This paper considers a class of contracts in which parties write detailed, long-term performance obligations that leave one or both parties with broad discretion to terminate the agreement on short notice with little or no penalty. I argue that formal contracts may be valuable, even where trade...

This paper considers a class of contracts in which parties write detailed, long-term performance obligations yet leave one or both parties broad discretion to terminate the agreement on short notice with little or no penalty. If the purpose of formal contracting is to make agreements legally...