IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/9696.html
   My bibliography  Save this paper

Economic Analysis of Contract Law

Author

Listed:
  • Steven Shavell

Abstract

Contract law governs agreements between parties. This paper contains the chapters on contract law from a general, forthcoming book, Foundations of Economic Analysis of Law (Harvard University Press, 2003). Chapter 13 presents an overview of the subject. Chapter 14 is concerned with contract formation, that is, with the process through which parties find contracting partners, with aspects of contract negotiation, and with the rules governing when an arrangement between parties becomes legally recognized as a contract. Chapter 15 considers at length an important type of contract: the contract to produce something. Chapter 16 is concerned with two other types of contract: the contract for transfer of possession of something that already exists (such as land or a painting), and donative contracts.

Suggested Citation

  • Steven Shavell, 2003. "Economic Analysis of Contract Law," NBER Working Papers 9696, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:9696
    Note: LE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w9696.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Diamond, P. A. & Maskin, Eric, 1981. "An equilibrium analysis of search and breach of contract II. A non-steady state example," Journal of Economic Theory, Elsevier, vol. 25(2), pages 165-195, October.
    2. Masahiro Okuno-Fujiwara & Andrew Postlewaite & Kotaro Suzumura, 1990. "Strategic Information Revelation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(1), pages 25-47.
    3. William P. Rogerson, 1984. "Efficient Reliance and Damage Measures for Breach of Contract," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 39-53, Spring.
    4. Smith, Janet Kiholm & Smith, Richard L, 1990. "Contract Law, Mutual Mistake, and Incentives to Produce and Disclose Information," The Journal of Legal Studies, University of Chicago Press, vol. 19(2), pages 467-488, June.
    5. Bebchuk, Lucian Ayre & Shavell, Steven, 1991. "Information and the Scope of Liability for Breach of Contract: The Rule of Hadley vs. Baxendale," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(2), pages 284-312, Fall.
    6. Grossman, Sanford J, 1981. "The Informational Role of Warranties and Private Disclosure about Product Quality," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 461-483, December.
    7. Yeon-Koo Che & Tai-Yeong Chung, 1999. "Contract Damages and Cooperative Investments," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 84-105, Spring.
    8. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Econometrica, Econometric Society, vol. 62(2), pages 257-282, March.
    9. Tai-Yeong Chung, 1991. "Incomplete Contracts, Specific Investments, and Risk Sharing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(5), pages 1031-1042.
    10. Rasmusen, Eric & Ayres, Ian, 1993. "Mutual and Unilateral Mistake in Contract Law," The Journal of Legal Studies, University of Chicago Press, vol. 22(2), pages 309-343, June.
    11. Nöldeke, Georg & Schmidt, Klaus M., 1995. "Option contracts and renegotiation," Munich Reprints in Economics 19329, University of Munich, Department of Economics.
    12. Hadfield, Gillian K, 1994. "Judicial Competence and the Interpretation of Incomplete Contracts," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 159-184, January.
    13. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
    14. Donald B. Hausch & Yeon-Koo Che, 1999. "Cooperative Investments and the Value of Contracting," American Economic Review, American Economic Association, vol. 89(1), pages 125-147, March.
    15. Grout, Paul A, 1984. "Investment and Wages in the Absence of Binding Contracts: A Nash Bargining Approach," Econometrica, Econometric Society, vol. 52(2), pages 449-460, March.
    16. Sykes, Alan O, 1990. "The Doctrine of Commercial Impracticability in a Second-Best World," The Journal of Legal Studies, University of Chicago Press, vol. 19(1), pages 43-94, January.
    17. Bernstein, Lisa, 1992. "Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry," The Journal of Legal Studies, University of Chicago Press, vol. 21(1), pages 115-157, January.
    18. Kathryn E. Spier & Michael D. Whinston, 1995. "On the Efficiency of Privately Stipulated Damages for Breach of Contract: Entry Barriers, Reliance, and Renegotiation," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 180-202, Summer.
    19. Stole, Lars A, 1992. "The Economics of Liquidated Damage Clauses in Contractual Environments with Private Information," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 8(3), pages 582-606, October.
    20. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-785, July.
    21. Kathryn E. Spier, 1992. "Incomplete Contracts and Signalling," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 432-443, Autumn.
    22. Mathios, Alan D, 2000. "The Impact of Mandatory Disclosure Laws on Product Choices: An Analysis of the Salad Dressing Market," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 651-677, October.
    23. Bebchuk, Lucian Arye & Ben-Shahar, Omri, 2001. "Precontractual Reliance," The Journal of Legal Studies, University of Chicago Press, vol. 30(2), pages 423-457, Part I Ju.
    24. Wils Wouter P.J., 1993. "Who Should Bear the Costs of Failed Negotiations? A Functional Inquiry into Precontractual Liability," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 4(1), pages 1-42, March.
    25. Aghion, Philippe & Hermalin, Benjamin, 1990. "Legal Restrictions on Private Contracts Can Enhance Efficiency," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 6(2), pages 381-409, Fall.
    26. William M. Landes & Richard A. Posner, 1978. "Salvors, Finders, Good Samaritans and Other Rescuers: An Economic Study of Law and Altruism," NBER Working Papers 0227, National Bureau of Economic Research, Inc.
    27. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
    28. Georg Noldeke & Klaus M. Schmidt, 1995. "Option Contracts and Renegotiation: A Solution to the Hold-Up Problem," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 163-179, Summer.
    29. Aghion, Philippe & Hermalin, Benjamin, 1990. "Why Legal Restrictions on Private Contracts Can Enhance Efficiency," Department of Economics, Working Paper Series qt4j76f10g, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    30. Fudenberg, Drew & Tirole, Jean, 1990. "Moral Hazard and Renegotiation in Agency Contracts," Econometrica, Econometric Society, vol. 58(6), pages 1279-1319, November.
    31. Peter A. Diamond & Eric Maskin, 1979. "An Equilibrium Analysis of Search and Breach of Contract, I: Steady States," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 282-316, Spring.
    32. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    33. Bebchuk, Lucian Arye & Png, I. P. L., 1999. "Damage measures for inadvertant breach of contract," International Review of Law and Economics, Elsevier, vol. 19(3), pages 319-331, September.
    34. Jolls, Christine, 1997. "Contracts as Bilateral Commitments: A New Perspective on Contract Modification," The Journal of Legal Studies, University of Chicago Press, vol. 26(1), pages 203-237, January.
    35. Michael J. Fishman & Kathleen M. Hagerty, 1990. "The Optimal Amount of Discretion to Allow in Disclosure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(2), pages 427-444.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Peter Cserne, "undated". "Freedom of choice and paternalism in contract law: a law and economics perspective," German Working Papers in Law and Economics 2006-1-1139, Berkeley Electronic Press.
    2. María Alexandra Ortiz Cabrera (Editor), 2017. "Derecho económico," Books, Universidad Externado de Colombia, Facultad de Derecho, number 964, October.
    3. Dieter Schmidtchen & Roland Kirstein, "undated". "Störung der Vertragsparität," German Working Papers in Law and Economics 2004-1-1093, Berkeley Electronic Press.
    4. Lando, Henrik & Rose, Caspar, 2004. "On the enforcement of specific performance in Civil Law countries," International Review of Law and Economics, Elsevier, vol. 24(4), pages 473-487, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lewis A. Kornhauser & W. Bentley MacLeod, 2012. "Contracts between Legal Persons [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    2. Oliver Hart & John Moore, 2004. "Agreeing Now to Agree Later: Contracts that Rule Out but do not Rule In," Edinburgh School of Economics Discussion Paper Series 109, Edinburgh School of Economics, University of Edinburgh.
    3. Patrick W. Schmitz, 2005. "Should Contractual Clauses that Forbid Renegotiation Always be Enforced?," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 21(2), pages 315-329, October.
    4. Göller, Daniel & Stremitzer, Alexander, 2014. "Breach remedies inducing hybrid investments," International Review of Law and Economics, Elsevier, vol. 37(C), pages 26-38.
    5. Mehrdad Vahabi, 1999. "From Walrasian General Equilibrium to Incomplete Contracts: Making Sense of Institutions," Post-Print halshs-03704424, HAL.
    6. Alexander Stremitzer, 2012. "Standard Breach Remedies, Quality Thresholds, and Cooperative Investments," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 28(2), pages 337-359.
    7. Schwartz, Alan & Watson, Joel, 2000. "Economic and Legal Aspects of Costly Recontracting," University of California at San Diego, Economics Working Paper Series qt4jr3g3h7, Department of Economics, UC San Diego.
    8. Yeon-Koo Che & Jozsef Sakovics, 2006. "The Hold-up Problem," Edinburgh School of Economics Discussion Paper Series 142, Edinburgh School of Economics, University of Edinburgh.
    9. Steven Shavell, 2005. "Contracts, Holdup, and Legal Intervention," NBER Working Papers 11284, National Bureau of Economic Research, Inc.
    10. Alessandro De Chiara, 2018. "Courts' Decisions, Cooperative Investments, and Incomplete Contracts," CEU Working Papers 2018_5, Department of Economics, Central European University.
    11. Surajeet Chakravarty & W. Bentley MacLeod, 2004. "On the Efficiency of Standard Contracts the Case of Construction," Working Papers 874, Princeton University, Department of Economics, Industrial Relations Section..
    12. Göller, Daniel & Stremitzer, Alexander, 2009. "Breach Remedies Including Hybrid Investments," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 282, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    13. Donald B. Hausch & Yeon-Koo Che, 1999. "Cooperative Investments and the Value of Contracting," American Economic Review, American Economic Association, vol. 89(1), pages 125-147, March.
    14. Surajeet Chakravarty & Bentley MacLeod, 2004. "On the Efficiency of Standard Contracts the Case of Construction," Working Papers 874, Princeton University, Department of Economics, Industrial Relations Section..
    15. MacLeod, W. Bentley, 2011. "Great Expectations: Law, Employment Contracts, and Labor Market Performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 18, pages 1591-1696, Elsevier.
    16. Rebecca Stone & Alexander Stremitzer, 2020. "Promises, Reliance, and Psychological Lock-In," The Journal of Legal Studies, University of Chicago Press, vol. 49(1), pages 33-72.
    17. Watson, Joel & Wignall, Chris, 2009. "Hold-Up and Durable Trading Opportunities," University of California at San Diego, Economics Working Paper Series qt8p8284wg, Department of Economics, UC San Diego.
    18. Buzard, Kristy & ,, 2012. "Contract, renegotiation, and hold up: Results on the technology of trade and investment," Theoretical Economics, Econometric Society, vol. 7(2), May.
    19. Buzard, Kristy & ,, 2012. "Contract, renegotiation, and hold up: Results on the technology of trade and investment," Theoretical Economics, Econometric Society, vol. 7(2), May.
    20. Xinyu Hua, 2007. "Strategic ex ante contracts: rent extraction and opportunity costs," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 786-803, September.

    More about this item

    JEL classification:

    • D00 - Microeconomics - - General - - - General
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:9696. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.