Default Rules Theory: Implications on Teaching Contract Law in India

AuthorBadrinath Srinivasan,Seema Yadav
DOIhttp://doi.org/10.1177/23220058221099820
Published date01 July 2022
Date01 July 2022
Subject MatterArticles
Article
Default Rules Theory:
Implications on Teaching
Contract Law in India
Badrinath Srinivasan1 and Seema Yadav1
Abstract
There is a wide gap between what is taught in classroom and that which is practised in law: this is an
oft-made complaint. Various efforts have been taken in India to bridge this gap, but such efforts have
not been regarded as adequate. How this serious shortcoming can be addressed has been the subject
of various debates, not only in India but also world-over. Numerous solutions have been proposed to
address this issue. There can be no single answer to the various challenges that this gap poses. One
such solution is the default rules theory. This article explores the potential of default rules theory in
bridging the gap between law as taught in the classroom and law in practice. It explains with illustrations
how the theory can promote better understanding of contract law doctrines in action and enable a
nuanced critique of contract law. This article argues that legal academia misses out by not including the
default rules theory in legal analysis and critique.
Gap Between Law-as-taught and Law Practice
There is a wide gap between what is taught in classroom and that which is practised in law: this is an
oft-made complaint.2 Various efforts have been made to bridge this gap but such efforts have not been
regarded as adequate.3 How this serious shortcoming can be addressed has been the subject of various
debates, not only in India but also world-over. There can be no single answer to the various challenges
posed on account of this gap. One possible solution to addressing this gap in a concrete manner is the
default rules theory.
The default rules theory originated in the late 1980s in order to explain and at the same time critique
contract law doctrines. The theory which has evolved in the past three decades sought to explain default
rules, altering rules, mandatory rules and types of such rules. The theory is rich in the literature, especially
1 School of Law, Galgotias University, Greater Noida, Uttar Pradesh, India.
2 Neil J. Dilloff, Law School Training: Bridging the Gap between Legal Education and the Practice of Law Symposium: The
Future of the Legal Profession, 24 Stanford Law PoLicy rev. 425, 426–427 (2013).
3 Anne-Marie Cotter, Teaching Law for the Real World: Bridging the Gap between Law School and the Legal Profession,
4 aSian J. Leg. educ. 71–77 (2017); Dilloff, supra note 1, at 425; R. Michael Cassidy, Beyond Practical Skills: Nine Steps for
Improving Legal Education Now, 53 BoSton coLLege L. rev. 1515–1532 (2012); National Knowledge Commission, Report of
the Working Group on Legal Education (2007), p. 11. http://docshare01.docshare.tips/files/4958/49586475.pdf (accessed 22
February 2022).
Asian Journal of Legal Education
9(2) 200–215, 2022
© 2022 The West Bengal National
University of Juridical Sciences
Reprints and permissions:
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DOI: 10.1177/23220058221099820
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Corresponding author:
Badrinath Srinivasan, School of Law, Galgotias University, Greater Noida, Uttar Pradesh 201309, India.
E-mail: lawbadri@gmail.com
Srinivasan and Yadav 201
on default rules, and provides explanatory account of various contract law doctrines. It also prescribes
normative prescriptions on how default, altering and mandatory rules are to be structured.
At a basic level, the default rule theory views law in terms of mandatory, default and altering rules.
This trifurcation and their conceptual basis help understanding contract law, the manner in which parties
should comply with the law and how they can diverge from it through transactional arrangements. The
theory has immense potential to bridge the gap between law as taught in the classroom and law in
practice. Even so, surprisingly, the theory’s usefulness in law teaching has not been explored in detail.
This article introduces and maps the default rule theory from the perspective of Indian law. The article
then explores the potential of the theory in enabling a nuanced critique of contract law doctrines in action
and notes how the theory could enable bridging the gap between the textbook law and the law in practice.
It argues that law teachers should make better use of the default rules theory in the classroom.4 Although
this works explores the potential of the theory from the Indian perspective,5 the arguments equally apply
to other jurisdictions.
With the above objectives, the article proceeds as per the following methodology: first, the article
provides a descriptive comment of the default rule theory. It then discusses how the default rule theory
has been viewed in the Indian legal system and then goes on to analyze the potential of default rules in
understanding and critiquing the existing state of the Indian law. It also argues that Indian legal academia
misses out by not including the default rules theory in legal analysis and critique. Towards this end, the
article provides several instances of how law teachers can address this gap by integrating the theory in
the classroom.6
What are Mandatory, Default and Altering Rules?
Contract Incompleteness
Contractual incompleteness, originally applied to the nature of the firm,7 has been applied in several
fields in economics and law. The concept has been applied in contract theory in several senses, and there
is no single definition of what constitutes contractual incompleteness.
All contracts are regarded as incomplete primarily for the following reasons8:
• Parties cannot contemplate all the situations that are likely to arise in future and negotiate
contractual terms to that effect.9 For instance, the London Interbank Offered Rate (LIBOR) is the
4 Although the illustrations and the case law discussed are from Indian perspective, the leitmotif of the article, that is, the potential
of default rules theory in enabling better contract law teaching, is universally applicable.
5 See also, Badrinath Srinivasan & Seema Yadav, Default, Mandatory & Altering Rules in Law: An Indian Perspective, 3 comPany
L. J. 1–9 (2021).
6 A detailed examination of the possible methods to integrate the theory into the classroom would depend on many factors,
including the syllabus taught, teaching methodologies employed, and jurisdiction, etc. which are beyond the scope of this article.
7 Sanford J. Grossman, & Oliver D. Hart, The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration,
94 J. PoLit. econ. 691–719 (1986).
8 Ian Ayres & Robert Gertner, Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules, 99 yaLe L.J. 87, 92,
(1989) footnote 29 (hereinafter Filling Gaps).
9 Robert E. Scott, A Theory of Self-enforcing Indefinite Agreements, 103 coLumBia L. rev. 1641 (2003).

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