Civil Contract Law and Economic Reasoning: An Unlikely Pair?
THE ARCHITECTURE OF EUROPEAN CODES AND CONTRACT LAW, Stefan Grundmann and Martin Schauer, eds., Kluwer Law International, Private Law in European Context Series, Vol. 8, pp. 159-191, 2006
34 Pages Posted: 6 Feb 2005
Is there any economic reasoning behind Civil law as there supposedly is behind Common law? Is Civil law efficient or at least as efficient as Common law? To answer this question, I have decided to use contract law as the object of comparative analysis. In the areas where there is a significant difference between Common and Civil law, which law is more efficient? Which legal family is closer to economic reasoning? In this paper, I am going to explore these questions. First of all, I am going to present my hypothesis that Civil law (or at least Civil contract law) is more efficient than Common law. In order to test this hypothesis, I will be discussing two major issues in the economics of contract law: efficient breach and penalty clauses. In these two areas, economists have criticized Common law, characterizing its institutions as inefficient. I will go over the criticisms and try to show that the opposite is true: that in fact Civil law is more efficient than Common law in these two areas. Finally, I am going to discuss briefly why economic analysis of law is still useful for Civil law and why it can be instrumental for the interpretation of contracts by lawyers.
Keywords: Economics of Contract Law, Civil Law and Common Law, Comparative law and economics, Efficiency of Common Law Hypothesis, Efficient Breach, Penalty Clauses
JEL Classification: K12
Suggested Citation: Suggested Citation