This refers to economic contracts that do not explicitly mention the terms and conditions under which future issues between the contracting parties may be decided. In fact, it is argued that most contracts by their very nature are incomplete as the parties cannot possibly foresee all possible future contingencies and have perfect solutions to deal with them. Further, both parties may voluntarily decide to renegotiate the contract in the future, thus making current terms void. The study of incomplete contracts was pioneered by American economists Oliver Hart and Sanford Grossman through their 1986 paper “The costs and benefits of ownership”.
