The Inherent Failures of Long-Term Contracts — and How to Fix Them

Oliver Hart, Nobel-winning Harvard economist, and Kate Vitasek, faculty at the University of Tennessee, argue that many business contracts are imperfect, no matter how bulletproof you try to make them. OLIVER HART: What we are really arguing in this article is that a better approach is to acknowledge that you can’t cover everything in the contract, and try to figure out procedures you’re going to use to deal with situations which the contract doesn’t cover. CURT NICKISCH: That’s Oliver Hart, economist at Harvard University, and Kate Vitasek, faculty at the University of Tennessee.