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From an economic perspective, contract theory studies how economic actors can and do construct contractual arrangements, generally in the presence of information asymmetry. Because of its connections with both agency and incentives , contract theory is often categorized within a field known as law and economics .
The first statement of the theory of efficient breach appears to have been made in 1970 in a law review article by Robert L. Birmingham in "Breach of Contract, Damage Measures, and Economic Efficiency". [3] The theory was named seven years later by Charles Goetz and Robert Scott. [4] Efficient breach theory is commonly associated with Richard ...
Law and economics, or economic analysis of law, is the application of microeconomic theory to the analysis of law. The field emerged in the United States during the early 1960s, primarily from the work of scholars from the Chicago school of economics such as Aaron Director , George Stigler , and Ronald Coase .
Birmingham approaches contracts and damage measures from a law and economics standpoint. The first systematic statement of the efficiency of expectation damages to appear in the legal literature was that of Professor Birmingham, in his article Breach of Contract, Damage Measures, and Economic Efficiency, 24 Rutgers L. Rev. 273 (1970). [6]
In economic theory, the field of contract theory can be subdivided in the theory of complete contracts and the theory of incomplete contracts. In contract law, an incomplete contract is one that is defective or uncertain in a material respect. A complete contract in economic theory means a contract which provides for the rights, obligations and ...
Macneil's theory posits that the traditional approach of doctrinal contract law in the common law countries, which he calls "classical" and "neoclassical", which concentrates on "the deal" at its time of making, and treats individual contracts as discrete entities, is an inadequate and inaccurate tool for the study of contracts. [7]
Freedom of contract is the principle according to which individuals and groups may form contracts without government restrictions.This is opposed to government regulations such as minimum-wage laws, competition laws, economic sanctions, restrictions on price fixing, or restrictions on contracting with undocumented workers.
In modern contract theory, the “theory of the firm” is often identified with the “property rights approach” that was developed by Sanford J. Grossman, Oliver D. Hart, and John H. Moore. [ 45 ] [ 46 ] The property rights approach to the theory of the firm is also known as the “Grossman–Hart–Moore theory”.