1. Doctors who form a partnership may say nothing in the partnership agreement concerning its future dissolution.

The parties may deliberately avoid discussing dissolution for fear of breeding distrust.

Provide some other examples of gaps left in contracts for strategic reasons.

2

Give examples of unfortunate and fortunate contingencies that could make breach of contract more efficient than performance.

Give reasons why the parties might not insert explicit terms in the contract to deal with these contingencies, such as a term excusing breach when performance is very costly.

3 Assume that a fortunate contingency makes breach efficient for a sales contract, and assume that the parties cannot renegotiate the contract.

Explain why the remedy of damages can save transaction costs by reducing the number of sales required to move the good to the person who values it most. Explain why the remedy of specific performance enables the court to avoid the problem of subjective valuations of the good.

4 Explain the difference between foreseeable events and foreseen events.

7.

Return to the rent control example and diagrams.

Landlord and Tenant - Rent Control Average Rent Demand Supply Marginal Cost MC Average Cost AC Rent ceilir imposed governme Number of Landlord ApartmentsLandlord and Tenant - Rent Control Average Rent Demand Supply Marginal Cost MC Average Cost AC Rent ceiling imposed by government Number of Landlord ApartmentsLandlord and Tenant - Rent Control Average Rent Demand Supply Marginal Cost MC Average Cost AC Rent ceiling imposed by government Number of Landlord Apartments Shortage leads to rationing, queuingLandlord and Tenant - Rent Control Average Rent Supply Demand Marginal Cost MC Average Cost AC Rent ceiling imposed by government Number of Landlord Apartments Shortage leads to rationing, queuing