Revisiting the Many Legal Institutions that Support Contractual Commitments in a Globalized World

Gillian K. Hadfield () and Alexander Bernier ()
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Gillian K. Hadfield: University of Toronto
Alexander Bernier: University of Toronto

Chapter 12 in Handbook of New Institutional Economics, 2025, pp 267-292 from Springer

Abstract: Abstract Neoclassical economic models assume the enforcement of contracts to be costless and automatic. In practice, litigation and adjudication subject contract enforcement to high transaction costs. The characteristics of the local legal environment and the structure of available legal institutions affect the transaction costs of contract enforcement. Empirical and theoretical literature are beginning to disentangle the contributions that distinct formal legal institutions make in securing contractual commitments at low cost. Well-specified private law and efficient rules of procedure contribute to low-cost enforcement. So do competitive markets for legal talent and a judiciary that has incentives to produce fair and efficient outcomes. Increasingly, institutions outside of the local jurisdiction, including predictable rules of private international law, well-structured competition between courts, and innovations in online dispute resolution, determine enforcement costs. Interdependencies between domestic and transnational legal institutions suggest that well-functioning local courts and legal professions will no longer be sufficient in guaranteeing low-cost access to contract law. Interjurisdictional cooperation and transnational institutions are needed to secure contractual commitments in a globalized world.

Keywords: Contractual commitment; Law and innovation; New Institutional Economics; Private law theory; Transaction cost economics (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/978-3-031-50810-3_12

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