Boilerplate and Economic Power in Auto-Manufacturing Contracts

Ben-Shahar, Omri; White, James J.

doi:10.1017/cbo9780511611179.005

Cited by 18 publications

(22 citation statements)

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“…Because of “the range of situations in which boilerplate appears” (Rakoff 2007, 203), a variety of characteristics come to the fore; it becomes hard to pin down a single view of what we think of as boilerplate or how boilerplate language functions. Boilerplate has been identified by scholars as being both standardized and increasingly customizable (Radin 2007, 190); opaque to some parties and transparent to others (Boardman 2007, 176); inscrutable to all (or most) but familiar and, hence, valuable (Choi and Gulati 2006, 1152 note 83, 1160; Kahan and Klausner 1997, 721 note 16); 24 presumptively reflective of substantive agreement (Johnston 2007); one‐sided and nonnegotiated but understood and accepted by parties (Ben‐Shahar and White 2007); ubiquitous and context‐specific (Rakoff 2007; Gillette 2007, 98); and portable and modular, in a way that maximizes context‐independence (Smith 2007, 164).…”

Section: The Meaning Of Boilerplatementioning

confidence: 99%

“…Boilerplate terms have also been shown to reflect the agreement between sophisticated parties. In Ben‐Shahar and White's (2007) analysis of the particular operation of standard‐form provisions in auto‐manufacturing contracts, boilerplate continues to exhibit qualities of traditional contractual terms. While the authors focus on the efficiency of the transactions reflected in the boilerplate, their discussion reveals the extent to which nontailored terms express the substance of the arrangement.…”

Section: Evidence Of Agreement In Descriptions Of the Operation Of Bomentioning

confidence: 99%

“… 25. Omri Ben‐Shahar and James J. White (2007) find overwhelming uniformity in the language of contracts used by each original equipment manufacturer in contracts with tier‐1 automotive suppliers—noting the one million annual procurement contracts entered by General Motors all governed by the same terms—but find varied terms across original equipment manufacturers (31).…”

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confidence: 99%

“… 30. As Ben‐Shahar and White (2007) explain, the economic power in these transactions is distributed unevenly, with original equipment manufacturers wielding their power to dictate “selfish boilerplate” in transactions with tier‐1 suppliers; Ben‐Shahar and White find these provisions to be inefficient (3035). …”

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confidence: 99%

“… 31. For example, Ben‐Shahar and White (2007) identify the way in which the standardized broad termination rights of original equipment manufacturers, though arguably unenforceable for lack of consideration or under the statute of frauds for failure to state a quantity term, transform a transaction into a succession of short‐term arrangements (32). …”

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confidence: 99%

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The Persisting Ideal of Agreement in an Age of Boilerplate

Kastner¹

2010

Law soc. inq.

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This essay argues that the treatment of boilerplate as a distinct phenomenon in some contract scholarship sheds light on the way we imagine our social relations. In Omri Ben‐Shahar's 2007 compilation, Boilerplate: The Foundation of Market Contracts, aspects of the traditional meeting‐of‐the‐minds model persist, notwithstanding the move away from this framework indicated by the differentiation of boilerplate from traditional contract. Much boilerplate scholarship is informed by a narrative of agreement as an ideal involving agency, autonomy, and meaningful choice. Thus, in an age in which form language pervades American life, a narrative of genuine agreement continues to frame a conception of contractual relations.

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Section: The Meaning Of Boilerplatementioning

confidence: 99%

Section: Evidence Of Agreement In Descriptions Of the Operation Of Bomentioning

confidence: 99%

mentioning

confidence: 99%

mentioning

confidence: 99%

mentioning

confidence: 99%

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The Persisting Ideal of Agreement in an Age of Boilerplate

Kastner¹

2010

Law soc. inq.

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The double‐edged effect of knowledge acquisition: How contracts safeguard pre‐existing resources

Zanarone

Madsen

2016

Strategic Management Journal

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Research summary: Acquiring knowledge on a partner's pre-existing resources plays an important yet ambiguous role in collaborative relationships. We formally model how contracts trade off productive and destructive uses of knowledge in a buyer-supplier relationship. We show that, when the buyer's pre-existing resources are vulnerable to the revelation of sensitive knowledge, the supplier overinvests in knowledge acquisition as it expects to use the knowledge as a threat in price negotiations. A non-renegotiable closed-price contract prevents such overinvestment and reduces the supplier's ability to expropriate the buyer ex post. Our results extend to the cases of renegotiable closed-price contracts, repeated interactions between a buyer and a supplier, and the use of nondisclosure policies. We draw theoretical, empirical, and managerial implications from our model. Managerial summary:This study yields new insights regarding the use of contract design in protecting pre-existing, nonrelationship specific assets in buyer-supplier arrangements. Anecdotal examples illustrate the "dark side" of these arrangements where opportunistic suppliers exploit knowledge of buyers' pre-existing resources to seek rent and appropriate value. When a supplier is likely to act harmfully, a closed-price contract that specifies the price of the supplier's component upfront may reduce the supplier's incentives to overinvest in acquiring and exploiting knowledge of the buyer's pre-existing resources. As such, when a buyer's pre-existing resources are highly valuable, and thus more vulnerable to use by the supplier outside of the arrangement, a non-renegotiable closed-price contract is more efficient. Additionally, limited disclosure policies and informal agreements based on repeated interactions complement indirect governance via price contracts.

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What do contracts do to facilitate relationships?

Itoh

2023

JER

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I demonstrate that transacting parties may expend resources on ex ante contracting, which may not be legally enforceable, to help build and maintain their long-term relationships. I first introduce three legal concepts, namely scaffolding, managerial provisions, and formal relational contracts, which highlight the recent trend towards more detailed contracts. These concepts indicate that the role of detailed contracts is not to improve judicial contract enforcement, but to enhance clarity and alignment of interests and to reduce renegotiation costs, which ultimately support the parties’ relationships. I then proceed to present and analyze a simple reduced-form model, which demonstrates that the parties’ efforts for ex ante contracting are not necessarily monotonic with the level of alignment of their interests. Furthermore, I discuss recent contracting practices in Japan and attempt to provide an explanation for the lack of change observed in these practices.

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Boilerplate and Economic Power in Auto-Manufacturing Contracts

Cited by 18 publications

References 0 publications

The Persisting Ideal of Agreement in an Age of Boilerplate

The Persisting Ideal of Agreement in an Age of Boilerplate

The double‐edged effect of knowledge acquisition: How contracts safeguard pre‐existing resources

What do contracts do to facilitate relationships?

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