Contract represents a fourth strategy by which principals can assume some control over the behavior of those who act on their behalf. Contracts enunciate the principal's preferences and priorities, disclose the responsibilities and obligations of agents, explicitly state the procedures agents are to follow and the decision rules they are to employ (thereby limiting agent discretion), plan for contingencies, create incentives for contractual compliance, and specify sanctions to be imposed if agreements are not kept. Principals and agents engage in "norm making"; they formulate a unique normative agenda appropriate to their relationship.

DEFINE: Defines contract as a control strategy in the principal-agent framework, distinguishing it from other mechanisms.

Shapiro, Susan P., The Social Control of Imper…, loc. 44