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Contract theory comprises many different theories and various interpretations of the various body of rules and subrules that define Contract Law. Image File history File links Scale_of_justice. ...
A contract is a promise or an agreement made of a set of promises. ...
This article concerns the common-law legal system, as contrasted with the civil law legal system; for other meanings of the term, within the field of law, see common law (disambiguation). ...
Offer and acceptance analysis is a traditional approach in contract law used to determine whether an agreement exists between two parties. ...
The mailbox rule or the postal acceptance rule is a term of common law contracts which determines when a contract has been formed where the parties are communicating via the mail. ...
In the law of contracts, the mirror image rule states that an offer must be accepted exactly without modifications. ...
In contract law, an invitation to treat (invitation to bargain in the US) is an action by one party which may appear to be a contractual offer but which is actually inviting others to make an offer of their own. ...
It has been suggested that this article or section be merged with Consideration under English law. ...
The capacity of both natural and artificial persons determines whether they may make binding amendments to their rights, duties and obligations, such as getting married or merging, entering into contracts, making gifts, or writing a valid will. ...
Duress in the context of contract law is a common law defence, and if you are successful in proving that the contract is vitiated by duress, you can rescind the contract, since it is then voidable. ...
Undue influence (as a term in jurisprudence) is an equitable doctrine that involves one person taking advantage of a position of power over another person. ...
In contract law, an illusory promise is one that courts will not enforce. ...
The statute of frauds refers to a requirement in many common law jurisdictions that certain kinds of contracts, typically contractual obligations, be done in writing. ...
This article or section does not cite its references or sources. ...
This article or section does not cite its references or sources. ...
A standard form contract (sometimes referred to as a contract of adhesion or boilerplate contract) is a contract between two parties that does not allow for negotiation, i. ...
An integration clause, in the contract law, is a term in the language of the contract that declares it to be the complete and final agreement between the parties. ...
Contra preferendum or contra preferentem is the rule in contract law that is applied when interpreting a clause, especially an exclusion clause, in an action that says that, where ambiguity as to a terms meaning exists, it should be read against the party who wrote it. ...
In contract law a mistake is incorrect understanding by one or more parties to a contract and may be used as grounds to invalidate the agreement. ...
In contract law, a misrepresentation is a false statement of fact made by one party to another party and has the effect of inducing that party into the contract. ...
Frustration of purpose is a term used in the law of contracts to describe a defense to an action for non-performance based on the occurance of an unforseen event which makes performance impossible or commercially impracticable. ...
Modal logic, or (less commonly) intensional logic is the branch of logic that deals with sentences that are qualified by modalities such as can, could, might, may, must, possibly, and necessarily, and others. ...
This article or section does not cite its references or sources. ...
This article or section does not cite its references or sources. ...
An illegal agreement, under the common law of contract, is one that the courts will not enforce because the purpose of the agreement is to achieve an illegal end. ...
Accord and satisfaction is the purchase of the release from a debt obligation. ...
The doctrine of privity in English law provides that a contract cannot confer rights or impose obligations arising under it on any person or agent except the parties to it. ...
An assignment is a term used with similar meanings in the law of contracts and in the law of real estate. ...
Delegation is a term used in the law of contracts to describe the act of giving another person the responsibility of carrying out the performance agreed to in a contract. ...
Novation is a term used in contract law and business law to describe the act of either replacing an obligation to perform with a new obligation, or replacing a party to an agreement with a new party. ...
A third party beneficiary, in the law of contracts, is a person who may have the right to sue on a contract, despite not having originally been a party to the contract. ...
Breach of contract is a legal concept in which a binding agreement or bargained-for exchange is not honored by one of the parties to the contract by non-performance or interference with the other partys performance. ...
Anticipatory repudiation (or anticipatory breach) is a term in the law of contracts that describes a declaration by one party (the promissing party) to a contract that they do not intend to live up to their obligations under the contract. ...
Cover is a term used in the law of contracts to describe a remedy available to a merchant buyer who has received an anticipatory repudiation of a contract for the receipt of goods. ...
An exclusion clause is a term in a contract that seeks to restrict the rights of the parties to the contract. ...
Fundamental breach, sometimes known as a repudiatory breach, is a breach so fundamental that it permits the aggrieved party to terminate performance of the contract, in addition to entitling that party to sue for damages. ...
Definition of Specific performance In the law of remedies, a specific performance is a demand of a party to perform a specific act. ...
Liquidated damages is a term use in the law of contracts to describe a contractual term which establishes damages to be paid to one party if the other party should breach the contract. ...
Penal damages are best seen as quantitatively excessive liquidated damages and are invalid under the common law. ...
In contract law, rescission (to rescind or set aside a contract) refers to the cancellation of the contract between the parties. ...
Estoppel is a concept that prevents a party from acting in a certain way because it is not equitable to do so. ...
Quantum meruit is a Latin phrase meaning as much as he has deserved. In the context of contract law, it means something along the lines of reasonable value of services. Situations The concept of quantum meruit applies to the following situations: I. When a person employs (impliedly or expressly) another...
International private law, private international law or conflict of laws is the branch of private law which regulates lawsuits involving foreign laws or jurisdictions. ...
Commercial law or business law is the body of law which governs business and commerce and is often considered to be a branch of civil law and deals both with issues of private law and public law. ...
In the common law, a tort is a civil wrong for which the law provides a remedy. ...
Property law is the area of law that governs the various forms of ownership in real property (land as distinct from personal or movable possessions) and in personal property, within the common law legal system. ...
In the common law, a will or testament is a document by which a person (the testator) regulates the rights of others over his property or family after death. ...
The law of trusts and estates is generally considered the body of law which governs the management of personal affairs and the disposition of property of an individual in anticipation and the event of such persons incapacity or death, also known as the law of successions in civil law. ...
Criminal law (also known as penal law) is the body of statutory and common law that deals with crime and the legal punishment of criminal offenses. ...
The law of evidence governs the use of testimony (e. ...
Classical contract theory
Classical contract theory is the set of ideas and assumptions that underpinned the development of contract law in England and the United States during the 19th century. During this period, the prevailing liberal individualist philosophy of laissez faire elevated contract to a position of central importance in the law. Motto: (French for God and my right) Anthem: Multiple unofficial anthems Capital London Largest city London Official language(s) English (de facto) Government Constitutional monarchy - Queen Queen Elizabeth II - Prime Minister Tony Blair MP Unification - by Athelstan AD 927 Area - Total 130,395 km² (1st in UK) 50,346 sq...
Alternative meaning: Nineteenth Century (periodical) (18th century — 19th century — 20th century — more centuries) As a means of recording the passage of time, the 19th century was that century which lasted from 1801-1900 in the sense of the Gregorian calendar. ...
Laissez-faire () or laisser-faire is short for laissez faire, laissez aller, laissez passer, a French phrase meaning let do, let go, let pass. ...
Classical contract theory was organised around the will theory of contract, which held that a contract represents an expression of the will of the contracting parties, and for that reason should be respected and enforced by the courts. The principles of modern contract law were founded on the concepts of individualism and free will over government intervention. They were encapsulated in a political theory labelled "contractualism" by Morris Cohen. Individualism is a term used to describe a moral, political, or social outlook, that stresses human independence and the importance of individual self-reliance and liberty. ...
There are a couple of known Morris Cohens: Morris Two-Gun Cohen (1887-1970) was a British-born adventurer who became a bodyguard for Sun Yat-sen. ...
This approach had two principal effects. Firstly, the courts were reluctant to recognise the existence of non-contractual obligations. Since the law of tort and restitution was still largely undeveloped, the courts tended to perceive social relations in contractual terms. The principles of contract law were seen as objective and neutral, and based on a respect for voluntary choices. This article or section does not cite its references or sources. ...
Restitution is the name given to a form of legal relief in which the plaintiff recovers something from the defendant that belongs, or should belong, to the plaintiff. ...
Criticism of classical theory The will theory and classical approach to contract have been comprehensively criticised by the legal realism movement. Legal realists demonstrated that contracts did not necessarily represent the will of the parties. The classical notion of individuals freely entering into contracts fails to take account of the complexities of social behaviour and the unequal distribution of economic power. Legal realism is a family of theories about the nature of law developed in the first half of the 20th century in the United States (American Legal Realism) and Scandinavia (Scandinavian Legal Realism). ...
There is no agreed-upon definition of power in economics. ...
Another deficiency in the will theory is that many problems that contract law must deal with arise as a result of what parties have not expressly agreed upon, rather than what they have agreed upon. A contract could arise on the basis of an objective interpretation of the parties agreement, even if that was inconsistent with the true will of one of the parties. This approach, based
Why Are Contracts Enforced The central problem for contract theory is the question, Why are contracts enforced? One prominent answer to this question focuses on the economic benefits of enforcing bargains. This first approach could be said to offer a utilitarian theory of contracts. This article or section does not cite its references or sources. ...
A second approach to the question emphasizes the role of promise and draws on deontological moral theory. This second view is associated with Charles Fried, who articulated the promise theory of contract in his book Contract as Promise. In moral philosophy, deontology is the view that morality either forbids or permits actions, which is done through moral norms. ...
Fried makes the point that a person who makes a promise is morally bound to keep it because that person has "intentionally invoked a convention whose function it is to give grounds - moral grounds - for another to expect the promised performance." Fried's theory fits comfortably with the classical will theory of contract. His endorsement of the ideology of laissez faire underlies his view that judges shouldn't interfere with contracts in order to redistribute wealth. However, Fried does reject some of the extremes of the classical approach and allows that there are aspects of contract law that do not rest on the promise principle. For example, when a contract is frustrated by subsequent events, the courts must fill the gap by applying non-promissory principles of fairness.
Default Rules and Complete Contracts Contract theory also utilizes the notion of a complete contract, which is thought of as a contract that specifies the legal consequences of every possible state of the world. Because it would be impossible and costly for the parties to an agreement to make their contract complete, the law provides default rules which fill in the gaps in the actual agreement of the parties. A complete contract is an important concept from contract theory. ...
In legal theory, a default rule is a rule of law that can be superseded by a contract, trust, will, or other legally effective agreement. ...
Economics In economics, the theory of contracts is part of information economics and describes how economic actors use particular contractual arrangements to deal with information asymmetries. Face-to-face trading interactions among on the New York Stock Exchange trading floor Economics, as a social science, studies human choice behavior and how it effects the production, distribution, and consumption of scarce resources. ...
Information economics is a branch of Economics that studies how information affects economic decisions. ...
Where the principal is not informed about a certain characteristic of the agent, an adverse selection problem may arise, e.g. in the case of health insurance which is more likely to be taken out by people who are likely to get sick. One of the pioneers of this branch of economics was George Akerlof, who described adverse selection in the market for used cars. In certain models, such as Michael Spence's job-market model, the agent can signal his type to the principal which may help to resolve the problem. Agency is an area of law dealing with a contractual or quasi-contractual relationship between at least two parties in which one, the principal, authorizes the other, the agent, to represent her or his legal interests and to perform legal acts that bind the principal. ...
Adverse selection or anti-selection is a term used in economics and insurance. ...
This article or section does not cite its references or sources. ...
George Arthur Akerlof (born June 17, 1940) is an American economist and Koshland Professor of Economics at the University of California, Berkeley. ...
Michael Spence is a winner of Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, along with George A. Akerlof and Joseph E. Stiglitz, for their work on the dynamics of information flows and market development. ...
In economics, more precisely in contract theory, signaling is the idea that one party (termed the agent) conveys some meaningful information about itself to another party (the principal). ...
In moral hazard models, information asymmetries result from the principal's inability to observe the agent's action. Thus, performance-based contracts will be employed to create incentives for the agent to act in the principal's interest, such as in the case of managerial compensation. This section is studied by Argagui monopoli In law and economics, moral hazard is the name given to the risk that one party to a contract can change their behaviour to the detriment of the other party once the contract has been concluded. ...
The more recent development known as the theory of incomplete contracts, pioneered by Oliver Hart and his coauthors, points out the incentive effects the party's inability to write complete contingent contracts, e.g. concerning relationship-specific investments. Oliver Hart is an economist and professor at Harvard University. ...
During the last 20 years, much effort has gone into the analysis of dynamic contracts. Important early contributors to this literature include, among others, Edward J. Green, Stephen Spear, and Sanjay Srivastava. Edward J. Green is an American economics economist best known for his contributions to the theory of dynamic contracts. ...
Literature:
- Salanié, Bernard: "The Economics of Contracts" (MIT Press, Cambridge, Mass. & London, England, 1997).
- Laffont, J.J. and Martimort, D.: The Theory of incentives" (2002)
- Bolton, Patrick and Dewatripont, Mathias: "Contract Theory" (MIT press, 2005)
- Capuano, A, "Not Keeping the Faith: A Critique of Good Faith in Contract Law in Australia and the United States" (2005) Bond Law Review Vol. 17 No. 1, pp.29-49.
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