Contracts

Question 1

Classical Contract Law

Answer 1

Facilitates exchange by making agreements clear and enforceable. It aims to handle all possible issues upfront, focusing on formal written agreements over informal terms. The identities of parties are irrelevant, and strict legal rules govern disputes. Market governance is closely linked to classical contracting.

Question 2

Neoclassical Contract Law

Answer 2

Used for long-term contracts where future contingencies cannot be fully anticipated. Adaptations are necessary as new circumstances arise. Disputes may emerge due to uncertainty in responsibility. Neoclassical contracts acknowledge gaps and include mechanisms for flexibility and dispute resolution.

Question 3

Relational Contracting

Answer 3

As business relationships grow in duration and complexity, traditional contract law becomes less effective. Long-term partnerships (e.g., corporate law, collective bargaining) rely more on ongoing, transaction-specific administrative adjustments rather than rigid legal rules.