The Enforcement of Contracts and Private Ordering

Victor P. Goldberg
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Victor P. Goldberg: Columbia University

Chapter 19 in Handbook of New Institutional Economics, 2008, pp 491-511 from Springer

Abstract: The primary purpose of contract lawis, mostwould concede, to facilitate private ordering. The parties are the best judges of their interests and the law should, as much as possible, stay out of the way. There are exceptions–there might turn out to be good reasons to discourage, or prohibit, certain classes of promises (for example, disclaimers or promises to commit illegal acts) or to be suspicious of the manner in which agreements have been reached (for example, the battle of the forms or duress). Still, the facilitation of voluntary exchange remains the primary goal of contract law. Voluntary exchange is not a zero-sum game; it allows parties to achieve gains from trade. The parties enter into their agreement because they each expect to be better off. They might, of course, turn out to be wrong. It might have seemed a good idea at the time, but conditions might have changed so that one party now regretted having entered into the agreement. Or, one party might simply have misperceived the possible outcome. Had it known more (or been a more intelligent processor of available information), it would not have entered into the deal. Regardless, the basic presumption that there are gains from trade is the economic foundation for a facilitative law of contract.

Keywords: Risk Aversion; Good Faith; Price Adjustment; Spot Price; Contract Price (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1007/978-3-540-69305-5_20

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