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Freedom Of Contract: The Trojan Horse Of Rule 10b-5, Margaret V. Sachs

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Before the late 1980s, traditional contract law played virtually no role in private litigation under section 10(b) of the Securities Exchange Act of 1934 and rule 10b-5. The reason was perceived incompatibility. The 1934 Act is regulation intended to supersede “the philosophy of caveat emptor,” whereas traditional contract law promotes bargaining free of regulation. In the late 1980s, however, the tide turned. Since that time, private rule 10b-5 litigation has become riddled with the vocabulary of traditional contract jurisprudence – the statute of frauds, merger clauses, attorneys' fees clauses, choice of law clauses, releases, and the formation of an agreement. …