Albert H. Choi

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Volume 93.1
Designing Contract Modification
Albert H. Choi
Paul G. Kauper Professor of Law, University of Michigan Law School and Research Member, European Corporate Governance Institute (ECGI).

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.

George Triantis
Dean and Richard E. Lang Professor of Law, Stanford Law School.

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.

Contract Law Law and Economics
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v88.4
Deal Protection Devices
Albert H. Choi
Professor of Law, University of Michigan Law School

I would like to thank workshop participants at the law schools of Columbia University, University of Michigan, and University of Southern California; conference participants at the 2018 Trans-Pacific Business Law Conference and the 2020 Winter Deals Conference; and particularly Dhruv Aggarwal, Adam Badawi, Elisabeth de Fontenay, Joel Friedlander, Jeff Gordon, Michael Knoll, Vice Chancellor Travis Laster, Brian Quinn, and Bob Scott for many helpful comments and suggestions. Comments are welcome to alchoi@umich.edu.

On April 12, 2018, two wholesale office supply companies, Genuine Parts Corporation (GPC) and Essendant, Inc., agreed to combine their office supply businesses in order to better compete against e-commerce sellers, such as Amazon.com, Inc.

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