This paper examines the contractual practices of African manufacturing firms using survey data collected in Burundi, Cameroon, Cote d'Ivoire, Kenya, Zambia, and Zimbabwe. Descriptive statistics and econometric results are presented. They show that contractual flexibility is pervasive and that relational contracting is the norm between manufacturers, their suppliers, and their clients. The existence of long-term relations between firms helps them deal with contract non-performance through negotiation. Confrontational methods such as lawyers and courts are used only by large firms and when negotiations fail. Whenever confrontation can be avoided, business is resumed. Of the six studied countries, incidence of breach and the use of lawyers and courts are highest in Zimbabwe which is also the country with legal institutions that best support business. Our favoured interpretation is that good legal institutions incite firms to take more chances, thereby encouraging trade and leading to more cases of breach and more recourse to courts and lawyers. A high frequency of contract non-compliance should thus not be interpreted as a sign of imperfect legal institutions.
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Paper provided by Centre for the Study of African Economies, University of Oxford in its series Working Papers Series with number
99-20.
Length: 30 pages Date of creation: 1999 Date of revision: Handle: RePEc:fth:oxesaf:99-20
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Find related papers by JEL classification: K12 - Law and Economics - - Basic Areas of Law - - - Contract Law L40 - Industrial Organization - - Antitrust Issues and Policies - - - General L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
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