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The Law and Economics of Contracts

Benjamin E. Hermalin

University of California, Berkeley

Avery W. Katz

Columbia University - Law School

Richard Craswell

Stanford Law School

Handbook of Law and Economics, Forthcoming
Columbia Law and Economics Working Paper No. 296

This paper, which will appear as a chapter in the forthcoming Handbook of Law and Economics (A.M. Polinsky & S. Shavell, eds.), surveys major issues arising in the economic analysis of contract law. It begins with an introductory discussion of scope and methodology, and then addresses four topic areas that correspond to the major doctrinal divisions of the law of contracts. These areas include freedom of contract (i.e., the scope of private power to create binding obligations), formation of contracts (both the procedural mechanics of exchange, and rules that govern pre-contractual behavior), contract interpretation (what consequences follow when agreements are ambiguous or incomplete), and enforcement of contractual obligations. For each of these sections, we address the economic analysis of particular legal rules and institutions, and, where relevant, connections between legal arrangements and associated topics in microeconomic theory, including welfare economics and the theory of contracts.

Number of Pages in PDF File: 144

Keywords: contract law, freedom of contract, contract formation, pre-contractual liability, promissory estoppel, interpretation, incomplete contracts, default rules, form and substance, breach of contract, contract damages, private enforcement of contracts, contract theory

JEL Classification: D00, D8, K00, K12

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Date posted: June 12, 2006  

Suggested Citation

Hermalin, Benjamin E. and Katz, Avery W. and Craswell, Richard, The Law and Economics of Contracts. Handbook of Law and Economics, Forthcoming; Columbia Law and Economics Working Paper No. 296. Available at SSRN: https://ssrn.com/abstract=907678

Contact Information

Benjamin E. Hermalin
University of California, Berkeley ( email )
545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
510-642-7575 (Phone)
510-643-1420 (Fax)

Avery W. Katz (Contact Author)
Columbia University - Law School ( email )
435 West 116th Street
New York, NY 10025
United States
212-854-0066 (Phone)
212-854-7946 (Fax)

Richard Craswell
Stanford Law School ( email )
559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
650-725-8542 (Phone)
650-723-8230 (Fax)

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