Law Commons^™

What Default Rules Teach Us About Corporations; What Understanding Corporations Teaches Us About Default Rules, Tamar Frankel

Faculty Scholarship

This Article addresses corporate law's default rules, which allow corporations to waive their directors' liability for damages based on a breach of their fiduciary duty of care. Most large publicly held corporations have adopted such a waiver in their articles of association. This Article suggests that courts should limit the range of the waivers to the circumstances that existed when the voters voted and to the information they received before they voted. This Article distinguishes between public contracts (legislation) and private contracts (commercial transactions) and the default rules that apply to each. The Article shows that courts view corporations and …