A private ordering system can enforce contracts entirely outside state law.

Evidence

This article has been largely devoted to offering explanations of why the diamond industry has long relied on the extralegal enforcement of its business norms. By a variety of reputational bonds, customary business practices, and arbitration proceedings, the diamond industry has developed a set of rules and institutions that its participants find clearly superior to the legal system. The industry, as it has been traditionally organized, is able to make and, more important, enforce its own rules. The market is organized to promote the low cost and rapid intraindustry dissemination of information about reputation, which enables it to use reputation bonds to create intraindustry norms that function as a deterrent to breach of contract and a private sanctioning system whose judgments can almost always be enforced completely outside the legal system. — Lisa Bernestein, Opting out of the Legal System, 283

Categorization

• XREF: Directly parallels Scott’s third-party reputation mechanisms and connects to the reader’s Coleman/network-closure framing — private ordering works because reputation information carries enforcement power. — connects to: Private arbitration systems extend their authority to outsiders who consent. — Lisa Bernestein, Opting out of the Legal System, 81; Private adjudication could function without state enforcement powers. — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 10; Trust matters everywhere, but cheap reputation bonds enable fully private law — Lisa Bernestein, Opting out of the Legal System, 167 (+3 more)

Related

• Private legal systems can rival state law when reputation functions as enforcement. (similarity 0.87)
• Diamond industry’s private law succeeds by enforcing judgments faster than courts. (similarity 0.86)
• The diamond trade sustains an extralegal contractual regime through private arbitration and reputational enforcement. (similarity 0.86)
• Trust matters everywhere, but cheap reputation bonds enable fully private law (similarity 0.85)
• Reputation, not third-party enforcement, governs diamond market transactions. (similarity 0.84)
• Cheap legal contracts still depend on extralegal reputation bonds (similarity 0.82)
• Reputation can substitute for legal enforceability in evaluating contracts. (similarity 0.80)
• Diamond industry norms persist regardless of national legal systems. (similarity 0.79)
• Private arbitration can effectively substitute for courts (similarity 0.78)

Broader Connections

• Private adjudication could function without state enforcement powers. #corroborates (0.95) — PAUL R. MILGRO, PAUL R. MILGRO - THE ROLE OF…, 10
• Private legal systems can rival state law when reputation functions as enforcement. #expands (0.92) — Lisa Bernestein, Opting out of the Legal System, 16
• Trust matters everywhere, but cheap reputation bonds enable fully private law #qualifies (0.85) — Lisa Bernestein, Opting out of the Legal System, 167
• Private arbitration systems extend their authority to outsiders who consent. #expands (0.82) — Lisa Bernestein, Opting out of the Legal System, 81
• Private arbitration systems resolve disputes without public accountability. #expands (0.75)
• Private arbitration beats courts on speed, cost, and secrecy. #expands (0.72) — Lisa Bernestein, Opting out of the Legal System, 231