Swiss Cheese Contracts Are Melting Down

Handling corporate debt has long been a standardized process, but something strange has been happening with contract law in recent years. These loan agreements are like the oil that lubricates our economic engine, yet the oil is breaking down as lawyers increasingly exploit contract loopholes to pocket higher returns at the expense of investors. Paul and Peter discuss the trend as described in the paper, “Swiss Cheese Contracts: The Costs of Creative Lawyering,” (Stephen Choi et al), and why it doesn’t quite fit traditional libertarian assumptions about market efficiency.

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