is not applicable in the absence of unexpected events.

is a legal mechanism to make contracts renegotiation proof.

maintains that courts should be sympathetic to those suffering from financial hardship to solve the judgment-proof problem.

sometimes achieves a similar objective to the pre-existing duty rule.

The outside option is often referred to as the BATNA: Best Alternative to a Non-Negotiatied Agreement.

Outside options influence the surplus parties can get in a negotiation because, if any party's outside option is worse than what it gets from a proposed deal, that party will walk away from negotiations.

Manipulating the parties' outside option (for instance, through a break-up fee) can help mitigate the holdup problem.

One party can capture a larger share of the surplus in a negotiation, by increasing its bargaining power.

An ex-post efficient contract is an agreement in which the parties always trade the efficient quantity. An ex-ante efficient contract is an agreement in which parties always make the efficient investments. Renegotiation ensures that contracts are always ex-ante efficient.

Parties don’t need to renegotiate complete contracts as they have anticipated all relevant circumstances and provided for them.

Parties routinely renegotiate a contract if it turns out that performing the contract as written would be inefficient.

Holdup arises if the non-investing party does not capture part of the surplus created by the investing party.