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Series:   Elements in Law, Economics and Politics

A Safety Valve Model of Equity as Anti-opportunism

Published online by Cambridge University Press:  14 August 2023

Kenneth Ayotte ,
Ezra Friedman  and
Henry E. Smith
Kenneth Ayotte
Affiliation:
University of California, Berkeley School of Law
Ezra Friedman
Affiliation:
Northwestern University Pritzker School of Law
Henry E. Smith
Affiliation:
Harvard Law School, Massachusetts

Summary

Equity can be defined as the use of a more flexible, morally judgmental, and subjective mode of legal decision making that roughly corresponds with historical equity. This Element presents a simple contracting model that captures the role of equity as a safety valve, and shows how it can solve problems posed by opportunists–agents with unusual willingness and ability to take advantage of necessary imperfections in the law. In this model, a simple but imperfect formal legal regime is able to achieve first best in the absence of opportunists. But when opportunists are added, a more flexible regime (equity), can be preferred. However, equity is also vulnerable to being used opportunistically by the parties it intends to protect. Hence, the Element shows that it is often preferable to limit equity, reserving it for use only against those who appear sufficiently likely to be opportunists.
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Keywords

equityformalismcontextualismopportunismcontracts
Type
Element
Information
Series: Elements in Law, Economics and Politics
Online ISBN: 9781009217965
Publisher: Cambridge University Press
Print publication: 07 September 2023

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A Safety Valve Model of Equity as Anti-opportunism
  • Kenneth Ayotte, University of California, Berkeley School of Law, Ezra Friedman, Northwestern University Pritzker School of Law, Henry E. Smith, Harvard Law School, Massachusetts
  • Online ISBN: 9781009217965
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A Safety Valve Model of Equity as Anti-opportunism
  • Kenneth Ayotte, University of California, Berkeley School of Law, Ezra Friedman, Northwestern University Pritzker School of Law, Henry E. Smith, Harvard Law School, Massachusetts
  • Online ISBN: 9781009217965
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A Safety Valve Model of Equity as Anti-opportunism
  • Kenneth Ayotte, University of California, Berkeley School of Law, Ezra Friedman, Northwestern University Pritzker School of Law, Henry E. Smith, Harvard Law School, Massachusetts
  • Online ISBN: 9781009217965
Available formats
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