Law Commons^™

Innovation In Boilerplate Contracts: An Empirical Examination Of Soverign Bonds, Mitu Gulati, Stephen J. Choi

Faculty Scholarship

Network externalities may lead contracting parties to stay wiht a "standardized" term despite preferences for another term. Using a dataset of sovereign bond offerings from 1995 to early 2004, we test the importance of standardization for the modification provisions relating to payment terms. We provide evidence that (1) standardization may lead parties to adopt provisions not necessarily out of preference and (2) standards, nonetheless, may change. The process of change, however, is not necessarily quick or straightforward. In the sovereign bond context, change came by way of an "interpretive shock." Contracts with modification provisions requiring the unanimous consent of bondholders …