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Feel-Good Formalism

20 Pages Posted: 17 Sep 2009 Last revised: 25 Dec 2014

Anna Gelpern

Georgetown University Law Center

G. Mitu Gulati

Duke University School of Law

Date Written: September 16, 2009

Abstract

This essay highlights a phenomenon that has no place in the conventional theory of sophisticated business contracts: the term that makes no sense as an enforceable promise, one that defies functional explanation, one that drafters blush to rationalize in retrospect or chalk up to honest mistake. The subset of contract drafters who stop and think about the term before the contract is signed know that it has little enforcement or other instrumental value. Even if a court were to enforce such a term, its interpretation would be extremely hard to predict at signing. Nevertheless, such clauses get included in contracts between sophisticated parties. Why? The authors speculate that some terms are in business contracts because the process of formalizing certain feelings about the parties’ relationship in an official and routine manner characteristic of business contracting provides value to the parties. They suggest that such value is, at least in part, the satisfaction of expressing their feelings publicly and formally. The authors introduce the concept of “feel-good formalism” to describe the impulse to express feelings in contract terms, with limited or no regard for the terms’ instrumental utility.

Keywords: Business contracts, sovereign debt, formalism

JEL Classification: F34, K12

Suggested Citation

Gelpern, Anna and Gulati, G. Mitu, Feel-Good Formalism (September 16, 2009). Queen's Law Journal, Forthcoming; American University, WCL Research Paper No. 2009-27. Available at SSRN: https://ssrn.com/abstract=1474448

Anna Gelpern (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

Gaurang Mitu Gulati

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

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