Abstract
Legal scholars increasingly utilize contract “paradigms” or models to analyze diverse relations such as marriages, corporations, creditors and debtors, and private associations.1 For example, many marriage theorists assert that distinct social norms no longer govern the conduct of marriage.2 Mandatory state laws regulating the family unit, grounded on general societal norms, are therefore antiquated. The obsolescence of these norms requires a new theoretical structure to govern marriage.3 Some marriage theorists have set forth a contractarian model to accommodate the idiosyncratic norms of individual marriages. The model recognizes and enforces private agreements made between spouses during marriage, governing marriage support, dispute resolution, lifestyles, or even marriage duration.4 The model offers a rationale for protecting the economic and social interests of the disfavored spouse under existing state law, typically the wife.5
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Notes
See generally Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982).
See generally Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982). at 207–08.
See generally Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982). at 219–224.
See, e.g., Lenore J. Weitzman, The Marriage Contract 230 (1981) (“Modernday feminists have… embraced the marriage contract as a means of establishing an egalitarian relationship in defiance of the law’s sex-based inequalities.”);
Kris Jeter & Marvin B. Sussman, Each Couple Should Develop a Marriage Contract Suitable to Themselves, in Current Controversies in Marriage and Family 283,283 (Harold Feldman & Margaret Feldman, eds., 1985) (“Today the personal marriage contract bears the potential for couples to form equitable dyadic relationships….”); Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204, at 271. See also Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204. at 316–17 (wife’s claim for support to continue her education); Frances E. Olsen, The Family and the Market: A Study of Ideology and Legal Reform, 96 Harv. L. Rev. 1497, 1504–07 (1983); Marsha Garrison, Marriage: The Status of Contract, 131 U. Pa. L. Rev. 1039, 1043–44 (1983)
reviewing Lenore J. Weitzman, The Marriage Contract (1981)) (“traditional marriage contract… perpetuates the subjugation of women,” interpreting L. Weitzman.
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 210 (discussing skeptics). See also Carol Weisbrod, The Way We Live Now: A Discussion of Contracts and Domestic Arrangements, 1994 Utah L. Rev. 777, 779 (discussing skeptics).
Ira M. Ellman, The Theory of Alimony, 11 Cal. L. Rev. 1, 16-23 (1989).
William W. Bratton, Jr., The “Nexus of Contracts” Corporation: A Critical Appraisal, 74 Cornell L. Rev. 407, 409 (1989) (describing contractualism) [hereinafter Bratton, Nexus of Contracts].
William W. Bratton, Jr., The “Nexus of Contracts” Corporation: A Critical Appraisal, 74 Cornell L. Rev. 407, 409 (1989) (describing contractualism) [hereinafter Bratton, Nexus of Contracts]. at 417. See also Frank H. Easterbrook & Daniel R. Fischel, The Corporate Contract, 89 Colum. L. Rev. 1416,1418 (1989) (“[T]he corporate structure is a set of contracts through which managers and certain other participants exercise a great deal of discretion that is ‘reviewed’ by interactions with other self-interested actors.”). For Easterbrook and Fischel’s latest view, see Frank H. Easterbrook & Daniel R. Fischel, The Economic Structure of Corporate Law (1991) [hereinafter Easterbrook & Fischel, Economic Structure].
See infra notes 94–115, and accompanying text.
See, e.g., Henry M. Butler, The Contractual Theory of the Corporation, 11 Geo. Mason U. L. Rev., Summer 1989, at 99, 100.
See John C. Coffee, No Exit?: Opting Out, The Contractual Theory of the Corporation, and the Special Case of Remedies, 53 Brook. L. Rev. 919, 934 (1988) (discussing the view of interventionists) [hereinafter Coffee, No Exit].
See John C. Coffee, No Exit?: Opting Out, The Contractual Theory of the Corporation, and the Special Case of Remedies, 53 Brook. L. Rev. 919, 934 (1988) (discussing the view of interventionists) [hereinafter Coffee, No Exit]. at 934 (contractarians “consider[] the market and its pricing mechanism as an adequate surrogate for individual bargaining”); Barry D. Baysinger & Henry N. Butler, The Role of Corporate Law in the Theory of the Firm, 28 J. L. & Econ. 179, 179-80 (1985) [hereinafter Baysinger & Butler, Theory of the Firm].
Melvin A. Eisenberg, Contractarianism Without Contracts: A Response to Professor McChesney, 90 Colum. L. Rev. 1321 (1990) [hereinafter Eisenberg, Response]; Fred S. McChesney, Contractarianism Without Contracts? Yet Another Critique of Eisenberg, 90 Colum. L. Rev. 1332 (1990) [hereinafter McChesney, Another Critique]; Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982); Ira M. Ellman, The Theory of Alimony, 11 Cal.. L. Rev. 1, 16-23 (1989). See also Michael Trebilcock, The Limits of Freedom of Contract 23–57 (1993).
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 230-31.
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982). at 232. For example, unlike other contracting parties, marriage partners cannot adjust the terms of their ongoing marriage. See Kris Jeter & Marvin B. Sussman, Each Couple Should Develop a Marriage Contract Suitable to Themselves, in Current Controversies in Marriage and Family 283,283 (Harold Feldman & Margaret Feldman, eds., 1985) (“Today the personal marriage contract bears the potential for couples to form equitable dyadic relationships….”) at 285, quoting Maynard v. Hill, 125 U.S. 190 (1888). See also Ira M. Ellman, The Theory of Alimony, 11 Cal. L. Rev. 1, 16-23 (1989), at 13. Under traditional marital arrangements the husband is head of the household and responsible for support, and the wife is in charge of “domestic services” and child care. Marsha Garrison, Marriage: The Status of Contract, 131 U. Pa. L. Rev. 1039, 1043–44 (1983) (reviewing Lenore J. Weitzman, The Marriage Contract (1981)) (“traditional marriage contract… perpetuates the subjugation of women,” interpreting L. Weitzman), at 1041-43.
See Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 235. See also Lenore J. Weitzman, The Marriage Contract (1981)) (“traditional marriage contract… perpetuates the subjugation of women,” interpreting L. Weitzman)., at 239.
Lenore J. Weitzman, The Marriage Contract (1981)) (“traditional marriage contract… perpetuates the subjugation of women,” interpreting L. Weitzman)., at 231. For example, contracting partners would likely make unwise arrangements and create legal obligations unintentionally, which would cause dissatisfaction and disharmony. Lenore J. Weitzman, The Marriage Contract (1981)) (“traditional marriage contract… perpetuates the subjugation of women,” interpreting L. Weitzman).. at 241. For a discussion of the kinds of situations in which contract law should leave enforcement to nonlegal sanctions, see David Charny, Nonlegal Sanctions in Commercial Relationships, 104 Harv.L. Rev. 373(1990).
See, e.g., Balfour v. Balfour, [1919], 2 K.B. 571, 579.
Balfour v. Balfour, [1919], 2 K.B. 571, 579.; Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 235.
June Carbone, Economics, Feminism, and the Reinvention of Alimony: A Reply to Ira Ellman, 43 Vand. L. Rev. 1463, 1469 (1990). See also Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 231–32; 280–82. Several states permit spouses to make enforceable agreements concerning property rights and post-separation support. Balfour v. Balfour, [1919], 2 K.B. 571, 579.; Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 235. See, e.g., N.M. Stat. Ann. § 40-2-8 (1978) (“A husband and wife cannot by any contract with each other alter their legal relations, except of their property, and except that they may agree in writing, to an immediate separation, and may make provisions for the support of either of them and of their children during their separation.”); Cal. Civ. Code § 4802 (West 1983); Nev. Rev. Stat. § 123.080 (1986).
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 258. See also Carol Rose, Bargaining and Gender, 18 Harv. J. L.& Pub. Policy 547, 561 (1995) (“women benefit greatly from their ability to bargain”); Carol Weisbrod, The Way We Live Now: A Discussion of Contracts and Domestic Arrangements, 1994 Utah L. Rev. 777, 779 (discussing skeptics), at 783 (“everything is discussable in contract terms”).
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 249–53.
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982). at 251. “Family status is no longer the central prestige-conferring mechanism in an age of mobility and urban anonymity.” Lenore J. Weitzman, The Marriage Contract (1981)) (“traditional marriage contract… perpetuates the subjugation of women,” interpreting L. Weitzman)., at 136.
See, e.g., Carol Weisbrod, The Way We Live Now: A Discussion of Contracts and Domestic Arrangements, 1994 Utah L. Rev. 777, 779 (discussing skeptics), at 810. The increasing frequency of divorce with society’s approbation underscores evolving marriage mores: “From being a scandalous and sinful rarity, virtually impossible for most people to achieve, divorce has become a morally neutral commonplace, available to all.” Neil McKendrick, Book Review, N.Y. Times, Nov. 4,1990 § VII (Book Review), at 12, col. 1 (reviewing Lawrence Stone, Road to Divorce (1990)).
Marsha Garrison, Marriage: The Status of Contract, 131 U. Pa. L. Rev. 1039, 1043–44 (1983), at 1043.
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 247 (quoting Sussman, Family Systems in the 1970′s: Analysis, Policies and Programs, 396 Annals 40, 42 (1971)).
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982). at 314-15; Carol Weisbrod, The Way We Live Now: A Discussion of Contracts and Domestic Arrangements, 1994 Utah L. Rev. 777, 779 (discussing skeptics), at 815. “[T]he traditional marriage contract is now at odds with social reality.” Marsha Garrison, Marriage: The Status of Contract, 131 U. Pa. L. Rev. 1039, 1043–44 (1983), at 1043. The message of marriage contractarians includes a prescriptive agenda: “[A] decision to support private decisionmaking might lead the state to encourage the making of such contracts rather than just to tolerate them.” Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 281.
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 248. See also id. at 274: “If the state no longer asserts that it is in a better position than the spouses to define the characteristics that mark the end of a marriage, then the state can hardly assert that it can best define the characteristics of an existing marriage.”
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982). at 280. For a discussion of those areas of marriage that are traditionally regulated, see Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982). at 224-40. “[C]ourts have refused to enforce such agreements between spouses as: payment by one spouse to another for domestic, child care, or other services in the home; planned termination of the marriage after a given period of time; alteration of statutory duties of support; and provision in advance for the eventuality of divorce.” Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982). at 231.
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982). at 331.
Lenore J. Weitzman, The Marriage Contract 230 (1981), at 339-41.
Lenore J. Weitzman, The Marriage Contract 230 (1981). at 284, 223, 260–61. Professor Weitzman also offers examples involving agreements as to the frequency of entertaining, attending the ballet, going on vacation, and responsibility for birth control. Lenore J. Weitzman, The Marriage Contract 230 (1981). at 298, 304. A few states already enforce antenuptial agreements dealing with post-divorce financial issues. See, e.g., Posner v. Posner, 233 So.2d 381 (Fla. 1970), rev’d on other grounds, 257 So.2d 530 (Fla. 1972).
See, e.g., Lenore J. Weitzman, The Marriage Contract 230 (1981), at 230 (“Modern-day feminists have… embraced the marriage contract as a means of establishing an egalitarian relationship in defiance of the law’s sex-based inequalities.”); Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 271. See also id. at 316-317 (wife’s claim for support to continue her education); Olsen, supra note 5, at 1504–07; Marsha Garrison, Marriage: The Status of Contract, 131 U. Pa. L. Rev. 1039, 1043–44 (1983), at 1043–44 (“traditional marriage contract… perpetuates the subjugation of women”); Michael Trebilcock, The Limits of Freedom of Contract 23–57 (1993), at 57.
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 216.
See Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982). at 242: “The assertion that equalization is more likely than exploitation rests on the assumption that even though men have more power they nevertheless share an egalitarian ideology and will not think it ‘fair’ or ‘just’ to try to impose an exploitative contract on the women they love.”
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982). at 240. The term “solidarity norms” derives from Ian Macneil, Economic Analysis of Contractual Relations: Its Shortfalls and The Need for a “Pick Classificatory Apparatus,” 75 Nw. U. L. Rev. 1018 (1981).
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 210.
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982) at 254.
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982). at 242.
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982). at 242. For a recent discussion of the value of intimacy in family relations, see Milton C. Regan, Jr., Family Law and the Pursuit of Intimacy (1993).
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 256. Further, “intimate behavior involves reciprocity and processes analogous to those for assessing personal gain and loss in economic exchange…. [S]uch concepts and processes can contribute to both its understanding and its effective functioning.” Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982). at 257. See also Weisbrod, supra note 6, at 797 (“a focus on the emotional… does not tell the whole story”).
Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 301-03. See Chapter 7 for a discussion of relational contracting.
See generally Milton C. Regan, JR., Family Law and the Pursuit of Intimacy (1993). Even if parties made marriage contracts, they may not promote more harmonious relations during the marriage. Suppose Green and Argosy marry and Argosy seeks to “enforce” through legal dispute resolution Green’s promise to support him while he attends law school. Marriage contractarians assert that this alternative might save the marriage, whereas today the parties will resent each other and perhaps divorce. Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 326-27. But in the commercial realm, business people rarely sue each other, preferring to maintain good will and to work out their problems. Macaulay, supra note 55. As with business people, Argosy and Green would probably end up resenting each other if a court or other tribunal awarded Argosy damages or specific performance. Argosy would resent the need to vindicate his rights through formal proceedings. Green would dislike being sued and losing. But see Lenore J. Weitzman, The Marriage Contract 230 (1981), at 239–46 (contracting will not increase negative feelings).
Lenore J. Weitzman, The Marriage Contract 230 (1981), at 239.
Lenore J. Weitzman, The Marriage Contract 230 (1981), at 239.
Lenore J. Weitzman, The Marriage Contract 230 (1981), at 240.
Frances E. Olsen, The Family and the Market: A Study of Ideology and Legal Reform, 96 Harv. L. Rev. 1497, 1504–07 (1983), at 1537. See also Gail Frommer Brod, Premarital Agreements and Gender Justice, 6 Yale J. Law & Feminism 229, 247 (1994) (“There may be a considerable imbalance of power, experience, and resources in favor of the prospective husband.”).
See generally Teresa A. Sullivan Et Al., As we Forgive Our Debtors: Bankruptcy and Consumer Credit in America ch. 8 (1989). See also Markovits, supra note 54, at 1734.
Lenore J. Weitzman, The Marriage Contract 230 (1981), at 247 (women “conditioned to desire marriage more than men”). See also Anderson, supra note 1, at 1792 (Pateman’s thesis is that contracts “legitimate patriarchal and other forms of domination under the guise of equality.”).
Ira M. Ellman, The Theory of Alimony, 11 Cal. L. Rev. 1, 16-23 (1989), at 46. See also June Carbone, Economics, Feminism, and the Reinvention of Alimony: A Reply to Ira Ellman, 43 Vand. L. Rev. 1463, 1469 (1990), at 1465 n. 10.
Ira M. Ellman, The Theory of Alimony, 11 Cal. L. Rev. 1, 16-23 (1989), at 46. See also June Carbone, Economics, Feminism, and the Reinvention of Alimony: A Reply to Ira Ellman, 43 Vand. L. Rev. 1463, 1469 (1990), at 1465 n. 10.; Lenore J. Weitzman, The Marriage Contract 230 (1981), at 247.
Marsha Garrison, Marriage: The Status of Contract, 131 U. Pa. L. Rev. 1039, 1043–44 (1983), at 1058.
Frances E. Olsen, The Family and the Market: A Study of Ideology and Legal Reform, 96 Harv. L. Rev. 1497, 1504–07 (1983), at 1537-38. See also Brod, supra note 62, at 295 (“It is ironic, if not perverse, that in the name of gender equality, premarital agreements that discriminate against women as a class have been made readily enforceable.”); Carole Pateman, The Sexual Contract 187 (“Men exercise their masculine capacity for political creativity by generating political relationships of subordination through contract.”).
See Ira M. Ellman, The Theory of Alimony, 11 Cal. L. Rev. 1, 16-23 (1989), at 21–24.
See Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 302–03. Weitzman acknowledges the problem of gaps, but believes that the problem is no greater in marriage than commercial contracts and that it is not insurmountable in either. Lenore J. Weitzman, The Marriage Contract 230 (1981), at 248–50. See also Carol Weisbrod, The Way We Live Now: A Discussion of Contracts and Domestic Arrangements, 1994 Utah L. Rev. 777, 779 (discussing skeptics), at 781.
See June Carbone, Economics, Feminism, and the Reinvention of Alimony: A Reply to Ira Ellman, 43 Vand. L. Rev. 1463, 1469 (1990), at 1497.
See Ira M. Ellman, The Theory of Alimony, 11 Cal. L. Rev. 1, 16-23 (1989), at 28–29; Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 315.
See Marsha Garrison, Marriage: The Status of Contract, 131 U. Pa. L. Rev. 1039, 1043–44 (1983), at 1053 (marriage agreements suggested by Weitzman “pose difficult questions of interpretation.”).
Barry D. Baysinger & Henry N. Butler, Antitakeover Amendments, Managerial Entrenchment, and the Contractual Theory of the Corporation, 71 Va. L. Rev. 1257, 1269–70 (1985)[hereinafter Baysinger & Butler, Antitakeover]; Lucien A. Bebchuk, Foreward: The Debate on Contractual Freedom in Corporate Law, 89 Columl. Rev. 1395,1396 (1989) (mandatory rules “govern most of the important corporate arrangements’); Bernard S. Black, Is Corporate Law Trivial: A Political and Economic Analysis, 84 Nw. U.L. Rev. 542, 547 (1990) [hereinafter Black, Corporate Law]. See generally Symposium, New Directions in Corporate Law, 50 Wash. & Lee L. Rev. 1373 (1993). I focus here on law involving the duties of managers to investors, not on law governing the duties of managers to other parties such as employees or members of the community. On the latter, see, e.g., Black, Corporate Law, supra at 547; Robert B. Thompson, The Law’s Limits on Contracts in a Corporation, 15 J. Corp. L. 377, 380 (1990). See also Bebchuk, supra at 1405–06 (discussing possible “externalities”).
Bernard S. Black, Shareholder Passivity Reexamined, 89 Mich. L. Rev. 520, 527–29 (1990) [hereinafter Black, Passivity].
See Bernard S. Black, Shareholder Passivity Reexamined, 89 Mich. L. Rev. 520, 527–29 (1990) [hereinafter Black, Passivity]. at 527-28; Mark J. Roe, A Political Theory of American Corporate Finance, 91 Colum. L. Rev. 10,12 (1991).
See Adolf A. Berle & Gardiner C. Means, The Modern Corporation and Private Property 124 (1932); William W. Bratton, Jr., The New Economic Theory of the Firm: Critical Perspectives from History, 41 Stan. L. Rev. 1471, 1494 (1989) [hereinafter Bratton, New Economic Theory]. See also David Millon, Theories of the Corporation, 1990 Duke L.J. 201, 221 (corporate law’s “central concern” is “the accountability problem”).
Lucien A. Bebchuk, Foreward: The Debate on Contractual Freedom in Corporate Law, 89 Columl. Rev . 1395,1396 (1989) (mandatory rules “govern most of the important corporate arrangements’), at 1396–97. See also Wolfson, supra note 92.
Armen Alchian & Harold Demsetz, Production, Information Costs, and Economic Organization, 62 Am. Econ. Rev . 777,777 (1972). See also Easterbrook & Fischel, supra note 9, at 1417-18 (“[W]hat is open to free choice is far more important to the daily operation of the firm… than is what the law prescribes.”); Bratton, Nexus of Contracts, supra note 8, at 453–54. Contractualism derives from Coase’s 1937 essay, The Nature of the Firm, 4 Economica 386.
Frank H. Easterbrook & Daniel R. Fischel, The Corporate Contract, 89 Colum. L. Rev. 1416,1418 (1989) (“[T]he corporate structure is a set of contracts through which managers and certain other participants exercise a great deal of discretion that is ‘reviewed’ by interactions with other self-interested actors.”), at 1421. But see Michael Klausner, Corporations, Corporate Law, and Networks of Contracts, 81 Virginia L. Rev. 757 (1995) (focusing on “network externalities”).
Lucien A. Bebchuk, Foreward: The Debate on Contractual Freedom in Corporate Law, 89 Columl. Rev. 1395,1396 (1989) (mandatory rules “govern most of the important corporate arrangements’), at 1397. Even the most enthusiastic contractarians concede the need for some regulation. Judge Easterbrook and Professor Fischel, for example, seem to approve of law forbidding perpetual directorships and “the sale of votes divorced from the investment interest.” Frank H. Easterbrook & Daniel R. Fischel, The Corporate Contract, 89 Colum. L. Rev. 1416,1418 (1989) (“[T]he corporate structure is a set of contracts through which managers and certain other participants exercise a great deal of discretion that is ‘reviewed’ by interactions with other self-interested actors.”), at 1417. They also agree with quorum and disclosure rules. Id. at 1417–18. The authors nevertheless insist that “for equity investors, almost everything is open to choice.” M at 1418. For Easterbrook and Fischel’s latest word, see Frank H. Easterbrook & Daniel R. Fischel, The Corporate Contract, 89 Colum. L. Rev. 1416,1418 (1989) (“[T]he corporate structure is a set of contracts through which managers and certain other participants exercise a great deal of discretion that is ‘reviewed’ by interactions with other self-interested actors.”).
See, e.g., Lenore J. Weitzman, The Marriage Contract 230 (1981), at 229.
See, e.g., Bratton, New Economic Theory, supra note 93, at 1499. See also Brudney, supra note 12, at 1410 (“[T]he rhetoric of contract serves to… complete the process of legitimating the substantial discretion which corporate management has, both to shirk in its performance and to divert corporate assets to its own benefit at investors’ expense.”).
Lucien A. Bebchuk, Foreward: The Debate on Contractual Freedom in Corporate Law, 89 Columl. Rev. 1395,1396 (1989) (mandatory rules “govern most of the important corporate arrangements’), at 1404. Contractarians employ the metaphor of contract or agency to capture the relationship of managers and shareholders. See Brudney, supra note 12, at 1411–12.
Lucien A. Bebchuk, Foreward: The Debate on Contractual Freedom in Corporate Law, 89 Columl. Rev. 1395,1396 (1989) (mandatory rules “govern most of the important corporate arrangements’), at 1397. See also William W. Bratton, Jr., The “Nexus of Contracts” Corporation: A Critical Appraisal, 74 Cornell L. Rev. 407, 409 (1989) (describing contractualism) [hereinafter Bratton, Nexus of Contracts], at 455; McChesney, Another Critique, supra note 16, at 1334 (“The contractarian paradigm… counts as contracts agreements that specify rules of open-ended, unilateral future performance.”).
William W. Bratton, Jr., The “Nexus of Contracts” Corporation: A Critical Appraisal, 74 Cornell L. Rev. 407, 409 (1989) (describing contractualism) [hereinafter Bratton, Nexus of Contracts], at 455.
Lucien A. Bebchuk, Foreward: The Debate on Contractual Freedom in Corporate Law, 89 Columl. Rev. 1395,1396 (1989) (mandatory rules “govern most of the important corporate arrangements’), at 1407. See also Frank H. Easterbrook & Daniel R. Fischel, The Corporate Contract, 89 Colum. L. Rev. 1416,1418 (1989) (“[T]he corporate structure is a set of contracts through which managers and certain other participants exercise a great deal of discretion that is ‘reviewed’ by interactions with other self-interested actors.”), at 1430 (“The price of stocks traded in public markets is established by professional investors.”); Frank H. Easterbrook & Daniel R. Fischel, The Corporate Contract, 89 Colum. L. Rev. 1416,1418 (1989) (“[T]he corporate structure is a set of contracts through which managers and certain other participants exercise a great deal of discretion that is ‘reviewed’ by interactions with other self-interested actors.”). at 1435. Professor Black notes, for example, that voting shares cost more than nonvoting shares. Bernard S. Black, Is Corporate Law Trivial: A Political and Economic Analysis, 84 Nw. U.L. Rev. 542, 547 (1990) [hereinafter Black, Corporate Law], at 570.
Melvin A. Eisenberg, The Structure of Corporation Law, 89 Colum. L. Rev. 1461, 1489 (1989) (discussing contractarians) [hereinafter Eisenberg, Structure].
Michael P. Dooley & E. Norman Veasey, The Role of the Board in Derivative Litigation: Delaware Law and the Current ALI Proposals Compared, in The American Law Institute Corporate Governance Project in Mid-Passage What Will It Mean to You?, 45,78 (1991).
Robert B. Thompson, The Law’s Limits on Contracts in a Corporation, 15 J. Corp. L. 377, 380 (1990), at 3 83.
Robert B. Thompson, The Law’s Limits on Contracts in a Corporation, 15 J. Corp. L. 377, 380 (1990). at 381. Professor Black asserts that shareholder voting constrains managers because collective action problems are “manageable” today where large institutions, such as banks, insurance companies, and mutual funds, are the “dominant shareholders.” Bernard S. Black, Shareholder Passivity Reexamined, 89 Mich. L. Rev. 520, 527–29 (1990) [hereinafter Black, Passivity], at 608.
Frank H. Easterbrook & Daniel R. Fischel, The Corporate Contract, 89 Colum. L. Rev. 1416,1418 (1989) (“[T]he corporate structure is a set of contracts through which managers and certain other participants exercise a great deal of discretion that is ‘reviewed’ by interactions with other self-interested actors.”), at 1420.
John C. McChesney, Another Critique, supra note 16, at 1334. See also Coffee, The Mandatory/Enabling Balance in Corporate Law: An Essay on the Judicial Role, 89 Colum. L. Rev. 1618, 1681 (1989) (“[C]orporate law entrusts authority to the board of directors… to resolve all future disputes.”) [hereinafter Coffee, Mandatory/Enabling]. Professor Macey finds the flexibility afforded by the enabling approach its “most important advantage” over mandatory corporate law. Jonathan R. Macey, Corporate Law and Corporate Governance: A Contract Perspective, J. Corp. L. 198 (Winter 1993) (hereinafter Macey, Corporate Law).
Easterbrook & Fischel, supra note 9, at 1433. Under this approach, the “true ground of authority is not the beliefs of the judge… but the will and consent of the contracting parties….” Johnson, supra note 110, at 2237. Contractarians recognize that gap filling by means other than “implied contracts” would defeat contractualism. See Macey, supra note 15, at 1694-95. For an account of gap-filling based on “penalty defaults,” see Ian Ayres, Making a Difference: The Contractual Contributions of Easterbrook and Fischel (Book Review of Frank H. Easterbrook & Daniel R. Fischel, The Economic Structure of Corporate Law (1991)), 59 U. Chi. L. Rev. 1391 (1992). For a discussion of penalty defaults, see Chapter 6.
Henry N. Butler & Larry E. Ribstein, Opting Out of Fiduciary Duties: A Response to the Anti-Contractarians, 65Wash. L. Rev. 1, 34-35 (1990) (“There is substantial evidence favoring the general efficiency of the securities markets…. And because information about contract terms and managers is accurately reflected in market price, investors get what they pay for, and capital is allocated to the most efficient terms.”). See also id. at 53; William W. Bratton, Jr., The New Economic Theory of the Firm: Critical Perspectives from History, 41 Stan. L. Rev. 1471, 1494 (1989) [hereinafter Bratton, New Economic Theory], at 1480.
Bernard S. Black, Is Corporate Law Trivial: A Political and Economic Analysis, 84 Nw. U.L. Rev. 542, 547 (1990) [hereinafter Black, Corporate Law], at 574Frank H. Easterbrook & Daniel R. Fischel, The Corporate Contract, 89 Colum. L. Rev. 1416,1418 (1989) (“[T]he corporate structure is a set of contracts through which managers and certain other participants exercise a great deal of discretion that is ‘reviewed’ by interactions with other self-interested actors.”), at 1432 (“No one argues that regulators are better at valuing terms of corporate governance than are markets.”). See also Robert C. Clark, Contracts, Elites and Traditions in the Making of Corporate Law, 89 Colum. L. Rev. 1703, 1714-15 (1989) (‘“[Glovernment,’ in the person of judges, legislators, or regulators, is only infrequently likely to do better than A and B on either the incentive or the information dimension.”). But Professor Black points out that the power of corporations to incorporate elsewhere may create the correct incentive for regulators. Black, Corporate Law, supra, at 574.
Fred S. McChesney, Economics, Law and Science in the Corporate Field: A Critique of Eisenberg, 89 Colum. L. Rev. 1530, 1544 (1989) [hereinafter McChesney, Economics]. See also Eben Moglen & Richard J. Pierce, Jr., Sunstein’s New Canons: Choosing the Fictions of Statutory Interpretation, 57 U. Chi. L. Rev. 1203,1218 (1990) (legislatures favor large organizations over “loose aggregations… crippled by relatively high organization and information costs”). The “lack of identity between the interests” of regulators and those regulated, contractarians point out, leads regulators to pursue their own interests instead of those regulated. Clark, supra note 119, at 1720.
Robert C. Clark, Contracts, Elites and Traditions in the Making of Corporate Law, 89 Colum. L. Rev. 1703, 1714-15 (1989) (‘“[Glovernment,’ in the person of judges, legislators, or regulators, is only infrequently likely to do better than A and B on either the incentive or the information dimension.”), at 1718-19 (discussing contractarians).
Robert C. Clark, Contracts, Elites and Traditions in the Making of Corporate Law, 89 Colum. L. Rev. 1703, 1714-15 (1989) (‘“[Glovernment,’ in the person of judges, legislators, or regulators, is only infrequently likely to do better than A and B on either the incentive or the information dimension.”) at 1714–15. See Lucien A. Bebchuk, Foreward: The Debate on Contractual Freedom in Corporate Law, 89 Columl. Rev. 1395,1396 (1989) (mandatory rules “govern most of the important corporate arrangements’), at 1397 (“[T]he contractual view of the corporation implies that the parties involved should be totally free to shape their contractual arrangements.”); Robert C. Clark, Contracts, Elites and Traditions in the Making of Corporate Law, 89 Colum. L. Rev. 1703, 1714-15 (1989) (‘“[Glovernment,’ in the person of judges, legislators, or regulators, is only infrequently likely to do better than A and B on either the incentive or the information dimension.”), at 1706. Professor Bratton discusses the “institutional variant” of this microeconomic analysis, which describes a more relational view of the nature of contracting between management and shareholdersWilliam W. Bratton, Jr., The New Economic Theory of the Firm: Critical Perspectives from History, 41 Stan. L. Rev. 1471, 1494 (1989) [hereinafter Bratton, New Economic Theory], at 1480.
Robert C. Clark, Contracts, Elites and Traditions in the Making of Corporate Law, 89 Colum. L. Rev. 1703, 1714-15 (1989) (‘“[Glovernment,’ in the person of judges, legislators, or regulators, is only infrequently likely to do better than A and B on either the incentive or the information dimension.”), at 1706 (discussing contractarians).
John C. McChesney, Another Critique, supra note 16, at 1334. See also Coffee, The Mandatory/Enabling Balance in Corporate Law: An Essay on the Judicial Role, 89 Colum. L. Rev. 1618, 1681 (1989) (“[C]orporate law entrusts authority to the board of directors… to resolve all future disputes.”) [hereinafter Coffee, Mandatory/Enabling]. Professor Macey finds the flexibility afforded by the enabling approach its “most important advantage” over mandatory corporate law. Jonathan R. Macey, Corporate Law and Corporate Governance: A Contract Perspective, J. Corp. L. 198 (Winter 1993) (hereinafter Macey, Corporate Law), and accompanying text.
William W. Bratton, Jr., The “Nexus of Contracts” Corporation: A Critical Appraisal, 74 Cornell L. Rev. 407, 409 (1989) (describing contractualism) [hereinafter Bratton, Nexus of Contracts], at 460-61; Brudney, supra note 12, at 1415 n.31; Lewis A. Kornhauser, The Nexus of Contracts Approach to Corporations: A Comment on Easter brook and Fischel, 89 Colum. L. Rev. 1449, 1452(1989).
See generally Lucien Bebchuk, Limiting Contractual Freedom In Corporate Law: The Desirable Constraints on Charter Amendments, 102 Harv. L. Rev. 1820 (1989) [hereinafter Bebchuk, Charter Amendments].
Melvin A. Eisenberg, The Structure of Corporation Law, 89 Colum. L. Rev. 1461, 1489 (1989) (discussing contractarians) [hereinafter Eisenberg, Structure], at 1477–78. “Shareholder consent to rules proposed by top managers in publicly held corporations may be either nominal, tainted by a conflict of interest, coerced or impoverished.” Eisenberg, Response, supra note 16, at 1328.
Lucien Bebchuk, Limiting Contractual Freedom In Corporate Law: The Desirable Constraints on Charter Amendments, 102 Harv. L. Rev. 1820 (1989) [hereinafter Bebchuk, Charter Amendments], at 1828-29.
Melvin A. Eisenberg, The Structure of Corporation Law, 89 Colum. L. Rev. 1461, 1489 (1989) (discussing contractarians) [hereinafter Eisenberg, Structure], at 1477–78.
See Jean Braucher, Contract Versus Contractarianism: The Regulatory Role of Contract Law, 47 Wash. & Lee L. Rev. 697, 701 (1990) (pointing out that a provision entitling managers to act in their own interests would raise issues of consent, such as whether the investors had sufficient information, and whether the term permitted managers to usurp all opportunities). See also Manuel A. Utset, Towards a Bargaining Theory of the Firm, 80 Cornell L. Rev. 540, 546 (1995) (“market and contractual constraints on managerial discretion… are not terribly effective”).
Robert C. Clark, Contracts, Elites and Traditions in the Making of Corporate Law, 89 Colum. L. Rev. 1703, 1714-15 (1989) (‘“[Glovernment,’ in the person of judges, legislators, or regulators, is only infrequently likely to do better than A and B on either the incentive or the information dimension.”), at 1731 (‘Traditions greatly reduce the very high costs of repeated discovery, learning, and rational decisionmaking by individuals”). See also Robert C. Clark, Contracts, Elites and Traditions in the Making of Corporate Law, 89 Colum. L. Rev. 1703, 1714-15 (1989) (‘“[Glovernment,’ in the person of judges, legislators, or regulators, is only infrequently likely to do better than A and B on either the incentive or the information dimension.”). at 1742.
Robert C. Clark, Contracts, Elites and Traditions in the Making of Corporate Law, 89 Colum. L. Rev. 1703, 1714-15 (1989) (‘“[Glovernment,’ in the person of judges, legislators, or regulators, is only infrequently likely to do better than A and B on either the incentive or the information dimension.”). at 1718-19 (“the reason given for resisting paternalism—no information asymmetry exists-is desperately implausible in many real-world contexts”). See also Robert C. Clark, Contracts, Elites and Traditions in the Making of Corporate Law, 89 Colum. L. Rev. 1703, 1714-15 (1989) (‘“[Glovernment,’ in the person of judges, legislators, or regulators, is only infrequently likely to do better than A and B on either the incentive or the information dimension.”). at 1720 (“the informational advantages of elite rule making may outweigh the agency costs it creates”).
Robert C. Clark, Contracts, Elites and Traditions in the Making of Corporate Law, 89 Colum. L. Rev. 1703, 1714-15 (1989) (‘“[Glovernment,’ in the person of judges, legislators, or regulators, is only infrequently likely to do better than A and B on either the incentive or the information dimension.”). at 1719. Moreover, logically, some of the criticisms of intervention fall away when the goal is defining minimal levels of reasonable conduct. After all, it is hardly convincing to argue that law mandating good faith and fair dealing may be unwise or inefficient because it may be the product of uninformed or disinterested lawmakers.
But see Oliver E. Williamson, The Logic of Economic Organization, 4 J. L. Econ. & Organization 65, 72–76 (1988) (empirical study). Cf. Anderson, supra note 1, at 1805 (“argument for a noncontractual based labor system must depend upon an empirical comparison of its advantages to those of the best contractual systems available”).
See, e.g., Frank H. Easterbrook & Daniel R. Fischel, The Corporate Contract, 89 Colum. L. Rev. 1416,1418 (1989) (“[T]he corporate structure is a set of contracts through which managers and certain other participants exercise a great deal of discretion that is ‘reviewed’ by interactions with other self-interested actors.”), at 1442 (“Unless the person challenging a provision of the corporate contract can make a convincing argument that the consequences ofthat term could not have been appreciated by investors and priced efficiently, there is no reason for intervening to correct a mistake.”); Melvin A. Eisenberg, Contractarianism Without Contracts: A Response to Professor McChesney, 90 Colum. L. Rev. 1321 (1990) [hereinafter Eisenberg, Response], at 1324, 1330-31; Fred S. McChesney, Contractarianism Without Contracts? Yet Another Critique of Eisenberg, 90 Colum. L. Rev. 1332 (1990) [hereinafter McChesney, Another Critique], at 1335–36.
Fred S. McChesney, Contractarianism Without Contracts? Yet Another Critique of Eisenberg, 90 Colum. L. Rev. 1332 (1990) [hereinafter McChesney, Another Critique], at 1335.
Melvin A. Eisenberg, Contractarianism Without Contracts: A Response to Professor McChesney, 90 Colum. L. Rev. 1321 (1990) [hereinafter Eisenberg, Response], at 1330–31.
Melvin A. Eisenberg, Contractarianism Without Contracts: A Response to Professor McChesney, 90 Colum. L. Rev. 1321 (1990) [hereinafter Eisenberg, Response]. at 1331; Fred S. McChesney, Contractarianism Without Contracts? Yet Another Critique of Eisenberg, 90 Colum. L. Rev. 1332 (1990) [hereinafter McChesney, Another Critique], at 1339. Professor Romano questions the centrality of this debate: “The rules that are identified as ‘mandatory’… are either easily—and legally—side stepped, or they pose nonbinding contraints because there is no burning demand to deviate from them.” Roberto Romano, Answering the Wrong Question: The Tenuous Case for Mandatory Corporate Laws, 89 Colum. L. Rev. 1599, 1599 (1989).
But see Jonathan R. Macey, Corporate Law and Corporate Governance: A Contract Perspective, J. Corp. L. 198 (Winter 1993) (hereinafter Macey, Corporate Law), at 207–211 (discussing empirical evidence).
Lucien A. Bebchuk, Foreward: The Debate on Contractual Freedom in Corporate Law, 89 Columl. Rev. 1395,1396 (1989) (mandatory rules “govern most of the important corporate arrangements’), at 1409 (“[D]eregulators do not have a monopoly over the contractual framework of analysis.”). See also Bratton, Nexus of Contracts, supra note 8, at 446–48.
John C. Coffee, No Exit?: Opting Out, The Contractual Theory of the Corporation, and the Special Case of Remedies, 53 Brook. L. Rev. 919, 934 (1988) (discussing the view of interventionists) [hereinafter Coffee, No Exit], at 951: “[W]hile the ‘rhetoric of contract* may legitimate excessive managerial discretion, ‘fiduciary rhetoric’ could equally justify unthinking devotion to anachronistic legal dogma.”
Melvin A. Eisenberg, Contractarianism Without Contracts: A Response to Professor McChesney, 90 Colum. L. Rev. 1321 (1990) [hereinafter Eisenberg, Response], at 1330-31.
See Robert C. Clark, Contracts, Elites and Traditions in the Making of Corporate Law, 89 Colum. L. Rev. 1703, 1714-15 (1989) (‘“[Glovernment,’ in the person of judges, legislators, or regulators, is only infrequently likely to do better than A and B on either the incentive or the information dimension.”), at 1726 (“A good society depends on both autonomy and heteronomy, each present in large measure. Theorists ought to face up to this point and then see what headway, if any, can be made in devising principles for setting the optimal mix.”). Of course, this will be a difficult task. “[Identifying theoretically justified and practically useful criteria for distinguishing between waivable and nonwaivable rules [has] proven to be extraordinarily difficult.” Robert C. Clark, Contracts, Elites and Traditions in the Making of Corporate Law, 89 Colum. L. Rev. 1703, 1714-15 (1989) (‘“[Glovernment,’ in the person of judges, legislators, or regulators, is only infrequently likely to do better than A and B on either the incentive or the information dimension.”). at 1708.
Robert C. Clark, Contracts, Elites and Traditions in the Making of Corporate Law, 89 Colum. L. Rev. 1703, 1714-15 (1989) (‘“[Glovernment,’ in the person of judges, legislators, or regulators, is only infrequently likely to do better than A and B on either the incentive or the information dimension.”). at 1707. That is not to say that centrists have failed to present proposals. Dean Clark’s essay is a fine example of the latter. See also Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982)2, at 328: “While selective reduction of legal control is appropriate and essential, wholesale delegalization is not ultimately a tenable strategy for state governance of marriage.”
See Michael Trebilcock, The Limits of Freedom of Contract 23–57 (1993), at 43: “The goal of reform has been to affirm in women the ability to operate as fully autonomous and self-determining agents, free to bargain and enjoy all the rights and freedoms previously held only by men.” “Many systems provide for almost complete freedom of the spouses to arrange their affairs to suit themselves, subject only to the limitation that the arrangements so made must not contravene some important public policy of the jurisdiction….” Max Rheinstein & Mary Ann Glendon, Interspousal Relations, in IV International Encyclopedia of Comparative Law 148–49, (A. Chloros, chief ed. 1980).
Marsha Garrison, Marriage: The Status of Contract, 131 U. Pa. L. Rev. 1039, 1043–44 (1983), at 1046.
See Marjorie M. Shultz, Contractual Ordering of Marriage: A New Model for State Policy, 70 Calif. L. Rev. 204 (1982), at 305; Carol Weisbrod, The Way We Live Now: A Discussion of Contracts and Domestic Arrangements, 1994 Utah L. Rev. 777, 779 (discussing skeptics), at 810-811. “Some systems… facilitate the spouses’ choice by providing statutory models of the most commonly desired alternative regimes and statutory guides to varying the details of the basic regime. This is the scheme of French law… and also that of the Netherlands.” Max Rheinstein & Mary Ann Glendon, Interspousal Relations, in IV International Encyclopedia of Comparative Law 148–49, (A. Chloros, chief ed. 1980), at 149. See also id. at 56 (The Holland “Civil Code supplies authoritative explanations for frequently used designations of contractual regimes:” for example, “community of fruits and income” and “community of gain and loss.”).
See generally Chapter 6. See also William C. Whitford, Ian Macneil’s Contribution to Contracts Scholarship, 1985Wis. L. Rev. 545.
See, e.g., Lynn A. Baker, Promulgating the Marriage Contract, 23 U. Mich. J. L. Ref. 217 (1990).
See, e.g., Kris Jeter & Marvin B. Sussman, Each Couple Should Develop a Marriage Contract Suitable to Themselves, in Current Controversies in Marriage and Family 283,283 (Harold Feldman & Margaret Feldman, eds., 1985) (“Today the personal marriage contract bears the potential for couples to form equitable dyadic relationships….”), at 287-90.
Susan Edmiston, How to Write Your Own Marriage Contract, in People As Partners 107, 108, 116 (Jaqueline P. Wiseman, ed., 2d ed. 1977).
Kris Jeter & Marvin B. Sussman, Each Couple Should Develop a Marriage Contract Suitable to Themselves, in Current Controversies in Marriage and Family 283,283 (Harold Feldman & Margaret Feldman, eds., 1985) (“Today the personal marriage contract bears the potential for couples to form equitable dyadic relationships….”), at 287 (“Contract functions as a moral or ethical basis for a relationship in terms of reciprocal expectations and responses to expectations.”).
See E. Allan Farnsworth, Precontractual Liability and Preliminary Agreements: Fair Dealing and Failed Negotiations, 87 Colum. L. Rev. 217, 249–251 (1987).
See Charles L. Knapp, Enforcing the Contract to Bargain, 44 N.Y.U. L. Rev. 673, 681 (1969).
See, e.g., Kris Jeter & Marvin B. Sussman, Each Couple Should Develop a Marriage Contract Suitable to Themselves, in Current Controversies in Marriage and Family 283,283 (Harold Feldman & Margaret Feldman, eds., 1985) (“Today the personal marriage contract bears the potential for couples to form equitable dyadic relationships….”), at 287; See also supra note 161, and accompanying text.
See Marsha Garrison, Marriage: The Status of Contract, 131 U. Pa. L. Rev. 1039, 1043–44 (1983) (reviewing Lenore J. Weitzman, The Marriage Contract (1981)) (“traditional marriage contract… perpetuates the subjugation of women,” interpreting L. Weitzman), at 1055. See also Fed. R. Civ. P. 16(c); Robert A. Hillman, Court Adjustment of Long-Term Contracts: An Analysis Under Modern Contract Law, 1987 Duke L.J. 1,19 n.97. “ADR rejects traditional win-or-lose outcomes in favor of compromises, tries to develop ‘a consensus about future conduct rather than [assign] responsibility for events in the past,’ views personal conflicts as embedded in social contexts, and looks to the satisfaction of needs rather than the vindication of rights.” Markovits, supra note 54, at 1753 (quoting Susan Silbey & Austin Sarat, Dispute Processing in Law and Legal Scholarship: From Institutional Critique to the Reconstruction of the Juridical Subject, 66 Den. U. L. Rev. 437,453 (1989)). But Professor Markovits doubts the benefits of ADR. Id. at 1753–54.
See Robert A. Hillman, Court Adjustment of Long-Term Contracts: An Analysis Under Modern Contract Law, 1987 Duke L.J. 1,19 n.97, at 18 n.93 and cases cited therein.
See Robert A. Hillman, Court Adjustment of Long-Term Contracts: An Analysis Under Modern Contract Law, 1987 Duke L.J. 1,19 n.97, at 18 n.93 and cases cited therein.. at 6–8 for the commercial analogy.
On marriage, see Susan W. Prager, Shifting Perspectives on Marital Property Law, in Rethinking the Family: Some Feminist Questions 125, 126 (B. Thome & M. Yalom eds. 1982). On commercial negotiations, see infra note 176, and accompanying text.
Dan B. Dobbs, Handbook on the Law of Remedies 299 (1973).
June Carbone, Economics, Feminism, and the Reinvention of Alimony: A Reply to Ira Ellman, 43 Vand. L. Rev. 1463, 1469 (1990), at 1483.
See, e.g., Lenore J. Weitzman, The Economics of Divorce: Social and Economic Consequences of Property, Alimony and Child Support Awards, 28 U.C.L.A. L. Rev. 1181, 1211 (1981) (“Even though both spouses may have worked during the marriage, it is likely that, as a marital unit, they have chosen to give priority to one spouse’s career in the expectation that both will share in the benefits of that decision.”).
Hoffman v. Red Owl Stores, 26 Wis. 2d 683, 133 N.W. 2d 267 (1965) is the leading case. See also Skycom Corp. v. Telstar Corp., 813 F.2d 810 (7th Cir. 1987).
John C. McChesney, Another Critique, supra note 16, at 1334. See also Coffee, The Mandatory/Enabling Balance in Corporate Law: An Essay on the Judicial Role, 89 Colum. L. Rev. 1618, 1681 (1989) (“[C]orporate law entrusts authority to the board of directors… to resolve all future disputes.”) [hereinafter Coffee, Mandatory/Enabling], at 1665 (case for unconscionability weakest in commercial setting).
Frank H. Easterbrook & Daniel R. Fischel, The Corporate Contract, 89 Colum. L. Rev. 1416,1418 (1989) (“[T]he corporate structure is a set of contracts through which managers and certain other participants exercise a great deal of discretion that is ‘reviewed’ by interactions with other self-interested actors.”), at 1418 (“No one set of terms will be best for all; hence the ‘enabling’ structure of corporate law.”); Principles of Corporate Governance: Analysis and Recommendations, Introductory Note to Part IV (Tentative Draft No. 11, 1991) ([amplication of general legal standards “will involve subtle evaluations of specific facts and circumstances”).
See, e.g., Frank H. Easterbrook & Daniel R. Fischel, The Corporate Contract, 89 Colum. L. Rev. 1416,1418 (1989) (“[T]he corporate structure is a set of contracts through which managers and certain other participants exercise a great deal of discretion that is ‘reviewed’ by interactions with other self-interested actors.”), at 1436-37 (“unless legal rules set up a requirement of reciprocal disclosure no firm may find it optimal to disclose information that is valuable to investors”).
See Rudolf B. Schlesinger, The Uniform Commercial Code in the Light of Comparative Law, 1 Inter-Am. L. Rev. 11, 33 (1959).
See, e.g., American Bank of Commerce v. Covolo, 88 N.M. 405, 540 P.2d 1294 (1975); Federal Deposit Insurance Corp. v. Forte, 94 A.D.2d 59, 463 N.Y.S.2d 844 (1983); Continental Bank and Trust Co. v. Utah Security Mortgage, Inc., 701 P.2d 1095 (Utah 1985).
See, e.g., Congress Financial Corp. v. Sterling-Coin Op Machinery Corp., 456 F.2d 451 (3d Cir. 1972); Toomey Equipment Co., Inc. v. Commercial Credit Equipment Corp., 386 So. 2d 1155 (Ala. Civ. App. 1980).
May v. The Women’s Bank, 807 P2d 1145 (Colo. 1991).
See, e.g., Brodheim v. Chase Manhattan Bank, 75 Misc. 2d 285, 347 N.Y.S.2d 394 (N.Y. Sup. Ct. 1973). See also In re East Coast Brokers & Packers, Inc. 120 BR 221 (1990) (parties can agree to a term requiring inspection of perishable goods within 24 hours).
See Robert A. Hillman, Court Adjustment of Long-Term Contracts: An Analysis Under Modern Contract Law, 1987 Duke L.J. 1,19 n.97.
John C. McChesney, Another Critique, supra note 16, at 1334. See also Coffee, The Mandatory/Enabling Balance in Corporate Law: An Essay on the Judicial Role, 89 Colum. L. Rev. 1618, 1681 (1989) (“[C]orporate law entrusts authority to the board of directors… to resolve all future disputes.”) [hereinafter Coffee, Mandatory/Enabling], at 1668–69; Melvin A. Eisenberg, The Structure of Corporation Law, 89Colum. L. Rev, at 1469–70 (discussing closely held corporations).
Frank H. Easterbrook & Daniel R. Fischel, The Corporate Contract, 89 Colum. L. Rev. 1416,1418 (1989) (“[T]he corporate structure is a set of contracts through which managers and certain other participants exercise a great deal of discretion that is ‘reviewed’ by interactions with other self-interested actors.”), at 1433.
Michael P. Dooley & E. Norman Veasey, The Role of the Board in Derivative Litigation: Delaware Law and the Current ALI Proposals Compared, in The American Law Institute Corporate Governance Project in Mid-Passage What Will It Mean to You?, 45,78 (1991), at 75. Professor Coffee reports that most states permit charter terms exculpating manager negligence. Coffee, The Mandatory/Enabling Balance in Corporate Law: An Essay on the Judicial Role, 89 Colum. L. Rev. 1618, 1681 (1989) (“[C]orporate law entrusts authority to the board of directors… to resolve all future disputes.”) [hereinafter Coffee, Mandatory/Enabling], at 1650.
See Robert C. Clark, Contracts, Elites and Traditions in the Making of Corporate Law, 89Colum. L. Rev. 1703, 1714-15 (1989) (‘“[Glovernment,’ in the person of judges, legislators, or regulators, is only infrequently likely to do better than A and B on either the incentive or the information dimension.”), at 1707 (discussing Daniel R. Fischel & Michael Bradley, The Role of Liability Rules and the Derivative Suit in Corporation Law: A Theory and Empirical Analysis, 71 Cornell L. Rev. 261, 277–83, 286 (1986)). Following this logic, several states have enacted provisions limiting liability for duty of care violations. For a discussion, see, e.g., Principles of Corporate Governance: Analysis and Recommendations § 7.17, cont. a at 116–117 (Tentative Draft No. 9, 1989). The rationale for [the] difference in the treatment of due care and loyalty cases is explained not only by the greater need for a litigation remedy to enforce the duty of loyalty, but also by the greater vulnerability of due care cases to abusive litigation. Virtually any corporate transaction can be challenged on due care grounds, and the risk of delay… can often have very costly consequences for the corporation. Thus, in a duty of care case, unless some unusual factor calls the board’s or committee’s judgment into question… the court should accept adequately supported findings as to business matters, even if the court itself could not conclude that it would reach the same judgment on the same record, unless the findings are so clearly unreasonable as to fall outside the bounds of the directors’ discretion.
Principles of Corporate Governance: Analysis and Recommendations § 7.08, cont. c at 121–122 (Tentative Draft No. 8, 1988).
See Robert C. Clark, Contracts, Elites and Traditions in the Making of Corporate Law, 89 Colum. L. Rev. 1703, 1714-15 (1989) (‘“[Glovernment,’ in the person of judges, legislators, or regulators, is only infrequently likely to do better than A and B on either the incentive or the information dimension.”). at 1667-71. For example, consider a term authorizing managers to purchase surplus corporate property at market value. See Principles of Corporate Governance: Analysis and Recommendations 5.02, illustration 1 at 281 (Tentative Draft No. 11,1991). Arguably, if properly disclosed, the price of shares will reflect the provision.
Robert B. Thompson, The Law’s Limits on Contracts in a Corporation, 15 J. Corp. L. 377, 380 (1990), at 392–93.
Melvin A. Eisenberg, The Structure of Corporation Law, 89 Colum. L. Rev. at 1469–70.
Melvin A. Eisenberg, The Structure of Corporation Law, 89 Colum. L. Rev. at 1477. See also Romano, supra note 145, at 1607 (characterizing the “crucial premise” of the charter amendment problem as the “rational apathy” of shareholders). For a detailed account of the issue, see Gordon, supra note 153, at 1573–85.
Roberto Romano, Answering the Wrong Question: The Tenuous Case for Mandatory Corporate Laws, 89 Colum. L. Rev. 1599, 1599 (1989), at 1607 (“The characterization of shareholders as rationally apathetic… is… highly problematic”). But see Gordon, supra note 152, at 1576 (“Since [the large public shareholder’s] expected returns from the combined costs of acquiring and disseminating information will probably be negative, he too will follow a course of rational apathy.”).
See William W. Bratton, Jr., The “Nexus of Contracts” Corporation: A Critical Appraisal, 74 Cornell L. Rev. 407, 409 (1989) (describing contractualism) [hereinafter Bratton, Nexus of Contracts], at 460-61; Brudney, supra note 12, at 1415 n.31; Lewis A. Kornhauser, The Nexus of Contracts Approach to Corporations: A Comment on Easter brook and Fischel, 89 Colum. L. Rev. 1449, 1452(1989), and accompanying text.
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Hillman, R.A. (1997). Theories of Contractarians and their Critics: Marriages and Corporations. In: The Richness of Contract Law. Law and Philosophy Library, vol 28. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-5680-6_4
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