The Law of Impersonal Transactions

Benito Arruñada
Authors registered in the RePEc Author Service: Benito Arruñada

No 500, Working Papers from Barcelona School of Economics

Abstract: Most economic interactions happen in a context of sequential exchange in which innocent third parties suffer information asymmetry with respect to previous "originative" contracts. The law reduces transaction costs by protecting these third parties but preserves some element of consent by property right holders to avoid damaging property enforcement – e.g., it is they, as principals, who authorize agents in originative contracts. Judicial verifiability of these originative contracts is obtained either as an automatic byproduct of transactions or, when these would have remained private, by requiring them to be made public. Protecting third parties produces a legal commodity which is easy to trade impersonally, improving the allocation and specialization of resources. Historical delay in generalizing this legal commoditization paradigm is attributed to path dependency – the law first developed for personal trade – and an unbalance in vested interests, as luddite legal professionals face weak public bureaucracies.

Keywords: Property rights; formalization; impersonal transactions (search for similar items in EconPapers)
JEL-codes: K22 K23 L59 O17 (search for similar items in EconPapers)
Date: 2015-09
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Related works:
Working Paper: The law of impersonal transactions (2010)
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