Abstract

http://ssrn.com/abstract=2000823
 


 



The Psychology of Contract Precautions


David A. Hoffman


Temple University - James E. Beasley School of Law; Cultural Cognition Project at Yale Law School

Tess Wilkinson‐Ryan


University of Pennsylvania Law School

February 7, 2012

University of Chicago Law Review, Forthcoming
U of Penn, Inst for Law & Econ Research Paper No. 12-10
Temple University Legal Studies Research Paper No. 2012-09
7th Annual Conference on Empirical Legal Studies Paper

Abstract:     
This research tests the intuition that parties to a contract approach each other differently before the contract is formed than they do once it is finalized. We argue that one of the most important determinants of self-protective behavior is whether the promisee considers herself to be in negotiations or already in an ongoing contract relationship. That shift affects precaution-taking even when it has no practical bearing on the costs and benefits of self-protection: the moment of contracting is a reference point that frames the costs and benefits of taking precautions. We present the results of three questionnaire studies in which respondents indicate that they would be more likely to protect their own interests — by requesting a liquidated damages clause, by purchasing a warranty, or by shopping around to ensure the best deal — when the contract is not yet finalized than they would when they understand the agreement to be finalized. We discuss competing explanations for this phenomenon, including both prospect theory and cognitive dissonance. Finally, we explore some doctrinal implications for work on disclosure, modification, and promissory estoppel.

Number of Pages in PDF File: 43

Keywords: contracts, precautions, psychology, reference point, reference transaction, prospect theory

Accepted Paper Series


Download This Paper

Date posted: February 7, 2012 ; Last revised: May 14, 2012

Suggested Citation

Hoffman, David A. and Wilkinson‐Ryan, Tess, The Psychology of Contract Precautions (February 7, 2012). University of Chicago Law Review, Forthcoming; U of Penn, Inst for Law & Econ Research Paper No. 12-10; Temple University Legal Studies Research Paper No. 2012-09; 7th Annual Conference on Empirical Legal Studies Paper. Available at SSRN: http://ssrn.com/abstract=2000823 or http://dx.doi.org/10.2139/ssrn.2000823

Contact Information

David A. Hoffman
Temple University - James E. Beasley School of Law ( email )
1719 N. Broad Street
Philadelphia, PA 19122
United States
215-204-0612 (Phone)
Cultural Cognition Project at Yale Law School
127 Wall St
New Haven, CT 06520
United States
Tess Wilkinson-Ryan (Contact Author)
University of Pennsylvania Law School ( email )
3501 Sansom Street
Philadelphia, PA 19104
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,296
Downloads: 218
Download Rank: 77,276

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.406 seconds