Edited by Djakhongir Saidov
Chapter 8: Are commercial standard form sales contracts efficient?
Most analyses of standard form contracts focus on the consumer setting. The underlying assumption is that standard forms in the commercial context reflect efficient terms, because sophisticated parties operating in relatively thick markets would assign transactional costs and risks in a way that is consistent with each party’s capacity to bear them. This chapter discusses multiple sources of inefficiency in the setting of commercial standard form contracts, ranging from market failures to failure to read to parties’ incentives in the drafting process. The chapter also suggests that some clauses that may appear to be inefficient, such as ostensibly vague terms and under-enforced terms, in fact reflect efficient risk allocations. Finally, the chapter discusses some strategies for dealing with potential inefficiency, such as regulation and interpretation.
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