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could be used more extensively and beneficially. This is where the proactive approach can play a role.

Part II of this chapter introduces the proactive law approach. Part III discusses how it can be applied to the CISG and cross-border contracting and highlights the need to increase the trading community’s awareness of and interest in the CISG. Part IV proposes an action plan that encourages the legal community to use the existing CISG case law and other resources to recognize the root causes of legal disputes in order to prevent their occurrence. Part V proposes the use of visualization – adding matrices, tables, or graphics to supplement text – to assist in the understanding of legal information in order to use law proactively. The chapter concludes by calling on practitioners and scholars to join in a visualization project, making the CISG work, with the goal of turning the core content of the CISG and related resources into a trader-friendly, visual format, so as to enhance communication and collaboration across borders, cultures, and disciplines.

II. Proactive Law Approach

Traditionally, the steps in providing legal care have resembled those of medical care: diagnosis, treatment, and referral – all steps that happen after a client or a patient has already incurred a problem. In the practice of medicine, the emphasis is increasingly on preventing illnesses before they occur. Even in other professions, such as quality management, prevention is assumed to be more effective than corrective action.

The idea of prevention in the practice of law – or legal foresight – is not new. The proactive approach to law has its origins in preventive law, an approach that emerged in the United States in the 1950s. Professor Louis M. Brown first introduced the concept of preventive law.1 One of Louis Brown’s fundamental premises was that in curative law, it is essential for the lawyer to predict what a court will do, while in preventive law, it is essential to predict what people will do.2 He summarized his legal philosophy as follows: “The time to see an attorney is when you’re legally healthy – certainly before the advent of litigation, and prior to the time legal trouble occurs.” In his treatise Preventive Law, published in 1950, he notes a simple but profound truth: “It usually costs less to avoid getting into trouble than to pay for getting out of trouble.”3 His legacy is carried on through the National Center for Preventive Law4 at the California Western School of Law in San Diego.

1Edward A. Dauer, “The Role of Culture in Legal Risk Management,” in A Proactive Approach, Scandinavian Studies in Law, vol. 49 (ed. P. Wahlgren) (Stockholm: Stockholm Institute for Scandinavian Law, 2006), 93, 93–4, available at http://www.scandinavianlaw.se/pdf/49-6.pdf.

2Id. See, generally, Louis M. Brown, Lawyering through Life: The Origin of Preventive Law (Littleton, CO: Fred B. Rothman & Co., 1986); Louis M. Brown and Edward A. Dauer, Planning by Lawyers: Materials on Nonadversarial Legal Process (Mineola, NY: Foundation Press, 1978); Louis M. Brown, Preventive Law (New York: Prentice-Hall, 1950).

3Brown, Preventive Law, 3.

4National Center for Preventive Law, California Western School of Law, http://www.preventivelawyer.org. See also Thomas D. Barton, Preventive Law and Problem Solving: Lawyering for the Future (Lake Mary, FL: Vandeplas Publishing, 2009) (new emphasis on legal problem solving, the environment in which problems arise, and the need for lawyers to think both preventively and proactively).

A. Proactive Law Movement

Over the past decade, the proactive law movement has gained momentum in Europe. The Nordic School of Proactive Law defines proactive law as:

A future-oriented approach to law placing an emphasis on legal knowledge to be applied before things go wrong. It comprises a way of legal thinking and a set of skills, practices and procedures that help to identify opportunities in time to take advantage of them – and to spot potential problems while preventive action is still possible. In addition to avoiding disputes, litigation and other hazards, Proactive Law seeks ways to use the law to create value, strengthen relationships and manage risk.5

The approach specifically called “proactive law” emerged in the late 1990s. The pioneers were a group of Finnish scholars, practitioners, and quality-driven business clients. The first applications, tools, and training were developed for quality and project managers who wanted to merge quality and risk management principles with forward-looking legal skills to improve the contracting processes in cross-border dealings. Proactive law was thus first applied in proactive contracting in a context where the CISG and contractual risk management plays a major part. The focus of the early development work in contracting was more on business and on quality than on legal issues, and more on practical tools and applications than on theoretical foundations.

Eventually, this led to a series of publications6 and the first proactive law conference, held in Helsinki, Finland, in 2003.7 This and other conferences eventually led to the formation of the Nordic School of Proactive Law,8 a network of researchers and practitioners from Denmark, Finland, Iceland, Norway, and Sweden. The Nordic School has been instrumental in the creation of the ProActive ThinkTank, whose mission is to provide a forum for business leaders, lawyers, academics, and other professionals to discuss, develop, and promote the proactive management of relationships, contracts, and risks, and the prevention of legal uncertainties and disputes.9 The Nordic School’s conferences have led to the publication of four English language books, A Proactive Approach,10 Corporate Contracting Capabilities,11 A Proactive Approach to Contracting

5Nordic School of Proactive Law home page, available at http://www.proactivelaw.org (site is maintained under the leadership of Professor Cecilia Magnusson Sjoberg¨. University of Stockholm).

6See Helena Haapio, “Quality Improvement through Pro-Active Contracting: Contracts Are Too Important to Be Left to Lawyers!,” 52 Proceedings of the Annual Quality Congress 243 (1998), abstract available at http://www.asq.org/qic/display-item/index.html?item=10690&item=10690. The graphical notes (“visualizations”) are on file with the author. See also Helena Haapio, “Preventive Lawyering in International Sales: Using Contract Reviews to Integrate Preventive Law, Risk Management, and Quality,” Preventive Law Reporter 16 (Winter 1997/8) (a later version of the paper).

7Proactive Law Conference in Helsinki in 2003 entitled “Future Law, Lawyering, and Language. Helping People and Business Succeed.” Visualizations from the conference are available at http://www.lexpert. com/en/documents/ProactiveLawConference2003-VisualNotesbyAnnikaVarjonen.pdf.

8Nordic School of Proactive Law Web site.

9ProActive ThinkTank Mission Statement, available at http://www.juridicum.su.se/proactivelaw/main/ thinktank/missionstatement.pdf.

10Wahlgren, A Proactive Approach.

11Corporate Contracting Capabilities, Conference Proceeding and Other Writings (ed. S. Nysten´-Haarala) (Joensuu: University of Joensuu, 2008).

and Law,12 and Proactive Law in a Business Environment.13 Other books and research publications are available in Finnish or Swedish.14

Since the first publications, a number of research and development projects have emerged. Examples include Corporate Contracting Capabilities (CCC),15 Proactive Contracting Processes in Public Procurement – Promoters for Partnership and Coinnovation (PRO2ACT),16 and ProActive Management – ProActive Business Law (PAM PAL)17 (a curriculum development project funded by the EU Commission). More recently, collaborations are ongoing between participants in the Nordic School, the ThinkTank, and legal scholars in the United States. These undertakings have explored the use of the law for competitive advantage and the interaction between law and strategy.18 Figure 44.1 shows some of the major milestones in the trajectory of the proactive movement.

Through the aforementioned research, the meaning of proactive law has been refined and clarified. Proactive law has two dimensions, both of which emphasize an ex ante, forward-looking perspective: (1) a preventive dimension and (2) a promotive dimension. Using the analogy of health care, the proactive approach to law can be said to combine aspects of disease prevention with those of health promotion. The goal is to help clients, both individuals and businesses, stay in good legal health and avoid legal uncertainties, disputes, and litigation. The promotive dimension of proactive law has a positive and constructive emphasis: The goal “is to embed legal knowledge and skills in clients’ strategy

12A Proactive Approach to Contracting and Law (ed. H. Haapio) (Turku: International Association for Contract and Commercial Management and Turku University of Applied Sciences, 2008).

13Proactive Law in a Business Environment (ed. G. Berger-Walliser and K. Østergaard) (Copenhagen: DJOF Publishing, 2012).

14See, e.g., Ennakoiva sopiminen: Liiketoimien suunnittelu, toteuttaminen ja riskien hallinta (ed. S. Pohjonen) (Helsinki: WSOY Lakitieto, 2002) (Proactive Contracting: Planning, Implementing and Managing Risk in Business Transactions); Ex ante: Ennakoiva oikeus (ed. S. Pohjonen) (Helsinki: Talentum Media Oy, 2005) (Ex ante: Proactive Law); Kaisa Sorsa, “Kansainvalisen¨ kaupan arvoketjujen sa¨antely¨. Yhteiskuntavastuun ja ennakoivan oikeuden tarkastelua,” Ph.D. dissertation, Annales Universitatis Turkuensis C 320, Faculty of Law, University of Turku, 2011), available at http://urn.fi/URN:ISBN:978-951-29-4777-5 (Regulation of Global Value Chains: Examining Corporate Social Responsibility and Proactive Law); Antti Tieva, “Pitkakestoisuus¨ kiinteisto¨- ja rakennusalan sopimussuhteissa,” Ph.D. dissertation, Publication TKK-R-VK6, Aalto University School of Science and Technology, Department of Structural Engineering and Building Technology, Espoo, 2010, available at http://lib.tkk.fi/Diss/2010/isbn9789526033860/ isbn9789526033860.pdf (Long-Term Contractual Relationships in the Field of Construction and Real Estate); Laura Kalliomaa-Puha, “Vanhoille ja sairaille sopivaa?: Omaishoitosopimus hoivan instrumenttina,” Ph.D. dissertation, Faculty of Law, University of Helsinki, 2007, available at http://urn.fi/URN: ISBN:978–951–669–753–9 (Suitable for the Old and Sick? Informal Care Agreements as an Instrument for Organizing Care).

15See Corporate Contracting Capabilities (CCC), University of Eastern Finland, http://www.uef.fi/ oikeustieteet/ccc.

16See PRO2ACT, Aalto University, SimLab, http://simlab.aalto.fi/en/research/pro2act/.

17See ProActive Management and ProActive Business Law – Lifelong Learning Programme Curriculum Development Project, Turku University of Applied Sciences.

18E.g., George Siedel and Helena Haapio, Proactive Law for Managers: A Hidden Source of Competitive Advantage (Farnham: Gower Publishing, 2011); George J. Siedel and Helena Haapio, “Using Proactive Law for Competitive Advantage,” 17 American Business Law Journal 641 (2010); Larry DiMatteo, George Siedel, and Helena Haapio, “Strategic Contracting: Examining the Business-Legal Interface,” in BergerWalliser and Østergaard, Proactive Law in a Business Environment, 59.

At its plenary session on December 3, 2008, the EESC adopted its opinion on “the proactive law approach: a further step towards better regulation at EU level.”23 In the opinion, the EESC makes reference to the work of the Nordic School of Proactive Law24 and urges a paradigm shift in EU law making, stating:

The time has come to give up the centuries-old reactive approach to law and to adopt a proactive approach. It is time to look at law in a different way: to look forward rather than back, to focus on how the law is used and operates in everyday life and how it is received in the community it seeks to regulate. While responding to and resolving problems remain important, preventing causes of problems is vital, along with serving the needs and facilitating the productive interaction of citizens and businesses.25

The opinion recognizes the benefits of the proactive law principle of using law as a tool to reach desired objectives, rather than focusing on legal rules and their enforcement alone. It states that “[t]o set the desired goals and to secure the most appropriate mix of means to achieve them requires involving stakeholders early, aligning objectives, creating a shared vision, and building support and guidance for successful implementation from early on.”26 This EESC approach holds true in corporate strategy and public law making. The EESC opinion further states:

When drafting laws, the legislator should be concerned about producing operationally efficient rules that reflect real-life needs and are implemented in such a manner that the ultimate objectives of those rules are accomplished.

The life cycle of a piece of legislation does not begin with the drafting of a proposal or end when it has been formally adopted. A piece of legislation is not the goal; its successful implementation is. Nor does implementation just mean enforcement by institutions; it also means adoption, acceptance and, where necessary, a change of behaviour on the part of the intended individuals and organisations.27

The EESC opinion recommends that the Commission, the Council and the European Parliament adopt the proactive law approach when planning, drawing up, revising, and implementing EU law and encourages member states also to do so wherever appropriate.28 It asserts that the proactive law approach should be considered systematically in all lawmaking and law implementation within the EU: “The EESC strongly

Economic and Social Committee, Foreword of Pegado Liz, Chairman of the Single Market Observatory, available at http://www.eesc.europa.eu/?i=portal.en.self-and-co-regulation-foreword.

23See Opinion of the European Economic and Social Committee on “The Proactive Law Approach: A Further Step Towards Better Regulation at EU level,” Official Journal of the European Union 2009/C175/05, available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:175:0026:0033:EN:PDF (hereafter referred to as EESC Opinion). In addition to the English-language version, the EESC Opinion is also available in all other official EU languages: 23 languages altogether. The Section for the Single Market, Production and Consumption, under the leadership of Jorge Pegado Liz, was responsible for preparing EESC’s work on the topic, and the author of this chapter, Helena Haapio, acted as expert in this work.

24Id., §§3.8 and 5.2.

25Id., §1.4.

26Id., §1.6.

27Id., §§2.4–2.5.

28Id., §2.8. See also “The proactive law approach: a novelty – For too long, the emphasis in the legal field has been on the past . . . ,” Press Release CES/08/115 (December 16, 2008), European Economic and Social Committee, available at http://europa.eu/rapid/press-release CES-08-115 en.htm.

as the centerpiece. If correctly assembled, the pieces of the puzzle form a complete, synchronized picture.30

International sales contracts are seldom planned or crafted by one person. Teams at the seller and buyer companies produce them. In many fields, what really matters in contracts are the business and financial terms, and the input of managers and engineers is often crucial in order to construct operationally efficient contracts.31 A wide range of people, functions, and technologies participate in the preparation of a contract. A successful contract requires communication between numerous stakeholders, often with only fragmented understanding of the issues involved.32

A typical corporate contracting process can be divided into three phases: (1) planning, solicitation, and bidding (precontract; preaward); (2) negotiation and execution of the contract; and (3) implementation (postcontract; postaward). For buyers and suppliers alike, the first phase is vital in creating the basis for successful contracts and relationships. Most contract information should be captured in the initial phase. At the early stages, the technical, implementation, business/financial, and legal aspects must be consistent and linked with each other.33

When used proactively as managerial-legal tools, contracts are planned and designed to communicate crucial information inside and between organizations; to help share, minimize, and manage cost and risk; and, in case of a dispute, to work as a record of what has been agreed and provide a means to resolve the dispute in a prompt and amicable way. Further, when used preventively, contracts communicate the deal and its terms clearly so as to avoid future disputes over meaning.34 Good contracts provide a clear framework for successful implementation. For the parties, the contract is not the goal; successful implementation is.35

After negotiating and signing the contract, a divergence often occurs between the precontract sales or procurement process and postcontract implementation and management. One reason for this is that people are reluctant to read contracts.36 Few managers

30Helena Haapio, “Innovative Contracting,” in Haapio, A Proactive Approach to Contracting and Law, 105, 124; Siedel and Haapio, Proactive Law for Managers, 121–3.

31According to an analysis of the International Association for Contract and Commercial Management (IACCM), on average nearly 80% of the terms in business-to-business contracts are not really areas of significant legal concern – they are the business and financial terms, which include key documents such as Statements of Work, Specifications and Service Level Agreements. See IACCM, Contracting as a Strategic Competence (Ridgefield, CT: International Association for Contract and Commercial Management, 2003), 4, available at http://www.iaccm.com/members/library/files/contracting.pdf. See also Nicholas Argyres and Kyle J. Mayer, “Contract Design as a Firm Capability: An Integration of Learning and Transaction Cost Perspectives,” 32 Academy of Management Rev. 1060 (2007).

32Martin J. Eppler, “Knowledge Communication Problems between Experts and Managers: An Analysis of Knowledge Transfer in Decision Processes,” paper 1/2004, University of Lugano, Faculty of Communication Sciences, Institute for Corporate Communication, May 2004, p. 6, available at http://doc.rero.ch/ lm.php?url=1000,42,6,20051020101029-UL/1_wpca0401.pdf.

33Haapio, “Innovative Contracting,” with references.

34Id., at 111.

35Danny Ertel, “Getting Past Yes: Negotiating as if Implementation Mattered,” Harvard Business Rev. (November 2004); and Danny Ertel and Mark Gordon, The Point of the Deal: How to Negotiate When Yes Is Not Enough (Boston: Harvard Business School Press, 2007).

36Scott. J. Burnham, “How to Read a Contract,” 45 Arizona L. Rev. 133, 133 (2003). See also Thomas D. Barton, “Collaborative Contracting as Preventive/Proactive Law,” in Berger-Walliser and Østergaard, Proactive Law in a Business Environment, 107 (the parties may have been trained to regard contracts “as

have formal training in how to read contracts or why they should do so.37 Yet many people are expected to read contracts and work with them. The buyer’s solicitation team and the supplier’s proposal team may consist of people different from those on the contract negotiation team, none of whom may be part of the operational or delivery team. The teams just “inherit” from their predecessors the contract documents that they are expected to master and work with.

Because of the fragmented process noted earlier, delivering on the promises made in a contract may prove difficult. On the seller’s side, the operational team needs to implement the supply contract, as well as pass on to subcontractors the pertinent terms of that contract. The implementation of contracts is more complicated when dealing under global umbrella or framework agreements made between group parent companies designed to be implemented in several countries with different requirements.

B. Invisible Terms and the CISG

Contracts and the CISG define key requirements related to the contracting parties’ roles, the quality of the goods to be delivered, and many other terms that have both technical and commercial implications. They require knowledge about resources, timing, cost, and so on before determining the price and before a well-written contract can be made. If the contract is expected to work as a roadmap for the parties to follow, people involved in planning, designing, and implementing the contract need to align many – often conflicting – expectations and master a wealth of knowledge. This necessitates a fresh look at contracts and the CISG and how they interact.

Courts, arbitrators, and lawyers are not the primary readers and users of contracts. Management and operational personnel are. They use the information contained in contracts to coordinate in-house and outsourced functions and manage budget, scope, schedule, resources, and so on. Problems are often encountered not because of what the contract says, but because of what it does not say – gaps in contracts have been the basis for numerous contract disputes.38 The concept invisible terms39 has been used to refer to terms (such as implied terms, implied warranties, and statutory default rules) that do not appear in the contract but become part of it, unless they are expressly excluded or amended. A lawyer familiar with the context knows and “sees” the invisible terms, while a nonlawyer does not.

The express terms of a contract – the visible terms – can get quite complicated, especially in international business transactions. Sometimes the CISG becomes part of the contract, without the parties being aware of that fact or of the content of the CISG.

the domain of the law and lawyers, where precision of legal language and full articulation of rights and duties is deemed essential”).

37Id.; and Gerlinde Berger-Walliser, Robert C. Bird, and Helena Haapio, “Promoting Business Success through Contract Visualisation,” 17 J. of Law, Business & Ethics 55 (2011), available at http://ssrn.com/ abstract=1744096.

38Helena Haapio, “Business Success and Problem Prevention through Proactive Contracting,” in Wahlgren, A Proactive Approach, 149, 162, see esp. figure 5, “Contract – Mind the Gaps!,” available at http://www. scandinavianlaw.se/pdf/49-9.pdf.

39See, e.g., Helena Haapio, “Invisible Terms in International Contracts and What to Do about Them,” Contract Management (July 2004), 32 (National Contract Management Association [NCMA]), available at http://www.ncmahq.org/files/Articles/81EEB cm July04 32.pdf; and Helena Haapio, “Invisible Terms and Creative Silence: What You Don’t See Can Help or Hurt You,” Contract Management (September 2009), 24 (NCMA), available at http://www.ncmahq.org/files/Articles/CM0909%20-%2024-35.pdf.