EconPapers    
Economics at your fingertips  
 

Optimal Remedies for Bilateral Contracts

Francesco Parisi (), Barbara Luppi () and Vincy Fon ()

The Journal of Legal Studies, 2011, vol. 40, issue 1, 245 - 271

Abstract: In several contract situations, parties exchange promises of future performance, creating reciprocal obligations. In this paper, we extend the standard models of contract remedies to consider the incentives created by contracts where both parties provide only executory consideration and where the parties' obligations are yet to be performed. We show that the legal remedies that govern these contracts provide valuable enforcement mechanisms that are not available when parties enter into a contract in which they exchange a promise for an actual performance. We show that when the values of the parties' performances are interdependent, contracts with executory consideration create effort incentives that are superior to the incentives of contracts with executed consideration. In contracts with independent values, contracts with executory consideration also offer a valuable instrument to correct enforcement imperfections. Such imperfections include imperfect compensation and litigation costs.

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://dx.doi.org/10.1086/658406 (application/pdf)
http://dx.doi.org/10.1086/658406 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlstud:doi:10.1086/658406

Access Statistics for this article

More articles in The Journal of Legal Studies from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().

 
Page updated 2022-09-18
Handle: RePEc:ucp:jlstud:doi:10.1086/658406