Importance Of Contracts

a) Pick an article(s) and author(s) you would like to explore. If possible, please quote the passage you feel most strongly about:

Alchian and Demsetz 1972

“The firm properly viewed is a“nexus” of contracts.”

The adoption of a contract-based definition of the firm is useful because it (a) allows us to envision the spectrum of both inter- and intra- organizational arrangements and tounderstand better their origin and structure, (b) provides a basis for estimating the value of components of the firm as the asset-equivalent of the contract, and (c) assess the relative contribution to firmvalue and provide management a means of focusing their information gathering and processing efforts.

b) Propose and state a general topic related to the article (i.e. shirking, PLC, firm selectionand survival, etc.)
Contracts

c) In a few sentences, please explore the topic by relating it to real-life examples

The business environment is full of agreements between industries andindividuals. It is true those agreements may be made orally, but most of companies use formal written contracts in order to proceed with operations. Written contracts provide to people and company a legaldocument that indicate both parties expectations, and the way to proceed in case on negative events in a negotiation. A contract is a tool that companies use to protect their resources.

d) State yourhypothesis: this would be either agreeing or disagreeing with the main premise.

While you are taking a contract orally, you take the risk to forget some important points agreed with the passingof time. A written contract establishes terms and conditions of any business transaction, including the purchasing of products or services. That helps to both parties to avoid any type ofmisunderstanding that could happen on the lacking of written contract.

A contract is beneficial because it guarantees the production to be sold and most likely a price will be agreed upon, reducing the...