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...

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...

This essay traces the evolution of the scholarly understanding of contract remedies, beginning with the era in which the compensation principle and expectation damages dominated. Fuller and Perdue’s classic articles in 1936-7 and, later, the theory of efficient breach both offered important...

The combination of cost-cutting pressures and technology advances are triggering a major transformation of the core practices of business law. Developments in automated contract drafting and management have spurred the entry of low-cost competition, beginning with the production of standardized...

Economic contract theory postulates two obstacles to complete contracts: high transaction costs and high enforcement (or verification) costs. The literature has proposed how parties might solve these problems under a stylized litigation system, but it does not address the question of how parties...

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...