ProCD v Zeidenberg and Cognitive Overload in Contractual Bargaining
Thanks to Omri Ben-Shahar, Dick Craswell, Ariel Porat, and D.C. Toedt for helpful comments.
- Share The University of Chicago Law Review | ProCD v Zeidenberg and Cognitive Overload in Contractual Bargaining on Facebook
- Share The University of Chicago Law Review | ProCD v Zeidenberg and Cognitive Overload in Contractual Bargaining on Twitter
- Share The University of Chicago Law Review | ProCD v Zeidenberg and Cognitive Overload in Contractual Bargaining on Email
- Share The University of Chicago Law Review | ProCD v Zeidenberg and Cognitive Overload in Contractual Bargaining on LinkedIn
Sellers often find it useful to sell products without revealing the terms of the contract to buyers until after buyers have taken the products home or begun to use them. These transactions take a number of forms. A buyer might purchase a box containing software or a database from a store. The box’s skin bears the name of the software and a description of its function, and perhaps a statement that other terms are inside, or perhaps not. The buyer learns the terms only after he takes the box home and opens it; if he does not like the terms, he can return the product as long as he has not yet begun to use it, and sometimes not even then. A buyer might order a computer or appliance or airplane ticket over the phone. The operator tells him none of the terms other than price and a few others; again, he learns those terms when the product or ticket arrives and may (or may not) have an opportunity at that point to repudiate the transaction.
We would like to thank the workshop participants at University of Michigan Law School, Northwestern University Law School, Notre Dame Law School, University of Toronto Law School, Stanford Law School, and N.Y.U. School of Law; and conference participants at the 2024 American Law and Economics Association Meeting for many helpful comments and suggestions. We are most grateful to Jonathan Morad Artal (Stanford Class of 2025) and Andrea Lofquist (Michigan Class of 2024) for their valuable research assistance and comments on earlier drafts.
We would like to thank the workshop participants at University of Michigan Law School, Northwestern University Law School, Notre Dame Law School, University of Toronto Law School, Stanford Law School, and N.Y.U. School of Law; and conference participants at the 2024 American Law and Economics Association Meeting for many helpful comments and suggestions. We are most grateful to Jonathan Morad Artal (Stanford Class of 2025) and Andrea Lofquist (Michigan Class of 2024) for their valuable research assistance and comments on earlier drafts.
The flexibility to renegotiate can facilitate long-term contracting and thereby beneficial reliance investments and risk allocation. The prospect of modification can induce contracting parties who expect their bargaining power to improve to enter into contracts earlier and realize the advantages of longer-term relationships. Otherwise, those parties might decline to contract or delay until those opportunities realize, thereby foregoing the benefits of long-term risk allocation or reliance investments. The parties decide not only whether, but also when, to make legally binding commitments to each other. Courts should be more lenient in enforcing contract modifications that, prompted by a shift in bargaining power, may have only a redistributive effect. Parties can design under-compensatory damages that would provide a credible threat of breach ex post to facilitate ex post modification. Requiring good faith in modification (along with damages) can constrain possible holdup and protect reliance investments and risk allocation.
We would like to thank the workshop participants at University of Michigan Law School, Northwestern University Law School, Notre Dame Law School, University of Toronto Law School, Stanford Law School, and N.Y.U. School of Law; and conference participants at the 2024 American Law and Economics Association Meeting for many helpful comments and suggestions. We are most grateful to Jonathan Morad Artal (Stanford Class of 2025) and Andrea Lofquist (Michigan Class of 2024) for their valuable research assistance and comments on earlier drafts.
We would like to thank the workshop participants at University of Michigan Law School, Northwestern University Law School, Notre Dame Law School, University of Toronto Law School, Stanford Law School, and N.Y.U. School of Law; and conference participants at the 2024 American Law and Economics Association Meeting for many helpful comments and suggestions. We are most grateful to Jonathan Morad Artal (Stanford Class of 2025) and Andrea Lofquist (Michigan Class of 2024) for their valuable research assistance and comments on earlier drafts.
The flexibility to renegotiate can facilitate long-term contracting and thereby beneficial reliance investments and risk allocation. The prospect of modification can induce contracting parties who expect their bargaining power to improve to enter into contracts earlier and realize the advantages of longer-term relationships. Otherwise, those parties might decline to contract or delay until those opportunities realize, thereby foregoing the benefits of long-term risk allocation or reliance investments. The parties decide not only whether, but also when, to make legally binding commitments to each other. Courts should be more lenient in enforcing contract modifications that, prompted by a shift in bargaining power, may have only a redistributive effect. Parties can design under-compensatory damages that would provide a credible threat of breach ex post to facilitate ex post modification. Requiring good faith in modification (along with damages) can constrain possible holdup and protect reliance investments and risk allocation.
For very helpful feedback on prior versions of this piece, I thank Russell Engler, David Luban, David Hoffman, Tal Kastner, Timothy Mulvaney, Michael Pollack, Tanina Rostain, Kathryn Sabbeth, Emily Saltzberg, Emily Satterthwaite, Jessica Steinberg, Neel Sukhatme, and Josh Teitelbaum. This Article benefited from presentations at the Harvard-Yale-Stanford Junior Faculty Forum, the Law and Society Association Annual Meeting, the 2024 Access to Justice Roundtable, the Property Worksin- Progress Workshop, the State and Local Courts Workshop, and the State and Local Government Law Workshop. Emmeline Basco provided excellent research assistance and Yi Yao provided excellent assistance with data analysis. I am very grateful to the editors of The University of Chicago Law Review for their outstanding editorial work. All errors are my own.
Eviction cases make up over a quarter of all cases filed in the federal and state civil courts and have enormous consequences for tenants, who are nearly always unrepresented by counsel. These cases overwhelmingly settle, yet settlement scholars have entirely overlooked eviction both empirically and theoretically. The Article presents results from the first empirical study of eviction settlement negotiations. The study involved rigorous analysis of an original dataset of over one thousand hand-coded settlements, observations of settlement negotiations in the hallways of housing court, and dozens of interviews. The findings demonstrate that unrepresented tenants—who make up the vast majority of tenants in the eviction system—have no meaningful influence over settlement terms. Rather, the terms are set by landlords and their attorneys. Drawing on the empirical findings and scholarship about contracts of adhesion, the Article develops the theoretical concept of “settlements of adhesion.”