By analyzing two American contract law decisions, the paper illustrates the usefulness of economic analysis in framing the inquiry. The cases have a common feature, unrecognized by the courts: they both deal with the production and transfer of information regarding the sale of an asset of uncertain value. One involves the combination of an option and a lockup to encourage the buyer to produce information. The other involves contingent compensation to convey the seller's assurance of the quality of the assets. Once this is recognized, the outcomes are straightforward.
Contracts | Law | Law and Economics
Center for Law and Economic Studies
Center for Contract and Economic Organization
Victor P. Goldberg,
Economic Reasoning and the Framing of Contract Law: Sale of an Asset of Uncertain Value,
Columbia Law School, The Center for Law & Economic Studies Working Paper No. 164
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/1209