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113 Yale L.J. 541 (2003-2004)
Contract Theory and the Limits of Contract Law

handle is hein.journals/ylr113 and id is 561 raw text is: Article Contract Theory and the Limits of Contract Law Alan Schwartzt and Robert E. Scotttt CONTENTS I. IN TROD U CTION ................................................................................. 543 II. JUSTIFYING AN EFFICIENCY THEORY OF CONTRACT........................ 550 A . What Firms M axim ize ..................................................................550 B. Why the State Should Help Firms ................................................ 555 III. THE ENFORCEMENT FUNCTION ........................................................ 556 A. Enforcement Often Is Unnecessary.............................................. 557 B. Encouraging Relation-Specific Investment.................................. 559 C. Contracting To Avoid Disruption: The Case of Volatile Markets ........................................................................... 562 D. Enforcement and Duress .............................................................. 565 IV. THE INTERPRETATION FUNCTION ..................................................... 568 t Sterling Professor of Law, Yale Law School; Professor, Yale School of Management. tt David and Mary Harrison Distinguished Professor of Law, University of Virginia School of Law; Justin W. D'Atri Visiting Professor of Law, Business and Society, Columbia Law School. This Article benefited from comments received at workshops at the Law Faculty, Cambridge, England, at the 2003 American Law and Economics Association meetings, and at the Harvard, Pennsylvania, Texas, Toronto, Virginia, and Yale Law Schools. We also are grateful to Bruce Ackerman, Scott Baker, Richard Brooks, Jules Coleman, Victor Goldberg, Sam Issacharoff, John Jeffries, Jason Johnston, Paul Mahoney, Tom Nachbar, Eric Posner, Andrew Postlewaite, Henry Smith, Paul Stephan, William Stuntz, and George Triantis for helpful comments. 541 Imaged with the Permission of Yale Law Journal

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