The common aspect of all those contracting settings is that the information gap between
the principal and the agent has some fundamental implications for the design of the
contract they sign. In order to reach an efficient use of economic resources, some information
rent must be given up to the privately informed agent. At the optimal second-best
contract, the principal trades off his desire to reach allocative efficiency against the costly
information rent given up to the agent to induce information revelation. Implicit here is
the idea that there exists a legal framework for this contractual relationship. The contract
can be enforced by a benevolent court of law, the agent is bounded by the terms of the
contract.