Chakravarty, S (2002) Essays on contracting in the construction industry. PhD thesis, University of Southern California, USA.
Abstract
Writing contracts is expensive. Due to this cost, agents often leave contracts incomplete. The cost of writing contracts increase as complexity of the transactions increase. Complexity and cost of contracting affects the type of contracts and also the contractual relationship. Incompleteness in the contract also leads to inefficiencies in the trade and increases the role of law. In the first essay, I discuss and analyze contractual relationship in the construction industry. I look at the legal rules that are prevalent in the industry and show that the most legal rules used are efficiency based. I discuss contract formation, liquidated damages, material breach, and remedies and find that all these doctrines used are such that the total trade surplus is maximized. Though most doctrines are based on the economic efficiency principle there are a few rules that are based on fairness. In the second essay, I study risk and uncertainty in contracts. Contractual relationships are often fraught with uncertainties. And how do modeling uncertainty rather than risk change results? This question is answered by analyzing three different contracting situations. While in case of contracts for bilateral trade there is no difference between risk and uncertainty, if the contracts are written for joint ownership then having uncertain agents may result in no renegotiation but with risk averse agents there always renegotiation. Lastly a possibility of no trade is shown if agents are uncertain. In the last essay, I analyze how complexity affects contracting. Complexity is an important issue in contracting and this is evident in the construction industry. Large number of contracts ends up in disputes and as a result the damages imposed by the courts play an important role in the effort made by the agents. The optimal damage rule is characterized. Expectation damage is optimal, but if the contractor has all the bargaining power reliance damages does better.
| Item Type: | Thesis (Doctoral) |
|---|---|
| Thesis advisor: | Macleod, W B |
| Uncontrolled Keywords: | complexity; ownership; uncertainty; contract formation; disputes; liquidated damages; owner |
| Index terms: | modelling, construction industry, contract formation, bargaining, fairness, ownership, owner, dispute, efficiency, agent, complexity, contractual relationship, damages, liquidated damages |
| Subjects: | practitioner, dispute resolution, contractual relationship, analytical methods, contract formation, contractual remedy, economics, performance management, systems engineering, industry analysis, leadership, sociology |
| Topics: | Supply Chain Management, Quality Management, Legal Issues, Engineering Principles, Contract Administration, Organizational Design, Research Practice, Stakeholder Management, Roles and Professions |
| Descriptive scope: | 3 PCT |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here