Before revision:  Our analysis relies on an optimal decomposition of the expected utility of the Principal in terms of the reservation utility of the Agent . In particular, this allows us to derive the Borch rule as a necessary optimality condition for this decomposition to hold, which sheds a new light on this economic concept .
After revision:  Our analysis relies on an optimal decomposition of the expected utility of the Principal in terms of the reservation utility of the Agent and works both in a discrete time and continuous time setting .