Does contract law matter from an economic standpoint? If so, differences in the laws of contract across various jurisdictions may produce divergent economic outcomes. Given the centrality of contractual arrangements to the operation of modern capitalism, one would expect this to be a central question for researchers interested in the relationship between law and economic development. Yet this is not what we see. In fact, the inquiry into the economic consequences of different contract laws around the world has received comparatively little scholarly attention.
Such neglect of the economic implications of different contract laws is all the more surprising given the abundance of studies in the related fields of comparative contract law and institutional economics. Comparative contract law has long commanded significant attention from scholars and practitioners, making it the most traditional area of comparative legal analysis. The existing studies, however, are mostly doctrinal in nature, generally failing to examine the economic consequences of the divergent legal regimes. And while the booming field of institutional economics has focused extensively on ‘contract institutions’, the resulting works are entirely devoid of any discussion of contract law as the field is understood by legal scholars and practitioners. Instead, they evaluate the quality of contract institutions based exclusively on measures of procedure, such as the duration and cost of the enforcement process, and the number of appeals involved.
My article undertakes to examine the various reasons that might explain such assumed disregard for the possible role of contract law in shaping economic outcomes. These are: (i) the lack of meaningful variation in contract laws around the world, (ii) the triviality of contract law, (iii) the ample availability of choice of law, (iv) the US-centric bias of the law-and-economics literature, (v) the lack of public data on contracting practices, and (vi) the problem of defining the boundaries of contract law. It concludes that, while important, these factors are ultimately insufficient to justify the scarcity of works on the economic consequences of contract law, which could be a fruitful area for future research.
Mariana Pargendler is Professor of Law at FGV School of Law in São Paulo (FGV Direito SP) and Global Professor of Law at New York University School of Law.