Friday, March 28, 2008
Well, back to the java. Interestingly, Starbucks seems to be sticking to the quality control issue and is adopting new automatic espresso machines designed to leave less error in the puling of the shots and steaming milk. The company is also returning to grinding beans at the stores, rather than using pre-ground bags of coffee. I’m not sure that this all will lead them to increased sales and business success, but it does show company commitment to make the “best” coffee a reality. The problem with the perfect coffee pledge to me, though, still remains. Starbucks has set consumer expectations high, but their ability to convert on their pledge of quality coffee rests with the employees in the stores. That is where the tension between being a great place to work and discontent over the tipping policy may affect whether the baristas ultimately “make it right.”
All of this serves as a reminder that companies which make express warranties regarding the quality of their products may be heavily dependent on their employees to really come through. This would seem to be especially true where the sale involves a mixed goods and services transaction. As to Starbucks, the dependence and ultimate fulfillment of warranty conditions (if the perfect coffee pledge is more than puffery) will require employee dedication to ensure quality coffees. When I went to the Starbucks website, the company’s statement concerning the tipping issue was prominent on the website. That struck me immediately, but upon reflection Starbucks really must tackle this issue that could threaten quality. Although the statement now appears on a less prominent company page, the tipping issue reflects the delicate balance that companies must achieve between satisfaction of warranties of quality and employee relations.
Wednesday, March 26, 2008
Monday, March 24, 2008
Irma’s observation about lack of consumer preferences on these types of terms strikes at the heart of the debate. It seems like an unfortunate state of affairs that consumers have little bargaining room in these types of transactions. That said, unless severe overreaching occurs, I tend not to question the terms offered and go on my way. In fact, the faster that Hertz gets me in the car and on my way, the happier I tend to be. Consumer inaction strikes again.
Wednesday, March 19, 2008
The bill amends § 9-506(c) so that a financing statement is sufficient for an individual name if a search on just the correct last name of the individual would disclose the record. The effect of this legislation will be to make the first and middle names of individuals irrelevant to the efficacy of a financing statement. That in turn will increase the due diligence burden for searchers. In short, searchers will have to review every financing statement that provides the same last name as the individual name searched. This could be a large task.
For example, a UCC search of the individual last name “Johnson” on the Nebraska Secretary of State’s web site produces 2671 unique active records. For a searcher interested in the property of any one of them, each of those filings would have to be reviewed. This would seem to significantly add to the cost associated with using the filing system, something that would seem undesirable in this time of tight credit.
The problems associated with filing and searching against individual debtors has frequently been the subject of long trains of postings on the UCC listserv. Texas has already enacted a non-uniform rule to deal with the preceived problem and now Nebraska is poised to adopt a different approach. The ALI and NCCUSL are in the process of establishing an Article 9 Review Committee to discuss issues that have arisen and formulate proposals (but not to do actual drafting). I hope the remaining 48 states refrain from adopting any more non-uniform approaches -- especially not Nebraska's approach -- to this issue until that Committee has the opportunity to address the matter.
The most recent decision on this point is In re Keeton, 2008 WL 686938 (Bankr. M.D. Ala. 2008) (dragnet clause in security agreement with joint debtors did not clearly encompass obligations later incurred by only one of them, and thus the collateral did not secure those individual obligations). Decisions such as this are lamentable. They are a judicial invention that implicitly treats secured transactions as if they were governed by the common law, rather than a fairly detailed legislative code. Beyond that, they are expressly rejected in the comment to revised Article 9. See 9-204 comment 5 . More important, the requirement that the advances be of a similar kind is inconsistent with its own underlying rationale. In an effort to ensure that the debtor has truly consented to secured treatment of the future advance, courts refuse to enforce the parties’ agreement as written – which is the best evidence of their intent. Moreover, in the process, they relegate the unquestioned intent of the secured party to an irrelevancy. Most significantly, there is really no way to draft around the rule to ensure that all future advances will be covered, even if that is the true intent of both parties and even though the rule is ostensibly designed to give effect to their (or at least the debtor’s) intent.
Tuesday, March 18, 2008
But . . . placement matters too. Not only does Larry’s essay tell a grim tale of the number of articles as a whole, but the study found no articles in the top ten journals for 2004-05 and only 2 in the same period for the top sixteen journals. I find myself asking whether there is a corollary between the secondary position of commercial law in the curriculum of some law schools and the lesser placement of scholarly commercial law articles. Jim's post about teaching commercial law is ultimately related to issues of scholarship as well. Students who don’t have an opportunity to take, learn and appreciate commercial law are the same ones who make publication decisions for the reviews. If some view the study as one that is only encouraged because it is necessary, the same would appear true of scholarship. It seems to be a problem that will perpetuate itself without law review editors being bold enough to publish work that falls outside some of the typical parameters (high citation counts and former placements). And, again, if there aren’t plenty of submissions of commercial law papers to the law reviews, it becomes an anomaly for the editors to see such things.
Agree or not with Larry’s findings. The status of commercial law does depend on what we do and how engaged we are with our field. I, like many others, will wait out the next few weeks to see what becomes of my manuscript. Wherever it ends up, I will continue to write in the area. There is always hope that the more pieces the law review editors see on their desk with “U.C.C.” lurking somewhere in the title, abstract or first page, the more likely that the status of the scholarship will gain a greater sense of appreciation. It will be worth seeing how the March submission cycle treats commercial law authors. Best to all in this season.
Sunday, March 16, 2008
In an email to me, Doug mentioned: "The purpose of the book was to change the way that commercial law is taught. In addition to the standard casebook and statutory supplement, I wanted to provide students with readings on the history, interpretation, and politics of the UCC." Now that’s a lot in one book.
Given Jim's post about teaching commercial law and Marie's on Teaching Commercial Law II , the broad based approach that Doug is trying to achieve has some attactiveness. Not only do students need critical statute reading and interpretative skills, but also an understanding of the methodology behind the sections, including the drafting history. I agree to a limited extent with Joe S. that the U.C.C. may have a different drafting practice than, for instance, an environmental statute. Yet, I find that students have difficulty with statutes of any kind and that the U.C.C. with its comments and history makes it a particularly good vehicle for students embarking on the study of critical statutory skills. The U.C.C. also has many sublties that make it interesting for those of us who study it long term. Perhaps my bias as a commercial law professor finds me agreeing with Marie Reilly that the study is not at all like broccoli (though I must admit that I have an affinity for that too). To me, I think the study is more like the flavor of a glass of Châteauneuf du Pape. The importance of the blend of skills that the study offers is a good part of what makes the practice of law intriguing. I certainly offer my best to Doug for his new edition.
Friday, March 14, 2008
By giving the dealer control over the Red Elvis, Lindholm had entrusted the work to the dealer sufficient to implicate UCC section 2-403. Through the entrustment, the dealer acquired the power to transfer Lindholm’s ownership to a buyer in the ordinary course of business. The question the court confronted in Lindholm v. Brant, 925 A.2d 1048 (Conn. 2007) was whether the experienced art collector was a buyer in the ordinary course of business. Prior to the sale, the collector’s attorney did a search of the international database on lost and stolen works of art and found no claims against the Red Elvis, but opined to the collector that this provided only “minimal assurances” of good title. The collector, concerned about potential claims against the work from Lindholm’s former husband, requested documentary evidence of the dealer’s ownership. The dealer refused on the basis that providing such evidence was not customary in the art trade. Despite the dealer’s refusal, the collector proceeded with the sale. Finding that the collector had acted consistent with the practices in the art trade, even if those practices seemed unreasonable to the court, the court found the collector was a buyer in the ordinary course of business and therefore, the owner of the Red Elvis.
By affixing his signature to SB 93 on March 13, 2008, Governor Mike Rounds made South Dakota the thirtieth state to enact Revised Article 1. South Dakota's enactment, along with Kansas's (enacted last year), will take effect on July 1, 2008.
SB 93, like the versions of Revised Article 1 enacted in Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Minnesota, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Rhode Island, Texas, Utah, Virginia, and West Virginia, rejects uniform R1-301. (To date, only the U.S. Virgin Islands has adopted uniform R1-301.)
SB 93, like the versions of Revised Article 1 enacted in Arkansas, California, Colorado, Connecticut, Delaware, Florida, Iowa, Kansas, Kentucky, Louisiana, Minnesota, Montana, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Texas, and West Virginia, adopts uniform R1-201(b)(20)'s definition of "good faith." By contrast, Alabama, Arizona, Hawaii, Idaho, Indiana, Nebraska, Rhode Island, Utah, and Virginia retained the pre-R1 “honesty in fact in the conduct or transaction concerned” definition in Article 1 and left 2-103(1)(b) & 2A-103(3) unchanged.
The bills currently pending in Massachusetts, Pennsylvania, Tennessee, and Vermont (see my February 28 post) do not appear to be making much progress.
Thursday, March 6, 2008
The tension between relational contracting and firm contract terms came up recently In Italverde Trading, Inc. v. Four Bills of Lading Numbered LRNNN 120950, LRNNN 122950, LRNN 123580, and MLSNV 254064, 485 F. Supp. 2d 187 (E.D.N.Y. 2007). After a freight forwarder seized a shipment of pasta in payment of a debt, the pasta manufacturer, Delverde SpA (“Delverde”), sought to establish that title to the pasta passed to the buyer, Italverde Trading, Inc. (“Italverde”), upon delivery to the shipper. The parties to the pasta sales agreement had a no modifications clause in their sales contract. The contract between Delverde and Italverde provided that Italverde would not gain title to the pasta until Italverde received the pasta in the United States, but Italverde argued that the parties waived this provision. First, the Delverde shipping invoices used the delivery term “CIF.” Ultimately, the court found this evidence inconclusive since the effect of the CIF term would depend on whether the parties understood the term as being used under the INCOTERMS, which does not govern title, or the U.C.C. section 2-320, which would. Second, the Italverde CEO testified that he understood that Italverde had title to the pasta when it was positioned on the ship. The court concluded that the inclusion of the CIF term on invoices, the lack of objection by Italverde and the testimony of the Italverde CEO were insufficient to establish as a matter of law that the parties had waived the no oral modifications provisions regarding title to the pasta. At trial, Italverde and Delverde would have the burden of proof to show the parties waived the transfer of title provision from the contract.
Perhaps this argument was created just to avoid the loss of the pasta to freight forwarder. But, on the other hand, title and risk of loss issues are often important to parties involved in shipping. If Deverde and Italverde did in fact change the contract’s title provisions through practice developed over time, as we might expect in a relational contract, then denial of the change undermines the intention of the parties. The common inclusion of non-modifications clauses as boilerplate in contracts may turn out to be a pitfall to parties to longer term contracts who often leave some of their contract terms behind as their business develops.
Wednesday, March 5, 2008
As a threshold matter, consider what is and what is not commercial law. The commercial law curriculum consists of the big three: Sales, Secured Transactions and Payment Systems. Sales covers the law that governs supply chain transactions (goods sales and leases, domestic and international). Secured Transactions opens the door of the mind to debt relationships. It explores where capital comes from, where it goes, and how borrowers and lenders solve recurring problems of agency and control. Payment Systems covers an array of items that facilitate transactions including bank-customer relations, risks associated with debt relationships with strangers, and alternate credit enhancement techniques. These three courses are the mirepoix and Contracts is the broth that supplies the flavor base to every mutually beneficial exchange.
I agree that in a perfect world, a first rate legal education would include at least one of the big three. But, Jim's points require clarification. Yes, commercial law courses are statutory. They feature articles of the UCC and, these days, a host of other statutes, state, federal and international. But commercial law courses are not just statutory. It is wrong to imagine a section by section slog through the Articles for the sole purpose of mastering the statute (no doubt, the legal analog to the Bataan death march). The UCC coexists with common law of commercial law: "the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause." UCC 1-103. White & Summers note that this scope section, 1-103, "is probably the most important single provision in the Code." The meaning and function of the Articles of the UCC are deeply embedded in the larger and highly dynamic legal environment in which commerce occurs. Commercial law is about how law supports and regulates business. It does not begin and end within the covers of a statutory supplement or a Nutshell. It is alive and well and everywhere.
Yes, statutory skills are good to have. Sadly, though, this truth is typically distorted in the presentation. "Commercial law courses are good for you," says the colleague down the hall who teaches Constitutional Law. The subtext in such a remark is unmistakable. Commercial law is a big green vegetable. Like high fiber food, commercial law courses and the statutory interpretation skills they deliver are "good for you" but pointless and mind numbing in the consumption. (Some colleagues actually assume an "I smell broccoli cooking" look whenever advising a student about a commercial law course.) The rejoinder to those who see the role of commercial law in the law school curriculum as a kind of lead bat in the on deck circle appears in justifications 2 and 3. In good times and especially in bad, law firms and clients pay for substantive expertise in commercial law. Moreover, commercial law courses are most definitely a legal "skills" experience. They present complex questions and require sophisticated answers. A well-trained lawyer can listen to a problem, translate it into the specialized language of commercial law, locate the governing principle, identify negotiating space, and offer reasoned advice to the client. It's probably true that few students remember distinct statutory language after the exam. Instead they carry away legal instinct, the urge to "look it up," and the courage and patience to do so.
Tuesday, March 4, 2008
Monday, March 3, 2008
A year and a half ago, The Conglomerate rightfully devoted careful attention to Larry Gavin's recent SSRN post, The Strange Death of Academic Commercial Law. Christine Hurt and Vic Fleischer each posted thoughtful proposals for reconfiguring the law school curriculum to bring this venerable and valuable subject back to legal academia.
After reviewing what I wrote in response to these proposals, I will add a few thoughts about commercial law and its centrality to legal education.
Read the rest of this post . . . .In August 2006, I wrote this in response to The Strange Death of Academic Commercial Law and The Conglomerate's discussion of that paper:
There is something to be said for reconfiguring the law school curriculum, especially in a third year that is as widely wasted as it is dreaded, according to the functional needs of new lawyers rather than the intellectual predilections of sinecured professors or, even worse, those professors' personal convenience.I still embrace the notion of building the entire third-year law school curriculum around capstone courses and practice-oriented exercises such as clinics, moot courts, and externships. I am now less sanguine, however, at the prospect that the legal academy as a whole would ever embrace something this radical. Even in August 2006, I feared that "an academy that is paralyzed by fear of The Ratings will be loath to try something different, no matter how sensible or how useful the alternative might be." Mark Osler has since identified serious and systemic institutional barriers to curricular innovation. Only partly in jest, I've suggested that those barriers dictate a single approach to faculty appointments: Hire no one.
Short of a comprehensive restructuring of the upper-level law school curriculum — which after all is the sort of proposal that sinks tenure petitions, ends deanships, and generally withers otherwise promising academic careers — perhaps we can consider a more modest intermediate step. Every law school student should complete a six-credit, two-semester "capstone" sequence as part of her or his third-year experience. Relying strictly on my personal arsenal of curricular weapons, I could conceivably offer full-year sequences in economic regulation (from antitrust to full-blown, command-and-control regulation of entry and rates), agricultural law and agribusiness law, the law of disasters, or natural resource and public lands management, among other possibilities. These are not offerings that lend themselves to a single 2-, 3-, or 4-credit course. In the tradition of, say, sports and entertainment law, they undertake to explain an entire way of doing business and to integrate such bodies of law as may be pertinent — all from a prospective client's perspective rather than the professor's idiosyncratic view of the field. Team teaching, skills training, and clinical experience can all be incorporated into this capstone sequence.
As a compromise, therefore, I modestly propose this intermediate step: Law schools should actively encourage all students, and not just those who contemplate a future in business law, to complete at least one course in commercial law. Better yet, all students — especially those who expect to work in areas they may not characterize as commercial or economic — should complete a core business law curriculum, including commercial law, the law of business associations, and basic income taxation. This may be an obvious point to the contributors to this blog, but a shocking number of students (and even professors) indicate a contrary belief through their curricular choices. Marie Reilly has already extolled the utility law teacher. I now praise the utility law course.
The virtues of teaching commercial law are many, but the principal ones merit quick mention here:
- Commercial law, throughout its manifestations, is primarily a product of statutory law. In an academy where few schools undertake to teach legislation and statutory interpretation and few students encounter the chief tool of contemporary lawmakers and courts, courses in commercial law (and, for that matter, in tax) may represent most students' only systematic introduction to statutes and codes.
- Commercial law covers the sort of substantive legal knowledge for which clients are most likely to be willing to pay. We must never forget that the vast majority of law students are not going to school for fun or mere intellectual stimulation. Every law students should take at least one upper-level course that will enable them, quite simply, to get a job.
- Commercial law outperforms most other law school offerings in its integration of legal doctrine with real-world problem-solving techniques. That potential, at any rate, means a great deal in the hands of a skillful teacher of commercial law.
Sunday, March 2, 2008
Although I would expect many to side with me on this one, several recent cases argued just that. This makes me wonder if I am missing something with the warranty of merchantability. In Hoyte v. Yum! Brands, Inc., 489 F. Supp 2d 24 (D.D.C. 2007), a physician argued that KFC food, particularly the French fries and chicken, breached the warranty of merchantability due to the trans-fats. The court granted the defendant’s motion for summary judgment because the physician could not allege an injury, but noted that “it might be appropriate for this court to find, as a matter of law, that the consumption of fat-including trans fat – is indeed within the reasonable expectations of the consumer of fried chicken and French fries prepared in fast food kitchens . . . .” Similarly, the court in In re McDonald's French Fries Litig., 503 F. Supp 2d 953 (N.D. Ill. 2007) dismissed claims of breach of the warranty of fitness for particular purpose in a case involving customers with special dietary issues and sensitivities to milk querying what the “non-ordinary use of a French fry or hash brown is.” Rounding out a trio of these cases was Gonzalez v. Pepsico, Inc., 489 F. Supp 2d 1233 (D. Kan. 2007), where the claims for breach of implied warranty of merchantability survived because the plaintiffs alleged the beverages contained benzene. The court compared the ordinary purpose under 2-314 with the tort principle of defect.