(Almost) Live Blogging From AALS Contracts Conference:
I am in Montreal at the Association of American Law Schools (AALS) Mid-Year Meeting. This year the topic is Exploring the Boundaries of Contract Law. These sessions are being held at the same time as an AALS Conference on Commercial Law at the Crossroads. This morning we are welcomed by Bill Hines, the AALS President followed by an introduction by Robert Hillman of Cornell and Dan Keating of Wash U. Both are on the planning committee for the conferences.
I have never live-blogged a conference before, so I may lose interest and stop. The question is whether the readers of this blog lose interest in a conference on contract law before I lose interest in blogging about it. Because I could not access the wireless network in the meeting room, I am uploading this post from my hotel room during the break. For this reason I do not have time to correct any typos or add links.
We start with a joint session between the contracts and commercial law groups. Bob Hillman-–a contracts professor--starts by saying he did not realize he was going to be addressing the commercial law group when he wrote his introduction, so he welcomes those of use who teach the first and second most interesting courses in the curriculum. I agree that contracts is a wonderful course to teach. It is chocked full of classic cases with wonderful fact patterns—pregnant cows, carbolic smoke balls, hairy hands—hard but discernable rules of law, and the challenge to theoretically understand them. It invokes important moral issues such as whether surrogacy contracts should be enforced, and whether the specific enforcement of labor contracts amount to slavery.
Now Dan Keating is doing his welcome. He mentions that the last time we had such a meeting on contracts was 15 years ago. He remembers rubbing shoulders with the greats, like E. Allan Farnsworth who, sadly, died this year. For me, Allan was not only an intellectual giant, he was a charismatic person whose absence at this conference will be missed.
The first panel is on “Modern Adhesion Contracts: Clickwrap, Browsewrap and Shrinkwrap.” The panelists are Bill Whitford (Wisconsin), Clay Gillette (NYU) and Juliet Moringiello (Widener). I have known both Bill and Clay for many years, so I am particularly interested in hearing what Juliet has to say, as I have never heard her speak before. [Click show to read rest of post
Bill Whitford’s talk is about the ProCD v. Zeidenberg (86 F.2d 1447 (7th Cir. 1996). This case involved the enforceability of a shrink wrap agreement that limited the use of the Pro-CD database to noncommercial uses. Pro-CD made a program in which you could look up anyone’s phone number and address in the US. This was a valuable program to have before lookup services on the internet. I bought one myself. ProCD priced the program very low for personal use and much higher for those who would use it commercially. Zeidenberg bought the program for the low price and used the program commercially. When sued by ProCD, he questioned the existence of his assent to the form terms in the contract that was included in the box. In an opinion by Frank Easterbrook, the 7th Circuit found that the form terms were enforceable. (At least these are the facts as I recall them. Whitford did not summarize the case as he assumed we all knew it.)
Whitford’s claim is that the decision on ProCD is “judicial activism.” He considers “judicial activism” to be law-making by judges and he starts by saying that sometimes it is proper and other times not so the issue is when there ought to be activism and when there should not be. He starts with the claim (assumption) that contract law rules should ordinarily be made by legislatures. But often there is legislative inertia against acting. His claim is that the goal of judicial action ought to be to get legislatures to act to address a problem. As the problems of “delayed term” transactions was already being addressed by the legislature, there was no need for the courts to get involved. Because it gave business a victory in ProCD, it had the effect of moving business to oppose new legislation to handle the problem rather than support legislation so it had the effect of shutting down the legislative process, What it should have been doing was protect the one-shot players (consumers) from repeat players (businesses). Here it did the reverse. My reaction: So “activism” is OK if it spurs legislation that assists consumers, and not when it serves to assist business (and thereby block consumer protection legislation). Got it.
Clay Gillette is up now discussing form contracts. He questions the underlying assumption that unregulated markets will necessarily exploit consumers by using one-sided form contracts. He notes that the inability of business to distinguish between those who read form contracts (like the buyers from NYU) from nonreaders (like him), will lead them to give more favorable terms to him so as not to lose the business of NYU.
On the other hand, readers of form contracts may not share the same interest as nonreaders, so the terms they get won’t serve the interests of nonreading buyers. For example a large buyer might have enough economic clout to get after-warranty service not included in the form terms when an individual buyer would be out of luck. Even if there are pro-seller terms, however, does not mean that contracts are pro-seller on balance. The real issue is whether the contract as a whole is on balance pro-seller. What matters for fairness is that the contract as a whole be sufficiently balanced.
He also notes that proseller contracts allow sellers to give breaks to deservingbuyers–the way businesses give refunds to deserving consumers when reserving the right not to, while being empowered to deny refunds to customers who they think are abusing the process in some way. This was a point made by Lisa Bernstein of the University of Chicago (and my former collegue at BU) is her contracts scholarship.
His plea is not to say that standard form contracts are good or bad, but to be more sensitive and to exactly who is really benefitted or harmed by form contracts. With respect to the form contracts in which the terms come later, he notes a study that in an industry in which some offer their terms in advance and others offer them later, the “terms later” contracts are no more pro-seller than those in which the terms were supplied earlier.
He closes by asking whether courts are in a good position to tell the difference between good terms and bad terms, much less good overall contracts from bad ones. If they cannot, then we should be wary of courts intervening to alter the terms of a contract–even form contracts. Note that Gillette’s use of judicial activism differs from Whitford’s. For him judicial activism is interfering with individual contractual agreements, For Whitford, it was interfering with the legislative process.
Juliet Moringiello is next and she is using a powerpoint presentation. She is focussing her talk on teaching form contracts. That was apparently supposed to be what the panel was supposed to be about, but both Whitford and Gillette’s talks were more about the merits of form contracts.
Moringiello uses the teaching of on-line form contracts as illustrating the objective theory of contracts. This is the theory by which people are held to be bound by what other reasonably believed they meant, as opposed to what they subjectively may have intended. (Think the difference between original public meaning and the original intentions of the framers.)
As someone who teaches contracts, I found all three presentations to be remarkably superficial. To be sure, each discussed insights that we do and should teach our students, but all this should have been old news to an audience consisting of contracts professors. (This is all covered, for example, in the latest edition of my contracts casebook so any professor using the casebook would be well aware of these issues.) Although all three presentations were engaging, and each presented a view worth considering, so far at least anyone familiar with the basic contract theory literature would have learned nothing new. Perhaps this is a conference for professors not so familiar, but why would such unengaged professors come all the way to Montreal during the summer. And had anyone been unfamiliar with these ideas would have had a hard time grasping the very brief summary of these ideas in these presentations.
In short, all that was said was thoughtful, but too truncated for anyone completely unfamiliar with them and also too superficial for anyone who is already familiar with the underlying positions they summarize.
During a brief interaction among speakers, Clay questions the use of “judicial activism” to describe when courts are enforcing the parties agreement. He also questions the theory that judges should adopt rules that operate as a check on organized interests. He notes that consumer groups are pretty organized and it is hard to see that their interests were not represented in the political process governing form contracts. He thinks that courts should focus on enforcing contracts rather than putting the thumb on the scale of the legislative process.
All this makes me wonder about the value of these sorts of academic conferences. While undoubtedly beneficial for networking with others in your field. Yet even in this program with excellent speakers on an interesting topic, I think little is accomplished. Hopefully, however, this summary of the session will be of interest to nonlegal readers who are unfamiliar with these sorts of issues of contract law. And for law students, you have a better idea of where some of your professors are this week.
Now it’s time for discussion from the floor. Mark Lemley of Stanford asks the panel what is left of assent under the cases allowing the enforcement of click wrap and especially browsewrap agreements. Juliette agrees entirely with browsewrap agreements. (I tend to agree as well that there is a difference between clickwrap and browsewrap agreements. The formality of being made to click assent is significant, even if one is assenting to standard form contracts. With browsewrap agreements, no such formality exists.)
Peggy Radin, also of Stanford, says she preaches damage control by telling people that the ProCD case is not the law everywhere in the US. She also distinguishes the case from situations where when there is no price discrimination between consumer and commercial uses, a factor that Judge Easterbrook emphasizes in his opinion in ProCD.
Jean Braucher, of the University of Arizona, make a point concerning another form contract case, Hill v. Gateway, in which the 7th Circuit upheld the enforceability of a form contract shipped with a computer ordered over the phone. Jean notes that Gateway now charges a 15% restocking fee for returning the computer if you reject the terms in the form contact included in the box when you buy it. What is left of assent? Left-contracts professors have made the rolling contract a big issue. For professors who style themselves to be “antiformalists” they put an amazing weight on the offer-acceptance model of mutual assent in objecting to the terms later approach.
Next up is a panel on Contract and Intellectual Property.
Intellectual Property Meets Contract Law
The next session is Intellectual Property (IP) Meets Contract Law. It is being chaired by Jean Braucher (Arizona). She explains that part of the issue is whether IP merely provides default rules that can be contracted around by entering into contracts. The concept of “default rules” is very basic to understanding contract law. The speakers are Peggy Radin (Stanford), Maureen O’Rourke (Interim Dean of BU), and Mark Lemley.
Peggy Radin is going first. She says she now teaches contracts after she realized that people could contract around all the meticulously negotiated intellectual property rules by such practices as clickwrap and browsewrap agreements. She asks whether contract law should be considered preempted by federal IP law. She is now insisting on the distinction between the “public” law (which sets original entitlements) and “private” law of contracts that rearranges the background property rights, in this case intellectual property rights.
Peggy has written seminal work on inalienability of rights, and she is now wondering whether the power to contract around background IP entitlements should be limited. . . . [to view the rest of this post click on show
My battery gave out on my laptop, so I had to switch to my Treo but I left the keyboard in my room. So I missed much of what Peggy had to say. Darn it! need to buy a new battery, but as I cannot access the wireless network in the meeting room, in the future it is just as easy to compose this on my Treo using the keyboard.
I got back in time to hear Mark Lemley (also of Stanford). Mark begins by noting how Microsoft imposes what amounts to a speech code on those who use its web building software and reports other examples of amazing terms included in software browsewrap "agreements." This includes spyware licenses restricting your right to remove it. His point is that when consent is eliminated, fantasically one-sided terms can result, contrary to what he says was the suggestion of Clay Gillette. The issue is when there should be restrictions on the ability to enforce such terms. (I have written about and endorsed such limits in the form contract context here
Mark's discussion of "preemption" of contracts by federal IP law is a bit too technical to summarize here. He basically says that sometimes the courts find that IP law preempts contracts and other times they not. The issue is how strong is the intellectual property policy.
Mark suggests that, rather than focusing on how important is the IP policy, we could also ask how much of a contract is there? Is this a browsewrap in which consent is really fictitious, or is it a specifically negotiated agreemments? The more the contract is really negotiated and agreed to, the more receptive we may be to allowing it to supercede the background IP rule. The more it looks imposed by one party on another without even a hint of assent, the less willing we should be to allow contracting around the IP. We should consider contracts on a sliding scale between these extremes.
Given a proper antipathy to browsewrap agreements, this sounds reasonable, but perhaps this is because there is no real assent at all. But when we talk about other form contracts to which you do need to indicate your assent (even if you do not read the terrms) I wonder which side of the line these would fall. Mark does not say, but I'll bet he has an opinion.
Next up is my boss—I mean my Dean—Maureen O'Rourke. She is discussing how the American Law Institute treats software, and the licenses that you agree to when using it. Is there a need for separate rules governing software or can it be handled by general contract law. She is the assistant reporter for the ALI project developing "principles." She is listing the questions they are addressing.
She is now discussing contract preemption again, and she agrees with Mark that you need a sliding scale depending on the nature of the contractual assent. She founds that the idea of contracts trumping IP law is much weaker with browsewrap agreements where consent is largely fictional. But what about click-wrap agreements with formal consent? She too does not address it, though she does refer pejoratively to "boilerplate" form contracts. Because such forms operate "against the world" they looks more like legislation than contracts and it is more troubling to allow these sorts of contracts to vary the rights provided by IP.
She closes by discussing the restrictive terms that define "open source" agreements. Although "open" they still provide restrictions on use that differ from the background IP regime.
I asked the panel from the floor about whether the proposal is really a "sliding scale" in which completely negotiated contracts are at one end of the scale and browsewrap with no indication of consent is on the other. Do they really think that click wrap and other form contracts where there is a manifestation of assent to an unread form supplied by one party should get some middling treatment. Or is it really a dichotomy and we need to decide whether click wraps are one side of the line or the other. In my article on form contract I do think that form contracts like “click” agreements should fall into a middle category in which, what Todd Rakoff called, "visible" terms (which it is rational to read) get enforced as a matter of course and "invisible" terms (about which it is rational to remain ignorant) only get enforced when they are not a surprise. (See my article here
Mark said he really does think there should be a sliding scale, rather than a dichotomy, but he did not address what middle treatment the middle types of agreements should receive.
Alan Schwartz of Yale asks the next (and last) question. He asks whether is any preemption at all. The issue is whether private acts are permitted under copyright laws. If so, then state contract law applies. His questions flummoxes the panel, I think, because he is using the term "preemption" in a more technical sense than are the panelists who are using "preemption" to refer to private contracts, as opposed to the state law of contracts. Mark thinks it really is a preemption issue because the question in whether you can go to (state) courts to enforce your private agreements that federal law says cannot be enforced. The hard part is figuring out what federal law really prohibits.
I am posting this after lunch and the next session begins in a few minutes. So I have to run.
The afternoon session is on Contracts and Arbitration. The panelists are Richard Alderman (Houston), Jean Sternlight (UNLV), and Steve Ware (Kansas).
Jean has summarized the law of arbitration for the benefit of the contracts professors. I have a section on private arbitration in my casebook, but it is rarely discussed in first year contracts classes, and I do not claim to know its nuances. The issue is whether arbitration can be mandated by a term in a contract—especially a form contract of the sort discussed in previous sessions. (Recall that I distinguish between browsewrap agreements where there is zero manifestation of assent and click-wrap agreements that you must click to agree to (probably unread) terms.)
Rick is giving an impassioned plea for the proposition that there should be no binding arbitration for consumer contracts. He contends that arbitration clauses are meant to avoid the substantive law of contracts that protect consumers as well as consumer protection laws.
He says that there is never any bargaining about arbitration clauses (generally true) and no "rational" person can say there was assent to such clauses. Here I disagree. I think it is quite realistic to consent to unread terms on the grounds that it is not worth it to the consumer to worry about such contingent clauses, while it IS worth it to the repeat players who provide the form since they have to deal with thousands of transactions. The issue for me is whether arbitration clause is so surprising that it is not within the range of terrms that could be consented to without it being brought specifically to the attention of the consumer. I think that arbitration are not so surprising that it cannot be said that a reasonable consumer runs the risk of their presence in an unread form contract.
Steve Ware is now up defending enforcing arbitration clauses. He contends that businesses who use such clauses save money and that SOME (not all) of these savings are passed along to consumers. So both sides benefit from such clauses.
He is now asking where is the source of the benefits to business. If it comes from lower awards to consumer claimants, then such clauses come at the expense of consumers. But he thinks cost savings may also result from lower process costs which is a win-win situatiion for both parties. Only lawyers who are excluded from arbitration are harmed by such clauses. So the issue is determining which is the principal source of the savings. He cites studies that suggest that lower awards in arbitration (as compared with a civil lawsuit) are traded off against higher numbers of successful claims brought in arbitration. So the situation for consumers is not uniform. More consumers may benefit from arbitration, but a few consumers may lose out by recovering less than they would in court. He says the empirical evidence is not that powerful, but this seems to be the trade-off that must be weighed, and he thinks the benefits to the price reductions that are passed along to consumers and the lower cost access to justice outweight what is given up in large jury awards. . . . [to read the rest click show
Jean replies that it is a myth that consumers can get a decent result in arbitration because very very few consumers go to arbitration over their small claims because (a) they don't know what arbitration is (b) they cannot get a lawyer and (c) consumers are afraid to take on the task.
Further, assuming consumers may benefit from lower prices, there are other public interest reasons to subject companies to discipline that arbtration largely allows them to excape. In Jean's view these costs outweigh any benefit to consumers by means of lower prices.
Jean concedes that the win rate for consumers may not be bad, but questions whether arbitration makes it too difficult to bring claims at all.
Rick agrees with all that. Rick does not care if it is rational for consumers because "we as a society make decisions for consumers." The right to go to court is all important. "We as professors" should care about that. He stresses the deterrent effect of lawsuits--as well as public condemnation--that are not acheived by arbitration.
Steve replies: A lot depends on whether civil litagation is a private matter between private parties or serves primarily a public function. He sees it as the former, Rick as the latter.
He then addresses the issue of who is using arbitration. Credit card companies for example use arbitration so often not because there is different substantive law that is being applied, but because of the lower process costs that make small scale enforcement feasible. This lowering the cost of collection benefits companies, but, as he previously argued also benefits consumers with lower prices.
From the floor, Frank Snyder points out that there are lots of contracts cases in state court to arbitration has not dried up the supply of cases to make the public law of contracts. Jean replies that the concern is that certain types of cases may not be brought often enough.
Charles Knapp (Hastings) asks why contracts professors are the only line of defense of the rule of law? Where are the procedure teachers? Rick agrees that contracts professors are the only line of defense.
Bill Whitford (Wisconsin) asks Steve what he thinks about a small claims court opt-out of arbitration? If I understood his answer, he thnks the lower cost small claims court opt out does reduce the cost advantage of arbiitration.
He then poses another question for Steve: Isn't it true that to collect an arbitration award don't creditors still have to go to court? Steve agrees that the cost savings is only on the first half, the adjudication of the merits portion of the claim.
Rachel Arnow-Richman (Denver) asks whether arbitration should itself be regulated to address these problems rather than eliminate abitration altogether? Where would such an alternative regulatory scheme come from? Jean things arbitration can be regulated by unconscionability doctrine so long as it is being used the same way here as elsewhere, and arbitration clauses are not just automatically knocked out across the board. Still she doubts that it is practical to regulate arbitration by traditional unconscionability. She thinks modifying the Federal Arbitration Act would be a possible way to go, but she doubts any changes can get through Congress at this point.
Jamie Fox (Stetson): Brings up the sliding scale discussion of the last panel. Should there be a carveout when you have the in between "adhesion" (form) contract. For example for racial discrimination. Steve says that bills attempting to carveout discrimination in employment contracts are regularly introduced in Congress and fail. He thinks such bills would have a much greater chances of passage in a Democratic Congress.
This was an interesting panel, as was the previous one on IP and contracts. Perhaps this is because even a superficial exposure to issues from other fields--like IP or ADR--is useful to contracts professors, as compared with a superficial discussion of contract law theory itself, which should be beneath the level of knowledge of most who teach contracts.
I am not sure if I am going to do this again for tomorrow’s sessions. For one thing, I dont know if anyone finds this sort of blogging interesting to read. But it was a fun thing for me to do, at least for a change of pace.
Also my Treo 600 with external keyboard worked well for typing my notes. Now if only PowerBlogs would create an interface so I could post to the blog using the Treo, then I could pgenuinely live blog from the event.
Cognititive Psychology and Contracts:
One of the reasons I came to the AALS was to hear Steve Ware and Marcus Cole speak. I have known both since they were law students. Unfortunately Marcus, who was supposed to be on this morning's panel became ill, so is not here. I had thought of skipping the first session, but my duty to you, dear VC reader, impelled me to return to (almost) liveblog the session, which is on the Implications of Limited Rationality for Contract and Commercial Law.
Reliance on cognitive psychology to understand how people make decisions has lately been fashionable among contract scholars. This panel is designed to introduce these ideas. The panelists are Danielle Kie Hard of Southwest University and Manuel Utset of Utah (and formerly of BU).
I am sitting next to Jay Feinman, one of the founders of the Critical Legal Studies movement back on the 1980s. He wrote some pioneering scholarship back then on critical approaches to contract law, the topic of the second panel of the morning.
Bob Hillman is calling for the session to begin. (I should note that I reviewed Hillman's book on contract law here
). I rarely get a chance to plug my writings on contract on VC. Consider this the commercial you must sit through to get to the "free" programing.) Hillman explains that this is a joint panel with the commercial law professors who are meeting along with we contracts folks. He is identifying questions he raised about the use of psychology in an article of his. The first question is whether the psych lab tests really apply to contacting situations? Second, do they provide a good account of contracting? He seems to be trying to stretch to make up for the absence of Marcus, but I would rather just hear from the 2 remaining speakers and leave more time for discussion from the floor, which has been rather truncated in previous sessions. But that's just me. (PS: The session ended up going 5 minutes over with very little time for audience participation,)
Danielle starts right off criticizing what she calls the “freedom of contract ideal.” Her complaint this morning is that "disclosure statutes" to correct bargaining imbalances and asymmetric information actually conceal the real problem with freedom of contract, which is disparity of power These statutes assume the classical conception of contract law which assumes that parties are able to make welfare enhancing choices that merit enforcement, provided they are given the relevant information. . . . [To read the rest, click on show
She is now summarizing what she calls classical contract theory. She is reading pretty fast so it is hard to keep up. It is the familiar description of the rational actor model. (This is the model that Marcus was going to critique.) Now she is summarizing the standard critique of the unrealistic nature of the rational actor model based on informational asymmetry, the failure to consider all salient information, and the absence of rationality in the marketplace. She says behavioral economics underscores this critique (which I am incompletely summarizing because she is speaking so fast--not too fast for the audience, just too fast for me to keep up).
Human cognitive abilities are limited, says the literature that she is now summarizing, so people use shortcuts. They ignore the statistical data in favor of other less perfect markers. Now she is describing framing effects in which preferences are changed solely because of how the information is presented to her, which puts power into the hands of those who are presenting choices to market actors. Other studies show that people are not truly rational self-maximizers. The example is that people tip though it is not in their interest to do so (a claim that is widely criticized BTW). Market forces require businesses to manipulate information to stay in business, she says. She says the assumptions of the rational actor model underlying classical contract theory are "arguably contestable."
All this undermines the feasibility of disclosure statutes because consumers will not process the information accurately and the resulting transaction will still not be wealth maximizing for consumers, which is the classical justification for enforcing contracts. By relying on disclosure statutes we are privileging the classical conception of freedom of contract which, on its own terms, is incoherent. Freedom of contract is only workable as an ideal if its underlying assumptions are sound, and they appear not to be. Freedom of contract, stripped of its underlying justifications leads to the "draconian" conclusion that "contracts should be kept." So what we have instead is a naked abuse of power. "Freedom of contract is essentially being used as a front for the use of contract as power."
One problem with this critique is that it is what philosopher's call "radical" which means essentially that it applies so broadly that it equally undercuts the position of the person making the critique. In this case, these inabilities to process information and make value maximizing choices equally (if not more so) undermine democratic theory by which voters choose leaders to pass laws to protect them from unscrupulous businesses. How are THESE choices to be made given the claims of cognitive impairment? The same would apply to the experts like contract law professors who posture that THEY know what the rules should be to compensate for consumer ignorance. What makes them able to transcend the weaknesses of human cognitive abilities. After all, they too are only human. Just attend a faculty meetings some time.
The truth is that the so-called classical model of contract is unrealistic, but a more realistic economic model nevertheless supports the decentralization of decisions down to the level of individual, rather than allowing some imperfect persons make choices for others--choices about which they lack knowledge. In addition, it is the individual who has the interest to make better choices for themselves than do enlightened rulers. All this is the thesis of my book, The Structure of Liberty: Justice and the Rule of Law
. There I defend "freedom of contract" based, not on perfect information, but on highly imperfect knowledge.
But returning now to our program, now it's Manuel Utset's turn to speak. He is using Powerpoint, which may make it easier for me to keep up. His talk is about the time-inconsistent preferences...--oops he changed ths slide! Too late to write down his whole thesis. The next slide is about 5 contract law issues, Optimal levels of Reliance, Opportunism, incomplete contracts, damn, the slide is gone now. I better stop reading the slides. Talk about informational impairment!
Well that does not help either. The problem is that he is throwing too many concepts at me so I cannot explain them to you and still keep up. (This is what I feared about live blogging.) On the other hand, this illustrates the problem he and Danielle are discussing. I doubt that most in the audience are internalizing much of the information he is throwing at us. Yet these are the very experts upon which Danielle would rely to make value enhancing choices for others. The reality is that the audience is deferring to the knowledge of the speakers, but most of the speakers are deferring to the knowledge of the researchers upon whom their papers are based.
Which is how we ALL make a good portion of our decisions. The main difference is that mistakes individuals make primarily harm themselves, whereas the mistakes made by rulers harm many others far and wide. And rulers lack the same incentives to make value maximizing choices for others, that we have for making them for ourselves.
Manuel is now discussing the difference between my present self and my future self. My present self wants to commit to do something but my future self will undermine my present choices. At this moment, I can identify with this as my present self wants to stop blogging. No wait, that is my future self who wants to stop and my present self wanted me to blog. Which means that my present-now-past self wanted me to blog but my future-now-present self wants to stop. (Well that's the difference between ex ante and ex post. Got that?) All this is what he means by “time inconsistent preferences.”
So I am now just listening until I can figure out what it is possible to report. The presentation is actually pretty effectively summarizing the cog psych argument for why individual decision making is not "optimal." Once again, however, this resort to optimality creates a straw man. If you took this critique seriously, you would conclude that individuals are incapable of making value maximizing choices--as Danielle seemed to suggest--which we know is not the norm, and we cannot explain why either democratic rule or rule by (human) experts will perform any better given that democratic or expert rulers with highly imperfect information and weaknesses in processing this information rationally will be able to make better choices for others than they can make for themselves.
There are possible answers to this challenge of course, but most of these responses (as we shall see) would serve to relax the assumptions on which the critique of individual choice is based, thereby reducing the problem for which democratic rule or rule by experts is supposed to be the solution.
I need to stress that, to the credit of its organizers, this panel was originally designed to be balanced. These two speakers were supposed to present the cog psych critique, which both did effectively--despite my inability to keep up with them in this blog--and Marcus was going to provide the response. Which makes it all the more unfortunate that his illness prevented him from attending.
I asked the panel about why this cog psych critique does not apply equally to rule by experts or democratic rule. Danielle freely concedes that it does apply across the board, but that larger institutions have the resources to devise and adopt strategies to compensate for these cognitive impairments that individuals and even small business lack. Fair enough, though I think the original critique unduly discounts the strategies that individuals employ to compensate for their cognitive deficiencies. That these strategies are imperfect (as they are) does not mean that they are not still preferable to rule by (imperfect) others.
Critiquing Contract Law
I am late for the program on Critiquing Contract Law--again because I was uploading the last blog post in my room. Since I now know someone is reading these posts, I decided to proofread it albeit quickly.
Jay Feinman (Rutgers) is almost done with his talk. I like Jay a lot, ever since we both visited at Northwestern teaching contracts. He's a nice guy. He is both describing the Critical Legal Studies (CLS) movement and how it came under attack and went into somewhat of a decline in favor of the New Formalism and the New Conservatism. It is interesting that he attributes the decline of the political critique of law to politics. This is consistent. What is not entirely consistent is why a rational critique offered by Crits is supposed to be evaluated on its merits as an effort in reason, but its rejection cannot be based on any deficiencies in their argument. It is just politics. But I suppose proponents of every school of thought (including libertarians, of course) attribute its lack of more general acceptance to a misunderstanding of the audience rather than to weaknesses of their arguments.
Jay closes on the pessimistic note that the contributions of the other scholars are unlikely to have much influence. He says "don't shoot the messenger." I do think Jay's gloominess from the Left is a social phenomena worth noting.
Deborah Waire Post (Tauro) opens with a PowerPoint slide with David Rosenberg's in class statement dismissing the contribution to torts of critical race theory and feminism. It gets a laugh. Her talk is about "critical outsider theory." The project is to construct alternative paradigms of the rules. . . . [to read the rest click show
She confesses an ambience towards contract law. On the one hand, contract promises to be a tool in contesting subordination and oppression. On the other hand, since assent is often lacking without “antisubordination” rules, contract law becomes an instrument of oppression. Examples of this can be found in intimate contracts, IP, and civil procedure. She says that the idea of contract has become all pervasive as a means of people asserting their rights. Examples are litigation against schools, employers and government agencies.
I am finding her presentation to be interesting and engaging, but a little too disjointed to report faithfully here. She is jumping from one point to another (apologizing for going so fast), while interjecting anecdotes, so it is hard to summarize fairly. As a result, I am doing a bit more listening than writing. She gets cheers for her presentation. The moderator Blake Moran (a really wonderful guy from Washington & Lee) notes on how fast she spoke and attributes this to the fact that she just flew in from China and is probably high on caffeine.
I am looking forward to Neil Williams' (Loyola) talk as it is based on the case of Bailey v. Alabama. Bailey is a case in which the Lochner-era court struck down a statute criminalizing breach of labor contracts as a means of establishing a system of peonage in Alabama. Justice Holmes (“The Great Dissenter”) dissented and would have upheld the statute.
I included the case in my contracts casebook (the first time this was done), and now learn that Murphy, Speidel & Ayres now has it in theirs. I cannot complain, as I "borrowed" from other casebooks when writing mine. For me, all this borrowing is an argument against intellectual property.
Neil asks whether it is appropriate for law professors to take into account the race of the parties when teaching cases? This is a very interesting and important question. He starts by telling the story of Alphonso Bailey. He took an advance for his employment contract, and when he left his job he was charged with a crime of fraud.
The Supreme Court mentioned Bailey's race to claim (unpersuasively to Neil) that his race did not matter. He says that the Lochner era court was reluctant to confront racial oppression head on but, to its credit, it struck down the statute for violating the 13th Amendment that prohibited involuntary servitude. Neil notes that Holmes dissented, which he thinks is inconsistent with others of his opinions. He cuts Holmes a bit of slack for his criticizing the court for failing to consider the case race neutrally as it claimed to be doing. I don't think that was Holmes's beef. Instead, Holmes himself insists upon the race neutrality perspective (which no one made him do) to assert his view that he could see no reason why the state can throw its weight on the side of contract performance by use of he criminal law.
The presentation raises but does not acknowledge how protecting freedom of contract ostensibly neutrally served to help blacks, whereas Holmes's majoritarianism hurt blacks. (This is David Bernstein's bailiwick.) If faithfully adopted, freedom of contract is valuable as a means to various ends. Perhaps one of these ends is the protection of disfavored minorities from oppressive majorities.
Neil is now talking about another interesting and classic case of Glover v. Jewish War Veterans. I won't summarize his interesting discussion of this case, which involved the refusal to pay a reward for information leading to the capture of the murderer. It has long been assumed that the claimant was black, but the case does not say. Williams' research confirms that she was, and he asks whether the refusal to pay Mrs. Glover was racially motivated. He says the black letter rules of contract shut down this relevant inquiry. He contrasts Glover with the recent effort to obtain reward for Ashley Smith despite the fact that she may not have been aware of the reward when she provided the information.
He closes by affirming that race is relevant to teaching otherwise abstract doctrines. I agree, which is why I include so much material on race (and gender) in my contracts casebook, including In re Mary Clark (involving involuntary servitude)--which is now finding its way into other casebooks--Bailey, and a background section on the role of race in the Chicago Coliseum v. Dempsey case, among other material. So too in Constitutional Law, I stress the role of slavery without which you cannot fully appreciate the original form of federalism adopted by the founders. Of course, race is also needed to understand the 14th Amendment that altered that original structure.
The challenge is to distinguish when race and gender is truly relevant and when it is not. Relevance will often be in the eyes of the beholder, but it is important for students to be aware that abstract rules and principles do not apply or enforce themselves. Indeed, this relates to the previous panel. Acknowledging our cognitive biases is one way we counteract those biases. On the other hand, what makes sense while studying law may not be as desirable when courts are applying it. We may want to critique decisions by taking race into account, while still contending that courts should strive to be as race neutral as they can.
The Bailey court (unlike Justice Holmes) was conscious of Alphonso Bailey's race as it needed to be to recognize peonage when evaluating the constitutionality of this "race neutral" criminal statute. Yet it still justified its decision by "race neutral" principles that could be used to protect any citizen. It is not obvious to me why this is not the appropriate use of race along with the appropriate use of neutrality. But only if race can be raised in the classroom can we consider whether this defense of Bailey is warranted.
Keith Rowley (UNLV) asks why Mrs. Glover could not be white which is why she turned in her daughter's black husband. Neil had proven Mrs. Glover's race by showing a picture of her son-in-law, who was clearly black. A nice point that is not inconsistent with Neil's basic thesis, as he himself raised the prospect that he might falsely be assuming that Mrs. Glover was black, which is why he did his research.
Charles Knapp, asking the last question from the floor, confesses that he has been hard on Jay Feinman in his writings, which he justifies now on the ground that he was equally hard on your humble blogging correspondent. That got a big laugh too.
All in all a very interesting and provocative session, but I am now late for the afternoon session.
Contract Across the Curriculum:
At lunch Dick Speidel (Northwestern) gave a tribute to the late Allan Farnsworth that asked, would an aspiring jobs candidate who said that he wanted to emulate Allan’s career be hired? Good question. Speidel characterizes Farnsworth’s approach as “Law and Law.” At the end of his talk, he asks the audience to candidly answer the question for their own school and, if the honest answer is “no” this is a failing of American legal education. The heart of his talk is a remarkably accurate, though brief, overview of the intellectual developments in contract law scholarship during Farnsworth’s long career, from legal realism, to law and economics, to critical legal studies to rights theories (he includes my approach of “manifested intention to create legal relations” in the latter category). Afterwards I commend him for his accuracy. I could not find fault with any of his story. Neither could Jay Feinman or Chuck Knapp with whom I spoke immediately afterwards.
The last session of the day is called “Contract Across the Curriculum.” Speakers are Margaret Friedlander Brinig (Iowa), Einer Elhague (Harvard) and Jody Freedman (UCLA). Turn out is much lower than “Critiquing Contract Law” before lunch--people may be sight-seeing--so I have a much better seat.
Einer is first up. He says he is trying to finish two books this summer. One on contract default rules and the other on statutory default rules. Both books are based on the distinction between “preference eliciting” default rules and “preference estimating” default rules.
In contracts, he says, we normally want default rules that efficiently achieve the preference of the parties. This does not extend to statutory default rules which are not solely meant to serve efficiency grounds, and you cannot identify the group that is the "parties" to the statute. The public are not true parties within the legislative process. Nor are legislators who must take into account their constituents’, not merely their own preferences. So how does this affect the difference between default rules in contract and default rules in statutory interpretation? [to read the rest click on show
What we are really looking for with interpreting statutes is "enactable preferences." This assessment is a probabilistic judgment. (And I would add somewhat more speculative than with private contracts.)
The second difference between contracts and statutes is that you are not bound by contracts unless you consent, whereas with statutes you are bound by acts of previous legislatures. So whose preferences do you look to? The enacting legislature or the current polity? He says that, paradoxically, previous legislators would want statutes interpreted according to evolving preferences--as this would increase the reach of the prior legislature into the future.
He favors using a preference eliciting default rule for statutory interpretation (like a penalty default rule in contract law). In other words, adopt interpretations that will provoke a legislative override that will make it clear what the (current) legislature really wants today. This contrasts with a default rule that tries to guess what today's legislators would want (a "preference estimating" default rule). He then provides some examples of this approach in statutory interpretation. I am not doing his argument complete justice, but this is in part because the bulk of his analysis is in his articles and book draft and is only cursorily summarized here.
Next up is Margaret Brinig (Iowa). Iowa is home to two great contract scholars: Steve Burton and Eric Anderson. Bob Hillman began his career at Iowa too. She begins by identifying the similarities between contracts and family law. She mentions how many casebooks start with family law cases like In Re Baby M (which is indeed the second case in my casebook). Family law cases are not only more relevant to students, she notes, but are more fun. Lee Marvin may be dead, but it is interesting to read about his palimony travails.
Marriages begin with contracts. She then shows a clip from Princess Bride (one of my favorite films). It is the hysterical marriage scene. "Man and wife, say man and wife!" Wesley later says the marriage "never happened" because the princess never said "I do." "If you didn't say it," he tells her, "it never happened." What a great illustration of formalities. (In class I always use the breaking of the glass in Jewish ceremonies to illustrate the formality of assent.)
After a lengthy discussion of how contracts play a role in family relationships and family law, she then asks why not simply contractualize the conception of marriage. (This is an approach to which I have been attracted to for a long time, as are many libertarians.) Here she thinks--citing my BU colleague Kate Silbaugh--commodifies the relationship and undermines the trust that should form the basis of the marital relationship. [Me: This is a topic in which (some) feminists and (some) social conservatives have common cause, as they also have with regard to pornography.]
She concludes by discussing many aspects of the family that cannot be reduced to contractual terms, and how the legal enforcement of implied contracts may change the basic nature of family law. In the end, she affirms the difference between contracts and family law, despite their overlaps and similarities. This is a nicely delivered and nuanced talk–much more so than this cursory summary suggests.
Jody Freeman (UCLA) is the last speaker. She is a very well-regarded younger scholar. This is my first opportunity to hear her speak. Indeed, this is one of the reasons to attend conferences like these. She is going to discuss how contracts overlap administrative and environmental law. She does not want to talk about “contracting out” government services or how regulations can be challenged as a taking of private contractual arrangements, but these two areas reveal an image of government regulation as contractual in nature.
Many view regulations as "command and control," but she notes that regulation often begins with negotiation between the regulators and the regulated. So does the enforcement process. There is a lot of informal contract behavior within the so-called command and control system of regulation. There are significant limits to the extent that government ever commands or controls anything.
So what she wants to examine is "agreement-based approaches to regulation." She says that Bush II uses negotiated regulation more than the Clinton administration did (and there is no pejorative tone in her voice when she says this). One example is negotiations over endangered species between the agency, developers, and environmental and municipal groups. These can lead to agreements that extend beyond the authority granted by the Endangered Species Act. The “consideration” for this agreement is a "no surprises" policy which promises landowners that they can rely on these agreements when making and acting on their development plans. Some more examples of negotiated regulations follow, but I think you get the idea.
One reaction to these "consent decrees" is how the nature of the consent deemed acceptable here is completely different than that demanded of ordinary contracts between business or with consumers. Consent obtained with the coercion of government regulation and enforcement is legitimate. Consent obtained by the "coercion" of refusing to do business on any other terms is deemed to be oppressive and a contract of "adhesion."
I do not attribute this contradiction to Jody. She has repeatedly stressed that she is not a contracts person. (After the panel we talk, she tells me she wants to pursue this issue, of which she had not previously been aware.) But the contrast between the previous 2 panels ridiculing the meaningfulness of private consent, and the virtues of "consent decrees" is striking, if only to me. Appropriately she concludes her talk by asking whether this is really contract-like or an overextended metaphor? A good question indeed. This was a very interesting, substantive and engaging talk. She's a terrific speaker.
During the brief question time, Carol Sanger (Columbia) notes that contracts are circumventing administrative agencies, which fits the tenor of the previous panels about the insidiousness of contract in other fields.
From the floor, I suggest (as I do above) that, if she wants to pursue her metaphor, Jody needs to confront the contracts scholarship that contest the meaningfulness of consent between private actors--especially in light of the coercion brought to bear on private parties to obtain "consent decrees."
Gillian Hadfield USC) agrees with this (though from the other direction) and adds that in the public sphere more classical contract principles are being used than are acceptable among contract scholars.
Blogging is tiring. But maybe it is just being forced to pay close attention that is tiring. Or maybe it is the wonderful meals in Montreal. Whatever it is, I am tired.
The Richness of Contract Theory:
I have now fixed the link to my review of Bob Hillman's book, The Richness of Contract Law (not that anyone complained). The review is called, The Richness of Contract Theory
, and here is the abstract:
In his book, "The Richness of Contract Law," Robert Hillman criticizes "highly abstract" or "unifying" contract law theories that, he says, fail to reflect adequately the complexities of existing contract law. In his review, "The Richness of Contract Theory," Randy Barnett takes issue with this claim and identifies the generational dispute between legal "realists," whose approach is shared by Professor Hillman, and legal "theorists" of whom Hillman is critical. Professor Barnett's thesis is that the very purpose of modern legal theories is to simplify a complex reality so as to better understand, cope with, and reform legal doctrine. Barnett then discusses Hillman's recent important empirical research on promissory estoppel. Hillman's findings represent a partial corrective to the previous consensus against a "reliance theory" of promissory estoppel insofar as they establish that reliance is a necessary element of promissory estoppel. However, his data also support the Willistonian conception of promissory estoppel by showing that a promise is also required. Ironically, Hillman is, Barnett claims, insufficiently sensitive to the complexity of the cases he surveys and the need to distinguish "reasonable" or "justified" from "unreasonable" or "unjustified" reliance. A more sophisticated analysis of these cases is provided by Professor Sidney DeLong who also is, not coincidentally, more receptive than Hillman to the richness of modern contract theory. While supporting Hillman's finding concerning the requirement of reliance, DeLong also notices courts frequently distinguishing "performance" from "enforcement" reliance. Enforcement reliance is reliance accompanied by a manifested intention by the promisor to be legally bound, or what Barnett has previously called consent.
Update:My apologies. I had not realized that there was only an abstract on SSRN, rather than the entire article. The final published version can be found on my website here. Sorry for any inconvenience.
Comment on Contracts Conference:
I did not receive very much feedback on my live blogging of the AALS conferences on contract law. So I decided, as an experiment, to open comments on this post so readers have a single place where they can react to the previous posts on all six panels (which are chained to this post). Did you find such blogging to be worthwhile? (Negative opinions on this are welcome, if civil.) Do you have any reactions to the topics of the various panels? Etc.