timelets | Quote of the Day: Contract

The contract is one whereby the factor, for a certain remuneration (which may be fixed or fluctuating), agrees to obey the directions of an entrepreneur within certain limits. The essence of the contract is that it should only state the limits to the powers of the entrepreneur. Within these limits, he can therefore direct the other factors of production.

- Ronald Coase, The Nature of the Firm. 1937.

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Remarkably, the Ancient Romans developed Contract Law for their barbarian subjects because proper Romans were governed by family laws, rules and traditions. The Romans needed something that would regulate people outside of the family. Over time, the contract became a dominant form of business relationships.