Contractual Evolution

78 Pages Posted: 28 Mar 2021 Last revised: 23 Jun 2022

See all articles by Matthew Jennejohn

Matthew Jennejohn

Brigham Young University - J. Reuben Clark Law School

Julian Nyarko

Stanford Law School

Eric L. Talley

Columbia University - School of Law; European Corporate Governance Institute (ECGI)

Date Written: March 22, 2021


Conventional wisdom portrays contracts as static distillations of parties’ shared intent at some discrete point in time. In reality, however, contract terms evolve in response to their environments, including new laws, legal interpretations, and economic shocks. While several legal scholars have offered stylized accounts of this evolutionary process, we still lack a coherent, general theory that broadly captures the dynamics of real-world contracting practice. This paper advances such a theory, in which the evolution of contract terms is a byproduct of several key features, including efficiency concerns, information, and sequential learning by attorneys who negotiate several deals over time. Each of these factors contributes to the underlying evolutionary process, and their relative prominence bears directly on the speed, direction, and desirability of how contractual innovations diffuse. Using a formal model of bargaining in a sequence of similar transactions, we demonstrate how different evolutionary patterns can manifest over time, in both desirable and undesirable directions. We then take these insights to real-world dataset of over 2,000 merger agreements negotiated over the last two decades, tracking the adoption of several contractual clauses, including pandemic-related terms, #MeToo provisions, CFIUS conditions, and reverse termination fees. Our analysis suggests that there is not a “one size fits all” paradigm for contractual evolution; rather, the constituent forces affecting term evolution appear manifest in varying strengths across differing circumstances. We highlight several constructive applications of our framework, including the study of contract negotiation unfolds when price cannot easily be adjusted, and how to incorporate other forms of cognitive and behavioral biases into our general framework.

Keywords: Mergers and Acquisitions; COVID-19; MAEs; CFIUS; #MeToo; Contracts; Contract Design; Network Effects

JEL Classification: G30, G34, K12, K22

Suggested Citation

Jennejohn, Matthew and Nyarko, Julian and Talley, Eric L., Contractual Evolution (March 22, 2021). University of Chicago Law Review, Vol. 89, pp. 901-978, Columbia Law and Economics Working Paper 654, Available at SSRN: or

Matthew Jennejohn

Brigham Young University - J. Reuben Clark Law School ( email )

436 JRCB
Brigham Young University
Provo, UT 84602
United States
9175093028 (Phone)

Julian Nyarko

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305
United States

Eric L. Talley (Contact Author)

Columbia University - School of Law ( email )

435 West 116th Street
New York, NY 10025
United States


European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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