I read this week's assignment with an eye toward the first in-class oral argument. As such, I paid special attention to the section on p. 21-23 regarding validity. The validity of the "alleged agreement" is part of the question in this week's problem regarding whether the Super Market rescinded their offer in time to avoid conclusion of the contract, which may determine whether Wine Co-op can bring them into an arbitration. (I'm over-simplifying, but this is the issue I want to focus on for this post.) I realize that this section of the CISG is differentiating between "formation" and "validity" because the CISG governs formation of a contract, whereas it does not govern other validity issues. Rather than focusing on examples of validity issues (and there are others in our problem), I just want to focus on the definition of formation as it applies to the ability to bring a party into an arbitration.
Take a look at the CISG's definition of formation:
"The predominant opinion correctly assumes that 'formation' in the sense of the CISG is the so-called 'external consensus', i.e. the mechanics of how the contract is concluded (e.g. offer and acceptance)."
Without choosing the claimant or respondent's side, I initially interpreted "formation" to include the process leading up to the actual conclusion of the agreement, "how the contract is concluded," whether a conclusion is reached or not. To me, this jibes with "external consensus" because the attempt to form an agreement leads to a general consensus before any signatures are involved. To consider formation to be the concrete, signed, concluded contract, would mean that "formation" excludes all the steps leading up to the agreement. I don't agree with the notion that if the existence of the concluded contract is disputed, it means that the side believing that no contract was formed can refuse to participate in an arbitration on the basis that there was no formation. To say that you must have a contract in order to argue about whether or not there is a contract negates the purpose behind arbitrating to resolve such disputes. Thus, if you can only arbitrate relating to the "formation, interpretation, breach or termination" of the contract, then formation should include the process leading up to the conclusion of the contract to allow arbitration to resolve whether or not an agreement was ever officially concluded or not.
Agreed. I was very perplexed by the lack of checking for validity of contract, while contract formation is part of CISG. Wouldn't contract formation demonstrate whether a contract is valid? I am perplexed by this.
ReplyDeleteYes, the fact that the CISG does not look into the validity aspects of the contract such as fraud, misrepresentation etc. intrigued me too.
ReplyDeleteJust remember, to quote my beautifully,cynical antitrust professor, Leno Graglia,:
ReplyDelete"There's no law so bad, so as not to be good for lawyers"
I suppose it makes some sense that invalidity due to fraud, domestic legislative prohibitions etc. should be governed domestically, since if something does not work on a domestic level, a seller should not be allowed to circumvent domestic laws by looking to the CISG. But I, too, was perplexed at the scope of the CISG.
ReplyDeleteI think validity is something that would be covered by the NYC and UNCITRAL/National Arb law. Perhaps this is why the CISG excludes it.
ReplyDeleteI appreciate this discussion, because it's helping me come to grips with a validity/formation distinction.
ReplyDeleteLauren, I understand you to argue that 'formation' may or should extend backwards in time to cover issues that purport to be validity issues? To cover issues beyond the mechanics of the final stage?
By focusing on the distinction between 'external', objective acts, and 'internal' coercion/deception issues, I can see a difference between formation and validity.
Here is my scenario, then: Joe and Pete are in arbitration. Joe initiated arbitration; Pete responds by saying the contract is invalid by reason of fraud. George, the arbitrator, responds, "Maybe it's valid, maybe it's invalid. That's for your criminal court to decide! All I can settle here is the fact that you both signed it. That's formation, and as far as I'm concerned we're okay here."
Does that sound like a good reason, and a right action?
Jonathan, your comment is really intriguing. I'd have to look at the laws...feel free to further enlighten me.
I agree that the validity/formation distinction is an interesting one, but I also think that it is necessary. To me the CISG tries to establish universal principles/laws regarding the formation of a contract and obligations of each party. It tries very hard not to delve into the domestic legal systems of each party. And I think that's because it wants to be universal. Remember back to our first reading: Culture is important. Validity of a contract relates to the culture of a system and shouldn't be universal.
ReplyDeleteSo, yes, Tim, I think that's a good reason and a right action. According to the CISG, the contract was formed. According to domestic law it is invalid (perhaps - depending on the domestic law). Keep in mind that if party A claims that party B tricked him into the contract by fraud, even if party B gets an award for breach of contract somewhere else, party B still has to take it up with party A's domestic courts. If party B did commit fraud according to A's domestic laws, the award shouldn't be enforced. So, there's still an out for A. (I hope my analysis of that is correct.)
I'm frustrated by the seeming lack of rules in the area of validity and formation. I agree that it's a good thing that a contract whose existence is in dispute is subject to arbitration, but I guess the "applicable law" question is still giving me trouble. In our in-class example, can you basically just argue that any law that is even tangentially involved in the dispute may govern the validity question?
ReplyDeleteLauren - Thanks for going before me so I knew what to focus on. I actually had a much different argument planned, but decided to shape mine much like yours instead (based on comments from the class and Professor Bayer). I think you did a good job handling questions from the arbitrator. You had to stop and start several times which is always tough. I think that also made you sound a little scattered. Substantively, I don't know if either of us had a lot to focus on. Of course, 8(2) was key and you certainly addressed that. I have a feeling we missed some stuff, so we'll see how things go next week.
ReplyDeleteThanks again for being the guinea pig!
Hey Lauren, sorry for taking long to post.
ReplyDeleteI liked how you showed you had knowledge of the rules, so that even when you were told not to discuss substantive material, you were able to move to the procedural. The only thing I think you need to work on was summarizing your points at the end. However, given how organized you were, I think you'll have no trouble doing that once you become more familiar with all the material.
I also liked how composed you looked throughout the presentation, especially while being interrupted. I don't know if it's possible to say you were too nice. I think you could have been a little more defensive; maybe give us that snazzy attitude Jeremy was giving me. Nothing rude, just defending your position. I hope this makes sense.
Anyway, I think you did really wonderful.
btw, does anyone have the link to Sarah's blog?
hello Lauren,
ReplyDeleteI really liked your presentation. I found that you were very composed, clear and organized in your thought process and you did a good job handling questions. The only negative thing I can think of is the professor seemed to say that you didn't use all of the arguments at your disposal... I thought it was great though and I'm just hoping to do as well as you did next week ;)
I thought you had excellent composure. My only style suggestion for you is to make more eye contact with the panel.
ReplyDeleteSubstantively, I don't know that I can say very much; I myself was very confused about the whole procedural/substantive argument distinction. You knew the case well, and I guess on the law front it seemed like there was more substantive rather than procedural argument. I thought you did well, especially since being first respondent is kind of terrible (I think our side has a harder time :( )
Hi Lauren,
ReplyDeleteI think you did a great job because being the Respondent in this case is extremely difficult, since there aren't many arguments in your favor!
I think you got the key points that you could have said in your Client's favor but I think that you maybe should have had an outline of the things that you were going to say in order.
Also, you maintained the same posture and composure throughout your argument, even after the Professor interrupted you, which shows a lot of confidence on the material you are presenting. This confidence is an excellent plus before the arbitrator because he can trust on what you are saying and doing
Hi Lauren, sorry for the late post. Great job of stating specific facts about the offer and acceptance to tell the tribunal why there is no contract. Much more specific than your opposing counsel. You also really knew the applicable provisions of JAMS and CISG and made some great application arguments. You made a lot of merits arguments, but I can’t tell the merits from the procedure either. Good job of redirecting when Professor Bayer asked questions, you did well at speaking slowly and deliberately.
ReplyDelete