Anti-formalism and commercial law by lanyuehua



  Professor John Glover
     RMIT University
   Melbourne, Australia
        Change in the world’s developed
        Electronic communication and
          computers replacing paper-based
        Production of services, by value, is
          eclipsing the value of goods
        Effect on commercial law.
RMIT University           Slide 2
 The significance of title and ownership in
  common law jurisdictions.

 Reliable means of proving ownership is
  an important feature of commercial law

 How do you prove ownership of an
  apartment, a car . . . or
  shares/securities transferred
RMIT University      Slide 3
          Electronic title:

          US Uniform Commercial Code (“UCC”)
           and Uniform Electronic Transactions
           Act 1999 –

                  Title = control of an electronic
                  document (including through agents).

                  A vague and indeterminate criterion?

RMIT University                  Slide 4
          Can “control” of an electronic dealing
           – a momentary sequence of
           electrons – ever match the certainty
           of documentary titles?

          Do electronic transactions have any
           hallmarks or distinguishing features?

          Surely fraud in an “open” system will

RMIT University            Slide 5
          But the UCC electronic title protocol
           will doubtless work effectively.

          Many thousands of businesses now
           rely on the new legal regime for
           electronic commerce.

          This is the realm of praxis – where
           solutions have to work.

RMIT University             Slide 6
       Electronic commerce changes typified in
         the UCC’s amended definition of “good

       Requiring the “observance of reasonable
        commercial standards of fair dealing”
        in place or mere “honesty”.

       More woolly words – or is the benchmark
        for commercial interaction changing?

RMIT University         Slide 7
          More about electronic title systems:

          Contrasting “closed” systems of
           electronic title – where participating
           members agree to play by the rules.

                  Systems of land title registration are
                  “going electronic” all over the
                  developed world – these are closed
                  systems, too.

RMIT University                   Slide 8
          How the prevalence of “closed”
           electronic title systems make the
           UCC’s “open” system based in control
           all the more remarkable.

          But electronic money is different.
          How “DigiCash” or “ECash” has not
            become fully negotiable yet – like
            notes and coins.
          Legal doctrine is causing problems.

RMIT University            Slide 9
          What do these examples show?

          • That the form of commercial
            interaction is changing;
          • Exchange is becoming more fluid;
          • The system requires higher levels of
            trust and reciprocity between
            participants in order for it to work.

RMIT University            Slide 10
          Commercial law has adapted to the
           new regime of production and
                  In structural terms:

                  standards and principles are taking
                  the place of rules and regulations in
                  common law commercial law

RMIT University                   Slide 11
          “Mechanical jurisprudence” of rules is in
                  e.g., consider the size of the rule-book
                  needed for regulation of UCC
                  electronic title.
                  Rules could not cover all the
                  possibilities for fraud - requiring
                  “reasonableness and conduct-
                  evaluation are the only way that the
                  system could be policed.
RMIT University                   Slide 12
          Ways of teaching commercial law and
           argument in commercial courts has
           also changed.

                  Commercial lawyers reason

                  Legal outcomes are preferred
                  according as they advance or retard

RMIT University                  Slide 13
          Changes in society and its commercial
           law – accompanied by a moral
                  Is robust individualism dying?
                  Is there still a capitalist “right to be
                  Does the law increasingly require
                  people to make sacrifices and

RMIT University                     Slide 14
          Legal norms have a more good-
            neighbourly aspect.

          The idea that justice inheres in
           outcomes rather rules for action is

                  Max Weber wrote about the
                  phenomenon in the early 20th

RMIT University                 Slide 15
          Weber believed that trusting was
           increasingly required by modern
           commodity exchange.

                  Weber said that regulation of
                  commerce had to be through
                  categories which expressed
                  meanings and intention – and not a
                  “mechanical jurisprudence” of rules.

RMIT University                  Slide 16
          Vehicles for anti-formalism differ in
           different countries.

                  In the US, change in commercial law
                  led by statute.

                  In Britain, Australia etc caselaw has
                  been more significant.

RMIT University                   Slide 17
          An example of US anti-formalism in
           commercial law:

                  Article 242 of the UCC – the multi-
                  purpose “unconscionability” criterion
                  for disallowing commercial

                  The age of unrestrained self-interest
                  has passed.

RMIT University                  Slide 18
          How the commercial law in non-US
           common law countries prohibits
           aspects of transactions which are
           morally objectionable.

                  e.g., estoppel doctrine require
                  commercial actors to be consistent and
                  not deceive others.

RMIT University                  Slide 19
          e.g., the fiduciary relationship and
            maintaining the social value of trust.
                  How this is even efficient –
                  well-ordered commercial systems
                  work better if clients trust attorneys,
                  suppliers can trust distributors etc

RMIT University                   Slide 20
          Is this the “reclusive inner morality of
            capitalism” – a “moral territory”
          • commercial actors are regularly
            acknowledged to be unequal.
          • people regularly promise to act and
            do business in the interests of

RMIT University             Slide 21
RMIT University   Slide 22

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