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Designing Contract Modification
Full text linkFor long-term commercial contracts, modification tends to be the norm rather than the exception. While modification often takes place in response to an arrival of new information, contracting parties frequently modify the terms in response to a shift in bargaining power. In this paper, we explain how the flexibility to renegotiate in response to a shift in bargaining power can facilitate long-term contracting and thereby beneficial reliance investments and risk allocation. The prospect of modification can induce contracting parties who expect their bargaining power to improve, such as from the emergence of outside opportunities, to enter into contracts earlier and realize the advantages of longer-term relationships. Otherwise, those parties might decline to contract or delay until those opportunities realize, thereby foregoing the benefits of long-term risk allocation or reliance investments. These parties’ private incentives to either forgo or delay a contractual relationship diverge from the joint interest in maximizing the contracting surplus. In examining this phenomenon, we address an important decision variable in the contract life cycle: the parties decide not only whether, but also when, to make legally binding commitments to each other. This timing question is, not surprisingly, a function of the path of information revelation and should be incorporated into the efficient balancing of commitment and flexibility in a transactional life cycle.
From the contract doctrine perspective, the paper argues that courts should be more lenient than they currently are in enforcing contract modifications that, prompted by a shift in bargaining power, may have only a redistributive effect. At the same time, the parties and courts should continue to be mindful that modifications can undermine the contracting objectives of protecting reliance investments and risk allocation. To pursue the balance between transactional efficiency and ex ante investment or risk allocation efficiency, we demonstrate how the parties can design undercompensatory damages that would provide a credible threat of breach ex post to facilitate ex post modification. At the same time, a complementary mechanism of requiring good faith in modification (along with damages) can constrain possible holdup and protect reliance investments and risk allocation. This explains why long-term commercial contracts often contain under-compensatory damages while requiring good faith in modification
The Role of Unrealized Gains and Borrowing in the Taxation of the Rich
Full text linkAs deficits rise and concerns about tax avoidance by the rich increase, we study how unrealized gains and borrowing affect Americans’ income taxes. We have four main findings: First, measuring “economic income” as currently-taxed income plus new unrealized gains, the income tax base captures 60% of economic income of the top 1% of wealth-holders (and 71% adjusting for inflation) and the vast majority of income for lower wealth groups. Second, adjusting for unrealized gains substantially lessens the degree of progressivity in the income tax, although it remains largely progressive. Third, we quantify for the first time the amount of borrowing across the full wealth distribution. Focusing on the top 1%, while total borrowing is substantial, new borrowing each year is fairly small (1-2% of economic income) compared to their new unrealized gains, suggesting that “buy, borrow, die” is not a dominant tax avoidance strategy for the rich. Fourth, consumption is less than liquid income for rich Americans, partly because the rich have a large amount of liquid income, and partly because their savings rates are high, suggesting that the main tax avoidance strategy of the super-rich is “buy, save, die.
Confronting Catastrophic Risk: The International Obligation to Regulate Artificial Intelligence
Full text linkWhile artificial intelligence (“AI”) holds enormous promise, many experts in the field are warning that there is a non-trivial chance that the development of AI poses an existential threat to humanity. Existing regulatory initiatives do not address this threat but instead merely focus on discrete AI-related risks such as consumer safety, cybersecurity, data protection, and privacy. In the absence of regulatory action to address the possible risk of human extinction by AI, the question arises: What obligations, if any, does public international law impose on states to regulate its development?
At present there is no scientific consensus as to the exact probability of this threat; however, it is generally agreed that the risk is non-zero. Given the potential magnitude of the harm, we argue that there is an international legal obligation on states to mitigate the threat of human extinction posed by AI. We ground our argument in the precautionary principle. Often invoked in relation to environmental regulation and the regulation of potentially harmful technologies, the principle holds that in situations where there is the potential for significant harm, even in the absence of full scientific certainty, preventive measures should not be postponed if delayed action may result in irreversible consequences.
We argue that the precautionary principle is a general principle of international law and, therefore, that there is a positive obligation on states under the right to life within international human rights law to proactively take regulatory action to mitigate the potential existential risk of AI. This is significant because, if an international obligation to regulate the development of AI can be established under international law, then the basic legal framework would be in place to address this evolving threat. Currently, no such framework exists
Economic Sanctions as Legal Ordering
Full text linkThis article recovers a critical episode in the history of economic sanctions and considers its implications for international legal order. Beginning in 1905, a group of Chinese citizens launched a series of protests targeting American, British, and Japanese goods. These boycotts caused economic damage, disrupted international relations, and at times won significant political victories. At the same time, they captured the imaginations of peace advocates, lawyers, and scholars, who saw in the boycotts either a fundamental threat to legal ordering, a promising avenue for enforcing interstate peace, or, most radically, an engine for new kinds of political organization outside the typical forms of state and empire.
The debates over the early twentieth-century Chinese boycotts invite us to rethink the relationship between economic sanctions and legal orders. Through historical and theoretical work, this article demonstrates that boycotts were understood at the time as a form of “insurgent legal ordering,” which threatened the unity of the state-based legal system. Drawing on the history of the boycotts, this article develops a theory of insurgent legal ordering. And it shows how lawyers of the period developed a response to the perceived threat of insurgent ordering that required states to centralize and control the means of economic warfare. The result sheds light on the history of economic sanctions and suggests a broader critique of the role that economic sanctions play in the international legal order today
How Artificial Intelligence Will Shape Securities Regulation
Full text linkHow will the increasing prevalence and sophistication of artificial intelligence (AI) change the doctrine and practice of securities law? My main thesis is that it will push securities regulation toward a more systems-oriented approach. This approach will replace securities law\u27s emphasis, in areas like manipulation, on forms of enforcement targeted at specific individuals and accompanied by punitive sanctions with a greater focus on ex ante rules designed to shape an ecology of actors and information
Build Public Renewables, Again
Full text linkA review of The Price Is Wrong: Why Capitalism Won’t Save the Planet. By Brett Christophers
Some Realism About Originalism
Full text linkA review of Memory and Authority: The Uses of History in Constitutional Interpretation. By Jack M. Balkin
Remedies for Non-Disclosure in Asset Sales: Voidance vs. Damages
No full textThis paper analyzes the problems of non-disclosure in the context of an asset sale between a buyer and a seller. The seller can have important information about the asset and can opportunistically decide not to disclose that information to the buyer, and the buyer may sue the seller ex post for remedy. The buyer and the court have a choice over different types of remedy. The paper considers three different remedy regimes: (1) no liability; (2) voidance; and (3) damages. Under voidance, the buyer can rescind the transaction (return the asset and get the price back), while with damages, the buyer receives monetary compensation from the seller. The analysis shows that, when comparing between voidance and damages, while voidance regime does poorly in deterring the opportunistic non-disclosure, by undoing inefficient transactions ex post, it can perform better than either damages or no liability. The paper analyzes circumstances under which one regime performs better than the others and also different types of damages
Supreme Court Gives States the Green Light to Go Ham: The Dormant Commerce Clause in Renewable Energy in Light of \u3cem\u3eNational Pork Producers\u3c/em\u3e
No full textTwo years ago, the Supreme Court slaughtered the Dormant Commerce Clause in its decision in National Pork Producers v. Ross. While the case is not explicitly about environmental law, it significantly affects environmental laws and policies, especially pertaining to state renewable portfolio standards. These state policies are especially prone to Dormant Commerce Clause litigation, given the interstate nature of electric grids. This paper argues that the scope of the Dormant Commerce Clause in light of this decision is appropriate for ensuring that states have adequate wiggle room in renewable energy regulation, but not an excessive amount of leeway so that it would hinder the national economy and disincentivize the production of renewable energy
Fall 2025 - AI Toolkit for Students
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Resources Covered: AI Toolkit
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