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Preventing post-contractual opportunism by an option to switch from one contract to another

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  • Said Boukendour

Abstract

This article proposes a pre-emptive mechanism that prevents a self-interested contractor from taking benefits resulting from any post-contractual opportunism. The mechanism is based on an option to switch from one contract to another. The client and the contractor must simultaneously enter into two (or more) contracts with an option given to the client to decide which one will apply once the work has been completed. The client's advantage lies in the power of preventing the contractor's opportunistic behaviour. The contractor's advantage lies in the possibility to demonstrate good faith.

Suggested Citation

  • Said Boukendour, 2007. "Preventing post-contractual opportunism by an option to switch from one contract to another," Construction Management and Economics, Taylor & Francis Journals, vol. 25(7), pages 723-727.
    • Handle: RePEc:taf:conmgt:v:25:y:2007:i:7:p:723-727
    DOI: 10.1080/01446190701392994
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    References listed on IDEAS

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    1. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-261, October.
    2. Said Boukendour & Rahim Bah, 2001. "The guaranteed maximum price contract as call option," Construction Management and Economics, Taylor & Francis Journals, vol. 19(6), pages 563-567.
    3. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    4. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
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    Cited by:

    1. Ceric Anita & Ivic Ivona, 2021. "Network analysis of interconnections between theoretical concepts associated with principal–agent theory concerning construction projects," Organization, Technology and Management in Construction, Sciendo, vol. 13(2), pages 2450-2464, January.

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