Individual actors want to make their promises enforceable in order to motivate mutually profitable investments. But parties cannot easily design contracts that maximize beneficial investments and also respond appropriately to changing conditions. Although economists have designed theoretical...

Contract today increasingly links entrepreneurial innovations to the efforts and finance necessary to transform ideas into value. In this Chapter, we describe the match between a form of contract that "braids" formal and informal contractual elements in novel ways and the process by which...

Contract design that motivates parties to invest and trade more efficiently occurs primarily in thin markets characterized by bespoke, bilateral agreements between commercial parties. In that environment, the cost of producing each contract is relatively high. Those costs are justified by...

Despite recent advances in our understanding of contracting behavior, economic contract theory has yet to identify the principal causes and effects of contract breach. In this Essay, I argue that opportunism is a primary explanation for why commercial parties deliberately breach their contracts....

Contracts are inevitably incomplete. And standard-form or boilerplate commercial contracts are especially likely to be incomplete because they are approximations; they are not tailored to the needs of particular deals. Not only do these contracts contain gaps but, in an attempt to reduce...

This article studies the impact of exogenous legal change on whether and how lawyers across four different deal types revise their contracts' governing law clauses in order to solve the problem that the legal change created. The governing law clause is present in practically every contract...

Market damages - the difference between the market price for goods or services at the time of breach and the contract price - are the best default rule whenever parties trade in thick markets: they induce parties to contract efficiently and to trade if and only if trade is efficient, and they do...

Economic contract theory postulates two obstacles to complete contracts: high transaction costs and high enforcement (or verification) costs. The literature has proposed how parties might solve these problems under a stylized litigation system, but it does not address the question of how parties...

The central task in developing a plausible normative theory of contract law is to specify the appropriate role of the state in regulating incomplete or relational contracts. Complete contracts (to the extent that they exist in the real world) are rarely, if ever, breached since by definition the...