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authorRalph Amissah <ralph@amissah.com>2007-08-19 03:10:39 +0100
committerRalph Amissah <ralph@amissah.com>2007-08-19 03:10:39 +0100
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@@ -12,6 +12,8 @@
0~date 2000-08-27
+0~rights Copyright (C) Ralph Amissah
+
0~level num_top=4;
0~italics /CISG|PICC|PECL|UNCITRAL|UNIDROIT|WTO|ICC|WIPO|ScIL|IoL|lex mercatoria|pacta sunt servanda|caveat subscriptor|ex aequo et bono|amiable compositeur|ad hoc/i
@@ -36,11 +38,11 @@
4~ Reinforcing trends: borderless technologies, global economy, transnational legal solutions?
-Revisiting the Autonomous Contract~{ /{The Autonomous Contract: Reflecting the borderless electronic-commercial environment in contracting}/ was published in /{Elektronisk handel - rettslige aspekter, Nordisk årsbok i rettsinformatikk 1997}/ (Electronic Commerce - Legal Aspects. The Nordic yearbook for Legal Informatics 1997) Edited by Randi Punsvik, or at http://www.jus.uio.no/the.autonomous.contract.07.10.1997.amissah/doc.html }~
+Revisiting the Autonomous Contract~{ /{The Autonomous Contract: Reflecting the borderless electronic-commercial environment in contracting}/ was published in /{Elektronisk handel - rettslige aspekter, Nordisk årsbok i rettsinformatikk 1997}/ (Electronic Commerce - Legal Aspects. The Nordic yearbook for Legal Informatics 1997) Edited by Randi Punsvik, or at http://www.jus.uio.no/lm/the.autonomous.contract.07.10.1997.amissah/doc.html }~
Globalisation is to be observed as a trend intrinsic to the world economy.~{ As Maria Cattaui Livanos suggests in /{The global economy - an opportunity to be seized}/ in /{Business World}/ the Electronic magazine of the International Chamber of Commerce (Paris, July 1997) at http://www.iccwbo.org/html/globalec.htm <br> "Globalization is unstoppable. Even though it may be only in its early stages, it is already intrinsic to the world economy. We have to live with it, recognize its advantages and learn to manage it.<br>That imperative applies to governments, who would be unwise to attempt to stem the tide for reasons of political expediency. It also goes for companies of all sizes, who must now compete on global markets and learn to adjust their strategies accordingly, seizing the opportunities that globalization offers."}~ Rudimentary economics explains this runaway process, as being driven by competition within the business community to achieve efficient production, and to reach and extend available markets.~{To remain successful, being in competition, the business community is compelled to take advantage of the opportunities provided by globalisation.}~ Technological advancement particularly in transport and communications has historically played a fundamental role in the furtherance of international commerce, with the Net, technology's latest spatio-temporally transforming offering, linchpin of the "new-economy", extending exponentially the global reach of the business community. The Net covers much of the essence of international commerce providing an instantaneous, low cost, convergent, global and borderless: information centre, marketplace and channel for communications, payments and the delivery of services and intellectual property. The sale of goods, however, involves the separate element of their physical delivery. The Net has raised a plethora of questions and has frequently offered solutions. The increased transparency of borders arising from the Net's ubiquitous nature results in an increased demand for the transparency of operation. As economic activities become increasingly global, to reduce transaction costs, there is a strong incentive for the "law" that provides for them, to do so in a similar dimension. The appeal of transnational legal solutions lies in the potential reduction in complexity, more widely dispersed expertise, and resulting increased transaction efficiency. The Net reflexively offers possibilities for the development of transnational legal solutions, having in a similar vein transformed the possibilities for the promulgation of texts, the sharing of ideas and collaborative ventures. There are however, likely to be tensions within the legal community protecting entrenched practices against that which is new, (both in law and technology) and the business community's goal to reduce transaction costs.
-Within commercial law an analysis of law and economics may assist in developing a better understanding of the relationship between commercial law and the commercial sector it serves.~{ Realists would contend that law is contextual and best understood by exploring the interrelationships between law and the other social sciences, such as sociology, psychology, political science, and economics.}~ "...[T]he importance of the interrelations between law and economics can be seen in the twin facts that legal change is often a function of economic ideas and conditions, which necessitate and/or generate demands for legal change, and that economic change is often governed by legal change."~{ Part of a section cited in Mercuro and Steven G. Medema, /{Economics and the Law: from Posner to Post-Modernism}/ (Princeton, 1997) p. 11, with reference to Karl N. Llewellyn The Effect of Legal Institutions upon Economics, American Economic Review 15 (December 1925) pp 655-683, Mark M. Litchman Economics, the Basis of Law, American Law Review 61 (May-June 1927) pp 357-387, and W. S. Holdsworth A Neglected Aspect of the Relations between Economic and Legal History, Economic History Review 1 (January 1927-1928) pp 114-123.}~ In doing so, however, it is important to be aware that there are several competing schools of law and economics, with different perspectives, levels of abstraction, and analytical consequences of and for the world that they model.~{ For a good introduction see Nicholas Mercuro and Steven G. Medema, /{Economics and the Law: from Posner to Post-Modernism}/ (Princeton, 1997). These include: Chicago law and economics (New law and economics); New Haven School of law and economics; Public Choice Theory; Institutional law and economics; Neoinstitutional law and economics; Critical Legal Studies.}~
+Within commercial law an analysis of law and economics may assist in developing a better understanding of the relationship between commercial law and the commercial sector it serves.~{ Realists would contend that law is contextual and best understood by exploring the interrelationships between law and the other social sciences, such as sociology, psychology, political science, and economics.}~ "...[T]he importance of the interrelations between law and economics can be seen in the twin facts that legal change is often a function of economic ideas and conditions, which necessitate and/or generate demands for legal change, and that economic change is often governed by legal change."~{ Part of a section cited in Mercuro and Steven G. Medema, /{Economics and the Law: from Posner to Post-Modernism}/ (Princeton, 1997) p. 11, with reference to Karl N. Llewellyn The Effect of Legal Institutions upon Economics, American Economic Review 15 (December 1925) pp 655-683, Mark M. Litchman Economics, the Basis of Law, American Law Review 61 (May-June 1927) pp 357-387, and W. S. Holdsworth A Neglected Aspect of the Relations between Economic and Legal History, Economic History Review 1 (January 1927-1928) pp 114-123.}~ In doing so, however, it is important to be aware that there are several competing schools of law and economics, with different perspectives, levels of abstraction, and analytical consequences of and for the world that they model.~{ For a good introduction see Nicholas Mercuro and Steven G. Medema, /{Economics and the Law: from Posner to Post-Modernism}/ (Princeton, 1997). These include: Chicago law and economics (New law and economics); New Haven School of law and economics; Public Choice Theory; Institutional law and economics; Neoinstitutional law and economics; Critical Legal Studies.}~
Where there is rapid interrelated structural change with resulting new features, rather than concentrate on traditionally established tectonic plates of a discipline, it is necessary to understand underlying currents and concepts at their intersections, (rather than expositions of history~{ Case overstated, but this is an essential point. It is not be helpful to be overly tied to the past. It is necessary to be able to look ahead and explore new solutions, and be aware of the implications of "complexity" (as to to the relevance of past circumstances to the present). }~), is the key to commencing meaningful discussions and developing solutions for the resulting issues.~{ The majority of which are beyond the scope of this paper. Examples include: encryption and privacy for commercial purposes; digital signatures; symbolic ownership; electronic intellectual property rights.}~ Interrelated developments are more meaningfully understood through interdisciplinary study, as this instance suggests, of the law, commerce/economics, and technology nexus. In advocating this approach, we should also pay heed to the realisation in the sciences, of the limits of reductionism in the study of complex systems, as such systems feature emergent properties that are not evident if broken down into their constituent parts. System complexity exceeds sub-system complexity; consequently, the relevant unit for understanding the systems function is the system, not its parts.~{ Complexity theory is a branch of mathematics and physics that examines non-linear systems in which simple sets of deterministic rules can lead to highly complicated results, which cannot be predicted accurately. A study of the subject is provided by Nicholas Rescher /{Complexity: A Philosophical Overview}/ (New Brunswick, 1998). See also Jack Cohen and Ian Stewart, /{The Collapse of Chaos: Discovering Simplicity in a Complex World}/ (1994). }~ Simplistic dogma should be abandoned for a contextual approach.
@@ -56,7 +58,7 @@ Apart from the study of "laws" or the existing legal infrastructure, there are a
Briefly viewing the wider picture, several institutions are involved as independent actors in systems modelling of the transnational legal infrastructure. Their roles and mandates and the issues they address are conceptually different. These include certain United Nations organs and affiliates such as the United Nations Commission on International Trade Law (UNCITRAL),~{ http://www.uncitral.org/ }~ the World Intellectual Property Organisation (WIPO)~{ http://www.wipo.org/ }~ and recently the World Trade Organisation (WTO),~{ http://www.wto.org/ }~ along with other institutions such as the International Institute for the Unification of Private Law (UNIDROIT),~{ http://www.unidroit.org/ }~ the International Chamber of Commerce (ICC),~{ http://www.iccwbo.org/ }~ and the Hague Conference on Private International Law.~{ http://www.hcch.net/ }~ They identify areas that would benefit from an international or transnational regime and use various tools at their disposal, (including: treaties; model laws; conventions; rules and/or principles; standard contracts), to develop legislative "solutions" that they hope will be subscribed to.
-A host of other institutions are involved in providing regional solutions.~{ such as ASEAN http://www.aseansec.org/ the European Union (EU) http://europa.eu.int/ MERCOSUR http://embassy.org/uruguay/econ/mercosur/ and North American Free Trade Agreement (NAFTA) http://www.nafta-sec-alena.org/english/nafta/ }~ Specialised areas are also addressed by appropriately specialised institutions.~{ e.g. large international banks; or in the legal community, the Business Section of the International Bar Association (IBA) with its membership of lawyers in over 180 countries. http://www.ibanet.org/ }~ A result of globalisation is increased competition (also) amongst States, which are active players in the process, identifying and addressing the needs of their business communities over a wide range of areas and managing the suitability to the global economy of their domestic legal, economic, technological and educational~{ For a somewhat frightening peek and illuminating discussion of the role of education in the global economy as implemented by a number of successful States see Joel Spring, /{Education and the Rise of the Global Economy}/ (Mahwah, NJ, 1998). }~ infrastructures. The role of States remains to identify what domestic structural support they must provide to be integrated and competitive in the global economy.
+A host of other institutions are involved in providing regional solutions.~{ such as ASEAN http://www.aseansec.org/ the European Union (EU) http://europa.eu.int/ MERCOSUR http://embassy.org/uruguay/econ/mercosur/ and North American Free Trade Agreement (NAFTA) http://www.nafta-sec-alena.org/english/nafta/ }~ Specialised areas are also addressed by appropriately specialised institutions.~{ e.g. large international banks; or in the legal community, the Business Section of the International Bar Association (IBA) with its membership of lawyers in over 180 countries. http://www.ibanet.org/ }~ A result of globalisation is increased competition (also) amongst States, which are active players in the process, identifying and addressing the needs of their business communities over a wide range of areas and managing the suitability to the global economy of their domestic legal, economic, technological and educational~{ For a somewhat frightening peek and illuminating discussion of the role of education in the global economy as implemented by a number of successful States see Joel Spring, /{Education and the Rise of the Global Economy}/ (Mahwah, NJ, 1998). }~ infrastructures. The role of States remains to identify what domestic structural support they must provide to be integrated and competitive in the global economy.
In addition to "traditional" contributors, the technology/commerce/law confluence provides new challenges and opportunities, allowing, the emergence of important new players within the commercial field, such as Bolero,~{ http://www.bolero.org/ also http://www.boleroassociation.org/ }~ which, with the backing of international banks and ship-owners, offers electronic replacements for traditional paper transactions, acting as transaction agents for the electronic substitute on behalf of the trading parties. The acceptance of the possibility of applying an institutionally offered lex has opened the door further for other actors including ad hoc groupings of the business community and/or universities to find ways to be engaged and actively participate in providing services for themselves and/or others in this domain.
@@ -68,13 +70,13 @@ The kernel for the development of a transnational legal infrastructure governing
/{"ICA"}/ is recognised as the most prevalent means of dispute resolution in international commerce. Unlike litigation /{"ICA"}/ survives on its merits as a commercial service to provide for the needs of the business community.~{ /{"ICA"}/ being shaped by market forces and competition adheres more closely to the rules of the market economy, responding to its needs and catering for them more adequately. }~ It has consequently been more dynamic than national judiciaries, in adjusting to the changing requirements of businessmen. Its institutions are quicker to adapt and innovate, including the ability to cater for transnational contracts. /{"ICA"}/, in taking its mandate from and giving effect to the will of the parties, provides them with greater flexibility and frees them from many of the limitations of municipal law.~{ As examples of this, it seeks to give effect to the parties' agreement upon: the lex mercatoria as the law of the contract; the number of, and persons to be "adjudicators"; the language of proceedings; the procedural rules to be used, and; as to the finality of the decision. }~
-In sum, a transnational/non-national regulatory order governing the contractual rights and obligations of private individuals is made possible by: *(a)* States' acceptance of freedom of contract (public policy excepted); *(b)* Sanctity of contract embodied in the principle pacta sunt servanda *(c)* Written contractual selection of dispute resolution by international commercial arbitration, whether ad hoc or institutional, usually under internationally accepted arbitration rules; *(d)* Guaranteed enforcement, arbitration where necessary borrowing the State apparatus for law enforcement through the /{NY Convention on ICA}/, which has secured for /{"ICA"}/ a recognition and enforcement regime unparalleled by municipal courts in well over a hundred contracting States; *(e)* Transnational effect or non-nationality being achievable through /{"ICA"}/ accepting the parties' ability to select the basis upon which the dispute would be resolved outside municipal law, such as through the selection of general principles of law or lex mercatoria, or calling upon the arbitrators to act as amiable compositeur or ex aequo et bono.
+In sum, a transnational/non-national regulatory order governing the contractual rights and obligations of private individuals is made possible by: *(a)* States' acceptance of freedom of contract (public policy excepted); *(b)* Sanctity of contract embodied in the principle pacta sunt servanda *(c)* Written contractual selection of dispute resolution by international commercial arbitration, whether ad hoc or institutional, usually under internationally accepted arbitration rules; *(d)* Guaranteed enforcement, arbitration where necessary borrowing the State apparatus for law enforcement through the /{NY Convention on ICA}/, which has secured for /{"ICA"}/ a recognition and enforcement regime unparalleled by municipal courts in well over a hundred contracting States; *(e)* Transnational effect or non-nationality being achievable through /{"ICA"}/ accepting the parties' ability to select the basis upon which the dispute would be resolved outside municipal law, such as through the selection of general principles of law or lex mercatoria, or calling upon the arbitrators to act as amiable compositeur or ex aequo et bono.
This framework provided by /{"ICA"}/ opened the door for the modelling of effective transnational law default rules and principles for contracts independent of State participation (in their development, application, or choice of law foundation). Today we have an increased amount of certainty of content and better control over the desired degree of transnational effect or non-nationality with the availability of comprehensive insulating rules and principles such as the PICC or /{Principles of European Contract Law}/ (/{"European Principles"}/ or /{"PECL"}/) that may be chosen, either together with, or to the exclusion of a choice of municipal law as governing the contract. For electronic commerce a similar path is hypothetically possible.
4~ "State contracted international law" and/or "institutionally offered lex"? CISG and PICC as examples
-An institutionally offered lex ("IoL", uniform rules and principles) appear to have a number of advantages over "State contracted international law" ("ScIL", model laws, treaties and conventions for enactment). The development and formulation of both "ScIL" and "IoL" law takes time, the CISG representing a half century of effort~{ /{UNCITRAL Convention on Contracts for the International Sale of Goods 1980}/ see at http://www.jus.uio.no/lm/un.contracts.international.sale.of.goods.convention.1980/ <br>The CISG may be regarded as the culmination of an effort in the field dating back to Ernst Rabel, (/{Das Recht des Warenkaufs}/ Bd. I&II (Berlin, 1936-1958). Two volume study on sales law.) followed by the Cornell Project, (Cornell Project on Formation of Contracts 1968 - Rudolf Schlesinger, Formation of Contracts. A study of the Common Core of Legal Systems, 2 vols. (New York, London 1968)) and connected most directly to the UNIDROIT inspired /{Uniform Law for International Sales}/ (ULIS http://www.jus.uio.no/lm/unidroit.ulis.convention.1964/ at and ULF at http://www.jus.uio.no/lm/unidroit.ulf.convention.1964/ ), the main preparatory works behind the CISG (/{Uniform Law on the Formation of Contracts for the International Sale of Goods}/ (ULF) and the /{Convention relating to a Uniform Law on the International Sale of Goods}/ (ULIS) The Hague, 1964.). }~ and PICC twenty years.~{ /{UNIDROIT Principles of International Commercial Contracts}/ commonly referred to as the /{UNIDROIT Principles}/ and within this paper as PICC see at http://www.jus.uio.no/lm/unidroit.contract.principles.1994/ and http://www.jus.uio.no/lm/unidroit.international.commercial.contracts.principles.1994.commented/ <br>The first edition of the PICC were finalised in 1994, 23 years after their first conception, and 14 years after work started on them in earnest. }~ The CISG by UNCITRAL represents the greatest success for the unification of an area of substantive commercial contract law to date, being currently applied by 57 States,~{ As of February 2000. }~ estimated as representing close to seventy percent of world trade and including every major trading nation of the world apart from England and Japan. To labour the point, the USA most of the EU (along with Canada, Australia, Russia) and China, ahead of its entry to the WTO already share the same law in relation to the international sale of goods. "ScIL" however has additional hurdles to overcome. *(a)* In order to enter into force and become applicable, it must go through the lengthy process of ratification and accession by States. *(b)* Implementation is frequently with various reservations. *(c)* Even where widely used, there are usually as many or more States that are exceptions. Success, that is by no means guaranteed, takes time and for every uniform law that is a success, there are several failures.
+An institutionally offered lex ("IoL", uniform rules and principles) appear to have a number of advantages over "State contracted international law" ("ScIL", model laws, treaties and conventions for enactment). The development and formulation of both "ScIL" and "IoL" law takes time, the CISG representing a half century of effort~{ /{UNCITRAL Convention on Contracts for the International Sale of Goods 1980}/ see at http://www.jus.uio.no/lm/un.contracts.international.sale.of.goods.convention.1980/ <br>The CISG may be regarded as the culmination of an effort in the field dating back to Ernst Rabel, (/{Das Recht des Warenkaufs}/ Bd. I&II (Berlin, 1936-1958). Two volume study on sales law.) followed by the Cornell Project, (Cornell Project on Formation of Contracts 1968 - Rudolf Schlesinger, Formation of Contracts. A study of the Common Core of Legal Systems, 2 vols. (New York, London 1968)) and connected most directly to the UNIDROIT inspired /{Uniform Law for International Sales}/ (ULIS http://www.jus.uio.no/lm/unidroit.ulis.convention.1964/ at and ULF at http://www.jus.uio.no/lm/unidroit.ulf.convention.1964/ ), the main preparatory works behind the CISG (/{Uniform Law on the Formation of Contracts for the International Sale of Goods}/ (ULF) and the /{Convention relating to a Uniform Law on the International Sale of Goods}/ (ULIS) The Hague, 1964.). }~ and PICC twenty years.~{ /{UNIDROIT Principles of International Commercial Contracts}/ commonly referred to as the /{UNIDROIT Principles}/ and within this paper as PICC see at http://www.jus.uio.no/lm/unidroit.contract.principles.1994/ and http://www.jus.uio.no/lm/unidroit.international.commercial.contracts.principles.1994.commented/ <br>The first edition of the PICC were finalised in 1994, 23 years after their first conception, and 14 years after work started on them in earnest. }~ The CISG by UNCITRAL represents the greatest success for the unification of an area of substantive commercial contract law to date, being currently applied by 57 States,~{ As of February 2000. }~ estimated as representing close to seventy percent of world trade and including every major trading nation of the world apart from England and Japan. To labour the point, the USA most of the EU (along with Canada, Australia, Russia) and China, ahead of its entry to the WTO already share the same law in relation to the international sale of goods. "ScIL" however has additional hurdles to overcome. *(a)* In order to enter into force and become applicable, it must go through the lengthy process of ratification and accession by States. *(b)* Implementation is frequently with various reservations. *(c)* Even where widely used, there are usually as many or more States that are exceptions. Success, that is by no means guaranteed, takes time and for every uniform law that is a success, there are several failures.
Institutionally offered lex ("IoL") comprehensive general contract principles or contract law restatements that create an entire "legal" environment for contracting, has the advantage of being instantly available, becoming effective by choice of the contracting parties at the stroke of a pen. "IoL" is also more easily developed subsequently, in light of experience and need. Amongst the reasons for their use is the reduction of transaction cost in their provision of a set of default rules, applicable transnationally, that satisfy risk management criteria, being (or becoming) known, tried and tested, and of predictable effect.~{ "[P]arties often want to close contracts quickly, rather than hold up the transaction to negotiate solutions for every problem that might arise." Honnold (1992) on p. 13. }~ The most resoundingly successful "IoL" example to date has been the ICC's /{Uniform Customs and Practices for Documentary Credits}/, which is subscribed to as the default rules for the letters of credit offered by the vast majority of banks in the vast majority of countries of the world. Furthermore uniform principles allow unification on matters that at the present stage of national and regional pluralism could not be achieved at a treaty level. There are however, things that only "ScIL" can "engineer", (for example that which relates to priorities and third party obligations).
@@ -90,13 +92,13 @@ The virtues of freedom of contract are acknowledged in this paper in that they a
The information problem is a general one that needs to be recognised in its various forms where it arises and addressed where possible.
-Adherents to the caveat subscriptor model, point to the fact that parties have conflicting interests, and should look out for their own interests. However information presents particular problems which are exacerbated in international commerce.~{ The more straightforward cases of various types of misrepresentation apart. }~ As Michael Trebilcock put it: "Even the most committed proponents of free markets and freedom of contract recognise that certain information preconditions must be met for a given exchange to possess Pareto superior qualities."~{ Trebilcock, (1993) p. 102, followed by a quotation of Milton Friedman, from /{Capitalism and Freedom}/ (1962) p. 13. }~ Compared with domestic transactions, the contracting parties are less likely to possess information about each other or of what material facts there may be within the other party's knowledge, and will find it more difficult and costly to acquire. With resource inequalities, some parties will be in a much better position to determine and access what they need to know, the more so as the more information one already has, the less it costs to identify and to obtain any additional information that is required.~{ Trebilcock, (1993) p. 102, note quoted passage of Kim Lane Scheppele, /{Legal Secrets: Equality and Efficiency in the Common Law}/ (1988) p. 25. }~ The converse lot of the financially weaker party, makes their problem of high information costs (both actual and relative), near insurmountable. Ignorance may even become a rational choice, as the marginal cost of information remains higher than its marginal benefit. "This, in fact is the economic rationale for the failure to fully specify all contingencies in a contract."~{ See for example Nicholas Mercuro and Steven G. Medema, p. 58 }~ The argument is tied to transaction cost and further elucidates a general role played by underlying default rules and principles. It also extends further to the value of immutable principles that may help mitigate the problem in some circumstances. More general arguments are presented below.
+Adherents to the caveat subscriptor model, point to the fact that parties have conflicting interests, and should look out for their own interests. However information presents particular problems which are exacerbated in international commerce.~{ The more straightforward cases of various types of misrepresentation apart. }~ As Michael Trebilcock put it: "Even the most committed proponents of free markets and freedom of contract recognise that certain information preconditions must be met for a given exchange to possess Pareto superior qualities."~{ Trebilcock, (1993) p. 102, followed by a quotation of Milton Friedman, from /{Capitalism and Freedom}/ (1962) p. 13. }~ Compared with domestic transactions, the contracting parties are less likely to possess information about each other or of what material facts there may be within the other party's knowledge, and will find it more difficult and costly to acquire. With resource inequalities, some parties will be in a much better position to determine and access what they need to know, the more so as the more information one already has, the less it costs to identify and to obtain any additional information that is required.~{ Trebilcock, (1993) p. 102, note quoted passage of Kim Lane Scheppele, /{Legal Secrets: Equality and Efficiency in the Common Law}/ (1988) p. 25. }~ The converse lot of the financially weaker party, makes their problem of high information costs (both actual and relative), near insurmountable. Ignorance may even become a rational choice, as the marginal cost of information remains higher than its marginal benefit. "This, in fact is the economic rationale for the failure to fully specify all contingencies in a contract."~{ See for example Nicholas Mercuro and Steven G. Medema, p. 58 }~ The argument is tied to transaction cost and further elucidates a general role played by underlying default rules and principles. It also extends further to the value of immutable principles that may help mitigate the problem in some circumstances. More general arguments are presented below.
5~ Justifying mandatory loyalty principles
Given the ability to create alternative solutions and even an independent /{lex}/ a question that arises is as to what limits if any should be imposed upon freedom of contract? What protective principles are required? Should protective principles be default rules that can be excluded? Should they be mandatory? Should mandatory law only exist at the level of municipal law?
-A kernel of mandatory protective principles with regard to loyalty may be justified, as beneficial, and even necessary for "IoL" to be acceptable in international commerce, in that they (on the balance) reflect the collective needs of the international business community. The present author is of the opinion that the duties of good faith and fair dealing and loyalty (or an acceptable equivalent) should be a necessary part of any attempt at the self-legislation or institutional legislation of any contract regime that is based on "rules and principles" (rather than a national legal order). If absent a requirement for them should be imposed by mandatory international law. Such protective provisions are to be found within the PICC and PECL.~{ Examples include: the deliberately excluded validity (Article 4); the provision on interest (Article 78); impediment (Article 79), and; what many believe to be the inadequate coverage of battle of forms (Article 19). }~ As regards PICC *(a)* The loyalty (and other protective) principles help bring about confidence and foster relations between parties. They provide an assurance in the international arena where parties are less likely to know each other and may have more difficulty in finding out about each other. *(b)* They better reflect the focus of the international business community on a business relationship from which both sides seek to gain. *(c)* They result in wider acceptability of the principles within both governments and the business community in the pluralistic international community. These protective principles may be regarded as enabling the PICC to better represent the needs of the commonweal. *(d)* Good faith and fair dealing~{ The commented PECL explain "'Good faith' means honesty and fairness in mind, which are subjective concepts... 'fair dealing' means observance of fairness in fact which is an objective test". }~ are fundamental underlying principles of international commercial relations. *(e)* Reliance only on the varied mandatory law protections of various States does not engender uniformity, which is also desirable with regard to that which can be counted upon as immutable. (Not that it is avoidable, given that mandatory State law remains overriding.) More generally, freedom of contract benefits from these protective principles that need immutable protection from contractual freedom to effectively serve their function. In seeking a transnational or non-national regime to govern contractual relations, one might suggest this to be the minimum price of freedom of contract that should be insisted upon by mandatory international law, as the limitation which hinders the misuse by one party of unlimited contractual freedom. They appear to be an essential basis for acceptability of the autonomous contract (non-national contract, based on agreed rules and principles/ "IoL"). As immutable principles they (hopefully and this is to be encouraged) become the default standard for the conduct of international business and as such may be looked upon as "common property." Unless immutable they suffer a fate somewhat analogous to that of "the tragedy of the commons."~{ Special problem regarding common/shared resources discussed by Garrett Hardin in Science (1968) 162 pp. 1243-1248. For short discussion and summary see Trebilcock, (1993) p. 13-15. }~ It should be recognised that argument over the loyalty principles should be of degree, as the concept must not be compromised, and needs to be protected (even if they come at the price of a degree of uncertainty), especially against particularly strong parties who are most likely to argue against their necessity.
+A kernel of mandatory protective principles with regard to loyalty may be justified, as beneficial, and even necessary for "IoL" to be acceptable in international commerce, in that they (on the balance) reflect the collective needs of the international business community. The present author is of the opinion that the duties of good faith and fair dealing and loyalty (or an acceptable equivalent) should be a necessary part of any attempt at the self-legislation or institutional legislation of any contract regime that is based on "rules and principles" (rather than a national legal order). If absent a requirement for them should be imposed by mandatory international law. Such protective provisions are to be found within the PICC and PECL.~{ Examples include: the deliberately excluded validity (Article 4); the provision on interest (Article 78); impediment (Article 79), and; what many believe to be the inadequate coverage of battle of forms (Article 19). }~ As regards PICC *(a)* The loyalty (and other protective) principles help bring about confidence and foster relations between parties. They provide an assurance in the international arena where parties are less likely to know each other and may have more difficulty in finding out about each other. *(b)* They better reflect the focus of the international business community on a business relationship from which both sides seek to gain. *(c)* They result in wider acceptability of the principles within both governments and the business community in the pluralistic international community. These protective principles may be regarded as enabling the PICC to better represent the needs of the commonweal. *(d)* Good faith and fair dealing~{ The commented PECL explain "'Good faith' means honesty and fairness in mind, which are subjective concepts... 'fair dealing' means observance of fairness in fact which is an objective test". }~ are fundamental underlying principles of international commercial relations. *(e)* Reliance only on the varied mandatory law protections of various States does not engender uniformity, which is also desirable with regard to that which can be counted upon as immutable. (Not that it is avoidable, given that mandatory State law remains overriding.) More generally, freedom of contract benefits from these protective principles that need immutable protection from contractual freedom to effectively serve their function. In seeking a transnational or non-national regime to govern contractual relations, one might suggest this to be the minimum price of freedom of contract that should be insisted upon by mandatory international law, as the limitation which hinders the misuse by one party of unlimited contractual freedom. They appear to be an essential basis for acceptability of the autonomous contract (non-national contract, based on agreed rules and principles/ "IoL"). As immutable principles they (hopefully and this is to be encouraged) become the default standard for the conduct of international business and as such may be looked upon as "common property." Unless immutable they suffer a fate somewhat analogous to that of "the tragedy of the commons."~{ Special problem regarding common/shared resources discussed by Garrett Hardin in Science (1968) 162 pp. 1243-1248. For short discussion and summary see Trebilcock, (1993) p. 13-15. }~ It should be recognised that argument over the loyalty principles should be of degree, as the concept must not be compromised, and needs to be protected (even if they come at the price of a degree of uncertainty), especially against particularly strong parties who are most likely to argue against their necessity.
4~ Problems beyond uniform texts
@@ -193,10 +195,10 @@ Within a system are those who benefit from the way it has been, that may oppose
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