Comparative Commercial Contracts · Law, Culture and Economic Development (Hornbook) by Kozolchyk, Boris -- Read -- Imperial Library of Trantor

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Title Page Copyright Page Dedication LIST OF NLCIFT BOARD OF DIRECTORS FOREWORD PROLOGUE Table of Contents PART I. OVERVIEW, METHODOLOGY, FORMATION AND EVOLUTION OF COMMERCIAL PROMISES

CHAPTER 1. GUIDING THEMES AND CONTENT OF THIS BOOK

§ 1.1 Introduction § 1.2 Guiding Themes

A. Whether as a Science or as an Art, the Law Is About People B. The Shaping Role of Standard and Best Practices C. Successful Standard and Best Practices and Commercial Statutory and Case Law D. Selfishness, Cooperation and Altruism as Integral Parts of Human Nature and Commerce E. Sub-Standard Contract—Often Simulated—Practices Are Found in All Legal Systems F. The Sharp Line Between Civil and Commercial Contracts in Many Civil Law Countries G. Familistic Societies Are Typical of Developing Nations, Regardless of Religion or Political Ideology H. Contracts as Indispensable Macro and Micro Economic Tools Especially When Helping to Determine Realistic Prices

§ 1.3 Content of the Book § 1.4 Appendix: Understanding Japan’s Corporate and Legal Culture

A. Introduction B. The Matsushita Decision C. The Supreme Court’s Reasoning D. Whose Legal Cultural Perspective? Whose Rationality? E. Professor Dan F. Henderson’s Views on Japanese Corporate Culture F. Personal Observations on German, Japanese and United States Business and Corporate Cultures G. The Transaction, Its Parties and Required Assurances H. The Independence or Abstraction of the Promises and Their Assurances I. The United States Position J. Germany’s and Japan’s Positions K. Micro-Contractual Policies

CHAPTER 2. METHODOLOGY

§ 2.1 The Comparative Method of This Book

A. Scientific Origins B. Different Methods of Comparison

§ 2.2 Two Methods of Legal Reasoning: Legal Scholasticism and the Logic of the Reasonable

A. Legal Scholasticism B. The Logic of the Reasonable C. A Preponderantly Factual and Analogical Logic

§ 2.3 Summary and Conclusions: A Proposed Research and Drafting Methodology § 2.4 Appendix: Access to Commercial Credit at Reasonable Rates of Interest

A. X’s Socio-Economic Context B. X’s Legal Context C. The NLCIFT 12 Principles of Secured Transactions Law in the Americas D. The Drafting of X’s Secured Transactions Law: The U.C.C. and the Canadian PPSA as Legislative Models E. The Roadmap Study F. Conclusions

CHAPTER 3. THE LAW OF CONTRACTS IN A PRE-COMMERCIAL OR AGRICULTURAL SURVIVAL SOCIETY

§ 3.1 Introduction: Why Bother with Pre-Commercial Society? § 3.2 On Status and Contract § 3.3 Duties Derived from “Dense” and Reciprocal Relationships

A. Absence of Market Dependence: Communal Living vs. A Commercial Association B. The Costs of a Community Method of Production and Distribution C. Reciprocity and Gift Giving D. Redistribution

§ 3.4 Impersonal Relationships in Free Market Societies § 3.5 “Dense” Transactions: A Perennial Obstacle to Competition § 3.6 Principles Originated in Pre-Commercial Societies

A. Unequal Treatment of Strangers B. Valuable Property Is Not to Be Sold, but to Be Kept in the Family Fold C. Continuous and Unlimited Familial Liability for What Was Conveyed or Sold D. A “Harmful” Agency Is Not Binding on the Principal E. Unenforceability of Executory Promises

§ 3.7 Anthropology and the Formulation of Commercial Law

A. The Work of E. Adamson Hoebel B. Anthropology and a Better Understanding of Commercial Law C. Law and Behavioral Imperatives

§ 3.8 Topics of Discussion

A. Agriculture and the Origin of Contracts B. Cultural Values, Jural Postulates and Legislative Principles C. Illustration of the Use of Jural Postulates in Drafting Principles for Future Legislation.

CHAPTER 4. ROMAN LAW

§ 4.1 Introduction: Roman Law and the Seminal Purposes of Private Legal Institutions § 4.2 The Providers of a Legal Alphabet

A. Stages in the Development of Roman Law

§ 4.3 The Socio-Economic Context of Roman Commercial Legal Institutions

A. Soldiering as a Gainful Occupation B. Commerce vs. Roman Archetypal Dignity

§ 4.4 The Legal Context

A. Sources for the Study of Roman Law B. The Contribution of Praetors C. Civil Procedure D. Contracts and Their Enforcement: Why Were Only Certain Types of Contracts Enforced?

§ 4.5 Topics for Comparative Discussion

A. The German and German-Inspired Rejection of Causa B. The End of the Journey of Nudum Pactum?

§ 4.6 Roman Legal Opinions on Types and Interpretation of Contracts: The Bonus Vir

A. Barter and Sale: And a Firm Grasp of Transactional Facts B. Price as an Essential Element C. Discretionary Conditions and the Bonus Vir Standard D. The Present and Future Res as an Element of the Contract of Sale E. Interpretation: Types of Mistakes F. Sales by a Non Owner G. Remedies for the Breach of a Sale Agreement

§ 4.7 Conclusions: Once More—Why Study Roman Law?

PART II. MEDIEVAL LAW: GUILDS, AGENTS AND NOTARIES

CHAPTER 5. MEDIEVAL LAW

§ 5.1 Introduction: Medieval Law and the Institutionalization of Commercial Trust § 5.2 Contract as Delict, Unjust Enrichment and Ritual in Some Southern European Countries § 5.3 Spain’s Foral Law § 5.4 Medieval European Cities and Their “Picaresque” Merchants

A. A Spanish Picaro and Archetypal Tricky Merchant B. The Legitimate But Religiously Suspect Archetypal Merchant

§ 5.5 Contemporary Versions of the Picaresque and Their Economic Development Costs § 5.6 Lay Law, Canon Law and Pacta Sunt Servanda § 5.7 Method of Reasoning

A. Aristotle’s Essences, Commutative Justice and Usury B. Scholasticism, Usury and the Typification of Contracts

§ 5.8 Preliminary Conclusions and a Contemporary Illustration § 5.9 Medieval Jewish Commercial Brotherhood

A. Customary and Rabbinical Brotherly Duties: The Archetypal Agent B. Evolution of the Biblical Prohibition of Usury and Its Effects upon Brotherhood C. Contracts and Medieval Executory Promises

§ 5.10 Rabbinic Responsa by Maimonides § 5.11 Agents’ Duty of Loyalty and Their Causal Representation in Jewish Law § 5.12 English Wool Contracts and Recognizances in Medieval Law

A. Advance Sales and Secured Loans B. “Recognizances” C. The Registration of Recognizances D. Conclusions: Limitations of Brotherly Duties

§ 5.13 Appendix: Medieval and Codified Law on Oaths, Mandate and Agency

A. The Oath in Civil and Common Law Jurisdictions B. Mandate and Agency and Third Parties C. The Common Law of Agency D. A Comparison of Civil and Common Law Statutory, Quasi-Statutory and Judicial Rules

CHAPTER 6. GUILDS AND THE CAPITALIST SYSTEM AND MARXIST LEGAL SYSTEMS

§ 6.1 Their Significance § 6.2 Guilds, the Verlagssystem and Capitalism

A. The Medieval Guilds and the Verlagssystem B. Basic Features of European Medieval Guilds C. The Transition to the Putting Out or the Verlagssystem of Contracting and Sub-Contracting of Work D. The Emergence of Different Types of Capitalist Merchants in European Commerce E. The “Fresh Start” of European Commerce: A Commercial Typology

§ 6.3 Dual Codes for France’s and Germany’s Private Law: A Remnant of the Guild System? § 6.4 Conclusions

CHAPTER 7. THE LATIN NOTARIAT AND CONTEMPORARY CONTRACTS

§ 7.1 Introduction § 7.2 The Formalities or Solemnities of Land and Commercial Transactions § 7.3 Authentication by Latin Notaries in Contemporary Commercial Transactions

A. The Meaning of Authentication B. The Limits of the Latin Notary’s Factual Authentication C. The German Notarial Experience with Commercial Transactions

§ 7.4 Notarial Attestations in Commercial Transactions: A New Breed of Commercial Notaries § 7.5 Appendix: The Living Law of the Notarial Profession in Developing and Developed Nations

A. Notarial Practice in Sonora, Mexico, and San José, Costa Rica: B. Sweden and the Liberalized Notariat

PART III. EUROPEAN CODIFICATION

CHAPTER 8. THE FRENCH CODE CIVIL; KEY POLICIES AND DRAFTING METHOD

§ 8.1 Introduction: Lawmaking Through Codes; A Babylonian and Greek Analogy § 8.2 The Influence of the Enlightenment and Natural Law upon Codification

A. Rationalism, Mathematics, Geometric Logic and Humanism B. Right Reason = Logic + Morality: The Writings of Hugo Grotius and Samuel Pufendorf

§ 8.3 The Drafting of the Code Civil § 8.4 Pothier’s Definitions and Classification of Contracts and Their Consequences

A. Definitions B. Classifications C. The Code Civil’s Classification of Contracts and Executory Promises D. The Negative Effect of Scholastically Inspired Definitions and Classifications

§ 8.5 Natural Law Principles and Code Interpretation § 8.6 Socio-Economic Context: The Bourgeoisie and Its Influence § 8.7 The Archetypal Bourgeois Civil Contracting Party

A. Party Autonomy B. Formality C. Contractual Justice D. Rescission Because of Lesion (Laesio Enormis) or Enormous Loss E. Causa F. The Morality of Causa G. Contracts Inter Praesentes and Disregard of Third Party Rights

§ 8.8 Conclusions: The Bourgeois Archetype of Code Civil Contracts § 8.9 Appendix: Codified, Statutory and Case Law

A. Introduction B. Promises of Sale of Real Property C. Relevant Code Civil Provisions

§ 8.10 Illegal Causa in an Insurance Contract

Comments and Questions

§ 8.11 Lesion

A. Related Statutory Law B. Court Decision: Soc. Économique de Rennes C. Pailleret et al.

CHAPTER 9. THE BIRTH OF A CONTINENTAL EUROPEAN COMMERCIAL LAW; FAIR AND COMMERCIAL COURTS

§ 9.1 Birthmarks of a European Commercial Law: The Role of Commercial Courts

A. Merchant Associations and Consular Courts B. The Statutes of Mostly Italian Commercial Cities and Consulates C. Consular Tribunals D. The Consulates of the Sea (Consulatus Maris)

§ 9.2 Fair Courts and the Unification of European Commercial Law

A. The Early Courts and the Peace of the Market B. Contributions of Early Fair Courts: Permanent Effects of “Peace of the Market,” Summary Trials and Equal Treatment C. The Post-Fifteenth-Century Fair Courts: Consulates and Commercial Courts D. The Contribution of Consular and Fair Courts E. The Successors of the Fair Courts: The French Commercial Courts and Their Failed Promise

§ 9.3 Today’s Commercial Court

Comments and Questions

CHAPTER 10. THE CODE DE COMMERCE OF 1807

§ 10.1 Brief Background: Enterprises and Who Is the Public?

A. The Final Draft of the Code de Commerce B. Early Bankruptcy and Commercial-Credit-Inspired Amendments: Bourgeois v. Merchants

§ 10.2 The Scope of an “Objective” Commercial Code: One or Two Moralities?

A. Acts of Commerce and the Protection of Bourgeois (Non-Merchant) Fathers of Families B. The List of Acts of Commerce in Original Articles 632 and 633 of the Code de Commerce

§ 10.3 Mexico’s Experience with Its Acts of Commerce

A. The Broadened Scope of Mexico’s Acts of Commerce B. The Mixed or Unilaterally Civil or Commercial Act in Mexico C. Some Hope in the Americas: The OAS Convention on Choice of Law D. Conclusions

§ 10.4 The Accordion-Like Present Code de Commerce

A. Introduction B. A Summary of the Contents of the 2008 Version of the Code de Commerce

§ 10.5 Conclusions § 10.6 Exercises § 10.7 Answers § 10.8 Appendix—Case Law Related to the Code de Commerce

A. Craftsmen and Merchants: Are French Guilds Still Alive? B. Merchants and Farmers C. Agricultural Civil Cooperatives and Acts of Commerce: A Clash Between Commercial and Civil Codes D. Commercial and Civil Acts: The Performance of Work vs. Agency; Material Acts vs. Juristic Acts

§ 10.9 An Illustration of the Effects of Scholastic Logic upon New Contracts

A. Overview B. The Problem C. The Research D. Code Civil and Code de Commerce Provisions E. The Compatibility of the Code Civil and the Code de Commerce Provisions with Escrow Agreements F. Compatibility of the Mexican Civil and Commercial Codes with Escrow Agreements

CHAPTER 11. SOCIO-ECONOMIC CONTEXT OF GERMANY’S CIVIL AND COMMERCIAL CODES

§ 11.1 The Context: From a Dismembered to a Unified Commercial and Industrial Germany

A. The French Ideological and Intellectual Influence B. The Congress of Vienna, the Zollverein and Free Internal Trade: A New Commercial Bourgeoisie C. Political Unification: Prussia and Bismarck’s Germany

§ 11.2 The Emerging German Industry, Agriculture, Commerce and Finance

A. Industries Big and Small: From Craftsmen to Merchants B. The Emergence of a Viable Retail Trade: Shopkeepers, Small Merchants, Credit Unions and Non-Usurious Credit C. Inventory, Accounts Receivable, Financing and a New Law of Executory Contracts D. From Cambium to Quasi Money E. The Importance of Credit and Payment Instruments in Germany’s Economic Development F. Commercialization of German Rural Property and Agriculture G. A Parenthetical Aside: The Importance of Professional Agents and Intermediaries; The Prokurist

§ 11.3 The Emergence of “High Commerce” and Bankers for Governments § 11.4 Merchant and Public Sector Banking: The Rothschilds

A. The Rothschilds’ Multi-National Banking B. Origins C. Development D. Banking and Government Bond Business E. Integrity and Trustworthiness: The Elector’s Treasure F. The Emergence of an International Bond Market G. Legal Implications of the House of Rothschilds’ Issuance of Negotiable Bonds: Archetypal Behavior

CHAPTER 12. THE CODIFICATION OF THE GERMAN CIVIL AND COMMERCIAL CODES

§ 12.1 Opposing Views on Codification: Romanists and Germanists § 12.2 Pandectist System Building

A. Illustrations of System Building B. The Pandectist Disinterest in Socio-Economic Facts and Needs

§ 12.3 The Drafting of the BGB

A. Background: The HGB & ADHGB B. Brief Review of the BGB’s Contents C. The Juristic Act and the Drafting of the General Part D. The BGB’s Commercialization of Civil Contracts E. Summary

§ 12.4 The Drafting of the HGB of 1897

A. The Law of Bills of Exchange (Wechselgesetz) B. The Adoption of the HGB C. The HGB’s “Subjective” Approach to Scope: A Longstanding Misunderstanding D. Is the Commercial/Civil Code Dichotomy Presently Justified and Is Unification Possible?

§ 12.5 An Overview of the Original and Amended Versions of the HGB

A. The Original (1897) Version of the HGB B. The Scope of the Amended (1998 and Present) Version of the HGB C. Illustrative Sections of the Amended HGB

§ 12.6 Commercialization of Contracts and Third Party Protection: Code Civil and BGB

CHAPTER 13. CUSTOMS, USAGES AND OTHER SOURCES OF COMMERCIAL CONTRACT LAW IN GERMAN AND OTHER REPRESENTATIVE CODES

§ 13.1 Sources and Their Heirarchy

A. Custom and Usage B. Case Law C. Doctrinal Law D. Commercial Treaties as Sources: Their Hierarchy

§ 13.2 The “General Conditions of Trade” in German Law

A. BGB Sections 305–307 B. An Illustration and an Exercise: A Standard Contract for the Purchase of Souvenirs from Oktoberfest

§ 13.3 Judicial Decisions on the Scope of the HGB, BGB, AGB and CISG

A. Introduction B. Bundesgerichtshof, October 31, 2001 [VIII ZR 60/01] C. Bundesgerichtshof, September 26, 1989, WM 1989, 1713: Slight Negligence in the AGB for Banks D. Bundesgerichtshof, February 3, 1986, 1986 WM 769–770 E. Bundesgerichtshof (Ninth Civil Senate) 24 February 1994, NJW 1994, 1341:

PART IV. FAMILISTIC AND SOCIALIST VARIANTS OF THE CIVIL LAW

CHAPTER 14. LATIN AMERICAN CODIFICATION AND ITS ALL-IMPORTANT COLONIAL BACKGROUND

§ 14.1 Familism and Authoritarianism in Latin American and Socialist Law § 14.2 Latin America’s Elusive Economic Development § 14.3 Spanish and Colonial Official Law

A. Legalism and Rule of Law B. Terminology and Types of Laws C. Compilations of Laws in Force in the Americas During the Colonial Period

§ 14.4 The Living Law of Colonial Commercial Contracts: Archetypal Behavior

A. High Commerce in New Spain: Picaresque Mercaderes, Flotistas, Almaceneros, and Hacendados B. The Living Law of Traveling Salesman and their Brotherly Standard of Fairness

§ 14.5 Latin American Codification

A. Latin American “Families” of Civil Codification B. Latin American Commercial Codification

§ 14.6 Conclusions § 14.7 Appendix: Colonial and Post-Colonial Attitudes

A. A Brief Review of Fray Tomás de Mercado’s “Manual of Bargains and Contracts” (“Suma de Tratos y Contratos”) B. A Tentative Presumption of Commercial Good Faith Aided by Confessors C. Reasonable Rates of Interest, Just Prices and the Market D. Bad Faith and Money Changers E. Cash and Installment Sales, Lawful Profits and Unlawful Profiteering F. Conclusions G. Conversations with Dr. Raúl Cervantes Ahumada

CHAPTER 15. SOVIET COMMERCIAL CONTRACT LAW

§ 15.1 Introduction: Commercial Contracting During the USSR or Its Functional Equivalent

A. Scope B. A Modern Society Without Commercial Contracts? C. Merchants and Entrepreneurs in Imperial Russia D. The Economic Picture of Pre-Revolutionary Russia E. The Soviet Experience with Commercial Contracts; Why Were They Not Eradicated?

§ 15.2 Marxism-Leninism as a Source of the Official Law of Commercial Contracts § 15.3 Marxism

A. Biographical Note B. “The Capital” and the Law of Motion of Modern Society C. Marx’s Purported Scientific Method D. The Bases of the “Law of Motion of Modern Society”

§ 15.4 Leninism

A. The Special Meaning of Lenin’s Charismatic Authoritarian Leadership B. The October Revolution of 1917 C. The April Theses D. Lenin’s Law Making: Authoritarian Legalism E. Economic Planning as a Source of Administrative-Contract Law F. Market Socialism and Market Prices: Ludwig von Mises’ Criticism G. Yevsey Liberman’s Autonomy of Production, Profitability Rate and Economic Planning H. The Debate on Libermanism

§ 15.5 Conclusions: An Invertebrate Legal System and Its Disregard of Human Nature

CHAPTER 16. THE PECULIAR MEANING OF SOVIET AND POST-SOVIET COMMERCIAL CONTRACTS: AN INVERTEBRATE LEGAL SYSTEM

§ 16.1 The Higher Law as Slogans: Corruption and the Invertebration of the Soviet Legal System

A. Sources of Private (“Personal”) Law and the Effect of Legal Nihilism B. Hierarchy

§ 16.2 Civil and Commercial Transactions in Codes and Other Enactments

A. The Civil Code of 1922 and the Civil Transaction B. Central Planning and Its Sources of Law: The Fundamental Principles or Bases of the Civil Law of 1961

§ 16.3 Transactions Involving Personal Property: The Federal Ownership Act of 1990 § 16.4 Allocation of Housing

A. To Whom Are Tenancy Duties Owed? Sources of Tenancy Law B. Allocating Housing Units Without Regard to Market Forces: Administrative Assessment of Needs and Merits C. The Building of Private Homes and Dachas D. Dacha Rentals and Models of Proper Party Behavior: Zikeyev’s Construction Materials E. Economic Significance of the Soviet Commerce in Personal Property F. Cases and Disputes Involving Artisans and Small Merchants

§ 16.5 Adjudicating Compliance with Economic Plan Duties: Ordinary and Supply Contracts

A. Absence of Raw Materials as a Defense B. Comparative Duties of Diligence: The Absence of “Best Efforts” (Good Faith) v. Implied Clause in the Supply Contract

§ 16.6 A Personal Experience with Bulgarian Central Planning and State Property § 16.7 The Civil Code of the Russian Federation of 1995

A. Style and Scope B. Epistemology, Political Ideology and Troubling Terminology C. Anachronistic and Harmful Provisions

§ 16.8 Conclusions

CHAPTER 17. CHINESE IMPERIAL, MOSTLY LIVING LAW OF CONTRACTS

§ 17.1 Introduction: Legal Invertebretation and Familism, Confucianism and Legalism § 17.2 The Family, Lineage and Clan as Early Private Law Makers and Economic Units

A. Patriarchal Hierarchy B. Place of Residence C. Common Budget and the Importance of Family Land for Family Survival D. Patrilineal Lineage and Legal Invertebration E. The Clan

§ 17.3 Traditional Values and Living Law: Confucius, Daoism and Legalism

A. Hierarchy B. Titles, the Moral Way and Obedience to the Ruler C. The Hierarchy of Occupations or Classes: Scholars, Craftsmen, Farmers and Merchants D. Superior Persons E. Ritual, the (Moral) Way and Confucian Law F. The Analects, Commerce and the Protection of the Third Party

§ 17.4 Governmental Policies, Economy, Markets and Contracts in Traditional China

A. Feudalism, Taxation and Confucian Adjudication During the Zhou and Qin Dynasties B. Monopolies and Corruption in an Agrarian Economy: The Han Dynasty C. An Expansive Empire: Land Contracts and Legalistic Prohibitions—The Tang Dynasty (618–907 A.D.) D. Monetization, Credit, Wholesale and Retail Contracts, and Manuals: The Song, Ming and Qing Dynasties

§ 17.5 Imperial China’s Failure to Become a Capitalist Nation

A. The Commercial Practices of an Archetypal Commercial Clan: The Huizhou B. Sharp Dealing, Bribery and Simulation C. Clans and Political Patronage D. Neo-Confucian Merchants, Bureaucrats and Limited Commercial Risk-Taking E. Uncompetitive Small Business vs. Monopolistic Clans and Guilds F. Absence of Capitalist Intermediaries and the Cotton Cloth Business G. Familism, Unlimited Liability and Business Associations H. Exclusive Dealings and the Guanxi

§ 17.6 Conclusions: Why Capitalism Failed to Emerge During the Ming & Qing Period

CHAPTER 18. CONTRACTS AND LITIGATION IN IMPERIAL AND MAO’S CHINA

§ 18.1 The Commercial and Economic Importance of Chinese Imperial Contracts

A. Free Tenancy and Commercialized Rights in the Land: Commercial and Legal Components of Commercialization B. The Legal Component: Causal vs. Independent or Abstract Promises and Rights C. Third Party Rights Under a Conditional Sale D. Third Party Rights Under a Tenancy or Ownership of Surface Land or Topsoil E. Chinese Families and Communities as Contracting and Litigating Units F. The Causality of Chinese Familistic Contracts G. Familistic Clauses, Disputes and Violence H. Effects of the Typical Land Contracts upon the Economic Growth of Imperial China I. Certainty of Family Rights vs. Rights of Third Parties J. Preliminary Conclusions

§ 18.2 Forgery and Chicanery in Imperial Court Litigation

A. The Assistants in Drafting and Pleading B. The Adjudicators C. An Illustration: A Statute of Limitations and a Clearly Drafted or “Doctored” Contract D. Conclusions: Familistic Clauses, Legal Invertebration, Uncertainty and Third Parties

§ 18.3 Mao Tse-tung and His Shifting Marxist-Leninist Dogma

A. The PRC Initial Land Reform B. The Abrogation of Pre-Existent Law and the Spirit of the New Socialist Man C. Mao’s Collectives, the NSM, the Absence of Contracts, and Its Human and Economic Costs D. Mediation and Non-Existent Land Contract Litigation During the Collectivization Period

§ 18.4 Conclusion

CHAPTER 19. CONTEMPORARY LAND CONTRACTS, THIRD PARTIES AND JUDICIAL LAW MAKING

§ 19.1 Introduction § 19.2 Deng Xiaoping’s Policies

A. Introduction B. A Socialist Market Economy

§ 19.3 Legal Reforms, Property Rights and Their Reliability

A. An Invertebrate Law B. The Results of Invertebration C. The Effectiveness of Land Registry Recordings D. Third Party Protection and the Land Registry of the PRC E. Conclusions

§ 19.4 Security Interests in Movable Property

A. The PRL’s Generic Mortgage B. The PRL’s Security Right C. The Pledge of Accounts Receivable D. Overlapping Movable Securities Registries E. Supreme Court Land Right Directives and Letter of Credit Judicial Interpretations: Cures of Legal Invertebration?

PART V. ANGLO-AMERICAN LAW

CHAPTER 20. SOCIO-ECONOMIC AND LEGAL CONTEXTS AND ENGLISH COMMERCIAL CONTRACTS

§ 20.1 Introduction § 20.2 English Law

A. Britain’s Seventeenth and Eighteenth Century Trade and Tradesmen B. The Honesty of Tradesmen and Their “Poetic” Licenses C. Monopoly and Mercantilism in England’s Modern International Trade D. Multilateralism and Cooperation with Colonial Tradesmen E. Samuel Storke: An Archetypal English and Colonial International Trader F. Slavery and England’s Welfare G. Judicial Institutions

§ 20.3 Forms of Action and Writs § 20.4 Lord Mansfield, Juries and Merchants

A. Lord Mansfield B. Some Key English Contributions to the Substantive Law of Commercial Contracts and Promises

CHAPTER 21. THE SOCIO-ECONOMIC AND LEGAL CONTEXTS OF U.S. COMMERCIAL CONTRACTS

§ 21.1 Introduction: Practices, Values and Attitudes That Shaped U.S. Law § 21.2 Puritan Merchants-Settlers (Early Seventeenth to Late Eighteenth Century)

A. The Productive Ethic and the Moral Capitalism of the Elect Industrious and Striving B. Extended Families: Trustworthiness and Credit Networks C. Maximization of Efforts and of Rights and the Decline of a Puritan Moral Capitalism D. Other Religious and Commercial Principles: Just Price and Reasonableness E. The Preference for Private Property F. Summary and Conclusions

§ 21.3 The Eighteenth-Century “General Store” and Its revolutionary Effects on Consumerism

A. The Start of a Consumer Revolution B. The Fielding Lewis Store of Fredericksburg, Virginia C. The Commercial and Consumer Credit Practices Associated with General Stores and their Foreign and Local Suppliers

§ 21.4 The Multi-Ethnic Family Farmer: Producer and Merchant

A. The Economic Importance of Small Farm Family Businesses B. Personal Unsecured Commercial Credit C. Effects

§ 21.5 Wholesalers and Other Non-Bank Suppliers of Commercial and Consumer Credit

A. The Migration of the British Model of Commercial Credit to Colonial and Independent America B. Commercial Intermediaries: Wholesalers, Factors and Jobbers C. Wholesalers as Lenders and Joint Venturers in the Dairy Industry D. Department Stores and Their Progeny

§ 21.6 Commercial Banks and Commercial Credit

A. Experiments with National and State Banking Systems B. The Present Commercial Banking System C. The Federal Reserve and Commercial Lending

§ 21.7 Credit Rating Agencies: Their Impact on Commercial Credit

A. Brief History B. Character Traits of an Archetypal Mid-Nineteenth Century Credit Worthy Borrower: The Meaning of Honesty C. Effects of the Presumption of a Debtor’s Good Faith D. The Problems with Biased Credit Reports E. Shorter Term Credits, Competition, “Dynamic” Practices and Fairer Prices F. The Continuing Search for Objective Reporting and Rating Criteria G. Conclusions

§ 21.8 Early Twentieth Century Secured Transactions and Bankruptcy Law

A. Early Secured Transactions Laws B. Bankruptcy Law and the “Second Chance” Theology

§ 21.9 Principles Derived from the Preceding Practices, Values and Attitudes

A. Freedom of Contract: That Which the Law Does Not Expressly Forbid, It Allows B. Contracts Must Be Performed in Good Faith, i.e., in an Honest, Reasonable and Fair Manner C. Private Ownership of Property Is Preferable to Communal Property D. Those Whose Labor Creates Wealth Are Entitled to a Share of It E. Equal Protection of Equals, and the Growing Inclusiveness of Equals F. The Protection of Third Parties as Actual or Potential Market Participants

§ 21.10 Commercial Legislation

A. Early Legislators in Independent America: Cultured Gentlemen, the Enlightenment and the Middling Sorts B. The Enlightenment and Some of the Key Principles of United States Public Law

§ 21.11 The United States Constitution of 1789 and Its Compromises

A. The Federal-State Dualism B. A Government with Limited Powers and a Society That Profited from Slavery C. A Uniform Federal Commercial Law?

§ 21.12 Statutory and Administrative Regulation of Abusive Practices

A. Overreaching B. The Tools to Combat Overreaching C. Disclosure as a Regulatory Tool

§ 21.13 Summary and Conclusions

PART VI. FORMATION, INTERPRETATION AND ADJUDICATION OF CONTRACTUAL AND CUSTOMARY LAW DISPUTES

CHAPTER 22. FORMATION OF CONTRACTS: CEREMONY OR CONDUCT?

§ 22.1 Introduction: The Static and Dynamic Versions of “Civil” and Commercial Contracts

A. The Code Civil (Static-Ceremonial) Contract B. The “Classic” (Static) Contract of Nineteenth Century United States Decisional Law and Restatement (First) of Contracts C. Legal and Economic Consequences of the Ceremonial Conception: Parmenides’ Transactional World D. The Commercial (Dynamic) Contract and the Market Forces Behind It: Heraclites’ Transactional World E. The Official and Living Law That Governs Contemporary Commercial Contracts

§ 22.2 Causa and the Predictability of Commercial Contracts

A. Causa in Roman and Medieval Law B. Causa in the Code Civil and in Some of Its Progeny C. The Long Moral Reach of Causa: A 1957 Decision by the French Cour de Cassation

§ 22.3 Contemporary International Principles of Contract Law Excluding Causa

A. EPCL B. UNIDROIT Principles

§ 22.4 Consideration: Gift Giving, Credit and Trustworthiness

A. Instances of Gift Giving, Fairness, Loyalty and Cooperation B. Reciprocity and Gift Giving in Pre-Commercial and Feudal England C. Credit and Commerce in Early Modern England D. The Legal Development of Consideration

§ 22.5 Contract as a Bilateral or Multi-Lateral Agreement and as a Promise § 22.6 Consideration as Bargain: The Shortcomings of the Bargain Test

A. A Revolution or a Regression to a Motivational Causa B. Adequacy of Consideration, the Peppercorn and the Bargained for Test

§ 22.7 Commercial Contracts That Lack Bargained—For Consideration, but Deserve Enforcement

A. Master Agreements and Bargained—For Consideration B. Past Consideration and Bargained—For Consideration: Lord Mansfield’s Decision in Pillans v. Van Mierop

§ 22.8 Offers, Acceptances and Consideration

A. The Meaning of Offer: Binding When Issued or When Accepted? B. Key Rule of Traffic: Offers Clothed with Consideration C. Some Key Rules of Traffic in the Restatement (Second) D. Irrevocability and § 2–205 of the U.C.C.

§ 22.9 Conclusions and Recommendations § 22.10 Appendix: Formalities and Solemnities in Comparative Case Law

A. Ibero-American and United States Case Law B. Parmenides’ Logic and the Validity of an Insurance Contract Under Uruguayan Law C. Heraclites’ Being: Informality in the Formation of United States Agri-Business Contracts D. Heraclites and Contract Formation as a Result of the Parties Conduct in Agri-Business E. Spanish Case Law: Formalities ad Solemnitatem and ad Probationem F. The Spiritualistic Principle in the Spanish Civil Code G. Supreme Court Decision No. 1743, March 12, 1994, Civil H. Supreme Court Decision No. 6424, July 4, 1994, Civil I. Salvadoran Case Law: Solemnity of a Waybill and Classification of Contracts J. Mexican Case Law on Contractual Formality and Solemnity K. Preparatory Contracts and Public Deeds Under Mexican Law

CHAPTER 23. TWO GUIDING PRINCIPLES FOR THE INTERPRETATION OF COMMERCIAL CONTRACTS: GOOD FAITH AND REASONABLENESS

§ 23.1 Introduction and Summary

A. From a Formalistic to a Commercial-Sectoral Interpretation B. An Illustration of Embedded Good Faith in Usages of Trade C. Good Faith in Representative Civil and Common European Law

§ 23.2 Contract Types, Stages and Sources of Interpretation § 23.3 Good Faith Interpretation: Judicial and Market Based Versions § 23.4 Good Faith in the Judicial Interpretation of Commercial Contracts

A. Good Faith (Bona Fides) in Roman and Medieval Law B. Good Faith (Bonne Foi) in the Code Civil and in French Judicial and Doctrinal Interpretation C. Good Faith, Trade Usage and Archetypal Behavior in the BGB, HGB and Court Decisions D. Good Faith and Reasonableness in English Law

§ 23.5 Good Faith in the U.C.C. and Restatement (Second)

A. Articles 1 and 2 of the U.C.C. and Restatement (Second) § 202 B. Llewellyn’s Archetypal “Decent” Merchant and His German Antecedent C. The Exclusion of Reasonableness in Article 5 of the U.C.C. on Letters of Credit D. The Merchant Rules of U.C.C. Article 2

§ 23.6 Scholarly Views on Good Faith: Law and Economics and the Bad Faith Excluder

A. The Facts B. A Subjective “State of Mind” Approach to Discerning Good or Bad Faith C. Judge Posner’s Ordered Search for Orenstein’s State of Mind D. The Law and Economics Justification for Judge Posner’s Opinion E. Professor Summer’s Negative Excluder F. An Objective, Sectoral Version of Good Faith Commercial Leasing

§ 23.7 Conclusions: Good Faith and the Prophecy of What Courts Will Do in Fact § 23.8 Appendix 1: Comments by a Respected Commercial Real Estate Broker § 23.9 Appendix 2: Comparative Case Law

A. Introduction B. How a Formal Logical Intent Can Do Away with Good Faith, Reasonableness, Fairness and Justice C. Good Faith Among Co-Adventurers D. Plain Meaning of the Words Within the Four Corners of a Deed vs. Market Intent E. Usage of Trade as Provider of Sectoral and Contractual Intent F. Usage of Trade Versus a Mutually Mistaken Term G. Strict Compliance, Good Faith, Fraud and Abuse of Rights in German Letter of Credit and Bank Guarantee Law

CHAPTER 24. DRAFTING COMMERCIAL PRACTICES AND THE GROWTH OF COMMERCIAL CONTRACT LAW

§ 24.1 Introduction § 24.2 The Nuclear Elements of a Viable Commercial Practice

A. Selfishness B. Altruism C. The Importance of Factual (Non-Formally Logical) Research When Identifying the Nuclear Elements of a Practice D. The Nuclear Elements of a Contemporary Secured Transaction

§ 24.3 Secured Lending in Imperial Rome: Archetypal parties

A. Socio-Economic Context: The Republican and Imperial Commercial Archetypes B. The Creditor’s Fiduciary Ownership (Fiducia), His Possesory Pledge (Pignus) and His Non-Possessory Mortgage (Hypotheca)

§ 24.4 Drafting Commercial Letter of Credit (LOC) Practices

A. Why LOC Practices? B. The Basic Commercial LOC Transaction C. The Interchangeable Functions of Correspondent LOC Banks and Their Organic Marketplace Standard of Fairness D. Standard and Best Practices for the Examination of LOC Documents

§ 24.5 The Limited Role of Judicial, Statutory or Codified LOC Law § 24.6 Predecessors of UCP 500

A. The New York Bankers Regulations Affecting Export Commercial Credits of 1920 (New York 1920 Regulations) B. The Uniform Customs and Practices for Documentary Credits (UCP) C. Bankers’ Documentary Examination Manuals and Checklists D. The Uniform Customs and Practices for Documentary Credits (UCP 1933 Revision) E. The Uniform Customs and Practices for Documentary Credits (UCP 1951 Revision) F. The 1962, 1974 and 1983 Revisions: Bernard Wheble and Lawyers as Participants in the Drafting Groups

§ 24.7 UCP 400 Problems and UCP 500 Cures

A. Revocability-Express or Hidden and Uncertainty of the Credit Promise B. An Issuer or Confirmer’s Primary Liability C. An Uncertain Time of Establishment D. Uncertain Finality of Payment by the Confirming Bank E. Negotiation of the LOC Draft and Commissions: Good Faith and Reasonableness F. Elimination of a Monopolistic Bill of Lading Practice G. Bad Faith Excuses Not to Pay or Reimburse: A Judicial Mirror Image Version of Strict Compliance H. The Issuing Bank’s Discretion to Approach the Applicant for a Waiver of Discrepancies I. Consequences of the Judicial Mirror Image Compliance: Costly Defensive Practices

§ 24.8 The UCP 500’s Response to Bad Faith Discrepancies and The ISBP § 24.9 Factors That Determine Documentary Checking Practices

A. Extrinsic Factors B. Intrinsic Factors: Archetypal Bad and Good Faith Bankers

§ 24.10 Summary and Conclusions

CHAPTER 25. BRIEF OVERVIEW OF COMMERCIAL TRIAL PROCEDURE

§ 25.1 Introduction

A. General Overview of Ordinary or Declarative Judicial Procedures in Latin America and Spain B. Justicia Rogada, Ultra Petita and the Remedial Finality of the Pleadings

§ 25.2 A Typical Uruguayan Complaint § 25.3 The Summary or Executive Process in Colombia, Mexico and Spain

A. Introduction B. Essential Elements of an Executive-Summary Procedure C. Cautionary Measures D. Types of Summary Processes: Large and Small Claims

§ 25.4 A Landmark Spanish Decision on Defenses in an Executive Procedure § 25.5 A Commentary, a Suggestion and a Few Questions § 25.6 United States Process: Discovery, Complaint and Decision

A. From Common Law Forms of Action to Code Pleadings B. Summary Judgment Decisions C. Filing a Civil Action

CHAPTER 26. PRE-CONTRACTUAL LIABILITY: CULPA IN CONTRAHENDO

§ 26.1 Introduction § 26.2 A Brief Survey of Culpa in Contrahendo in Civil Law Countries

A. Germany B. France C. Italy D. Peru and Argentina E. Chile

§ 26.3 Culpa in Contrahendo in Common Law Jurisdictions

A. Determination of Damages Under Culpa in Contrahendo B. Culpa in Contrahendo from an International Perspective C. Case Law

CHAPTER 27. EXCUSES FOR NON-PERFORMANCE OF CONTRACTS

§ 27.1 Introduction § 27.2 Factual Basis for the Arbitration § 27.3 Elements of the Arbitral Decision

A. The Plan of the Comparative Analysis B. The Exceptional Nature of Excuses for Non-Performance C. Summary of the Expert’s Opinion D. Basic Concepts Supporting This Opinion

§ 27.4 Transactional and Legal Bases for the Opinion

A. Normative Lineage and Main Features of Article 994 S.Com.C. and Article 1467 of the It.C.C. B. Foreseeability of the Assumption of Risks by the GCES C. Determining the Fair Price of Natural Gas Under the PCG D. The Remedies for Excessive Onerousness Under Italian Law E. Comparison of Remedies Under Italian Law F. Judicial and Doctrinal Circumscription of the Remedial Criteria of Article 1467 of the It.C.C. G. Excessive Onerousness Under Argentinean Law H. Excessive Onerousness in German Law I. The Rebus Sic Stantibus Clause Under Swiss Law J. Theory of Unforeseeability Under French Law K. Excuses for Non-Performance Under U.S. Law: Injury, Impossibility, Impracticability and Frustration of the Purpose

§ 27.5 The Restatement 2nd of Contracts: Issues for Class Discussion Questions

CHAPTER 28. EXTRAJUDICIAL REMEDIES AND THE REMEDY OF SPECIFIC PERFORMANCE

§ 28.1 Introduction § 28.2 Extrajudicial Remedies

A. CISG B. U.S. Escrow Agreement as an Extrajudicial Remedy C. UNIDROIT Principles on International Commercial Contracts (2004) (Hereinafter UNIDROIT Principles)

§ 28.3 Judicial Opposition to Extrajudicial Remedies § 28.4 The Increasing Role of Extrajudicial Remedies

A. Anticipatory Repudiation, Substitute Transactions and Nachfrist B. The Aggrieved Party’s Duty to Mitigate Damages C. Preclusion

§ 28.5 The Prohibition of the Pactum Commissorium, in A Costa Rican Decision

Comments and Questions

§ 28.6 The Sicherungsübereignung Under German Law

A. Interviews with German Bankers in Frankfurt and Hamburg—July 11, 1971 B. Economic Significance of Resolution Clauses and Extrajudicial Remedies in the Law of Commercial Loans C. Honduran Law on Secured Transactions—2010

§ 28.7 Specific Performance as a Remedy for Commercial Contracts

A. Introduction B. John P. Dawson and Specific Performance Under French, German and North American Law

§ 28.8 Specific Performance and the Just-in-Time Payment and Delivery: An Illustrative Case

Comments and Questions

CHAPTER 29. JUDICIAL AND EXTRAJUDICIAL TERMINATION

§ 29.1 Remedies for Breach of Commercial or Dynamic Contracts § 29.2 Justice Holmes’ Bad Man and Section 2–609 Assurances § 29.3 Anticipatory Repudiation § 29.4 A Judicial Excursus of Breach of Contract Remedies Under the U.C.C.

Comments and Questions

§ 29.5 Anticipatory Repudiation Under Spanish Law: Spanish Decision No. 7491, October 20, 1994

Comments

§ 29.6 Extrajudicial Resolution Under Mexican Case Law

Comments

§ 29.7 The Nachfrist In German Case Law

A. Bundesgerichtshof, October 30, 1991—VIII ZR 9–91 B. Bundesgerichtshof, December 12, 1985—VIII ZR 47–85 C. BGB Section 323

§ 29.8 Contemporary Variants of Extrajudicial Termination Remedies

A. U.C.C. Section 9–609 Secured Party’s Right to Take Possession After Default B. OAS Model Law of 2002 C. Guatemalan Decree Number 51–2007 D. Honduran Law of Secured Transactions of February 24, 2008 E. UCP 500 Sub Article 14d F. UCP 500 Sub-Article 14e

§ 29.9 Conclusion

CHAPTER 30. DAMAGES FOR BREACH OF WARRANTY IN U.S. ECONOMIC ANALYSIS INFLUENCED LAW

§ 30.1 Basic Notions of U.S. Law on the Recovery of Damages

A. Actual Resales B. Hypothetical Resales C. Specific Performance and the Seller’s Action to Recover the Price D. The Buyer’s Action for Cover E. Buyer’s Damages from a Hypothetical Re-Purchase F. Buyer’s Action for Breach of Warranty

§ 30.2 Damages for Non-Performance of Contractual Warranties in U.S. Law

A. Express and Implied Warranties Under the U.C.C. B. Historical Background of Contractual Warranties in Common Law C. Damages for Breach of Warranties; Consequential Damages in Taylor and Gaskin Inc. v. Chris Craft Industries D. Issues for Class Discussion E. The U.C.C. Implied Warranty of Merchantability and the Spanish Civil Code Redhibitory Action (“Accion Redhibitoria”)

§ 30.3 Recovery of Loss Profits by the “Lost Volume” Seller in Anglo-American Law

A. R.E. Davis Chemical Corp. v. Diasonics Inc. B. The “Economic Analysis of Law”; A Propos of the Lost Volume Seller C. Analytical Tools of EAL: Principles, Corollaries, Theorems and Concepts D. Posner’s Homo Economicus, Ordinary Merchants and the Bonus Vir

EPILOGUE FREQUENTLY CITED TABLE OF ABBREVIATIONS GLOSSARY INDEX

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