Table of Contents

A Sea Change in Creditor Priorities

Kristen van de Biezenbos, Loyola University New Orleans College of Law

Pre-Contractual Duty to Disclose Material Circumstances in Life Insurance: A Case for Reform

Badrinath Srinivasan, Independent

Contract as Empowerment: A New Theory of Contract

Robin Bradley Kar, University of Illinois College of Law

Mapping Private Regulation – Classification, Market Access and Market Closure Policy, and Law's Response

Kai Purnhagen, Wageningen University and Research Center (WUR) - Law and Governance Group, Erasmus University of Rotterdam - Rotterdam Institute of Law and Economics

Contract as Empowerment Part II: Harmonizing the Case Law

Robin Bradley Kar, University of Illinois College of Law


CONTRACTS & COMMERCIAL LAW eJOURNAL

"A Sea Change in Creditor Priorities" Free Download
University of Michigan Journal of Law Reform, Vol. 48, 2015

KRISTEN VAN DE BIEZENBOS, Loyola University New Orleans College of Law
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This Article argues that the operation of maritime law undermines a primary justification for creditor priorities under U.S. law. Under current law, when a debtor becomes insolvent, its secured creditors will be paid the full amount of their debt to the extent of their security interest, even if it means there is nothing left to pay unsecured creditors. This is controversial with respect to involuntary unsecured creditors, particularly those with tort claims against the debtor. Defenders of this scheme of priorities have argued that allowing greater priority to involuntary creditors would hinder the availability or increase the cost of credit. However, involuntary creditors have long enjoyed priority over secured creditors under maritime law, and it does not appear that firms subject to maritime law have experienced these effects. Experience with this priority scheme under maritime may provide support for efforts to reform current U.S. law to give greater priority to involuntary creditors more generally.

"Pre-Contractual Duty to Disclose Material Circumstances in Life Insurance: A Case for Reform" Free Download

BADRINATH SRINIVASAN, Independent
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The principle of uberrima fidei or utmost good faith is one of the hallmarks of insurance law and has been in vogue at least since the eighteenth century. However, the insurance market as was in existence at that time has changed considerably in the present. This has resulted in a review of the principle in the past decade and its consequent dilution, especially in prominent insurance markets such as United Kingdom and New York. The Indian insurance law, however, has stuck to its colonial past, although there have been several pro-consumer reforms. The leitmotif of this paper is that the existing state of law of pre-contractual duty to disclose material circumstances in life insurance contracts largely ignores the problems in life insurance. The present state of affairs often results in unjust and unfair results to the family of the life insured. The penalties levied in respect of the life insurance consumers are wholly disproportionate to the failure to disclose material circumstances. While there have been several reforms proposed by the Law Commission of India, it is the argument of this paper that the reforms are insufficient in addressing the concerns of the Indian life insurance market. Consequently, this paper recommends certain reforms in Section 45 that would go a long way in making the law fair, just and efficient.

"Contract as Empowerment: A New Theory of Contract" Free Download

ROBIN BRADLEY KAR, University of Illinois College of Law
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Modern contract theory is in a quandary. As Alan Schwartz and Robert E. Scott have observed: “Contract law has neither a complete descriptive theory, explaining what the law is, nor a complete normative theory, explaining what the law should be.? This article aims to cure these deficiencies with a novel theory, “Contract as Empowerment?.

Contract as Empowerment is a deontological (duty-based) theory, rooted in a special strand of social contract theory known as “contractualism?. The theory nevertheless differs from more familiar deontological theories, which are typically rooted in moral intuitions about promising, autonomy or reliance. Because of its foundation in social contract theory, contract as empowerment can absorb a number of important economic and psychological insights, which have traditionally given efficiency theories explanatory advantages over traditional deontological theories. But contract as empowerment can absorb these insights without subjecting them to thoroughgoing economic interpretation. It can thereby produce a more robust, unified and normatively satisfying account of many core areas of doctrine. Among other things, contract as empowerment offers a more compelling account of the consideration doctrine than exists in the current literature; a better account of the expectation damages remedy (both descriptively and morally); and a special way of understanding the appropriate role of certain doctrines like unconscionability, which regulate private market activity by making the scope or content of contractual obligations depend on facts other than contracting parties’ subjective wills.

This last fact provides a major point of contrast with most existing theories of contract. One of the most striking features of the way that standard debates between deontological and consequentialist theories have been framed in this area of the law is that general theories on both sides typically share a key implication. They imply that legal doctrines that invite courts to police bargains for fairness reflect alien intrusions into the basic subject matter of contract. Contract as empowerment suggests that this framing has been distorting our understanding of contracts (and hence modern markets) for some time now. It offers an alternative framework, which understands both private market empowerment and some market regulations as direct expressions of the same fundamental principles. Because this framework is principled, it can help depoliticize a range of currently heated debates about the appropriate scope and role of market regulation. This framework can be applied to many different forms of market exchange — from those in consumer goods to labor, finance, credit, mortgages and many others.

This article is the first in a two part series. Contract as Empowerment introduces and develops the theory of contract as empowerment. Contract as Empowerment II applies the theory to a range of doctrinal problems and argues that contract as empowerment offers the best general interpretation of contract law. This second article is currently available on ssrn at: http://ssrn.com/abstract=2476759.

"Mapping Private Regulation – Classification, Market Access and Market Closure Policy, and Law's Response" Free Download
Wageningen Working Papers in Law and Governance 2013/04

KAI PURNHAGEN, Wageningen University and Research Center (WUR) - Law and Governance Group, Erasmus University of Rotterdam - Rotterdam Institute of Law and Economics
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Private forms are gaining importance in the regulation of supply chains. Drawing on insights on the diminishing effectiveness of classical top-down regulation in inter-, supra-, and transnational supply chains, methods from self- and co-regulation increasingly take central stage. This new field comprises of standard setting, auditing, accreditation and enforcement. This chapter devotes an introduction and analysis of this emerging field of regulation and its relationship to law. It identifies the main regulatory character as market access and market closure challenge. It will show how law has responded to this challenge so far and will close with a summary and anticipation of some legal questions that remain open.

"Contract as Empowerment Part II: Harmonizing the Case Law" Free Download

ROBIN BRADLEY KAR, University of Illinois College of Law
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In Contract as Empowerment, at http://ssrn.com/abstract=2476148, I develop a new theory of contract, “Contract as Empowerment?. This article applies that theory to a broad range of doctrinal problems and argues that contract as empowerment offers the best general interpretation of contract law.

The argument proceeds in two stages. First, I identify a core set of legal doctrines, which provide an especially suitable test for different interpretations of contract. Second, I argue that contract as empowerment has the unique capacity to explain this entire constellation of doctrines. Along the way, contract as empowerment offers (1) a more compelling account of the consideration doctrine than exists in the current literature; (2) a more penetrating account of the expectation damages remedy; and (3) a concrete framework to determine the appropriate role of certain doctrines like unconscionability, which limit freedom of contract. Contract as empowerment also explains key doctrines and answers central puzzles at each basic stage of contract analysis. When coupled with its other normative and explanatory advantages, contract as empowerment thus offers the best general interpretation of contract.

The whole of this explanation is, moreover, greater than the sum of its parts. Because of its harmonizing power, contract as empowerment demonstrates how a broad range of seemingly incompatible surface values in modern contract law can work together — each serving its own distinct but partial role — to serve a more fundamental principle distinctive to contract. These surface values include the values of fidelity, autonomy, liberty, efficiency, fairness, trust, reliance and assurance, among others. The current theory suggests that many seeming conflicts between doctrines that serve these values are not, in fact, zero-sum games. So long as the complex interlocking rules of contract are fashioned in the right way, these doctrines can work together to serve a deeper and normatively satisfying principle of empowerment distinctive to contract. This framework can be used to guide legal reform and identify places where market regulation is warranted and needed in many different contexts of exchange — from those involving consumer goods to labor, finance, credit, landlord-tenant, home mortgages and many others.

There is also a deeper implication of contract as empowerment. Contract as empowerment reinterprets the basic nature of contract law and many related forms of economic activity. It suggests that contract law is not simply a set of rules that aim to maximize efficiency and promote personal consumption, rooted solely in competition and self-interest run wild. Contract law is instead a set of rules that produce genuine legal obligations in part because its rules are simultaneously personally empowering and reflective of a deeper moral ideal of equal respect for persons. If — as this article argues — this represents the best general interpretation of contract, then contracts and many related market activities have a distinctive moral fabric that has been running through them for some time now. This moral fabric has been obscured by classical economic interpretations but cannot be ignored in any true social science of these phenomena. Contract as empowerment seeks to cure these distortions. It can lead to a distinctive societal self-understanding, which better integrates economic activity into lives that brim with moral and civic virtue.

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Stanford Law School, Columbia Law School, European Corporate Governance Institute (ECGI)
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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