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November 17 Thursday

Bert W. Wasserman Workshop in Law and Finance: "Contractual Landmines" with UVA Law Prof. G. Mitu Gulati

  • Thursday, November 17, 2022 at 4:10PM - 5:40PM
  • SLB Room 121
  • Open To The Yale Community
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Description

G. Mitu Gulati, Perre Bowen Professor of Law and John V. Ray Research Professor of Law, University of Virginia School of Law, will be presenting from his draft paper, "Contractual Landmines" (joint with Robert E. Scott and Stephen J. Choi).  The abstract of the draft paper states:

"The conventional view is that standardized boilerplate terms represent an optimal contractual solution to the contracting problems facing parties in large markets. As Smith and Warner explained, 'harmful heuristics, like harmful mutations, will die out.' But an examination of a sample of current sovereign bond contracts reveals numerous instances of harmful landmines -- vague and apparently purposeful changes to standard language that increases a creditor's nonpayment risk, coupled with blatant errors in expression and drafting and a continuing use of inapt terms that were historically imported from corporate transactions. Moreover, these landmines differ from each other in important respects: purposeful changes to the standard form reflect careful lawyering on behalf of sovereign clients, while errors that only benefit subsequent activists reflect haste in adapting precedents to new transactions. Using both quantitative data and interviews with market participants, we find that the conventional view fails to recognize the unique and distorting role that lawyers play in the drafting of standard form contracts. Systematic asymmetries in the market for the lawyers who negotiate and draft these contracts appear to explain why real world contracts depart from the efficient contract paradigm."

The complete draft paper is available here.

Sponsoring Organization(s)

Yale Law School Center for the Study of Corporate Law

Law, Economics & Organization Workshop