Legal uncertainty and contractual innovation

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Legal uncertainty and contractual innovation

Author Info

Yaron Leitner

Abstract

Although innovative contracts are important for economic growth, when firms face uncertainty as to whether contracts will be enforced, they may choose not to innovate. Legal uncertainty can arise if a judge interprets the terms of a contract in a way that is antithetical to the intentions of the parties to the contract. Or sometimes a judge may understand the contract but overrule it for other reasons. How does legal uncertainty affect firms’ decisions to innovate? In “Legal Uncertainty and Contractual Innovation,” Yaron Leitner explores issues related to legal uncertainty, particularly the amount of discretion judges have and the types of evidence they consider.

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Publisher Info
Article provided by Federal Reserve Bank of Philadelphia in its journal Business Review.

Volume (Year): (2005)
Issue (Month): Q2 ()
Pages: 26-32
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Handle: RePEc:fip:fedpbr:y:2005:i:q2:p:26-32

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Keywords: Contracts;

References listed on IDEAS
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Bernheim, B Douglas & Whinston, Michael D, 1998. "Incomplete Contracts and Strategic Ambiguity," American Economic Review, American Economic Association, vol. 88(4), pages 902-32, September. [Downloadable!] (restricted)
Other versions:
- B. Douglas Bernheim & Michael D. Whinston, 1997. "Incomplete Contracts and Strategic Ambiguity," Harvard Institute of Economic Research Working Papers 1787, Harvard - Institute of Economic Research.
Luca Anderlini & Leonardo Felli & Andrew Postlewaite, 2003. "Should Courts Always Enforce What Contracting Parties Write?," PIER Working Paper Archive 03-026, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
Other versions:
- Luca Anderlini, Leonardo Felli, & Andrew Postlewaite, . "Should Courts Always Enforce What Contracting Parties Write?," Working Papers gueconwpa~03-03-29, Georgetown University, Department of Economics. [Downloadable!]
- Luca Anderlini & Leonardo Felli & Andrew Postlewaite, 2006. "Should Courts always Enforce what Contracting Parties Write?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
- Luca Anderlini & Leonardo Felli & Andrew Postlewaite, 2009. "Should Courts Always Enforce What Contracting Parties Write?," PIER Working Paper Archive 09-004, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
- Luca Anderlini & Leonardo Felli & Andrew Postlewaite, . "Should Courts Always Enforce What Contracting Parties Write?," Working Papers gueconwpa~06-06-07, Georgetown University, Department of Economics. [Downloadable!]
- Luca Anderlini & Leonardo Felli & Andrew Postlewaite, 2003. "Should Courts Always Enforce What Contracting Parties Write?," PIER Working Paper Archive 06-024, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Oct 2006. [Downloadable!]
- Anderlini, Luca & Felli, Leonardo & Postlewaite, Andrew, 2004. "Should Courts Always Enforce What Contracting Parties Write?," CEPR Discussion Papers 4197, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Julian R. Franks & Kjell G. Nyborg & Walter N. Torous, 1996. "A Comparison of UK, US and German Insolvency Codes," Financial Management, Financial Management Association, vol. 25(3), Fall.
Luca Anderlini & Leonardo Felli & Andrew Postlewaite, 2003. "Courts of Law and Unforeseen Contingencies," STICERD - Theoretical Economics Paper Series 447, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
Other versions:
- Luca Anderlini, Leonardo Felli & Andrew Postlewaite, . "Courts of Law and Unforeseen Contingencies," Working Papers gueconwpa~03-03-26, Georgetown University, Department of Economics. [Downloadable!]
- Luca Anderlini & Leonardo Felli & Andrew Postlewaite, 2001. "Courts of Law and Unforeseen Contingencies," PIER Working Paper Archive 06-001, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Jan 2006. [Downloadable!]
- Anderlini, Luca & Felli, Leonardo & Postlewaite, Andrew, 2001. "Courts of Law and Unforeseen Contingencies," CEPR Discussion Papers 2835, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
- Andrew Postlewaite, 2007. "Courts of Law and Unforeseen Contingencies," Journal of Law, Economics and Organization, Oxford University Press, vol. 23(3), pages 662-684, October. [Downloadable!] (restricted)

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