We're going to have three case studies in the course of the session and they'll pick up points that
we've been looking at as we go through.
So the first one very broad looking at contracts in the context of economic theory.
John Kaye who is a famous writer on economics in the U.K. published on his blog earlier this year a
statement that's quite useful to think about as we've done this set up work of what water contracts
and why do they exist.
So he's talking about the concept of the corporation as he calls it and there's a bunch of stuff in
here.
But the key point for us is a corporation has legal personality.
I talked about that before.
It means that although it's not a natural person it's not a human being.
It is able to enter into obligations and obtain rights that will be enforced and supported by the law.
So a corporation is an intangible thing.
It's existence only comes into being by its registration at Companies House or the equivalent in whatever
jurisdiction you're in.
So it doesn't exist except on paper and therefore the life of a corporation is generally on paper the
nexus of contracts that John K. describes is the thing that gives each corporation life.
So when we talk about the importance of contracts in the broad economy one of the key elements of that
for me is that you can't have corporations unless you have contracts.
Once you make that leap it took place a couple of hundred years ago from everything not being done by
individuals but risk being spread and capital being raised by groups of individuals binding themselves
together through the concept of a corporation.
And the other key aspect of corporations that was developed at the time of their birth was that there
was limited liability.
So a trade off here in order to support economic activity.
Corporations are given limited liability in other words investors in a corporation can invest in that
project without feeling that all of their life savings are at risk.
So as some disadvantage for people entering into contracts with the corporation if it runs out of money
runs out of investment you can't look behind the corporation.
The people who have invested have only invested a specific amount.
So these innovations working in turn the concept of legal personality the concept of limited liability
put corporations in a place where the whole of the economic life of the last couple of hundred years
is built on this fact that we now have notional intangible entities that are recognized by the legal
system and have their life and their aims supported by contracts.
So if a corporation wants to do something its method of doing that is by contracting with other people
or other corporations.
It's a contract sitting behind almost all of the economic activity that's going on in the US UK and
Europe these days.