In a market where enforcement depends on social ostracism or reputational damage, the formation of an extralegal contract depends on information about reputation. In addition, it requires adherence to enough formalities to alert other members of the relevant group that an agreement has taken place. In the diamond industry this function is served by customs such as handshakes, cachets, weight slips, and bills of sale that are able to effectively serve the channeling, cautionary, and evidentiary functions of formality while imposing minimal additional cost.

DEFINE: Clarifies how the concept of 'extralegal contract' operates in a market where legal enforcement is absent.

Lisa Bernestein, Opting out of the Legal Sys…, loc. 134