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.
KeywordsEurope Assure Expense Rosen
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