Abstract

Enforceable promises discourage lying, cheating, and stealing. Contracts that embody such promises shape institutions, distribute power, and organize markets. The Smith-King critique of elite empirical contracts scholarship reveals a field preoccupied with the first set of functions and barely interested in the second. I am loath to second-guess this view without empirical evidence of my own. Instead, I draw from it two sets of implications—one for the substantive study of contracts, the other for the relationship between contract theory and contract empiricism.

First, I suggest that organizational approaches enrich the study of public aspects of private contracts, such as their import for nonparties, their role in social ordering, and the political content of contracting practices. Second, I read Smith and King's work as a useful reminder that the role of empirical study in contracts goes beyond elaborating a fixed set of received theories. Real contracts teem with big puzzles; it pays to search across disciplinary lines for ideas to solve them.

Part I of this Commentary highlights some of the important insights that predicate the authors' turn to organizations. Their literature survey reveals both a narrow range of motivating theories and a surprisingly confined view of the empirical subject among contracts scholars. Smith and King seek to expand the field of inquiry; and their effort resonates beyond the theories they propose. In Part II, I sketch one context where organizational approaches might yield a payoff. My goal is not to apply a particular theory, but to use a case study to imagine how a Smith-King inspired literature might differ from the prevailing one. The over-the-counter derivatives industry makes a fitting case study because its standard contracts are drafted by a single organization and have an unusual modular structure. A focus on organizations can shed new light on the implications of this contract form for the drafter, the users, and the public. In Part III, I return to the relationship between contract theories and the study of contracts, and comment on some methodological implications of Smith and King's insights.

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