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Contract Law

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  • Hermalin, Benjamin E.
  • Katz, Avery W.
  • Craswell, Richard

Abstract

This chapter surveys major issues arising in the economic analysis of contract law. It begins with an introductory discussion of scope and methodology, and then addresses four main topics that correspond to the major doctrinal divisions of the law of contracts. These divisions include freedom of contract (the extent of private power to create binding obligations), formation of contracts (the procedural mechanics of exchange, and the rules that govern pre-contractual behavior), contract interpretation (the consequences that follow when agreements are ambiguous or incomplete), and enforcement of contractual obligations (the choice between private and public enforcement, and the legal remedies that follow from breach of contract). In each of these sections, we provide an economic analysis of relevant legal rules and institutions, and of the connections between legal arrangements and corresponding topics in microeconomic theory, such as welfare economics and the theory of contracts.

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This chapter was published in:

  • A. Mitchell Polinsky & Steven Shavell (ed.), 2007. "Handbook of Law and Economics," Handbook of Law and Economics, Elsevier, edition 1, volume 1, number 1.
    This item is provided by Elsevier in its series Handbook of Law and Economics with number 1-01.

    Handle: RePEc:eee:lawchp:1-01

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    Web page: http://www.elsevierdirect.com/product.jsp?isbn=9780444512352

    Related research

    Keywords: freedom of contract; Coase Theorem; contract formation; incomplete contracts; breach of contract; remedies for breach;

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    Cited by:
    1. Bernhard Ganglmair, 2008. "Breakup of Repeat Transaction Contracts, Specific Investment, and Efficient Rent-Seeking," JEPS Working Papers 08-001, JEPS.
    2. Lissoni, Francesco & Montobbio, Fabio & Zirulia, Lorenzo, 2013. "Inventorship and authorship as attribution rights: An enquiry into the economics of scientific credit," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 49-69.
    3. Masten, S.E. & Prüfer, J., 2011. "On the Evolution of Collective Enforcement Institutions: Communities and Courts," Discussion Paper 2011-074, Tilburg University, Center for Economic Research.
    4. Kolotilin, Anton & Li, Hao & Li, Wei, 2013. "Optimal limited authority for principal," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2344-2382.
    5. Ola Kvaløy & Trond E. Olsen, 2009. "Endogenous Verifiability and Relational Contracting," American Economic Review, American Economic Association, vol. 99(5), pages 2193-2208, December.

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