Three Modes of Regulating Price Terms in Standard-Form Contracts—The Israeli Experience

Zamir, Eyal; Mendelson, Tal

doi:10.1007/978-3-030-23057-9_16

Cited by 1 publication

(1 citation statement)

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“…Customers are much more likely to know how much they are expected to pay for the goods or services that they buy than the liquidated damages that are to be paid in case of breach or whether or not the contract includes an arbitration clause (and what it means). This is not to say that price terms, which may be complex and obscure (Bar-Gill 2012, 18–21), should not be regulated on the grounds of market failures, fairness, distributive justice, or paternalism—as they sometimes are (Atamer 2017; Zamir and Mendelson 2019, 437–45). However, since most contractual terms are not purely distributive, and purely distributive terms are less likely to be regulated in the first place, it does mean that the case for MTAs has a rather narrow application.…”

Section: Revisiting the Theoretical Analysismentioning

confidence: 99%

Substituting Invalid Contract Terms: Theory and Preliminary Empirical Findings

Katz¹,

Zamir²

2022

Law Soc. Inq.

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The law often lays down mandatory rules, from which the parties may deviate in favor of one party but not the other. Examples include the invalidation of high-liquidated damages and the unenforceability of excessive noncompete clauses in employment contracts. In these cases, the law may substitute the invalid term with a moderate arrangement, with a punitive arrangement that strongly favors the protected party, or with a minimally tolerable arrangement (MTA), which preserves the original term as much as is tolerable. This article revisits the choice between the various substitutes. Based on theoretical analysis and five new empirical studies (N = 2,089), it argues that the incidence of MTAs should be rather limited. It demonstrates that people find moderate substitute arrangements more attractive than the alternatives. It also points to two overlooked incentive effects of the substitute arrangement (in addition to its impact on the drafting of contracts). First, the applicable substitute strongly influences customers’ inclination to challenge excessive contract terms once a dispute arises. Second, when the invalidation of an excessive term is discretionary, the applicable substitute can affect decision makers’ inclination to invalidate excessive clauses in the first place.

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Section: Revisiting the Theoretical Analysismentioning

confidence: 99%