We often mislead ourselves into believing that, by arriving at a certain contract decision, we have carefully considered all available options, weighed up the pros and cons of each attribute dispassionately, and selected the most favourable outcome, i.e. the one which maximises our welfare in the transaction.

Regretfully, however, we are seldom cognisant of the rational components that form part of our contract decisions. In fact, we are rather often oblivious to the myriad of factors that a bad choice may entail and our ‘gut feeling’ can frequently lead us astray. Most of the time, we are gathering information that simply justifies our pre-existing beliefs or confirming our choices, rather than helping us to effectively make a decision (confirmation bias).

Whilst it is true that some of us can sway towards changes more easily, most of us would prefer remaining in our comfort zone and holding on to what we are most familiar with. Yet being curious and adventurous is part of our evolutionary process. How would this behaviour then play out in the choice of a governing contract law?

As surprising as it may sound, negotiators often opt for a law or rules of law that may be the result of a previous experience, such as a successful deal, without further deliberation. Parties may thus simply attribute a ‘tag’ to this experience and evaluate it according to outcomes achieved in the past. Nonetheless, these evaluations may not always be accurate and can be clouded by emotions, thereby raising a number of questions:

• Are there rational and non-rational elements involved in this choice?
• Does it depend on the context and external stimuli?
• Do emotions and cognitive biases play any role in the choice?
• Can emotions and cognitive biases cloud or enlighten the judgment of these choices? If so, to what extent?
• How can we avoid, control or minimise the effects of these factors?
• How can parties seek to influence and improve choice of governing contract law?

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