Rethinking Contract Law and Contract Design

Rethinking Contract Law and Contract Design

Rethinking Law series

Victor P. Goldberg

Rethinking Contract Law and Contract Design presents a rich array of ideas that reassess the law and economics of contractual relations. Victor P. Goldberg uses a transactional framework to critically analyse and re-evaluate contract doctrine and specific legal cases. This important work examines particular contractual precepts whilst conducting a detailed exercise in legal archaeology, challenging readers to reconsider significant legal decisions by forensic exploration of records, briefs, and other materials, including the staple cases of textbooks and casebooks.

Chapter 14: Brown v. Cara, the Type II Preliminary Agreement, and the option to unbundle

Victor P. Goldberg

Subjects: economics and finance, law and economics, law - academic, commercial law, law and economics, law of obligations


Traditionally, preliminary agreements were not enforceable. In TIAA v. Tribune, Judge Leval held that some such agreements required that the parties negotiate in good faith, so-called Type II agreements. This chapter analyses one case, Brown v. Cara, in which a court found that the parties had entered into a Type II agreement. Examination of the record leads to two conclusions. First, the record provided no support for the Type II characterization. Second, the core problem for the parties was pricing of the option to unbundle. There were a number of mechanisms available to them for pricing the option explicitly; recognition of the good faith duty to negotiate was unnecessary.

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