The Leadership Moment

Post has two assignments

1:Art 25 of the CISG fundamental breach, and maybe try to apply the subjective and objective teats for how much damage is needed to require a fundamental breach.

The fundamental breach standard under Article 25 is both important and complex (with much commentary and many decisions interpreting it). It is certainly an area worthy of a seminar paper, and you have suggested an interesting specific focus on whether the amount of loss that “counts” for purposes of determining whether a breach is fundamental should be measure “objectively” (what losses a party would “normally” suffer from the breach) or subjectively (what losses the actual, particular aggrieved party suffered from the breach). This issue is certainly related to, and be indistinguishable from, a matter we never had the chance to talk about in our seminar discussion of Article 25. Article 25 specifies that the only losses that “count” for purposes of determining a fundamental breach are those that were “foreseeable” by the breaching party (or by a reasonable party in the breaching party’s position). That may not be quite the same as saying that losses must be measured from an “objective” view under Article 25 – after all, losses that would not normally flow from the breach might be foreseeable to the breaching party if the aggrieved party told the breacher about special circumstances that would cause special losses from a particular kind of breach (for example that an aggrieved buyer would suffer great loss from even a short delay in delivery). But the foreseeability requirement of Article 25 has to be considered in connection with your issue.

One matter on which you will find discussion in the commentaries is the point of time at which what is foreseeable to the breaching party should be determined for purposes of Article 25. Most commentators suggest that what was foreseeable to the breaching party should be determined as of the time the contract was concluded – i.e., information the breaching party learns after that point (such as that a minor delay in delivery will cause great loss to the buyer) should not “count” for purposes of Article 25. The other place where there is a foreseeability requirement in the CISG – Article 74 – specifies that foreseeability under that provision is to be determined at the time of contract conclusion.

I’m not so sure, however, that Article 25 foreseeability is to measured at contract conclusion. For one thing, I think there are indications in the drafting history (the travaux preparatoires) that the drafters intentionally left open the time for determining foreseeability under Article 25, hoping later authorities would figure out the best time. My own view is that the foreseeability requirements in Articles 25 and 74 have quite different purposes, which may suggest measuring foreseeability at different points under the two provisions. The purpose of requiring foreseeability in Article 74 is to limit the amount of damages a breaching party is liable. This is a matter of financial risk, and it is appropriate to say you should only be charged with damages for losses foreseeable at the time of contract conclusion because that is when the breaching party can adjust the terms of the contract to reflect the financial risk it is taking on. For example, if a seller only learns after the contract was formed that even a short delay will cause the buyer major losses, the price has already been set and the seller cannot easily cover the extra costs of, e.g., a premium delivery service that will make sure the goods arrive on time.

The purpose of Article 25, in contrast, is to identify those breaches that have so damaged the contractual relationship that the aggrieved party should not be forced to continue in the contract. If a breaching party knows, because of post-contract formation information, that a minor delay in delivery will cause major problems for the buyer, but it goes ahead and delivers late anyway, I can see that the relationship could be so severely damaged by the breach that we shouldn’t force the aggrieved party to continue – even though, under Article 74, the breaching party would not be liable in damages under Article 74 for the buyer’s losses because those losses were not foreseeable when the contract was concluded. That might suggest to me that foreseeability of losses under Article 25 should not always be measured at the time of contract conclusion, but sometimes should be measured at the time of breach (or perhaps the last point in time it was reasonably possible for the breaching party to avoid the breach).

2:John Gutfreund and Solomon Brothers

Order Description

TEXT BOOK: The Leadership Moment: Nine True Stories of Triump and Disaster and Their Lessons for Us All

Answers should be 4 sentences per question (not too long)

1) What were the ethical principles used by John Gutfreund and Warren Buffet, when each acted as CEO of Salomon Inc.? How did the applied principles impact the organization?

2) What do you think was the basis for Gutfreud’s lack of action when he received the report of Mozer’s unauthorized February and May bids? Was this an ethical failure or a result of organizational culture?

3) How did Gutfreud’s leadership style of not sharing decisions or disseminating information create a silo effect within the organization and create the current crisis? Provide specific examples.

4) In the end, how was Gutfreund most effective as the leader of Salomon Inc.? What style of leadership did Gutfreund show when he enlisted the help of Warren Buffet to take control of the company?

5) How would the organizations culture change if Mozer was fired after learning of the 1st incident?

breach