ABSTRACT
Central to the economics of property rights-public choice theory 1 is the recognition that laws and institutions are important in promoting the efficiency of an economy. One of these institutions is the law of contracts. Contract law, via its role in constraining traders from breach of contract, reduces transaction costs and hence facilitates exchange. 2 But how do traders cope with the problem of contract uncertainty in an environment where the legal framework is nonexistent or poorly developed? The work of anthropologists such as Alice Dewey (1962) on Chinese traders in Java, and Cyril Belshaw (1965) on traders in “traditional” markets suggests that traders personalize or particularize exchange relations as a way of coping with contract uncertainty.
