42 Emory L. J. 897 (1993)
Contribution Arguments in Commercial Law

handle is hein.journals/emlj42 and id is 907 raw text is: EMORY LAW JOURNAL
Volume 42              FALL 1993              Number 4

Steven Walt*
Emily L. Sherwin**
Allocative decisions are the stuff of commercial law. This Article is con-
cerned with the branch of commercial law that governs the rights of com-
peting creditors, and specifically with priority claims to particular assets
of a debtor. In this area, the function of legal rules might be characterized
as an allocation of gains, insofar as the object is to divide a pool of assets
among creditors. In another sense, priority rules are rules for allocation of
losses resulting from a debtor's default. Taking the initial credit transac-
tion as a baseline, each creditor expects to be paid in full. When the
debtor's assets fall short of the sum of his or her obligations, priority rules
come into play to allocate the shortfall, positioning creditors at varying
points along the range from no loss to loss of the full amount of their
claims. Accordingly, priority rules serve a loss allocation function within a
larger body of commercial rules that allocate, or enable the parties to allo-
cate, both expected gains from exchange and potential losses.
* Professor of Law, University of Virginia.
** Professor of Law, University of San Diego.
We thank Kenneth Abraham, Larry Alexander, Clayton Gillette, Michael Kelly, Jody Kraus, Saul
Levmore, John McCoid, Maimon Schwarzschild, Robert Scott, Paul Stephan, and Christopher Won-
nell for helpful discussion or comments on previous drafts of this Article. The usual disclaimer

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