Mitu Gulati

If Boilerplate Could Talk: The Work of Standard Terms in Sovereign Bond Contracts

CO-AUTHORS Anna Gelpern and Jeromin Zettelmeyer
Law and Social Inquiry


Standard contract terms are “sticky”: they rarely change, even if change appears to be in the parties’ interest. Multiple theories to explain stickiness do not reach consensus on its causes. We investigate the role of stickiness in sovereign bond contracts, where it would be especially costly and therefore puzzling. In our interviews with more than a hundred officials responsible for the bond contracts of 28 countries, they linked reluctance to change non-financial contract terms and the imperative of following a “market standard” for such terms. When a term could be described as standard for the government’s debt stock or borrower cohort, its content often came across as secondary. Sovereign debt managers seemed willing to forgo some of the benefits of contract terms for dealing with contingencies and revealing private information, to avoid negative signals and maintain the liquidity of primary and secondary debt markets. Interviews with investors suggested a similar focus on standard form, and a limited engagement with contract content. 





Anna Gelpern, G. Mitu Gulati & Jeromin Zettelmeyer, If Boilerplate Could Talk: The Work of Standard Terms in Sovereign Bond Contracts, 44 Law and Social Inquiry 617-646 (2019).

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