Bargain Theory Research Articles

The Position of Consideration in Nepal: A Study of Theories, Cases, and Laws

Lawful consideration is one of the essential elements of a valid contract. However, The National Civil Code, 2017 A.D. (2074 B.S.) has not included a definition of consideration, and it has not stated the necessity of consideration in Nepal in a particular section. Nevertheless, it seems that the Code has realized the importance of lawful consideration in the provisions of contracts of rent, wage and hire purchase. The Code has also stated unjust enrichment, under which one party should not enrich himself or herself at the cost of others or other’s property. Conversely, the now-repealed Contract Act, 2000, in its section 2(d), had defined consideration and stated that consideration must be lawful in section 13(k). In the cases decided by the Supreme Court of Nepal (Bhagwan Lal Shah v. Harka Lal Giri and Chitra Bahadur Karki; Proprietor of Manakamana Construction and Concerns Pvt. Ltd v. Maniram Aggrawal, Proprietor of Aggrawal Industries Pvt. Ltd.), the Supreme Court has issued the precedent stating the importance of consideration in Nepal in regard to Contract Act, 2000 which has now been repealed and replaced by The National Civil Code 2017. Additionally, different theories of the contract like bargain theory, realistic interpretation, theory of reciprocity, ‘nundum pactum’ theory and ‘no consideration no contract’ theory also emphasize the importance of consideration in Contract. Finally, this research paper has proven that consideration is essential in Nepal, thereby stating the theories of consideration, the legislative provisions, and the cases. Furthermore, the researcher came to the conclusion that the lawful consideration is essential in Nepal and it should be dealt with like oxygen to humans and whether written or not, must be implicitly understood. The word ‘consideration’ not explicitly being mentioned in law should not create confusion that a contract can happen without lawful consideration.

Online Patriarchal Bargains and Social Support: Struggles and Strategies of Unwed Single Mothers in China

Patriarchal bargains have been studied in many settings as a strategy that helps women circumvent constraints and forge spaces for individual empowerment. Despite the growing use of mediated communication, little is known about how patriarchal bargains are enacted and realized within online interactions such as in discussion forums. By analyzing how Chinese unwed single mothers renegotiate the state’s oppressive population control and gender policies through their online activity, this study proposes the concept of “online patriarchal bargain” to extend patriarchal bargain theory to women’s Internet use. It further explores linkages between social support and patriarchal bargain to elucidate how support is integral to enacting agency in the face of forbidding systemic constraints. The findings also delve into the role of therapeutic culture in the day-to-day experiences of women, especially those in marginalized communities.

Time Use and Household Division of Labor in India—Within‐Gender Dynamics

AbstractHousehold allocation of labor is an important area of scholarship in developing countries where women's well‐being is affected by the heavy load of unpaid work within the household. This study extends nuclear household‐centric research on labor allocation by drawing attention to bargaining between female in‐laws in multigenerational households in India. This paper empirically tests two competing theories based on the impact of a daughter‐in‐law's education on household division of labor in multigenerational households. First is Caldwell's thesis that contends that increasing education would increase the bargaining power of daughter‐in‐law, thereby tilting the distribution of household labor in her favor, and the second is patriarchal bargain theory that makes an opposite claim. Both these theories are tested using time‐use data, and the latter is found to have higher explanatory power. Further layers are added to the analysis by tracing the effects of caste, class, and religion. Findings show that these mediate and determine the division of housework and bargaining outcomes between female in‐laws. This study emphasizes the need for an intersectional understanding of gender norms that are inextricably tied to factors such as religion, caste, class, and family structure. Findings also underline the need to study within‐gender dynamics systematically.

A Structured-Renegotiation Theory of Corporate Bankruptcy

A fundamental question for corporate bankruptcy law is why it exists in the first place. Why are there special rules that apply only in financial distress? The conventional law-and-economics answer—known as the Creditors’ Bargain Theory—identifies two core purposes of bankruptcy law: recreating a hypothetical ex ante bargain and respecting creditors’ nonbankruptcy entitlements. This Article challenges the Creditors’ Bargain Theory and presents an alternative: The sole purpose of corporate bankruptcy law is to solve the incomplete contracting problem that accompanies financial distress. Because financial distress is difficult to contract over, relationships involving a distressed firm are governed by incomplete contracts that allow parties to hold each other up. All distressed firms face this same value-destroying hold-up problem, and so pressure arises for a uniform solution. The purpose of corporate bankruptcy law is to provide that solution. In the United States, Chapter 11 of the Bankruptcy Code implements this purpose in the form of a framework for ex post renegotiation of incomplete contracts. This framework imposes judicial oversight and allocates bargaining power to minimize hold up among those with interests in a distressed firm. In a sense, it puts in place guardrails that give the parties room to bargain while keeping them from engaging in extreme forms of hold up. While this framework is not based on any hypothetical ex ante bargain and gives no special deference to nonbankruptcy entitlements, it is the fundamental attribute of Chapter 11.

Multilevel Control Over Sexuality of Unmarried Adolescent Girls and Related Violence: A Qualitative Exploration in Slums of Dhaka, Bangladesh.

High concerns about sexuality of unmarried adolescent girls (UAGs) in patriarchal societies and perceived links between sexuality and honor are likely to trigger controlling behavior and underlie a range of violence perpetrated against them. These concerns are heightened in the urban slums of Bangladesh, where economic and social changes challenge traditional gender roles and behaviors. Little is, however, known about control of and violence against UAGs perpetrated by families, romantic partners, and community. Using 12 key informant interviews, 15 focus group discussions, and 27 in-depth interviews carried out between June and November 2011 in Dhaka slums, this study explores the sociocultural expectations around sexuality of UAGs, how they interact with ground reality, control, resultant conflicts, violence against UAGs, and the ways UAGs grapple with controlling behavior and violence. The findings show that perceptions, attitudes, and expectations about the behavior of these girls remain patriarchal despite changes in economic and social circumstances reshaping gender roles and practices. Patriarchy finds new ways of controlling the girls by imposing dress codes, setting new boundaries for mobility and interaction with the opposite sex, and inflicting different forms of violence at different levels of the society. Some girls attempt to avoid violence by conforming to the new rules, while many negotiate the new boundaries with the family, romantic partner, and community. UAGs sometimes make compromises in one domain or level, while they resist control and violence in another. The findings lend support to the patriarchal bargain theory. Promotion of nonpatriarchal norms is expected to reduce vulnerability of these girls to violence.

From Langdell to Law and Economics: Two Conceptions of Stare Decisis in Contract Law and Theory

In his classic monograph, The Death of Contract, Grant Gilmore argued that Christopher Columbus Langdell, Oliver Wendell Holmes, and Samuel Williston trumped up the legal credentials for their classical bargain theory of contract law. Gilmore's analysis has been subjected to extensive criticism, but its specific, sustained, and fundamental charge that the bargain theory was based on a fraudulent misrepresentation of precedential authority has never been questioned. In this Essay, I argue that Gilmore's case against the classical theorists rests on the suppressed premise that the precedential authority of cases resides in the express judicial reasoning used to decide them. In contrast, I argue that the classical theorists implicitly presuppose that the precedential authority of cases consists in the best theory that explains their outcomes, even if that theory is inconsistent with the case's express judicial reasoning. The classical view of precedential authority completely defuses Gilmore's charge of fraud. In Gilmore's view, merely demonstrating the inconsistency between the proposition for which the classical theorists cited a case and the express reasoning in that case suffices as proof of misrepresentation. But in the classical theorists' view, the express reasoning in a case is simply a theory of its precedential authority, which, like any theory, can be wrong. Thus, the classical theorists simply reject Gilmore's claim that a case cannot properly be cited for a proposition inconsistent with its express reasoning. The real dispute, then, between Gilmore and the classical theorists is over the nature of precedential authority and not the content of contract law. Having reframed the classic death-of-contract debate, I then trace these competing conceptions of precedential authority through the major schools of contemporary contract theory. I argue that a contract theory's embrace of one view instead of the other can be explained by the relative priority it accords to each of the two components in a conception of adjudicative legitimacy. A conception of adjudicative legitimacy consists in a theory of what it means for a decision to be based on law and a theory of what is required for law to be justified. I explain why theories according priority to the former tend to subscribe to the precedents-as-outcomes view, while theories according priority to the latter tend to favor the express reasoning view. The Essay concludes by arguing that the economic analysis of contract law subscribes to the precedents-as-outcomes view and therefore is the contemporary jurisprudential successor to the late nineteenth-century classical theorists.

Reconstructing MNE-host country bargaining model in the international oil industry

The purpose of this paper is to reconstruct a model of multinational enterprise (MNE)-host country (HC) relationship in the international petroleum industry. For such a purpose, this study draws on the lenses of the MNE-HC bargaining theoretical framework. Using a comprehensive case study as the primary research method, it attempts to answer the question of how the power balance between oil MNEs and host government changed in Kazakhstan between 1991 and 2012. The results bear out the viability of the obsolescing bargain theory, although they suggest that the existing theoretical framework does not fully capture the dynamics of bargaining power balance. Specifically, they extend Raymond Vernon’s ‘Obsolescing Bargain Model’ (1971) by considering firm resources and host country resources together, along with external factors influencing the MNE-HC relationship.

Economic Efficiency of Contract Law

The bargain theory of exchange, which led to regulations of transactions before the existence of contract law, suffered from several limitations and inefficiency. The unenforceability of promises without consideration and enforceability of unfair bargains were major limitations of the bargain principle. The transaction cost involved in negotiations increased due to absence of regulatory mechanism. The solution to the problem is derived from the coase’s theorem of social cost, which paved way for the contract law. The contract law by enforcing unenforceable promises and protecting parties from going into loss led to economic efficiency in transactions.

Too Big to Fail as a Game of Chicken with the State: What Insolvency Law Theory Has to Say About TBTF and Vice Versa

Governments have bailed out banks that were considered too big to fail (TBTF). In an attempt to end these bail-outs, the European Commission has presented a proposal for a Directive for a European framework for the recovery and resolution of credit institutions and investment firms. This article analyses what insolvency law theory has to say about TBTF and vice versa. The dominant insolvency law theory, the creditors’ bargain theory (CBT), does not do well in explaining the problems presented by TBTF. The CBT frames insolvency law as a set of rules to overcome common pool problems, most notably to prevent a destructive race to the assets by individual creditors. The problems TBTF presents, however, do not primarily relate to a race to the assets. In order to understand the TBTF problem and key elements of the Directive's response (capital write-down and bail-in), the CBT needs to be supplemented with the property law theory of anticommons and its explanation of hold-out behaviour. Common pool problems and anticommons problems have different game-theoretical companions. Whereas common pool problems can be explained by the prisoners’ dilemma, anticommons can trigger a game of chicken. In the case of TBTF, shareholders and creditors can engage in this game of chicken with the state. The Directive sends out the message that states will no longer be drawn into playing this game.

Too Big to Fail as a Game of Chicken with the State: What Insolvency Law Theory Has to Say About TBTF and Vice Versa

Governments have bailed out banks that were considered Too Big To Fail (TBTF). In an attempt to end these bail-outs, The European Commission has presented a proposal for a Directive for a European Framework on Recovery and Resolution of Credit Institutions and Investment Firms. This article analyses what insolvency law theory has to say about TBTF and vice versa. The dominant insolvency law theory, the Creditors' Bargain Theory (CBT), does not do well in explaining the problems presented by TBTF. The CBT frames insolvency law as a set of rules overcoming common pool problems, most notably a destructive race to the assets by individual creditors. The problems TBTF presents, however, do not primarily relate to a race to the assets. In order to understand the TBTF problem and key elements of the Directive’s response (capital write down and bail-in), the CBT needs to be supplemented with the property law theory of anticommons and its explanation of hold out behaviour. Common pool problems and anticommons problems have different game-theoretical companions. Whereas common pool problems can be explained by the prisoners’ dilemma, anticommons can trigger a game of chicken. In the case of TBTF, shareholders and creditors can engage in this game of chicken with the state. The Directive sends out the message that states will no longer be drawn into playing this game.

Harmonisation of European Insolvency Law and the Need to Tackle Two Common Problems: Common Pool and Anticommons

AbstractInsolvency law has finally become a field of law for which harmonisation at a European level is considered both important and feasible. In deciding upon the content of such harmonised rules, there will need to be a common understanding about the goals of insolvency law and, therefore, a European debate on bankruptcy theory. Bankruptcy theory, and most notably the influential creditors' bargain theory, has long viewed insolvency law as a set of rules for overcoming common pool problems. Bankruptcy theory thus far has almost completely overlooked anticommons problems. Anticommons present themselves in a situation in which there are several owners or entitled parties, and each of the parties has it within its power to block the use by others. Should anticommons behaviour in insolvency procedures go unchecked, creditors as a whole will be harmed. Insolvency is a collective process, and this process may not be sabotaged by a single party. Four typical insolvency issues, each identified by INSOL Europe as a candidate for harmonisation at a European level, are discussed, analysing them in terms of common pool problems and anticommons: preferences, reorganisation/composition plans, claim validation and insolvency of a group of companies. Copyright © 2012 John Wiley & Sons, Ltd.

Contract’s Constitutive Core: Solving Problems by Making Deals

This article offers a positive, interpretive analysis of American contract law as an ongoing problem-solving enterprise. The article observes that solving problems is central to all life on this planet; that problem solving, both private and public, is the primary focus of American law generally and contract law in particular; and that many different decision-makers, including single individuals, small groups of collaborators, deal-making adversaries, large organizations, and governmental institutions, rely on a variety of deliberative processes in reaching and implementing solutions. The article uses this problem-solving perspective to explain American contract doctrine, including aspects that traditional bargain theory explains only with difficulty, if at all. In developing its central thesis, the analysis distinguishes between contract’s constitutive core and its regulative penumbra. The core empowers private actors to interact more effectively in reaching and implementing solutions to private problems. The penumbra consists of normative regulations that courts apply both to deal-making and to deals. When parties bring contracts claims to court, the plaintiff must show that the promises she relies on were part of an effort by the parties to use contract’s core to solve problems. Once assured of that premise, courts use the regulative penumbra to lend assistance, often enthusiastically, in interpreting, implementing, and sometimes salvaging deals struck by the parties. The article does not judge the rightness or wrongness of these judicial responses or the system of which they are part. Rather, the article contents itself with explaining what is really going on, and why.

The Death of Contract Law

I Introduction Thirty years ago, Grant Gilmore predicted the death of contract.1 He saw the expansion of legal liability for relied-upon promises as evidence that contract was being swallowed up by tort and would soon disappear as an independent, coherent body of law. Gilmore interpreted this trend as the repudiation of the classical bargain theory of contract, a theory that emphasized the central role of the law in enforcing and interpreting bargained-for promises. In Gilmore's view, the bargain theory owed more to the imagination of Oliver Wendell Holmes than to the case law, but in any event, by 1972 the boundaries of the classical, consideration-based model had clearly been breached, a new expansive version of contract law was emerging, and, for Gilmore, the triumph of reliance over bargain was an entirely salutary development. If anything, the trend that Gilmore identified has accelerated. After the adoption of the Uniform Commercial Code ( UCC), the last half of the twentieth century witnessed a dramatic expansion in the domain of contract law. Courts deployed creative and expansive strategies to find promissory liability that would not have been recognized under the classical model. But despite the accuracy of Gilmore's empirical observations, his prediction that the bargain theory of contract was dying could not have been more inaccurate. Indeed, almost from the moment his book was published, contract theorists of various persuasions set out to demonstrate the vitality and coherence of the bargain paradigm. Legal philosophers argued that the state's role in enforcing bargains is both explained and justified by moral theories grounded in notions of autonomy.2 Law and economics scholars proposed the efficiency criterion (in [End Page 369] one form or another) as the basis for the bargain theory.3 Equally important is the fact that contract theory became one of the most significant fields in modern economics. Three Nobel prizes have been awarded largely for work in contract theory, even though the field is less than thirty years old.4 While Gilmore was wrong in predicting that the bargain theory was dying, his instinct that something was amiss was quite prescient. But it is contract law rather than contract itself that is in severe peril. My project is to trace the causes of the decline in contract law and suggest some possible cures for what may otherwise prove to be a fatal disease. My claim, in brief, is that contract law is dying from hubris, from the belief that more contract law is always better than less. A significant effect of this expansion of liability has been a measurable increase in the costs of enforcing contracts. Ignored in this development is the fact that contract law regulates a consensual activity. This means that the parties to contractual agreements have a choice between legally enforceable contracts regulated by the state and other alternatives. The peril that public contract law faces is that many contracting parties have chosen to exit the public system of legal enforcement in favour of less costly alternatives over which they have more control. The result is that the law of contract is suffering from stagnation and, even more embarrassingly, from irrelevance. I conclude that contract law can be revived, but only if courts and legislators come to see that, in fact, less contract law is better than more. My argument has three parts. I begin by tracing the expansion of the new contract law and the resulting move from bright line rules to vague standards and contextual interpretation. Second, I describe the exodus [End Page 370] of contracting parties in response to these developments. Third, and finally, I justify returning to a parsimonious contract law by proposing self-enforcement as the preferable alternative to legal enforcement for many of those promises that fall outside the boundaries of the classical model. II The imperialism of contract law A Classical Contract Law and the Problem of Fit Contrary to Gilmore's contention, the bargain theory of contract did...

Why the Benefit of the Bargain Theory for Product Liability is Bad Law and Bad Economics?

Plaintiffs are using a new and novel theory to seek compensation for products that have not yet injured them. Such plaintiffs claim that, even though the product they are using has not injured them, the discovery of a potential for injury reveals an actionable form of misrepresentation. The consumers claim they would not have paid the price they paid had they known about the potential for injury, and therefore, the manufacturer has been unjustly enriched. They want the firm to pay back the difference between what they paid and what they would have paid had they known of the potential for harm. This difference is known as the of the bargain. In this paper, I show that such plaintiffs have no legitimate claim. The nature of the plaintiff's loss is economic in nature. Tort law does not allow recovery for economic losses, except under certain circumstances, none of which are present in the typical sale of a product. Even if plaintiffs were able to recover the of the bargain, I show that benefit is negligible. Any extra price paid is an insurance premium that the manufacturer collects to compensate consumers in the event of actual injury. Furthermore, given that different consumers value products for different reasons, and not just for the safety factor, measuring what the consumers would have paid had they known a product is unsafe is a speculative venture at best. Looking at some economic studies done on a variety of products, I conclude that the absolute dollar premium that consumers attach to safety for most products is minimal. Hence, any recovery by consumers for the of the bargain would be minimal too.

The Escalating Copyright Wars

Piracy is one of the biggest threats confronting the entertainment industry today. Every year, the industry is estimated to lose billions of dollars in revenue and faces the potential loss of hundreds of thousands of jobs. To protect itself against Internet pirates, the entertainment industry has launched the latest copyright war. So far, the industry has been winning. Among its trophies are the enactment of the Digital Millennium Copyright Act, Vivendi Universal's defeat and purchase of MP3.com, the movie studios' victory in the DeCSS litigation, the bankruptcy and subsequent sale of Napster and its recent relaunch as a legitimate subscription-based music service, the Supreme Court's rejection of the copyright bargain theory in Eldred v. Ashcroft, and the recording industry's relative success in its mass litigation campaign. Notwithstanding these victories, the war is expanding and has become even more difficult for the industry to fight than it was a year ago. Today, copyright law is no longer a complicated issue that is only of interest and concern to copyright lawyers, legal scholars, technology developers, and intellectual property rightsholders. Rather, it is a matter of public significance, affecting all of us in our daily lives. The ground has shifted. If the entertainment industry does not pay attention to the public and if it continues to use ill-advised battle strategies, it eventually might lose the war. Delivered as part of the 2003 Frontiers in Information and Communications Policy Lecture Series at Michigan State University, this Article examines the strategies used by the entertainment industry to fight the copyright wars: lobbying, litigation, self-help, education, and licensing. It also explores the impact of Eldred v. Ashcroft on these strategies, the decision's ramifications on future constitutional challenges to copyright laws, and recent developments in the international copyright arena. It concludes by arguing that the entertainment industry should change its existing strategies in light of the proliferation of peer-to-peer file-sharing networks and the increased consciousness of copyright issues.

A Team Production Theory of Bankruptcy Reorganization

This paper extends Professor Margaret Blair and Lynn Stout's pathbreaking Team Production Theory of Corporate Law to the bankruptcy reorganization of public companies. The paper begins by describing the prevailing contractarian theory of bankruptcy reorganization, the Creditors' Bargain theory propounded by Professor Thomas Jackson in 1982. The paper briefly describes the Team Production Theory of Corporate Law and then projects the consequences of that theory for the firm in bankruptcy. The final part of the paper compares the Team Production Theory of Bankruptcy Reorganization with the Creditors' Bargain theory, reaching two conclusions. First, the Team Production Theory of Bankruptcy Reorganization describes the bankruptcy system more accurately than does the Creditors' Bargain theory. Second, if the empirical assumptions underlying the Team Production Theory of Corporate Law theory are accurate, the ex ante maximization recommended by the Team Production Theory of Bankruptcy Reorganization will better serve the goal of economic efficiency than the ex post maximization recommended by the Creditors' Bargain theory.

The Anti-Theoretical Nature of Civil Law Contract Scholarship and the Need for an Economic Theory

The absence of theories developed for Roman law and the absence of grand theories in Civil contract law scholarship were outcomes of a particularistic approach to the problems created by the deficiencies of markets and driven by the need for a construction of a legal framework conducive to economic progress. The generation of efficient results by Civil law through the selection of efficient rules and standards was completed over the course of several centuries and stabilized after the great codifications. Common law had for centuries attempted to develop a similar construct that would be stable enough to facilitate economic relations. The borrowing of ideas and solutions from Civil law was the easy way out. Despite the numerous legal transplants, Common law fought hard to preserve a false independence and a parallel dilapidated coherence by building unified, conclusive, but dogmatic theories. The mimicking of Civil law has led to some efficient solutions, but with many islands of inefficiency trapped in the sea of rigid theories (bargain theory, privity, etc.). On the other hand, Civil law scholarship and practice has found it increasingly difficult to respond to the fast-changing economic circumstances. For the first time in history, economic relations have become so complicated that it is impossible for a judge endowed only with common sense to solve problems created by the dysfunctions of markets. Economic expertise is not only helpful, but required. A responsive economic theory of contract law is almost imperative if Civil law is to continue playing the role that it has successfully performed for centuries: providing the legal framework that helps the economy function.

Enhancing the Obsolescing Bargain Theory: A Longitudinal Study of Foreign Ownership of U.S. and European Multinationals

This research attempts to enhance the obsolescing bargain theory, for manufacturing companies, by statistically testing the effects of nine explanatory variables on the static and dynamic manifestations of bargaining success, with longitudinal, firm-level data. In order to highlight those effects, it develops a conceptual framework that provides a broader context in which the primary variables operate. It demonstrates that the obsolescing bargain took effect in India over a fifteen-year period following restrictive legislation. Unlike previous research, this study measures the effect of benefits received by multinationals from the host government in exchange for equity dilution. American companies are found to retain a smaller share of their foreign ownership over time than British and other European multinationals. Some explanatory variables that have previously been found to influence level of foreign ownership (static bargaining success) are found to be less important, or have a different effect, in explaining proportion of foreign ownership retained (dynamic bargaining success).

Bargain and Contract Theory in Law and Economics

(1976). Bargain and Contract Theory in Law and Economics. Journal of Economic Issues: Vol. 10, No. 1, pp. 1-22.

A bargain theory of pricing: generalization

Describes the Moyer model of price bargaining process with some extensions. Provides evidence supporting the model and findings based on research into part of the UK textile manufacturing and distributive industries. Suggests that the Moyer model provides support to the theory that the channel relationships affect the bargaining interval and buying price.