REMEDIES UNDER CONTRACT LAW: Designing Rules to Facilitate Out-of-Court Settlements

The law of contract is analyzed in economic terms, focusing on the influence of formal rules in contract disputes. An argument is presented for the utility of designing rules with an understanding of their impact on the relative regulating strength of the parties seeking to bargain out of court. Several reasons are identified for suggesting that unless designed for such out-of-court negotiations formal rules need to be different from those suitable for the resolution of contract disputes in the courts.