ABSTRACT
In attempting to explain the complicated contractual details of actual market exchange, I start by noting that complete, fully contingent, costlessly enforceable contracts are not possible. This is a proposition obvious to even the most casual observer of economic phenomenon. Rather than the impersonal marketplace of costlessly enforceable contracts represented in standard economic analysis, individuals in most real world
transactions are concerned with the possibility of breach and hence the identity and reputation of those with whom they deal. Further, even a cursory examination of actual contracts indicates that the relationship between transacting parties often cannot be fully described by a court-enforceable formal document that the parties have signed (see Stewart Macauley). While the common law of contracts supplies a body of rules and principles which are read into each contract, in many cases explicit terms (which include these general unwritten terms) remain somewhat vague and incomplete.
