Below is the abstract for “Obsolescence: The Intractable Production Problem in Contract Law,” available for download on SSRN.

Contract law has long suffered from an institutional problem: Which legal institution can best create an efficient law for commercial contracts that can overcome “obsolescence”—the persistence of rules that only solve yesterday’s contracting problems? Until the early 20th century, contract law was largely created by common law courts. The law’s default rules were efficient when created and courts updated them as commerce changed. But there were few rules and the common law process is slow. In response, the 20th century saw public and private lawmaking bodies enact commercial statutes in discrete legal areas such as secured credit, commercial paper and bankruptcy. Cohesive interest groups rapidly updated these discrete rules, but the rules, both originally and as changed, served only the interests of the creating groups.

Private lawmaking efforts also assumed a generalist portfolio. In the Uniform Commercial Code, they reached beyond specialized fields to the law of sales and then, in the Restatements, to all contracting behavior. But these generalist bodies lack the institutional capacity to update, so many of their rules have not changed with changing commercial practice. Obsolescence is not innocuous: it can induce inefficient contracting practices and encourage parties to behave strategically. The need for a modern general law of commercial contracts remains. Specialized lawmakers are subject to interest group capture and the generalist lawmaking bodies cannot update. Courts have responded better to the obsolescence concern, but they are slow and limited. Hence we suggest a public/private regulatory response to the vexing production problem in contract law.

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Robert E. Scott

Columbia University Law School

Robert E. Scott, the director of Columbia Law School’s Center for Contract and Economic Organization. Scott served as the Justin W. D’Atri Visiting Professor of Law, Business, and Society at Columbia Law School from 2001 to 2006 and joined the Columbia Law School faculty full-time in 2006. In 2014, he assumed the role of interim dean of the Law School. Before joining Columbia, Scott was a member of the University of Virginia School of Law faculty from 1974 to 2006 and served as the school’s dean from 1991 to 2001. 

Alan Schwartz

Yale Law School

Alan Schwartz is a Sterling Professor at Yale University. His appointments are in the Yale Law School and the Yale School of Management. Professor Schwartz's academic specialties include corporate finance and corporate governance, mergers and acquiisitions, bankruptcy, contracts, and commercial transactions.

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