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Friday, October 27, 2006

Nice Contract Theory Intervention

I have just read a wonderful paper by Columbia law student Matthew Jennejohn.  It is available for download here.  Although I remain somewhat skeptical of both the positive claim that more contracts in the "new" economy are "collaborative" (even he admits that more empirical work is necessary to verify the claim) -- and the normative upshot that the UCC's contextualist approach is inadequate to the task of interpreting such contracts and that formalism would help parties realize their expectations, the paper is among the most sophisticated and interesting student papers I have ever read.  It applies some very important insights about pragmatic governance that have received plenty of play in public law into the private law.  I highly recommend it. 

While reading it, I invite readers to consider (1) whether Matthew has indeed hit upon a new theory of contract; (2) whether the theory is not just an offshoot of "relational theory," insofar as it differentiates yet another "type" of contract subject to special rules (albeit different from the "long-term relationships of especial interest to the relationalists); and (3) whether there are more connections that can be made between Markovits' theory of "Collaboration & Contract" and Matthew's work.  Obviously, for (3) to work Matthew will need to argue against Markovits's claim that corporations and firms cannot enter communities of collaboration and solidarity because of their inability to act morally.  But there are some good ways to argue against Markovits on this score, as Nate Oman and Paul Gowder have done in the links above. 

Here's the abstract:

Herein I outline a new theory of contract and contract enforcement. This theory is based upon two claims, one positive and one normative. The first claim is that incomplete contracting theory fails to explain how economic actors govern production in the new economy. Theories of “pragmatic governance” do, however, capture how modern firms order their relationships. To support this first claim, evidence from collaborative contracts, recently made readily available to the public, is presented. The second claim is that, because both the traditional contextualist and the ascendant neoformalist approaches to contract enforcement undermine this new form of contract, a new philosophy is needed. A hybrid approach, integrating both formalism and problem-solving judicial intervention, provides such an alternative.

Posted by Ethan Leib on October 27, 2006 at 09:06 AM in Article Spotlight | Permalink

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