A. Differing legal consequences: The usual contract, which may be enforced by either party, is said to be “enforceable.” There are, however, certain kinds of agreements which are not fully enforceable.
1. Void contracts: Some kinds of agreements are said to be “void,” although this is a contradiction in terms. What is meant is that these agreements have no legal effect. Thus a gambling contract might be said to be “void as against public policy.”
2. Voidable contracts: A “voidable” contract is one which one party may at his option either enforce or not enforce. Thus a minor who has made what would otherwise be a binding agreement, or a person who has been induced to agree by fraud, has the choice of either “avoiding” the contract (i.e., acting as if no agreement had ever been made), or enforcing it.
3. Unenforceable contracts: An “unenforceable” contract is one which does not give an immediate right to judicial relief, but which nonetheless has some legal status. The most important difference between an “unenforceable” contract and a so-called “void” contract is that the unenforceable contract may be converted into a fully binding contract by the act of one of the parties, while a void contract may not.
a. Statute of Frauds: A common example of an unenforceable contract is an oral agreement of a type for which a writing is necessitated by the Statute of Frauds (e.g., a contract for the sale of land). If, after such an oral agreement has been reached, one party produces a written statement of its terms, the agreement is rendered enforceable against him. (A “void” contract, on the other hand, can never be rendered enforceable by the act of just one party.)
A. Generally: An important development in the law of contracts over the last few decades has been the increasing use of economic theory to analyze contracts problems.
1. The “Chicago school” of legal analysis: The use of economic analysis is closely associated with the University of Chicago Law School, so much so that the predominant wing of economics-and-law is known as the “Chicago school.” That wing has been led by Richard Posner and Frank Easterbrook, both University of Chicago law professors who subsequently became judges on the U.S. Court of Appeals for the Seventh Circuit.
B. Focus on efficiency: The central tenet of economic analysis is that “efficiency” should be the major objective of contract law. Most scholars who promote efficiency as an objective have in mind two main sorts of goals:
1. keeping “transaction costs” (e.g., litigation costs and legal fees) as low as possible;
2. allocating resources to their most highly valued uses. K&C, p. 11.