The creation and development of economic analyses of law over the past halfcenturyhas drawn public attention to the aspect of efficiency. The analyticalapproach of this novel idea in the realm of contract law has made it possible tocompare the efficiency of two different legal acts with reference to each otherand to identify their deficiencies. The main element of evaluation of theefficiency in a contract's structure is paying due attention to three principles:lower transaction costs, greater cooperation and the flexibility of the contract. Toapply these principles to buy-back and production sharing oil contracts indicatesthat the transaction costs of buy-back contracts are greater than for productionsharing contracts. Moreover, buy-back contracts fail to properly align theinterests of employer and contractor and this factor will amount to a decrease incooperative profit. As to their flexibility, production sharing contracts are alsoconsidered to be better placed because their contractual structure enables bothparties to align the content and structure of the contract with their own situationseither at the time of conclusion or enforcement of the contract. To identify thedeficiencies of buy-back contracts through the application of economic analysisof law will result in modification of the contract, an increase in profits for bothparties to the project and a better framework for exploiting the oil resources.Keywords: Buy-back, Production sharing agreement, Transaction costs,Cooperation, Flexibility, Economic Analysis.
)