Contract Law

1.

CONTRACT
LAW: GENERAL
THEORIES
Review on R. Carswell’s Article
Avakimov David
Craswell R. Contract law: General theories //
Encyclopedia of law and economics. 2000. Т. 3. P. 124.

2.

01
‘Majoritarian’ or ‘Market-Mimicking’ Default Rules
1.
2.
3.
Selection of Default Rules: Default rules can be selected based on
their efficiency, particularly assessing which rule would remain most
beneficial if no alternative is specified by the parties in a contract.
Expectation Damages Example: If expectation damages are
determined to be the most efficient remedy for breach of contract, this
method of selecting a default rule would advocate for these damages
to be the default remedy.
Economically-Oriented Research: Much of the research related to
contract law focuses on identifying remedies that yield the most
efficient outcomes in the absence of specific contractual provisions.

3.

02
‘Information-Forcing’ or ‘Penalty’ Default Rules
Information Asymmetries: In many transactions, parties involved
often start with differing amounts of information, which can lead to an
imbalance in knowledge.
Differing Information Sources: Parties may have varying levels of knowledge regarding:
Relevant legal rules
Risks associated with the transaction
Characteristics of the other party (e.g., the seller’s awareness of the buyer's potential
losses from a defective product)
Impact of Information Asymmetries: These imbalances in information can
significantly impact the transaction dynamics and decision-making processes.
Addressing Asymmetries: Information asymmetries are commonly dealt with
through mechanisms like disclosure regulations to ensure that all parties have
access to necessary information.

4.

03
Other Issues in Designing Default Rules
Choice of Approaches: The selection of legal approaches depends on the
competence and capabilities of legal institutions.
Market Mimicking and Information Forcing:
The first two approaches—market mimicking or majoritarian defaults, and
information forcing or penalty defaults—require legal institutions to
effectively identify efficient rules for contracting pairs.
Oversimplification of Legal Decision Making: Analyzing these approaches
under the assumption of an omniscient legal decision maker is an
oversimplification; the focus should be on their effectiveness in
actual courts and legislatures.

5.

Contracting Around Default Rules
A default rule allows parties the
freedom to establish an alternative
rule for their relationship if they wish.
There is minimal scholarly
exploration regarding the specific
Lack of Scholarly Analysis
steps parties must undertake to
specify an alternative rule.
Many scholars operate under the
Assumptions in Scholarly
assumption that specifying an alternative
Work
rule necessitates a valid provision within a
valid contract.
This assumption implies that the rules
Interaction with Contract
governing the specification of alternative
Law
rules can rely on existing contract formation
and interpretation laws.
The laws surrounding contract
Underanalysis of Contract
formation and interpretation are
Law Areas
among the least analyzed sectors of
contract law.
Definition of a Default Rule

6.

The Enforceability of Contracts Generally
Default Rules and Enforceability: The analysis of default rules
assumes that contracts are enforceable and focuses on determining
the content of these enforceable obligations.
Branch of Inquiry: There is a specific inquiry regarding whether
contracts should be enforced by a legal system or whether alternative
non-legal enforcement mechanisms could be more effective.
Types of Non-Legal Mechanisms:
Arbitration and Trade Associations
Informal Mechanisms
Commonalities with Other Obligations
Focus of Contract Enforcement Literature: Most discussions about
whether contracts should be enforced tend to abstract from the
specific enforcement mechanism and focus instead on the broader
question of if and why contracts should be enforced at all.

7.

Thanks for your
attention!