This node frames the question of identifying the key factors that prevent employment contracts from being fully comprehensive and enforceable. Understanding these reasons is fundamental to grasping the dynamics of the employer-employee relationship and the principal-agent problem.

Reasons for Incomplete Employment Contracts

This node poses the question of why employment contracts possess unique characteristics, such as their long-term nature and inherent incompleteness, that set them apart from other agreements like sales contracts. The text indicates that the reasons for these key differences will be analyzed.

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Contracts for sale and employment contracts are fundamentally different in what they transfer. A contract of sale, such as for a car, permanently transfers ownership rights of the asset to the new owner. In contrast, an employment contract involves an employee granting an employer temporary authority over their time and activities at work. This critical distinction means that an employment contract does not give the employer ownership of the employee.

Contract of Sale vs. Employment Contract

To cite the ebook, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/.

To cite a unit, use The CORE Econ Team 2023 The Economy 2.0: Microeconomics Open access e-text https://core-econ.org/the-economy/ Unit [unit number] (url).

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