About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

88 U. Chi. L. Rev. 1 (2021)
Stickiness and Incomplete Contracts

handle is hein.journals/uclr88 and id is 7 raw text is: Both economic theory and legal theory assume that sophisticated parties rou- tinely aim to write contracts that are optimal, in the sense of maximizing the parties' joint surplus. But more recent studies analyzing corporate and government bond agreements have suggested that some contract provisions are highly path dependent, or sticky, with future agreements only rarely improving upon previous ones. Analyzing half a million contracts using automated text analysis, this Article demonstrates that the stickiness hypothesis explains the striking lack of dispute res- olution clauses that can be found in agreements between even the most sophisticated commercial parties. When drafting these contracts, external counsel rely heavily on templates, and whether a contract includes a dispute settlement provision is almost exclusively driven by the template that is used to supply the first draft. There is no evidence to suggest that counsel negotiate over the inclusion of dispute resolution clauses, nor that law firm templates are revised in response to changes in the costs and benefits of incomplete contracting. Together, the findings reveal a distinct apathy toward addressing dispute res- olution through contracting. From an institutional perspective, this suggests that the role of default rules in contract law is more important than is often assumed. Whereas traditional accounts hold that commercial actors would simply contract around inefficient defaults, the evidence produced in this Article highlights that t Assistant Professor of Law, Stanford Law School. For helpful comments and sug- gestions, I thank Adam Badawi, Douglas Baird, Robert Bartlett, Andrew Bradt, Guy-Uriel Charles, Benjamin Chen, Adam Chilton, Albert Choi, Ryan Copus, Robert Cooter, John Coyle, Kevin Davis, John DeFigueredo, Josh Fischman, Jeffrey Gordon, Joe Grundfest, Mitu Gulati, Andrew Guzman, Deborah Hensler, Tim Holbrook, Bert Huang, William Hubbard, Matthew Jennejohn, Francine Lafontaine, Katerina Linos, Jonathan Masur, Justin McCrary, Joshua Mitts, Kevin Quinn, Bertrall Ross, Sarath Sanga, Robert Scott, Megan Stevenson, Eric Talley, Glenn West, Diego Zambrano, and Eyak Zamir, as well as the par- ticipants of workshops at Columbia Law School, NYU School of Law, Stanford Law School, the University of Chicago Law School, University of Virginia School of Law, University of Michigan Law School, UC Davis School of Law, University of Hamburg Faculty of Law, the 2020 American Bar Association M&A Committee Meeting, the 2020 Association of American Law Schools Annual Meeting, the 2020 Stanford-IACCM Symposium, the 2019 Northwestern Conference on Law and Textual Analysis, the 2019 Annual Empirical Con- tracts Workshop at Penn, the 2019 Annual Meeting of the German Law and Economics Association, the 2018 Conference on Empirical Legal Studies, the 2018 Conference on Em- pirical Legal Studies in Europe, and the 2018 International Conference on the Economics of Litigation. 1

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most