Overcoming contractual incompleteness: the role of guiding principles

Abstract Transactions of any complexity between buyers and sellers are supported by long-term contracts these inevitably incomplete. We propose an approach for overcoming contractual incompleteness based on the idea that most people inclined to follow widely accepted social norms, such as being fair-minded acting with integrity. suggest this tendency can be reinforced if norms incorporated into a formal contract in form guiding principles. develop model which principles reduce shading behavior discuss cases where has been successfully applied practice (JEL D23, D86, K12).