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account_balance Enforcing Contracts

The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in June 2016. See the methodology for more information.

What is Measured?

Figure 1 - What are the time and cost to resolve a commercial dispute through the courts?

Over the years, the Doing Business indicators on enforcing contracts have measured the time, cost and procedural complexity to resolve a standardized commercial dispute between two domestic businesses through local first-instance courts. The dispute involves the breach of a sales contract worth twice the income per capita or $5,000, whichever is greater. The case study assumes that a seller delivers custom-made goods to a buyer who refuses delivery, alleging that the goods are of inadequate quality. To enforce the sales agreement, the seller files a claim with a local court, which hears arguments on the merits of the case. Before reaching a decision in favor of the seller, the judge appoints an expert to provide an opinion on the quality of the goods in dispute, which distinguishes the case from simple debt enforcement.

Last year, Doing Business introduced an important change in methodology for the enforcing contracts indicators. While it continued to measure the time and cost to resolve a standardized commercial dispute under the same assumptions (figure 1), it also tested whether each economy had adopted a series of good practices that promote quality and efficiency in the commercial court system. For this purpose it replaced the indicator on procedural complexity with a new indicator, the quality of judicial processes index. The aim is to capture new and more actionable aspects of the judicial system in each economy, providing a picture of judicial efficiency that goes beyond the time and cost associated with resolving a dispute. The availability of such good practices continues to be measured in the Doing Business 2017 report.

The quality of judicial processes index covers a set of good practices across four areas, corresponding to the four components of the index: court structure and proceedings, case management, court automation and alternative dispute resolution (figure 2). These practices can result in a more efficient and transparent judiciary, greater access to justice, a smaller case backlog, faster and less costly contract enforcement and, in some cases, more qualitative judgments.

As of this year’s report, enforcing contracts indicators introduced a gender component by measuring whether a woman’s testimony carries the same evidentiary weight in court as a man’s.

Table 1 - What do the indicators on the quality of judicial processes measure?

The data are collected through study of the codes of civil procedure and other court regulations as well as questionnaires completed by local litigation lawyers and judges. The ranking of economies on the ease of enforcing contracts is determined by sorting their distance to frontier scores for enforcing contracts. These scores are the simple average of the distance to frontier scores for each of the component indicators (figure 3).

Figure 3 - Enforcing contracts: efficiency and quality of commercial dispute resolution

Read the methodology