Are Consequential Damages in the U.C.C. Gap Fillers a Penalty Default Rule?
In this article, game theory is applied to the battle of the forms and related scenarios to explain Daniel Keatings observations, reported in the article “Exploring the Battle of the Forms in Action,” 98 MICH. L. REV. 2678 (2000). The first of the two major findings in the paper is that drafters of boilerplate language should use adversarial, U.C.C. 2-207(1) proviso-conforming language to ensure that clients receive terms that are no worse than the default U.C.C. gap fillers. This is done first by explaining how courts apply U.C.C. 2-207 to the battle of the forms, and then applying backwards induction to a model of this situation. The second major finding is that there is a penalty default rule in contract law. This has been debated by the likes of Ian Ayers, Robert Gertner, and Eric Posner. The penalty default rule was hiding in the U.C.C. under the guise of the famous first-year contracts case Hadley v. Baxendale. Posners argument against penalty default rules in contract law, hinge
In this article, game theory is applied to the battle of the forms and related scenarios to explain Daniel Keating’s observations, reported in the article “Exploring the Battle of the Forms in Action,” 98 MICH. L. REV. 2678 (2000). The first of the two major findings in the paper is that drafters of boilerplate language should use adversarial, U.C.C. § 2-207(1) proviso-conforming language to ensure that clients receive terms that are no worse than the default U.C.C. gap fillers. This is done first by explaining how courts apply U.C.C. § 2-207 to the battle of the forms, and then applying backwards induction to a model of this situation. The second major finding is that there is a penalty default rule in contract law. This has been debated by the likes of Ian Ayers, Robert Gertner, and Eric Posner. The penalty default rule was hiding in the U.C.C. under the guise of the famous first-year contracts case Hadley v. Baxendale. Posner’s argument against penalty default rules in contract law,
Abstract: In this article, game theory is applied to the battle of the forms and related scenarios to explain Daniel Keating’s observations, reported in the article “Exploring the Battle of the Forms in Action,” 98 MICH. L. REV. 2678 (2000). The first of the two major findings in this article is that there is a game-theoretic reason drafters of boilerplate language should use adversarial, U.C.C. § 2-207(1) proviso-conforming language to ensure that clients receive terms that are no worse than the default U.C.C. gap fillers. The second major finding is that there is a penalty default rule in contract law. This has been debated by the likes of Ian Ayers, Robert Gertner, and Eric Posner. Under the U.C.C., consequential damages are part of the gap fillers, and thus part of the Nash Equilibrium default in the Battle of the Forms. This default gap filler is applied even though a majority of parties do not include this term in their negotiated, functionally complete contracts. Keywords: Law a
