Commercial Norms, Commercial Codes, and International Commercial Arbitration

By Drahozal, Christopher R. | Vanderbilt Journal of Transnational Law, January 2000 | Go to article overview

Commercial Norms, Commercial Codes, and International Commercial Arbitration


Drahozal, Christopher R., Vanderbilt Journal of Transnational Law


ABSTRACT

This Article examines whether the incorporation of commercial norms into commercial codes is an appropriate law-making strategy. Most commercial codes, including the Uniform Commercial Code, regard common business practices as an important source for courts to consider when resolving contract disputes. Yet some scholars criticize this incorporation strategy, arguing that reliance on commercial norms is often inappropriate and may distort the true nature of the parties' agreement. Reliance on commercial norms does restrict the ability of contracting parties to allocate part of their agreement to extra-legal means of enforcement. Nevertheless, this Article asserts that those costs may be outweighed by the benefits of incorporating commercial norms into commercial codes.

The Article looks to international commercial arbitration as a source of evidence for evaluating the appropriate role of commercial norms in resolving contract disputes. This evidence is helpful to answering the question whether the costs of relying on commercial norms outweigh the benefits because international arbitration is consensual, resembles adjudication in public courts in important ways, and is a highly competitive business. The author finds that, generally, international commercial arbitration relies on commercial norms to resolve such contract disputes. Although the evidence presented is not conclusive, it does suggest that the benefits of reliance on trade usages (but not prior dealings between the parties) exceed the costs from any distortion of the parties' agreement.

I. INTRODUCTION

Modern commercial codes treat common business practices--as reflected in usages of the trade as a whole and in the prior dealings of the parties to the contract--as an important source to which courts can turn in resolving disputes about the parties' obligations under their agreement. Article 2 of the Uniform Commercial Code (UCC) provides that usages of trade, courses of dealing, and courses of performance "give particular meaning to and supplement or qualify terms of an agreement."(1) The rationale of the drafters of Article 2 was that such norms of commercial behavior are an important source of rules governing the parties' behavior and that a commercial code should incorporate those norms when available.(2) The Convention on Contracts for the International Sale of Goods (CISG) similarly provides that the "parties are bound by any usage to which they have agreed and by any practices which they have established between themselves," including any "usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned."(3)

Whether incorporation of commercial norms into commercial codes is an appropriate law-making strategy has become the subject of much scholarly debate.(4) Criticizing the incorporation strategy is Professor Lisa Bernstein, who argues that commercial norms may reflect practices that seek to preserve the relationship of the parties ("relationship-preserving norms") rather than the norms the parties themselves would choose when their relationship essentially is at an end ("end-game norms").(5) The costs from such an inappropriate reliance on commercial norms, Bernstein argues, may outweigh the informational value of norms to generalist judges in understanding the parties' agreement. She finds evidence in support of her thesis in the treatment of trade usages and parties' dealings by arbitrators resolving disputes under the auspices of the National Grain and Feed Association (NGFA). NGFA arbitrators, Bernstein concludes, use a much more formalistic approach to resolving contract disputes than do judges applying modern commercial laws. This more formalistic approach gives clear precedence to the parties' contract terms and to the trade rules of the association over uncodified trade practices and dealings of the parties. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Commercial Norms, Commercial Codes, and International Commercial Arbitration
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.