``The Economics of Agency Law and Contract Formation''
AbstractThis article addresses issues that arise in agency law when agents make contracts on behalf of principals. The main issue is whether the principal should be bound when the agent makes a contract with some third party on his behalf which the principal would immediately wish to disavow. The resulting tradeoffs resemble those in tort law, so the least-cost-avoider principle is useful for deciding when contracts are valid and may be the underlying logic behind a number of different legal doctrines applied to agency cases. In particular, an efficiency explanation can be found for the undisclosed principal rule, which says that the principal is generally bound even when the third party is unaware that the agent is acting as an agent for him.
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Bibliographic InfoPaper provided by EconWPA in its series Law and Economics with number 9506002.
Date of creation: 14 Jun 1995
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- K - Law and Economics
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- Rasmusen, E., 1992.
"Mutual and Unilateral Mistake in Contract Law,"
92-022, Indiana - Center for Econometric Model Research.
- Bengt Holmstrom, 1981.
"Moral Hazard in Teams,"
471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kathryn E. Spier, 1992. "Incomplete Contracts and Signalling," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 432-443, Autumn.
- Caspar Rose, 2010. "The transfer of property rights by theft: an economic analysis," European Journal of Law and Economics, Springer, vol. 30(3), pages 247-266, December.
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