Rational Retroactivity in a Commercial Context

This Article focuses on the commercial law context. While transition issues have previously received scant attention, this area of the law is proceeding at an accelerating rate, making transition policy crucially important at this time. In particular, this Article will consider the plausibility and implications of a retroactivity norm in the commercial law context by examining the recent revisions and amendments to Articles 1 and 2 of the Code. Two claims will be advanced: The incentive-based analysis of retroactivity issues in other contexts does not necessarily comport with the realities of commercial law, and consideration of both expectations and incentives demonstrates that commercial law is more amenable to a rule-by-rule application of the retroactivity norm. Part I will briefly examine the consequentialist framework that undergirds modern attempts to deal with the problems of legal transitions and will explain why this approach is insufficient to shape a universal norm regarding the retroactivity of commercial law reform. The discussion will demonstrate why an incentive-based analysis is subject to particular criticism with respect to certain subsets of commercial law rules, without attempting to evaluate the overall merits of the "new" view. Part II will describe in summary form judicial decisions that have filled the voids left by legislation silent as to transition matters. It will also describe the ways in which the drafters of the Code have, over the years, responded to the problem of retroactivity. Part Ill will first recount the traditional reliance- or expectations-based rationale for transition policy. It will then examine and explain, within the context of U.C.C. Articles 1 and 2, when parties would rationally and predictably rely on the law and when they would not, as a means of demonstrating why reliance-based policy may at times be undesirable in commercial law contexts. It will then put forth a proposed framework for determining the retroactive applicability of commercial law changes. ...