane University Law School. Many scholars presented their papers relating to teaching and writing in comparative law, and more than 100 scholars from 80 countries attended. At the conference, I presented my work on Normative View of Party Autonomy to Choose a Forum in a Comparative Perspective. My paper emphasized the unprecedented rate of recognition of forum selection clauses in international civil and commercial transactions. I discussed theoretical justifications of the principle of party autonomy in choosing jurisdiction, drawing upon Kantian ideas of individual autonomy, non-instrumentalist private law theory accounts, and the increasing dominance of contractual principles within the modern law of civil procedure. In addition, I examined the reasons for limiting party autonomy in view of considerations of equality and certain public interests. Furthermore, I examined the evolution of party autonomy to choose a forum within the national systems of the U.S., Germany and Russia. I argued that some of the rationales behind the historical developments that led to party autonomy recognition in these national systems can be used to justify party autonomy in international dispute resolution.

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The Iran Nuclear Deal and Negotiations Between Enemies — Sadie Blanchard

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Post by Sadie Blanchard, Research Fellow Yale Law School

In its penultimate session of the spring, the Seminar in Private Law at Yale Law School considered the negotiations toward the Iran nuclear deal. Catherine Ashton, former European Union foreign minister who was a key participant in the negotiations, spoke together with Philip Bobbitt of Columbia Law School.

Ashton discussed the dynamics of the negotiations and the decisions about structuring them that were, in her view, critical to their success. Among them was a “noises off” policy instituted early by the delegates: they mapped out the issues that had to be part of a deal and excluded other considerations from being raised in the negotiations. That policy served to prevent future derailment of the critical negotiating points.

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Hohfeld Returns to the Supreme Court — Ted Sichelman

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Post by Ted Sichelman After more than a 25-year hiatus, Wesley Hohfeld—one of the preeminent private law theorists of the 20th century—has been cited by Justice Thomas in dissent earlier this week in Heffernan v. City of Paterson (thanks to Shyam Balganesh for the heads up), a case involving the alleged deprivation of free speech … Read more

Property and “The Right to Include” — Dan Kelly

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Post by Dan Kelly

Donald Kochan (Chapman) recently published an essay, “Property as a Vehicle of Inclusion To Promote Human Sociability,” in JOTWELL—The Journal of Things We Like (Lots).  The essay reviews my article on The Right to Include.  In that article, I attempt to highlight the fact that private property allows owners not only to exclude but also to include others.  Inclusion may occur informally, contractually, or through a range of property forms, from easements and leases to common-interest communities and trusts.  While there are benefits from including others in property (think of Airbnb), there are also costs and potential pitfalls of inclusion—coordination difficulties, strategic behavior, and conflicts over use.  For this reason, I argue, the law enables owners to select from a variety of forms that provide different types of anti-opportunism devices, including mandatory rules, fiduciary duties, and supracompensatory remedies.  Ultimately, I contend that “ownership can be inclusive, rather than exclusive; it can facilitate cooperation, not just result in conflict; and it frequently promotes human sociability, not atomistic individualism.”

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Yale Law School’s Seminar in Private Law: Online Dispute Resolution

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Post by Sadie Blanchard, Research Fellow Yale Law School

Last week, Yale Law School’s Seminar in Private Law took up online dispute resolution (ODR). Colin Rule, who created eBay’s and PayPal’s dispute resolution systems and now runs a startup that builds ODR platforms, spoke together with Tom Tyler, a social psychologist who studies how judgments about the justice of procedures impact legitimacy and cooperation.

Rule began by demonstrating an ODR platform he created in cooperation with the Dutch government, and which he presented as a prototype for the future of justice and access to justice. The platform, Rechtwijzer, is for couples contemplating or going through divorce. It provides information about legal options as well as a platform on which couples can collaborate to solve problems, negotiate, and, if necessary, mediate issues such as child custody, alimony, child support, and the division of property.

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Defences in Unjust Enrichment, Book Review — Yotam Kaplan

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Post by Yotam Kaplan, Private Law Fellow, Harvard Law School

Defences in Unjust Enrichment, edited by Andrew Dyson, James Goudkamp and Frederick Wilmot-Smith, is the recently published second volume in an ongoing series, Hart Studies in Private Law: Essays on Defences. The first volume covered defenses in tort law, and the remaining two volumes will treat defenses in contract law and equity. The current volume offers essays by some of the world’s leading scholars, and a memorable note by Lord Reed of the Supreme Court of the United Kingdom. This is a welcome addition to unjust enrichment scholarship, as the study of defenses (and the change of position defense in particular) has been central to the development of this area of law in recent years. 

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Summer School Announcment: “Contract Law in a Liberal Society” — Yonathan Arbel

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Post by Yonathan Arbel Dr. Lyn Tjon Soei Len, of the University of Amsterdam,  asked to bring this invitation for their very interesting summer-school to the attention of our readers: From June 29- July 1 the Summer School “Contract Law in a Liberal Society” will take place in Amsterdam. Junior scholars and advanced students will have … Read more

Yale Law School’s Seminar in Private Law: Non-Hierarchical Enforcement in International Relations

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Post by Sadie Blanchard, Research Fellow Yale Law School

Last week, Yale Law School’s Seminar in Private Law considered non-hierarchical enforcement. Oona Hathaway and Scott Shapiro discussed their work on outcasting as a method of law enforcement, and Leif Wenar discussed his new book Blood Oil: Tyrants, Violence, and the Rules that Run the World.

Hathaway and Shapiro describe outcasting as a type of law enforcement that does not rely on physical coercion by official actors within a legal regime. Instead, outcasting relies on “denying the disobedient the benefits of social cooperation and membership.” They find outcasting in orders that are clearly legal orders, such as classic canon law, medieval Icelandic law, and contemporary United States public law. It therefore follows that international law’s heavy reliance on outcasting for enforcement does not render it “not law.”

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Specific Performance in Action – Yonathan Arbel

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Post by Yonathan Arbel

Greg Klass’ recent post (as well as recent essay) raised the issue of efficient breach. Deeply embedded in the debate on efficient breach is the choice of remedies between specific performance and expectation damages. If courts award money damages, then this—in the view of opponents of the efficient breach theory—enables promisors to “buy” their way out of promises. Instead, the argument goes, awarding specific performance would give promisees “what they were promised”.  Contrary to their approach, specific performance is reserved under U.S. law only to (arguably) exceptional circumstances involving unique goods and land.

In my work, I try to show that enforcement matters. Parties do not negotiate or behave in the shadow of the law, I argue, but in the shadow of the sheriff. And conventional theory has tended to downplay and sometimes completely overlook the role of enforcement. Thinking through the lens of enforcement on private law provides new insight on old questions and the question of choice of remedies is no exception.

Looking from this perspective, I conducted a qualitative empirical analysis looking into the motivations of people suing for specific performance and the real-life outcomes of these lawsuits: are judgments implemented? Do people negotiate around them? To what extent do the motivations of litigants differ from their lawyers?

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Yale Law School’s Seminar in Private Law: Disputing Ends and Means in the Field of Human Rights

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Post by Sadie Blanchard, Research Fellow Yale Law School

Last week in Yale Law School’s Seminar in Private Law, Iain Levine, Deputy Executive Director at Human Rights Watch, and Sam Moyn, Professor at Harvard Law School, began a discussion of practical and theoretical perspectives on the legitimation of human rights. A preliminary point might help to orient readers, who would not be alone if they wondered what human rights have to do with private law or with the Seminar’s theme of how dispute resolution processes that exist outside of established legal or political structures can generate authority. Most nations, after all, have agreed to several multilateral human rights treaties negotiated within the United Nations. Human rights are monitored and enforced by international tribunals and other bodies created and controlled by states through the United Nations and other political assemblies of states. The international human rights regime seems to be precisely a political and legal structure designed and built by states.

Nonetheless, relevant questions remain. For example, how did this state of affairs come to be? The history of the global ascent of human rights is short. What is the content of human rights, and how should they be protected? What do they imply for sovereignty and public authority? Those issues remain contested not only within the state-centric human rights architecture but also outside of it. Such questions make human rights an appropriate object of study by those who wish to better understand conflict resolution outside of established structures.

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Hanoch Dagan on “an Autonomy-Based Private Law” — John Golden

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Post by John Golden

In a paper posted on SSRN, The Challenges of Private Law: Towards a Research Agenda for an Autonomy-Based Private Law, Hanoch Dagan lays out a vision of private law as a “law of our interpersonal (horizontal) relationships” that strives to “establis[h] ideal frameworks for respectful interaction between self-determining individuals.”  Dagan thereby seeks to escape the “deadlock” between views of private law as (1) “a garden-variety mode of regulation” and (2) a branch of law whose focus on “individual independence” makes it “resistant to demanding interpersonal claims.”  Dagan argues that, in a world “of interdependence and of personal difference,” “tak[ing] seriously law’s commitment to autonomy as self-authorship or self-determination” requires subjecting private law to a “prescription of structural pluralism and [an] injunction of relational justice.”  In accordance with the prescription of pluralism, private law should provide individuals with “meaningful choices.”  Indeed, private law theory should “celebrate [a] multiplicity of contract types and property institutions rather than suppress … or marginalize them.”  In accordance with concerns of relational justice, private law needs provisions for “interpersonal accommodation” to help ensure that individuals “respect each other’s right to self-determination and thus to substantive equality.”

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Yale Law School’s Seminar in Private Law: The Role of Business Elites in Negotiating the End of Apartheid

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Post by Sadie Blanchard, Research Fellow Yale Law School

Last week’s session of the Seminar in Private Law at Yale Law School considered the role of business elites in negotiating the end of the apartheid state in South Africa. Michael Young discussed the secret negotiations he convened in England during his tenure at a British mining firm operating in South Africa between the African National Congress in exile and Afrikaner elites. Itumeleng Makgetla presented a paper she is coauthoring with Ian Shapiro that applies game theory to the role of South African business leaders in negotiating the transition to democracy.

Young set the stage by recalling how dramatically international relations in the 1980s were shaped by the Cold War’s iron division of the world. South Africa’s social, economic, political, and security conditions were deteriorating: a state of emergency had been declared; unemployment was rising; and foreign investment was fleeing. Prime Minister P.W. Botha had begun running the country through a security bureaucracy, alienating even members of his own party. Despite the widely recognized instability and injustice of the regime, the United States and the United Kingdom were unwilling to offer diplomatic support to a transition because of the ANC’s communist affiliations within and outside South Africa.  

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Efficient Breach? — Greg Klass

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Post by Greg Klass

I just read Robert Scott’s 2015 Boden Lecture at Marquette Law School, “Contract Design and the Shading Problem.” For anyone interested in what’s happening in the economic, instrumental and empirical analysis of business-to-business contracts, this is a great place to start.

There is a lot of interesting stuff in this piece, but here I want to mention only Scott’s argument that we’ve all been paying too much attention to the theory of efficient breach. This is a remarkable claim from the scholar who, together with Charles Goetz on 1977, coined the term “efficient breach,” and did as much as anyone to promote the theory early on. Scott now considers it unsatisfactory for an empirical reason: the theory does not describe most breaches. Rather than one party deciding it is in its interest to breach and pay damages, most breach of contract cases involve disputes—sincere or opportunistic—as to what the contract requires. The breach did not increase the size of the pie, but resulted from disagreement about how the pie was supposed to be divided. Theories that emphasize efficient breach therefore ignore what parties, at the time of contracting, really care about: avoiding disagreement in the gray zone, or what Scott calls “shading.” Scott concludes that, “while we meant well, Goetz and I are probably primarily responsible for leading a generation of scholars down the wrong garden path.”

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How Not to Read Bonds — Aditi Bagchi

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Post by Aditi Bagchi

In 2001, Argentina defaulted on about $92 billion worth of bonds.  It subsequently restructured these bonds, and 93% of bondholders accepted the 30 cents on the dollar that Argentina offered.  But some hedge funds bought the original bonds at a discount and held out on repayment.  They were able to persuade Judge Griesa in New York that a pari passu clause in the original bonds prohibited Argentina from treating new bonds differently than the original bonds, and the judge actually issued an injunction prohibiting Argentina from making payments on the new bonds – effectively locking Argentina out from capital markets.

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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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Yale Law School’s Seminar in Private Law: Global Public Health Cooperation and Conflict

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Post by Sadie Blanchard, Research Fellow Yale Law School

This week’s session of the Seminar in Private Law at Yale Law School took up transnational cooperation to combat influenza. Professor Amy Kapczynski spoke together with Dr. Nancy Cox, former Chief of the CDC’s influenza division who was responsible for its cooperation with a global network, operating under the auspices of the WHO, of national flu research labs that shares influenza samples and isolates the strains of the virus used in vaccines.

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Social Perception of Testamentary Capacity — Tess Wilkinson-Ryan

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Post by Tess Wilkinson-Ryan I am teaching Trusts and Estates this semester, and we are currently covering standards for testamentary capacity. As a psychologist, I have a passing interest in cognitive ability and disability, but even moreso an interest in perceptions of capacity. A nice example of a case about social perceptions of mental health is … Read more

Yale Law School’s Seminar in Private Law: The Sociology of International Commercial Arbitration

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Post by Sadie Blanchard, Research Fellow Yale Law School Last week, I introduced a series of blog posts on Yale Law School’s Seminar in Private Law. The Seminar’s first session considered the sociology of international commercial arbitration. Emmanuel Gaillard and Yas Banifatemi of Shearman & Sterling’s international arbitration practice spoke alongside Emily Erikson, a professor of sociology … Read more

Yale Law School’s Seminar in Private Law: Dispute Resolution Beyond the State — Sadie Blanchard

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Post by Sadie Blanchard, Research Fellow Yale Law School

Over the coming term, the Seminar in Private Law at Yale Law School will explore dispute resolution outside the state. Disputes are often resolved through processes that fall outside any previously authorized political structure. Because such processes cannot rely on the state for legitimacy, they owe whatever authority they achieve to their own natures. To better understand this category of dispute resolution mechanisms, the Seminar will bring together scholars in law, the social sciences, and the human sciences and people who practice law, politics, medical research, human rights advocacy, university administration, and commerce to discuss their ideas and experiences concerning such free-standing efforts to resolve disputes.

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