Principal (commercial law)

About: Principal (commercial law) is a research topic. Over the lifetime, 1579 publications have been published within this topic receiving 35379 citations. The topic is also known as: Principal (commercial law).

The International Legal Effects of Unilateral Declarations

Abstract: The International Court of Justice is the principal judicial organ of the United Nations and its judgments are usually considered highly persuasive as to propositions of international law. Thus, when the ICJ formulates a rule of international law giving binding force to a unilateral declaration of a state’s future intentions, statesmen may be expected to refer to that formulation for guidance whenever they consider the possibility of issuing a declaration of future policy. Moreover, the ability of the ICJ to support its formulation of a rule of international law in terms of the international legal order and legal logic affects the perceptions of statesmen as to the probity of the Court, as well as the willingness of states to refer real cases to it. The Judgment of the ICJ in the Nuclear Tests cases raised both these issues in a particularly pointed way.

Legitimacy of control

Abstract: What is the motivational effect of imposing a minimum effort requirement? Agents may no longer exert voluntary effort but merely meet the requirement. Here, we examine how such hidden costs of control change when control is considered legitimate. We study a principal-agent model where control signals the expectations of the principal and the agent meets these expectations because he is guilt-averse. We conjecture that control is more likely to be considered legitimate (i) if it is not exclusively aimed at a specific agent or (ii) if it protects the endowment of the principal. Given the conjecture, the model predicts that hidden costs are lower when one of the two conditions is met. We experimentally test these predictions and find them confirmed.

Low balling, legal liability and auditor independence

Abstract: We construct a dynamic multi-agent moral hazard model to analyze the interactions among the firm owner, the manager and the auditor. Moral hazard may arise in hierarchical agency because a rational monitoring agent may accept a side payment from the monitored agent for misrepresenting information to the principal. This multi-agent moral hazard problem is the essence of the concern for auditor independence. We show that a "lowballing" compensation scheme and the auditor's legal liability constitute an efficient dynamic contracting mechanism for hierarchical agency. In particular, low balling serves as a substitute for legal liabilities for maintaining auditor independence. Low balling reduces the transaction costs associated with the audit engagement relative to the flat-fee structure and can actually improve auditor independence.

Opportunism and honest incompetence - Seeking explanations for noncompliance in public procurement

Abstract: This article utilizes agency theory to explain maverick buying in governmental agencies, that is, noncompliance to centrally negotiated frame agreements. Traditional agency theory assumes the agent to be an opportunistic self-interest seeker. A complementary view of agency problems portrays man as an honest, yet not fully competent, actor; both agents and principals may be burdened by "honest incompetence." We apply both perspectives on principal-agent relationships to study maverick buying in government procurement and link agency problems to three governance mechanisms: monitoring, training, and guidance. We find that guidance and training help to reduce governmental employees' noncompliance, but output monitoring does not. Our findings further indicate that maverick buying is related to goal incongruence and two different types of information asymmetry: Agency problems may arise not only because the agent has information the principal is not aware of but also because the principal may have information the agent is not aware of. Future research in public management using agency theory to study instances of hidden action could benefit from applying a similar dual lens to behaviors previously examined as purely opportunistic.

Legal Rules and International Society

Abstract: The principal argument of the book is that international law and international legal institutions are an important element of international relations and that political scientists in particular need to be more aware of the contributions they make. Arend critiques both the long-standing scepticism among political scientists, particularly adherents of structural realism, and the assumptions and methodologies of international lawyers.