A central question of contract law remains: when should the law supply a term not expressly agreed to? Many scholars have addressed that question, yet the justification for law- supplied terms often remains unconvincing. Because many proposals to supply terms do not incorporate a comparative frameworkfor assessing the costs and benefits of legal interventions, they are incompletely justifled. This Article proposes that a comparative net benefit approach (developed in institutional economics to explain private arrangements) be adapted and expanded to resolve fundamental issues of legal intervention. This Article uses that framework to critique the (1) hypothetical bargain and (2) Ayres/Gertner penalty default rule approaches to law-supplied terms. Finally, this Article illustrates the benefits of the comparative framework for resolving questions of law-supplied rules in the precontractual negotiation and subcontractor bidding contexts.
Law-Supplied Default Rules
Place of Original Publication
Southern California Interdisciplinary Law Journal
3 Southern California Interdisciplinary Law Journal 189 (1993)
Kostritsky, Juliet P., "Looking for Default Rule Legitimacy in All the Wrong Places: A Critique of the Authority of Contract Model and the Coordination Principle Proposed by Professor Burto" (1993). Faculty Publications. 705.