Scarcity of water has become a major issue facing many nations around the world. To improve the efficiency of water usage there has been consid- erable interest in recent years in trading water. A major issue in trading water rights is the problem of how an allocation system can be designed in perpetuity that also has desirable properties at each point of time. This is an isssue of the time consistency of the contract to trade water. In this paper we develop a model of dynamic recontracting of water rights and study time consistency properties of the resultant contracts using the ideas of Filar and Petrosjan [7].