Month: September 2009

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An Option You Shouldn’t Pass Up

          The nationwide credit crisis has made the “American Dream” unattainable to most citizens. As lenders instituting rigorous requirements making qualifying for mortgages nearly impossible. The record breaking foreclosures and unemployment have added fuel to the fire, putting pressure on homeowners to reduce their asking prices. Many owners have been forced to sell at far below market value, accepting a large loss on properties that when purchased had high potential for profitability. However, the resurgence of lease-option agreements, especially in areas where foreclosure rates are high, has sparked hope for many sellers and buyers. [1]

          A lease-option agreement, also called a rent-to-buy option, combines a traditional lease between a landlord and tenant with the option or right to purchase the leased home. [2] The agreement stipulates that “the buyer take possession of the goods with the first payment and takes ownership with the final payment.”[3] With a lease-option, the … Read the rest

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THE EFFICIENT BREACH HYPOTHESIS: ITS IMPACT AND EFFECT ON THE PENALTY CLAUSE AS DEFINED UNDER COLOMBIAN LAW

I.          INTRODUCTION 

Inspired by the close interaction of law and economics, common law scholars have applied an economic perspective to bear legal problems in the last decades. This scholastic effort has produced interesting results in the United States where the sophistication of the courts and its judges allow a pragmatic application of economic theories to actual controversies. Economists analyze legal rules in terms of efficiency. [1] Reallocating resources in a society is considered efficient only if that reallocation makes someone better without making some others worse off. [2]

Economic theory has been broadly applied in the United States, particularly in the area of contract law. At the heart of its application lies the efficient breach hypothesis, a milestone of contract law and the law and economics movement. [3] Simply put, the hypothesis suggests that promisors should be permitted, if not encouraged, to breach a contract whenever the … Read the rest