Business Law and Legal Institutions
Abstract: We ask which legal institutions could best create an efficient law to regulate commercial contracts. There are three candidates: courts; private law making bodies -- the ALI; NCCUSL--; specialized bodies of law that regulate specific areas (corporations, family). Judicial rules solve contracting problems in diverse areas as the private agents would have solved then and update as commerce changes. Specialized regulatory rules also respond to agent preferences and update in consequence of industry pressure. Private law making bodies enact comprehensive solutions but lack an updating feature; hence, their solutions become obsolete. We argue that the state's viable choice is the combination: courts and specialized bodies of law. The inability to update is intrinsic to the structure of the private law making bodies.
