Incomplete contracts and consider some of the consequences of contractual Incompleteness

Incomplete contracts and consider some of the consequences of contractual Incompleteness

Introduction

Contractual principles have overthrown the importance in recent times, as they are critical to establishing a solid balance and fair in contract preparation. The analysis in this regard is that the main contractual provisions with special emphasis on objective good faith and the social function of the contract, incorporated into the current Civil Code. The best known is the principle of freedom of contract in which one can conceptualize it as the freedom of the parties to stipulate the content at will contract, creating for themselves their rights and obligations under consensus and interest, and its effects protected by law (Brunner, 2009).

This freedom is afforded wide apart, not only referring to the construction of the covenant, but also concerning the freedom to hire or not, want to be part of the transaction, to determine its contents elaborating clauses stipulating the rights and obligations giving, etc. In this specific context gives the supremacy of individual autonomy, where the rules are applied in a civil or further operative. Exceptions are the cases of the rules of public order and exemplary morals, since in such cases the contractors want to subject always to its imperatives.

Incomplete contract

As opposed to the concept of complete contract, incomplete calls all contract regulating a commitment imperfect. A contract is an incomplete contract where due to the complexity of the transaction or the uncertainty of the context in which it is performed. The limits practical human, rationality to anticipate every eventuality that may arise or because even the imprecision of natural language in which it is written, contains gray areas. A contract that leaves lose ends or slot (unregulated aspects), under which some of the party s can take advantage of circumstances.

The contract of work, in which more than setting tasks to perform by the worker in every contingency is delegated to the employer the power to direct the work of the employee s, is a representative example of the recruitment incomplete. "When the direction of resources (within the limit s of contract) depends on the buyer (employer), can be obtained, this relationship is firm. Following the neoclassical tradition, this is the justification (reason for being) of the company in default so failure technical s market (transaction costs and contract s incomplete).

The contracts can be characterized by a long or very long duration but incomplete contract theorists specify their duration may be unlimited, because it is generally too expensive or epistemic ally impossible to specify all future contingencies. The contract used to manage the relationship of authority and subordination against future uncertainty. The theme of the theory of incomplete contracts was treated by authors such as David Kreps, Sanford Grossman and Oliver Hart. Unlike the theory of property rights and the theory of opportunism by Oliver Williamson, incomplete contracts theorists emphasize the inability of the courts to ascertain which variables are contracts.

They also indicate some notion of unexpected change, ...