Explaining Adversarial Boilerplate Language in the Battle of the Forms: Are Consequential Damages in the U.C.C. Gap Fillers a Penalty Default Rule?

Journal of Business, Entrepreneurship and the Law

59 Pages Posted: 21 Oct 2009 Last revised: 21 Oct 2010

Date Written: October 20, 2009

Abstract

In this article, game theory is applied to the battle of the forms and related scenarios to explain Daniel Keating’s observations, reported in the article "Exploring the Battle of the Forms in Action," 98 MICH. L. REV. 2678 (2000). The first of the two major findings in this article is that there is a game-theoretic reason drafters of boilerplate language should use adversarial, U.C.C. § 2-207(1) proviso-conforming language to ensure that clients receive terms that are no worse than the default U.C.C. gap fillers. The second major finding is that there is a penalty default rule in contract law. This has been debated by the likes of Ian Ayers, Robert Gertner, and Eric Posner. Under the U.C.C., consequential damages are part of the gap fillers, and thus part of the Nash Equilibrium default in the Battle of the Forms. This default gap filler is applied even though a majority of parties do not include this term in their negotiated, functionally complete contracts.

Keywords: Law and Economics, Battle of the Forms, Adversarial Boilerplate Language, Game Theory, Penalty Default Rule, Consequential Damages, Contracts, U.C.C. § 2-207, U.C.C. § 2-715

JEL Classification: C70, K12

Suggested Citation

Griffee, Ryan D., Explaining Adversarial Boilerplate Language in the Battle of the Forms: Are Consequential Damages in the U.C.C. Gap Fillers a Penalty Default Rule? (October 20, 2009). Journal of Business, Entrepreneurship and the Law, Available at SSRN: https://ssrn.com/abstract=1491863 or http://dx.doi.org/10.2139/ssrn.1491863
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