Pace International Law Review

Volume 21 Issue 1 Winter 2009 Article 1

January 2009

Beyond the Four Corners of a Written Contract: A Global Challenge to U.S. Contract Law

Chunlin Leonhard

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Recommended Citation Chunlin Leonhard, Beyond the Four Corners of a Written Contract: A Global Challenge to U.S. Contract Law, 21 Pace Int'l L. Rev. 1 (2009) Available at: https://digitalcommons.pace.edu/pilr/vol21/iss1/1

This Article is brought to you for free and open access by the School of Law at DigitalCommons@Pace. It has been accepted for inclusion in Pace International Law Review by an authorized administrator of DigitalCommons@Pace. For more information, please contact [email protected]. 26570_pir_21-1 Sheet No. 7 Side A 04/08/2009 15:17:04 1 , 27 J. 6-APR-09 12:15 Winter 2009 Seq: 1 Seq: 1 unknown 1 ARTICLES Chunlin Leonhard Contract in the Age of Sustainable Consumption U.S. CONTRACT LAW SCHOOL OF LAW OF SCHOOL PACE UNIVERSITY PACE A GLOBAL CHALLENGE TO A GLOBAL CHALLENGE OF A WRITTEN CONTRACT: OF A WRITTEN BEYOND THE FOUR CORNERS BEYOND THE Brooke Overby, This article has benefited tremendously from discussions at the April 27, This article has benefited tremendously 2 “. . . [A] great deal of American contract law and scholarship “. . . [A] great deal of American 2 1 . L. 603, 605 (2002). INTERNATIONAL LAW REVIEW INTERNATIONAL LAW ORP M K C now seems to proceed from a perspective of universalism.now seems to proceed from a perspective Ameri- tacitly, that domestic theories can universalism assumes, often are valid not only across the in contemporary American debate world, but throughout time.assumption is In other words, the transculturally and objectively made that such theories are valid true.” Volume XXI, Number I Volume XXI, Number \\server05\productn\P\PIR\21-1\PIR101.txt 2007 Conference of Asian Pacific American Law Faculty held at William Mitchell 2007 Conference of Asian Pacific American discussions with Professors Ilhyung School of Law, including, without limitation, S. Kim of California Western School of Lee of University of Missouri and Nancy Law. University School of Law in Chicago for I am grateful to the faculty of Loyola their support and encouragement. In particular, I want to thank Loyola Univer- Ho, Margaret Moses, Gregory Shaffer, sity Professors Michael Kaufman, Cynthia and Spencer Waller for commenting on the earlier drafts of this paper. I am also grateful to Janice Collins, a law librarian at Sonnenschein, Nath & Rosenthal, LLP, for her generous research assistance. All mistakes are mine. C Y 26570_pir_21-1 Sheet No. 7 Side A 04/08/2009 15:17:04 A 04/08/2009 7 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 7 Side B 04/08/2009 15:17:04 2 M K . C Y EV , http:// Rely- L. 427 Equity’s . L. R L ’ 6 . 805, 808 [Vol. 21:1 EB NT EV 6-APR-09 12:15 . 1051, 1061-69 . J. I , 84 N U.S. contract EV A 7 . U. L. R Hence, in a U.S. W 8 . L. R , 41 V Seq: 2 Seq: AL Rethinking the Role of Law , 94 N , 88 C Because of those basic as- Because of those . 579, 590 (2003); Melvin A. Eisen- . 265, 329 (1999). 5 EV EV unknown . L. R . L. R AL . 889, 897 (1997). NG Law and Behavioral Science: Removing the Ra- Law and Behavioral Science: Removing EV E NTRODUCTION note 4, at 1061-69; Larry A. DiMatteo, note 4, at 1061-69; Larry A. DiMatteo, I A Commitment to Pluralism: Introduction , 91 C EW A simplified summary of the basic as- A simplified summary Philip J. McConnaughay, 4 . L. R The Relevance of Race and Disparity in Discussion of The Relevance of Race and Disparity in supra NG , 33 N Evolving Business and Social Norms and Interpretation PACE INT’L L. REV. E Tongue-Tied in the Market: The Relevance of Contract Law EW see also note 4, at 590-91. 3 , 31 N supra Lim, Nancy S. Kim, As pointed out by many scholars, U.S. contract law has made some progress The Power of Culture, R. Korobkin & T.S. Ulen, Korobkin & Ulen, Why There is No Law of Relational Contracts “We should not only tolerate cultural differences (between cultural not only tolerate “We should of certain es- has developed on the basis U.S. contract law 6 7 8 4 5 3 (2000); Julian S. Lim, Modification of Contract: An Analysis of the Twentieth Century’s Equitable Refor- mation of Contract Law and Contracts in East-West Commercial Relationships www.powerofculture.nl/uk/archive/report/chapter2_intro.html (last visited Feb. www.powerofculture.nl/uk/archive/report/chapter2_intro.html 24, 2009). this statement, I do not mean to suggest that all cultural By quoting or should be respected.values or differences are worth preserving However, it is be worth preserving.fair to say that some cultural values may a This is certainly very controversial topic. I simply mean to include cultural differences which have aside all the philosophical inquiries one a positive impact on human life, leaving can engage on that topic. tionality Assumption from Law and Economics Contract Law to Racial-Language Minorities 506, 508-09 (2005); Rules: The Need for a Dynamic Approach to Contract Disputes ethnic groups, countries or religions), we should, in fact, wel- we should, in or religions), countries ethnic groups, come them.” sumptions underlying U.S. contract law is that rational and U.S. contract law is that sumptions underlying on their own will drive a hard bargain well informed parties agreement own best interests and the resulting behalf for their will of the parties. reflects the free sential assumptions such as freedom of contract, autonomy and such as freedom of contract, sential assumptions liberal individualism. 2 \\server05\productn\P\PIR\21-1\PIR101.txt sumptions, U.S. contract law primarily concerns itself with only contract law primarily concerns sumptions, U.S. parties. bargain reached by the protecting the resulting law essentially casts a magic shield around the written contract law essentially casts a magic shield intent. as a true embodiment of the parties’ and evolved away from its rigid classical paradigm, to allow equitable considera- (2000); Blake D. Morant, ing on a set of well entrenched contract interpretation and con- ing on a set of well entrenched will generally refuse to look struction principles, U.S. courts written contract. beyond the four corners of the (2001). berg, https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 7 Side B 04/08/2009 15:17:04 B 04/08/2009 7 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 8 Side A 04/08/2009 15:17:04 3 3 11 infra supra Are Chinese 6-APR-09 12:15 discussion See Seq: 3 Seq: L. 105, 106-07 (2006). The L ’ NT They do not “travel well” They do . J. I 10 note 4 (examining this issue primarily HI unknown 5 (2005). I am borrowing this “traveling” supra , 7 C ONTEXT C Lim, IN Have Concepts, Will Travel: Analytical Jurisprudence in Have Concepts, Will Travel: Analytical J. L. different cultures are interacting with each different cultures L ’ 12 NT This paper describes the cultural differences This paper describes note 7, at 531-32. see generally 9 13 , 1 I supra A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL This paper focuses on the cultural differences between China and the U.S. This paper focuses on the cultural differences Cromeens, Holloman, Siber, Inc. v. AB Volvo, 349 F.3d 376, 395-96 (7th Cir. Cromeens, Holloman, Siber, Inc. v. AB Volvo, Kim, William Twining, that the word “globalization” A review of the globalization debate shows U.S. contract law’s underlying assumptions reflect the core reflect the assumptions law’s underlying U.S. contract This article uses the Chinese culture as an example to the Chinese culture as an This article uses 9 13 10 11 12 M K Companies Taking Over the World? from the language/race perspective). a Global Context values of the Anglo-American traditions of the dominant west- of the dominant traditions the Anglo-American values of States. in the United ern culture note 7, at 532-36; Part III. Id. tions in certain limited situations. As discussed later in this paper, the limited present in a cross cultural busi- progress is insufficient to remedy the inequities paper is concerned. ness to business context with which this 2009] contract] [of a written to “enforce terms party is entitled court, a to the letter.” with drastically different traditions.across cultures In this age of globalization, \\server05\productn\P\PIR\21-1\PIR101.txt other economically and otherwise in unprecedented ways. and otherwise in unprecedented other economically The to the subprime market turmoil related recent world financial United States, which originated in the mortgage loan problems, many coun- reminder of how interdependent is merely another tries have become. adapt to a global need for U.S. contract law to demonstrate the environment. because of the importance and increasing volume of China’s trade with the U.S. because of the importance and increasing Business contacts between China and the United States have increased dramati- cally over the last two decades and will continue to do so. China has experienced spectacular growth of foreign trade. Malish, Mitchell Silk & Richard 2004). has become a term of art. Its definition varies depending on who is talking. this In neutrally to describe the reality of a article, I am using the word “globalization” of high speed internet and other technolo- shrinking globe as a result of the advent both digitally and physically. gies and the ease of moving around globally that impact contracting behavior in the commercial business that impact contracting behavior between the United States context in cross border transactions concept from Professor William Twining, Quain Professor of Jurisprudence Emeri- concept from Professor William Twining, tus, University College London. Professor Twining discussed concepts that “travel relatively well or badly” in his article.in this I use the phrase “traveling well” also applicable equitably and efficiently. context to mean not only applicable, but problems raised by this paper also face peoples from other countries and regions and among immigrant residents and citizens of the United States. Kim, C Y 26570_pir_21-1 Sheet No. 8 Side A 04/08/2009 15:17:04 A 04/08/2009 8 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 8 Side B 04/08/2009 15:17:04 4 M K C Y [Vol. 21:1 6-APR-09 12:15 Seq: 4 Seq: unknown PACE INT’L L. REV. and they have different understandings regarding understandings have different and they 14 The United States today has become a very pluralistic society. By using the The following example illustrates the serious consequences illustrates the serious The following example 14 the significance of written contracts. of written the significance written agree- As a result, reflect the do not often Chinese parties U.S. and ments between parties.true intent of the written con- Therefore, interpreting law and en- the colored lenses of U.S. contract tracts through of the parties’ contracts in total disregard forcing those written to a party from may be unfairly detrimental cultural differences culture. a drastically different Chinese company misunderstandings on a of culturally induced with a U.S. com- into a contractual relationship when it enters pany. U.S. global competition, a multinational Driven by fierce manufacture and to China to find a partner to company went (“widgets”) under the U.S. design consumer electronics products company’s brand. initial The U.S. company wanted to avoid the the manufacturing and to take extensive capital investment for in Asia.advantage of the low design costs It chose a successful which had a demon- Chinese electronics widgets manufacturer strated design capacity. over During the numerous meetings the U.S. company’s representa- the telephone and face to face, long term business partner.tives orally promised to be a It that the relationship would promised the Chinese company as the first phase.start with contract manufacturing Eventu- also use the Chinese company to ally, the U.S. company would company.design the widgets for the U.S. The U.S. company to manufacture the widgets ex- also asked the Chinese company clusively for the U.S. company. com- In return for the Chinese the U.S. company’s pany’s exclusivity commitment, that it would purchase large representatives orally promised the long term from the Chinese quantities of the widgets over buy widgets designed by the company and eventually, it would Chinese company. 4 and China.research has demonstrated scholarly Extensive values as same cultural share the Chinese do not that the Americans \\server05\productn\P\PIR\21-1\PIR101.txt phrase “American culture,” I do not mean to ignore the cultural diversity in this country. in For the sake of brevity, however, the term “American culture” as used this article refers to dominant culture which derives from the Anglo-Saxon tradition. https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 8 Side B 04/08/2009 15:17:04 B 04/08/2009 8 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 9 Side A 04/08/2009 15:17:04 5 5 6-APR-09 12:15 Seq: 5 Seq: unknown A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL The U.S. company presented the Chinese company with a company with the Chinese company presented The U.S. Chinese company pointed In their negotiation sessions the substantially expanded its The Chinese company then M K 40 page, single spaced agreement in English drafted by the U.S. drafted by in English single spaced agreement 40 page, attorneys.company’s the Chinese stated that The agreement for the exclusively widgets agreed to manufacture company U.S. company.contract term that the agreement specified The terminate for any and the U.S. company could was three years six months notice.reason by providing The agreement set forth company would quantity of widgets the U.S. the minimum the Chinese company.purchase from agreement did not The relationship. about the design phase of the contain any terms It merger clause.contained a standard addition, the agree- In and the relation- the parties were not partners ment stated that between the rise to a fiduciary relationship ship did not give parties. governing chose a U.S. state law as the The agreement law. in the agreement were not what out that the terms as set forth they had orally agreed upon. The U.S. company’s representa- not to worry about those terms. tives told the Chinese company was required by their legal de- They said that the agreement put away and promptly forgot- partment and that it would be ten.Despite these inconsistencies, the Chinese company as drafted by the U.S. essentially signed the agreement company. with its understanding of the manufacturing capacity to comply agreement with the U.S. company. It hired and trained to prepare for the manu- thousands of employees and engineers widgets.facturing and the design of the Soon after the relation- having disputes.ship began, the parties began two Barely the U.S. company termi- years after the relationship began, the contractually required six nated the agreement by providing months notice. The Chinese company protested vehemently, but to no avail. Chi- After struggling for a few more years, the nese company went out of business. The Chinese company was financially healthy at the beginning of the relationship. It em- ployed over 10,000 employees at its height. The Chinese com- a pany’s downfall was due to the financial difficulties caused to in- large extent by its extensive capital and human resources vestment in the manufacturing facility for the U.S. company. 2009] \\server05\productn\P\PIR\21-1\PIR101.txt C Y 26570_pir_21-1 Sheet No. 9 Side A 04/08/2009 15:17:04 A 04/08/2009 9 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 9 Side B 04/08/2009 15:17:04 6 M K C Y Part I [Vol. 21:1 15 6-APR-09 12:15 promises were made what Seq: 6 Seq: unknown PACE INT’L L. REV. This paper does not challenge the fundamental notion that promises should This paper explores the impact of cultural differences on differences impact of cultural explores the This paper Part IV sets forth some arguments in support of a need for Part IV sets forth some arguments 15 and should be enforced. 6 invest- recoup its initial had hoped to company The Chinese partnership. long term the promised ment through contracting behavior.Chinese has argues that globalization It should U.S. contract law challenges that a new set of presented address. phenome- that, in light of the globalization It proposes by U.S. con- afforded to written contracts non, the reverence context. be justified in cross-cultural tract law may not \\server05\productn\P\PIR\21-1\PIR101.txt be kept, a belief shared by both Chinese and western cultures. Rather, it chal- lenges the U.S. contract law doctrines used to ascertain briefly discusses the major cultural, social and legal differences the major cultural, social and briefly discusses differences im- and United States and how those between China behavior.pact contracting discusses selected ex- Part II briefly and how their U.S. contract law doctrines amples of major favors U.S. com- cultural contracts unfairly application to cross power. the party with more bargaining panies, typically Part which allow for existing contract doctrines III discusses certain context and why they are in- equitable considerations in limited in cross cultural business-to- sufficient to address the inequities business contracts. domestic contract law in light of the United States to adapt its the globalization phenomenon. cur- Part V briefly summarizes proposals to accommodate cul- rent academic discussions and law.tural differences in contract to Finally, as an attempt debate on this issue, Part V pro- generate continuing academic approach to acknowledge the poses a culturally differentiated contracting behavior.impact of cultural differences on ap- This permit introduction of cultural proach calls for U.S. courts to akin to a cultural defense evidence as a threshold requirement, initial step.in the criminal law context as an Once a party sus- contract doctrines of construc- tains the burden, the traditional the parol evidence rule would tion and interpretation such as be allowed to introduce all rele- not apply and the party would of its contract, as the parties vant evidence to prove the terms truly intended. https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 9 Side B 04/08/2009 15:17:04 B 04/08/2009 9 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 10 Side A 04/08/2009 15:17:04 7 . 7 US In , 15 B L 16 ’ NT 6-APR-09 12:15 , 37 J. I IFFERENCE 17 . L.J. 459, 477 (2003). HINA AND THE D US C Seq: 7 Seq: . B M A high context culture AKE A 18 , 40 A M ONTRACTS ETWEEN The American and the Chi- C The Mountains Are High and the Em- B HEY 20 unknown The Chinese focus on T 21 HY W EGARD TO R IFFERENCES Tension and Trust in International Business Negotia- Convergence, Culture and Contract Law in China Convergence, Culture and Contract Law D ITH W AJOR TATES AND S L. 329, 373 (2006). L ’ A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL I. M NT NITED The American culture is highly individualistic while the The American culture is highly Patricia Pattison & Daniel Herron, John H. Matheson, Kam-hon Lee et al., Id. Id. Id. U ART Chinese contract law also has some major philosophical dif- law also has some major philosophical Chinese contract Chinese and American cul- Extensive research shows that This section briefly reviews the major cultural and legal dif- and legal the major cultural briefly reviews This section . J. I 19 . 623, 624 (2006). P 16 17 18 19 20 21 INN TUD M K M peror Is Far Away: Sanctity of Contract in China peror Is Far Away: Sanctity of Contract tions: with Chinese Executives American Executives Negotiating ferences from U.S. contract law.ferences from U.S. legal system is The Chinese the U.S. legal system.very different from All of these differ- behav- create a context for Chinese contracting ences combined from the context assumed by ior that is significantly different U.S. contract law. tural values are different. Ameri- Researchers have classified “as a low-context culture and can Anglo-saxon oriented culture the Chinese as a high-context culture.” ferences between China and the United States that are relevant States that are and the United between China ferences toward contracts.to Chinese attitudes The Chinese culture has over thousands of years.been developed It has been primarily Lao Tzu. philosophers: Confucius and shaped by two major Chinese culture is collectivistic. “maintaining long-term, harmonious personal relationships” “maintaining long-term, harmonious interested in “information, objec- while the Americans are more Chinese Culture is Substantially Different from the Anglo Chinese Culture is Substantially American Culture. 2009] \\server05\productn\P\PIR\21-1\PIR101.txt nese cultures practically lie at opposite ends of the individual- nese cultures practically lie at ism/collectivism spectrum. places strong emphasis on social context and traditional val- places strong emphasis on social ues. addition, the Chinese communism ideology has strongly influ- communism ideology has addition, the Chinese mainland Chinese thinking. enced the modern S C Y 26570_pir_21-1 Sheet No. 10 Side A 04/08/2009 15:17:04 A 04/08/2009 10 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 10 Side B 04/08/2009 15:17:04 8 M K . C Y , 17 UFF 31 Toward Rela- , 2 B . 237, 265- 32 [Vol. 21:1 J. 244, 270 EV Y ’ “He pro- 6-APR-09 12:15 OL 26 L. R L ’ NT I . L. & P Joseph W. Dellapenna, AC Seq: 8 Seq: -P The Confucius tradi- MORY 30 see also Confucius’ goals were to Confucius’ goals SIAN , 11 E note 25, at 1160. 25 He has influenced the Chi- He has influenced , 7 A 24 supra unknown The Chinese culture therefore culture The Chinese note 25, at 254. 22 Taming a 5,000 Year-Old Dragon: Toward a Taming a 5,000 Year-Old Dragon: Toward L. 1145, 1153 (2005); Albert H.Y. Chen, L. 1145, 1153 (2005); Albert H.Y. Chen, note 16, at 478; note 16, at 479. note 16, at 478. note 16, at 478. supra L ’ NT supra supra supra supra Transitions in Chinese Law: A Short History of Law, Transitions in Chinese Law: A Short . J. I PACE INT’L L. REV. EO Windrow, These virtues established a complicated moral These virtues established 23 note 25, at 130; Zhu, 27 see L. J. 125, 129-30 (1999/2000). “When all people remain within their established “When all people remain within A Case Study of Legal Transplant: The Possibility of Efficient A Case Study of Legal Transplant: The , 36 G Moreover, the Confucian tradition created a society Moreover, the Confucian tradition 29 ASIN supra 28 . B at 479; at 130. . AC . L. 231, 235-37 (1996). Id. Pattison & Herron, Id. Chen, Pattison & Herron, Id. Pattison & Herron, Id Robert M. LaKritz, Comment, Pattison & Herron, Hayden Windrow, L ’ This rigid social hierarchy results in the basic notion that This rigid social hierarchy results Confucius (551-479 B.C.E) “has the greatest impact on Chi- B.C.E) “has the greatest impact Confucius (551-479 26 27 28 29 30 31 32 22 23 24 25 NT a Legal Enlightenment: Discussions in Contemporary China on the Rule of Law a Legal Enlightenment: Discussions in Contemporary 66 (1997). Breach in China UCLA P Norms and Social Control in Imperial China Theory of Legal Development in Post Mao China Theory of Legal Development in Post Mao where each person’s role is relative and comparative to an- where each person’s role is relative other’s role. relationships are the foundation of a Chinese society. relationships are the foundation nese culture and business today.” nese culture and code which resulted in an autocratic and hierarchical social in an autocratic and hierarchical code which resulted structure. The Role of Legal Rhetoric in the Failure of Democratic Change in China The Role of Legal Rhetoric in the Failure 8 competitiveness.” tivity, and \\server05\productn\P\PIR\21-1\PIR101.txt tionships connect individuals, family groups, and friends to tionships connect individuals, roles . . . the rule of man is sufficient.” tion thus has taught the Chinese that the rule of law becomes tion thus has taught the Chinese deviate from their roles. necessary only when individuals does not share the Anglo-American values of individuality, au- of individuality, values share the Anglo-American does not par- among market and equality freedom of association tonomy, are law principles which U.S. contract values upon ticipants, based. primarily nese society since the second century, when his philosophy the second century, when nese society since state philosophy. became the official implement peace, order and stability into society.implement peace, Confucius harmony rather than justice. emphasized social moted a philosophy of virtue, ethics, emphasizing . . . duty, loy- of virtue, ethics, emphasizing moted a philosophy respect for age piety, kindness, sincerity, and alty, honor, filial and seniority.” J. I (2006); Ni Zhu, https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 10 Side B 04/08/2009 15:17:04 B 04/08/2009 10 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 11 Side A 04/08/2009 15:17:04 9 9 34 . L. OMP & C L ’ 6-APR-09 12:15 43 (Martinus NT . I ”]. . 173, 179 (1999). ND AW RACTICE EV L P Seq: 9 Seq: , 13 I L. R ONTRACT RAKE C HEORY AND : T 35 , 48 D Lao Tzu’s philosophy (Taoism) philosophy Lao Tzu’s unknown AW HINESE L 36 Communism focuses on promoting Communism focuses note 16, at 486. note 16, at 479-82. 39 ONTRACT C supra supra When the Chinese Communist Party took When the Chinese Therefore, both Confucianism and Taoism Therefore, both 38 40 37 note 17, at 373. The Evolution and International Convergence of the Doc- 42 HINESE supra note 25, at 1151-52. , C The group is more important than individuals. is more important The group Entering the Chinese Legal Market: A Guide for American Law- As a result of Communism and the influence of As a result of Communism and 33 41 HANG supra A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL Z at 481. O Id. Id. Matheson, Robert Bejesky, M Pattison & Herron, Id. Yujie Gu, Zhu, Pattison & Herron, The Chinese legal system and its contract law approach in The Chinese legal system and The mid-twentieth century saw China adopt the ideology of century saw China adopt the The mid-twentieth Lao Tzu, another Chinese philosopher, also had a profound philosopher, another Chinese Lao Tzu, 37 38 39 40 41 42 33 34 35 36 . 353, 380 (2003). EV M K Nijhoff Publishers 2006) [hereinafter “C yers Interested in Practicing Law in China trine of Specific Performance in Three Types of States view law negatively. over control of the country in 1949, it abolished private property over control of the country in 1949, ownership. the above philosophies, the Chinese continue to focus on group the above philosophies, the Chinese individual achievement or per- actions and roles rather than on sonal ownership. particular are also different from those in the United States. particular are also different from contract law approach and its These differences in the Chinese Chinese contracting behavior. legal system have also affected Karl Marx and communism.Karl Marx and its proclaimed Ironically, despite feudalistic tra- which represents China’s rejection of everything the Confucian Communist Party continues ditions, the Chinese focus on the community. influence on Chinese culture. influence Legal Differences between China and the United States. Legal Differences between China 2009] each other. code, the social system internalizes these roles, this Through society. a self-regulating creating \\server05\productn\P\PIR\21-1\PIR101.txt the collective good. provides that the need for law arises when disorder develops need for law arises when provides that the righteous- the way, integrity, humaneness, when one has lost ness and etiquette. R C Y 26570_pir_21-1 Sheet No. 11 Side A 04/08/2009 15:17:04 A 04/08/2009 11 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 11 Side B 04/08/2009 15:17:04 10 M K , C Y 50 EPUBLIC OF [Vol. 21:1 R 6-APR-09 12:15 S ’ note 7, at 442. supra EOPLE 45 P China’s traditional Culture and Contract Law Seq: 10 Seq: 46 There is no separation There is 44 note 34, at 179-80. Throughout its history, Throughout its , The Yin and Yang of Foreign Eco- note 44, at 43-44. 47 YSTEM OF THE . 2497, 2499 (2005). The Chinese resolved their 8-9 (Sweet & Maxwell Asia 2002). supra S EV Although ancient Chinese law Although ancient supra 49 unknown The Orphan of China: Law and Literature , The Chinese Communist Party Communist The Chinese HINA 48 EGAL 43 L. R C HOW L HE note 16, at 506. AW IN , T ARDOZO L Chinese consider reliance on the written Chinese consider reliance on supra . 155, 165 (1996); McConnaughay, HOW 51 note 17, at 376. In his article, PACE INT’L L. REV. , 26 C OM Wanhong Zhang, note 23, at 244; Gu, ONTRACT 52 C.K. C supra , C note 34, at 179; C supra see also ING ; . at 68-69. ANIEL L supra D , 16 J.L. & C ING Gu, B See id. See generally id. LaKritz, Pattison & Herron, Neil Boyden Tanner, Note and Comment Matheson, See See id 70 (Thomson West 2003). In 1911, the last Chinese dynasty, the Qing Dynasty, was In 1911, the last Chinese dynasty, China has a civil law system and its judicial decisions do judicial decisions system and its a civil law China has developed commer- not have a well China did Historically, 46 47 48 49 50 51 52 43 44 45 HINA Professor Matheson provided a detailed discussion on the evolution of Chinese con- Professor Matheson provided a detailed tract law. nomic Contract Law in the People’s Republic of China - A Legalistic and Realistic Perspective overthrown. The Chinese Nationalist Party established the Re- public of China (“ROC”). The Chinese Nationalist government not have precedential value. precedential not have law. due to its cultural bias against cial law system For a few man, the Em- China was mostly ruled by one thousand years, the “heavenly mandate.” peror, who had C Because of Chinese cultural “emphasis on social harmony and Because of Chinese cultural “emphasis Chinese culture “discour- the fulfillment of moral obligations,” private monetary or pro- aged civil suits to pursue individuals’ prietary interests.” 10 \\server05\productn\P\PIR\21-1\PIR101.txt disputes through compromise and community functionalism. disputes through compromise of the judicial, legislative or executive powers. or executive legislative of the judicial, recognized private contracts, application of law to contract dis- contracts, application of law recognized private contract disputes by Confucian ethics and putes was influenced with ethical considerations at were often resolved in accordance the expense of legal principles. China developed little or no civil law; Chinese law was prima- little or no civil law; Chinese China developed and penal. rily administrative in Contemporary China law as evidence that the individuals had failed to resolve a dis- law as evidence that the individuals pute honorably. currently controls all aspects of China. controls all aspects currently focus on agriculture and the restrictions on the development of and the restrictions on the focus on agriculture of private law hindered the development commercial activities law tradition. concepts and civil https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 11 Side B 04/08/2009 15:17:04 B 04/08/2009 11 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 12 Side A 04/08/2009 15:17:04 11 11 The 58 The law The Cul- 6-APR-09 12:15 54 62 The Cultural 63 All “contracts” es- Private individuals Seq: 11 Seq: 59 57 The Communist Party had The Communist 55 unknown note 41, at 43. 61 supra 56 , AW L note 44, at 70. note 23, at 255. note 40, at 382. note 47, at 10. note 47, at 11. supra ONTRACT , They were “made and executed according to the They were “made and executed supra supra C 60 supra HOW , , supra However, the Communist Revolution in 1949 dramati- Revolution in the Communist However, C A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL at 7. at 11. 53 HINESE ING ING See Bejesky, C Id. LaKritz, Id. Id. L Id. L Id. The Cultural Revolution which began in 1966 interrupted The Cultural Revolution which During that time, Chinese contract law development came Chinese contract law development During that time, 55 56 57 58 59 60 61 62 63 53 54 M K state plan” to facilitate the exchange of commodities among the state plan” to facilitate the exchange various governmental units. any economic development of the country as well. any economic development of to a standstill. eliminated private When the Communist Party law because there was no need for contract property ownership, property. the government owned all of the 2009] European after . . . system modeled a “civil law instituted codes.” \\server05\productn\P\PIR\21-1\PIR101.txt cally changed whatever rule of law that had previously existed had previously rule of law that whatever cally changed ROC Civil the Party [abolished] and the “Communist in China laws.” all other Nationalist . together with Code . . tablished were output quotas and input orders according to the tablished were output quotas and state plan. became an instrument of politics. became an instrument tural Revolution practically shut down all the law schools in the tural Revolution practically shut country. The number of lawyers in China shrunk dramatically. system which had previously Whatever resemblance of a legal that time. existed was decimated during concept of “contracts” was imported from the Soviet Union and concept of “contracts” was imported in China. used to guide industrialization absolute control over the creation of law and ruled more by de- over the creation of law and absolute control cree than by law. used shame The Communist Party frequently order of society; for disrupting the good working as punishment relationships in to family, friends and other obligations owed than individ- order are given higher priority the collective social of rights. ualistic notions Revolution ended in 1976. could not engage in any independent economic activities. could not engage in any independent C Y 26570_pir_21-1 Sheet No. 12 Side A 04/08/2009 15:17:04 A 04/08/2009 12 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 12 Side B 04/08/2009 15:17:04 12 M K C Y 65 Are , 27 Despite [Vol. 21:1 The New Era 67 6-APR-09 12:15 Fang Shen, . 215, 217 (2003). see also at 8. EV Seq: 12 Seq: Id. 70 Contracting “conduct that vio- unknown , 72 UMKC L. R 68 note 41, at 52-53. Private individuals in note 41, at 43-44; Feng Chen, note 16, at 499-500; supra supra , supra , approach. AW This reflects the Chinese legislature’s This reflects the Chinese L PACE INT’L L. REV. 69 66 note 64, at 155. ONTRACT C L. 153, 155-57 (2001) [hereinafter Feng]. After the Cultural Revolution ended in 1976, China ended in Cultural Revolution After the laissez faire L ’ supra 64 NT Pattison & Herron, at 80. at 82-83. HINESE CONTRACT LAW HINESE Feng, C Id. Id. It is beyond the scope of this paper to make a comprehensive comparison of C See . J. I In 1999, China enacted the Contract Law of the People’s enacted the Contract Law of In 1999, China Chinese contract law which exists today began its develop- exists today contract law which Chinese 66 67 68 69 70 64 65 ROOK You Prepared for This Legal Maze, How to Serve Legal Documents, Obtain Evi- You Prepared for This Legal Maze, How dence, and Enforce Judgments in China B of Chinese Contract Law: History, Development and a Comparative Analysis of Chinese Contract Law: History, Development China were permitted for the first time to make technology contracts under the China were permitted for the first time to make technology contracts under Technology Contract Law adopted by China in 1987. began opening up to the outside world. up to the began opening 1980s, China In the moved from a modern legal system as China sought to establish economy. into a more market-oriented a planned economy Republic of China in an attempt to harmonize its previous con- in an attempt to harmonize Republic of China regulations (“Contract Law”).tract laws and For the first time had the right history, private individuals in Communist China’s behalf. contracts on their own to enter into general ment in the late 1970s in connection with the Chinese govern- with the Chinese in connection the late 1970s ment in market-oriented a more decentralized, to develop ment’s desire economy. 12 significant move a series of contract laws in a China enacted and incentive- decentralized, market-oriented, towards a “more based economy.” \\server05\productn\P\PIR\21-1\PIR101.txt notion of what is good for the parties regardless of the parties’ notion of what is good for the desire. This approach is fundamentally different from U.S. con- tract law’s lates social morals and public order [may] include those that lates social morals and public restrict economic or business ac- damage national interest . . . [or] . . .tivities, violate fair competition con- infringe [upon] sumer interests.” the major differences between U.S. and China contract law principles. Professors its adoption of certain familiar western terms such as “freedom its adoption of certain familiar has some substantive differences of contract,” the Contract Law from U.S. contract law. For example, the Contract Law appears very paternalistic in nature.that a The Contract Law requires social-economic order nor im- legal contract “may not disrupt pair social or public interests.” https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 12 Side B 04/08/2009 15:17:04 B 04/08/2009 12 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 13 Side A 04/08/2009 15:17:04 13 13 note supra Many of note 17, at The con- “It is esti- 6-APR-09 12:15 76 China’s le- 71 There is a There 73 supra 74 72 note 17, at 379-80. Part of Seq: 13 Seq: supra Because of cultural influ- 77 unknown note 16, at 505-08; Matheson, note 16, at 507. notes 16 & 17. note 48, at 2503. supra supra supra See supra note 23, at 262. note 65, at 217. note 65, at 238. note 65, at 217-18; Matheson, supra supra supra supra They are obligated to be loyal to the cause of the Chi- They are obligated to be loyal at 217; Zhang, A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL 75 Shen, Shen, Pattison & Herron, Shen, Id. LaKritz, Pattison & Herron, In addition to the differences in substantive laws, China’s in substantive to the differences In addition Chinese lawyers also play a significantly different role from also play a significantly different Chinese lawyers In addition, Chinese judges are not well trained. In addition, Chinese judges are 73 74 75 76 77 71 72 M K 25, at 1168. 375-81. the reasons why Chinese law is plagued with problems could be attributable to the the reasons why Chinese law is plagued system to foster its unprecedented eco- fact that in its haste to establish a legal nomic growth, China transplanted a lot of western legal concepts. Zhu, legal system suffers from other serious problems. other serious suffers from legal system Matheson, Pattison and Herron provided a more in depth analyses of the two con- Matheson, Pattison and Herron provided tract law approaches. 2009] \\server05\productn\P\PIR\21-1\PIR101.txt gal development also suffers from a lack of active legal aca- also suffers from a lack of gal development demic debates. there was no During the Cultural Revolution, scholarship.active legal academic have been politi- It would to the official to express an opinion contrary cally hazardous position.Communist Party down of practically all The shutting also inter- during the Cultural Revolution of the law schools of qualified legal professionals. rupted the training those in U.S. society. Chinese lawyers lack political indepen- dence. ences and Chinese legal traditions, many Chinese judges focus ences and Chinese legal traditions, between the parties, as opposed on preserving the relationship nese Communist Party. as the The attorney-client relationship, does not exist in China. American legal system contemplates, have not played any significant On the whole, Chinese lawyers their counterparts in the role in business contexts, unlike United States. them are retired military officials. in- The judges lack judicial “local government . . . for their dependence and depend on the wages, promotions and bonuses.” mated that [China has] fewer than 200,000 lawyers now, with has] fewer than 200,000 lawyers mated that [China the number to 300,000 by 2010.” plans to increase grave shortage of well trained legal professionals. of well grave shortage tract laws and regulations suffer from lack of transparency, con- lack of transparency, suffer from and regulations tract laws problems. and other redundancies tradictions, C Y 26570_pir_21-1 Sheet No. 13 Side A 04/08/2009 15:17:04 A 04/08/2009 13 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 13 Side B 04/08/2009 15:17:04 14 M K , C Y U- B Fi- 78 ENSUS [Vol. 21:1 6-APR-09 12:15 U.S. C Therefore, it is 81 note 25, at 1163-64. Seq: 14 Seq: note 25, at 1163. supra China IDB Country Summary 82 supra Zhu, Zhu, unknown see see also China’s vast size and the conflicts China’s vast size http://www.census.gov/ipc/www/idb/country/ch 80 note 16, at 507. supra United States IDB Country Summary, PACE INT’L L. REV. note 25, at 162-63. note 47, at 9; available at note 23, at 262; , http://www.census.gov/ipc/www/idb/country/usportal.html. supra supra supra , UREAU ING B Chen, L 79 available at LaKritz, See Pattison & Herron, The U.S. Census Bureau notes that the U.S. population as of 2008 is ap- See ENSUS In sum, China has had less than three decades to develop a decades to develop less than three China has had In sum, As a result of the problems with the Chinese legal system problems with the Chinese As a result of the In contrast, the United States follows a common law system In contrast, the United States follows , 79 80 81 82 78 China’s population stands currently at 1.3 billion. U.S. C legal system geared towards a free market economy in an envi- towards a free market economy legal system geared political ideology tensions between the ronment with inherent economy. and free market 14 “letter of the law.” to the contracts pursuant to enforcing \\server05\productn\P\PIR\21-1\PIR101.txt between the central and local governments also present some and local governments also between the central special challenges. legal en- factors result in an unstable These with problems. vironment plagued of law, the Chi- cultural view toward the rule and its negative on the law to resolve their disputes.nese do not count “In civil fourth of the litigants are rep- and economic cases, less than one fewer than four percent of busi- resented by legal counsel and advisors.” nesses in China have regular legal not at all surprising that Chinese companies typically do not not at all surprising that Chinese trained lawyers, advising them have any lawyers, let alone U.S. on legal issues. of British common law tradi- which is derived from a long line tions. Although the United States has had its own struggles, its legal system has developed uninterrupted. States The United legal system despite its share has a relatively well functioning of problems. There is also a long tradition of legal scholarship with active academic debates. boasts The United States also lawyers and judges, even though close to one million employed China’s. its population is one fourth of portal.html. proximately 303 million. REAU nally, even if a judgment is rendered, the disputing parties are the disputing parties is rendered, if a judgment nally, even judicial rendered by judgments “to execute often unable bodies.” https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 13 Side B 04/08/2009 15:17:04 B 04/08/2009 13 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 14 Side A 04/08/2009 15:17:04 15 15 87 84 6-APR-09 12:15 . L. 95, 110 (1999). Seq: 15 Seq: OMP Chinese philosophies en- & C L ’ 86 NT unknown . J. I CH note 16, at 479, 486. supra From “Sanctity” to “Fairness”: An Uneasy Transition in note 18, at 624. As discussed in the previous section, the most section, the in the previous As discussed , 18 N.Y. L. S 83 note 25, at 130. supra . supra K. M. Sharma, at 486. anecdotal exchange is very informative on this The following A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL The Chinese tend to establish contractual relationships The Chinese tend to establish at 488 Because of the focus on collective good, a Chinese man- Because of the focus on collective Id. See Lee et al., Chen, Pattison & Herron, Id. 88 85 Because of their cultural focus on relationships, the Chi- Because of their cultural focus The Chinese cultural attitude influences Chinese con- attitude influences The Chinese cultural As a result of its legal, cultural and political traditions, the traditions, cultural and political of its legal, As a result 86 87 88 83 84 85 M K the Law of Contracts? based on trust and honor without any reliance on the enforce- based on trust and honor without ment powers of law. “A contract is considered unnecessary, of loyalty and mutual obliga- sometimes offensive, when rules ager will retain “[u]nproductive employees . . . and unprofitable ager will retain “[u]nproductive companies may continue to exist.” nese are more sensitive to the relationship aspect of negotia- nese are more sensitive to the tions. tracting behavior in multiple ways.tracting behavior a Chinese citizen en- When party, profit relationship with another gages in an economic may not be the paramount goals.and self interest These goals or common good” to a larger group-based may be “subordinated goal. foundations of the rules of Chinese society are relationships, of Chinese society of the rules foundations American understood (not the commonly and respect reciprocity of law). notions 2009] Contracting Behavior. Differences on of Chinese The Impact \\server05\productn\P\PIR\21-1\PIR101.txt courage individuals to subordinate themselves to the good of the courage individuals to subordinate achieve balance and harmony. family and society in order to U.S. contract law’s assumption This is directly contrary to the negotiate at arms’ length and that parties to a contract will of their own best interests. drive a hard bargain on behalf point. a big city in China, he noted that many When a U.S. business man visited crew) were sweeping the streets with Chinese people (part of the city’s sanitation old fashioned brooms. The U.S. business man turned to his Chinese host, a gov- the ernment official, and offered to sell street sweeping machines that can clean streets a lot faster and better. at the U.S. business The government official looked has man and asked: “Then, what would I do with the 10,000 people that the City employed as sanitation workers?” fundamental difference between the Chinese and Western cul- between the Chinese fundamental difference an individual plays in society.tures is the role The Chinese self,” unlike the formed based on a concept of identity is “not which is focused on the individual. Western identity C Y 26570_pir_21-1 Sheet No. 14 Side A 04/08/2009 15:17:04 A 04/08/2009 14 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 14 Side B 04/08/2009 15:17:04 16 M K C Y 93 [Vol. 21:1 6-APR-09 12:15 Because a 94 Hence, in con- 98 The Chinese will The Chinese The Chinese will The Chinese 89 Seq: 16 Seq: 91 The Chinese will go to 97 unknown 95 note 16, at 488. note 16, at 487-88. note 16, at 491. supra supra supra Therefore, even if a contract is ultimately Therefore, even PACE INT’L L. REV. 92 note 52, at 161. supra 90 The strong desire to maintain harmony also means The strong desire to maintain at 487. at 488. at 489. at 491. 96 Pattison & Herron, Id. Id. Id. Id. Id. Pattison & Herron, Tanner, Pattison & Herron, Id. Because of the Chinese cultural emphasis on reaching Because of the Chinese cultural Chinese culture values patience and long term perspec- patience and culture values Chinese The Chinese cultural aversion to conflict and their negative The Chinese cultural aversion 90 91 92 93 94 95 96 97 98 89 signed, a signed contract means the beginning of a relationship, contract means the beginning signed, a signed the parties’ end all” document which controls not the “be all and contract law. as in the eyes of U.S. economic relationship, that the Chinese are averse to conflict. that the Chinese are averse to agreements through cooperation and collaboration, they “will agreements through cooperation both parties rather than ‘win- look for the mutual benefit of ning.’” tives. time perspec- take a holistic have learned to The Chinese on long-term viewpoints. tive and focus Pattison and Herron point out that “[m]any westerners make point out that “[m]any Pattison and Herron the communica- when they assume that their biggest mistake when a contract is signed.” tion is completed 16 environment.” the business tion structure \\server05\productn\P\PIR\21-1\PIR101.txt frequently ignore the written contract and treat it as a mere and treat it contract ignore the written frequently formality. great lengths to avoid conflict and criticism. great lengths to avoid conflict spend time cultivating relationships for long term benefit. relationships for long term spend time cultivating The open” in con- to leave timing and planning “Chinese may prefer tract negotiations. tract negotiations, the Chinese are unlikely to engage in con- tract negotiations, the Chinese frontational negotiations. do not expect to resort to courts view of law also mean that they for contract enforcement. other In the United States, on the and the force of law that pro- hand, it is the specter of litigation enforceability. vide much of the impetus for contract signed contract only represents the existence of a relationship, signed contract only represents as changeable and renegotiable the Chinese tend to treat it throughout the relationship. https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 14 Side B 04/08/2009 15:17:04 B 04/08/2009 14 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 15 Side A 04/08/2009 15:17:04 17 17 AW L 6-APR-09 12:15 ONTRACT C Seq: 17 Seq: LASSIC PPLICATION TO ONTRACTS A U.S. C C unknown HEIR T HINESE XAMPLES OF E U.S.-C OCTRINES AND D ERTAIN A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL II. C This section provides a brief overview of the assumptions All of these differences contribute to extensive misunder- contribute to differences All of these thinking, well-versed in Anglo-American For an American attitude toward the in- The Chinese company’s nonchalant ART P M K behind classic contract law. It focuses on certain examples of U.S. contract interpretative principles or canons of construc- tion. This section shows how those contract principles, based on standings when a Chinese company contracts with a U.S. com- with a company contracts when a Chinese standings pany. in disastrous result sometimes These misunderstandings case in the above Chinese, as shown for the consequences example. company in the understand how the Chinese it is difficult to under the could have signed the contract above case example circumstances. company, a appear that the Chinese It would assumed company, may have knowingly relatively sophisticated and made a bad business decision.the business risk Yet, when company be- cultural context, the Chinese put in the Chinese norms. with the Chinese cultural haved entirely consistently It signed the agree- that the Chinese company is not surprising be- U.S. company, despite the inconsistencies ment with the the oral promises.tween the written version and Being of the Chinese company relationship oriented, the managers their oral promises.trusted the U.S. company and U.S. The agreement would not be enforced company’s assurance that the cultural bias against law. is consistent with the Chinese contract and the verbal rep- consistencies between the written the Chinese view that a written resentations is consistent with existence of a relationship.contract merely signifies the De- specified a three year term spite the fact that the agreement any reason upon six month’s with the right to terminate for apparently believed that written notice, the Chinese company the relationship was long term. To the Chinese, the relation- because the manufacturing ship was intended to be long term, capital investment and it facility required intensive initial the investment in three years in would not be possible to recoup a manufacturing operation. 2009] \\server05\productn\P\PIR\21-1\PIR101.txt C Y 26570_pir_21-1 Sheet No. 15 Side A 04/08/2009 15:17:04 A 04/08/2009 15 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 15 Side B 04/08/2009 15:17:04 18 M K C Y 100 [Vol. 21:1 Caporale v. The only 6-APR-09 12:15 103 see also 102 Seq: 18 Seq: unknown Thus, it is only natural that the U.S. con- Thus, it is only PACE INT’L L. REV. 101 note 87, at 110. note 4, at 590. note 4, at 590. Shell Rocky Mt. Prod. v. Ultra Res., Inc., 415 F.3d 1158, 1165 supra The classic contract law assumes that the parties to assumes that contract law The classic supra supra 99 Lim, Sharma, Huge v. Overly, 445 F. Supp. 946, 949 (W.D. Pa. 1978); Lim, See, e.g., The classical contract law interpretative principles, such as law interpretative principles, The classical contract princi- Several current contract interpretation/construction The core value of U.S. contract law is the ideal of freedom of ideal of freedom law is the value of U.S. contract The core 99 100 101 102 103 Mar Les, Inc., 656 F.2d 242, 244 (7th Cir. 1981). (10th Cir. 2005). the parol evidence rule, and the U.S. courts’ general unwilling- the parol evidence rule, and the of the contract are justified ness to look beyond the four corners based on those core assumptions. the Under those theories, case example is unlikely to re- Chinese company in the above enforcement action in a U.S. cover for its damages in a contract court. The U.S. court’s singular focus on the written contract by the Chinese company to in- will likely preclude any attempt or oral terms that are troduce evidence of oral representations terms of the agreement.inconsistent with the explicit The company and the U.S. com- agreement signed by the Chinese the outcome under current pany would most likely determine U.S. contract law paradigm. in cross cultural context.ples are especially problematic ex- For instructs a U.S. judge to stay ample, the four corners doctrine when interpreting a writ- within the four corners of the contract of the parties. ten contract to ascertain the intent 18 unfair to applied, may be as contract law assumptions classical cultural perspective. from a different the party contract. contract accu- that the resulting written This theory assumes of the arms terms agreed upon as a result rately reflects the the minds, mea- a figurative meeting of length negotiations, by both parties to manifestation of intent sured by the objective form the contract. \\server05\productn\P\PIR\21-1\PIR101.txt tract law’s role is merely to enforce the written terms of the is merely to enforce the written tract law’s role parties’ promises presumably embodies the agreement which fruits of their bargaining. and to protect the a contract will exercise their free will and watch out for their and watch out their free will will exercise a contract own behalf. and bargain diligently on their own self interests way a U.S. court will look beyond the corners of the written way a U.S. court will look beyond that the contract terms agreement is for a party to demonstrate https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 15 Side B 04/08/2009 15:17:04 B 04/08/2009 15 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 16 Side A 04/08/2009 15:17:04 19 19 6-APR-09 12:15 , 652 A.2d 1278, 1279 . Seq: 19 Seq: unknown Although parol evidence can be Although parol evidence can 107 To invoke the protection of this doc- To invoke the protection of this 106 Again, U.S. courts focus on the written language in focus on the written language Again, U.S. courts HCB Contractors v. Liberty Place Hotel Assocs Knudsen v. Transp. Leasing/Contract, Inc., 672 N.W.2d 221, 223 (Minn. 105 A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL 104 Alack v. Vic Tanny Int’l of Mo., Inc., 923 S.W.2d 330, 343 (Mo. 1996). See See Parrish v. Jackson W. Jones, P.C., 629 S.E.2d 468, 471 (Ga. Ct. App. 2006). Another related doctrine, the plain meaning rule, requires the plain meaning related doctrine, Another In light of these well established contract doctrines, a Chi- In light of these well established The parol evidence rule is another well established contract rule is another well established The parol evidence 104 105 106 107 M K (Pa. 1995). trine, many U.S. contracts typically contain a standard merger trine, many U.S. contracts typically states that the written con- or integration clause that expressly the parties’ intent and that it tract is the final expression of agreements between the merges all prior or contemporaneous parties. The agreement prepared by the U.S. company’s in- contained such a merger house counsel in the above example clause. Under the parol evidence rule, this clause will usually promises prior to the formation bar the introduction of any oral “terms of the written contract of the contract that contradict the which is valid on its face.” a U.S. court to interpret the written contract in accordance with the written contract in a U.S. court to interpret clear and unam- if the terms of a contract are its plain meaning biguous. Ct. App. 2003). 2009] are ambiguous. con- will not necessarily U.S. courts However, because simply to be ambiguous terms of a contract sider the of the interpretation the proper disagree regarding the parties terms. \\server05\productn\P\PIR\21-1\PIR101.txt admitted under certain circumstances (to show fraud, to supple- admitted under certain circumstances ambiguities), the threshold ment contract terms or to explain a business-to-business context is requirement for admission in high. This doctrine is particularly prejudicial against the non- contractual relationship. U.S. party in a cross cultural as the Chinese company in nese company in a similar situation prejudiced in an action to the above example, may be severely a contract. when the core as- Although this rule makes sense when the written true, the rule does not work sumptions hold agreement as a reflect the terms of the parties’ contract does not cultural differences. result of substantive of any prior or bars introduction into evidence principle which to vary the terms written or oral agreements contemporaneous of the written contract. C Y 26570_pir_21-1 Sheet No. 16 Side A 04/08/2009 15:17:04 A 04/08/2009 16 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 16 Side B 04/08/2009 15:17:04 20 M K C Y U.S. 110 Embracing [Vol. 21:1 ROSS 6-APR-09 12:15 C Those limited Those statutes are de- 109 OCTRINES ARE . 73, 101 (2006). Professor Id. Seq: 20 Seq: D EV Amy J. Schmitz, AW NEQUITIES IN . L. R ELATIONSHIPS L I LA See also R . unknown , 58 A Id. ONTRACT passim ONTRACT C passim. DDRESS THE C A note 5, PACE INT’L L. REV. XISTING note 5, supra It has recognized equitable issues raised by a It has recognized equitable issues ULTURAL note 4, at 590. supra C 108 III. E supra DiMatteo, ART NSUFFICIENT TO I P DiMatteo, See Lim, U.S. contract law has evolved away from its classic para- U.S. contract law has evolved Furthermore, because a written agreement drafted by a a written agreement Furthermore, because 108 109 110 Unconscionability’s Safety Net Function signed to protect U.S. consumers and will not be able to remedy inequities in cross cultural business to business context. digm to address equitable issues primarily in consumer protec- digm to address equitable issues tion context. 20 in a U.S. court.written contract the terms of a enforce Since sym- contract to merely a written culture considers the Chinese will Chinese companies a relationship, existence of bolize the or they its terms without understanding sign a contract readily those terms. significance of the will underestimate That is pre- example did. Chinese company in the case cisely what the A of the con- to look beyond the four corners U.S court’s refusal demonstrating the Chinese company from tract will prevent from those set have agreed on terms different that the parties contract. forth in the written clause, similar to generally include a merger U.S. company will be extremely the above case example, it would the agreement in to introduce impossible, for a Chinese company difficult, if not made to the oral promises the U.S. company evidence of the Chinese company in a U.S. court. re- Yet, the parties’ economic and representations. lationship was based on oral promises \\server05\productn\P\PIR\21-1\PIR101.txt modern society within the domestic context. modern society within the domestic courts still begin their analyses of contract problems with the courts still begin their analyses doctrines are insufficient to address the inequities raised by the doctrines are insufficient to address above case example. mod- Some scholars have pointed out that gone far enough away from its ern U.S. contract law has not to evaluate fairness issues classic model because it continues contract principles. within the confines of the classic Schmitz noted that numerous federal and state legislations have also enacted vari- at- ous statutes (consumer protection, insurance, consumer lending, etc.) in an tempt to counter the inequitable results from strict applications of the classic contract law principles in various consumer contexts. https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 16 Side B 04/08/2009 15:17:04 B 04/08/2009 16 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 17 Side A 04/08/2009 15:17:04 21 21 As a 111 6-APR-09 12:15 Seq: 21 Seq: Courts have typically invoked Courts have typically unknown 115 Hence, there was no inequality The focus is on the language in is on the language The focus 114 116 112 As explained below, these contract below, these As explained 113 Whitebox Convertible Arbitrage Partners, L.P. v. IVAX note 4, at 582. see also notes 104-08. ,Corp., 162 F. App’x 168, Format Corp. v. Widewaters Prop. Dev. , Freightliner of Knoxville, Inc. v. DaimlerChrysler Vans, LLC, 484 , Freightliner of Knoxville, Inc. v. DaimlerChrysler supra e.g. A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL , See, e.g. I agree wholeheartedly with the notion that Chinese companies should See Lim, See supra F.3d 1106, 1110 (8th Cir. 2007) Cordry v. Vanderbilt Mortg. & Fin., 445 The Chinese company in the case example is therefore un- The Chinese company in the case Recognizing the harsh results of applying classic contract harsh results of applying classic Recognizing the 115 116 111 112 113 114 M K Corp., 482 F.3d 1018, 1021 (8th Cir. 2007) (dismissing a breach of contract claim Corp., 482 F.3d 1018, 1021 (8th Cir. 2007) New York law). by relying on the plain meaning rule under likely to win a claim based on fraud or misrepresentation re- likely to win a claim based on to the signing of the written lated to the negotiations prior agreement. Based on the current U.S. contract law paradigm, protected its own interest by the Chinese company should have behalf.bargaining zealously on its own The Chinese company to hire an attorney to as- certainly had the financial resources sist with contract negotiations. could The Chinese company have informed itself better. 2009] of contracts. and autonomy of freedom core assumptions \\server05\productn\P\PIR\21-1\PIR101.txt F.3d 865, 870 (6th Cir. 2007) (relying on the parol evidence rule and the merger F.3d 865, 870 (6th Cir. 2007) (relying on plaintiff’s claims based on extrinsic clauses in the written agreement and rejecting representations); the doctrine of fraud or misrepresentation in a situation which fraud or misrepresentation in the doctrine of and where it fraud or misrepresentation involves outright as written. unfair to enforce the contract would be patently context rarely invoked in business-to-business This doctrine is engage in these businesses that regularly with sophisticated types of economic transactions. 170 (3rd Cir. 2006). learn not to sign written agreements without understanding their significance or learn not to sign written agreements without understanding their significance seeking sound legal advice. has happened and will But the reality is that this happen and U.S. contract law is stacked against the Chinese companies and other (stating that “[p]arties are generally free to contract as they wish, and courts will (stating that “[p]arties are generally free meaning, unless induced by fraud, du- enforce contracts according to their plain ress, or undue influence.” (quoting Util. Serv. & Maint., Inc. v. Noranda Alumi- num, Inc., 163 S.W.3d 910, 913 (Mo. 2005))). the written agreement. the written principles based on equitable considerations cannot adequately considerations based on equitable principles contracts. present in cross cultural remedy the inequity sometimes re- situations, U.S. courts have principles in certain to of the doctrine of fraud or misrepresentation sorted to the use terms. void certain contract result, modern contract law continues to limit its engagement law continues contract result, modern issues. with social-fairness C Y 26570_pir_21-1 Sheet No. 17 Side A 04/08/2009 15:17:04 A 04/08/2009 17 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 17 Side B 04/08/2009 15:17:04 22 M K C Y The “Most 122 [Vol. 21:1 118 6-APR-09 12:15 U.S. courts have Therefore, the un- Seq: 22 Seq: 121 119 unknown PACE INT’L L. REV. note 109, at 75. note 109, at 74 (discussing in depth the development of the The unconscionability test is very difficult to The unconscionability test is note 7, at 553. note 7, at 551-52. 120 supra supra supra supra Under this doctrine, a party who wishes to avoid a party who wishes Under this doctrine, at 75. 117 Schmitz, Id. Kim, Schmitz, Kim, Id. The unconscionability doctrine is another doctrine associ- doctrine is another doctrine The unconscionability U.S. courts have applied the unconscionability test in a U.S. courts have applied the 117 118 119 120 121 122 unconscionability doctrine). parties from different cultural backgrounds. ad- The question this paper seeks to undertake from a contract law perspec- dress is what steps the United States can tive to level the playing field. 22 perspective. from the financial positions in bargaining A U.S. would see law tradition contract in the classical judge steeped had which seemingly Chinese company to rescue a no reason into this contract.risk of entering the business assumed This dy- ignores the cultural however, contract mentality, classic company and between the Chinese namics of the relationship the U.S. company. is The doctrine of fraud/misrepresentation the cross cultural to remedy the inequities in therefore unlikely context. fairness con- contract law’s attempt to address ated with U.S. cerns. \\server05\productn\P\PIR\21-1\PIR101.txt conscionability doctrine does not apply when the unfair circum- conscionability doctrine does not the contract was entered into. stances did not exist at the time rigid fashion. [U.S.] courts . . . require that the conditions of unconscionability [U.S.] courts . . . require that the made.” exist at the time the contract was enforcement of a contract generally must show that the agree- a contract generally must show enforcement of unconscionable. and procedurally ment is both substantively the bargain- focuses on whether “Procedural unconscionability unduly one-sided, whereas sub- ing process . . . was adhesive or on whether the contract stantive unconscionability focuses or otherwise unfair.” terms are unduly oppressive satisfy in a business-to-business context. satisfy in a business-to-business only found an agreement unconscionable where it offended no- only found an agreement unconscionable all viewed in unfair results tions of “decency,” or had grossly – western cultural values. the context of the dominant doctrine of unconscionability is further limited because it is only doctrine of unconscionability is enforcement, and not as a available as a defense to contract https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 17 Side B 04/08/2009 15:17:04 B 04/08/2009 17 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 18 Side A 04/08/2009 15:17:04 23 23 see 6-APR-09 12:15 Seq: 23 Seq: note 7, at 552. unknown Thus, it cannot be used as a it cannot be used Thus, 125 supra 123 124 note 4, at 607; Kim, supra A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL Lim, Tri-County Motors, Inc. v. Am. Suzuki Motor Corp., 494 F. Supp. 2d 161, Philo Smith & Co., Inc. v. USLIFE Corp., 554 F.2d 34, 36 (2d Cir. 1977); Because U.S. courts have sought to address fairness issues fairness sought to address U.S. courts have Because doctrine can- the unconscionability Furthermore, because doctrine which may pro- Another example of an equitable 123 124 125 In order to recover under a promissory estoppel theory . . . a plain- In order to recover under a promissory promise; 2) reasona- tiff must show: 1) a clear and unambiguous party to whom the promise is ble and foreseeable reliance by the the party asserting the estop- made; and 3) an injury sustained by pel by reason of his reliance. M K Lynch v. Sease, 2007 F. App’x 0297N (6th Cir. 2007). However, even if a plaintiff is able to establish promissory es- However, even if a plaintiff is application of the theory to a toppel, courts have restricted the “the circumstances are such as to limited class of cases in which to enforce the promise upon render it unconscionable” to refuse which the promisee has relied. 2009] affirmative relief. source of \\server05\productn\P\PIR\21-1\PIR101.txt mechanism for seeking damages in a U.S. court. damages in a for seeking mechanism the contract paradigm, the U.S. classic confines of within the fairness address cannot adequately doctrine unconscionability context. cultural business to business concerns in cross It is un- in the above judge will consider the agreement likely that a U.S. to the level of between two businesses rise case example unconscionability. will not remedy a vehicle to recover damages, it not be used as damages. the other party has suffered the inequities where In was unable to example, the Chinese company the above case in manufacturing of its extensive investment reap the benefits company’s early facilities because of the U.S. equipment and termination of the contract. The Chinese company suffered had to shut down its oper- heavy financial losses and ultimately suffered.ations because of the losses it The Chinese company damages for the U.S. com- would be more interested in seeking instead of attempting to avoid pany’s breach of the agreement its enforcement. situations is the doctrine of vide some limited relief in certain promissory estoppel. 173 (E.D.N.Y. 2007); Cyberchron Corp. v. Calldata Sys. Dev., Inc., 47 F.3d 39, 44 173 (E.D.N.Y. 2007); Cyberchron Corp. v. Calldata Sys. Dev., Inc., 47 F.3d 39, (2d Cir. 1995). C Y 26570_pir_21-1 Sheet No. 18 Side A 04/08/2009 15:17:04 A 04/08/2009 18 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 18 Side B 04/08/2009 15:17:04 24 M K C Y E- R ; see [Vol. 21:1 128 6-APR-09 12:15 Seq: 24 Seq: Promissory estoppel comes Promissory § promissory 55 (2008) (noting that 126 unknown § 2 (1981). ONTRACTS C PACE INT’L L. REV. Estoppel and Waiver OF D ) . 2 UR ECOND . J M (S Charleston County Sch. Dist. v. Laidlaw Transit, Inc., 348 S.C. 420, 559 Therefore, if a valid, enforceable contract exists be- valid, enforceable contract Therefore, if a Volvo Constr. Equip. N. Am., Inc. v. CLM Equip. Co., Inc., 386 F.3d 581, White v. Roche Biomedical Lab., Inc., 807 F. Supp. 1212, 1217 (D.S.C. White v. Roche Biomedical Lab., Inc., See 28 A 127 By definition, a promise is a representation as to future in- as to future is a representation a promise By definition, signed a example, the Chinese company In the above case company could success- Furthermore, even if the Chinese 127 128 126 estoppel is “predicated on promises or assurances as to future conduct”) estoppel is “predicated on promises or S.E.2d 362, 364 (S.C. Ct. App. 2001) (dismissing promissory estoppel counterclaim because counterplaintiff admitted a contract that specifically governed the issue); STATEMENT tween the parties as to a certain issue, their rights and as to a certain issue, tween the parties terms. governed solely by the contract obligations are tent, not a past or present fact. a past or present tent, not with the U.S. company.written contract promissory estop- The most likely not apply.pel doctrine would In addition, the doc- relied on the Chinese company “reasonably” trine requires that the promises. the Chinese Without proper cultural context, written terms of on oral promises despite company’s reliance be viewed as un- the contrary would most likely the contract to law perspective.reasonable from a U.S. contract the Hence, not be able to help the Chi- promissory estoppel doctrine would nese company in the case example. doctrine, it would have only fully assert the promissory estoppel to recover damages suffered in allowed the Chinese company promises made by the U.S. com- reasonable reliance of the oral pany. Those damages would most likely include only the company invested in its amount of money that the Chinese reasonable reliance on the long manufacturing equipment in term relationship promise. com- Therefore, even if the Chinese the doctrine of promissory estop- pany could successfully invoke any damages in the form of pel, it would not be able to recover expected profits. see also 24 \\server05\productn\P\PIR\21-1\PIR101.txt 599 (4th Cir. 2004) (“[I]n South Carolina, equitable relief is precluded under a the- ory of promissory estoppel if the estoppel claim is in direct conflict with a specific contract term.”). 1992). into play in situations where actual consideration is not pre- consideration is where actual in situations into play sent. where a contract in situations does not apply It generally considera- contract is element of a valid a necessary exists since tion. https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 18 Side B 04/08/2009 15:17:04 B 04/08/2009 18 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 19 Side A 04/08/2009 15:17:04 25 25 McLuhan, : phenome- 6-APR-09 12:15 U.S. 132 EED FOR Seq: 25 Seq: N DAPT The covenant requires a requires The covenant A 130 , § 205 (1981). unknown AW TO L The Legacy of Innes and McLuhan ONTRACTS C U.S. courts generally hold that every generally hold U.S. courts OF ) 129 ONTRACT C LOBALIZATION AND THE ECOND , http://www.collectionscanada.gc.ca/innis-mcluhan/002033- (S Cromeens, Holloman, Sibert, Inc. v. AB Volvo, 349 F.3d 376, 395 IV. G A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL 131 ART ESTATEMENT P R See e.g., Id. Old Messengers, New Media, The central theme of this paper readily begs the following The central theme of this paper renders it necessary This paper argues that globalization It is unlikely that this doctrine could help the Chinese com- this doctrine could help the It is unlikely that Another U.S. contract principle which can provide some can provide principle which U.S. contract Another 129 130 131 132 M K The Global Village contract contains an implied promise of good faith and fair deal- good faith and promise of contains an implied contract parties. the contracting ing between 2060-e.html (last visited October 13, 2008). McLuhan coined Herbert Marshall this term in the 1960s. McLuhan was a Canadian Dec. 31, 1980) (July 21, 1911 – educator, philosopher, and scholar. of Global Village I am borrowing the concept (7th Cir. 2004). questions: Why is there any need for the United States to adapt questions: Why is there any need to accommodate different cul- its domestic contract law theory tures globally? Why can’t Chinese companies hire competent want to do business with U.S. U.S. trained attorneys if they companies? For example, the Chinese company in the above to hire competent lawyers.case example can certainly afford In companies (or companies around any event, why don’t Chinese the American way? the globe) learn how to do business for U.S. contract law to adapt. The Global Village pany in the case example.pany in the case as it is currently for- This doctrine, used to contradict the express mulated and applied, cannot be terms of a written contract. de- A U.S. court would most likely the two parties in this case. fer to the agreement between limited relief is the doctrine of the implied covenant of good covenant of the implied relief is the doctrine limited fair dealing. faith and 2009] \\server05\productn\P\PIR\21-1\PIR101.txt party vested with broad discretion to act reasonably and not ar- broad discretion to act reasonably party vested with reasonable expec- manner inconsistent with the bitrarily or in a tations of the parties. use the covenant to U.S. courts generally is suscepti- of the parties where a contract determine the intent constructions.ble to two conflicting court is unlikely to A U.S. or modify covenant of good faith to overrule rely on an implied of a contract in a business-to-business the express terms context. C Y 26570_pir_21-1 Sheet No. 19 Side A 04/08/2009 15:17:04 A 04/08/2009 19 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 19 Side B 04/08/2009 15:17:04 26 M K C Y 133 136 , 31 rules of ISPARITIES [Vol. 21:1 D 6-APR-09 12:15 OWER P INTERNALISE 9 (Butterworths 2000); Globalization and the Fu- Seq: 26 Seq: HEORY (Farrar, Straus and Giroux, T . 1277, 1289 (2008). LAT EV F EGAL S LOBALISATION AND I , G David S. Law, & L unknown While some legal principles may Globalization & Law: Beyond Traditional ORLD . U. L. R see W 137 W ROCESSES HE note 16, at 477 (noting that “[w]ith the advent of a note 16, at 477 (noting that “[w]ith the at 523. P , T Id. , 102 N LOBALISATION supra EGAL , G PACE INT’L L. REV. L noteat 606; 2, note 2, at 606. RIEDMAN 521, 522 (2006). & Halliday point out that there Carruthers WINING However, questions of whether or the extent to which the local law However, questions of whether or the extent supra supra T L. F NQUIRY The Internet and other modern technology has re- modern technology and other The Internet Id. . I RANSNATIONAL ILLIAM 134 OC HOMAS T Overby, W Overby, T global has been attracting exten- The interaction between the local and the 135 Law Between the Global and the Local: Negotiating Globalization: Global Law Between the Global and the Local: Professor Overby has sagely pointed out the “potential has sagely pointed out the Professor Overby & S 136 137 133 134 135 AW transnational law.”); Fabio Morosini, L 2005); Pattison & Herron, Methodology of Comparative Legal Studies and an Example From Private Interna- ture of Constitutional Rights Scripts and Intermediation in the Construction of Asian Insolvency Regimes Scripts and Intermediation in the Construction duced the significance of physical geographical boundaries.of physical geographical significance duced the An have different countries from number of companies increasing with U.S. companies.begun doing business China is only one of different cultures.the many with substantially It is undeniable interdepend- interaction results in increased that increased ency. truly globalized world, it is not only markets but entire cultures that are coming truly globalized world, it is not only markets omitted). into contact.”) (internal citation and quotations has been extensive interdisciplinary scholarship on law and globalization in the has been extensive interdisciplinary scholarship rights, environmental policies, and areas of voting rights, immigration, women’s citizenship. clash between the local and the global that will call into ques- local and the global that will clash between the and undercut state of American contract law tion the current years.” tendencies in the upcoming Western universalist should adapt to the global in the commercial law context in light of globalization should adapt to the global in the commercial has been under researched. see also out 327 (Michael Likosky, ed., Butterworths 2002) (wherein Professor Koh pointed the need to study transnational legal process: “the theory and practice of how pub- lic and private actors . . . interact in a variety of public and private, domestic and international fora to make, interpret, enforce and ultimately, Scholars from across the disciplines have recognized that across the disciplines have Scholars from theories” which a challenge to “black box globalization presents bounded societies, or legal treat nation states, geographically systems as discrete entities. of transportation and other technologi- here to refer to the fact that internet, ease distances and eliminated the physi- cal advances have shortened the geographical cal borders of countries. As a result, the world has figuratively shrunk into a small village. 26 for this adaptation. forefront the need brought to the non has to- global companies world has brought of the The “flattening” gether. \\server05\productn\P\PIR\21-1\PIR101.txt sive contemporary social science research.Hal- Bruce G. Carruthers & Terence C. liday, https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 19 Side B 04/08/2009 15:17:04 B 04/08/2009 19 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 20 Side A 04/08/2009 15:17:04 27 . 27 AL , 94 , 88 C note 4, at 142 6-APR-09 12:15 supra note 4, at 592; Ei- supra Seq: 27 Seq: note 4, at 897. Professor Ian McNeil has Professor Ian McNeil 140 supra . L. 541, 542 (2005) (pointing out that “if unknown Professor Eisenberg has pointed OMP U.S. contract law is a classic exam- law is a U.S. contract 141 at 1813. However, other scholars have pointed & C The Emergence of Dynamic Contract Law 138 note 4, at 1069-70; Lim, L Id. ’ NT supra Relational Contract Theory: Challenges and Queries Relational Contract Theory: Challenges J. I note 87, at 116 (commenting that “academic criticism of con- note 87, at 116 (commenting that “academic Numerous legal scholars have criticized U.S. Numerous legal note 133, at 1288. 139 ARDOZO supra note 4, at 808-11; Morant, . 877, 881 (2000). supra EV , 13 C A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL supra Law, Sharma, Korobkin & Ulen, Ian R. Macneil, Melvin Aron Eisenberg, . 1743, 1744 (2000). Professor Eisenberg posits that the classic contract law U.S. contract law has been widely criticized for its flawed has been widely criticized U.S. contract law EV 138 139 140 141 142 . U. L. R W M K N 590. one Whether or not the modern contract law has evolved to the point at which can conclude that the classic contract law reasoning and rules have been over- thrown is beyond the scope of this paper. As discussed later in this article, certain the modern contract law principles which are intended to remedy the harshness of classic contract law approach cannot remedy the inequities in the cross cultural business-to-business context with which this article is concerned. senberg, tract law has been harsh, with one leading critic labeling it “dead” and another tract law has been harsh, with one leading citations omitted). calling contract theory “a mess.”) (internal out that although courts have rejected application of classical contract principles out that although courts have rejected in certain instances, much of the U.S. modern contract law continues to be driven by the classic contract premise of the freedom of contract. Lim, contract law for having assumptions that are rooted in the clas- having assumptions that are contract law for reality of human model and detached from the sic contract law domestic context. behavior in the tional Law 2009] im- a world of relatively function “in served their have arguably they of production,” immobile factors borders and permeable borders relatively porous “in a world of function so well may not mobility.” and relentless \\server05\productn\P\PIR\21-1\PIR101.txt long recognized the complex relational nature of contractual re- the complex relational nature long recognized his relational devoted a career to developing lationships and contract theory. analysis of any He has argued that “effective and consideration of all essen- transaction requires recognition relations that might affect the tial elements of its enveloping transaction significantly.” has been largely overthrown. out that contract law should be “more individualized rather out that contract law should rather than objective, complex than standardized, subjective rather than static.” rather than binary, and dynamic ple of such “black box theories.”ple of such phenomenon globalization The exacerbated ex- set of different challenges or has presented a to U.S. contract law. isting challenges assumptions. individuals and businesses continue to delocalize at an increasing rate, nations individuals and businesses continue to new tools to understand foreign individu- must develop mechanisms and provide als, systems, and institutions.”). L. R C Y 26570_pir_21-1 Sheet No. 20 Side A 04/08/2009 15:17:04 A 04/08/2009 20 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 20 Side B 04/08/2009 15:17:04 28 M K . C Y J. 148 149 In M ARV 147 143 , 4 H , 86 A Profes- [Vol. 21:1 144 6-APR-09 12:15 note 4, at 586-87. supra Seq: 28 Seq: Lim, See Some international scholars Building Bridges IV: Of Cultures, Col- unknown 150 Professor McConnaughay has also Professor McConnaughay He urged a rethinking of the role of He urged a rethinking of the 145 146 note 7, at 478-79. The Emerging Rights to Democratic Governance supra PACE INT’L L. REV. note 7, at 507. Evolving Business and Social Norms and Interpreta- Social Norms and Business and Evolving . 115, 150 (2000). supra EV at 528-30. at 537. Id. McConnaughay, Id. Even within the domestic context, the United States has become a pluralis- Thomas Franck, Berta Esperanza Hernandez-Truyol, Kim, Id. L. R , she pointed out that “[c]ultural and linguistic differences that “[c]ultural and linguistic , she pointed out In view of the changing global landscape and acknowledged In view of the changing global Following the dynamic reasoning of Professor Eisenberg, reasoning of the dynamic Following L. 46, 48 (1992). L 145 146 147 148 149 150 143 144 ’ ATINO NT ors, and Clashes - Capturing the International in Delgado’s Chronicles tion Rules: the Need for a Dynamic Approach to Contract Dis- to Contract a Dynamic Approach the Need for tion Rules: putes flawed assumptions in U.S. contract law, what are the conse- flawed assumptions in U.S. contract failure to adapt?quences of U.S. contract law’s argue One can of U.S. contract law is at that the legitimacy and relevancy stake. For U.S. contract law principles to be legitimate in the need to take into consideration global business community, they parties from other countries. the cultural differences of the Professor Kim has argued that “rapid societal changes require a changes that “rapid societal Kim has argued Professor with them.” is capable of evolving contract that theory of abound in international transactions as well as in transactions transactions as well abound in international residents of the United States.” between and among Professor Thomas Franck has argued that, to be legitimate, Professor Thomas Franck has the consent of the governed. governmental acts depend on ascertain the opinions and Therefore, a “government must outsiders, before designing and desires of the people, including enforcing government actions.” 28 \\server05\productn\P\PIR\21-1\PIR101.txt sor Kim examined in depth the fairness of applying U.S. classic in depth the fairness of applying sor Kim examined in the context to cross cultural contracts contract law principles transactions. border and domestic consumer involving cross interpretation application of U.S. contract She argued that and advocated for U.S. contract law objectives rules undermines ascertaining the approach which focuses on a dynamic contract parties. true intent of the tic society which mirrors the global community. law and contracts in East-West commercial relationships. law and contracts in East-West her article, her article, noted the fundamental differences in the role of law between noted the fundamental differences the East and the West. I L https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 20 Side B 04/08/2009 15:17:04 B 04/08/2009 20 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 21 Side A 04/08/2009 15:17:04 29 29 157 . (IBM ERVS S 6-APR-09 12:15 http://www-935.ibm. ONSULTING Seq: 29 Seq: . C The Chinese govern- US 156 Contract law principles Contract note 150, at 147. Some scholars available at http://www.cisg.law.pace.edu/cisg/ 151 , IBM B supra Investors with highly mobile Investors with Going Global: Prospects and Challenges unknown If the U.S. contract law persists If the U.S. contract 154 note 135, at 524. available at 152 supra 153 . (2003), Some studies also suggest that the “quality Some studies also suggest that Id. FR Hernandez-Truyol, note 137, at 552. note 87, at 130. However, it is not clear if alternative dis- 155 The Parol Evidence Rule and the CISG - A Comparative Anal- The Parol Evidence Rule and the CISG - note 133, at 1287 n. 33. supra supra Compare . L.J. S. A supra A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL OMP Morosini, Carruthers & Halliday, Id. Law, IBM Institute for Business Value, Bruno Zeller, Sharma, Furthermore, U.S. contract law, with its Anglo-American Furthermore, U.S. There is anecdotal evidence that numerous Chinese compa- that numerous anecdotal evidence There is , 36 C 153 154 155 156 157 151 152 M K biblio/zeller6.html. Global Servs., Somers, N.Y.), Mar. 2006, at 5, have suggested that informal alternative dispute resolution mechanisms disad- have suggested that informal alternative arguments that the alternative dis- vantage subordinate groups, notwithstanding and relaxed venues have a leveling effect pute resolution mechanism’s lower costs on power differentials. com/services/us/imc/pdf/g510-6269-going-global.pdf. for Chinese Companies on the World Stage ysis and characteristics of a country’s legal infrastructure . . . affect and characteristics of a country’s its prospects for economic prosperity.” pute resolution mechanism provides a more appropriate forum for cross border pute resolution mechanism provides a between people from drastically differ- commercial business-to-business disputes ent cultures. bias, can potentially interfere with the economic development of interfere with the economic bias, can potentially the United States. shown that investors Scholarly research has countries which legal differences and prefer are sensitive to laws to them. have favorable There is anecdotal evidence that Chinese companies are hesi- There is anecdotal evidence that States because they consider the tating to invest in the United States unfriendly. legal environment of the United 2009] to re- must be reviewed “domestic law out that have pointed practices.” step with best main in \\server05\productn\P\PIR\21-1\PIR101.txt in “my way or the highway,” it will risk becoming irrelevant in highway,” it will risk becoming in “my way or the the global community. that clearly favor domestic parties cannot be legitimate in the be legitimate parties cannot favor domestic that clearly community. business international resolution clauses on alternative dispute nies are now insisting of submitting with U.S. companies instead in their contracts U.S. law. themselves to the ment has been encouraging Chinese companies to go global. ment has been encouraging Chinese capital can move around the globe and select jurisdictions capital can move around the friendly to them. C Y 26570_pir_21-1 Sheet No. 21 Side A 04/08/2009 15:17:04 A 04/08/2009 21 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 21 Side B 04/08/2009 15:17:04 30 M K C Y [Vol. 21:1 U.S. con- 6-APR-09 12:15 162 The resulting 164 159 Seq: 30 Seq: U.S. contract law le- note 4, at 619. note 4, at 591. 161 supra Armed with its team of with its team Armed supra note 4, at 603. 158 Legitimacy, Globally: of The Incoherence unknown . L.J. 20, 21 (May 2003) (pointing out an . L.J. 20, 21 (May 2003) (pointing out supra US As Professor Kim pointed out, at- As Professor Kim . B 163 160 ICH . 733, 743-45 (2001). note 109, at 74; Lim, EV 82 M note 4, at 808; Lim, PACE INT’L L. REV. The Truth About Arbitration: Enforcing Consumers’ and The Truth About Arbitration: Enforcing supra supra note 7, at 530. note 7, at 567. note 7, at 530; Lim, supra supra supra http://www.michbar.org/journal/pdf/pdf4article564.pdf. Schmitz, , 69 UMKC L. R Eisenberg, Kim, Michael H. Davis & Dana Neacsu, See Kim, Kim, Keith Maurer, One may arguably justify maintaining the fiction of “free- justify maintaining the fiction One may arguably current U.S. contract law’s In addition to being unfair, the In addition, as pointed out by Professor Kim and some Kim and out by Professor as pointed In addition, 160 161 162 163 164 158 159 Free Trade Practice, Global Economics and Their Governing Principles of Political Economy Employees’ Legal Rights, dom of contract or individual autonomy” perpetuated by U.S. or individual autonomy” perpetuated dom of contract of stability, reli- domestic contexts for the sake contract law in ance and predictability. also undermines U.S. contract focus on the written contract the intent of the parties to the law’s ultimate goal to ascertain contract. As Professor Kim pointed out, certain “[f]ormalistic parol evidence rule and the four evidentiary rules, such as the by the party who has corners rule,” can be easily manipulated resources. better access to lawyers and more other scholars, U.S. contract law is unfair to people with differ- to people with law is unfair U.S. contract other scholars, in- the existing this can perpetuate values, because ent cultural other companies from companies and between the U.S. equities cultures. with different countries available at 30 \\server05\productn\P\PIR\21-1\PIR101.txt tract law should not avoid its responsibility for fairness either tract law should not avoid its domestically or globally. U.S. trained lawyers, a U.S. company will be at a clear advan- a U.S. company will be U.S. trained lawyers, company, as into a contract with a Chinese tage when entering the case example.demonstrated by problem is exacer- This to hire equiva- sometimes prohibitive, costs bated by the high, experienced U.S. lawyers. lently trained and tempting to maintain such a fiction in cross cultural contexts such a fiction in cross tempting to maintain quo in favor of those with more would perpetuate the “status power.” resources or greater bargaining gitimizes the inequity by maintaining this fiction. gitimizes the inequity by maintaining written agreement is sometimes more of an attempt to manipu- written agreement is sometimes American Bar Association report that “100 million Americans are effectively American Bar Association report that cost of lawyers and the lawsuit system.”), barred from seeking justice by the high https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 21 Side B 04/08/2009 15:17:04 B 04/08/2009 21 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 22 Side A 04/08/2009 15:17:04 31 a- 31 166 6-APR-09 12:15 Professor Donald Seq: 31 Seq: Professor McCon- 171 This position assumes 165 168 169 China has had only two de- China has had 167 unknown note 7, at 429-31. note 87, at 109-10. supra note 23, at 240, 265. supra supra Sharma, A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL at p. 431 nn. 19-22. Professor LaKritz has pointed out that “nothing sug- Professor LaKritz has pointed McConnaughay, Id. Id. One can argue that the numerous problems that the Chinese legal system See LaKritz, Id. 170 Some may argue that the U.S. contract law paradigm seeks Some may argue that the U.S. One may also question the assumption that the Chinese (or that the Chinese the assumption also question One may 165 166 167 168 169 170 171 M K gests that market equality and transactional autonomy vis-`gests that market equality and more valuable than more tradi- vis government institutions are norms.” tional Chinese transactional to promote transactional autonomy. naughay points out that the “Western legal traditions and val- out that the “Western legal traditions naughay points societies. been adopted wholesale by Asian ues” have not that transactional autonomy is necessary to promote healthy that transactional autonomy economic growth. Some scholars have questioned that assump- tion. Japan, for example, has had “over one hundred years of experi- has had “over one hundred Japan, for example, cultural values civil law,” but traditional ence with Western Japanese behav- a significant role in shaping “continue to play relationships. ior” in commercial 2009] of opposed to a reflection rules as predictable contract late the true intent. the parties’ to do busi- “learn how cultures) will from other different peoples American way.”ness the questioned the have Some scholars of all desirability of “complete westernization feasibility or the commercial practices.” international \\server05\productn\P\PIR\21-1\PIR101.txt Clarke has also questioned whether “a legal order offering sta- Clarke has also questioned whether and contract [characteris- ble and predictable rights of property the developed countries of the tics] . . . of the legal systems of Rights Hypothesis) is necessa- West” (what he refers to as the have with implementation and enforceability are symptoms of incompatibility. cades of experience trying to set up a functioning legal system. trying to set up a functioning cades of experience with some le- has adopted extensive legislation Although China western civil law and common gal concepts borrowed from the open question whether those law traditions, it is an entirely with the Chinese cultural transplanted concepts are compatible can supplant deep rooted cul- values, let alone whether they tural values. Moreover, there is also the question of the desira- bility of transplanting legal concepts. C Y 26570_pir_21-1 Sheet No. 22 Side A 04/08/2009 15:17:04 A 04/08/2009 22 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 22 Side B 04/08/2009 15:17:04 32 M K C Y Ole supra AW L [Vol. 21:1 6-APR-09 12:15 LaKritz, See generally see ONTRACT Seq: 32 Seq: U.S. C ONTRACTS C Therefore, to be morally con- Therefore, to be 175 There has also been extensive There has also unknown QUITABLE 174 173 Nonetheless, it represented the first step. L.J. 64, 66-70 (2000). E ULTURAL Id. ASIN . L. 379, 380 (2005). to a The CISG only applies C . L. 89, 91-92, 110-11 (2003); A Trojan Horse Behind Chinese Walls? Problems A Trojan Horse Behind Chinese Walls? ORE . B OMP OMP M AC ROSS Economic Development and the Rights Hypothesis: The Economic Development and the Rights C PACE INT’L L. REV. . J. C . J. C M M FOR OWARD A , 53 A , 18 UCLA P , 51 A V. T 172 CISG and its Followers: A Proposal to Adopt Some International Principles Donald C. Clarke, the worldwide efforts to urge This comparison is not intended to criticize Matthew C. Stephenson, U.S. domestic contract law to ac- This paper focuses on the adaptation of How should U.S. contract law acknowledge the impact of How should U.S. contract law Finally, the U.S. government and academic communities and academic the U.S. government Finally, ART Whether or not the CISG rules equitably address issues related to cross cul- at 381. Some of the topics for the UNICTRAL 2007 Congress, held in July 172 173 174 175 P Lando, China Problem and Prospects of U.S. Sponsored Rule of Law Reform Projects in the People’s Re- and Prospects of U.S. Sponsored Rule of public of China of Contract Law cultural differences on contracting behavior?cultural differences on contracting This is a difficult question without an easy answer. have long criticized China’s human rights record. human rights criticized China’s have long China has val- rules which reflect the Anglo-American been urged to adopt of powers. of the press and separation ues such as freedom adapt China’s do- States is urging China to Clearly, the United values. mestic laws to western tural contracts or whether the U.S. courts are applying CISG equitably is beyond the scope of this paper.UNIDROIT adopted the In 2004, the Governing Council of new edition of the UNIDROIT Principles of International Commercial Contracts. Id. Id. note 23, at 265. 32 the only growth or significant economic to achieve rily required contract of effective enforcement to provide mechanism rights. \\server05\productn\P\PIR\21-1\PIR101.txt discussion about a “‘Rulediscussion about reform of Law Initiative’ to help China institutions.” its laws and legal sistent, the United States should be willing to adapt its own do- States should be willing to sistent, the United cultures in this the concerns from other mestic laws to address environment. increasingly global subset of cross cultural contracts. China to improve its human rights record. Rather, it is meant to support the need laws to nurture a more harmonious global for critical self examination of domestic this planet with us. environment for all countries which share knowledge cultural differences. One question is whether this issue should be re- solved at the global level. At the global level, there has been extensive activity and and feasibility of harmonizing contract academic debates about the desirability law. on Contracts for the International Sales of In 1980, the U.N. Convention conference organized by United Na- Goods (“CISG”) was adopted in a diplomatic Law (“UNCITRAL”).tions Commission for International Trade https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 22 Side B 04/08/2009 15:17:04 B 04/08/2009 22 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 23 Side A 04/08/2009 15:17:04 33 33 . 677, EV She ar- . L. R 6-APR-09 12:15 177 A , 65 L Contemplating a Civil Seq: 33 Seq: 10th Biennial Conference of the As Professors Korobkin and 181 unknown Wayne R. Barnes, Under Professor Kim’s “dynamic Under Professor 178 note 4, at 1073. See also supra note 7, at 507-08, 565-68 (providing in detail a set of guidelines . 87 (2001). EV Professor Kim suggested that contracting parties be suggested that contracting parties Professor Kim Professor Kim proposed, among others, that the among others, Kim proposed, Professor supra A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL at 567. 179 180 . L. R 176 Kim, Id. Id. Id. Id. Korobkin & Ulen, ICK This paper proposes a differentiated approach toward cross a differentiated approach This paper proposes Recognizing the social changes brought on by increased changes brought the social Recognizing 176 177 178 179 180 181 M K 734-53 (2005) (discussing the international efforts on contract law).734-53 (2005) (discussing the international It is beyond pros and cons of global harmonization of the scope of this paper to examine the a set of international contract principles contract law and whether there exists which accommodate different cultural values. In any event, global practices do not a more equitable approach domestically. absolve the United States of fashioning for a dynamic approach to contract interpretation). Law Paradigm for a Future International Commercial Code Law Paradigm for a Future International International Academy of Commercial and Consumer Law: Creating International International Academy of Commercial and Do We Need a Global Commercial Code? Legislation for the Twenty-First Century: cultural contracts. treat cross cultural U.S. contract law should of contracts.contracts as a separate category may Although it to have one set of contract be highly desirable and convenient to all contracts, universality law principles to apply universally “universality is inconsistent may need to be compromised where with sophistication and realism.” cross border transactions and the use of standard form agree- of standard form and the use transactions cross border ments, 2007, dealt with The Future of Contract Law Harmonization; Uniform Contract 2007, dealt with The Future of Contract 21st Century; Electronic Commerce: Be- Law in Practice; Carriage of Goods in the yond Functional Equivalence. Some scholars have raised the issue of creating a Global Commercial Code. Michael Joachim Bonell, 106 D 2009] \\server05\productn\P\PIR\21-1\PIR101.txt approach,” the focus is on ascertaining the true intent of the focus is on ascertaining the true approach,” the parties. Ulen suggest, “legal policymakers are better off foregoing Ulen suggest, “legal policymakers a collection of situation-spe- universality and, instead, creating allowed to present evidence of prior negotiations and the sur- evidence of prior negotiations allowed to present intent of the to prove the true rounding circumstances parties. traditional formalistic contracttraditional the parol ev- “such as principles be abandoned. corners rule” and the four idence rule gued that these rules “ignore the significance of preexisting rules “ignore the significance gued that these and wrongly as- nonverbal communication relationships and certainty.” sume linguistic C Y 26570_pir_21-1 Sheet No. 23 Side A 04/08/2009 15:17:04 A 04/08/2009 23 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 23 Side B 04/08/2009 15:17:04 34 M K . C Y EV . L. R [Vol. 21:1 186 RIM . 843 (2000) 6-APR-09 12:15 EV . C M L. R S ’ , 43 A OHN Seq: 34 Seq: . J T The party would be , 74 S 185 Some U.S. courts have al- Some U.S. courts The Aftermath of MCC-Marble: Is This 183 unknown Paolo Torzilli, PACE INT’L L. REV. Culture as Justification, Not Excuse In the contract law context, instead of mitigat- In the contract 184 see generally 182 at 1321. For a more lengthy discussion of the parol evidence rule and why it should Id. Elaine M. Chiu, Id. Parol Evidence Rule and the Plain A CISG advisory opinion states that the This two phased approach would allow U.S. courts to con- This two phased approach would This culturally differentiated contract approach consists of approach consists contract differentiated This culturally Once a party demonstrates the existence of cultural differ- Once a party demonstrates the , October 23, 2004. Rapporteur: Professor Richard Hyland, Rutgers Law , October 23, 2004. Rapporteur: Professor 186 182 183 184 185 1317, 1320 (2006) (providing a detailed discussion about the use of evidence of 1317, 1320 (2006) (providing a detailed minority cultures in the criminal law context). (discussing the parol evidence rule and providing reasons for abandoning it). the Death Knell for the Parol Evidence Rule? sider cultural differences when those cultural differences have sider cultural differences when behavior.impacted the parties’ contracting U.S. It would serve ascertaining the parties’ intent contract law’s ultimate goal of two steps.to proffer evi- allow parties courts should First, U.S. of cul- the existence to demonstrate cultural differences dence of tural differences.the adoption of a . . . Scholars have “urged cultural defense” — of minority cultures the use of evidence — of cultural plural- law context for the “twin goals in the criminal justice.” ism and individualized School, Camden, N.J. U.S.A. CISG would allow On its face, it appears that the consideration of cultural differences in contracting behavior in a subset of con- tracts involving cross border transactions. Can the CISG effectively address the Chinese challenge? This topic is beyond the scope of this article. Parol Evidence Rule, Plain Meaning Rule, Contractual Merger Clause and the Parol Evidence Rule, Plain Meaning Rule, CISG 34 legal of discrete in the analysis useful cific minitheories problems.” \\server05\productn\P\PIR\21-1\PIR101.txt lowed criminal defendants to assert culture as a defense, defendants to assert culture lowed criminal general have va- for criminal defendants in although the results ried greatly. ing, excusing or justifying a crime, cultural evidence would be justifying a crime, cultural evidence ing, excusing or current U.S. con- to pierce the magic shield the used as a sword over a written contract. tract law has cast interpretation and construc- ences, then the traditional contract tion doctrines would not apply. permitted to introduce evidence of all relevant negotiations in permitted to introduce evidence of the parties. Numerous order to ascertain the true intent parol evidence rule be aban- scholars have proposed that the its reason for existence. doned because it has outlived be abandoned, Meaning Rule do not apply to contracts under the CISG.Meaning Rule do not apply to contracts CISG-AC Opinion No. 3, https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 23 Side B 04/08/2009 15:17:04 B 04/08/2009 23 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 24 Side A 04/08/2009 15:17:04 35 35 Un- 187 6-APR-09 12:15 Seq: 35 Seq: . L. 177 (1999) (tracing the develop- GRIC unknown Adhesion Contracts, Bad Faith, and Eco- J. A ONCLUSION C RAKE , 4 D A GLOBAL CHALLENGE TO U.S. CONTRACT LAW U.S. CONTRACT TO CHALLENGE A GLOBAL J.W. Looney & Anita K. Poole, In conclusion, globalization has brought many changes and This differentiated approach has precedent in the existing has precedent approach This differentiated Admittedly, this differentiated approach would allow evi- differentiated approach would Admittedly, this the predictability As the above case example demonstrates, 187 M K nomically Faulty Contracts challenges. Different peoples and remote cultures have come 2009] a party which favors current approach, than the more faithfully is well and who American values the Anglo who shares detriment to the contract law principles to manipulate equipped from other cultures. of parties framework.U.S. contract law with the advent For example, have adapted of form agreements, U.S. courts and increased use and developing “contract of adhesion” concept by adopting the adhesion.” addressing those “contracts of special rules in \\server05\productn\P\PIR\21-1\PIR101.txt like the dynamic approach of Professor Kim, a differentiated ap- approach of Professor Kim, a like the dynamic the existing U.S. cross cultural contracts leaves proach toward intact.contract law framework the subsets of the It affects only where cultural differences matter. written contracts to reach terms show that the parties intended dentiary proof to agreement.different from those in the written reduce This can one of the factors always cited the predictability in a U.S. court, interpretative principles. in support of the classic contract case of cross cultural contracts However, predictability in the comes at the expense of fairness. is to Perhaps, a better balance extent for the sake of fairness. reduce predictability to a limited was easily manipulated by a le- sustained by U.S. contract law at the expense of the Chinese gally sophisticated U.S. company party. If U.S. contract law refuses to take into consideration on contracting behavior in cultural values and their impact predictable result is that the cross cultural contexts, the only get the short end of the stick party from another culture will where U.S. contract law is concerned. the This conflicts with fundamental notion of fairness. law It is time for U.S. contract between predictability and fair- to search for a proper balance other cultures. ness that includes peoples from ment and history of adhesion contracts doctrine). C Y 26570_pir_21-1 Sheet No. 24 Side A 04/08/2009 15:17:04 A 04/08/2009 24 Side Sheet No. 26570_pir_21-1 26570_pir_21-1 Sheet No. 24 Side B 04/08/2009 15:17:04 36 M K C Y [Vol. 21:1 6-APR-09 12:15 Seq: 36 Seq: unknown PACE INT’L L. REV. U.S. contract law in its current form is inadequate in the is inadequate current form law in its U.S. contract 36 manner.unprecedented in an closely together a result, we As more interdependent.have become re- The interdependence princi- rules and formulating domestic vigilance in quires more and/or borders. across cultures are equitable ples that age of globalization. reflect the val- Its underlying assumptions American society.ues of an Anglo not apply to other It does values and priorities.cultures with different Therefore, apply- can be unfair law to cross cultural contracts ing U.S. contract goal of en- the U.S. contract law’s ultimate and may undermine of the contractual parties.forcing the intent A differentiated cultural differ- that considers substantial contract law approach without threaten- to remedy the unfairness ences may be able of U.S. contract law. ing the entire framework \\server05\productn\P\PIR\21-1\PIR101.txt https://digitalcommons.pace.edu/pilr/vol21/iss1/1 26570_pir_21-1 Sheet No. 24 Side B 04/08/2009 15:17:04 B 04/08/2009 24 Side Sheet No. 26570_pir_21-1