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The Moral Hazard Of Contract Drafting, Eric A. Zacks
The Moral Hazard Of Contract Drafting, Eric A. Zacks
Law Faculty Research Publications
This Article identifies and examines the principal-agent problem as it arises in the context of contract preparation. The economic agency relationship, as it may be understood to exist for contract drafting, provides a superior framework for understanding and reforming the inability of the non-drafting party (the principal) to control the drafting party (the agent). As an economic agent, the drafting party faces a moral hazard when preparing the contract because of the differing interests of the parties as well as the information and control asymmetries that exists. For example, the use of standard form contracts in consumer transactions is an …
Contract Review: Cognitive Bias, Moral Hazard, And Situational Pressure, Eric A. Zacks
Contract Review: Cognitive Bias, Moral Hazard, And Situational Pressure, Eric A. Zacks
Law Faculty Research Publications
This Article explores the contract drafting and review process of attorneys from a cognitive and social science perspective. Based on an understanding of the behavioral tendencies of individual attorneys as impacted by cognitive bias, moral hazard, and situational pressure, the drafting attorney may be able to secure particular transactional advantages for her client. For example, the anchoring effect, which suggests that individuals are affected by the presence by an initial value position, may explain why drafters should and do include extreme positions in their initial draft. Similarly, time pressure may affect an attorney's review of a contract, which a drafting …