Veljanovski provides economic intuition behind the law of contracts. He argues that contracts form a crucial building block of expeditious markets as they enable stakeholders to eliminate inefficiencies and other complexities in transactions. The nexus-of-contracts guess defines the concept of the corporation in line with Veljanovskis subscribe to that firms are รข€¦ a complex network of property rights and contracts (p.113). The guess postulates that firms are merely a set of implicit and intelligible contracts amidst a group of stakeholders, predominantly shareholders, creditors, managers, employees, suppliers and customers. The complex agreement of contracts within a corporation is the nexus which links the stakeholders.
Hayden and Bodie put forward a recent discussion of the nexus-of-contracts guess which originated from Jensen and Mecklings theory of human behavior and other contractarian scholars. The well-disposed theory asserts that social contracts are the result of a bargaining demonstrate between self-interested, rational stakeholders; similar to the bargain theory mentioned by Veljanovski.
The nexus-of-contracts theory applies this social perspective in defining corporations as effectual fictions serving to minimize transaction costs of the negotiation process between stakeholders (Hayden and Bodie). Hence contractarians argue that firms should not be hardened as entities; a corporation does not exist in itself as it is a non-tangible concept. Instead firms consist of a simulation of measurable contractual relations (Hayden and Bodie).
The nexus-of-contracts theory has provided crucial foundations in the development of wakeless theory conveying both descriptive and prescriptive elements (Hayden and Bodie). There is ongoing academic debate on how the theory should be interpreted in creating an effective legal framework. An example of the theory of constraints concerns principal-agent relationships. Contractarians view the relation as strictly contractual, i.e....If you want to get a full essay, order it on our website: Ordercustompaper.com
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