“good faith” as one of the ethical rules has found an important position in contract law. in many countries, good faith is regarded as a mandatory rule to be respected in formation, performance and interpretation of contracts. good faith is a fundamental principle in almost all civil law countries. this article deals only with good faith in formation of contract. the duty to observe good faith ...

Infrastructure concessions are frequently renegotiated after investments are sunk, resulting in better contractual terms for the franchise holders. This paper offers a political economy explanation for renegotiations that occur with no apparent holdup. We argue that they are used by political incumbents to anticipate infrastructure spending and thereby increase the probability of winning an upc...

This paper shows how the fear of signaling distrust can endogenously lead to incomplete contractual agreements. According to standard results in contract theory an optimal incentive contract should be conditional on all verifiable information containing statistical information about an agent’s action or type. Most real world contracts, however, condition only on few contingencies and often no e...

Typical contracts assign both coercive and non-coercive means of power to the principal’s side, providing the agent with a comparably small range of countervailing anti-power. Initially agents are therefore vulnerable to opportunistic principal behavior and will rationally anticipate this threat upon signing a contract. In this paper we analyze various forms of power and explain their asymmetri...