The Dynamics of Contract Evolution

44 Pages Posted: 27 Jun 2012 Last revised: 22 Dec 2014

See all articles by Stephen J. Choi

Stephen J. Choi

New York University School of Law

G. Mitu Gulati

Duke University School of Law

Eric A. Posner

University of Chicago - Law School

Date Written: June 23, 2012


Contract scholarship has given little attention to the production process for contracts. The usual assumption is that the parties will construct the contract ex nihilo, choosing all the terms so that they will maximize the surplus from the contract. In fact, parties draft most contracts by slightly modifying the terms of contracts that they have used in the past, or that other parties have used in related transactions. A small literature on boilerplate recognizes this phenomenon, but little empirical work examines the process. This Article provides an empirical analysis by drawing on a data set of sovereign bonds. We show that exogenous factors are key determinants in the evolution of these contracts. We find an evolutionary pattern that roughly separates into three stages. Stage one where a particular standard form dominates; stage two where there are external shocks and marginal players experiment with deviations from the standard form; and stage three where a new standard emerges. The pattern confirms roughly to the S curve commonly described in the product innovation literature. We also find that more marginal law firms are likely to be leaders in innovation at early stages of the innovation cycle but that dominant law firms are the leaders at later stages.

Suggested Citation

Choi, Stephen J. and Gulati, Gaurang Mitu and Posner, Eric A., The Dynamics of Contract Evolution (June 23, 2012). University of Chicago Institute for Law & Economics Olin Research Paper No. 605, Available at SSRN: or

Stephen J. Choi

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

Gaurang Mitu Gulati

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

Eric A. Posner (Contact Author)

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States
773-702-0425 (Phone)
773-702-0730 (Fax)


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