MarĂa Claudia Solarte-VĂĄsquez, Katrin Nyman-Metcalf
Abstract Smart contracting (SC) is a proactive proposal to operationalize the relational contract theory for the upgrade and improvement of legally relevant exchange. The dynamic institutional environment of the European Union (EU) is a suitable framework for this proposal. SC addresses the interests of the business management, law and information technology practices with a perspective of influence in digital exchange, communication processes and other human and human-machine interactions. This position paper restates the advantages of the concept by highlighting the practical transition pathway SC offers to moderate the growing haste towards the embeddedness of exchange in automated and distributed models. This theoretical contribution supports the systematization of the proactive and legal design research field, and explains the characterization, operationalization and specification of the SC concept.
This chapter looks beyond the novelty of self-executing âsmart contractsâ in blockchain networks and explores developments against the background fact that commercial parties have, for centuries, used documentary credit to simulate autonomous performance. Blockchain-based smart contracts and documentary credit share three core functionalities which are essential to any effective autonomous performance, analogue or digitalâthey both (i) act through internalized media of exchange; (ii) operate as closed systems; and (iii) provide means of securing sufficient resources to guarantee contractual performance. Using these three functionalities as a framework, this chapter conducts a comparative analysis of mechanisms for effecting autonomous contractual performance in a commercial setting. From this comparison, a few hypotheses are drawn regarding the potential areas where smart contract technology is more likely to find fruitful application. In particular, the chapter considers potential limitations to applying smart contracts to scenarios beyond digital asset transfers, how dispute resolution mechanisms should be designed to complement (rather impair) the autonomous nature of contractual performance under smart contracts, and potential capital cost implications which might arise in some cases when parties seek to replace human intermediaries with smart contracts.
Two parties sign a contract but before they fully perform they modify the contract.Should courts enforce the modified agreement?The modification may enable efficient trade in response to changed circumstances, or one party may have made an efficient relationship-specific investment and then been held-up by the other.Courts have had difficulty tackling this problem because the facts required to discriminate between the two situations are non-verifiable.A private remedy is for the parties to write a contract that is robust to hold-up or that makes the facts relevant to modification verifiable.But implementing such remedies requires commitment to the provisions, i.e., they themselves are subject to non-compliance.Conventional contract technology, e.g., the use of liquidated damages, to ensure commitment are disfavored by courts and subject to renegotiation.Smart contracts written on blockchain ledgers may offer a solution.We explain the basic economics of these technologies.We argue that they can used to implement liquidated damages without court involvement and thereby obtain commitment to renegotiation design and revelation mechanisms.We address the hurdles courts may impose to use of smart contracts and argue that sophisticated parties' ex ante commitment to them may lead courts to allow their use as pre-commitment devices.
This year marks the fiftieth anniversary of the adoption of Federal Rule of Civil Procedure Rule 23, and with it, the advent of the modern class action. As the fiftieth anniversary approached, many scholars, including myself, said that class actions were dead, dying, or headed for a zombie state. Many of the Supreme Courtâs recent class action cases all but confirmed that view. In just the last six years, the Supreme Court ratcheted up the requirements for class certification under Rule 23 in Wal-Mart Stores v. Dukes and Comcast v. Behrend, increasing the cost and difficulty of obtaining certification. And, in a series of cases, the Court permitted the use of class action prohibitions in arbitration contracts, thus eliminating a swath of class actions and, often, the underlying claims themselves. The Courtâs language in these cases also tracked stock arguments against the class action, leaving the distinct impression that the Roberts Court was on a mission to diminish or destroy the class action procedure.
But a funny thing happened on the way to the funeral: just as the obituaries for the class action were being written, the Supreme Court issued a series of decisions that breathed new life into it. In Halliburton Co. v. Erica P. John Fund, Inc. (Halliburton II) and Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, the Court reaffirmed the fraud-on-the-market theory, a critical tool in securities class actions. In Tyson Foods v. Bouaphakeo, the Court vindicated the use of statistical proof to satisfy Rule 23 requirements, distancing itself from strong suggestions in prior cases that individualized proof requirements would doom class certification. And the language in these cases tracked stock arguments in favor of class actions.
To paraphrase Mark Twain, the rumors of the class actionâs death now seem greatly exaggerated. But the Courtâs class action decisions raise a new and perhaps more vexing question. If the Court is not fully intent on destroying the class action, what drives its seemingly disparate decisions? Do they reflect an antiâclass action agenda losing steam, as Professor Coffee has suggested? Was the unbridled antiâclass action agenda an illusion to begin with? Or is there a deeper explanation for these decisions? Part I of this Article demonstrates that the Courtâs âproâclass actionâ decisions cannot be easily reconciled with their âantiâclass actionâ counterparts through traditional meansâneither through straightforward applications of Rule 23, nor precedent, nor particular case facts. But Part II posits that the Courtâs seemingly disparate class action cases can still be rationalized. To do so, however, one must look past the procedural veneer and consider the underlying substantive rules and remedial regimes at stake. Indeed, a key question presented in each caseânotwithstanding what appears in the petitions for writs of certiorariâis whether the Court will embrace an interpretation of a substantive rule that has the effect of facilitating the availability of the class action. The Courtâs ultimate answer reflects a composite judgment about the substantive rule at issue and its implications for the availability of the class action device. Accordingly, to the extent one insists that procedural rules are, or ought to be, transsubstantiveâthat, âin form and manner of application, [they do] not vary from one substantive context to the nextââthe Courtâs class action jurisprudence might actually be deemed ânon-transsubstantive.â
This Articleâs thesis has numerous implicationsâfor separation of powers, judicial lawmaking power, federalism, the role of precedent, notions of transsubstantive procedure, procedural theory, and the nature and legitimacy of the judicial role, among others. The limitations of the Article format permit consideration in Part III of just two: First, the implications for the nature and scope of the federal courtsâ procedural and substantive lawmaking powers under the Rules Enabling Act [hereinafter Enabling Act]. And second, related implications for the nature and legitimacy of the judicial role in âproceduralâ opinions.
The law speaks clearly on the standards of proof, but listeners often misunderstand its words. This article tries, with some common sense, to explain how the law expects its standards to be applied, and then to show how the law thereby avoids such complications as the conjunction paradox. First, in accordance with belief function theory, the factfinder should start at zero belief. Given imperfect evidence, the factfinder will end up retaining a fair amount of uncommitted belief. As evidence comes in, though, the factfinder will form a belief in the truth of the disputed fact but also form a disbelief, or a belief in the factâs falsity. At the close of evidence, the standard of proof requires only comparing belief and disbelief. For example, the civil standard, rather than asking whether a fact more likely than not happened according to traditional probability theory, asks whether the factfinder believes the fact more than the factfinder believes that the fact did not happen. The burdened party need not push proof above 50% by dispelling the phantoms of every possibility, while the opponent need not generate a competing version of truth but can instead rely on denial to demand that the burdened party generate a belief.Second, belief and disbelief being nonadditive partial truths, the mathematical result is that one cannot combine beliefs by traditional probability theory, as by using the product rule designed for conjunction of betting odds. Instead, one must use multivalent logic, including its rule that conjoined likelihood equals the likelihood of the least likely element. Linking the elements in a chain tells a story that is as likely as its weakest link. Consequently, if each element of a claim or defense passes the standard of proof, the conjunction of elements will pass the standard of proof. The conjunction paradox thus vaporizes for factfinding, just as the law has always maintained. The law has found the way to decide in accord with our best knowledge of the facts.
Modern economies are held together by innumerable contracts. However, current contracts are neither machine-readable nor easily human-readable. The Ricardian Contract paradigm of parameters, prose and code posits a hybrid model of automation and conventional legal text. This paper connects recent work on design criteria for 'Smart Contract Templates' with prose objects and prototype inheritance demonstrated at CommonAccord. Templates authored and shared as prose objects can become the basis for automation, codification, commentary, big data analysis and graphic presentations.
This paper gives an overview on smart contracts and assess their legal relevance. The first part, explains the notion of smart contract and provides simple examples of it. In the second part, we propose a legal analysis of smart contract. First, we explore how smart contracts can be relevant in the eyes of the law. Then we differentiate and assess smart contract with regards to their types. And finally, we look at chosen problematic of smart legal contracts.
Abstract Regulatory agencies in the United States and Europe have wellâdeserved reputations for fixating on the total benefits and costs of proposed and final regulatory actions, without doing any more than anecdotally mentioning the subpopulations and individuals who may bear disproportionate costs or reap disproportionate benefits. This is especially true on the âcostâ side of the costâbenefit ledger, where analysts exert little effort to even inform decisionmakers and the public that the costs of regulations might be distributed either regressively or progressively. Many scholars and advocates have observed that regulation can increase the efficiency of market outcomes, but caution about its untoward (or suboptimal) effects on equity. Here, we argue that without considering distributional information about costs and benefits, regulatory policies in fact can also cause violence to notions of efficiency , for two reasons: (i) society cannot hope to approach Paretoâefficient outcomes without identifying those who must lose so that others can gain more; and (ii) because the harm experienced by involuntary risks and by imposed regulatory costs is likely nonâlinear in its magnitude (at the individual level), efficiency is, in fact, a strong function of the shape of the distribution of these effects. This article reviews evidence about the distribution of regulatory costs and benefits, describes how agencies fail to incorporate readily available distributional information, and sketches a vision for how they could analyze costs and benefits to promote more efficient regulatory choices and outcomes.
Open access
Regulation and Compliance Studies
Health Systems, Economic Evaluations, Quality of Life
The standard of proof in criminal trials in many liberal democracies is proof beyond a reasonable doubt, the BARD standard. It is customary to describe it, when putting a number on it, as requiring that the fact finder be at least 90% certain, after considering the evidence, that the defendant is guilty. Strikingly, no good reason has yet been offered in defense of using that standard. A number of non-consequentialist justifications that aim to support an even higher standard have been offered; all are morally unsound. Meanwhile, consequentialist arguments plausibly support a substantially lower standard â in some cases so low as to undermine the idea that punishment is what is at stake. In this paper, I offer a new retributive justification that supports excluding the instrumental benefits of punishment from the balance that sets the standard. The resulting balance supports a standard arguably in the ballpark of the customary understanding of BARD: a standard requiring that the fact finder have a high, though not maximally high, degree of confidence that the defendant is guilty.
The Information Age has made publishing, distributing and collecting information easier, resulting in the exponential growth of information available to us. Databases were once ledgers written by hand by a single person; today they can be vast stores of data agglomerated from a myriad of disparate sources. The mass media, formerly limited to newspapers and television programs held to strict journalistic standards, has expanded to include collaborative content such as blogs, wikis and message boards. Documents covering Judging of Sources nearly every topic abound on the Internet, but the authors are often anonymous and the accuracy uncertain.
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TABLE OF CONTENTS I. Introduction II. Standards of Proof--An Overview A. The Burden of Proof B. The Role and Types of Standards of Proof C. Previous Empirical Studies 1. Survey Evidence 2. Experimental Studies III. Microsoft v. i4i and Presumption of Validity in Patent Law IV. Methodology and Study Design A. Hypotheses About i4i's Impact B. Why an Experiment? C. Study Design V. Discussion A. Results B. Implications C. Directions for Future Research VI. Conclusion Appendix A Appendix B I. Introduction Our litigation system is based upon assumption that standards of proof matter. (1) They serve instruct factfinder concerning degree of confidence our society thinks he should have in correctness of factual conclusions. (2) The various standards of proof reflect legal system's judgment about proper allocation of risk between litigants, as well as relative importance of issues at stake. (3) For example, in criminal cases where defendant's liberty may be at stake, prosecution carries burden of proving every element of criminal charge beyond a reasonable doubt. (4) In contrast, of a much less stringent standard, is most common in civil cases. (5) The third main standard, and convincing is an intermediate standard employed in civil litigation when the individual interests at stake ... are both 'particularly important' and 'more substantial than mere loss of money.' (6) But despite perceived importance of standards of proof, few empirical studies have tested lay jurors' understanding and application of standards of proof, particularly in civil litigation. (7) Specifically, to our knowledge, there has not been a large-scale study of a demographically representative population comparing jurors' decisions when confronted with two standards of proof used in civil litigation: (1) preponderance of evidence, and (2) clear and convincing (8) Patent law recently presented an opportunity to assess impact of varying standard of proof in civil litigation. Under Section 282 of Patent Act, every claim in a issued U.S. Patent and Trademark Office (USPTO) is presumed to be valid. (9) This same statute also provides that [t]he burden of establishing invalidity of a or any claim thereof shall rest on party asserting such invalidity. (10) However, statute fails to specify standard of proof necessary to overcome this presumption of validity. In a recent case, Microsoft Corp. v. i4i Ltd. Partnership (i4i), U.S. Supreme Court heard competing arguments regarding proper standard of proof for finding a invalid. (11) Microsoft argued that preponderance of evidence standard should apply, at least when USPTO had not considered prior art that allegedly invalidated patent. (12) But Court unanimously affirmed U.S. Court of Appeals for Federal Circuit's (Federal Circuit) longstanding interpretation that invalidity must be proven by clear and convincing evidence. (13) However, Court also held that if party challenging a patent's validity could introduce new evidence in litigation that had not previously been considered USPTO during patent's examination, then the challenger's burden to persuade jury of its invalidity defense clear and convincing evidence may be easier to sus-sustain. (14) In such situations, jury should be instructed that it has heard evidence that [US]PTO had no opportunity to evaluate before granting patent and to consider that fact when determining whether an invalidity defense has been proved clear and convincing evidence. (15) But at same time, Court declined endorse any particular formulation for such an instruction. (16) Both parties in i4i and Court apparently assumed that standard of proof would affect lay jurors' decisions regarding invalidity, at least on margins. âŠ
The optimal stringency of the burden of proof is characterized in a model in which relaxing the proof burden enhances deterrence but also chills desirable behavior. The result are strikingly different from those in prior work that uses a simpler model in which individuals only choose whether to commit a harmful act (so only deterrence is at stake). Moreover, the qualitative differences between the optimal rule and the familiar preponderance of the evidence ruleâand related rules that look to Bayesian posteriorsâare great, much more so than revealed by prior work.
Bankruptcy proceedings tend to involve civil disputes where nothing more than money is at stake. In such instances, the application of the preponderance-of-the-evidence standard of proof offers the greatest utility and is aligned with the comparatively minimal importance society places on purely monetary disputes. However, bankruptcy courts are not viewed as typical civil courts. Rather, many view these courts as âcourts of equityâ and this perception serves as a crutch which many bankruptcy judges use in advocating the application of the clear-and-convincing standard of proof to customary civil disputes. These actions distort the accepted risk allocation schemes implicit in standards of proof; the consequence of which often is inequitable results. A lack of direction by the Supreme Court is a key factor in this process failure. The Court has addressed the application of standards of proof infrequently and, when it has, the holding has been narrowly tailored. In 1990, the Court issued a ruling in Grogan v. Garner, 498 U.S. 279 (1991), that appeared to provide guidance. Unfortunately, as of late, the ruling has been misinterpreted by a number of courts and has led to additional confusion on an issue that was already elusive. In my article, I propose a new, comprehensive normative approach to determine which standard of proof is applicable in disputes involving debtors in possession under the Bankruptcy Code. My approach is based on a coextensive reading of applicable Supreme Court precedent that honors the narrow basis on which many of these rulings are made. I urge use of an approach that will engender greater uniformity on this fundamental issue. Further, I analyze some key forms of relief available under the Bankruptcy Code in which courts have advocated the application of the clear-and-convincing standard of proof but failed to provide any explanation for this action. By applying my approach, I evaluate bankruptcy case law and isolate instances where bankruptcy courts impermissibly distort accepted risk allocation schemes. Finally, I attempt to show that some unexplained applications of the clear-and-convincing standard of proof are justified.
Complex business contracts are notoriously difficult to write and read. Certainly, when litigation arises, courts scarcely have an easy time interpreting them. Indeed, contracts don't look at all as though they are written to tell a court what the parties want. Why can't smart, well-motivated lawyers do a better job? My article argues that they rationally don't try. I argue for a view of contracting in which parties aren't principally trying to set forth an agreement for a court to enforce. Rather, by leaving inartful language and ambiguity in the agreement, parties are bonding themselves not to seek precipitous recourse to litigation. The agreement entered into provides each party with grounds to bring a lawsuit if it so desires. Thus, if one party sues, the other party will virtually always have grounds to countersue. The complex transacting community has a norm against litigation in any event; bonding encourages and bolsters this norm, as well as norms of appropriate conduct throughout the contracting relationship. The contracting process, and the contract that results, thus serves importantly to create the parties' relationship and to set the stage for dispute-resolution consistent with preserving the relationship, as well as to keep available the backstop of enforcement if needed.
Separation of ownership from management, multidivisional firm organizations, delegation of production decisions to worker teams, delegation of pricing and advertising decisions to retail franchisers, reliance on intermediaries in trade or finance, and distribution of regulatory authority across different agencies represent examples of organizations that delegate and distribute decision-making authority instead of centralizing it. This paper reviews literature on costs and benefits of delegated decision making in hierarchical organizations or contracting networks with regard to problems of incentives and coordination. It starts by describing incentive and coordination costs of delegation in simple canonical examples of hierarchies where both information and incentives of different decisionmakers differ. One class of models pertain to contexts where the classical Revelation Principle applies, i.e., where costs of contractual complexity, information processing, or communication are absent, agents do not collude, and the mechanism designer can commit to the mechanism. Delegation may conceivably entail a loss of control and coordination arising from the divergence of information and incentives. Sufficient and necessary conditions for this loss to be mitigated entirely include risk neutrality, top-down contracting, and monitoring of transfers or production assignments between subordinates. The next class of models introduces communication costs that restrict the performance of centralized arrangements relative to delegation owing to a resulting loss of flexibility, which has to be traded off against possible control losses of delegation. Finally, consequences of collusion among agents is discussed, which typically enlarge the range of circumstances under which delegation can attain optimal second-best outcomes. The paper concludes with a discussion of the relevance of this theoretical literature to recently emerging empirical studies of industrial organizations where delegated decision making plays an important role: adoption of innovative human resource management practices, new information technologies and retail franchising.
Here is a fairly straightforward sketch of the theoretical structure of evidence law. Fact-finding involves decision-making under uncertainty,1 that is, in situations where we cannot be absolutely sure of where the truth lies. The best that fact-finders can do, then, is assess the probability of liability. Fact-finding should be conducted rationally, therefore we can think of it as governed by the rules of probability theory.2 These rules provide a framework within which fact-finders should draw on their general experience to assess the probability of the evidence presented and, ultimately, of the facts in issue. Because fact-finders make decisions under uncertainty, evidence law needs to provide rules specifying the degree of certainty required for a verdict. Such rules are termed standards of proof. Standards of proof can only be set by considering what is at stake in a finding of liability, so at this point accounts of the rules governing civil and criminal trials diverge. In civil trials, the basic presumption is one of equality between claimant and defendant: a mistake affecting one side is as serious as a mistake affecting the other. Decision theory can then be used to show that the civil standard of proof should be set at a probability of 0.5, the âbalance of probabilitiesâ, a rule which has the additional merit of minimizing the number of expected fact-finding errors. The presumption of equality does not apply to criminal trials, where the censure involved in a finding of liability, as well as the âhard treatmentâ which frequently follows such a finding, point to a higher standard of proof.3