By Christopher R. Drahozal. 113 Penn St. L. Rev. 1031.
The literature on private ordering examines how parties use extralegal means – most commonly reputational sanctions – to enforce contracts. As described by Barak D. Richman, private ordering “compares the efficiencies of private (extralegal) contract enforcement with the more traditional use of public law and state-run courts.” A series of studies by Lisa Bernstein illustrates a paradigm case of private ordering – trade associations that use industry arbitrators (private judges) to adjudicate disputes, with the arbitrators’ awards typically enforced by the threat of extralegal sanctions such as expulsion from the association. In the trade associations studied by Bernstein, the merchants opted out of the public court system and instead chose to have their disputes resolved by private judges applying industry trade rules. . . [ keep reading]