In this paper a stylized labour contarct model is constructed where it is shown that when contracts are enforced by a specific performance rule, then above mentioned unfortunate features emerge. Thse features 'disappear' when the environment is amended by assuming that the court uses an at-will...

In this paper I demonstrate the existence an initial incomplete contract that can subsequently be renegociated to the set of first best allocations in a fairly geneal principal-agent model when the state space is continuous.