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Contract: Rules and Theory of Contract Law

Contract law and economic development

  • 3 things to know
  • Components 2 and 3

Overview

Importance of contract law to economic development, how the industrial revolution shaped the modern rules of contract and efficient breach.

What you need to know

Answer each one before you reveal it.

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Key term

Explain the importance of contract law to economic development.

Key term

How does the enforceability of promises reduce the cost of doing business?

Key term

Why is contract law important to the development of credit?

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    Explain the importance of contract law to economic development.

    Model answer

    Enforceable agreements let traders deal with strangers and at a distance. Investment and credit depend on knowing that a promise can be enforced.

  2. 2

    How does the enforceability of promises reduce the cost of doing business?

    Model answer

    A party need not insist on payment and delivery at the same instant. Reliance on a legal remedy replaces expensive precautions against being cheated.

  3. 3

    Why is contract law important to the development of credit?

    Model answer

    A lender advances money now against a promise of repayment later. Lenders would advance nothing if a promise carried no legal force.

  4. 4

    How does the law of contract support international trade?

    Model answer

    Traders in different countries can choose the law and forum that will govern the deal. Standard shipping and sale terms then carry a known legal meaning.

  5. 5

    Explain how the industrial revolution shaped the modern rules of contract.

    Model answer

    Nineteenth-century expansion in manufacture and rail transport produced far more commercial disputes. Judges of that period built the doctrines of offer, acceptance and remoteness that are still used.

  6. 6

    Why does economic analysis treat contract remedies as an incentive?

    Model answer

    Economic analysis argues that damages make a party keep a promise only where performance is worth more than breach. Compensation rather than punishment is said to direct resources to their most valued use.

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Parliamentary and European Law Making
Delegated Legislation
Statutory Interpretation
Judicial Precedent

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The court sits in .
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AAn interim injunction restrains publication before trial.
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CAn injunction may be the only effective remedy.

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A Public Bill changes the general law.
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