Abstract
This article explores some behavioral findings that are relevant to three areas of contract: formation, performance, and remedies. I compare the rational choice theory analysis of various aspects of contract law with how behavioral findings lead to a change in our understanding of that area of law. A penultimate section considers several criticisms of behavioral economics. A concluding section calls for altering some settled understandings of contract law to accommodate behavioral results and for further research about some still uncertain aspects of contracting.
Acknowledgments
I would like to thank my friend Francesco Parisi for inviting me to participate in this symposium. I also want to thank my friend and neighbor Andrew Troutt. Andrew negotiates, helps draft, and monitors multi-million-dollar contracts for a large international company. In numerous conversations he has illustrated many of the insights of the behavioral contract literature at play in his work. I also want to thank Ian Ayres, Bob Cooter, Ben Depoorter, Nuno Garoupa, Sven Hoeppner, Russell Korobkin, Richard McAdams, Greg Mitchell, Eric Posner, Doron Teichman, and Tess Wilkinson-Ryan for their comments and suggestions on an earlier version of this article. I want to single out Mel Eisenberg for a remarkably thoughtful long set of comments to which I owe a separate article, not just my heartfelt thanks. I also owe a very big thank you to Jeanette Sayre, who edited the article with great care and effort
References
Alter, A.L., Oppenheimer, D.M., Epley, N., and Eyre, R.N. (2007). Overcoming intuition: metacognitive difficulty activates analytic reasoning. J. Exp. Psychol. Gen. 136: 569–576. https://doi.org/10.1037/0096-3445.136.4.569.Suche in Google Scholar
Ayres, I. (2003). Valuing modern contract scholarship. Yale Law J. 112: 881. https://doi.org/10.2307/3657492.Suche in Google Scholar
Ayres, I. (2012). Regulating opt-out: an economic theory of altering rules. Yale Law J. 121: 2032.Suche in Google Scholar
Ayres, I. and Schwartz, A. (2014). The No-reading problem in consumer contract law. Stanford Law Rev. 66: 545.Suche in Google Scholar
Baird, D.G. (2013). Reconstructing contracts. Harvard University Press, Cambridge, MA, USA.10.2307/j.ctvjsf5cdSuche in Google Scholar
Bakos, Y., Marotta-Wurgler, F., and Trossen, D.R. (2014). Does Anyone read the fine print? Consumer attention to standard-form contracts. J. Leg. Stud. 43: 1. https://doi.org/10.1086/674424.Suche in Google Scholar
Bar-Gill, O. (2004). Seduction by plastic. Northwest. Univ. Law Rev. 98: 1373.Suche in Google Scholar
Bar-Gill, O. (2006). Bundling and consumer misperception. Univ. Chicago Law Rev. 73: 33–61.Suche in Google Scholar
Bar-Gill, O. (2008). The behavioral economics of consumer contracts. Minn. Law Rev. 92: 749.Suche in Google Scholar
Bar-Gill, O. (2012). Seduction by contract: law, economics, and psychology in consumer markets. Oxford University Press, Oxford, England.10.1093/acprof:oso/9780199663361.001.0001Suche in Google Scholar
Bar-Gill, O. and Ben-Shahar, O. (2021). Rethinking nudge: an information-costs theory of default rules. Univ. Chicago Law Rev. 88: 531.10.2139/ssrn.3582129Suche in Google Scholar
Bar-Gill, O. and Warren, E. (2008). Making credit safer. Univ. Penn. Law Rev. 157: 1.Suche in Google Scholar
Barr, M.S., Mullainathan, S., and Shafir, E. (2008). Behaviorally informed financial services regulation. University of Michigan Law School Scholarship Repository, Ann Arbor, MI, USA.Suche in Google Scholar
Bebchuk, L.A. and Posner, R.A. (2006). One-sided contracts in competitive consumer markets. Mich. Law Rev. 104: 827.10.1017/CBO9780511611179.003Suche in Google Scholar
Becker, G.S. (1962). Irrational behavior and economic theory. J. Polit. Econ. 70: 1. https://doi.org/10.1086/258584.Suche in Google Scholar
Ben-Shahar, O. and Schneider, C.E. (2011). The failure of mandated disclosure. Univ. Penn. Law Rev. 159: 647.10.2139/ssrn.1567284Suche in Google Scholar
Ben-Shahar, O. and Schneider, C.E. (2014). More than you wanted to know: the failure of mandated disclosure. Princeton University Press, Princeton, NJ, USA.10.23943/princeton/9780691161709.001.0001Suche in Google Scholar
Brito, D.L. and Hartley, P.R. (1995). Consumer rationality and credit cards. J. Polit. Econ. 103: 400–433. https://doi.org/10.1086/261988.Suche in Google Scholar
Bubb, R. and Pildes, R.H. (2014). How behavioral economics trims its sails and why. Harv. Law Rev. 127: 1593.Suche in Google Scholar
Calabresi, G. and Douglas Melamed, A. (1972). Property rules, liability rules, and inalienability: one view of the cathedral. Harv. Law Rev. 85: 1088. https://doi.org/10.2307/1340059.Suche in Google Scholar
Camerer, C.F. and Kunreuther, H. (1989). Decision processes for low probability events: policy implications. J. Policy. Anal. Manage. 8: 565–592. https://doi.org/10.2307/3325045.Suche in Google Scholar
Camerer, C., Babcock, L., George, L., and Thaler, R. (1997). Labor supply of New York cabdrivers: one day at a time. Q. J. Econ. 112: 407–441. https://doi.org/10.1162/003355397555244.Suche in Google Scholar
Chang, T. and Gross, T. (2014). How many pears would a pear packer Pack if a pear packer could Pack pears at quasi-exogenously varying piece rates? J. Econ. Behav. Organ. 99: 1–17. https://doi.org/10.1016/j.jebo.2013.11.001.Suche in Google Scholar
Coase, R.H. (1960). The problem of social cost. J. Law Econ. 3: 1–44. https://doi.org/10.1086/466560.Suche in Google Scholar
Cooter, R.D. and Ulen, T.S. (2011). Law and economics, 6th ed. Pearson, Hoboken, NJ, USA.Suche in Google Scholar
Dafny, L. and Dranove, D. (2008). Do report cards tell consumers anything they don’t already know? The case of Medicare HMOs. Rand J. Econ. 39: 790. https://doi.org/10.1111/j.1756-2171.2008.00039.x.Suche in Google Scholar
DellaVigna, S. (2009). Psychology and economics: evidence from the field. J. Econ. Lit. 47: 315. https://doi.org/10.1257/jel.47.2.315.Suche in Google Scholar
DellaVigna, S. and Malmendier, U. (2006). Paying not to go to the gym. Am. Econ. Rev. 96: 694. https://doi.org/10.1257/aer.96.3.694.Suche in Google Scholar
Depoorter, B. and Tontrup, S. (2012). How law frames moral intuitions: the expressive effect of specific performance. Ariz. Law Rev. 54: 673.Suche in Google Scholar
Dodd-Frank Wall Street Reform and Consumer Finance Protection Act (2010). Pub. L. No. 111-203 (§ 929-Z, 124 Stat).Suche in Google Scholar
Edwards, H.T. (1992). The growing disjunction between legal education and the legal profession. Mich. Law Rev. 91: 34. https://doi.org/10.2307/1289788.Suche in Google Scholar
Edwards, H.T. (1993). The growing disjunction between legal education and the legal profession: a postscript. Mich. Law Rev. 91: 2191. https://doi.org/10.2307/1289731.Suche in Google Scholar
Eisenberg, M.A. (1982). The bargain principle and its limits. Harv. Law Rev. 95: 741. https://doi.org/10.2307/1340776.Suche in Google Scholar
Eisenberg, M.A. (2000). The emergence of dynamic contract law. Calif. Law Rev. 88: 1743. https://doi.org/10.2307/3481209.Suche in Google Scholar
Eisenberg, M.A. (2005). Actual and virtual specific performance: the theory of efficient breach and the indifference principle in contract law. Calif. Law Rev. 93: 975.Suche in Google Scholar
Eisenberg, M.A. (2014). Behavioral economics and contract law. In: Zamir, E. and Teichman, D. (Eds.), The Oxford Handbook of behavioral Economics and the law. Oxford University Press, Oxford, England, pp. 438–464.10.1093/oso/9780199731404.003.0011Suche in Google Scholar
Eisenberg, M.A. (2018). Foundational principles of contract law. Oxford University Press, Oxford, England.10.1093/oso/9780199731404.001.0001Suche in Google Scholar
Eisenberg, T. and Miller, G.P. (2015). Damages versus specific performance: lessons from commercial contracts. J. Empir. Leg. Stud. 12: 29–69. https://doi.org/10.1111/jels.12064.Suche in Google Scholar
Engel, K.C. and McCoy, P.A. (2002). A tale of three markets: the law and economics of predatory lending. Tex. Law Rev. 80: 1259.10.2139/ssrn.286649Suche in Google Scholar
Epstein, R.A. (2006). Behavioral economics: human errors and market corrections. Univ. Chicago Law Rev. 73: 111.Suche in Google Scholar
Epstein, R.A. (2008). Exchange: the neoclassical economics of consumer contracts. Minn. Law Rev. 92: 803.Suche in Google Scholar
Farnsworth, W. (1999). Do parties to nuisance cases bargain after judgment? A glimpse inside the cathedral. Univ. Chicago Law Rev. 66: 373. https://doi.org/10.2307/1600470.Suche in Google Scholar
Farnsworth, E.A. (2004). Farnsworth on contracts, 3rd ed. Aspen Publishers, Santaquin, UT, USA.Suche in Google Scholar
Fehr, E., Hart, O., and Zehnder, C. (2011). Contracts as reference points – experimental evidence. Am. Econ. Rev. 101: 493. https://doi.org/10.1257/aer.101.2.493.Suche in Google Scholar
Feldman, Y. and Teichman, D. (2011). Are all contractual obligations created equal? Georgetown Law J. 100: 5.Suche in Google Scholar
Feldman, Y., Schurr, A., and Teichman, D. (2013). Reference points and contractual choices: an experimental examination. J. Empir. Leg. Stud. 10: 512–541. https://doi.org/10.1111/jels.12018.Suche in Google Scholar
Frederick, S. (2005). Cognitive reflection and decision making. J. Econ. Perspect. 19: 25. https://doi.org/10.1257/089533005775196732.Suche in Google Scholar
Gneezy, U. and Rustichini, A. (2000). A fine is a price. J. Leg. Stud. 29: 1. https://doi.org/10.1086/468061.Suche in Google Scholar
Goetz, C.J. and Scott, R.E. (1977). Liquidated damages, penalties, and the just compensation principle. Columbia Law Rev. 77: 554. https://doi.org/10.2307/1121823.Suche in Google Scholar
Hanson, J.D. and Kysar, D.A. (1999). Taking behavioralism seriously: some problems of market manipulation. N. Y. Univ. Law Rev. 74: 630.10.2307/1342413Suche in Google Scholar
Hart, O. and Moore, J. (2008). Contracts as reference points. Q. J. Econ. 123: 1. https://doi.org/10.1162/qjec.2008.123.1.1.Suche in Google Scholar
Hillman, R.A. and Rachlinski, J.J. (2002). Standard form contracts in the electronic age. NYU Law Review 77: 429.10.2139/ssrn.287819Suche in Google Scholar
Hippel, S. and Hoeppner, S. (2021). Contracts as reference points: a replication. Int’l Review of Law and Economics 65: 105973. https://doi.org/10.1016/j.irle.2020.105973.Suche in Google Scholar
Ho, D.E. (2012). Fudging the nudge: information disclosure and restaurant grading. Yale Law J. 122: 574.Suche in Google Scholar
Hoffman, D.A. and Wilkinson-Ryan, T. (2013). The psychology of contract precautions. Univ. Chicago Law Rev. 80: 395.10.2139/ssrn.2000823Suche in Google Scholar
Hossain, T. and List, J.A. (2012). The behavioralist visits the factory: increasing productivity using simple framing manipulations. Manag. Sci. 58: 2151–2167. https://doi.org/10.1287/mnsc.1120.1544.Suche in Google Scholar
Jin, G.Z. and Leslie, P. (2003). The effect of information on product quality: evidence from restaurant hygiene grade cards. Q. J. Econ. 118: 409–451. https://doi.org/10.1162/003355303321675428.Suche in Google Scholar
Johnson, E.J. and Goldstein, D.G. (2003). Do defaults save lives? Science 302: 1338. https://doi.org/10.1126/science.1091721.Suche in Google Scholar
Kahneman, D. (2011). Thinking, fast and slow. Macmillan, New York, NY, USA.Suche in Google Scholar
Kaplow, L. (1992). Rules versus standards: an economic analysis. Duke Law J. 42: 557. https://doi.org/10.2307/1372840.Suche in Google Scholar
Kaplow, L. and Shavell, S. (2006). Fairness versus welfare. Harvard University Press, Cambridge, MA, USA.Suche in Google Scholar
Kessler, F. (1943). Contracts of adhesion – some thoughts about freedom of contract. Columbia Law Rev. 43: 629. https://doi.org/10.2307/1117230.Suche in Google Scholar
Korobkin, R.B. (1998). The status quo bias and contract default rules. Cornell Law Rev. 83: 608.10.1037/e683302011-044Suche in Google Scholar
Korobkin, R.B. (2000). Behavioral economics, contract formation, and contract law. In: Sunstein, C.R. (Ed.), Behavioral Law and economics. Cambridge University Press, Cambridge, England, pp. 116–143.10.1017/CBO9781139175197.005Suche in Google Scholar
Korobkin, R.B. (2003). Bounded rationality, standard form contracts, and unconscionability. Univ. Chicago Law Rev. 70: 1203. https://doi.org/10.2307/1600574.Suche in Google Scholar
Koszegi, B. (2015). Behavioral contract theory. J. Econ. Lit. 52: 1075.10.1257/jel.52.4.1075Suche in Google Scholar
Kuhn, T. (1996). The Structure of scientific revolutions, 3rd ed. University of Chicago Press, Chicago, IL, USA.10.7208/chicago/9780226458106.001.0001Suche in Google Scholar
Lake River Corp. v. Carborundum Co. (1985). 769 F.2d 1984 (7th Cir. 1985). Opinion by Judge Richard Posner.Suche in Google Scholar
Langevoort, D.C. (1998). Behavioral theories of judgment and decision making in legal scholarship: a literature review. Vanderbilt Law Rev. 51: 1499.Suche in Google Scholar
Langevoort, D.C. (2001). The human nature of corporate boards: law, norms, and the unintended consequences of independence and accountability. Georgetown Law J. 89: 797–832.10.2139/ssrn.241402Suche in Google Scholar
Laycock, D. (1990). The death of the irreparable injury rule. Harv. Law Rev. 103: 687. https://doi.org/10.2307/1341345.Suche in Google Scholar
Laycock, D. (1991). The death of the irreparable injury rule. New York: Oxford University Press.10.2307/1341345Suche in Google Scholar
Lubet, S. (1997). Is legal theory good for anything? Univ. Ill Law Rev. 1997: 193.Suche in Google Scholar
Marotta-Wurgler, F. (2007). What’s in a standard form contract? An empirical analysis of software license agreements. J. Empir. Leg. Stud. 4: 677–713. https://doi.org/10.1111/j.1740-1461.2007.00104.x.Suche in Google Scholar
Marotta-Wurgler, F. (2012). Does contract disclosure matter? J. Inst. Theor. Econ. JITE 168: 94. https://doi.org/10.1628/093245612799440122.Suche in Google Scholar
Marotta-Wurgler, F. (2015). (Even) more than you wanted to know about the failures of disclosure: a review of Omri ben-shahar and Carl schneider’s More than you Wanted to know. Jerus. Rev. Leg. Stud. 11: 63. https://doi.org/10.1093/jrls/jlu018.Suche in Google Scholar
Mathis, K. and Tor, A. (Eds.) (2020). Consumer law and economics. Springer International, New York, NY, USA.10.1007/978-3-030-49028-7Suche in Google Scholar
Mitchell, G. and Klick, J. (2006). Government regulation of irrationality: moral and cognitive hazards. Minn. Law Rev. 90: 1621.Suche in Google Scholar
Mullenix, L.S. (2015). Gaming the system: protecting consumers from unconscionable contractual forum-selection and arbitration clauses. Hastings Law J. 66: 719.Suche in Google Scholar
Nisbett, R.E. (2015). Mindware: tools for smart thinking. Canada: Doubleday.Suche in Google Scholar
Perillo, J.M. (2009). Calamari and Perillo on contracts, 6th ed. West Academic Publishing, Saint Paul, MN, USA.Suche in Google Scholar
Plous, S. (1993). The Psychology of Judgment and decision making. McGraw-Hill Series in Social Psychology, New York, NY, USA.Suche in Google Scholar
Posner, E.A. (2003). Economic analysis of contract law after three decades: success or failure? Yale Law J. 112: 829. https://doi.org/10.2307/3657491.Suche in Google Scholar
Posner, E.A. (2015). Contract Law and theory, 2nd ed. Wolters Kluwer, Alphen aan den Rijn, Netherlands.Suche in Google Scholar
Rakoff, T.D. (1983). Contracts of adhesion: an essay in reconstruction. Harv. Law Rev. 96: 1174. https://doi.org/10.2307/1341009.Suche in Google Scholar
Restatement (Second) of Contracts (1981). American Law Institute.Suche in Google Scholar
Riker, W.H. (1986). The art of political manipulation. Yale University Press, New Haven, CT, USA.Suche in Google Scholar
Schwartz, A. (1979). The case for specific performance. Yale Law J. 89: 271. https://doi.org/10.2307/795838.Suche in Google Scholar
Schwartz, A. (2015). Regulating for rationality. Stanford Law Rev. 67: 1373.Suche in Google Scholar
Schwartz, A. and Scott, R.E. (2003). Contract theory and the limits of contract law. Yale Law J. 113: 541. https://doi.org/10.2307/3657531.Suche in Google Scholar
Sharot, T. (2011). The optimism bias. Curr. Biol. 21: R941–R945. https://doi.org/10.1016/j.cub.2011.10.030.Suche in Google Scholar
Slawson, W.D. (1971). Standard form contracts and democratic control of lawmaking power. Harv. Law Rev. 84: 529. https://doi.org/10.2307/1339552.Suche in Google Scholar
Stigler, G.J. (1982). The process and progress of economics, pp. 1–20, Available at: https://www.Nobelprize.Org/Nobel_Prizes/Economic-Sciences/Laureates/1982/Stigler-Lecture.Pdf.Suche in Google Scholar
Sunstein, C.R. (2011). Empirically informed regulation. Univ. Chicago Law Rev. 78: 1349.Suche in Google Scholar
Sunstein, C.R. (2013). Simpler: the future of government. New York: Simon & Schuster.Suche in Google Scholar
Sunstein, C.R. (2014). The real world of cost-benefit analysis: thirty-six questions (and almost as many answers). Columbia Law Rev. 114: 167.10.2139/ssrn.2199112Suche in Google Scholar
Thaler, R.H. (2015). Misbehaving: the making of behavioral economics. W.W. Norton Company, Inc, New York, NY, USA.Suche in Google Scholar
Thaler, R.H. and Sunstein, C.R. (2021). Nudge: the final edition. Yale University Press, New Haven, CT, USA.Suche in Google Scholar
Tversky, A. and Kahneman, D. (1981). The framing of decisions and the psychology of choice. Science 211: 453. https://doi.org/10.1126/science.7455683.Suche in Google Scholar
Ulen, T.S. (1984). The efficiency of specific performance: toward a unified theory of contract remedies. Mich. Law Rev. 83: 341. https://doi.org/10.2307/1288569.Suche in Google Scholar
Warren, E. (2007). Unsafe at any rate. J. Democr. 2007: 8–19.10.1017/CCOL9780521848015.002Suche in Google Scholar
Wilkinson-Ryan, T. (2010). Do liquidated damages encourage breach? A psychological experiment. Mich. Law Rev. 108: 633.Suche in Google Scholar
Wilkinson-Ryan, T. (2015). Incentives to breach. Am. Law Econ. Rev. 17: 290–311. https://doi.org/10.1093/aler/ahu019.Suche in Google Scholar
Wilkinson-Ryan, T. and Baron, J. (2009). Moral judgment and moral heuristics in breach of contract. J. Empir. Leg. Stud. 6: 405. https://doi.org/10.1111/j.1740-1461.2009.01148.x.Suche in Google Scholar
Wilkinson-Ryan, T. and Hoffman, D.A. (2010). Breach is for suckers. Vanderbilt Law Rev. 63.10.2139/ssrn.1441605Suche in Google Scholar
Wilkinson-Ryan, T. and Hoffman, D.A. (2015). The common sense of contract formation. Stanford Law Rev. 67: 1269.Suche in Google Scholar
Williams, B. (2019). Unconscionability as a sword: the case for an affirmative cause of action. Calif. Law Rev. 107: 2015–2070.Suche in Google Scholar
Willis, L.E. (2013). When nudges fail: slippery defaults. Univ. Chicago Law Rev. 80: 1155.10.2139/ssrn.2142989Suche in Google Scholar
Zamir, E. and Teichman, D. (2018). Behavioral Law and economics. Oxford University Press, Oxford, England.10.1093/oso/9780190901349.001.0001Suche in Google Scholar
© 2021 Walter de Gruyter GmbH, Berlin/Boston
Artikel in diesem Heft
- Frontmatter
- Article
- The Impact of Behavioral Economics on the Law: Introduction
- Special Issue Articles
- The Paternalistic Turn in Behavioral Law and Economics: A Critique
- Behavioral Contract Law
- The Limits of Behavioral Economics in Tort Law
- Behavioral Economics in Plea-Bargain Decision-Making: Beyond the Shadow-of-Trial Model
- Behavioral Economics and Court Decision-Making
- The Role of Bias in Economic Models of Law
- Behavioral Biases and the Law
- The Evolutionary Force of Behavioral Economics in Law
Artikel in diesem Heft
- Frontmatter
- Article
- The Impact of Behavioral Economics on the Law: Introduction
- Special Issue Articles
- The Paternalistic Turn in Behavioral Law and Economics: A Critique
- Behavioral Contract Law
- The Limits of Behavioral Economics in Tort Law
- Behavioral Economics in Plea-Bargain Decision-Making: Beyond the Shadow-of-Trial Model
- Behavioral Economics and Court Decision-Making
- The Role of Bias in Economic Models of Law
- Behavioral Biases and the Law
- The Evolutionary Force of Behavioral Economics in Law