Table of Contents

Debt-Buyer Lawsuits and Inaccurate Data

Peter A. Holland, University of Maryland Francis King Carey School of Law

Contractual Indescendibility

David Horton, University of California, Davis - School of Law

Unjust Enrichment and Contract

Peter A. Jaffey, Brunel University - Law School

Contractual Freedom and Family Business

Benjamin Means, University of South Carolina School of Law

The Pakistani Consumer: Dumb or Dumber?

Owais Hassan Shaikh, Max Planck Institute for Innovation and Competition - International Max Planck Research School for Competition and Innovation, Munich Intellectual Property Law Center (MIPLC)

Regulating for Rationality

Alan Schwartz, Yale Law School

How Collateral Laws Shape Lending and Sectoral Activity

Charles W. Calomiris, Columbia University - Columbia Business School, National Bureau of Economic Research (NBER)
Mauricio Larrain, Columbia University
Jose Maria Liberti, Northwestern University - Kellogg School of Management, DePaul University
Jason Sturgess, DePaul University


"Debt-Buyer Lawsuits and Inaccurate Data" Free Download
Communities & Banking, v. 25, no. 2, spring 2014, p. 20-21.
U of Maryland Legal Studies Research Paper No. 2014-14

PETER A. HOLLAND, University of Maryland Francis King Carey School of Law

Pursuant to secret purchase and sale agreements (also known as forward flow agreements), the accounts that banks sell to debt buyers are often sold “as is,? with explicit and emphatic disclaimers that the debts may not be owed, the amounts claimed may not be accurate, and documentation may be missing. Despite their full knowledge that the accuracy and completeness of the data has been specifically disclaimed by the bank, when they sue consumers, debt buyers tell courts that the information obtained from the bank is inherently reliable and accurate. In order to avoid a fraud on the courts, the contents of these purchase and sale agreements should be made public.

"The views expressed are not necessarily those of the Federal Reserve Bank of Boston or the Federal Reserve System. Information about organizations and upcoming events is strictly informational and not an endorsement."

"Contractual Indescendibility" Free Download
Hastings Law Journal, Vol. 66, 2015 Forthcoming

DAVID HORTON, University of California, Davis - School of Law

Testation is supposed to be comprehensive: when we die, we pass everything we own to our friends and family. However, a growing number of valuable things defy this principle. From frequent flyer miles to virtual property to email and social media accounts, some assets expressly state that they cannot be transmitted by will, trust, or intestacy. This invited contribution to the Hastings Law Journal Symposium in honor of Charles L. Knapp analyzes this trend, which I call “contractual indescendibility.? It shows that consumers who challenge non-inheritability provisions face three obstacles. First, they have to prove an ownership interest in the item. Second, they need to invalidate the indescendibility clause under contract law. And third, they must navigate the gauntlet of federal legislation that governs this area. Despite these hurdles, I conclude that companies should not have carte blanche to delete this cherished stick from the bundle of rights.

"Unjust Enrichment and Contract" Fee Download
The Modern Law Review, Vol. 77, Issue 6, pp. 983-993, 2014

PETER A. JAFFEY, Brunel University - Law School

Benedetti v Sawiris was concerned with the measure of a quantum meruit, and in particular whether a ‘subjective’ or ‘objective’ measure should be preferred. The Supreme Court addressed the issue broadly in line with the approach in the mainstream academic literature on unjust enrichment, according to which this is a problem of how to measure benefit. The article argues that this unjust enrichment approach is misguided because it obscures the role of agreement and conflates transfer and exchange, and that a contractual analysis of the case would make the issues clearer and easier to resolve.

"Contractual Freedom and Family Business" Free Download
Research Handbook on Partnerships, LLCs and Alternative Forms of Business Organizations (Robert W. Hillman and Mark Loewenstein eds., Edward Elgar Publishing, 2015, Forthcoming)

BENJAMIN MEANS, University of South Carolina School of Law

This chapter argues for a conception of contractual freedom that places renewed emphasis on the importance of default rules and background equitable principles as tools for facilitating the parties’ business relationship. In other words, contractarianism should not be seen as synonymous with contract; a meaningful freedom of contract is broader and more complex than the proverbial blank sheet of paper on which to draft and a deferential court willing to enforce the results, however nonsensical. Declaring contract king does not establish that it is actually capable of governing its realm. Rather, to facilitate the underlying contractual values of personal autonomy and welfare maximization, it may be better to guide the parties’ relationship with well-crafted default rules and reasonable equitable constraints.

In a family business, for instance, a contractarian framework is typically insufficient to support the expectations of family participants. As is true of any closely held business, contracts in family businesses establish relationships rather than the terms of specific, bargained-for exchanges, and the parties cannot be expected to anticipate and adequately address all eventualities that may occur over time. For family businesses, relational aspects are particularly significant: the time horizon stretches across generations, objectives often include more than simple profit maximization, and business dealings involve emotional consequences for the participants that also need to be acknowledged. Instead of adhering to a false assumption that the parties to a business venture are capable of negotiating adequate protections for themselves and likely to do so, contract law should offer a resource — a set of principles that credit the parties’ negotiated bargain in full context but that also compensate for what they cannot anticipate or adequately address.

"The Pakistani Consumer: Dumb or Dumber?" Free Download

OWAIS HASSAN SHAIKH, Max Planck Institute for Innovation and Competition - International Max Planck Research School for Competition and Innovation, Munich Intellectual Property Law Center (MIPLC)

The Competition Commission of Pakistan (CCP) has adopted the notion of ordinary consumer for assessing confusion or deception in ‘deceptive marketing practices’ cases under Section 10 of the Competition Act, 2010. In its first order in this area, the CCP defined ordinary consumer as a person who is ‘the usual, common or foreseeable user or buyer of the product’ and differs from the ‘ordinary prudent man’ under contract law. According to the CCP, this conceptualisation of the Pakistani consumer was important for achieving the goal of implementing the Competition Act 2010 in its letter and spirit, the intent of the law and that of protecting Pakistani consumers from anti-competitive practices. Despite acknowledging that other jurisdictions such as the EU and the US follow the standards of average and reasonable consumer, respectively, the CCP considered that following these standards ‘would result in shifting the onus from the Undertaking to the consumer and is likely to result in providing an easy exit for Undertakings from the application of Section 10 of [CA, 2010]’.

In this paper, I argue that the ordinary consumer of the CCP does not have any normative basis either in law or in economics. This standard is also incompatible with the well-established Pakistani trademark law, which employs the notion of ‘consumer’ in line with the concept of bounded rationality where the consumer is unable to make decisions that maximise her utility. Defining the concept of consumer is also imperative as it has practical ramifications for marketers. For example, in the presence of these conflicting standards confusion is bound to arise as whether a marketing campaign should be designed around the concept of consumer as defined by the CCP or around that adopted by higher courts, including the Supreme Court of Pakistan in various trademarks (and passing off or unfair competition) cases. Should marketers prepare separate campaigns so that they are not caught by the provisions of either laws? Would there be one consumer profile for a target market or countless? And would there be a target market or many?

To ensure normative as well as positive consistency; to provide legal certainty to marketers and to meet consumer expectations, the CCP should refer to the representative customer profile created by the marketers, in cases of deceptive marketing practices. This is the consumer for whom the product or service or the marketing campaign is created and she is the one who should not be deceived.

"Regulating for Rationality" Free Download
Stanford Law Review, Forthcoming

ALAN SCHWARTZ, Yale Law School

Traditional consumer protection law responds with various forms of disclosure to market imperfections that are the consequence of consumers being imperfectly informed or unsophisticated. This regulation assumes that consumers can rationally act on the information that it is disclosure’s goal to produce. Experimental results in psychology and behavorial economics question this rationality premise. The numerous reasoning defects consumers exhibit in the experiments would vitiate disclosure solutions if those defects also presented in markets. To assume that consumers behave as badly in markets as they do in the lab implies new regulatory responses. This Essay sets out the novel and difficult challenges that such “regulating for rationality? -- intervening to cure or to overcome cognitive error -- poses for regulators. Much of the novelty exists because the contracting choices of rational and irrational consumers often are observationally equivalent: both consumer types prefer the same contracts. Hence, the regulator seldom can infer from contract terms themselves that reasoning errors produced those terms. Rather, the regulator needs a theory of cognitive function that would permit him to predict when actual consumers would make the mistakes that laboratory subjects make: that is, to know which fraction of observed contracts are the product of bias rather than rational choice. The difficulties exist because the psychologists lack such a theory. Hence, cognitive based regulatory interventions often are poorly grounded. A particular concern is that consumers suffer from numerous biases, and not every consumer suffers from the same ones. Current theory cannot tell how these biases interact within the person and how markets aggregate differing biased consumer preferences. The Essay then makes three further claims. First, regulating for rationality should be more evidence based than regulating for traditional market imperfections: in the absence of a theory the regulator needs to see what actual people do. Second, when the facts are unobtainable or ambiguous regulators should assume that bias did not affect the consumer’s contracting choice because the assumption is autonomy preserving, administerable and coherent. Third, disclosure regulation can ameliorate some reasoning errors. Hence, abandoning disclosure strategies in favor of substantive regulation sometimes would be premature.

"How Collateral Laws Shape Lending and Sectoral Activity" Free Download

CHARLES W. CALOMIRIS, Columbia University - Columbia Business School, National Bureau of Economic Research (NBER)
MAURICIO LARRAIN, Columbia University
JOSE MARIA LIBERTI, Northwestern University - Kellogg School of Management, DePaul University
JASON STURGESS, DePaul University

This paper investigates the effect of cross-country differences in collateral laws regarding movable assets on lending and sectoral allocation of resources. Using micro-level loan data for a sample of emerging market countries we show that loan-to-values of loans collateralized with movable assets are on average 21 percentage points higher in countries with strong-collateral laws relative to immovable assets. Further, stronger collateral laws tilt collateral composition away from immovable to movable assets. We also provide evidence of a collateral class, including bank guarantees, for which enforcement is independent of collateral law. To examine the effect of collateral laws on real activity we map the relationship of collateral laws and collateral composition to asset-composition and sectoral resource allocation using industry-level output and employment data. Weak collateralization laws that discourage the use of movables assets as collateral create distortions in the allocation of resources that favor immovable-based production. The results shed light on an important channel – collateral laws – through which legal institutions affect lending and real economic activity.


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Contracts & Commercial Law eJournal

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

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Wilson-Dickinson Professor of Law, University of Chicago Law School

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

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