Echo of Support for the Lifetime Achievement Award for Linda Rusch

Jeremy Telman over at the Contracts Prof Blog posted over there about the Lifetime Achievement Award that Linda Rusch will receive at the Ninth Annual International Conference on Contracts February 20-21, 2014 to be held at St. Thomas University in Miami, Florida.  I must echo Jeremy's praise of Linda's accomplishments.  Linda is a retired professor of law as of August 2012 and now is getting to enjoy the great outdoors. She was the inaugural holder of the Frederick N. and Barbara T. Curley Professor in Commercial Law at the Gonzaga University School fo Law from 2005-2010. She was also a co-director of the Law School’s Commercial Law Center.  And, of course, Professor Rusch has been involved in the revision of the Uniform Commercial Code in many capacities and is the recent past Chair of the Business Law Section of the American Bar Association.  It is great to see her contributions to contract and commercial law recognized!

 

If you are considering presenting at the February Conference, the call for papers is currently OPEN. 

Papers and works-in-progress are welcome from those who study Contracts from any perspective, whether doctrinal, pedagogical, theoretical, empirical, historical, economic, critical, comparative, or interdisciplinary. Works that take an international or civil law approach are also welcome. Junior scholars are particularly encouraged to participate. Those interested in proposing and organizing panels (3-5 presenters) on specific themes are especially encouraged to do so. Individual submissions should be made by a brief abstract (one page is sufficient) of the paper or WIP that includes contact information for the author(s). The deadline is Monday, December 16, 2013 with proposals submitted earlier will be accepted on a rolling basis. Proposals submitted after the deadline will be accepted on a space-available basis. Submissions should be directed to: Professor Jennifer S. Martin (me) at jmartin@ stu.edu.

 

-JSM

Keeping it simple: Financial Advice on an Index Card

I heard about the the 4X6 inch index card financial advice on NPR this week.  This advice comes from University of Chicago Professor Harold Pollack.  My first thought is that he would be a business school prof, but Professor Pollack does social services work.  The simplicy of the program is good, but the last piece of advice is cut off in the picture (and gives away his true calling):

Promote social insurance programs to help people when things go wrong.

This, of course, brings to mind the current debate in Congress over spending and attempts to defund healthcare, food stamps and other programs.  Perhaps the nation's finances would be in better order if Congress consulted Professor Pollack.  Simple advice, yes, but probably sound in basics.  Typically that is enough for ordinary people to keep up with and improve their finances.

-JSM

KCon 2014 Call for Papers

Papers are invited for the 2014 Contracts Conference at St. Thomas University in Miami, Florida.  The Conference website is up at http://www.contractsconference.com/kcon/KCON9__Miami.html and able to take registrations, including information about hotel registration.  Here is the call for papers. 

 

KCON9

The 9th Annual Conference on Contracts

The Call for Papers is OPEN.

For information,

contact Professor Jennifer S. Martin

at jmartin@stu.edu

February 21-22, 2014

CALL FOR PAPERS

 Submissions are cordially invited for the 9th Annual International Conference on Contracts, the largest annual scholarly and educational conference devoted to Contracts and related areas of commercial law. Papers and works-in-progress are welcome from those who study Contracts from any perspective, whether doctrinal, pedagogical, theoretical, empirical, historical, economic, critical, comparative, or interdisciplinary. Works that take an international or civil law approach are also welcome. Junior scholars are particularly encouraged to participate. Those interested in proposing and organizing panels (3-5 presenters) on specific themes are especially encouraged to do so.

Individual submissions should be made by a brief abstract (one page is sufficient) of the paper or WIP that includes contact information for the author(s). Individual submissions will be placed on panels with like submissions. Panel proposals should include the name and contact information of the moderator or organizer, and a summary of the proposed papers or works in progress. There is no publication commitment for the conference, but organizers of individual panels are free to arrange for publication on their own.

Submissions

Deadline is Monday, December 16, 2013.

Proposals submitted earlier will be accepted on a rolling basis. Proposals submitted after the deadline will be accepted on a space-available basis. Submissions should be directed to:

Professor Jennifer S. Martin

jmartin@ stu.edu

 

Sneaky Credit Card Charges

Credit card delinquencies have gone way down  to the levels of the 1990s.   Some younger consumers have forgone credit cards entirely (perhaps due to their already high levels of student loan debt).  For those using credit cards, though, the landscape remains buyer beware.  "Grey" charges of about $14.3 billion are attached to credit card statements for subscriptions and memberships with renewal charges.  A whopping 35% of credit card statements get hit with these annually.

So, whether debit or credit card, make sure that you review the statement for these charges.  With the Iphone and other Apple products having such popularity, there are plenty of subscriptions through Apple that are auto renew and tied to a card.  The Wall Street Journal today ran a piece about the difficulty that consumers encounter when trying to cancel renewable services (in that case, a security system).  In that case, the consumer was allegedly misled into signing a contract extension.  Sounds like a good case for a claim of fraud in the inducement perpaps?  Misrepresentation by the security tech? 

In the end, consumer vigilance is still the best tool.  Be proactive with your statements.  And, it is really easy to give your card number to less than scrupulous providers.   In the Internet world, it is easy to click on the terms and conditions (WSJ, Those Wordy Contracts).  But in many cases, consumers can prevent these debacles from ready what they sign and being careful about giving out their card numbers.

If there are charges that should not be there, it takes time to do battle on these, but contact the credit card company.

                                                                                                                                                  - JSM

Ave Maria School of Law looking for Contracts and Commercial Law Faculty

Ave Maria School of Law invites applications for multiple faculty positions from entry-level and lateral candidates, pre- or post-tenure.  Ave Maria particularly welcomes applications from candidates with teaching and research interest in Contracts, Business Organizations, Sales, Negotiable Instruments, Secured Transactions, and related commercial subjects.  Applicants should have superior academic credentials; a record, or the promise, of excellence in teaching and legal scholarship; and an interest and commitment in exploring his or her teaching and research interests in an institution that strives to integrate the Catholic intellectual tradition into teaching, scholarship, and service.  Entry-level applicants may demonstrate scholarly promise by publications in scholarly journals or scholarly works in progress.  In the case of any applicant with tenure, a distinguished record of teaching and scholarship is required.  Interested candidates should send their materials to Professor Patrick T. Gillen, current chair of the Appointments Committee.    Applications can be e-mailed to Professor Gillen at ptgillen@avemarialaw.edu or can be mailed to his attention at 1025 Commons Circle, Naples, Florida 34119.  Resume review will begin immediately and continue until the positions are filled.

Ave Maria School of Law, providing legal education enriched by the Catholic Faith, seeks employees whose education, experience and beliefs are consistent with its mission.  Ave Maria School of Law is an EQUAL OPPORTUNITY/AFFIRMATIVE ACTION employer that values diversity, including diversity in religious affiliation, and strongly encourages applications from persons of diverse backgrounds willing to support the institutional mission; it requires compliance with all state and federal laws governing employment discrimination. 

 -JSM

 

Banks behaving badly: Evictions of Military Families

The New York Times today ran an article about banks foreclosing on the homes of deployed military families.  See, Banks Find More Wrongful Foreclosures Among Military Families.  The Servicemembers' Civil Relief Act provides protections to military service members on important financial issues, including evictions and mortgage foreclosures, which should have prevented many of the reported cases.  The SCRA is a key protection that perhaps needs further promotion to ensure that banks comply.

- JSM

Courts Continue to Examine Mixed Goods Cases

In mixed-sales transactions, those involving goods and services, most courts apply a predominant purpose test to determine if Article 2 of the UCC applies to the transaction applying sections 2-102 and 2-105. See, e.g., Warshaw v. QBE Ins. Corp., 78 U.C.C. Rep. Serv. 2d 434 (D. Mass. 2012)(providing that “where a contract implicates both goods and services, the test to determine the applicability of art[icle] 2 is whether ‘the predominant factor, thrust or purpose of the contract is . . . the rendition of service, with goods incidentally involved.’”). Under this test, Article 2 applies if the transaction is predominantly for the sale of goods, but does not apply if the transaction is predominantly for the provision of services. Courts continue to look at how this test works in individual cases.

For instance, in Audio Visual Artistry v.Tanzer, No. W2012–00216–COA–R3–CV, 2012 WL 6697600, at *1 (Tenn. Ct. App. Dec. 26, 2012), the court considered whether a contract for the installation of a “smart home system” during the construction of a new home was one for the sale of goods. Stephen Tanzer (“Tanzer”) and Audio Visual Artistry (“AVA) contracted for the sale and installation of electronic and entertainment equipment in Tanzer’s home, which was under construction. The contract, which was for a custom home theater, music, phone and lighting system, itemized the pricing for the contract into components that included equipment, labor, and cable, with the equipment forming the bulk of the price. A dispute developed over the functionality of some components of the Tanzer system. AVA filed suit for breach of contract to recover unpaid invoice amounts and Tanzer filed a counter-complaint. Accordingly, the court correctly ruled that Article 2 governs transactions where goods and services are bundled if “the goods element predominated.”

The court outlined four factors key to application of the predominant purpose test: (1) the language of the contract; (2) the nature of the seller’s business; (3) the purpose of the contract; and (4) the amounts paid toward the goods and services components of the contract. Although the AVA-Tanzer transaction involved a service, the installation of the smart home system during the construction phase, the court concluded that the contract was distinguishable from other construction agreements typically outside the scope of Article 2. The language of the contract, which repeatedly referred to the purchase of equipment and the installation of the components into the home, did not change the moveability of the goods sold. Moreover, AVA’s business was the sale of “smart home” components of multiple manufacturers, with installation being incidental to the sales aspect. Additionally, even Tanzer described the contract as one for electronic equipment and the contract amounts paid for the equipment far outweighed the installation charges, indicating that the contract was predominantly for the sale of goods.

- JSM

Banks Providing Payday Loans

It seems at least Wells Fargo is now offering payday loans, though they call theirs a "direct deposit advance." (See Wells Fargo FAQ).  A large number of states prohibiting payday loans and an even larger number opposed to any federal charter for payday lenders.  (see Center for Responsible Lending).  It seems that some lenders are turning to setting up shop on the Internet, states that allow these loans or even in foreign countries.  (see Major Banks Aid in Payday Loans, New York Times).  While there is plenty to dislike about this product, how its marketed, the price, etc., there are also complaints against major banks that have been permitting withdrawals on these loans, even where the loans are illegal in the first place. 

Customers should be able to discontinue automatic withdrawals of any variety by a simple request to the bank.  Banks that don't comply with customer requests do so that their own peril.  Notice of a stop payment would seem to make any further transactions not properly payable under section 4-401 and prohibited under the Electronic Funds Transfer Act at the very least. There are some reports that the banks truly are attempting to increase overdraft fees by forcing customers on the edge to continue making auto-withdrawlas over a stop payment request.  While I am not surprised that banks might overreach at times, customer persistence may help to stomp this out.  Or at least an industrious attorney or law student who is able to remind banks of the rules of Article 4 and Regulation E under the Electronic Funds Transfer Act 205.10 (allowing customers to stop payment).

-JSM

Yet another entrustment case. Buyer wins.

It seems there with regularity appear cases that well illustrate the "entrustment" doctrine, often concerning artwork that falls into ownership by a buyer in the ordinary course.  UCC section 2-403 governs the rights of buyers in the ordinary course who receive the goods from a merchant dealing in goods of the kind, even where the merchant did not have authorization to sell from the actual owner of the goods.  Application of this section was at issue in the case of Joseph P.Carroll Ltd. v. Baker concerning ownership of the painting Untitled (1943) by John D. Graham (“the Painting”).  Craig Baker (“Baker”) purchased the Painting in a private sale, but later consigned the Painting with a third party gallery owned by Lawrence Salander (“SOG”) for sale.  In 2000, John P. Carroll Ltd. (“Carroll”) expressed an interest in the Painting but did not purchase it from SOG until 2007.  Four months after the sale, Baker discovered the sale and confronted SOG; however SOG had declared bankruptcy in the interim and, consequently, Baker was not paid for the painting.  Applying section 2-403, the court determined that Baker entrusted the painting to SOG, a merchant.  Because Carroll was a buyer in the ordinary course that purchased the Painting in good faith and without knowledge of the rights of Baker, SOG effectively transferred all of Baker’s rights to the painting to Carroll. Therefore, Carroll held title to the painting.  See also Lakes Gas Co. v. Clark Oil Trading Co., 875 F. Supp. 2d 1289, 1305–06 (D. Kan. 2012) (finding that summary judgment precluded where there were genuine issues of material fact as to whether Lakes effectively entrusted its propane to Stevenson to sell to third parties, as to whether Clark Oil comported with usual or customary practices in buying propane from Stevenson, and as to whether Clark Oil qualified as a buyer in the ordinary course within meaning of the section 2-403).

While indeed this is a harsh result to the former owner of the painting, the message is that those who entrust valuable objects to others should look into filing a Financing Statement in the proper office to protect the interest.

                                                                                                   -JSM

 

Thanks to Frank Synder and Texas Wesleyan

I'd like to echo Meredith Miller's thanks over at Contracts Prof Blog and add my own to Professor Frank Synder and Texas Wesleyan School of Law for hosting the Eighth International Contracts Conference this past weekend.  I am pleased to announce that St. Thomas University School of Law will host next year's conference February 21-22, 2014 in lovely Miami.  So, save the dates for a great weekend of paper presentations and contract (and often commercial) law discourse.  We will start accepting paper and panel proposals in the coming months when the Call for Papers is announced.

More to come on this soon.

                                                                                                                                     -JSM

Revolving door of contract terms?

At the International Contracts Conference, there was plenty of references and discussion of companies changing terms and conditions whenever they see fit to do so (see AT&T litigation; Apple).  AT&T readily notes that it changes terms "from time to time.  as does Apple.   As another example, Facebooks' multiple terms and conditions changes have resulted (see, e.g.,  new instagram changes), like AT&T, more than a bit of grumbling from users. 

So, is there anything to be done about this?  Seems not.  A contract just isn't what it used to be in terms of mutual assent it appears.  Now we all agree to an agreement that allows unilateral modification.  I am hardly convinced that consumers actually agree to this, but the overreaching of sellers in is well documented.  Pete Seeger once said, “Education is when you read the fine print. Experience is what you get if you do not.” It seems now, it might not matter whether we read the fine print terms or not.  Hardly encouragement to read these darn provisions.

Other than suing the seller, consumer options seem limited.  When Facebook, Inc. made its debut as a publicly traded company, and changed its terms and conditions, some Facebook users attempted to creatively try to block resuse of profile content.  Basically, the users began posting status updates citing provisions from the Uniform Commercial Code in order to protect their content. The notice, in part, read:

By the present communiqué, I hereby notify Facebook that it is strictly forbidden to disclose, copy, distribute, disseminate, or take any other action against me on the basis of this profile and/or its contents. The aforementioned prohibited actions also apply to employees, students, agents, and/or any staff under Facebook’s direction or control. The content of this profile is private and confidential information. The violation of my privacy is punishable by law (UCC 1-308, 1-103, and the Rome Statute).

Commentators did not seriously believe that posting this notice on a Facebook page would have any legal impact on privacy. Moreover, the Uniform Commercial Code is not really implicated here.  It is hard to see how the UCC really helps, as much as I admire those who wield its provisions by section number.  The bottom line is that one cannot take back what they have already consented to, even if the consent is to an ever changing set of terms. Specifically, all users when opening their accounts agree to Facebook’s Statement of Rights and Responsibilities (SRR). Contained within the SRR are the site’s privacy policy and its terms and policies. By opening their account and clicking the “sign up” button, all users have accepted these terms and stated they have read these policies. Therefore, one cannot alter their acceptance to these policies nor can they restrict the rights of entities who are not parties to that agreement by posting a contradictory legal notice on their page. 

While the Facebook user tactic has no teeth to it, it represents an ever present issue that consumers will face concerning terms and conditions, particularly those that companies can, and do, change frequently.  All without any additional consent. 

 

                                                                                                       - JSM and Raymond Alvarez

The High Price of Law School

Good news for law students?  There has been much in the news about the increasing student loans nationwide, the high cost of law school and the downturn in applications.  So, could there be some good news from the "taxman?"  Enter the LifetimeLearning Tax Credit (LLTC) available on tax returns for tax year 2012.  The credit, processed on IRS Form 8863, along with the American Opportunity Tax Credit, are targeted toward students.  The LLTC appears, unlike others, to apply to those obtaining graduate-level education.

So, what is the deal when your students come by to ask as mine did?  The Lifetime Learning Tax Credit consists of a maximum of $2,000 or 20% of the qualifying education expenses.  These expenses must be paid to any post-secondary education, including graduate schools, and they constitute tuition and fees, course-related books, supplies, and equipment that are required as a condition for enrollment.  Even a new laptop may qualify if documentation can be provided that the school requires it! Anyone who pays -even with borrowed funds- expenses for higher education (being undergraduate or graduate education), -either for him, a spouse, or a dependent- may claim the credit.  As always, there are income limitations, set at $61,000, or if filing jointly (which is required if married), $122,000. 

The expenses count for the year in which they are paid, not for the academic year for which they are paid.  For example, if tuition is paid in the Fall of 2012 for the Spring semester of 2013, it constitutes the expenses of 2012. Also, the expenses must be reduced by any amount paid for classes that a student withdraws, as well as for any tax-free educational assistance received such as some scholarships and fellowships.  For example, if $10,000 is paid in tuition, a $2,000 credit (10,000 x .20) may qualify, assuming no other education tax credit was claimed such as the American Opportunity Credit.  However, if the claimant was reimbursed for any of the previous reasons, or the student received a tax-free scholarship, the amount of expenses of $10,000 would be reduced and 20% calculated from it.

 So, when they come by and complain about the high cost of law school, books and the dearth of jobs, perhaps the bright spot might be a $2000 tax incentive.  Hmmm, be sure to mention it. 

                                                                                                                         - JSM and Rosario Torres

No Contract?

Professor  Oren Bar-Gill (NYU) has been busy of late!  Not only was he a presenter at the International Contracts Conference in Texas Wesleyan in Ft. Worth, Texas, this past weekend, and has a new book "Seduction by Contract: Law, Economics and Psychology in Consumer Markets," he has a new paper "No Contract?" on SSRN taking up the issue of no contract arrangements, where consumers opt-out of long term relationships with providers.  Yet another interesting paper in my stack to read.

                                                                                                                                     - JSM

Promising "Reads" in Contract Law

The Eigth International Contracts Conference is now done, but a report on yesterday's panels is worth noting.  The presentations included a panel on Are Consumer "Contracts" Contracts? with Oren Bar-Gill (NYU), Jean Braucher (U Arizona), David Horton (UC-Davis) and Margaret Jane Radin (U Michigan) as presenters.  The focus of this discussion was Professor Radin's book "Boilerplate: The Fine Print, Vanishing Rights, and the Rule of Law" (Available on Amazon for $30.40 and Kindle $19.25).  I haven't read it yet, but after hearing the panel, a number of those in the audience ordered it.  The Wall Street Journal did a book review for it and Professor Horton will post a review on SSRN soon.  The book gives a historical view of the dreaded boilerplate language for any who aren't already drawn in by the issues and then turns to a discussion concluding what many already know: there are serious defects with consent to boilerplate under classic contract doctrine.  Of course, restricting boilerplate has its problems as well in a society depending on speedy transactions that are not individually negotiated.

Another panel focused on Professor Bar-Gill's book "Seduction by Contract: Law, Economics and Psychology in Consumer Markets" (Available on Amazon for $32.50 and $19.24 on Kindle).  Professor Bar-Gill takes up specific instances of long-term consumer contracting (cell phones, mortgages, credit cards, etc.) and grapples with consumer short term philosophy toward their own prospects and the market that ultimately allows sellers to secure less favorable long-term deals.

I look forward to reading these soon.

                                                                                                                                     - JSM

Greetings from the Eighth Annual International Contracts Conference

Two days of great discourse on contract law is being held at the Annual International Conference on Contracts, the schedule for the Eighth International Conference on Contracts, coming up this weekend, is available here.  Of note, yesterday's speakers included Neil Sobel's (Texas Wesleyan) presentation on Attacking Zombie Debts highlighted the perils of resurrected debt to consumers.  Fernando Dias Simoes' (University of Macao) presentation on Professionals v. Consumers: Should SME's be Treated at Laymen? argued that regulatory structures should include in some contexts small and medium business entities in consumer protection regimes.  I look forward to seeing both of these papers on SSRN soon.

Today's presentations include a panel on Are Consumer "Contracts" Contracts? with Oren Bar-Gill (NYU), Jean Braucher (U Arizona), David Horton (UC-Davis) and Margaret Jane Radin (U Michigan) as presenters.

If you are not here in Ft. Worth, you are missing some great talks.  The Conference's Lifetime Achievement Award went to Dr. John Murray.  Next year's Conference will take place on February 21-22, 2014 at St. Thomas University in Miami, Floida.  Hope you will join us!

                                                                                                                                           -JSM

SSRN Recently Submitted Papers in Journal of Consumer Law eJournal

RECENT HITS (for all papers announced in the last 60 days)
TOP 10 Papers for Journal of Consumer Law eJournal
December 24, 2012 to February 22, 2013

Rank	Downloads	Paper Title
1	498	Law School Marketing and Legal Ethics Ben Trachtenberg, University of Missouri School of Law, Date posted to database: December 21, 2012 Last Revised: January 4, 2013
2	380	Choice of Law in the American Courts in 2012: Twenty-Sixth Annual Survey Symeon C. Symeonides, Willamette University - College of Law, Date posted to database: January 13, 2013 Last Revised: January 14, 2013
3	276	Arbitration and Access to Justice: Economic Analysis Omri Ben-Shahar, University of Chicago Law School, Date posted to database: January 6, 2013 Last Revised: January 10, 2013
4	223	The Politics of Twitter Data Cornelius Puschmann, Jean Burgess, Humboldt University of Berlin - School of Library and Information Science, Queensland University of Technology, Date posted to database: January 25, 2013 Last Revised: January 25, 2013
5	178	Award as an Investment: The Value of an Arbitral Award or the Cost of Non-Enforcement Loukas A. Mistelis, Centre for Commercial Law Studies, Queen Mary University of London, Date posted to database: January 7, 2013 Last Revised: January 7, 2013
6	153	The Law of Friction William McGeveran, University of Minnesota Law School, Date posted to database: December 20, 2012 Last Revised: December 20, 2012
7	151	The Consumer Financial Protection Bureau: An Introduction Adam J. Levitin, Georgetown University - Law Center, Date posted to database: January 12, 2013 Last Revised: February 5, 2013
8	141	The HOB-Vín Judgment: A Failed Attempt to Standardise the Visual Imagery, Packaging and Appeal of Alcohol Products Alberto Alemanno, HEC Paris - Law Department, Date posted to database: January 13, 2013 Last Revised: January 13, 2013
9	141	Discrimination in Online Ad Delivery Latanya Sweeney, Harvard University, Date posted to database: January 29, 2013 Last Revised: January 29, 2013
10	139	The Economics and Regulation of Network Branded Prepaid Cards Todd J. Zywicki, George Mason University - School of Law, Faculty, Date posted to database: January 23, 2013 Last Revised: January 23, 2013 - JSM

Lance Armstrong and Fitness for a Particular Purpose

Each year the authors of the Moot Problem for ICAM cook up perplexing problems On of my favorites this year is the claim by a buyer that goods were not fit for a particular purpose because they were produced by a firm associated with the use of child labor. Thus, the could not be sold for a profit.  As far as we know, no children laid a hand on these particular shirts but buyers are up in arms nonetheless. Of course, there are many reasons an item may not be profitably sold that have little to do with a promise by the seller. So one has to look further than that and think about why they did not sell.

In some sense, does the fitness for a particular purpose warranty even apply to the signalling one does by wearing the item or the sense that one has done the "right thing." You might think about the Lance Armstrong situation. All those Livestrong shirts are the same as they were when you bought them. But, when you bought them you may have wanted to advertise your admiration for Lance. Or you were just happier with them because you like Lance. Are they now unfit for a particular purpose?

Of course, a little quirk is that they were perfectly fit when no one knew of the misdeeds.  Are then unfit now simply because of new information?

Reg. CC in Legal Limbo?

Mark Twain once said, “Be careful when reading health books, you may die of a misprint.” While the risk of death does not seem likely from a commercial law book, lawyers, professors, and students should be wary of the things they read.  A recent change to Regulation CC’s treatment regarding Next-day Availability of Funds as part of the Dodd-Frank Act should have the legal community taking a closer look at their codebooks.

The Expedited Funds Availability Act of 1987 (EFAA), implemented by the Federal Reserve's Regulation CC, sets standards for banks making funds deposited into accounts available for withdrawal, including availability specific schedules.   Section 1086 of the Dodd-Frank Act amends the EFAA (requiring a conforming amendment to Reg. CC) to require depository institutions to make the first $200 of funds deposited by certain checks into an account available for withdrawal on the business day after the banking day that a deposit is received.   See, Regulation CC 229.10(c)(1)(vi) (formerly $100); FDIC version of Reg. CC.

All moves along as expected thus far.  In accordance with amendments, the U.S. Department of the Treasury sent out a bulletin to the Chief Executive Officers and Compliance Officers of all National Banks outlining the major changes. Officiously, the Department of the Treasury stated “National banks should make the appropriate changes to their practices, policies, and disclosures as necessary to comply with the statute by July 21, 2011, even if the changes to Regulation CC have not been adopted by that date.” While it appears that today banks are on notice regarding the Dodd-Frank change to the availability rules, the updated $200 rule remains absent from the Federal Reserve and FDIC current versions of Regulation CC published online.

The potential for confusion does not end there. Some of the latest editions of commercial law textbooks such as 2012 Fifth Edition of Lopucki, Warren, Keating and Mann’s Commercial Transaction: A System Approach have misprints in regard to the rule as well (retaining the $100 rule without comment). Even codebooks that reflect the $200 dollar rule before the regulators have officially put it into regulation are inconsistent. William Warren and Steve Walt’s Commercial Law: Selected Statutes for 2012-13 under section 229.10(c)(1)(vii) reflects the $200 rule with a footnote attribution to Dodd-Frank, but under the printed version of section 229.12(d) retains the reference to the former $100 available under section 229.10(c)(1)(vii).

With the Federal Reserve and FDIC not reflecting the $200 change to section 229.10(c)(1)(vii), as well as conforming amendments in other parts of Reg. CC, it is not surprising that the statutory codebooks and textbooks have had difficulty in conveying the amended rule.  In the meantime, don't believe everything you read.

- JSM and Ramon Alvarez (J.D. 2014) 

The Cost of Default: Bow Wow

Snoop Dog may have his namesake in favor of Snoop Lion, but Bow Wow offers Uniform Commercial Code entertainment for those with a canine preference.  Apparently, a lender had to repossess Bow Wow's Lamborghini.  The original loan was in the amount of $300,165, with about $157,571 owing on the loan at the time of repossession.  The bank managed to sell the car for $161,000, but had $25,000 in costs associated with the repossession and resale of the car.  The bank sued the rapper for a deficiency of $21,371. See, Bank to Bow Wow.

 

UCC Article 9 directs the secured party to apply the proceeds from a disposition of collateral to the expenses of retaking, holding and preparing the collateral for disposition and then toward the obligation secured by the loan.  9-615.  The debtor is liable for any deficiency after application of the proceeds.  So, Bow Wow does in fact appear to owe the Bank the additional chow.  One of my students found this case.  Apparently, like me, he enjoys a little bit of Article 9 in action.

 

- JSM

Does Article 2 Inform CISG Damages?

When it comes to teaching remedies, it is easy to collapse doctrines onto one another that appear consistent in underlying theory.  When it comes to the CISG (Convention on the International Sale of Goods) this conflation would be erroneous.  A large number of American courts have held that where Article 2 and the CISG are similar in theory or language, that resort to Article 2 cases and provisions is an appropriate method for interpreting the CISG.  This approach, though, would not be consistent with the Article 7 of the CISG's mandate theat “[i]n the interpretation of this Convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade."  The unifority would not seem to be enhanced by American courts referring to Article 2, even though they are more familiar with its provisions.  Quite simply, there is no expectation that courts of other countries would defer to Article 2 in any manner. 

Rather, the better reasoned approach should be to consider interpretive sources that evidence this international perspective, which might be used individually or collectively toward deducing the meaning behind various CISG provisions. For instance, courts could accept that a specific source of general principles of contracts routinely informs CISG cases worldwide, such as those of the Unidriot Principles of International Contracts.  Alternatively, the CISG Advisory Council Opinions could fulfill a stronger informative role regarding interpretation of provisions in the manner like the comments to the UCC do such that courts and commercial parties would regularly follow its interpretations in practice.  Yet another alternative available in the fulfillment of the CISG’s mandate is consultation with decisions rendered by tribunals applying the CISG where such are available.  Where such decisions are unavailable, insufficient, incomplete or unhelpful, though, UCC Article 2 might form part of the evidence of applicable private international law, as well as usages, customs and practices, but would not itself be the primary legal authority. The writings of scholars collecting opinions, examining theory and practice and providing careful analysis would also surely constitute sources expected for consultation in these cases just as in domestic ones.

This is not meant to state that Article 2 would never be part of the consideration of interpretation in CISG cases, but only that courts have overstated its usefullness.  There is only a limited role for Article 2 in such cases where it forms part of a larger indication of international perspective or a portion of an applicable usage.  This would be true even where the language in the CISG seems to track that of Article 2 or be otherwise similar in theory.  An example of this would be CISG Article 74’s general directive regarding remedies provides that: "Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract."   While American courts have ample experience with remedy considerations involing loss profits and foreseeabilty (Hadley v. Baxendale), it would be in error to solely rely on our perspective for these doctrines that are entrenched in our own legal history and perspective.  The better view is that our perspective simply is part of a larger understanding of these doctrines where it is consistent with the international perspective.

If the CISG is to have any force as a body, we cannot consider it merely an extension of Article 2.  For more on this, see: Does Article 2 Inform CISG Damages?

- JSM