Customized Procedure in Theory and Reality

58 Pages Posted: 9 Sep 2015

See all articles by Mark C. Weidemaier

Mark C. Weidemaier

University of North Carolina School of Law

Date Written: September 8, 2015

Abstract

Contract theory has long posited that parties can maximize contract value by specifying the procedural rules that will apply if there is a dispute. Beyond choosing a litigation or arbitration forum, parties can alter pleading standards, adjust rules of evidence and discovery, and customize nearly every aspect of adjudication procedure. In time, this theoretical insight became a matter of empirical faith. A few recent studies, however, find little evidence that parties exercise their supposed procedural autonomy.

This article provides a comprehensive picture of dispute resolution practices in a sample of commercial contracts. Parties do exercise autonomy in structuring the rules of adjudication, but they do so within a limited domain. Contracts almost always specify the governing law and routinely designate a litigation or arbitration forum, and a substantial minority allocate responsibility for attorney fees. In arbitration, parties go further, frequently allocating costs, imposing expertise requirements, and shaping decision-making dynamics (as by requiring multiple arbitrators). In neither forum, however, do parties expressly modify governing rules of pre-trial or trial/arbitration procedure. These findings imply that it is premature to debate the normative implications of party-controlled procedure, for contracts rarely include the kinds of clauses that many find problematic. The more immediate question is why parties do not exercise their supposed procedural autonomy.

Keywords: contracts, dispute resolution, procedure

Suggested Citation

Weidemaier, Mark C., Customized Procedure in Theory and Reality (September 8, 2015). Washington and Lee Law Review, Vol. 72, No. 4, 2015, UNC Legal Studies Research Paper No. 2657750, Available at SSRN: https://ssrn.com/abstract=2657750

Mark C. Weidemaier (Contact Author)

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
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