Trakia Journal of Sciences, Vol. 13, Suppl. 1, 2015 143 Trakia Journal of Sciences, Vol. 13, Suppl. 1, pp 143-149, 2015 Copyright © 2015 Trakia University Available online at: http://www.uni-sz.bg ISSN 1313-7069 (print) doi:10.15547/tjs.2015.s.01.024 ISSN 1313-3551 (online) THE FIRM AS A CONTRACT M. Georgiev* Economics Department, Agricultural University, Plovdiv, Bulgaria ABSTRACT This study aims to clarify the firm in neo-institutional context. The firm is a particularly dynamic, constantly evolving process and an organizational structure. The firm is a symbiosis of entities, internal and external regulations, market and non-market mechanisms and relations, legal and economic conditions and effects. In the legal aspect, it is the sum of relationships developing inside and outside the scope of the organization legal process through which the property is managed. Economically, it is an organization created to profit from the production optimum. In the neo-institutional context, it is an abstract mechanism to control processes - on the one hand legal, economic, social and other administrative, marketing and arbitration - Contract processes. These companies have resources to create a balance between the costs behavioral resources for speed and security. The assessment of such corporate efficiency is based on transaction costs. Key words Neo-institutional Economics, Contract, Transaction costs INTRODUCTION STANDARD CONCEPTS REGARDING THE FIRM AND THE CONTRACT Legally speaking, the term “firm” is the name under which the trader performs his/her activities. However, there is a legal entity behind the firm – the trader. The firm is a subjective right, property of the trader and through it the latter identifies his/her activity. The trader is the person who, by means of the company, establishes certain relations, specific legal and economic – speculative goals. In a broader sense, we can assume that the firm is the legal structure that is used to manage property by separating it from the certain direct ownership carriers 1 . Then, the firm is an abstract legal form that is used to divide or unite certain legal relations depending on the interests. The firm is also a contract. Within the meaning of the legal theory, the contract serves as the grounds on which the legal relations can be manifested. The latter is an agreement between parties for the purpose of establishing, changing or terminating a legal relation between them 2 . Going back to the firm, it is obvious that the firm is established, terminated or altered by virtue of formal, 1 The survey makes it clear that with certain legal forms of traders (Sole traders and non-capitalized companies) the ownership and the management may merge. 2 See Law on obligations and contracts regarding the legal definition (Bulgaria) multi-lateral and concession contracts. The firm contract is both inside and outside the firm relations. The latter is where paid labour is. The latter can also be seen as a framework of the development of relations with external subjects concerning the firm property – the commercial enterprise. In the classic and neo-classic economic context, the firm is a union of individuals established to pursue certain economic interests. Practically speaking, the union itself can be regarded as an individual economic subject. The classic theory says a lot on the issue of how these interests are distributed along the internal axis of the organization but the individual rationality and the motives of the individuals remain hidden. It is assumed that they are rational and have organizational unity regarding the objectives. In a certain way, the firm is like a “black box” transforming a number of relations into outgoing uniform stable states. The classic economic theory defines the firm as a basic way of generating revenue by means of: -economic behavior reaching its optimum state – in the knowledge about the exact correlations and the options to exchange the resources, the ____________________________  Correspondence to: Minko Georgiev, Economics department, Agricultural University - Plovdiv, 12”Mendeleev”str., 4000 Plovdiv, Bulgaria, tel.032 / 654 402, e-mail: mm72gg@gbg.bg