Contract Theory on and Off the Grid

Abstract

The New Institutional Economics emphasizes the importance of effective legal institutions to economic performance. International organizations such as the World Bank and the International Monetary Fund apply New Institutional Economics principles in seeking to promote the economic growth of developing countries. This paper considers whether contemporary theories of contract are relevant to developing economies with legal systems lacking an established tradition of Western legal institutions. The paper reviews contract theories of Peter Benson, Melvin Eisenberg, Charles Fried, James Gordley, Thomas Scanlon and Michael Trebilcock. The paper concludes that even if an effective formal institution of contract has the potential to promote growth, these contract theories tell us very little about the proper content, desirability, or legitimacy of contract law in societies other than those in which Western private law institutions are already well established.

Keywords: contract law, private law, law and development