Over the past 40 years, an irrelevance proposition has been prevalent in law -and -economics scholarship: bargaining power should affect only price and not non-price terms of a contract. In contrast, practitioners and commentators in industry regularly invoke bargaining power to explain static and dynamic variance in non-price contract terms. This paper unpacks and analyzes the assumptions of the strong—and weak—versions of this bargaining power irrelevance proposition, to bridge the gap between theory and the real world. In the first half of the paper, we identify and discuss a variety of explanations for the effect of bargaining power on contract design, under conditions of information asymmetry and positive transaction costs. These include the effects of shifts in market supply and demand and the effect of bargaining through lawyers. In the second half of the paper, we present an in-depth examination of one set of explanations, concerning the impact of bargaining power and information asymmetry on non-price terms, when the value and cost of non-price terms vary across contracting parties. In the extreme cases in which one or the other party enjoys overwhelming bargaining power, the efforts of that party to capture a larger share of the surplus by screening or signaling may compromise the efficiency of the non-price terms. We show that this incentive disappears or is mitigated when bargaining power is more evenly shared between the parties: for example, when a monopolist faces the threat of competition, when the parties can renegotiate, or when they engage in bilateral bargaining with more even bargaining power. As a whole, the paper provides a theoretical basis for interpreting the intuition among market participants that the impact of bargaining power extends beyond price terms. Before concluding, we briefly suggest implications for legal policy, particularly the contract law doctrine of unconscionability.
Article
Taking Conscience Seriously
For too long, the conventional account of morality in medicine has placed conscience firmly on one side of the moral divide. The archetypal doctor who refuses to participate in controversial treatments—most commonly end-of-life care, abortion, sterilization, and contraception—has been the lodestar of legislative efforts and scholarly accounts. In the name of institutional conscience, healthcare facilities have also been permitted to assert moral or religious objections to care and impose them on employees and affiliates of all beliefs and backgrounds. Doctors, nurses, and institutions that are willing to deliver controversial care have been virtually absent from discussions.
This Article aims to reframe the debate by taking conscience seriously. Through engagement with the moral philosophical literature, it makes two inter-related arguments. First, conscience equally may compel a doctor or nurse to deliver a controversial treatment to a patient in need. Yet legislation meant to protect conscience, paradoxically, has undermined the consciences of these doctors and nurses. Second, endowing healthcare institutions with conscience via legislation is theoretically and practically problematic. By privileging the institutions’ rights to refuse to provide certain treatments, legislation impinges on the rights of individual providers to provide care they feel obligated by conscience to deliver. Ultimately, if legislation is to protect conscience, it must negotiate between competing claims of conscience of health providers and the facilities in which they work—regardless of whether they refuse or are willing to provide controversial care. This Article introduces a new framework for achieving a better balance between the interests of institutions, individual doctors and nurses, and the patients who depend on them for care.
Reconstructing Murdock v. Memphis
In the 1789 Judiciary Act, the first Congress limited the Supreme Court’s appellate jurisdiction over state court judgments to questions of federal law that appeared on the face of the record. During Reconstruction, Congress amended the Act and dropped the earlier limitation, thus suggesting that, in cases within its appellate jurisdiction, the Court could review errors of state law as well as federal law. But in the landmark case of Murdock v. Memphis (1875), the Court rejected such a reading—a ruling that continues to govern the Court today. Some scholars charge, however, that Murdock failed to give meaning to Congress’s changes and urge its reconsideration.
This Article argues that as a historical matter, those critics are likely wrong. Murdock gave substantial meaning to the Reconstruction changes to the Court’s jurisdiction in ways that scholars have overlooked or minimized. First, Murdock read the changes as allowing the Court to look beyond what once constituted the formal “record” on appeal in order to identify more readily state court denials of federal rights. Second, in an even more significant departure from prior practice, Murdock read the changes as requiring it to deny jurisdictional status to “adequate state grounds”—state law grounds sufficient to uphold the judgment, independent of the federal grounds. Today, the Court views such grounds as a jurisdictional bar to reviewing errors of federal law, although it scrutinizes such grounds lest state courts subvert the Court’s jurisdiction by doubtful rulings on state law. But Murdock achieved a somewhat similar result by de-jurisdictionalizing adequate state grounds, thus allowing the Court to review errors of federal law, adequate state grounds notwithstanding.
By focusing on Murdock’s conclusion that the Court could not generally review errors of state law, critics have underappreciated the substantial role that Murdock gave to Reconstruction reforms to secure the supremacy of federal law. Moreover, it is questionable whether the Reconstruction Congress wanted the Court to review questions of state law generally, as opposed to having it police the adequacy of state law grounds (which, at the time, were largely unreviewable). Although Murdock’s particular solution to the problem of adequate state grounds proved short-lived, the decision was an important step in the Supreme Court’s expanded review of federal rights denials, and, overall, was responsive to the Reconstruction Congress’s likely concerns.