Definition
Limits of contracts refer to a number of exceptions in contract law to the rule that courts should fully enforce voluntary agreements between capable parties.
Introduction
Economic analysis and the rational actor model have dominated contract scholarship for at least a generation. More recently, a group of behaviorists has challenged the ability of the rational choice model to account for contracting behavior. Numerous tests done by psychologists and experimental economics have shown that people often do not exhibit the kinds of reasoning ascribed to agents in rational choice models (Tversky and Kahneman 1974). Behavioral economics incorporates evidence of decision-making flaws that people exhibit to model consumer markets in which sophisticated firms interact with boundedly rational consumers. Behavioral law and economics uses existing scholarship in both cognitive psychology and behavioral economics to explain legal...
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Vandenberghe, AS. (2019). Limits of Contracts. In: Marciano, A., Ramello, G.B. (eds) Encyclopedia of Law and Economics. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7753-2_540
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