If Boilerplate Could Talk

65 Pages Posted: 13 Jun 2017 Last revised: 27 Apr 2020

See all articles by Anna Gelpern

Anna Gelpern

Georgetown University Law Center

Mitu Gulati

University of Virginia School of Law

Jeromin Zettelmeyer

International Monetary Fund (IMF); Peterson Institute for International Economics; CEPR

Date Written: July 4, 2018

Abstract

Standard contract terms are “sticky”: they rarely change, even if change appears to be in the parties’ interest. Multiple theories to explain stickiness do not reach consensus on its causes. We investigate the role of stickiness in sovereign bond contracts, where it would be especially costly and therefore puzzling. In our interviews with more than a hundred officials responsible for the bond contracts of 28 countries, they linked reluctance to change non-financial contract terms and the imperative of following a “market standard” for such terms. When a term could be described as standard for the government’s debt stock or borrower cohort, its content often came across as secondary. Sovereign debt managers seemed willing to forgo some of the benefits of contract terms for dealing with contingencies and revealing private information, to avoid negative signals and maintain the liquidity of primary and secondary debt markets. Interviews with investors suggested a similar focus on standard form, and a limited engagement with contract content.

Keywords: Contracts, Stickiness, Sovereign Debt, Sovereign Default

JEL Classification: F33, F34, K12

Suggested Citation

Gelpern, Anna and Gulati, Mitu and Zettelmeyer, Jeromin, If Boilerplate Could Talk (July 4, 2018). Duke Law School Public Law & Legal Theory Series No. 2017-45, Available at SSRN: https://ssrn.com/abstract=2984293 or http://dx.doi.org/10.2139/ssrn.2984293

Anna Gelpern (Contact Author)

Georgetown University Law Center ( email )

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

Mitu Gulati

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

Jeromin Zettelmeyer

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

CEPR ( email )

London
United Kingdom

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