Strategic Urban Projects in Amsterdam and New York: Incomplete Contracts and Good Faith in Different Legal Systems

Abstract

Contracts between local government and private investment agencies play an important role in strategic urban projects. Real estate cycles provide only a narrow window of opportunity within which to draft such contracts. A legal system should therefore not impede the possibility of reaching an agreement quickly; instead, it should facilitate efficient ways of reaching an agreement. Lengthy contracting may contribute to the persistence of real estate market cycles. This paper explores the question of whether the civil law principle of good faith facilitates the drafting of incomplete contracts, which may be efficient in situations of high uncertainty and complexity, as was the case with two strategic inner-city projects: the South Axis in Amsterdam and Battery Park City in New York City. The paper further establishes that good faith does play a considerable role in the differences in contracting practice.