Law and Economics
Economics of Contract Law Analysis Papert
In this paper you should apply the basic understanding of contract law you learned in class to an area of contracts that interests you. You can choose any topic or area that relates to contract law, as long as it is not something we have explicitly studied in class. The first part of your paper should be a brief summary of the topic and relevant issues.
Once you choose a topic, you should then construct a basic economic model of the situation that we can potentially use to determine the socially efficient outcome. The primary goals of contract law are to ensure a contract was validly formed (including contract modification and information disclosure) and to incentivize breach of a contract only when it is efficient. Thus, the first step in your economic analysis should be to determine whether you are analyzing an instance of contract formation or contract breach. In either case you should determine the parties that are involved, the promisor and the promise as well as the relevant elements of the contract including the offer and consideration. If a remedy for breach is included in the contract, you should specify that as well.
After clearly defining the contracting parties and terms of the contract, you should begin to apply an economic analysis to the situation. This may include determining if the terms contract create an efficient/competitive market or allow one party to apply undue market power, to identify if contract modification is economically desirable, to identify whether it is efficient to breach the contract, and the apply the most efficient remedy for breach. Note that this list of potential means of analysis is not complete and the appropriate elements of analysis depend on the specific nature of your topic.
The final step is to formulate this analysis into a simple economic model. The final form of your economic model will vary depending on the situation you are analyzing, but may look similar to one of several economic models we constructed regarding contract law.