Legal Supervision of Commercial Opportunism
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Description
Commercial law ideally seeks to reduce opportunism—conduct that attempts to reallocate risks that were implicitly or explicitly assigned by the contract. But efforts to regulate opportunism confront serious limitations. Legal doctrines aimed at such conduct may reduce one form of opportunism, but simultaneously create risks of alternative forms. Arbiters of commercial disputes who seek to constrain misconduct in a specific case may have difficulty distinguishing between opportunism and behaviour that is consistent with contractually created entitlements to take advantage of changed circumstances. Consequently, reduction of commercial opportunism may perhaps best be achieved by reliance on contractual clauses and reputation. Examination of contracts negotiated in circumstances that expose one party to the risk of hold-up reveals that parties incur significant drafting costs in order to reduce incentives for opportunism. Courts and other arbiters would advance efforts to minimize strategic behaviour by enforcing such clauses, notwithstanding doctrinal limitations on their validity.
Source Publication
Contract Governance: Dimensions in Law and Interdisciplinary Research
Source Editors/Authors
Stefan Grundmann, Florian Möslein, Karl Riesenhuber
Publication Date
2015
Recommended Citation
Gillette, Clayton P., "Legal Supervision of Commercial Opportunism" (2015). Faculty Chapters. 724.
https://gretchen.law.nyu.edu/fac-chapt/724
