LOCATION CHANGE
LAW & ECONOMICS WORKSHOP SERIES
presents
George Triantis
Charles J. Meyers Professor of Law and Business
Stanford University
The Design of Staged Contracting
(coauthored with Albert Choi)
Tuesday, October 10, 2017
4:10 – 5.45
Flavelle Building, Room 219
78 Queen’s Park
In negotiating complex business transactions, parties decide whether, when and how to invite legal enforcement of the rules that govern their relationships, particularly in their use of intermediate agreements that reflect some agreement on a number of provisions but contemplate further negotiation (variously labelled memorandum of understanding, agreement in principle, letter of intent, term sheet). Under the common law of most U.S. jurisdictions, the parties have an intermediate option between enforcement and no-enforcement of such intermediate agreements: a duty to bargain or negotiate in good faith or with best efforts. Law firms warn their clients about the risk of inadvertently bringing on this type of enforcement but with care, this risk is small. Rather, the parties are often unclear about the freedom they prefer for themselves or their counterparties to deviate from the terms of their intermediate agreements. They expect these terms to be sticky to some degree, but do not think through how much and by what means to achieve this. Judges and commentators identify the protection of specific investments as the principal goal of the commitment to bargain or negotiate. We suggest, however, that the benefit of the flexible standard of good faith or best efforts comes more broadly from mid-stream regulation of the negotiation process. The parties need flexibility in optimizing their deal, while also efficiently constraining value-claiming behavior and allocating exogenous risks during their negotiations. Building on our earlier work on strategic ambiguity, we also show that concerns about the uncertainty of such flexible standards can be addressed.
George Triantis is the Charles J. Meyers Professor of Law and Business at Stanford University and was the Eli Goldston Professor of Law at Harvard Law School before joining the Stanford faculty in 2011. His teaching and scholarship are in the fields of contracts, bankruptcy and law-and-finance. His recent publications concern the process of business negotiations, the link between contract design and dispute resolution, the design of legal remedies in commercial contracts, the impact of bargaining power on contract design, and the forces of disruption and innovation in transactional legal practice. His academic service roles have included Associate Dean of Research for Stanford University, the inaugural faculty director of the Stanford Cyber Initiative and editor of the Journal of Law & Economics.
For more workshop information, please contact Nadia Gulezko at n.gulezko@utoronto.ca
