Jump to ContentJump to Main Navigation
The Economic Structure of TrustsTowards a Property-based Approach$
Users without a subscription are not able to see the full content.

M. W. Lau

Print publication date: 2011

Print ISBN-13: 9780199602407

Published to Oxford Scholarship Online: May 2011

DOI: 10.1093/acprof:oso/9780199602407.001.0001

Show Summary Details
Page of

PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 23 January 2021

Agency Costs and the Nexus of Contracts

Agency Costs and the Nexus of Contracts

(p.37) 2 Agency Costs and the Nexus of Contracts
The Economic Structure of Trusts

M. W. Lau

Oxford University Press

This chapter examines Robert Sitkoff's agency costs theory of trust law, which is derived from Michael Jensen and William Meckling's theory of the firm. Sitkoff's account of trusts consists of two parts. The first part describes the trust as a nexus of contractarian relationships and the second part demonstrates how various trust laws reduce agency costs. This chapter argues that the trust is not a nexus of relationships; in fact, it is closer to a tripartite contract than to the web of relationships that Sitkoff describes. It then argues that most of the trust problems that Sitkoff identifies as being resolved by trust law are actually not agency cost problems, but mere conflicts of interests. Furthermore, it observes that there are many other non-legal factors influencing and incentivizing the various parties. These include social norms, reputation, and trustee remuneration. Finally, it argues that the misapplication of agency economics gives credence to apologists of the ‘trust deal’.

Keywords:   Robert Sitkoff, Michael Jensen, William Meckling, agency costs, nexus of contracts, social norms, reputation, trustee remuneration

Oxford Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs , and if you can't find the answer there, please contact us .