The Incentives of Delaware Judges to Choose Indeterminacy

With specific reference to the question of private ordering

The Chancery Daily’s August 25, 2025, newsletter discussed at length the ambiguous meaning of the claim that, under Delaware law, "corporate charters and by-laws are contracts among the shareholders of a corporation." In particular, TCD pointed to the oddity that the extent to which private ordering can override statutory rules seems to depend on the nature of the entity. Partnerships, limited partnerships, and limited liability companies all are entitled to a much higher degree of private ordering than are corporations.

The current legal regime effectively treats charters and bylaws as contracts only in certain senses, subject to a diluted application of traditional contract principles -- perhaps as subtle acknowledgement of the fact that charters are not ordinary contracts. This results in a stratified pecking order of contracts where some enjoy all rights, responsibilities, and requirements of the Common Law of Contract and others are subject to only selected elements of the Common Law of Contract. Such a pragmatic compromise may serve Delaware's Courts and litigants in certain ways, but it comes at the cost of coherence in a jurisdiction that prides itself on "contractarian" clarity.

I do not propose herein to bring doctrinal clarity to the issue. Instead, I propose to discuss the incentives Delaware courts have to generate indeterminate law on the point.