University of Toronto Law School Faculty Blog

Mutual Misunderstanding in Contract

I have just posted a new paper on SSRN, entitled Mutual Misunderstanding in Contract, which I will be presenting at a conference in Tel Aviv early next week.  The paper is still in draft form, so I particularly welcome comments, questions, or suggestions for improving it.  Here's the abstract:

It is accepted throughout the common law that agreements founded on a mutual misunderstanding are void ab initio. It follows from this that unenforcement is necessary and inevitable; indeed, there is simply no contract to enforce. Curiously, however, in cases involving mutual misunderstanding the parties themselves usually believe and behave as if they have settled upon a knowable and enforceable agreement from the outset. It is typically only sometime later that the mutual misunderstanding between the parties comes to light. In this article I question the wisdom of the widely accepted common law rule surrounding mutual misunderstanding. I present and defend an alternative legal rule that significantly improves upon the efficiency of the results in cases involving mutual misunderstanding. The rule I propose would allow each party to an agreement founded on mutual misunderstanding to have the option to enforce his or her reasonable understanding of the agreement vis-à-vis the other party. This rule can be shown to preserve the reasonable expectations of the parties, promote reliance on promises, and provide implicit insurance against the risk that a mutual misunderstanding will interfere with the realization of expected contractual surplus.

Canadian Law and Economics Association Annual Meeting - Call for Papers

The next Annual Meeting of the Canadian Law and Economics Association will be held on Sept. 26-27, 2008.  As usual, the meeting will be held at the Faculty of Law, University of Toronto.  More details and Call for Papers here.

Collectivizing Rights; Privatizing Taxation: The Unarticulated Function of Copyright Collectives

The recent proposal from the Songwriters Association of Canada to fully legalize peer-to-peer file sharing of music by adding a $5 monthly charge to the cost of Internet access (and similar proposals floating south of the border) has brought renewed attention in the role of levies and tariffs collected by copyright collectives in Canada.  I am now beginning a research project that looks at the broader implications of the expansion of collective administration of copyrights and the use of levies and tariffs.  Since the topic is current, I thought I'd use the blog not only for sharing some of my initial thoughts, but hopefully, to solicit some ideas that will help me to shape them.  Therefore, I'm posting below the description of the project and the questions  it seeks to answer.  Comments on or off the blog will be highly appreciated.  Here it is:

New Articles Available Online: On Competition Law and Intellectual Property, and on Patents and Phramaceuticals Regulation

Two articles of mine have been recently published and are available online.  The first article, published in 49 Arizona Law Review is Making Sense of Nonsense: Intellectual Property, Antitrust, and Market Power.  Here's the abstract:

While the economic rationale for intellectual property ("IP") rights rests on the concepts of "monopoly" or "market power," the U.S. Supreme Court, in Illinois Tool Works v. Independent Ink, has recently joined a "virtual consensus" among antitrust commentators believing that no presumption of market power should exist in antitrust cases involving IP. This Article critically analyzes this consensus, and clarifies the relationship between IP and market power, shows why IP rights often do confer market power in the antitrust sense, but also explains why acknowledging this should not necessarily lead to oversized application of antitrust law to IP.

Is Gender Really More Important than Appointing Prime Minister?

Professors Jame Stribopoulos and Moin Yahya recently published an article in the Osgoode Hall Law Journal entitled, Does a Judge's Party of Appointment or Gender Matter to Case Outcomes? An Empirical Study of the Court of Appeal for Ontario.  The abstract explains:

This study reveals that at least in certain categories of cases, both party of appointment and gender are statistically significant in explaining case outcomes.  Between these two variables, gender actually appears to be the stronger determinant of outcome in certain types of cases.  While these findings are cause for concern, this study also points toward a simple solution.  Diversity in the composition of appeal panels both from the standpoint of gender and party of appointment dampened the statistical influence of either variable.  In other words, in the case of gender, a single judge on a panel who is of the opposite sex from the others, or in the case of political party, a single judge appointed by a different political party, is sufficient to eliminate the potential distorting influence of either variable.  This finding suggests a need to reform how appeal panels are currently assembled in order to ensure political and gender diversity and minimize concerns about the potential for bias.

The methodology adopted by the authors attempted to isolate the influence on appeal outcomes of the gender and party of appointing Prime Minister composition of panels sitting on each case.  Their dataset included all reported judgments of the Court of Appeal from 1990 to 2003, a total of 4,906 cases.  The authors found that in several types of appeals that gender and party of appointment appear to have a significant effect on whether an appeal is likely to succeed.

One of the unanswered questions arising out of this study is the degree of variation in the policy preferences of the individual justices.  A methodology that is well suited to estimating these preferences is one developed by two American political scientists, Andrew Martin and Kevin Quinn.  It involves an item response theory model that is estimated using a Markov Chain Monte Carlo approach.  Stribopoulos and Yahya were kind enough to share their data so that I could estimate the policy preferences of the 40 justices who served on the Court of Appeal during this period with this different approach. 

Here is a summary of the findings:

Judicial Traits	Average Ideal Point
Conservative appointee (n = 18)	-0.131
Liberal appointee (n = 20)	0.237
Male (n = 31)	0.029
Female (n = 9)	0.263
Male Conservative appointee (n = 14)	-0.249
Male Liberal appointee (n = 15)	0.233
Female Conservative appointee (n = 4)	0.280
Female Liberal appointee (n = 5)	0.249

Supreme Court of Canada Justices are Unpredictable -- Mostly, Part II

This is a follow-up to the previous post regarding the paper Andrew Green and I recently posted on SSRN.  The point of this post is to elaborate on the motivation for the paper and summarize our results.

The debate: There is an active debate surrounding the desirability of a more open appointments process for Supreme Court of Canada justices. On the one side of the debate are those militating for more openness, transparency, and public input into the selection of justices for the Court. The argument is that since the decisions of the Court often have such wide-ranging social and economic effects—often not reversible by Parliament or legislatures (other than temporarily through the use of the notwithstanding clause)—there should be a role for democratic input into the selection of justices. Typically the envisioned opening of the process would involve Parliamentary scrutiny and vetting of nominees, with the aim of exposing and testing the policy inclinations of would-be justices. On the other side of the debate are those who fear that Parliamentary involvement in the selection of justices would threaten judicial independence and politicize the selection of justices in ways that the process has avoided in the past. Further, opponents of a Parliamentary process fear that strong candidates that would otherwise be willing to consider an appointment might refuse in order to avoid putting their personal lives before a national audience and to avoid the unpleasantness of aggressive questioning by Parliamentarians who are keen to score political points.

The common assumptions: One of the central assumptions underlying the debate about appointments to the Supreme Court of Canada is that it is possible to know “the policy preferences” or “ideology” of a prospective justice before they are appointed. After all, if Prime Ministers cannot easily determine ex ante how a particular justice is likely to vote in politically divisive appeals, then it would seem that the hopes of those in the first camp of exposing and testing nominees’ political preferences are fanciful. A further assumption is that justices come “pre-loaded” with a certain policy orientation, and that this policy orientation does not (or is unlikely to) change over time.  In other words, there is an assumption that justices will have unwavering, constant policy preferences. This assumption is important because even if a justice’s policy preferences can be known at the time of appointment, this information may be of only short-run relevance if the views of justices are subject to continuous revision, refinement and change.

Tea and oranges that come all the way from China

Had Suzanne heard the news in recent months she'd probably think twice before serving Leonard Cohen tea and oranges that came all the way from China.  With reports about recalled toys, pet food poisoning and the FDA ban on certain imports of seafood from China, there is no exotic romance in such tea and oranges anymore.  No wonder American politicians and government officials step in to protect consumers against such safety dangers.  As Hillary Clinton said "I don't want to eat bad food from China or have my children having toys that are going to get them sick."  Nor do I. 

Remedies and Alternative Contracts

I've posted a new paper on SSRN entitled, Remedies and Alternative Contracts (it's co-authored with Jim Dinning, a recently graduated JD student).  The paper is forthcoming in the American Business Law Journal.  The abstract appears after the break:

Copyright Board's New Ringtone Decision

The Copyright Board issued yesterday its decision certifying SOCAN's Tariff 24 for ringtones.   The Board set a base rate of 6% of the price paid by the subscriber for the ringtone (net of any network usage fees) with a minimum of $0.06 per ringtone.  The main legal controversy before the tribunal was whether the delivery of ringtones is "communication to the public" but I don't want to comment on that here.  Instead, I want to comment on a more fundamental issue, and ask why should the royalties be set by a tribunal at all?  Why wouldn't copyright holders and ringtone suppliers enter into voluntary agreement and decide who should pay and how much?  Ordinarily, prices are determined by the "market".  Why then are these prices set in a strange way in which one seller (SOCAN) proposes prices and then, over a period of three years lawyers, prominent economists and other experts try to convince a tribunal what those prices should be?