Even though prospective tort claimants in a hypothetical contract setting would prefer a compensation scheme that treats present and future claimants equally, current mass tort bankruptcy practice favors present claimants over future claimants, distributing to present claimants a disproportionate share of the debtor's assets.
In order to treat claimants fairly--in the sense of treating them according to a rule to which they would subscribe in the hypothetical contract setting--the proposed trust shares must include an interest term.
This approach would be unfair, however, in the sense that prospective mass tort bankruptcy claimants would not agree to it in the hypothetical contract setting.
This is the equal treatment that risk-averse prospective tort claimants would choose in the hypothetical contract setting.(114)
Also, I observe that had I made a different definition of the hypothetical contract
, under which nonperformance would be accompanied by the payment of money by the seller, my conclusion about the agreed upon conditions of performance would be the same.
If one envisions the appropriate gap-filling principle as emerging from a hypothetical contract negotiation between bondholders and shareholders, then Millon's proposal might seem correct.
Framed as a hypothetical contract between shareholders and bondholders, the problem of settling on a gap-filling rule is intractable.
Moreover, hypothetical contract analysis that uses highly diversified investors as its personnel is more appealing in settling gap-filling principles for contracts with financial claimants than it would be for firm contracts with human capital investors.
Long, Jr., A Theory of Hypothetical Contract, 94 YALE L.J.
Hypothetical contract theorists are divided, however, with respect to such idiosyncratic preferences as the preference to benefit from one's own efforts rather than from the unsolicited efforts of others.
The restrictive approach insists that the hypothetical contract story be premised upon the value of individual liberty and suggests that abandoning the subjective utility calculus in favor of an objective standard of cost-benefit analysis violates this value.
It also requires exploring the (weak) sense in which the court-imposed contract is hypothetical in cases of good samaritan intervention where the two conditions of the hypothetical contract theory are fulfilled.