John F. Coyle, The Role of the CISG in U.S. Contract Practice: An Empirical Study
, U. Penn. J. Int'l L.
(forthcoming 2016), available at SSRN
Very few American contract courses cover the CISG. (My book gestures at coverage; my course doesn’t.) That was true before the recent lamented trend toward a one-semester course, and it is increasingly the rule today. Why? Contract professors I’ve talked to on this subject typically justify themselves by asserting that the CISG is rarely relevant in domestic practice. But such casual empiricism, when asserted in a company mixed with comparativists, can seem irresponsible. What if we’re wrong?
Now comes John Coyle to test that conventional account. Of course, there’s nothing easier to publish than a surprising empirical finding. (That such findings are rarely replicable is an embarrassment.) Articles confirming instead of rebutting our priors are thus especially important to celebrate. Coyle tells teachers of contract law that we’ve gotten it basically right: the CISG is less popular than the Congress. He does so in a mixed-methods paper notable for its carefulness and restraint. I like it lots.
Coyle’s approach starts by noting recent surveys finding that most domestic practitioners urge their clients to opt out of the CISG when otherwise applicable. But, as Coyle notes, such surveys are bedeviled by various methodological problems. He thus starts afresh by looking at the CISG’s use in material contracts on EDGAR. He finds ~5,000 contracts from 1988 to 2014 which include the term “international sale of goods.” That’s 0.7% of a population of approximately 700,000 filed agreements. As Coyle notes, his identification strategy has limits: (1) EDGAR’s material contract database is not representative of all corporate contracts, and (2) since the CISG is a default rule, identifying contracts which specifically address it may offer a distorted lens. That is, parties wishing the CISG to apply can simply be silent. Perhaps a large number of the 695,000 contracts that he did not identify intended to adopt the CISG by default. Similarly, parties that chose the law of a particular state may have intended for the Convention to apply under the treaty power. Thus, Coyle’s 5,000 contract sample, however large, may be unrepresentative if used as a proxy for parties’ attitudes toward the CISG.
But the contracts do tell us something. Coyle uncovers a number of curious facts. First, 69% of the contracts in the sample excluded the CISG unnecessarily—i.e., the contract was not a sale of goods, or the CISG was not ratified in the counterparty’s home country, or the contract was between wholly domestic parties. This either reflects an overweening fear of the CISG or boilerplate error. Second, the absolute number of contracts affirmatively choosing the CISG was negligible: 61 out of 5092, and the trend is against adoption. Coyle contacted the firms opting in, and found that a striking number now routinely opt out, or claimed that the instance of opting in was a one time concession to a counterparty. As Coyle summarizes: “Whatever the intrinsic merits of the CISG, and notwithstanding the broad support that it enjoys within the academic community, the treaty has made scant little headway in gaining adherents among lawyers in the United States in the twenty-eight years since it entered into force.” (P. 24.)
These data would be themselves quite illuminating, but Coyle adds to our understanding by compiling a secondary dataset of supply contracts filed with the SEC between 2011 and 2015. Identifying a universe of 5549 contracts, he reviewed each to see whether one party was international and thus subject to the CISG. From the 248 international supply contracts that remained, he focused on 44 contracts where the CISG applied but the parties had been silent—i.e., the parties appeared to have chosen the CISG by default. He then wrote each of the companies involved and asked, in essence, what were you thinking?
The responses offered powerful evidence that the CISG isn’t an intentionally chosen, thoughtful, default norm—none of the contacted firms appeared to have intentionally been silent. Attorneys’ excuses for their (resulting) mistaken choice of the CISG ranged from puzzled to rueful to apologetic. (As Gulati and his co-authors have found in another context, attorneys’ bad choices can always be rationalized, but rarely explained.) In any event, this extra research provides some comfort to those worried about Coyle’s identification strategy (discussed above) but little to comparativists who thought that the silent majority was with them.
Coyle concludes by arguing that the CISG “has no real constituency among public companies in the United States.” Indeed, as he points out, it is rarely applied in litigated cases, and only then when the parties have failed to adopt the normal practice of excluding it. Coyle argues that the result is an interpretive jurisprudence developed on the backs of suckers, whose lawyers aren’t thoughtful, or well-trained, enough to exclude the convention from their agreements. The CISG ends up looking less like a majoritarian, and more like a penalty, default.
This leads, of course, back to a pedagogical question. Given that domestic firms apparently do not want the CISG to apply, should we, as contracts teachers, be in the business of drilling students on the convention solely so that it can be routinely excluded? This seems a bit like teaching students all about the life cycle of e. coli so they can avoid a restaurant with a bad health grade. Perhaps courts ought to adopt a different default rule, at least when parties chose the law of a particular state.
Cite as: David Hoffman, Is the CISG Irrelevant?
(November 4, 2016) (reviewing John F. Coyle, The Role of the CISG in U.S. Contract Practice: An Empirical Study
, U. Penn. J. Int'l L.
(forthcoming 2016), available at SSRN), https://contracts.jotwell.com/is-the-cisg-irrelevant/
Aaron Perzanowski & Chris Jay Hoofnagle, What We Buy When We Buy Now
, 165 U. Pa. L. Rev.
(forthcoming 2017), available at SSRN
In their forthcoming article, What We Buy When We Buy Now, Aaron Perzanowski and Chris Jay Hoofnagle richly capture today’s digital media marketplace and rightly raise concerns about consumers’ understanding of their legal rights upon licensing a book, movie, or song. They focus upon vendors’ use of the language “buy now” on their websites and test consumer comprehension of this language empirically. The results, showing, for example, that 83 percent of respondents believed they “owned” their media, certainly raise alarms. The article proposes a sensible and inexpensive solution, supported by the authors’ empirical evidence, that would help clear up the “buy now” confusion, namely “adding a short notice to a digital product page that outlines consumer rights.” I enthusiastically recommend this article for anyone interested in twenty-first century digital commerce.
As with any excellent article, perplexing issues remain. For example, is “buy now” less misleading than the article suggests? As mentioned, 83 percent of respondents believed they “owned” their media, but as the authors concede, the concept of ownership is inherently ambiguous, and perhaps doesn’t preclude in consumers’ minds the limitations that licensing entails. In addition, although more than 80 percent of respondents believed they could use their digital media on any of their devices, the reality is not so starkly different according to the authors, with some vendors allowing such usage and others not. Fewer than 50 percent of respondents thought incorrectly that they held the right in turn to lend, gift, resell, or copy their product, or leave their product in a will. In fact, fewer than 25 percent thought mistakenly that they had the right to resell or copy their media. On the other hand, 86 percent of respondents thought they could keep their digital product indefinitely, and Perzanowski and Hoofnagle set forth several counterexamples demonstrating that this misperception may be a real problem. In addition, the authors note that the FTC labels an advertising practice as deceptive even if only 10 or 15 percent of people are misled by the practice.
Another issue concerns the so-called duty to read. After all, the licensing agreement makes the rights of the licensee clearer, if not clear, if the consumer bothered to read the form. And “buy now” is not the most precise guarantee of consumer rights. Of course, for good reason, consumers give digital licenses (as well as paper ones) short shrift (if any “shrift” at all!). And my coauthor and I have shown that vendors of software on the Internet make important quality claims on their websites only to withdraw them through warranty disclaimers on their digital standard forms. (Robert A. Hillman & Ibrahim Barakat, Warranties and Disclaimers in the Electronic Age, 11 Yale J.L. & Tech. 1 (2009).) We therefore concluded that in the digital age, bait-and-switch is a real problem in the area of software product warranties. So I am the last to say that the duty-to-read idea should trump any concern in the licensing-of-media context. But, playing devil’s advocate for the moment, perhaps the arguably ambiguous meaning of “buy now” combined with the elaboration of rights in the digital standard form, if clear, should give pause as to whether consumers need additional protection.
To the extent that there is a serious problem, the authors’ solution, a box on the digital product page explaining rights, “You may not resell this ebook,” etc., is a good solution as far as it goes. However, what about consumers’ confusion over the extent of warranty coverage, access to courts, the right of the vendor to modify the terms, etc.? In short, if consumers are to be protected and the license itself cannot do the job, the box may itself grow too large and unwieldy to do much good. Further, the task of determining what rights are sufficiently important to require box treatment will challenge the lawmaker.
In the end, I believe much can be said for an alternative, albeit modest, solution suggested by the American Law Institute’s Principles of the Law of Software Contracts. Despite some rather farfetched claims in the literature about the failure of disclosure as a general remedy for consumer (and others’) ignorance, the software project took the position that early disclosure of terms on the Internet, even before a consumer took the leap and decided to “buy,” in conjunction with adequate judicial policing of “dangerous terms,” was likely the only realistic contribution to greater consumer protection. The expectation was not that consumers would likely increase reading their standard forms and shop around for better terms, but that watchdog groups would access the openly available forms, and spread the word about their meaning and ramifications. This would create the incentive on the part of vendors to write reasonable terms. An example of the success of such a strategy was the furor over Facebook’s privacy terms that caused it to reverse its approach.
I hope it is clear from this brief discussion that I believe What We Buy When We Buy Now is an important contribution to the literature on digital contracts and that the authors deserve kudos for bringing the “buy now” problem to our attention.
CONTRACTS Section Editors
The Section Editors choose the Contributing Editors and exercise editorial control over their section. In addition, each Section Editor will write at least one contribution (”jot”) per year. Questions about contributing to a section ought usually to be addressed to the section editors.
Professor David A. Hoffman
Murray H. Shusterman Professor of Transactional and Business Law
Temple University Beasley School of Law
Professor Nancy S. Kim
ProFlowers Distnguished Professor Internet Studies & Professor of Law
California Western School of Law
Contributing Editors agree to write at least one jot for Jotwell each year.
Professor Aditi Bagchi
Professor of Law
Fordham University School of Law
Professor Daniel D. Barnhizer
Professor of Law & The Bradford Stone Faculty Scholar
Michigan State University College of Law
Professor Shawn Bayern
Larry & Joyce Beltz Professor of Torts
Florida State University College of Law
Professor Omri Ben-Shahar
Leo & Eileen Herzel Professor of Law
The University of Chicago Law School
Professor Martha Ertman
Carole & Hanan Sibel Research Professor of Law
University of Maryland Francis King Carey School of Law
Professor Robert A. Hillman
Edwin H. Woodruff Professor of Law
Cornell Law School
Professor Hila Keren
Professor of Law
Southwestern Law School
Professor Florencia Marotta-Wurgler
Professor of Law
New York University School of Law
Professor Eboni S. Nelson
Professor of Law
University of South Carolina School of Law
Professor Robert E. Scott
Alfred McCormack Professor of Law
Columbia Law School
Professor Tess Wilkinson-Ryan
Professor of Law & Psychology
University of Pennsylvania Law School
Professor Eyal Zamir
Augusto Levi Professor of Commercial Law
The Hebrew University of Jerusalem
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