lecture1a - Lecture 1 Contract Law Voluntary exchanges...

Info icon This preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Lecture 1 Contract Law Voluntary exchanges increase efficiency by moving goods from less valuable to more valuable uses. (As long as the exchange is voluntary on both sides, it makes both parties better off and therefore increases efficiency.) So legal rules should encourage/support the process of voluntary exchange. Under the capitalist, private property system, a role of the government is to enforce contracts that private parties make. Not all transactions need a legal system to enforce them, but more complicated transactions do.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 Types of exchanges: (1) exchange money for goods available immediately. (Buy a cappuccino from Starbucks.) This type of exchange doesn’t require much enforcement. Customers know what they are getting, prices are posted. The main government role is to discourage theft. (2) order goods to be made to order and delivered in the future. (Order some sandals to be made by hand in a particular size.) Here the customer delivers money to the shoemaker in return for a promise of sandals next month. Enforcement of the contract discourages the producer from collecting money and going off to Mexico.
Image of page 2