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Parallel Contract

38 Pages Posted: 29 Feb 2012 Last revised: 6 Nov 2013

Aditi Bagchi

Fordham University School of Law

Date Written: February 25, 2012

Abstract

This Article identifies a pervasive model of contracting that is inadequately treated in existing law and theory. In parallel contract, one party enters into a series of contracts with many similarly situated individuals on background terms that are presumptively identical. In these settings, the transaction costs associated with negotiating or even unilaterally tailoring terms to individuals exceed the benefit from such tailoring. Instead, the repeat party sets uniform background terms based on facts pertaining to its contracting partners as a group, including the mean and distribution of their preferences.

Parallel contracts depart from the classical model of contract in two fundamental ways. First, obligations are not robustly dyadic in that they are neither tailored to the two parties to a given agreement nor understood by those parties by way of communications with each other. Second, obligations are not fixed at a discrete moment of contract. Parallel contracts should be interpreted differently than agreements more consistent with the classic model; in particular, the obligations of the repeat party should be understood by reference to its most recent practices and communications with any of the other parties in a given setting.

Keywords: Contracts, contract theory, default rules, contract interpretation, employment contracts, implied contract, standard form contracts, contracts of adhesion, relational contract, bilateralism, incomplete contract

Suggested Citation

Bagchi, Aditi, Parallel Contract (February 25, 2012). University of Pittsburgh Law Review, Forthcoming; U of Penn Law School, Public Law Research Paper No. 12-17. Available at SSRN: https://ssrn.com/abstract=2012679 or http://dx.doi.org/10.2139/ssrn.2012679

Aditi Bagchi (Contact Author)

Fordham University School of Law ( email )

140 West 62nd Street
New York, NY 10023
United States

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