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Contributions of Contract Law to Economic Activities in Society This paper addresses the role of contract law in economic development. Unlike many other papers, its perspective is consequential ist, as it defines, explains, analyzes and evaluates the contributions of contract law to economic activities in society and is aimed to prove the hypothesis that the existence of a formal contract law and contract law practices significantly contribute to the economic growth in the world countries. Obviously, economic welfare is one of the most important issues for human wellbeing, as it is directly relevant to human development and the exercise of freedom. However, it should be taken into consideration that economic growth is not the only goal of the law and is not the sole objective worth considering in the law that might be characterized as justice and freedom, but still it is one of the most important concerns of the legal system (Cross, 2002). Concerning contract law, there are various institutions that play an important role in supporting the basic contract law. As it was already mentioned, these institutions are potentially conductive to the efficiency and cost of this method of enforcing agreed-upon exchange (Hadfield, 2004).
Although the basic contract law is quite simple, as the contracting parties designate a certain set of actions performed by each party (such as pay money, delivery goods, etc), and the law asserts the right by the state to extract certain penalties (e. g. fines, injunctions, or damages) in case this set of actions is not performed duly (Murrell, 2001). However, in order for this simple contract law mechanism to be efficient, a number of legal institutions should take part. Contract law itself makes its promises to the contracting parties, as it makes a promise to be available to accurately interpret the agreement the contracting parties have made, to impartially judge the performances rendered, and to reliably implement the appropriate remedies. (Hadfield, 2004) At the same time, the fulfilment of these promises is in direct dependence on legal institutions, and the effective coordination between them. These institutions include but not limited to courts and judges, and lawyers.
In order for them to play an essential tole in increasing the efficiency and reducing the cost of contractual commitments, it is necessary for them to know the relevant law (the importance of legal education) (Klein & Leffler, 1981). Professional organizations, courts and judicial oversight of lawyers, norms and practices of judicial reasoning, direct government regulation and service provision are also important. Next, it is impossible to effectively deal with the contract law without coming within the purview of a host of other legal rules, which include property laws, procedural laws, economic regulations, principles of legal rule development, and many others. As all these components function effectively, the contract law facilitates economic activities and provides better opportunities for economic growth. Although the contract law is not the only important component of the economic growth, as there are many components such as labor productivity, investment, and others, which are also critical, it is still one of the determinants of the world economic growth. The law and the government institutions, and, therefore, the contract law, are directly relevant to the growth of economic activities in the society.
Although the government itself fails automatically create the conditions favoring to the economic activities, it is able to create the policies strengthening economies and developing market-oriented systems. In its turn, strong economic systems are found in the governments and nations, which have acknowledged the necessity for and "secured widespread property rights protected by just laws, " (Cross, 2002), while the countries experiencing economic decline suffer from their poor legal systems and ineffective contract law practices (North, 1990). The hypothesis that the effectiveness of contract law is very important for the sustainable growth of the economic activities in society is quite popular, and is especially widespread in the literature on development and transition economies (Hadfield, 2004). It is essential to understand the role played by various institutions in supporting contractual commitments, in order to understand the importance of contract law as one of the determinants of the prosperity and economic growth (Laffont & Martimort, 2002).
The multiplicity and complexity of these institutions supporting contracting are still underestimated. According to Hadfield, (2004), the institutional needs of contracting range from the mundane court scheduling and case tracking practices to the sublime judicial philosophy and the legitimate sources of lawmaking authority. There is also an assumption that common law systems tend to outperform civil code systems, however, these suggestions emerge predominantly due to oversimplified conceptions of the legal institutional differences between the civil and common contract law (Hadfield, 2004). The formality in contract law is also closely related to longer delays in enforcing some simple contracts, however, it remains unknown whether the formality is able to depress contact law enforcement in practice, or whether it survives because other institutional adaptations make it irrelevant, reducing the pressure on the law to evolve. (Hadfield, 2004) In conclusion it may be said that low-cost and effective contract enforcement is one of the fundamental contributions to the institutional economies.
The effectiveness of contract law is very important to the growth of economic activities, especially when it relates to the transition and development economies. Therefore, common law legal systems are crucial to the possibility of greater economic growth. These systems achieve lower cost and more effective contract enforcement, which, in its turn, plays crucial role in structuring a cost-effective regime of contract law enforcement, being conductive to the overall growth of economic activities in the society. References Cross, Frank B. , (2002) Law and Economic Growth [Symposium: The Impact of Civil Justice on the American Economy & Polity], 80 Texas Law Review 1737. Hadfield, G. K. (2004).
Contract Law is Now Enough: The Many Legal Institutions That Support Contractual Commitments. University of Southern California Law School. Klein, B. and Leffler, K. B. (1981) The role of market forces in assuring contractual performance.
Journal of Political Economy Vol. 89, pp. 615 - 41. Laffont, J. -J. & Martimort, D. (2002) The Theory of Incentives. (Princeton, NJ: Princeton University Press). Murrell, P. (2001) Assessing the Value of Law in Transition Economies (Ann Arbor: University of Michigan Press). North, Douglass C. (1990) Institutions, Institutional Change and Economic Performance (Cambridge: Cambridge University Press).
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Research essay sample on One Of The Most Important Contract Law
