chiseler and known corner cutter and chiseling and palming off

I got derailed again today on the way to a potentially fruitful topic, and so I need to begin with a confession regarding this derailment. I was sitting down this morning for my daily feast, this time on the ideass informing the mind of Karl Llewellyn in the late 1930s/early 1940s while he was coming up with the concept of a revised Sales Act (the old Uniform Sales Act was from 1906) which would eventually lead to Article 2 of the Uniform Commercial Code. Allen R. Kamp's article on this topic in the 1998 SMU Law Review got me started very helpfully. He pointed out three shaping influences on Llewellyn: (1) the anthropological notion of folkways as key to understand usage of trade; (2) the need to equalize the bargaining power of consumers and sellers; and (3) his desire to prevent "chiseling" among merchants. Kamp pointed out that this concept of "chiseling" or the "chiseler" was, for pre-Keynesian economists, a central economic problem and primary cause of the Depression (51 SMU L R (1998) at 287). Why?

"A prevalent view was that chiseling created a vicious cycle--it caused the lessening of the quality of goods and cheating, leading to the paying of lower wages, decreased demand, overproduction, and finally, to additonal chiseling. This process was characterized by chaotic fluctations in production, shoddy goods, ruinous cut-throat competition, and wages too low to support workers and their families in minimum standards of health and welfare" (Id. and literature cited at n. 56).

I smiled to myself as I read this quotation. I smiled not because I doubted the reality of "chiseling" in the 1930s but because the word "chiseling" had apparently become such a term of art in economic, political and legal thinking at that time that it could be conjured up at will to terrify. I wondered for a moment if any artist had depicted "The Chiseler." But once I go down this road I enter into a sort of dream-state, and I know I won't come down to earth for a while. Here is how this simple reference to chiseling got me sidetracked.

Mental Wandering

I began to think of other phrases from the Article 2 of the Uniform Commercial Code, shaped by Llewellyn, that might be reflective of this "anti-chiseler" sentiment. I recalled the phrase "known corner-cutter" from 2-609 Official Comment 4 (probably not your bedtime reading). In that section, which relates to what is called "adequate assurance of due performance," the principle is presented that if one party is unsure whether the other will perform his/her contract, s/he is entitled to ask the performing party for "adequate assurances" of on-time performance. But what constitutes an adequate assurance in return? Llewellyn and others no doubt mulled over this problem for months, and decided that it depended on the reputation of the seller/performer. If a "seller of good repute" promises to give the matter his attention, this is sufficient assurance to fulfill the statutory demand. If, however, a similar promise is given by a "known corner-cutter," it might be insufficient.

Aren't we into a world of fairy tales and tinsel when the Code speaks this way? 'Will the known corner-cutter please stand up?' What is the test of a "known corner-cutter?" Do you check out his lawn? Ask his associates? See if he has a supply of chisels in his shop? We are in the realm of word pictures, which is a funny place to be for a scholar, like Llewellyn, who thought that he was pursuing what he called a "realistic jurisprudence."

Returning To Kamp's Article

I decided to continue reading Kamp's article to see how these three influences on Llewellyn might have shaped his drafting of a new Sales article. One of the ways that Llewellyn sought to eliminate the "chiseler" or "known corner-cutter" was to try to incorporate trade association agreements into the law. That is, if a trade association was pro-active and laid out the expectations for honest dealing in its industry, and these expectations were codified in a statutory form, then Llewellyn could get rid of the chiseler once and for all. Indeed, the National Recovery Administration, established pursuant to an early New Deal statute (June 1933), was set up to empower trade groups to regulate themselves. The statute was declared unconstitutional in the Schechter case from 1935 in the Supreme Court, but the idea of empowering trade groups (like merchants, in the case of Article 2) became firmly fixed in Llewellyn's mind as he worked on his own Sales Act.

But rather than plunging ahead to see how Llewellyn's draft of a new Sales Act developed in the 1940s, I wanted to look at the Schechter decision of the Court. I recall reading excerpts from it in law school (that is all you really do in law school--read excerpts. It is almost as if we law school faculty are so obsessed with what I call the "myth of coverage"--to "get through" so much material in a class-- that we never really pause and understand any one thing thoroughly), but I didn't remember anything about the case. So I decided to click on it and spend a few hours wrestling with it. I go over that case here. What struck me about the case is that when Chief Justice Hughes gets to the important point of the opinion, whether the statute authorizing the National Recovery Administration exceeded Congress' constitutional power, he looks to the language of the Recovery Act and sees that it provides for fair competition. But what is fair competition? Well, the common law knows of "unfair competition," which is forbidden. What is the technical meaning of unfair competition, defined in strict legal terms by the Chief Justice of the United States?

"Primarily, and strictly, it relates to the palming off of one's goods as those of a rival trader" (295 US at 531).

Conclusion

Oh-oh, I thought. Here we have the greatest lawyers of the age speaking in terms of "chiseling" and "known corner-cutters" and "palming off" to get across their central legal concepts. I think I have to take a detour through some of those words.

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