Unilateral decision-making powers in contract to be used by good boys or cognitive misers?

Abstract

Modern contracts allocate material powers to contractants to take major decisions which affect the interests of counterparties. Empirical evidence, from studies and from litigated cases, tends to show that those responsible for taking decisions using powers granted to them under contracts take those decisions seriously. They give the decision some thought, and they try to be reasonable. The law, however, does not generally insist on high standards of conduct. I explore the law and the social psychology of decision making, System 1 or System 2 as Kahnemann classified it, and how to align them, as well as discuss, from legal theory, how one might define a reasonable decision. Legal argument is underpinned by an analysis which suggests that control of decision-making powers should be a matter of contract construction, the Court's question to be directed at the likely intention of the parties.