Qualifying the concept of ‘contractual equilibrium’: From equality of exchange to fair play

Nikos Antoniadis (Humboldt University of Berlin)

Abstract

This paper challenges the conventional intuition that ‘contractual equilibrium’ can be adequately understood as an exchange of value reflected in the parties’ performance. It critiques this perspective as founded upon outdated pre-neoclassical theories of value, from which legal scholarship has yet to fully separate. By distinguishing between market value and intra-contractual value, the paper sets the stage for a deeper analysis of the functional differences between contracts and markets. Aligned with the recent microeconomic ‘contract theory’ scholarship, the paper emphasizes the role of adjustment processes over static value determination in maintaining contractual equilibrium. Drawing from the insights of evolutionary game theory, it suggests that procedurally fair adjustment procedures should be fostered to preserve and harness the advantages of transacting in contracts as opposed to transacting in markets. An overarching theme is that sophisticated parties have to a great extent incorporated such practices in their contracts even in the absence of a rigorous theoretical framework — a finding consistent with the inductive methodology of Elinor Ostrom (1990).

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