in Newman, Peter (ed.), The New Palgrave Dictionary of Economics and the Law, London: Macmillan, vol. 3, 199–203 (1998)
6 Pages Posted: 7 Sep 2016
Date Written: March 31, 1998
This short chapter, written for The New Palgrave Dictionary of Economics and the Law (1998), offers an economic analysis of quasi contracts, in their broad, civil-law definition. All quasi-contractual exchanges can be seen as coerced transactions between private parties, either in the form of 'private takings' (where the active party takes a property right in return for monetary compensation, as in old common-wall cases), 'private taxes' (where the active party renders a service and gets monetary compensation, as in unconscious patient cases) and `private compulsory services' (where the active party obliges the passive party to render a service in return for monetary compensation, as in duty-to-rescue cases).
Imposed transactions between private parties are permitted by legal systems when three conditions are simultaneously fulfilled. First, high transaction costs (caused by time constraints, temporary incapacity, mistakes, or bilateral monopolies) must stand in the way of a consensual transfer. Second, it must be obvious to outsiders (such as judges) that the transfer is a Kaldor-Hicks improvement. Third, the transaction costs associated with compensation must outweigh the incentive benefits of compensation.
Keywords: Restitution, quasi contracts, liability rules v property rules, unjust enrichment
JEL Classification: K11, K12, K19
Suggested Citation: Suggested Citation