Law is a powerful commitment device. By entering into a binding contract, a contracting party can invoke the coercive law enforcement powers of states to compel another party to perform. Many, if not most, contracts are carried out without ever invoking these coercive powers; they operate in the shadow of the law. Less attention has been paid to the flip side of law’s shadow: the possibility of relaxing or suspending the full force of the law, or making law elastic. While this may seem anathema to the “rule of law”, it is not an infrequent occurrence, especially in times of crisis. The elasticity of law should be distinguished from the incompleteness of law, that is, the inherent limitation lawmakers face in trying to anticipate all future contingencies. In this paper I will offer two tales of the American Insurance Group (AIG) to illustrate the elasticity of contracts as well as of law.
