Contractual Holdup and Legal Intervention

Contractual Holdup and Legal Intervention

This article develops the point that incentive and risk-bearing problems associated with contractual holdup may justify legal intervention. Contractual holdup is considered both for fresh contracts and for modifications of contracts. One type of legal intervention is flat voiding of contracts. Such intervention tends to be advantageous when holdup situations are engineered. Another type of inte...

Contractual Holdup and Legal Intervention S. Shavell 3/5/08 Contracts, Holdup, and Legal Intervention

Contractual Remedies to the Holdup Problem: A Dynamic Perspective

An important theme of modern contract theory is the role contracts play to protect parties from the risk of holdup and thereby encouraging their relationship specific investments. While this perspective has generated valuable insights about various contracts, the underlying models abstract from realistic investment dynamics. We reexamine the role of contracts in a dynamic model that endogenizes...

Legal Status of Pre-Contractual Liability

The discussion about the person's liability for the actions attributable to him before the stage of contracting is a new debate that has been attracted the attention of legal circles. According to this debate, the person’s freedom of contracting does not implement the person’s freedom to ignore the rights and interest of other party. As a result, it would be possible that contracting person con...

Contractual Provisions to Mitigate Holdup: Evidence from Information Technology Outsourcing

T complexity and scope of outsourced information technology (IT) demands relationship-specific investments from vendors, which, when combined with contract incompleteness, may result in underinvestment and inefficient bargaining, referred to as the holdup problem. Using a unique data set of over 100 IT outsourcing contracts, we examine whether contract extensiveness, i.e., the extent to which f...