Towards a Socio-Legal Theory of Contractual Risk

Abstract:     
This paper deals with the risk of opportunism – the usual risk in economic exchanges. The breach of contract is probably the most common event in daily life and has therefore attracted research and debates in many disciplines of the social sciences. Our discussion deals with the current knowledge of the ways societies are coping with the risk of opportunism distinguishing between three approaches with ascending degrees of complexity: theories of institutional support of contractual exchanges, theories of relational trust, and theories of social systems of trust. As demonstrated in fig.1 these theories are chosen among many other competing approaches. Legal sociological knowledge rather than being replaced by institutional economics or economic sociology is a necessary and valuable ingredient for theories of contractual risk. Without our knowledge of the protection of property rights in a particular society, of choices made by business people or consumers between formal and informal modes of conflict resolution, of obstacles in court proceedings and of problems when a lawyer is consulted our neighbour disciplines come to either overoptimistic conclusions as regards institutional trust or to oversimplified models as regards personal trust and relationships.

Number of Pages in PDF File: 10

Keywords: opportunism, contracts, contractual risk, trust, relational trust, social systems of trust, legal protection, legal institutions, contractual exchanges, institutional economics, sociology of law

JEL Classification: A14, D21, D23, D74, D81, K12, K20, K41

Accepted Paper Series