Skip to main content Accessibility help
×
Hostname: page-component-7c8c6479df-27gpq Total loading time: 0 Render date: 2024-03-29T06:24:10.465Z Has data issue: false hasContentIssue false

2.2 - The mitigation principle: toward a general theory of contractual obligation (1)

Published online by Cambridge University Press:  10 November 2010

Get access

Summary

Most contract rules are permissive, applying only if the parties do not otherwise agree. By providing standardized and widely suitable risk allocations in advance, the law enables most parties to select a preformulated legal norm “off-the-rack,” thus eliminating the cost of negotiating every detail of the proposed arrangement. Atypical parties remain free to bargain for customized provisions, much as a person with an unusual physique may purchase custom-tailored garments for a premium rather than accept a standard size and cut available at a lower price.

Ideally, the preformulated rules supplied by the state should mimic the agreements contracting parties would reach were they costlessly to bargain out each detail of the transaction. Using this benchmark raises two separable issues: First, what arrangements would most bargainers prefer? And second, what atypical arrangements should be supported as benign alternatives?

The model developed in this article will show that the contractual obligee and obligor would agree in advance to minimize the joint costs of adjusting to prospective contingencies, assigning the responsibility of mitigating to whoever is better able to adjust to the changed conditions. The occurrence of contingencies requiring adjustment, however, may encourage strategic behavior by both parties: The obligor may attempt to evade his performance responsibilities while the obligee may bargain opportunistically whenever his cooperation is requested. Any effort legally to regulate one manifestation of this strategic behavior almost inevitably exacerbates the other. But where a developed market for substitute performances exists, the potential for opportunism is negligible; parties can therefore focus on eliminating evasion of contractual obligations without losing the benefits of cooperation.

Type
Chapter
Information
Publisher: Cambridge University Press
Print publication year: 1982

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Save book to Kindle

To save this book to your Kindle, first ensure coreplatform@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×