Law Commons^™

Amending Corporate Charters And Bylaws, Albert H. Choi, Geeyoung Min

All Faculty Scholarship

Recently, courts have embraced the contractarian theory that corporate charters and bylaws constitute a “contract” between the shareholders and the corporation and have been more willing to uphold bylaws unilaterally adopted by the directors. This paper examines the contractarian theory by drawing a parallel between amending charters and bylaws, on the one hand, and amending contracts, on the other. In particular, the paper compares the right to unilaterally amend corporate bylaws with the right to unilaterally modify contract terms, and highlights how contract law imposes various limitations on the modifying party’s discretion. More generally, when the relationship of contracting parties …

In Defense Of The Restatement Of Liability Insurance Law, Tom Baker, Kyle D. Logue

All Faculty Scholarship

For most non-contractual legal claims for damages that are brought against individuals or firms, there is some form of liability insurance coverage. The Restatement of the Law Liability Insurance is the American Law Institute’s first effort to “restate” the common law governing such liability insurance policies, and we are the reporters. In a recent essay funded by the insurance industry, Yale Law Professor George Priest launched a strident critique of the Restatement project, arguing that the rules adopted in the Restatement:

(a) are radically contrary to existing case law,

(b) have a naïve “pro-policyholder” bias that ignores basic economic insights …

Contract Consideration And Behavior, David A. Hoffman, Zev. J. Eigen

All Faculty Scholarship

Contract recitals are ubiquitous. Yet, we have a thin understanding of how individuals behave with respect to these doctrinally important relics. Most jurists follow Lon Fuller in concluding that when read, contract recitals accomplish their purpose: to caution against inconsiderate contractual obligation. Notwithstanding the foundational role that this assumption has played in doctrinal and theoretical debates, it has not been tested. This Article offers what we believe to be the first experimental evidence of the effects of formal recitals of contract obligation — and, importantly too, disclaimers of contractual obligation — on individual behavior. In a series of online experiments, …

The Perverse Consequences Of Disclosing Standard Terms, Tess Wilkinson-Ryan

All Faculty Scholarship

Although assent is the doctrinal and theoretical hallmark of contract, its relevance for form contracts has been drastically undermined by the overwhelming evidence that no one reads standard terms. Until now, most political and academic discussions of this phenomenon have acknowledged the truth of universally unread contracts, but have assumed that even unread terms are at best potentially helpful, and at worst harmless. This Article makes the empirical case that unread terms are not a neutral part of American commerce; instead, the mere fact of fine print inhibits reasonable challenges to unfair deals. The experimental study reported here tests the …

Bankruptcy On The Side, Kenneth Ayotte, Anthony J. Casey, David A. Skeel Jr.

All Faculty Scholarship

This article provides a framework for analyzing side agreements in corporate bankruptcy, such as intercreditor and “bad boy” agreements. These agreements are controversial because they commonly include a promise by one party to remain silent – to waive some procedural right they would otherwise have under the Bankruptcy Code – at potentially crucial points in the reorganization process.

Using simplified examples, we show that side agreements create benefits in some instances, but parties to a side agreement may have incentive to contract for specific performance or excessive stipulated damages that impose negative externalities on non-parties to the agreement. A promise …