Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 2 of 2
Full-Text Articles in Law
Efficient Breach, Gregory Klass
Efficient Breach, Gregory Klass
Georgetown Law Faculty Publications and Other Works
The theory of efficient breach is the best known, and the most controversial, product of nearly half a century of economic analysis of contract law. In its simplest form, which is the one that dominates the legal imagination, the theory argues that expectation damages are good because they allow, even encourage, a party to breach when performance becomes inefficient, thereby increasing social welfare. Many noneconomists assume the theory is well supported by principles of neoclassical economics. Thus critics commonly focus on the theory’s moral failings, or on problems with the neoclassical approach more generally. But today no economic thinker defends …
To Perform Or Pay Damages, Gregory Klass
To Perform Or Pay Damages, Gregory Klass
Georgetown Law Faculty Publications and Other Works
In The Myth of Efficient Breach: New Defenses of the Expectation Interest, Daniel Markovits and Alan Schwartz argue that contractual promises between sophisticated parties are best interpreted as disjunctive promises to perform or pay damages. They further argue that this dual performance hypothesis answers moral critics of the expectation remedy. This comment makes three claims about Markovits and Schwartz's argument. First, although the dual performance hypothesis is supported by Markovits and Schwartz's instrumentalist model, they do not have a good argument that it is empirically correct -- that it is the best interpretation of what sophisticated parties actually intend. …