Contract and innovation: The limited role of generalist courts in the evolution of novel contractual forms

New York University Law Review

Volumn 88, Issue 1, 2013, Pages 170-215

  Gilson, Ronald J ^a,b   Sabel, Charles F ^a   Scott, Robert E ^a  

^a Och Spine at New York Presbyterian Hospitals   (United States)

^b STANFORD UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

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EID: 84878802312     PISSN: 00287881     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Note

References (136)

1. Beginning with the battle between the titans of contract-Samuel Williston and Arthur Corbin-and continuing to the present, two polar positions have competed for dominance in the interpretation of formal agreements between sophisticated parties. The primary battleground has taken place in generalist courts that are committed to polar interpretive styles: In a textualist regime, and absent ambiguity, generalist courts cannot choose to consider context.
2. We extend to purely private contractual relationships the conception of "contextualizing regimes" that was first used to describe public-private collaborations in Charles F. Sabel & William H. Simon, Contextualizing Regimes: Institutionalization as a Response to the Limits of Interpretation and Policy Engineering, 110 Mich. L. Rev. 1265, 1266 (2012).
3. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
4. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
5. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
6. See, e.g., Agnew v. Lacey Co-Ply, 654 P.2d 712, 715 (Wash. Ct. App. 1982) ("A court may not create a contract for the parties which they did not make themselves. ").
7. The Second Restatement of Contracts has adopted the activist incorporation approach first advanced by the Uniform Commercial Code. See, e.g., Restatement (Second) of Contracts § 204 (1979) (Supplying an Omitted Essential Term).
8. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
9. In this Article, we examine the role of generalist courts in the emergence of innovations in commercial contracting between sophisticated parties. We argue elsewhere that any theory of optimal contract design and interpretation requires a separation of the question of consumer protection-whether a particular contract is exploitive and, in turn, what terms would be reasonable-from the design and interpretation of commercial contracts. Consumer protection is an important goal of public policy, but placing the responsibility for advancing this goal in the hands of generalist courts charged with the task of contract enforcement and interpretation of commercial contracts is a category error. See Ronald J. Gilson, Charles F. Sabel & Robert E. Scott, Text and Context: An Integrated Theory of Contractual Interpretation 48-58 (Mar. 15, 2012) (unpublished manuscript) (on file with the New York University Law Review) (arguing that courts should not uniformly apply standard common law rules of interpretation designed for commercial parties to consumer contracts and exploring alternative approaches).
10. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
11. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
12. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
13. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
14. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
15. See Susan Helper, John Paul MacDuffie & Charles Sabel, Pragmatic Collaborations: Advancing Knowledge While Controlling Opportunism, 9 Indus. & Corp. Change 443, 443-47 (2000) (arguing that firms have increasingly adopted a model of "pragmatic collaborations" to address these challenges).
16. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
17. See Francine Lafontaine & Margaret Slade, Vertical Integration and Firm Boundaries: The Evidence, 45 J. Econ. Lit. 629, 649-50 (2007) (noting that the hold-up problem "clearly pose[s] problems for long-term contracting, and those problems are exacerbated in volatile environments, " and that "when the problems that are associated with transaction costs are important, [transaction costs] models suggest that firms will choose governance structures-including vertical integration or separation-to reduce the likelihood and cost of haggling and exploitation").
18. See, e.g., John Deere & Co. & Stanadyne Corp., Long Term Agreement (Dec. 14, 2001) [hereinafter John Deere/Stanadyne Agreement] (on file with the New York University Law Review) (five-year supply contract for the purchase of fuel filtration systems, injection nozzles, and related products by Deere from Stanadyne).
19. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
20. For detailed discussion of this contract, see Ronald J. Gilson, Charles F. Sabel & Robert E. Scott, Braiding: The Interaction of Formal and Informal Contracting in Theory, Practice, and Doctrine, 110 Colum. L. Rev. 1377, 1405-10 (2010).
21. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
22. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
23. See Nicholas S. Argyres, Janet Bercovitz & Kyle J. Mayer, Complementarity and Evolution of Contractual Provisions: An Empirical Study of IT Services Contracts, 18 Org. Sci. 3, 15 (2007) ("[C]ontractual partners that had a longer history of transacting with oblieach other were more likely to include contingency planning in their contracts. ").
24. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
25. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
26. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
27. The categorization in contract law scholarship of discrete versus relational contract is generally attributable to the work of Ian Macneil. See Ian R. Macneil, The Many Futures of Contracts, 47 S. Cal. L. Rev. 691, 693-96 (1974) (describing the distinction between discrete and relational contracts).
28. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
29. See, e.g., Allstate Ins. Co. & Acxiom Corp., Data Management Outsourcing Agreement art. 2 (Mar. 19, 1999) [hereinafter Allstate/Acxiom Agreement], available at http://contracts.onecle.com/acxiom/allstate.outsource.1999.03.19.shtml (defining thirty-four technical or nonstandard meanings including specialized meanings of "Affiliate, " "Agreement, " "Confidential Information, " "Current Projects, " "Data Integrity, " "End-User, " "Material Default, " "Party, " "Person, " "Problem, " "Term, " "Work Order, " and "Work Product").
30. See, e.g., Allstate Ins. Co. & Acxiom Corp., Data Management Outsourcing Agreement art. 2 (Mar. 19, 1999) [hereinafter Allstate/Acxiom Agreement], available at http://contracts.onecle.com/acxiom/allstate.outsource.1999.03.19.shtml (defining thirty-four technical or nonstandard meanings including specialized meanings of "Affiliate, " "Agreement, " "Confidential Information, " "Current Projects, " "Data Integrity, " "End-User, " "Material Default, " "Party, " "Person, " "Problem, " "Term, " "Work Order, " and "Work Product").
31. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
32. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
33. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
34. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
35. Ronald J. Gilson, Charles F. Sabel, & Robert E. Scott, Contract, Uncertainty, and Innovation, in Rules for Growth: Promoting Innovation and Growth Through Legal Reform 223, 228 (2011) [hereinafter Gilson, Sabel & Scott, Contract, Uncertainty, and Innovation].
36. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
37. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
38. See, e.g., Eli Lilly & Co. v. Emisphere Technologies, Inc., 408 F. Supp. 2d 668, 696-97 (S.D. Ind. 2006) (holding that the contractual remedy for breach of a collaborative agreement is limited to the right to terminate and retain accrued scientific information).
39. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
40. Ronald J. Gilson, Charles F. Sabel, & Robert E. Scott, Contract, Uncertainty, and Innovation, in Rules for Growth: Promoting Innovation and Growth Through Legal Reform 223, 228 (2011) [hereinafter Gilson, Sabel & Scott, Contract, Uncertainty, and Innovation].
41. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
42. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
43. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
44. For examples of the behavioral literature analyzing the crowding out problem, see Iris Bohnet, Bruno S. Frey & Steffen Huck, More Order with Less Law: On Contract Enforcement, Trust, and Crowding, 95 Am. Pol. Sci. Rev. 131, 132 (2001) ("At intermediate levels [of enforcement], honesty is crowded out.
45. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
46. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
47. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
48. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
49. See Alan Schwartz & Robert E. Scott, Precontractual Liability and Preliminary Agreements, 120 Harv. L. Rev. 661, 665-66, 680-82 (2007) ("Preliminary agreements thus commonly are exploratory.
50. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
51. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
52. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
53. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
54. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
55. Generalist courts can err in several different ways. They can, for example, interpret formal terms that are intended merely to supplement the underlying context (including the default rules of contract such as the doctrine of excuse) as trumping the context and its defaults. See, e.g., Publicker Indus., Inc. v. Union Carbide Corp., 17 U.C.C. Rep. 989, 992 (E.D. Pa. 1975) (concluding that while "the contract contemplated that foreseeable cost increases would be passed on to the buyer, " its inclusion of "a specific provision which put a ceiling on contract price increases resulting from [cost increases] impels the conclusion that the parties intended" for the seller to bear "the risk of a substantial and unforeseen rise in cost[s]").
56. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
57. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
58. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
59. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
60. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
61. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
62. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
63. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
64. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
65. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
66. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
67. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
68. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
69. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
70. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
71. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
72. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
73. For a further example of a court declining to impose legal sanctions to enforce a preliminary agreement in the absence of evidence of opportunism, see Kandel v. Ctr. for Urological Treatment & Research, P.C., No. M2000-02128-COA-R3-CV, 2002 WL 598567, at *7-8 (Tenn. Ct. App. Apr. 17, 2002), which held that a defendant physician's group did not breach its duty to negotiate in good faith with the plaintiff over an agreement to purchase stock.
74. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
75. See, e.g., Venture Assocs. Corp., 96 F.3d at 278 (noting that expectation damages may be available in proper cases).
76. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
77. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
78. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
79. To be sure, one might argue that in a low-uncertainty, multilateral environment, generalist courts can entertain evidence from the disputing parties as to the common practice or trade. But the problem is that in modern heterogeneous economies, trade practices are both complex and widely varied across industry groups. Some parties may, for example, wish to separate the legal norms that govern their written agreement from the informal norms that govern their actions. Under these circumstances, courts err if they permit the evidence of common practice to trump the formal terms of the agreement. Moreover, the available evidence suggests that courts, perhaps mindful of the risks, generally do not undertake careful evidentiary hearings to determine the precise nature of the relevant context in a contractual dispute. See Robert E. Scott, The Uniformity Norm in Commercial Law: A Comparative Analysis of Common Law and Code Methodologies, in The Jurisprudential Foundations of Commercial and Corporate Law 149, 166-67 & n.68 (Jody S. Kraus & Steven D. Walt eds., 2000).
80. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
81. Lisa Bernstein, Private Commercial Law in the Cotton Industry: Creating Cooperation Through Rules, Norms, and Institutions, 99 Mich. L. Rev. 1724, 1749-54 (2001) [hereinafter Bernstein, Cotton]. For discussion of analogous multilateral regimes.
82. Lisa Bernstein, Merchant Law in a Merchant Court: Rethinking the Code's Search for Immanent Business Norms, 144 U. Pa. L. Rev. 1765, 1771-77 (1996) (discussing rules of the National Grain and Feed Association, which requires that all disputes among members must be submitted to the Association's arbitration system).
83. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
84. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
85. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
86. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
87. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
88. Ronald J. Gilson, Charles F. Sabel, & Robert E. Scott, Contract, Uncertainty, and Innovation, in Rules for Growth: Promoting Innovation and Growth Through Legal Reform 223, 228 (2011) [hereinafter Gilson, Sabel & Scott, Contract, Uncertainty, and Innovation].
89. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
90. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
91. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
92. Ronald J. Gilson, Charles F. Sabel, & Robert E. Scott, Contract, Uncertainty, and Innovation, in Rules for Growth: Promoting Innovation and Growth Through Legal Reform 223, 228 (2011) [hereinafter Gilson, Sabel & Scott, Contract, Uncertainty, and Innovation].
93. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
94. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
95. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
96. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
97. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
98. See Cotton States Arbitration Rules, Am. Cotton Shippers Ass'n, http://www.acsacotton. org/rules-and-policies/smr-cotton-states-arbitration-rules (last visited Feb. 13, 2013) ("Rule 15: The basis of all arbitrations for grade and/or staple shall be the Official Universal Cotton Standards of the United States Department of Agriculture for grade and/ or the Official Cotton Standards of the United States Department of Agriculture for length of staple.").
99. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
100. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
101. The fast-track process is a "method of construction by which actual construction is commenced prior to the completion of all design, planning, bidding and subcontracting stages in order to alleviate the effects of inflation. " Meathe v. State Univ. Constr. Fund, 410 N.Y.S.2d 702, 703 (App. Div. 1978).
102. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
103. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
104. Scale also matters with respect to designating the forum that will adjudicate disputes concerning the performance of a contract. Analogous to form contracts, scale will support specialized forums that will have the experience and expertise to understand and apply the relevant context. Out of this testing process, a set of standardized terms emerges that collectively reduces the risk of writing construction contracts. Cf. Victor G. Trapasso, The Lawyer's Use of AIA Construction Contracts, Prac. Law., May 1973, at 37 (advising attorneys to "be aware of the wide acceptance of AIA form instruments by the construction industry").
105. By choosing arbitration, parties are able to select decisionmakers who have expertise in the relevant industry. This is likely to result in more accurate outcomes and, thus, is especially important with regard to novel contractual forms. See Christopher R. Drahozal & Keith N. Hylton, The Economics of Litigation and Arbitration: An Application to Franchise Contracts, 32 J. Legal Stud. 549, 558-61 (2003) (suggesting that parties are more likely to leave contract terms vague when they trust a decisionmaker to fill the gaps).
106. See, e.g., Ronald J. Gilson & Jeffrey N. Gordon, Controlling Controlling Shareholders, 152 U. Pa. L. Rev. 785, 803-04 (2003) (describing the Delaware Court of Chancery's preference in freeze-out merger cases for applying fairness review processes over determining the value of minority shares).
107. See Michael Klausner, Corporations, Corporate Law and Networks of Contracts, 81 Va. L. Rev. 757, 761 (1995) (describing how independent but parallel actions of parties create network effects).
108. That the Delaware court is one of equity has an additional advantage: There are no juries in a court of equity. A lay jury as the trier of fact is a significant independent source of potential error in complex commercial cases.
109. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
110. In the United States, the internal affairs doctrine dictates that the law of the state of incorporation governs the corporation's internal affairs, including the scope and application of fiduciary duties. Jesse H. Choper, John C. Coffee, Jr. & Ronald J. Gilson, Cases and Materials on Corporations 233-34 (7th ed. 2008).
111. William T. Allen, Reinier Kraakman & Guhan Subramanian, Commentaries and Cases on the Law of Business Organizations 92 (3d ed. 2009) ("The typical corporation statute of today, such as [Delaware's], is a nonregulatory, 'enabling' statute. ").
112. See Frank H. Easterbrook & Daniel R. Fischel, The Economic Structure of Corporate Law 204 (1991) ("[F]irms go public in easy-to-acquire form: no poison pill securities, no supermajority rules or staggered boards. Defensive measures are added later, a sequence that reveals much. ").
113. See, e.g., Leo E. Strine, Jr., If Corporate Action Is Lawful, Presumably There Are Circumstances in Which It Is Equitable to Take That Action: The Implicit Corollary to the Rule of Schnell v. Chris-Craft, 60 Bus. Law. 877, 879-80 (2005) (arguing that Delaware addresses managerial exploitation by equitable standards, not legal rules).
114. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
115. For example, in Lisa Bernstein's description of the role of the International Cotton Advisory Committee in the cotton industry, industry-specified context operates to avoid conflict in periods of low uncertainty.
116. This account of the Delaware Court of Chancery as a contextualizing regime does not address a destabilizing element that is peculiar to corporate law. Much corporate law fiduciary litigation is brought by plaintiffs' lawyers representing shareholders generally, rather than reflecting disagreements between corporations. Because plaintiffs' lawyers can bring such cases in states other than Delaware even though Delaware corporate law and precedent applies, the Delaware Court of Chancery can be avoided in cases where its knowledge and experience would be particularly useful. Early empirical studies suggest that this phenomenon may be significant. See John Armour, Bernard Black & Brian Cheffins, Is Delaware Losing Its Cases?, 9 J. Empirical Legal Stud. 605, 624-25 (2012) (citing the growth of important corporate cases filed outside of Delaware). We now may be observing the early stages of a round of parallel activity to sustain a working contextualizing regime through the adoption of amendments to the corporation's charter that require fiduciary litigation to be tried in the Court of Chancery.
117. See Joseph A. Grundfest, The History and Evolution of Intra-corporate Forum Selection Clauses: An Empirical Analysis, 37 Del. J. Corp. L. (forthcoming 2012), available at http://ssrn.com/abstract=2042758 (discussing suits "challenging the adoption of forum selection clauses in bylaw provisions without prior shareholder approval").
118. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
119. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
120. Ronald J. Gilson, Charles F. Sabel, & Robert E. Scott, Contract, Uncertainty, and Innovation, in Rules for Growth: Promoting Innovation and Growth Through Legal Reform 223, 228 (2011) [hereinafter Gilson, Sabel & Scott, Contract, Uncertainty, and Innovation].
121. See Food-Trade Network Vulnerable to Fast Spread of Contaminants, Science Daily. com (June 7, 2012), http://www.sciencedaily.com/releases/2012/06/120607180241. htm (discussing the international food-trade network's vulnerability to fast-spreading contaminants).
122. State of Cal. Dep't of Food & Agric., California Leafy Green Products Handler Marketing Agreement (effective as amended Mar. 5, 2008) [hereinafter California Marketing Agreement], available at http://www.cdfa.ca.gov/mkt/mkt/pdf/CA%20Leafy% 20Green%20Products%20Handler%20Agreement.pdf.
123. See generally Julie Schmit, All Bacteria May Not Come Out in the Wash, USA Today, Oct. 5, 2006, at 1B, available at http://www.usatoday.com/money/industries/food/ 2006-10-04-spinach-wash-usat_x.htm (discussing the 2006 outbreak and the special concerns associated with eating raw spinach).
124. See, e.g., 21 U.S.C. §§ 342(a)(1), 601(m)(4) (2006) (prohibiting the sale of food that is "injurious to health").
125. Benjamin Kaplan, Prefatory Note, "The Class Action-A Symposium, " 10 B.C. Indus. & Com. L. Rev. 497, 497 (1969) (expressing the views of the Advisory Committee's Reporter).
126. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
127. See U.S.D.A. Agric. Mktg. Serv., Justification of Proposed Federal Marketing Agreement for Leafy Green Vegetables, http://www.ams.usda.gov/AMSv1.0/getfile?dDoc Name=STELPRDC5077207.
128. See generally Varun Shekhar, Produce Exceptionalism: Examining the Leafy Greens Marketing Agreement and Its Ability to Improve Food Safety, 6 J. Food L. & Pol'y 267 (2010) (evaluating the benefits and weaknesses of the LGMA in ensuring food safety).
129. The LGMA is governed by a thirteen-member board. Board members are chosen by the state Secretary of Agriculture from nominations by the membership. Between seven and twelve members must be representatives of the handler-members of the organization.
130. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
131. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
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133. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
134. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
135. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).
136. Stephen C. Yeazell, Brown, The Civil Rights Movement, and the Silent Litigation Revolution, 57 Vand. L. Rev. 1975, 1977-85 (2004).