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There are three basic institutions that provide the framework for all economic transactions in contemporary society, namely, market, governmental regulation, and contract. The economic analysis of their performance and function reveals that contracting is an especially effective legal institution in coordinating private economic transactions if the following requirements are satisfied in the process of contract formation and contract performance: freedom of contract, fairness and social utility, bargaining power parities, symmetric information and transparency of intentions, third-party exemption, possibility of adjustment, and legal forum for settlement and enforceability.

Freedom of contract is sometimes explained as deriving from the prepolitical notions of freedom and autonomy, which assign rights to the individuals to plan, consider, and pursue their welfare. Other contract theorists originate freedom of contract within democratic self-government ...

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