Information Deficiencies in Contract Enforcement
While contracts are often useful devices for achieving commitment, they can be imperfect devices for doing so when contract breach is unverifiable by third parties or unobservable by the parties themselves. This contribution focuses on the law and economics literature which explains particular features of contract law on the basis of problems of non-verifiability and non-observability. An example is the legal system’s use of weaker or no sanctions for contract breach of specific types of contracts, like employment and marriage contracts. It also includes the use of the non-verifiability problem for the evaluation of the desirability of particular legal duties, such as the duty to renegotiate contracts when circumstances change unexpectedly.
KeywordsLegal System Legal Pressure Employment Relationship Contractual Obligation Legal Duty
- Epstein R (1995) Simple rules for a complex world. Harvard University Press, Cambridge, MAGoogle Scholar
- Klein B (1980) Transaction costs determinants of “unfair” contractual arrangements. Am Econ Rev Pap Proc 70:356–362Google Scholar
- Milgrom P, Roberts J (1992) Economics, organization and management. Prentice-Hall, Englewood Cliffs, New JerseyGoogle Scholar
- Posner E (2000) Agency models in law and economics. University of Chicago Law School, John M. Olin law and economics working paper no. 92: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=204872
- Williamson O (1975) Markets and hierarchies: analysis and antitrust implications. Free Press, New YorkGoogle Scholar