While much has been written about the design of default rules, disclosures and nudges, relatively little scholarly attention has been given to the design of mandatory rules. To fill this gap, this article first summarizes the key arguments for and against the use of mandatory rules in supplier–customer relationships, and describes their prevalent use in Israel. Next, the article offers a systematic analysis of ten choices involved in the design of mandatory rules. These include the identity of the regulator, the choice between rules and standards, and the norms’ scope of incidence. Additional questions pertain to the degree of immutability and the choice between bidirectional and unidirectional immutability. The article further explores the choice between substantive rules and rules that interfere with the wording of the contract. Ancillary questions arise regarding the outcomes of noncompliance with wording rules and the positive or negative framing of the rules. Finally, the article discusses two questions concerning the outcomes of clauses’ unenforceability: what arrangement should substitute the invalid clause, and how its invalidity should affect the remainder of the contract. The discussion includes the findings of empirical studies dealing with some of these issues.

The upshot of the analysis is that the choice whether to use mandatory rules is not dichotomous (i.e., yes or no), but rather covers a huge variety of options that differ in numerous respects. Thus, the inquiry into the question of how to regulate the content of transactions sheds new light on the question of whether to do so.

Forthcoming in Eliezer Rivlin Book. The full paper is available on SSRN