Contractual term

Abstract: This paper shows that one-sided terms in standard contracts, which deny consumers a contractual benefit that seems efficient on average, may arise in competitive markets without informational problems (other than those of courts). A onesided term might be an efficient response to situations in which courts cannot perfectly observe all the contingencies needed for an accurate implementation of a balanced contractual term when firms are more concerned about their reputation, and thus less inclined to behave opportunistically, than consumers are. We develop this explanation, discuss its positive and normative implications, and compare them to those of informationbased explanations for one-sided terms.

Abstract: The literature on the theory of the firm is rich in theoretical and practical insights. The key messages in this overview are the following: (a) the modern theory of the firm provides many insights into political organization, for political jurisdictions can be viewed as pseudo-firms that provide services and that group together various kinds of decisionmaking activities. (b) questions about decentralization in government are questions about the allocation of control rights. If contractual relation were complete, it would not matter whether power were decentralized, as contracts would specify everything to be done at each level of government. There would be no need for discretion; (c) how much to decentralize depends on which level of government will have the most incentive to bring about desired outcomes. Centralized governments may be better at coordinating things but tend to be less accountable than decentralized governments (with important expections); and (d) the organizational design of government affects not only incentives to make decisions but also incentives to gather the information on which those decisions are based.

Abstract: A common law obligation of good faith in contractual performance and enforcement is arising in the form of an implied contractual term, with judicial suggestion (both at Supreme Court and Federal Court level) that the implication should be an incident of all commercial contracts. This article examines the potential implications of this broad approach to good faith by the use of two case studies involving contractual opportunism (and a consequent consideration of motive). The case studies raise a number of questions. Assuming good faith is an implied incident of a certain class of contract, is the class of ‘commercial contracts’ an appropriate good faith filter or does the filter need refinement? Are commercial contracts sufficiently homogenous that a good faith obligation should be implied, as a matter of law, in all contracts falling within this class? Is a cooperative contractual model (such as good faith) appropriate in all commercial contract transactions or is there still scope for the operation of the traditional adversarial contractual model? The article proffers a solution whereby the commercial contractual context may be relevant, rather than according all commercial contracts the same contractual treatment regardless of context.

Abstract: Australian courts are faced with competing narrow and wide approaches to the necessity test that is applied when they are asked to imply a new contractual term by law. This complexity stems from the obscure development of the necessity test in England. The recent Australian High Court decision concerning the existence of an implied term of mutual trust and confidence, in Commonwealth Bank of Australia v Barker, appears paradoxically to support both the narrow and wide approaches to the necessity test. This article argues that unless the application of the necessity test is clarified, the courts will likely avoid implying terms by law in employment contracts altogether. This outcome is problematic because gaps in those contracts will remain and need to be filled.