The land restitution in Bulgaria led to a severe fragmentation in land ownership. This has an impact on the agricultural development and land market. The article investigates the land transactions on the sale and rentals markets. In order to explain the processes three new institutional economic theories will be employed: property rights theory, transaction costs theory and agricultural contract theory. First, the article reviews the appropriateness of each theory, and second, results of conducted survey in two regions of Bulgaria with different degrees of land fragmentation. Key words: Bulgaria, Contractual arrangements, Land fragmentation, Land market, Land transactions, Property rights