The Law And Economics Of Framework Agreements

This book addresses the increasing demand for a logical understanding of how framework agreement should be used and implemented.

A 2002 survey of economics of contracts appealing to scholars in economics, management and law.

In the last two decades, multinational companies (MNCs) and global union federations (GUFs) have started to negotiate so-called global framework agreements (GFAs) which define minimum standards for labor conditions across their locations. This book focuses on the question why companies conclude GFAs, and identifies four groups of incentives: reduction and privatization of conflicts; public relations; promotion of equal competitive conditions; exogenous requirements and avoidance of public regulation. Based on an in-depth analysis of incentives considered to play a dominant role in the decision of companies to conclude GFAs, the book attempts to predict under which conditions GFAs can be expected to proliferate in the future.

Economic analysis is being applied by scholars to an increasing range of legal problems. This collection brings together some of the main contributions to an important area of this work, the economics of contract law. The essays and illuminating notes, questions, and introductions provided by the editor outline the Law and Economics framework for analyzing contractual relationships. The first two parts of the book present a number of useful concepts--adverse selection, moral hazard, and rent seeking--and a general way of thinking about the economics of contracting and contract law. The remainder of the book considers a wide range of topics and issues. The recurring theme is that contracting parties want to assign the responsibility for adjusting to particular contingencies to the party best able to control the costs of adjustment. The adjustment problem is exacerbated by the fact that the parties might engage in various types of strategic behavior, such as opportunism, moral hazard, and rent-seeking. Many contract law doctrines can best be understood as attempts to replicate how reasonable parties might resolve this adjustment problem.

The central theme of this book is that an economic framework--incorporating such concepts as information asymmetry, moral hazard, and adaptation to changed circumstances--is appropriate for contract interpretation, analyzing contract disputes, and developing contract doctrine. The value of the approach is demonstrated through the close analysis of major contract cases. In many of the cases, had the court (and the litigators) understood the economic context, the analysis and results would have been very different. Topics and some representative cases include consideration (Wood v. Lucy, Lady Duff Gordon), interpretation (Bloor v. Falstaff and Columbia Nitrogen v. Royster), remedies (Campbell v. Wentz, Tongish v. Thomas, and Parker v. Twentieth Century Fox), and excuse (Alcoa v. Essex).

Consumers routinely enter into long-term contracts with providers of goods and services - from credit cards, mortgages, cell phones, insurance, TV, and internet services to household appliances, theatre and sports events, health clubs, magazine subscriptions, transportation, and more. Across these consumer markets certain design features of contracts are recurrent, and puzzling. Why do sellers design contracts to provide short-term benefits and impose long-term costs? Why are low introductory prices so common? Why are the contracts themselves so complex, with numerous fees and interest rates, tariffs and penalties? Seduction by Contract explains how consumer contracts emerge from the interaction between market forces and consumer psychology. Consumers are short-sighted and optimistic, so sellers compete to offer short-term benefits, while imposing long-term costs. Consumers are imperfectly rational, so sellers hide the true costs of products and services in complex contracts. Consumers are seduced by contracts that increase perceived benefits, without actually providing more benefits, and decrease perceived costs, without actually reducing the costs that consumers ultimately bear. Competition does not help this behavioural market failure. It may even exacerbate it. Sellers, operating in a competitive market, have no choice but to align contract design with the psychology of consumers. A high-road seller who offers what she knows to be the best contract will lose business to the low-road seller who offers what the consumer mistakenly believes to be the best contract. Put bluntly, competition forces sellers to exploit the biases and misperceptions of their customers. Seduction by Contract argues that better legal policy can help consumers and enhance market efficiency. Disclosure mandates provide a promising avenue for regulatory intervention. Simple, aggregate disclosures can help consumers make better choices. Comprehensive disclosures can facilitate the work of intermediaries, enabling them to better advise consumers. Effective disclosure would expose the seductive nature of consumer contracts and, as a result, reduce sellers' incentives to write inefficient contracts. Developing its explanation through a general framework and detailed case studies of three major consumer markets (credit cards, mortgages, and cell phones), Seduction by Contract is an accessible introduction to the law and economics of consumer contracts, and a powerful critique of current regulatory policy.

This book addresses the case for a Sustainable Energy Trade Agreement (SETA) and the move from fossil fuels to renewable energy.