Table of Contents

FIDIC Contracts and Hungarian Law or the Most Important Aspects of Using FIDIC Contracts in Hungary

Tamás Balázs, Balázs & Kovátsits Legal Partnership
Lukas Klee, Balázs & Holló Law Firm
Daniel Gulyas, affiliation not provided to SSRN

Formal and Social Enforcement of Individual vs. Corporate Transgressions

Uriel Haran, Ben-Gurion University of the Negev
Yuval Feldman, Bar-Ilan University - Faculty of Law
Doron Teichman, Hebrew University of Jerusalem - Faculty of Law

An Empirical Study on the Contractual Risk Allocation and Indemnity and Hold Harmless Clauses in the Oilfield Service Contracts in Malaysia

Wan M. Zulhafiz, University of Aberdeen, School of Law, Students

How Does the Substantial Modification of a Public Contract Affect its Legal Regime?

Jan Brodec, Charles University in Prague - Law Faculty
Vaclav Janecek, Charles University in Prague - Law Faculty

The Risks of Shadow Insurance

Daniel Schwarcz, University of Minnesota Law School

Contentious Modes of Understanding Chinese Commercial Law

Tianshu Zhou, China University of Political Science and Law
Mathias M. Siems, Durham University - Durham Law School, University of Cambridge - Centre for Business Research


CONTRACTS & COMMERCIAL LAW eJOURNAL

"FIDIC Contracts and Hungarian Law or the Most Important Aspects of Using FIDIC Contracts in Hungary" Free Download
The International Construction Law Review, Pt 2, 2014

TAM?S BAL?ZS, Balázs & Kovátsits Legal Partnership
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LUKAS KLEE, Balázs & Holló Law Firm
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DANIEL GULYAS, affiliation not provided to SSRN

Hungarian law is part of the European-continental legal system. It most closely resembles German law in particular and is the sum total of itemised legal norms. Developed on the basis of Roman legal tradition, these norms incorporated into codes and promulgated legislation. FIDIC contracts however, fundamentally bear the hallmarks of, and presuppose the customs of, Anglo-Saxon contracts. In light of this, whenever comparing Hungarian law to FIDIC contracts and aligning them in practice, we are faced with the problems that occur when there are conflicts between Anglo-Saxon and Hungarian law in specific cases. The Hungarian private law including the provisions of the civil code dealing with contract for works is dispositive so the use of the FIDIC forms is generally viable without major adjustments in the particular conditions. However, it is a specific feature of Hungarian construction law that it contains a great many mandatory norms from which the parties must not deviate. Divergent provisions in construction contracts may be declared null and void despite complying with the terms and conditions of FIDIC contracts. This is because the mandatory Hungarian legal provision prevails in the legal relationship - even when Hungarian law is not chosen as the governing law by the Parties. Problems in connection with the above occur primarily in legal disputes between the Parties and during tests by Hungarian construction supervisors. In this short study, we provide a brief overview of specific, frequently asked questions based on the Red Book and the Yellow Book that arise when drawing up a FIDIC contract in Hungary. The study will further examine instances when the terms and conditions of FIDIC contracts need to be aligned with the provisions of Hungarian law.

For the purposes we focus on the provisions of Hungarian law which are to be applied when choosing Hungarian law as the governing law or when applying the terms and conditions of FIDIC contracts (irrespective of Hungarian law) in certain cases.

"Formal and Social Enforcement of Individual vs. Corporate Transgressions" Free Download

URIEL HARAN, Ben-Gurion University of the Negev
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YUVAL FELDMAN, Bar-Ilan University - Faculty of Law
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DORON TEICHMAN, Hebrew University of Jerusalem - Faculty of Law
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One of the primary instruments which people use to retaliate against unfair practices is social enforcement: the decentralized action of monitoring, identifying, and reporting misconducts. Social enforcement is widely recognized as a key incentive of good practices by service providers. Technological advancement and the rise of the internet and social networks have increased the accessibility and expanded the variety of available sanctions against violators of business relationships. Whereas in the past, the primary route for applying such sanctions was the formal, state-sanction route (e.g., law suits, complaints to regulatory agencies), today, aggrieved parties are also offered a range of informal, privatized means (e.g., publicizing the transgressions, mobilizing social action and consumer action via online outlets). This new route can promote efficient enforcement and increase compliance. However, it also presents risks by weakening the accused party’s ability to defend itself, or even know the identity of the accuser in some cases.

The current research investigates people’s attitudes toward applying different means of enforcement on individual and corporate transgressors. We conducted three scenario-based experiments, which presented participants with transgressions committed by either individuals or corporations. These transgressions included maximizing ambiguities in the contractual requirements for one’s self-interest at the expense of the counterparty, exploiting one's bargaining position to make unreasonable demands, and negligent behavior. Participants assessed the likelihood they would, in response to these transgressions, take either formal action, using either legal means or regulatory institutions, or social action via the internet and social networks. The evaluated scenarios depicted purchase of land for purposes of development (Experiment 1), the purchase of an apartment from a building contractor (Experiment 2) and employer HR policies (Experiment 3).

We find that willingness to apply sanctions in response to violation of the contractual relationship depends on both the identity of the violator and the nature of the violation. First, the identity of the target of enforcement affected people’s willingness to use it: consistent with prior research, participants’ willingness to take action against a corporation depended on a clear violation of a law or a norm, whereas their willingness to take action against a person was not sensitive to this condition. Second, the type of violation had an effect on assessments of taking formal action, whereas assessments of privatized action remained relatively stable across different violations. This suggests that social and formal enforcement are not necessarily complementary in the sense that reduction in formal enforcement lead to an increase in social enforcement. We found that cases without an unambiguous violation of the law were characterized by a lower willingness to apply formal enforcement, but did not observe a change in willingness to apply social enforcement. Finally, we found that cases of negligence are met with a clear preference for formal over privatized action, regardless of the target of the sanction. However, in cases of exploiting contractual flexibility, there was a preference for formal means of enforcement against persons, but not against corporations.

The state has a number of good reasons to outsource the enforcement of norms in contractual relationships to the public and promote the use of social enforcement. However, our results demonstrate that willingness to forgo state-sponsored action in favor of such actions may, on the one hand, not be very high, and on the other hand be prone to perceptual biases of individuals and corporations.

"An Empirical Study on the Contractual Risk Allocation and Indemnity and Hold Harmless Clauses in the Oilfield Service Contracts in Malaysia" Free Download
Paper Proceedings of 'Second International Conference on Interdisciplinary Legal Studies (ICILS) 2015' on 9th & 10th June 2015 in Toronto, Canada (ISBN 978-0-9939889-5-0)

WAN M. ZULHAFIZ, University of Aberdeen, School of Law, Students
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Oil and gas projects are risky undertakings, which may cause severe damage to property and the environment, not to mention, personal injury and death to personnel. Contractual provision such as an indemnity and mutual hold harmless clause is used as a tool in allocating the risks. Most oil companies, in their task to manage the risks, seek to depart from the traditional form of risk allocation e.g. knock-for-knock indemnity regime. In this respect, there is a tendency that the oil companies will pass a greater share of the risks on to contractors. This problem could lead to financial impairment and unfairness to the contractors. An empirical study was conducted to investigate the issues and problems with regard to risk allocation provisions and indemnity and hold harmless clauses of oilfield service contracts in Malaysia. The data for the empirical study was drawn from the intensive semi-structured interviews of ten respondents from oil companies, contractors and one legal practitioner. The finding of this empirical study indicates that contractors are concerned about the one-way adversarial style of operator-contractor relationship and also that they are being allocated more contractual risks. The methodology employed in this paper will essentially be a combination of literature review and semi-structured interview, which will be carried out in a prescriptive and analytic manner.

"How Does the Substantial Modification of a Public Contract Affect its Legal Regime?" Free Download
(2015) 24(3) Public Procurement Law Review, pp. 90 - 105

JAN BRODEC, Charles University in Prague - Law Faculty
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VACLAV JANECEK, Charles University in Prague - Law Faculty
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This article outlines the fundamental consequences for the legal regime of public contracts which result from the substantial modifications of such contracts within the meaning of EU law. The authors conclude that an EU law-compliant understanding of the term “substantial modification to public contracts? may result, in some national legal systems, in the “privative novation? of the original contract, i.e. in its complete discharge and replacement with a new contract. However, this may be associated with a number of negative implications impairing the principle of legal certainty, thereby indirectly affecting the efficient functioning of the EU’s internal market. This conclusion appears to be contrary to the objectives pursued by the doctrine of indirect effect of EU law. The authors show some viable solutions to this problem, both from the position of contracting authorities and courts, and from the perspective of the member states in the forthcoming implementation of the new EU Public Procurement Directives.

"The Risks of Shadow Insurance" Free Download
Georgia Law Review, Forthcoming

DANIEL SCHWARCZ, University of Minnesota Law School
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In a shadow insurance transaction, a life insurer purchases reinsurance from an affiliated company that is licensed as a captive insurer or Special Purpose Vehicle and is not an “authorized? reinsurer. Such transactions have been scrutinized in recent years by the Federal Insurance Office, the Financial Stability Oversight Council, the Federal Reserve Bank, the New York Department of Financial Services, and the National Association of Insurance Commissioners, among others. Nonetheless, the precise mechanisms by which shadow insurance may pose risks to policyholders, the insurance industry, and the broader financial system remain sketchy. At least partially for this reason, substantial debate continues to exist regarding the extent to which the traditional tools of state insurance regulation adequately address the risks of shadow insurance. This Article contributes to the debate by describing four distinct risks posed by shadow insurance transactions. First, such transactions create reinsurance default risk, or the risk that captive reinsurers will default on their obligations to the underlying insurers. Second, they can expose insurers to recapture risk, or the prospect that an insurer will no longer be allowed to receive favorable accounting treatment for the reinsurance transactions that are part of a larger shadow insurance scheme. Third, shadow insurance can create correlated parent company risk by magnifying the prospect that a single financial shock will similarly affect multiple individual companies within a broader financial conglomerate. Finally, shadow insurance transactions can generate interconnectedness risk by increasing the connections between the insurance and banking sectors. State insurance regulation has traditionally focused predominantly on reinsurance default risk, while largely ignoring the three other risks posed by shadow insurance. The Article concludes that while certain forms of shadow insurance may produce sensible relief from poorly-designed insurance regulations, the practice ultimately harms insurance markets by undermining the ability of policyholders, market intermediaries, and regulators to transparently trade off risk and return.

"Contentious Modes of Understanding Chinese Commercial Law" Free Download
The George Mason Journal of International Commercial Law, 2015 Forthcoming

TIANSHU ZHOU, China University of Political Science and Law
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MATHIAS M. SIEMS, Durham University - Durham Law School, University of Cambridge - Centre for Business Research
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Is Chinese commercial law simply a copy of German and other Western commercial laws, a “mystery? that Westerns cannot understand, or an “irrelevance? given the role of culture and politics in China? This article critically discusses these three modes of understanding. It is found that, while they seem to have some initial plausibility, one also has to be aware of their shortcomings. Thus, in the understanding of Chinese commercial law, it is most appropriate to take into account all three modes, as well as their limitations. This article also suggests approaching this topic as a “bilateral process? since the understanding of Chinese law also depends on the way Chinese law-makers understand Western legal systems.

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Contracts & Commercial Law eJournal

IAN AYRES
William K. Townsend Professor of Law, Yale University - Yale Law School, Yale University - Yale School of Management

RANDY E. BARNETT
Carmack Waterhouse Professor of Legal Theory, Georgetown University Law Center

LISA E. BERNSTEIN
Wilson-Dickinson Professor of Law, University of Chicago Law School

CLAYTON P. GILLETTE
Max E. Greenberg Professor of Contract Law, New York University School of Law

ROBERT A. HILLMAN
Edwin H. Woodruff Professor of Law, Cornell Law School

AVERY W. KATZ
Milton Handler Professor of Law, Columbia University - Law School

RANDAL C. PICKER
Leffmann Professor of Commercial Law; Senior Fellow, The Computation Institute of the University of Chicago and Argonne National Laboratory, University of Chicago - Law School

ALAN SCHWARTZ
Sterling Professor of Law, Yale Law School

MICHAEL J. TREBILCOCK
Professor and Chair in Law and Economics, University of Toronto - Faculty of Law

ELIZABETH WARREN
Leo E. Gottlieb Professor of Law, Harvard Law School