Contract Theory

I study the implications of economic shocks for objective and subjective CEO performance evaluation. A shock perturbs pay-setting parties' information about the firm and the CEO. I argue that pay-setting parties then lack information they need for evaluating the CEO objectively, and de-emphasize objective CEO performance evaluation in favor of subjective CEO performance evaluation; over time, pay-setting parties become better informed about the firm as well as the CEO, and increasingly use again objective CEO performance evaluation. My evidence, which uses data on objective and subjective CEO performance evaluation in US executive pay between 1992 and 2013, is consistent with my argument.

It has long been standard in agency theory to search for incentive-compatible mechanisms on the assumption that people care only about their own material wealth. However, this assumption is clearly refuted by numerous experiments, and we feel that it may be useful to consider nonpecuniary utility in mechanism design and contract theory. Accordingly, we devise an experiment to explore optimal contracts in an adverse-selection context. A principal proposes one of three contract menus, each of which offers a choice of two incentive-compatible contracts, to two agents whose types are unknown to the principal. The agents know the set of possible menus, and choose to either accept one of the two contracts offered in the proposed menu or to reject the menu altogether; a rejection by either agent leads to lower (and equal) reservation payoffs for all parties. While all three possible menus favor the principal, they do so to varying degrees. We observe numerous rejections of the more lopside...

The most of economic analysis of law uses economic efficiency as a normative criterion or for the purpose of positive analysis. The term Economic Efficiency refers to the relationship between aggregate benefits and costs to the individuals concerned. Among the widely used efficiency criteria are the Pareto Optimality, the Kaldor-Hicks, the Cost-Benefit and the Wealth Maximization criterion. In this essay, we discuss economic efficiency as a tool for the social choice among the alternative legal rules. Discussion is carried out by using illustrative examples. We show that in several contexts the efficiency can serve as a useful tool for comparing the legal rules. However, it has serious limitations as well. In several situations, the efficiency criteria can fail to compare legal rules or can lead to contradictory rankings. Moreover, the assumptions underlying some of the efficiency criteria do not hold always. We discuss merits and demerits of various efficiency criteria. It shown that in the real world, economic efficiency has limitations as a guide for making social choice from among the legal institutions.

We compare the characteristics of real-world financial contracts to their counterparts in financial contracting theory. We do so by studying the actual contracts between venture capitalists (VCs) and entrepreneurs. The distinguishing characteristic of VC financings is that they ...

The interrelatedness between computer systems, networks, code, and traditional law and legal frameworks continues to pose a number of important and vexed questions. This report will consider one area of the relationship: legal recognition of distributed ledger technology (DLT) or blockchain applications. Specifically, registers appended to blockchains (thereby creating “blockchain registries”), and “smart contracts” executed on blockchains

This work demonstrate the application of the civil principle of the social function of the contract to the environmental protection, by the construction of the concept of environmental function of the contract. For this, it is necessary to understand the updated classic concept of contract and the peculiarities of its contemporary profile. The environmental function of contract may be used through the public action, by initiative of people that are equalized to the parts, therefore affected by the effect of the polluting agreement, being able both the parts to be responsible for the environmental damage. The revision of the polluting contract can be judicial or administrative, like the commitment of behavior adjustment.
Este trabalho tem por objetivo demonstrar a aplicação do princípio civil da função social do contrato à proteção do meio ambiente, através da construção do conceito de função ambiental do contrato. Para isso, é necessário compreender a inadequação do conceito clássico do contrato e as peculiaridades do seu conceito contemporâneo. Defende-se a operacionalização da função ambiental do contrato através da ação civil pública, por iniciativa de terceiros que se equiparam às partes, pois afetados pelos efeitos do pacto poluidor, podendo ambas as partes serem responsabilizadas pelo dano ambiental. A revisão do contrato poluidor pode ser judicial ou administrativa, por compromisso de ajustamento de conduta.

The Theses LVI belong to a series of hitherto unpublished early manuscripts of the Dutch humanist and jurisconsult Hugo Grotius (1583-1645) that were acquired by the University of Leiden in 1864. It is not certain when the Theses were written, but preliminary research on the physical manuscript and the sources cited indicate two possible windows. The first is around 1602-1605, that is roughly at a time when Grotius was also working on his Commentary on the Law of Prize and Booty (De Iure Praedae Commentarius). The second dating places the genesis of the manuscrbipt around 1613-1615.
In the context of Grotius’ writings, the Theses LVI assume an important position for several reasons: They raise questions about state formation, the duty of citizens to the state and the right of political resistance in far greater detail than in any other work of the celebrated Dutch humanist. The Theses LVI also feature important reading notes that yield priceless insights into the sources that Grotius directly consulted and their influence on his ideas. The manuscript grants modern scholars a unique glimpse into the working mind of its author. Evidence points not only to the ferocious haste with which Grotius wrote his works, but also the occasional sloppiness of his reading and research habits."""

Nous analysons les déterminants des renégociations des crédits en France durant
la période 1999-2015. Pour modéliser le processus de renégociation nous prenons
en compte les caractéristiques du contrat de prêt, de l’entreprise et de la banque.
Pour tenir compte de l’endogénéité de la décision et du degré de renégociation nous
utilisons la procédure de Wooldrige (2014). Nous montrons que seules les caractéristiques
du prêt et de l’entreprises ont un impact sur la décision de renégociation.
La maturité, le montant et la définition du prêt sont les caractéristiques les plus
susceptibles d’être renégociées par les grandes entreprises en France.

This essay argues that substantive fairness - defined here as fairness with respect to a contract’s terms - is a distinct virtue of good contracts. The essay begins by identifying two possible standards against which the fairness of a contract’s terms might be assessed: competitive market prices and standard or “normal” prices. It then argues that the most compelling reason to care about substantive fairness is that contracts at non-normal prices may disrupt planning and hence our ability to lead self-directed, autonomous, lives. However, the label “substantively unfair” is properly attached only where the contract price deviates significantly, both relatively and absolutely, from the normal price, and where the worse-off party cared about price, was not making a gift, was aware of the value of what it was selling (if a seller), and was not in a better position than the advantaged party to obtain the normal price. In the essay’s final section, it is argued that while some conceptions of substantive fairness may be difficult or dangerous for courts to apply, the conception defended in this essay is not.

Certain altruistic phenomena in the workplace that exceed the bounds of contract theory can be explained within the framework of gift exchange theory. We discuss the application of gift exchange theory to interactions between an employer and an employee as well as between employees themselves. We emphasize the opportunities of gifts to improve coordination and contract efficiency in the workplace and argue that there exists the productive function of gifts. We use the framework of a market for externalities in order to demonstrate that given the interrelated activities of agents a gift exchange between them can lead to Pareto improvement.

While prior research regarding strategic projects recognizes the tension inherent in interfirm relationships, less is understood of the impact of risk sharing in the design of the contracts guiding those relationships. This investigation illuminates important performance elements of projects as they differ in the amount of contractual risk that is shared among firms. Through a multivariate analysis of 240 United States defense department R&D and new product development contracts, we found that defense contracts with partner risk sharing built in involve more change and growth than their concentrated risk counterparts. Our results suggest that projects, when managed through interfirm contracts, are more likely to involve strategic change when risk is shared than when either the buyer or seller assumes full design, technical, and/or financial risk. The results further suggest that projects containing shared buyer and seller risk enhance the prospects of joint gain through the generation of opportunities for learning.

This paper empirically considers the role of preplanned exits (the investor's initial strategy to sell the investee firm via an acquisition or an initial public offering (IPO) at the time of initial contract with the entrepreneur), legal conditions and investor versus investee bargaining power in the allocation of cash flow and control rights in entrepreneurial finance. We introduce a sample of 223 entrepreneurial investee firms financed by 35 venture capital funds in 11 continental European countries, and these data indicate the following. First, preplanned acquisition exits are associated with stronger investor veto and control rights, a greater probability that convertible securities will be used, and a lower probability that common equity will be used; the converse is observed for preplanned IPOs. Second, investors take fewer control and veto rights and use common equity in countries of German legal origin, relative to Socialist, Scandinavian, and French legal origin. Third, more experienced entrepreneurs are more likely to get financed with common equity and less likely to be financed with convertible preferred equity, while more experienced investors are more likely to use convertible preferred equity and less likely to use common equity.

Rigidity of form, but liberty of content – Stipulatio and freedom of contract in the works of Friedrich Carl von Savigny

The Roman stipulatio was one of the main interests of 19th-century German legal scholars who discussed freedom of contract and the question whether causa was necessary to conclude a contract. This is particularly true for Savigny as the most eminent among them. In his System des heutigen Römischen Rechts, the stipulatio plays two key roles at once:

First, it is presented as “cornerstone” (cf. Zimmermann) of ancient roman contract law (part C, pp. 157-170). Savigny explains that stipulatio allowed to overcome the limited number of enforceable contracts by making promises of arbitrary content legally binding. That’s because it draws its binding force not from its content, but from its particular form. Thus Savigny characterizes the stipulatio as “formal contract”. The power of the form is justified by the fact that it is rooted in popular belief (Volksbewußtsein). In contrast, Savigny feels that the enforceability of the other (informal) contracts needs further justification which he delivers separately for every type of contract (pp. 164-168). Formalism appears as the most natural way to render promises enforceable.

Second, in Savigny’s view, stipulatio becomes crucial for the development of a general principle of enforceability of all contracts (part D, pp. 170-175). During the reception of Roman law, he argues, stipulatio lost its particular formalities for they were not known to the German people. So the common civil law (Gemeines Recht) received a formal contract that could be concluded without complying with any formality. That is why modern contracts of arbitrary content are not, as one could believe, informal contracts. To Savigny, they are formless formal contracts. Why did he not prefer another explanation – namely, that after the classical times, more and more pacta and at last all pacta became enforceable? A plausible answer is that by linking the modern contract to the stipulation, Savingy emphasized its enforceability irrespective of its particular content (p. 174). Another possible answer is that only his theory allowed for the application of all Roman rules relating to stipulationes to modern contracts, thus guaranteeing the practical use of the traditional law (p. 175).

Further discussiong contemporary law, Savigny criticizes Liebe, Gneist and Puchta for – allegedly – postulating that the “practical effects” of a stipulatio depend on the existence of a valid causa. This is cryptic, because Savigny himself seems not to come to any other practical results than Liebe. Both accept the condictio and the exceptio doli as weapons against a stipulatio which lacks a causa. As the article describes in detail, Savigny’s treatment fails to properly grasp the ideas he attacks (pp. 176-188).  This – intentional or true – misunderstanding reveals a strong determination to fight for freedom of contract (pp. 188-192).

Introduction to Contract Theories and The Justification of Contractual Obligations comprise Chapters 2 and 4 of Contract Theory (Oxford University Press, 2004). The book provides a comprehensive discussion of, and contribution to, contemporary contract theory. Part 1 examines methodological issues, setting out frameworks for distinguishing different kinds of theoretical work about contract law and for evaluating the interpretive theories that are the book's focus. Part II, which includes the above chapters, discusses general theories of contract - theories that attempt to explain the basic notion of contractual obligation and, by implication, most of the main substantive features of contract law. An example is the idea that contractual obligations are rights-based promissory obligations. Introduction to Contract Theories explains the importance, when comparing general theories, of distinguishing analytic questions about the nature of contractual obligations (e.g., are contracts promissory obligations or reliance-based obligations) from normative questions about the justification for contractual obligations (e.g., are contractual obligations justified by rights-based moralities or utilitarian moralities) and provides a classification scheme based on this distinction. The Justification of Contractual Obligations then discusses the normative question in more detail, focusing on rights-based and utilitarian accounts of contract law (using economic theories as the main example of the latter). The chapter explains the basic assumptions of each theory, how each account for the main features of contract law, and the most important objections to each theory. It is argued that despite the radically different explanations of the law offered by rights-based and utilitarian theories (as highlighted by their approaches to remedies), each fits equally well (or poorly) with the main contract law doctrines. The main differences between rights-based and utilitarian theories concern how well each is able to account for the fact that contract law, like law generally, is presented and understood from the internal perspective as both justified (morally) and transparent (meaning that the reasons for a rule or decision are the real reasons). The chapter concludes that the most significant difference between these two groups of theories is that rights-based theories better satisfy the transparency criterion. Finally, Part III of the book examines in more detail the theoretical issues raised by the main substantive contract law doctrines (e.g., offer and acceptance, interpretation, remedies, etc.). An overview of this discussion can be found in the Preface and Table of Contents that are available to download together with Chapters 2 and 4.

We discuss the notion of ownership in economics, taking our point of departure in the Grossman-Hart-Moore property rights approach. We criticize the exclusive identification of ownership with residual rights to control in this approach, and argue that economic organization may be rendered determinate under complete contracting (contrary to the GHM approach). Crucially, we argue that under complete contracting, some control rights may be appropriable because of measurement and enforcement costs. This holds the key to a theory of ownership that is not dependent on the notion of residual rights to control, but rather relies on appropriable control rights. However, the two perspectives may be complementary rather than rival.

Kurz vor der Jahrtausendwende gelang Thomas Donaldson und Thomas D. Dunfee mit „Ties that Bind“, einen Ansatz der Wirtschafts- und Unternehmensethik zu entwickeln, der den Eindruck einer neuen Stoßrichtung erweckte. Mit der Anwendung kontraktualistischer Methodik bei der „Integrated Social Contract Theory“ sollten drei Probleme der Wirtschaftsethik gelöst werden. Erstens fehlte modernen Konzepten der Wirtschafts- und Unternehmensethik, wie zum Beispiel dem Stakeholder-Ansatz, eine normative Legitimationsbasis, die ihr eigener Ansatz liefern sollte.  Zweitens böten klassisch-ethische Schulen wie der Kantianismus oder die Gerechtigkeitstheorie von Rawls keine Antworten auf komplexe Einzelfragen des wirtschaftlichen Handelns.  Dies führe zum dritten Problem, dass nämlich keine kulturtolerante, sondern nur eine vermeintlich objektiv orientierte Betrachtung möglich sei.  Beide Problemstellungen sollte Donaldsons und Dunfees Ansatz auflösen und dabei sowohl empirisch als auch normativ sein.  Dazu sollte das Konzept den Entscheidungsträgern der Wirtschaft eine allgemein anwendbare Entscheidungsbasis bieten, da diese zu den wichtigsten Verantwortungsträgern der modernen Welt gehörten.
Diese Herangehensweise stieß auf „offene Ohren“ in der Managementtheorie der Vereinigten Staaten und prägt dort bis heute die Managementlehre.
In diesem Aufsatz wird der Ansatz von Donaldson und Dunfee vorgestellt und kritisch betrachtet.

Real Estate Law: Fundamentals for The Development Process takes a pragmatic, transactional approach to real property law in an urban context, with an emphasis on walkable urban places (sometimes referred to herein as “WalkUPs”). This course—taught in an immersive, interactive classroom environment—offers students an overview of the manner in which legal issues arise in the course of the:
o selection,
o acquisition,
o development,
o financing,
o ownership, and
o management of real estate;

• the nature of those legal issues; and

• how they may best be identified and addressed.

Real Estate Law: Fundamentals for The Development Process utilizes The Development Process as the framework for teaching Finance majors about how a broad range of laws impact, directly and indirectly, a variety of urban real estate transactions and issues, while also addressing the use of a variety of legal agreements to govern particular relationships between the various parties involved in real estate development and finance transactions, and the management of operating properties.

This article presents results from the first statistically significant study of cost escalation in transportation infrastructure projects. Based on a sample of 258 transportation infrastructure projects worth US$90 billion and representing different project types, geographical regions, and historical periods, it is found with overwhelming statistical significance that the cost estimates used to decide whether such projects should be built are highly and systematically misleading. Underestimation cannot be explained by error and is best explained by strategic misrepresentation, that is, lying. The policy implications are clear: legislators, administrators, investors, media representatives, and members of the public who value honest numbers should not trust cost estimates and cost-benefit analyses produced by project promoters and their analysts.

Third parties protection has been an extensive issue for the shipping
community over the last century. Although this problem has been solved to
some extent in practice by various means of circumvention created by the
industry, it remains conceptually obscure. A substantial obstacle with third
party protection is the classic perspective of contract law, which considers
a contract to be a bilateral promise between the parties. However, it can be
argued that in the modern factual context of the shipping industry, where
third parties are the pivots of the business, the reliance perspective and a
particular aspect of reliance perspective related to third parties could be
an alternative way of looking at the issue de lege ferenda

Abstract: The present study aims to identify the main theories about promises of rewards, developed in the continental legal systems, and to argue that, under some circumstances, promises of rewards can be defined as conditional promises.

Resumo: O presente estudo visa identificar asprincipais teorias sobre a promessa pública,desenvolvidas nos sistemas jurídicos continentais,e enunciar a possibilidade de perspetivar a promessa pública, atendendo a circunstânciasconcretas, como uma promessa condicionada

"This book offers annotated translations of documents touching on Dutch admiral Cornelis Matelieff de Jonge and his voyage to Asia between 1605 and 1608. These translations are aimed at a contemporary English-speaking Asian readership interested in the early modern history of European trade, warfare and expansion in Southeast Asia with a focus on Malaysia, Singapore, and Indonesia. Researchers specialising in early European colonialism, international law, international relations, security studies, and diplomatic history will also find that the documents translated in this volume offer new and unfamiliar perspectives. Materlieff’s business acumen, military and diplomataic prowess as well as his vision of empire all have implications for examining not only European expansion into Southeast Asia, but also into other regions at large, including especially south Asia, Africa and the Americas.
Admiral Matelieff was a director of the Rotterdam Chamber of the Dutch East India Company (VOC) formed in 1602. He was appointed fleet commander on one of the company’s first voyages to Asia. Matelieff’s mission was both commercial and military: he launched a major sea-borne attack on the Portuguese colony of Melaka, arranged for the signing of treaties with the rulers of Johor, Aceh and Ternate, and founded the first Dutch fort on the island of Ternate. His endeavours, however, to open the Chinese market for the Dutch company proved unsuccessful.
Following his return to the Dutch Republic in September 1608, Matelieff penned a series of memorials and letters. In these he advanced recommendations for changing the way the company organized its fleets and conducted business. More importantly he offered  his Dutch contemporaries a vision of empire in Asia. The materials contained in this volume offer important observations of a perceptive analyst who was also determined to grasp the political and economic structures of Asia, and also of inter-state relations in across this vast region. At a time of Spanish, Portuguese, Dutch, Danish, French and English engagement in Southeast Asia, Matelieff sought to critically assess and strategize on the ways in which Europeans were increasingly engaging with Asian polities and their rulers.

This book will be released for sale in Australasia and Europe in June 2014 and available in the Americas after September 2014
""""

And to the extent to which this is an accurate account of the atmosphere that we shall be sharing during the days of this Congress, one implication is that it should also be possible for us not only to benefit from philosophy as "consolation," as something directed inward, but also to extend its benefits outward to our fellow human beings, who are constantly being induced, by very powerful forces in our contemporary world, to think of life in the shallowest, most superficial ways. May our days here in Athens result, then, among other things, in a renewed belief in what the name of a very old academic society in my country asserts: "ἡ φιλοσοφία τοῦ βίου κυβερνήτης"-philosophy the guide of life. My heartfelt thanks to all those involved in the hard work of preparing and organizing this World Congress, and to each and every one of you for participating.

Hobbes’s political philosophy starts from a number of premises that are supposed to be self-evident, supplemented by various observations from experience. These statements are examined critically and in their interrelatedness in order to find out to what extent Hobbes provides a convincing system of thought. The importance of the basis of man’s actions, his self-interest, is inquired, since it serves as the basis of his practical philosophy. After this, Hobbes’s views on ‘moral’ notions are expounded. As it turns out, Hobbes maintains a number of concepts that have such a connotation, but interprets these in a specific way. The article is concluded with a modest systematic reconstruction of Hobbes’s main thoughts in practical philosophy.

Megaproject Planning and Management: Essential Readings contains the seminal articles from the growing body of research on megaproject planning and management along with an original introduction by the editor, Bent Flyvbjerg. The leading and most cited authority in the field, Flyvbjerg has used crowdsourcing and 25 years of experience to cherry-pick from several hundred articles and books the writings that define the field. This volume will be an indispensable source for those wishing to speak with authority about how megaprojects are prepared, delivered, and fought over. The target audience is students, academics, practitioners, and media pundits alike, as well as communities affected by megaprojects.

L'articolo ricostruisce la clausola di tolleranza nel sistema di diritto privato interno. Nella prima parte, il saggio esamina gli effetti del comportamento tollerante sul contratto: il mancato esercizio di un rimedio previsto dal contratto potrebbe implicare la sua non esigibilità. Nella seconda parte, si indagano gli effetti della clausola con cui le parti cercano di evitare che il comportamento tollerante del creditore possa rilevare come ragione di non esigibilità della pretesa.

RagionaRe peR decideRe g. giappichelli editoRe -toRino RagionaRe peR decideRe a cura di gioVanni BoMBelli e BRUno MontanaRi © copyright 2015 -g. giappichelli editoRe -toRino Via po, 21 -tel. 011-81.53.111 -FaX 011-81.25.100 https://www.giappichelli.it iSBn/ean 978-88-921-0052-7 Composizione: carla degiacomi -torino Stampa: legodigit s.r.l. -lavis (tn) le fotocopie per uso personale del lettore possono essere effettuate nei limiti del 15% di ciascun volume/fascicolo di periodico dietro pagamento alla Siae del compenso previsto dall'art. 68, commi 4 e 5, della legge 22 aprile 1941, n. 633. Le fotocopie effettuate per finalità di carattere professionale, economico o commerciale o comunque per uso diverso da quello personale possono essere effettuate a seguito di specifica autorizzazione rilasciata da CLEARedi, Centro Licenze e Autorizzazioni per le Riproduzioni Editoriali, Corso di Porta Romana 108, 20122 Milano, e-mail [email protected] e sito web www.clearedi.org.

Back cover text: Megaprojects and Risk provides the first detailed examination of the phenomenon of megaprojects. It is a fascinating account of how the promoters of multi-billion dollar megaprojects systematically and self-servingly misinform parliaments, the public and the media in order to get projects approved and built. It shows, in unusual depth, how the formula for approval is an unhealthy cocktail of underestimated costs, overestimated revenues, undervalued environmental impacts and overvalued economic development effects. This results in projects that are extremely risky, but where the risk is concealed from MPs, taxpayers and investors. The authors not only explore the problems but also suggest practical solutions drawing on theory, experience and hard, scientific evidence from the several hundred projects in twenty nations and five continents that illustrate the book. Accessibly written, it will be the standard reference for students, scholars, planners, economists, auditors, politicians and interested citizens for many years to come.