Contractarianism, Contractualism, and the Law of Corporate Insolvency
48 Pages Posted: 22 Nov 2006
Date Written: November 2006
A version of this paper appears in  Singapore Journal of Legal Studies (July).
What is the appropriate way of theorising about corporate bankruptcy law? That lies, argues this paper, in rejecting Pareto and Kaldor-Hicks efficiency in favour of a particular conception of transaction cost efficiency, and in rejecting the 'contractarian' Creditors' Bargain Model in favour of the 'contractualist' Authentic Consent Model. The paper vindicates these arguments with an analysis of the automatic stay which characterises the collective liquidation regime, of the pari passu principle often said to be at the heart of this regime, and of the liability imposed in some jurisdictions on the managers of terminally distressed companies for failing to take reasonable steps to avoid further loss to their company's creditors.
Keywords: Anthony Duggan, Thomas Jackson, Douglas Baird
JEL Classification: K10, K22
Suggested Citation: Suggested Citation