Abstract

Private law and regulation are constantly involved in the evaluation of conflicts of interest, judging some of them salutary, with others requiring adjustment. Focusing on the question of conflicts of interest allows us to clarify our vision of when such adjustment is appropriate and, more specifically, when the law should supply an infrastructure for cooperative behavior. Thus, the prism of conflicts of interest provides a lens through which to view basic legal problems that turn on whether individual actors will be deemed responsible to some joint interest or whether they will be at liberty to pursue their individual interests despite the adverse effects of such activity on others. This article proposes a conflicts of interest perspective for examining contract law and its immediate surroundings. It suggests a map of conflicts of interest along three axes: the remedial axis; the axis of positive duties to avoid conflicts; and the axis of the transition from independence to loyalty. Applying the map to contract doctrine, the article examines a number of contract doctrines including: remedies for breach of contract; modification; conditions; good faith in performance; and formation. The article goes on to apply the map of conflicts to two complex fact situations: corporate acquisitions and corporate bankruptcies. The analysis underscores the fact that conflicts of interest rules do not simply protect existing interests, but also contribute to the very constitution of those interests. Recognizing the constitutive role of legal rules raises questions about our ability to determine interests ex ante and thus calls for a more nuanced approach to gauging the incentive effects of a legal regime.