Scholars have cataloged rigidities in contract design. Some have observed that boilerplate provisions are remarkably resistant to change, even in the face of shocks such as adverse judicial interpretations. Empirical studies of debt contracts and collateral, in contrast, suggest that covenant...

What role do contracts play in long-term relationships? Very little, if any, according to the relational contract literature. It is not the contract that induces promise-keeping but the imposition of (or threat of imposing) relational or informal sanctions, such as suspension or termination of...

Over the past forty years, an irrelevance proposition has been prevalent in law-and-economics scholarship: bargaining power should affect only price and not nonprice terms of a contract. In contrast, practitioners and commentators in industry regularly invoke bargaining power to explain static...

Under conventional contract theory, contracts may be efficient by protecting relationship-specific investment from hold-up in subsequent (re)negotiation over terms of trade. This paper demonstrates a different problem than hold-up when specific investment also provides significant private...