Designing a contract is often more of an economic than a legal problem. A good contract protects parties against opportunistic behavior while providing motivation to cooperate. This is where economics and, especially contract theory, may prove helpful by enhancing our understanding of incentive...

Arguments for and against property rules (roughly equitable remedies) and liability rules (legal remedies) have been largely based on efficiency considerations. Courts can clearly determine efficient remedies when they are sufficiently informed about the valuations of parties. However, courts...

Legal and economic scholars have predicted that increases in liability encourage firms to contract out risky activities in order to take advantage of so-called judgment-proof strategies. These strategies allow entities to limit their liability through through contractual arrangements with nearly...

The operating agreements of many business ventures include clauses to facilitate the exit of joint owners. In so-called Texas Shootouts, one owner names a single buy-sell price and the other owner is compelled to either buy or sell shares at that named price. Despite their prevalence in...