Judicial Incorporation of Trade Usages: A Functional Solution to the Opportunism ProblemConnecticut Law Review (2006)
AbstractThis Article argues that the strategy of rejecting trade usages unless they are part of the express contract is too rigid. The rejection is premised on an overly narrow cost/benefit analysis that fails to account for the functional role that such usages may play in curbing opportunistic behavior and thereby increasing gains from trade and overall welfare. Plain meaning and incorporation must each be evaluated to see how each one can achieve the parties’ presumed instrumental goals of curbing opportunism—the “hold-up” game. Decision makers should also consider the particular reasons why parties failed to include the trade usages n their express contract. Some of the reasons for omission might argue for and some against norm incorporation. The incorporation decision should also depend on assessing the critical structural factors that make self-enforcement of trade practices possible. After proposing a taxonomy for assessing the normative issue of incorporation the Article examines case law. It suggests that the divergences can be explained by whether invocation would achieve the parties’ functional goal of reduced opportunism. The Article concludes by suggesting that the taxonomy proposed here helps to overcome some past objections to incorporation strategy.
- Trade Usage
Publication DateDecember, 2006
Citation InformationJuliet P Kostritsky. "Judicial Incorporation of Trade Usages: A Functional Solution to the Opportunism Problem" Connecticut Law Review Vol. 39 Iss. 2 (2006)
Available at: http://works.bepress.com/juliet_kostritsky/5/