Buying commercial law: Choice of law, choice of forum, and network externalities

Copyright @ 2009 Bryan DruzinThis paper applies network effect theory to transnational commercial law, arguing that commercial parties selecting law through choice of law and choice of forum clauses can be likened to consumers selecting a product, and thus equally susceptible to the effects of network externalities. The number of “consumers” who subscribe to the same legal norms is analogous to the number of consumers who use a product. As the number of “consumers” increases, so too does the inherent value of selecting that jurisdiction, inducing even more parties to “purchase” that body of law. This is a network effect. I argue that transnational commercial law is ideally calibrated so as to generate a network effect. This stems from the inherent nature of commerce. The discussion distinguishes between two kinds of externalities, direct and indirect network externalities, concluding that network systems that possess both kinds of network externalities (as is the case with law-selection decisions in commercial contracts), are the best candidates to produce a robust network effect. I then examine how the twin ingredients of fluid interaction and frequent choice present in commerce precipitate a network effect; expansive interaction places a higher premium on the need for synchronization, and frequent opportunities to select law in the contracts of fresh commercial relationships allow for an incremental drift towards a specific jurisdiction. The paper ultimately concludes that, as a result, network externalities indeed play an influential role in the ascension of particular jurisdictions over others in law-selection decisions, an important conclusion as it points to an unrecognized influence underpinning the current development of transnational commercial law

Efficient Contracts for Digital Content

This paper analyses efficient contracts for digital content, focusing on the music industry. It contributes to the quest for an efficient intellectual property rights environment for information goods. Moreover, it adds an interesting application to the field of behavioural economics. The model is set in a contract theory framework with the copyright holder being the principal and a consumer the agent. We offer three contract cases for analysis: strong copy protection, a strategically low price and voluntary reciprocal contributions. Insights from the economics of information and behavioural economics - information goods have public goods properties; social preferences are significant among individuals - are applied to examine the value of a strict copyright enforcement in the digital age. We find that endogenous incomplete contracts based on fair, reciprocal behaviour may achieve a first-best allocation of information goods, while complete contracts are limited to second-best results.internet, music industry, social preferences, reciprocity, moral hazard, file sharing

Firms, Courts, and Reputation Mechanisms: Towards a Positive Theory of Private Ordering

This Essay formulates a positive model that predicts when commercial parties will employ private ordering to enforce their agreements. The typical enforcement mechanism associated with private ordering is the reputation mechanism, in which a merchant community punishes parties in breach of contract by denying them future business. The growing private ordering literature argues that these private enforcement mechanisms can be superior to the traditional, less efficient enforcement measures provided by public courts. However, previous comparisons between public and private contractual enforcement have presented a misleading dichotomy by failing to consider a third enforcement mechanim: the vertically integrated firm. This Essay develops a model that comprehensively addresses three distinct types of enforcement mechanisms--firms, courts, and reputation-based private ordering. The model rests on a synthesis of transaction cost economics, which compares the efficiencies of firms versus markets, and the private ordering literature, which compares the efficiencies of public courts versus private ordering. It hypothesizes that private ordering will arise when agreements present enforcement difficulties, high-powered market incentives are important, and the costs of entry barriers are low. The Essay then conducts an illustrative test by comparing the model\u27s predictions to documented instances of private ordering

Legal Fictions and the Essence of Robots: Thoughts on Essentialism and Pragmatism in the Regulation of Robotics

The purpose of this paper is to offer some critical remarks on the so-called pragmatist approach to the regulation of robotics. To this end, the article mainly reviews the work of Jack Balkin and Joanna Bryson, who have taken up such ap- proach with interestingly similar outcomes. Moreover, special attention will be paid to the discussion concerning the legal fiction of ‘electronic personality’. This will help shed light on the opposition between essentialist and pragmatist methodologies. After a brief introduction (1.), in 2. I introduce the main points of the methodological debate which opposes pragmatism and essentialism in the regulation of robotics and I examine how legal fictions are framed from a pragmatist, functional perspective. Since this approach entails a neat separation of ontological analysis and legal rea- soning, in 3. I discuss whether considerations on robots’ essence are actually put into brackets when the pragmatist approach is endorsed. Finally, in 4. I address the problem of the social valence of legal fictions in order to suggest a possible limit of the pragmatist approach. My conclusion (5.) is that in the specific case of regulating robotics it may be very difficult to separate ontological considerations from legal reasoning—and vice versa—both on an epistemological and social level. This calls for great caution in the recourse to anthropomorphic legal fictions

To be or not to be an auctioneer: Some thoughts on the legal nature of online eBay auctions and the protection of consumers

This paper discusses the legal classification of online “eBay” auctions. The discussion has key implications on the scope of consumer protection law as sale by auctions are, for example, excluded from the scope of the Consumer Protection (Distance Selling) Regulations 2000. The paper uncovers that online “eBay” auctions cannot always be considered as traditional auctions and that eBay, as an intermediary, is not to be considered as an auctioneer. This creates difficulties associated with a distributive application of consumer protection laws such as the Consumer Protection (Distance Selling) Regulations 2000. Another set of difficulties is associated with a lenient legal regime applicable to the liability of eBay under the Electronic Commerce (EC Directive) Regulations 2002 . The paper concludes that there is an urgent need to clarify the legal classification of online auctions and to rethink the liability of online auction sites to better protect consumers

Parol Evidence Rules and the Mechanics of Choice

Scholars have to date paid relatively little attention to the rules for deciding when a writing is integrated. These integration rules, however, are as dark and full of subtle difficulties as are other parts of parol evidence rules. As a way of thinking about Hanoch Dagan and Michael Heller’s The Choice Theory of Contracts, this Article suggests we would do better with tailored integration rules for two transaction types. In negotiated contracts between firms, courts should apply a hard express integration rule, requiring firms to say when they intend a writing to be integrated. In consumer contracts, standard terms should automatically be integrated against consumerside communications, and never integrated against a business’s communications. The argument for each rule rests on the ways parties make and express contractual choices in these types of transactions. Whereas Dagan and Heller emphasize the different values at stake in different spheres of contracting, differences among parties’ capacities for choice — or the “mechanics of choice” — are at least as important

The Legal Enforceability of Contracts made by Electronic Agents under Islamic Law: A Critical Analysis of the Effectiveness of Legal Reform in Saudi Arabia

The aim of this dissertation is to analyse whether contracts made by electronic agents1 might be made enforceable under Islamic law. It discusses what constitutes an enforceable contract under Islamic law and whether this is applicable when a contract is made by an electronic agent. The enforceability of these contracts under Islamic law is especially important in the Kingdom of Saudi Arabia (KSA) where Islamic law constitutes the legal system. Ignoring the doctrine of Islamic law in relation to the enforceability of these contracts could, therefore, fundamentally affect the future viability of these contracts in the KSA. The dissertation argues first that the principle of mutual consent under Islamic law is not satisfied in contracts made by electronic agents because there is no communication of an offer and acceptance by the contracting parties (users). Secondly, while electronic agents function like human agents, there are a number of doctrinal requirements under Islamic agency theory that prevent electronic agents from being agents proper. Thirdly, the term ‘legal personality’ is categorised in Islamic law under ‘Dhimmah’, an ethical concept designed principally for human beings which cannot, therefore, be attributed to electronic agents. This dissertation demonstrates that Islamic law creates conceptual obstacles which prevent contracts made by electronic agents being enforceable in the KSA. One implication of this will be a risk of negative impact on the development of these contracts in the KSA because they are contradictory to Islamic law. Islamic law must avoid narrow traditional interpretations of its legal concepts, because a lack of reform in this area will create difficulties and barriers against the enforceability of these contracts under Islamic law