Working Paper: NBER ID: w16049
Authors: Lewis A. Kornhauser; W. Bentley Macleod
Abstract: Contract law and the economics of contract have, for the most part, developed independently of each other. In this essay, we briefly review the notion of a contract from the perspective of lawyer, and then use this framework to organize the economics literature on contract. The review thus provides an overview of the literature for economists who are interested in exploring the economic implications of contract law. The title, Contracts between Legal Persons, limits the review to that part of contract law that is generic to any legal person. A legal person is any individual, firm or government agency with the right to enter into binding agreements. Our goal is to discuss the role of the law in enforcing these agreements under the hypothesis that the legal persons have well defined goals and objectives.
Keywords: contract law; economics of contract; legal persons; enforcement of agreements
JEL Codes: D02; D22; K12; L14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| legal framework surrounding contracts (K12) | behavior of legal persons in entering and enforcing agreements (K12) |
| incompleteness of contracts (D86) | need for judicial interpretation (K40) |
| design of legal institutions (D02) | efficiency of contractual relationships (L14) |
| asymmetric information (D82) | inefficiencies in contract performance (D86) |
| rules governing contracts (K12) | bargaining power of parties (C79) |
| bargaining power of parties (C79) | outcomes of contractual agreements (L14) |