philosophy
A theory that all law derives from prevailing social interests and public policy. According to this theory, judges consider not only abstract rules, but also social interests and public policy when deciding a case. In this respect, legal realism differs from legal formalism. Either theory can be understood in a descriptive way, prescriptive way, or both ways at once.
A theory that legal rules stand separate from other social and political institutions. According to this theory, once lawmakers produce rules, judges apply them to the facts of a case without regard to social interests and public policy. In this respect, legal formalism differs from legal realism. Either theory can be understood in a descriptive way, prescriptive way, or both ways at once.
Wiki: Formalism remains one of the most influential and important theories of adjudication and has been called the thesis to which realism is the antithesis.[4] Formalism sees adjudication as the uncontroversial application of accepted principles to known facts to derive the outcome in the manner of a deductive syllogism.[5]
Formalists believe that the relevant principles of law of a given area can be discerned by surveying the case law of that area.[6][7] Christopher Columbus Langdell believed that the only resources needed to create a science of law was a law library.[8][9]
Formalism has been called an "autonomous discipline,"[10] in reference to the formalist belief that judges require only the facts and the law, all normative issues such as morality or politics being irrelevant.[11] If judges are seen to be simply applying the rules in a mechanical and uncontroversial manner, this protects judges from criticism. For this reason, formalism has been called "the official theory of judging."[12] Some scholars deny that legal formalism ever existed.[13]
Formalists, contrary to Realists, take the judge at face value, assuming that the facts and principles as recorded in a judge's reasons reflect the facts that the judge considered to be relevant, and the principles that the judge arrived at to reach the judgement. They therefore place little emphasis on the means by which a judge determines the facts.
As a normative theory, legal formalists argue that judges and other public officials should be constrained in their interpretation of legal texts, suggesting that investing the judiciary with the power to say what the law should be, rather than confining them to expositing what the law does say, violates the separation of powers. This argument finds its most eloquent expression in the Massachusetts Constitution of 1780, which provides that the judiciary "shall never exercise the legislative and executive powers, or either of them; to the end [that Massachusetts' government] may be a government of laws, and not of men."[14] Formalism seeks to maintain that separation as a "theory that law is a set of rules and principles independent of other political and social institutions."[15]
Legal formalism can be contrasted to legal instrumentalism, a view associated with American legal realism.[16] Instrumentalism is the view that creativity in the interpretation of legal texts is justified in order to assure that the law serves good public policy and social interests, although legal instrumentalists could also see the end of law as the promotion of justice or the protection of human rights. It also advocates the use of judicial discretion. However, legal formalists counter that giving judges authority to change the law to serve their own ideas regarding policy undermines the rule of law. This tension is especially interesting in common law, which depends on judicial precedent. The "claim to fame" of common law systems is that the task of developing and updating law is best done incrementally by courts that keep in close touch with social, economic, and technological realities than by political organs that, every so often, will attend to legal reforms. Thus legal realism or "relationalism" has been favored in some common law jurisdictions, where the kind of legal codification associated with civil law are virtually unknown
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Positive laws (Latin: ius positum) are human-made laws that oblige or specify an action. Positive law also describes the establishment of specific rights for an individual or group. Etymologically, the name derives from the verb to posit.
The concept of positive law is distinct from "natural law", which comprises inherent rights, conferred not by act of legislation but by "God, nature, or reason."[1] Positive law is also described as the law that applies at a certain time (present or past) and at a certain place, consisting of statutory law, and case law as far as it is binding. More specifically, positive law may be characterized as "law actually and specifically enacted or adopted by proper authority for the government of an organized jural society."[2]
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Legal positivism is a school of thought of analytical jurisprudence developed largely by legal philosophers during the 18th and 19th centuries, such as Jeremy Bentham and John Austin. While Bentham and Austin developed legal positivist theory, empiricism provided the theoretical basis for such developments to occur. The most prominent legal positivist writer in English has been H. L. A. Hart, who, in 1958, found common usages of "positivism" as applied to law to include the contentions that:
Historically, legal positivism is in opposition to natural law's theories of jurisprudence, with particular disagreement surrounding the natural lawyer's claim that there is a necessary connection between law and morality.
In the positivist opinion, the source of a law is the establishment of that law by some legal authority which is recognised socially. The merits of a law are a separate issue: it may be a 'bad law' by some standard, but if it was added to the system by a legitimate authority, it is still a law.
The Stanford Encyclopedia of Philosophy summarises the distinction between merit and source like so: "The fact that a policy would be just, wise, efficient, or prudent is never sufficient reason for thinking that it is actually the law, and the fact that it is unjust, unwise, inefficient or imprudent is never sufficient reason for doubting it. According to positivism, law is a matter of what has been posited (ordered, decided, practiced, tolerated, etc.); as we might say in a more modern idiom, positivism is the view that law is a social construction."[3]
Legal positivism does not claim that the laws so identified should be obeyed, or that necessarily there is value in having clear, identifiable rules (although some positivists may also make these claims). Indeed, the laws of a legal system may be quite unjust, and the state may be quite illegitimate; as a result, there may be no obligation to obey them. Moreover, the fact that a law has been identified by a court as valid does not provide any guidance as to whether the court should apply it in a particular case. As John Gardner has said, legal positivism is "normatively inert"; it is a theory of law, not a theory of legal practice, adjudication, or political obligation. Legal positivists believe that intellectual clarity is best achieved by leaving these questions for separate investigation.
Niklas Luhmann asserts "We can reduce ... positive law to a formula, that law is not only posited (that is, selected) through decision, but also is valid by the power of decision (thus contingent and changeable)."[4] However, positivists do not assert that law is made valid by anyone's decision. In Hart's opinion, the validity of law is a matter of the customary and collective practices of the courts. As for the moral validity of law, both positivists and realists maintain that this is a matter of moral principles. "The power of decision" has no essential role in either, since individual decision rarely suffices to create a social practice of recognition, and it would be implausible to suppose that moral principles are made so by anyone's decision.[3][5][citation needed]
Hart liked Austin's theory of a sovereign, but claimed that Austin's command theory failed in several important respects. Among the ideas developed in Hart's book The Concept of Law (1961) are:
A pupil of Hart, Joseph Raz has been important in continuing Hart's arguments of legal positivism since Hart's death. This has included editing in 1994 a second edition of Hart's The Concept of Law, with an additional section including Hart's responses to other philosophers' criticisms of his work.[13]
Raz has also argued, contrary to Hart,[14] that the validity of a law can never depend on its morality.[15] However, Raz has come to accept that law may depend upon morality in certain circumstances.[16]
Legal positivism in Germany has been famously rejected by Gustav Radbruch in 1946 where prosecution of Nazi supporters faced a challenge of assessing actions that were legally compliant with Nazi Germany law. Radbruch argued that when "discrepancy between the positive law and justice reaches a level so unbearable", it effectively becomes "erroneous law" and must not be followed unconditionally.
Legal positivism is distinct from legal realism. The differences are both analytically and normatively important. Both systems consider that law is a human construct. Unlike the American legal realists, positivists believe that in many instances, the law provides reasonably determinate guidance to its subjects and to judges, at least in trial courts.
Niklas Luhmann asserts "We can reduce ... positive law to a formula, that law is not only posited (that is, selected) through decision, but also is valid by the power of decision (thus contingent and changeable)."[4] However, positivists do not assert that law is made valid by anyone's decision. In Hart's opinion, the validity of law is a matter of the customary and collective practices of the courts. As for the moral validity of law, both positivists and realists maintain that this is a matter of moral principles. "The power of decision" has no essential role in either, since individual decision rarely suffices to create a social practice of recognition, and it would be implausible to suppose that moral principles are made so by anyone's decision.[
The main claims of interpretivism are that
In the English-speaking world, interpretivism is usually identified with Ronald Dworkin's thesis on the nature of law as discussed in his text titled Law's Empire, which is sometimes seen as a third way between natural law and legal positivism.
In the English-speaking world, interpretivism is usually identified with Ronald Dworkin's thesis on the nature of law as discussed in his text titled Law's Empire, which is sometimes seen as a third way between natural law and legal positivism.
The concept also includes continental legal hermeneutics and authors such as Helmut Coing and Emilio Betti. Legal hermeneutics can be seen as a branch of philosophical hermeneutics, whose main authors in the 20th century are Martin Heidegger and Hans-Georg Gadamer, both drawing on Edmund Husserl's phenomenology. Hermeneutics has now expanded to many varied areas of research in the social sciences as an alternative to a conventionalist approach.
We argue for a particular principle by grappling with a whole set of shifting, developing and interacting standards (themselves principles rather than rule) about institutional responsibility, statutory interpretation, the persuasive force of various sorts of precedent, the relation of all these to contemporary moral practices, and hosts of the other standards. We could not bolt all of these together into a single ‘rule’, even a complex one, and if we could the result would bear little to Hart’s picture of a rule of recognition, which is the picture of a fairly stable master rule specifying ‘some feature or features, possession of which by a suggested rule is taken as a conclusive affirmative indication that it is a rule.’28
Dworkin’s argument appears to be this: the legal impact of a principle’s institutional support on its legality and weight is itself determined by principles, namely, those relating to institutions and their authority. For example, whether a judge should recognize the principles in Henningsen and, if so, how much weight to attribute to them depends on a whole constellation of principles relating to the institutional authority of common law courts, their relations to legislatures, and to ordinary moral practices. These institutional principles, in turn, are supported by very broad principles of political morality.29 Dworkin believes that no rule could be fashioned that accurately reflects the verdicts of all these political principles, presumably because the possibilities that would have to be considered and codified are infinite in number. Moreover, these principles and their weights fluctuate over time, based on their own degree of institutional support, and hence any resulting master rule would fail to be stable. According to Dworkin, therefore, the Pedigree Thesis must be rejected for two reasons. First, legal principles are sometimes binding on judges simply because of their intrinsic moral properties and not because of their pedigree. Second, even when these principles are binding in virtue of their pedigree, it is not possible to formulate a stable rule that picks out a principle based on its degree of institutional support. Having previously disposed of the Discretion Thesis, Dworkin concludes that legal positivism must be rejected as an adequate theory of law.
…
According to Raz, therefore, when pedigreed standards run out, judges are under a legal obligation to look to moral principles to resolve the case at hand. Furthermore, in such cases, judges are exercising strong discretion insofar as they are obligated to look beyond the law and apply these extralegal principles to the case at hand. Strong discretion does not, therefore, entail the existence of “extra-legal principles [a judge] is free to apply if he wishes.”38 Rather, judges are legally constrained to apply certain extralegal principles, namely, the morally best ones.39
Another way of highlighting these differences between formalists and realists is by considering where they lie on a spectrum of metaethical views about judging. At one extreme are natural lawyers, who are objectivists about values, believing that values are always consistent through time and regardless of society. Next on the spectrum come formalists, who are metaethical relativists in that they believe that values are relative to the time and society. They are followed by what might be called “moderate” realists, who agree with formalists some of the time, but also believe that there are some circumstances where judges’ decisions manifest their individual values (Baum 2006, 8–9). Finally, an “extreme” realist might believe that judges’ val- ues always manifest their individual values all of the time and would thus fall at the opposite end of the spectrum (Leiter 1997, 279).
It is this single metaethical difference between formalism and realism that seems to cause the two camps to hold differing views about the veridicality of reasons. We noted above that there is no reason for a formalist or a realist to differ on their assumption that judges aim to accurately infer facts, but there may be reasons why judges would represent their findings inaccurately if their values differ from other judges. Given that formalists believe that judges have common values, there is no reason for a formalist to think that judges would misrepresent their values.
[7 In the context of fact-finding in a case, we should recognise that there are two different things that we may be seeking to identify. We may be seeking to identify what really hap- pened given the evidence, or we may be seeking to identify what adjudicators infer happened given the evidence. Formalists treated these two as one and the same, but it is likely that there are slight divergences between the two. Adjudicators’ inferences may diverge from the real world to the challenges of finding out what really happened when we only have limited and unreliable information. Adjudicators inferences’ may turn out to be consistently imperfect. It is helpful to return to the analogy of Euclidian geometry. We know that the intuitions of peo- ple that are the axioms of Euclidian geometry are consistent. Nonetheless, we also know that these intuitions fail to approximate how we believe the physical universe to be in certain ex- ceptional circumstances. Thus it is a possibility that adjudicators’ fact-finding is similarly imperfect.
Positivist theories of law are distinguished by their commitment to the following two broad theses:10
Formalism-Let us call "the class of legal reasons" the class of reasons that may be legitimately offered in support of a legal conclusion, and that is such that, when it supports the conclusion, the conclusion is required "as a matter of law." The class of legal reasons then will include not only (a) the valid sources oflaw (e.g., statutes, precedents, etc.), but also (b) the interpre tive principles through which such sources yield legal rules, as well as (c) the principles of reasoning (e.g., deductive, analogical) by which legal rules and facts are made to yield legal conclusions. Let us say that the law is "rationally determinate" if the class of legal reasons justifies one and only one outcome to a legal dispute. Finally, let us say that judging is "mechanical" insofar as judges, in reaching conclusions about legal dis putes, have no discretion. Judges exercise "discretion" if they either (a) reach conclusions about legal disputes by reasoning in ·ways not sanc tioned by the class oflegal reasons; or (b) render judgments not justified by the class of legal reasons.
…
There are different ways, too, in which the law may fail to realize the formalist's ideal of rational determinacy. The class of legal reasons is indeterminate if it justifies any outcome on a given question. The class of legal reasons is underdeterminate if it justifies more than one but not sim ply any outcome on a given question. Any plausible thesis about the indeterminacy of law is, strictly speaking, a thesis about the underd.eterminacy of law.46 Now the class of legal reasons in a particular legal system is constituted, at least in part, by that system's Rule of Recognition. If the class of legal reasons is underdeterminate, that means that it still con strains the decisions of officials who are exercising discretion-for offi cials have discretion, recall, simply when the class of legal reasons fails to justify a unique outcome. Thus, even our appellate judges who, by hy pothesis, always exercise discretion still may be guided by the Rule of Recognition, just like the other officials of the legal system. But saying this is still compatible with denying the formalist idea that they lack dis cretion, for the Rule of Recognition (and the class of legal reasons it helps define) still underd.etermines any particular decision. Formalism can be false, and the Rule of Recognition can still be a social rule. The real conceptual link, in short, is not between positivism and formalism, but between positivism as a theory of law and the idea that judicial behav ior (including, perhaps, the behavior of appellate judges) is constrained in some measure (even if not fully determined) by the criteria of legal valid ity set out in the society's Rule of Recognition. But formalism demands more than mere constraint, as we have seen already.
The famous Realist arguments for indeterminacy-which focus on the conflicting, but equally le gitimate, ways lawyers have of interpreting statutes and precedents51- only show that the law is indeterminate on the assumption either
(1) that statutes and precedents largely exhaust the authoritative sources of law or
(2) that any additional authoritative norms not derived from these sources conflict.
It is the former assumption that seems to motivate the Realist arguments. Thus, Llewellyn says that judges take rules "in the main from authoritative sources (which in the case of law are largely stat utes and the decisions of the courts)."52
What concept of law is being presupposed here in these arguments for legal indeterminacy, a concept in which statutes and precedent are part of the law, but uncodified norms and policy arguments are not? It is certainly not Ronald Dworkin's theory, let alone any more robust natural law alternative. Rather, the Realists are presupposing something like the ("Hard") positivist idea of a Rule ofRecoguition whose criteria of legality are exclusively those of pedigree: A rule (or canon of construction) is part of the law by virtue of having a source in a legislative enactment or a prior court decision.53
Contract
Llewellyn's contract theory was meant to tell decisionmakers how to regulate sales transactions. The decisionmakers in the theory were courts and law reform organizations such as the National Conference of Commissioners on Uniform State Laws; legislatures played a minor role. The theory had a sub stantive aspect (what the legal rules should be) and an institutional aspect (which legal institutions should make the rules and what form the rules should take). Both aspects of the theory implied views that would be regarded as conventional in today's law and economics world.
A theory directed to decisionmakers should identify and motivate its norms. Law reformers then were concerned with efficiency and redistribution. Llewellyn believed that distributional goals had no place in a contract theory because the commercial actors in the theory commonly occupied the two relevant roles of buyer and seller. This multiplicity of roles would vitiate the pursuit of distributional ends, for what a party would gain when wearing her seller hat she would lose when wearing her buyer hat. The regnant norm in Llewellyn's contract theory thus was efficiency, as then understood. Llewellyn never explicitly justified the pursuit of efficiency. Rather, he believed that American society had accepted the efficiency norm and he did as well.
The substantive aspect of Llewellyn's contract theory followed from four premises:
Llewellyn as a law reformer sought to implement the second and fourth premises of his theory. These held that the state should create efficient default rules (2) and enact transaction cost reducing rules (4). Llewellyn thus said of the realist enterprise, "There is a strong tendency [of realists] to approach most legal problems as problems in allocation of risks, and so far as possible, as problems of their reduction....To approach business matters, in a word,
as matters of general policy."82 Llewellyn explicitly applied this approach to commercial law. The introduction to his sales law casebook stated, "the book
... views the contract as a device for allocating various business risks; it takes up the presumptions [i.e., defaults] of Sales Law as a device for allocating risks which parties have not expressly covered."83 The law could allocate risks with default rules (he called them "yielding rules") or with mandatory rules ("rules ofiron").84 A fault of the Uniform Sales Act was to be unclear about which of its sections were mandatory and which were not.85
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The key notion for Llewellyn's antiformalism was that immanent local customs and practices could provide for fair and reasonable results case-by-case. Appeal to custom would supply the "situation sense"-responsiveness to the particularities of the transaction before the court-that Llewellyn understood to be the essence of common law adjudication.4 This resort to local and situation-specific custom set itself in opposition to two types of formal rationality. Enforcement of custom meant rejecting the highly formalized rules of the classical law of sale, deduced from basic notions of consent. Moreover, appeal to customary norms would ward off the hegemony of private systems of bureaucratic dominance: contracts of adhesion imposed by bureaucratized transactors in their dealings with dispersed consumers or small firms.5 From the perspective of"situation sense" adjudication, the authority of the classical rules or of the ''modern" contract of ad hesion would suffer a common defect: unresponsiveness to the needs and expectations of the participants in the particular transaction before the court. Most deeply, Llewellyn's antiformalist conception of custom responds to Weber's conception of rationalization and the "iron cage" of bureaucratic rule. The appeal to custom would be an effective strategy for resisting the oppres sions of bureaucratic rationalization-for helping transactors to escape from the iron cage.
Llewellyn's antiformalist strategy apparently founders at two crucial points. First, Llewellyn overestimated the coherence among immanent local practices. It is surely an overstatement to say that there are no customs in the sense contemplated by Llewellyn. The evidence, to the contrary, indicates that there were numerous local customs. This is hardly surprising: local transactors were repeat dealers, often in direct personal contact; they consequently could develop a relatively complete contingent contract consisting of expressly bargained terms plus the under standings that arose between them or among all of the local transactors. Rather, the key problem arises when one moves from local to national markets. This move exposed the immense varia tion in custom across local markets, and even within single mar ket types or markets for a single good. Again, in retrospect, this hardly comes as a surprise. Many of the customs at issue are in large measure arbitrary: customs about the referents of agreed upon terms, upon which the desideratum is simply a focal point that prevents ambiguity or opportunistic insistence on purported private meanings. Rules about transactional conventions also are focal points. Moreover, even for rules as to which there are effi ciency advantages, the efficient rule might have differed widely among local markets in the early part of the century. Particularly for agricultural commodities, local conditions for production and distribution-and, correlatively, appropriate contract rules would vary with the weather, local harvesting season, quality of output, and the like.
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Christopher C. Langdell, one of the most prominent classicists (and dean of the Harvard Law School) re jected this rule.9 To him, the essence of contract lay in the concept of promise, and the essence of promise lay in communication to the promisee. A promise that the promisee had not received was, by definition, not a promise at all; thus, acceptance could take effect only upon receipt by the offeror. 10 Langdell recog nized that there might be practical arguments for the mailbox rule. He noted that judges had "claimed that purposes of substantial justice, and the interests of contracting parties as understood by themselves, [would] be best served by holding that the contract is complete the moment the letter of acceptance is mailed," and that some had posed cases showing that Langdell's approach "would produce not only unjust but absurd results."11 For an essentialist like Lang dell, though, these practical arguments were "irrele vant."12 Once one understood the true nature of a promise, nothing else could matter.
New Formalists disdain this sort of essentialism. They advocate formalism, not because it coheres with abstract concepts like "contract" and "promise," but because it advances important pragmatic values like certainty, stability, and efficiency. 13 For example, Lisa Bernstein writes that formalist adjudication by private arbitral regimes benefits contracting parties by promoting clarity and predictability.14 A compre hensive set of bright-line rules, she argues, reduces transaction costs and makes misunderstandings less likely. Moreover, if disputes do arise, a formalist ap proach improves the chances of settlement "by mak ing arbitral outcomes relatively predictable." 15 Simi- larly, Schwartz and Scott advocate formalist interpre tation of certain business contracts, at least as a de fault position, as a means of promoting efficiency. 16 They believe that a plain-meaning approach, coupled with a "hard" version of the parol evidence rule and strict enforcement of merger clauses, best suits the presumed goals of contracting parties--maximizing the joint gains from transactions.
The second difference relates to the classicists' be lief in the ineluctability of legal rules. Classicism taught that judges should apply common law doc trines with relentless logic, without allowing for ex ceptions based upon new social propositions or the harshness of particular results. 17 For example, classi cal contract law held that rromises lacking considera tion were unenforceable.1 Gift promises lacked con sideration; as a result, a court should not enforce a gift promise, even in circumstances where the pro misee reasonably had relied on the promise to his or her detriment. People might recoil at the idea of a promisee bearing the loss in these circumstances, but a court could not ignore the rule about gift promises simply because the rule led to a harsh or unfair result in a particular case. Just as classicists denied the role of real-world concerns in the formulation of legal rules, they denied the role of real-world concerns in the application of rules as well.
By contrast, New Formalists believe that legal rules have merely presumptive force.19 When pragmatic or ethical considerations counsel strongly against the application of a rule in a particular case, a court should not insist on applying the rule. For example, Frederick Schauer endorses a "new" version of for malism that he calls "presumptive positivism."20 Un der this approach, legal rules create "presumptive rather than absolute" constraints for courts, "thereby... allowing for the possibility of override in particularly exigent circumstances."21 Similarly, Randy Barnett's "consent theory" of contract relies heavily on presumptions in explaining the proper lim its of objective interpretation and the role of contract defenses. While the parties' consent makes out a prima facie case of contractual obligation, Barnett argues, the case may be rebutted by a showing of cir cumstances, generally coterminous with traditional contract defenses, that deprive that consent "of its normal moral, and therefore legal, significance."22
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The Uniform Commercial Code (Code) directs courts deciding disputes between merchants to look to usages of trade and other commercial standards and practices to interpret contracts and fill contractual gaps. This so-called incorporation approach1 was the brainchild of the Code’s principal drafter, Karl Llewellyn, and was an important application of legal realist philosophy to commercial law.2 The incorporation approach was both endorsed and expanded in the most recent proposed revision of Articles 1 and 2 of the Code.3 It is also at the jurisprudential heart of many of the most important international commercial law statutes,4 including the recently completed Common European Sales Law.5
The Code’s incorporation strategy has been in operation in U.S. courts for over seventy years and has influenced the development of commercial law around the world; yet the justifications for the strategy have always been predominantly theoretical. The conceptual model underlying the strategy has never been tested or even evaluated against the reality of the way that its trade usage component operates in practice. This Article presents a detailed study of all of the sales-related trade usage cases digested under the Code’s trade usage provision from 1970 to 2007. It then draws on the study’s findings to reevaluate the core justification for the strategy, namely that as compared to a more formalist (agreement-centric) approach to interpretation, incorporation decreases specification costs without unduly increasing interpretive error costs.6
Subject to the usual methodological limitations of studies based on reported cases, the study reveals that the trade usage component of the incorporation strategy works very differently in practice from the way that
it has long been assumed to work in theory. The study demonstrates that interpretive error costs are likely to be higher than theorists assume since the types of “objective” evidence of trade usages that incorporation’s defenders suggest will minimize the risk of interpretive errors7—such as expert witness testimony, trade codes, and statistical evidence—are not routinely introduced in sales-related litigation. Rather, in a majority of cases, the existence and content of usages was proven solely through the testimony or affidavits of the parties and/or their employees, a type of testimony that may be either deliberately or subconsciously self-serving.8 In addition, there was not a single case in which either party introduced any data that the alleged usage was regularly observed. The study also suggests, though by no means proves, that given the weak evidentiary basis of trade usage determinations, the Code’s permissive parol evidence rule, and the ways that courts have interpreted the Code’s hierarchy of authority, the incorporation strategy is unlikely to reduce—and may even increase— specification costs in many transactional contexts.
In light of these and other findings about the incorporation strategy’s effect on motions for summary judgment, transactors’ ability to engage in litigation-related strategic behavior, and the interaction of the strategy and the operational policies and contract administration mechanisms used in large multi-agent firms, this Article concludes that significant commercial law reform is warranted. More specifically, it suggests that if commercial law is to effectively meet the needs of the modern outsourced and highly innovation-dependent economy, its background interpretive presumptions should be shifted in the more formalist/agreement-centric direction of the New York common law, at least in transactions between large business entities.
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1 The term “incorporation approach” refers to the Code’s incorporation of course of performance, course of dealing and usage of trade. This Article focuses solely on the incorporation of trade usage. For a discussion of the reasons why it is undesirable to incorporate course of dealing and course of performance into commercial contracts, see Lisa Bernstein, Merchant Law in a Merchant Court: Rethinking the Code’s Search for Immanent Business Norms, 144 U. PA. L. REV. 1765 (1996).
2 See WILLIAM TWINING, KARL LLEWELLYN AND THE REALIST MOVEMENT (2d ed. 2012) (describing the realist jurisprudential bent of the Code, but noting that no realist-style social scientific research was done in connection with the Code project). It is, however, important to note that early drafts of the Code were more sensitive than the adopted version to the procedural and strategic considerations identified in this Article. They contained a provision directing “Merchant Experts on Mercantile Facts,” to determine the content of usages relating to a variety of subjects including, but not limited to, the conformity or nonconformity of goods, whether a nonconformity was substantial, the reasonableness of actions, and other issues within the purview of “special merchants’ knowledge, rather than of general knowledge.” See REPORT AND SECOND DRAFT: THE REVISED UNIFORM SALES ACT 251-54 (1941) [hereinafter REVISED UNIFORM SALES ACT]. Llewellyn recognized that these determinations were ill-suited to adversarial litigation in front of lay juries, explaining that even “such question[s] as conformity of textiles to a requirement of merchantability can take three weeks merely to prepare for trial,” and there is a “tendency of the seller’s choice [of witnesses] to be the seller’s ‘man.’” Id. at 251–52.
3 See James J. White, Good Faith and the Cooperative Antagonist, 54 SMU L. REV. 679, 679 n.1 (2001) (noting that the invocation of commercial standards that rely on usage of trade for their content has been “expanded” in the revised Code).
4 See UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS, Apr. 11, 1980, 1489 U.N.T.S. 3, art. 9.
5 See Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law, COM (2011) 635 final (Nov. 10, 2011); see also Lisa Bernstein, An (Un)Common Frame of Reference: An American Perspective on the Jurisprudence of the CESL, 50 COMMON MKT. L. REV. 169, 169–70 (2013) (observing that the Common European Sales Law’s reliance on trade usage is similar to the Code’s and therefore suffers from many of the same flaws).
6 See Jody S. Kraus & Steven D. Walt, In Defense of the Incorporation Strategy, in THE JURISPRUDENTIAL FOUNDATIONS OF CORPORATE AND COMMERCIAL LAW 193 (Jody S. Kraus & Steven Walt eds., 2000); Clayton P. Gillette, Harmony and Stasis in Trade Usages for International Sales, 39 VA. J. INT’L L. 707, 707–09 (1999) (“The commercial law literature contains a somewhat traditional story about the efficient incorporation of trade usage Commercial parties, unable to specify every contingency with precision, can reduce transactions costs by incorporating default rules into their contracts; total contracting costs are minimized to the extent that those defaults reflect risk allocations that most parties would have adopted had they negotiated explicitly about the term,” and suggesting that “usages of trade . . . provide an alternative source of majoritarian defaults. [that] serve the function of reducing the costs of contracting.”); see also Steven Shavell, On the Writing and the Interpretation of Contracts, 22 J.L. ECON. & ORG. 289 (2005) (putting forth a specification cost saving justification for looking to usage that is based on a stylized model of contracting that does not take into account error costs or strategic behavior costs).
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contracts- LR-WVa-recent-contracts
contracts- remedies-breach-express-warranty
contracts- review_On_Justice_in_Transactions