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Full-Text Articles in Law
The Paradox Of Contracting In Markets, Robert E. Scott
The Paradox Of Contracting In Markets, Robert E. Scott
Faculty Scholarship
Traditional economic analysis distinguishes economic organization along three dimensions: firm, contract, and market. This categorization is misleading in any number of respects, but none more so than the assumption that contract and market are separate modes of exchange. In fact, other than barter, which is almost unknown in contemporary commercial transactions, every market transaction is implemented by contract. Thus, in markets the two modes of exchange are inextricably combined. Moreover, the vast majority of contract activity occurs in some form of market, so it does not require much loss of generalization to say that not only are contracts in all …
Innovation Versus Encrustation: Agency Costs In Contract Reproduction, Stephen J. Choi, Mitu Gulati, Robert E. Scott
Innovation Versus Encrustation: Agency Costs In Contract Reproduction, Stephen J. Choi, Mitu Gulati, Robert E. Scott
Faculty Scholarship
This article studies the impact of exogenous legal change on whether and how lawyers across four different deal types revise their contracts’ governing law clauses in order to solve the problem that the legal change created. The governing law clause is present in practically every contract across a wide range of industries and, in particular, it appears in deals as disparate as private equity M&A transactions and sovereign bond issuances. Properly drafted, the clause increases the ex ante economic value of the contract to both parties by reducing uncertainty and litigation risk. We posit that different levels of agency costs …