Law Commons^™

Contract Damages, Moral Agency, And Henry James’ The Ambassadors, Jennifer Nadler

Jennifer Nadler

This paper enters the dispute over the proper interpretation of the expectation measure of damages in contract law. Should damages be measured by the plaintiff’s financial loss or by the cost of acquiring a substitute performance (“cost of cure”)? I begin by presenting a moral (as opposed to an economic or a pragmatic) justification for the traditional contract principle that a plaintiff has a right to compensation for the financial loss flowing from breach but no right to performance. I do so by showing that implicit in the principle that the plaintiff has a right to compensation for financial loss …

Contract Damages, Moral Agency, And Henry James’ The Ambassadors, Jennifer Nadler

Articles & Book Chapters

This paper enters the dispute over the proper interpretation of the expectation measure of damages in contract law. Should damages be measured by the plaintiff’s financial loss or by the cost of acquiring a substitute performance (“cost of cure”)? I begin by presenting a moral (as opposed to an economic or a pragmatic) justification for the traditional contract principle that a plaintiff has a right to compensation for the financial loss flowing from breach but no right to performance. I do so by showing that implicit in the principle that the plaintiff has a right to compensation for financial loss …

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 …

Virtue Ethics And Efficient Breach, Avery W. Katz

Faculty Scholarship

The concept of "efficient breach" – the idea that a contracting party should be encouraged to breach a contract and pay damages if doing so would be more efficient than performance – is probably the most influential concept in the economic analysis of contract law. It is certainly the most controversial. Efficient breach theory has been criticized from both within and without the economic approach, but its most prominent criticism is that it violates deontological ethics – that the beneficiary of a promise has a right to performance, so that breaching the promise wrongs the promisee.

This essay argues that …

Expectation Damages, The Objective Theory Of Contracts, And The "Hairy Hand" Case: A Proposed Modification To The Effect Of Two Classical Contract Law Axioms In Cases Involving Contractual Misunderstandings, Daniel P. O'Gorman

Kentucky Law Journal

No abstract provided.

Could Breach Of Contract Be Immoral?, Seana Shiffrin

Michigan Law Review

Some scholars defend the contract law's ban on punitive damage awards on the grounds that breach of contract, in itself, is not morally wrong. In this Article, I offer two responses. First, I refute one prevalent argument of Steven Shavell's in support of this view. Shavell argues that contractual breach is not immoral in those cases in which the legal regime would offer expectation damages because the contracting parties would not have agreed to require performance had they explicitly deliberated about the circumstances occasioning the breach. I criticize his argument for failing to justify this hypothetical-contract approach and, in any …

Willfulness Versus Expectation: A Promisor-Based Defense Of Willful Breach Doctrine, Steve Thel, Peter Siegelman

Michigan Law Review

Willful breach doctrine should be a major embarrassment to contract law. If the default remedy for breach is expectation damages designed to put the injured promisee in the position she would have been in if the contract had been performed, then the promisor's behavior-the reason for the breach-looks to be irrelevant in assessing damages. And yet the cases are full of references to "willful" breaches, which seem often to be treated more harshly than ordinary ones based on the promisor's bad/willful conduct. Our explanation is that willful breaches are best understood as those that should be prevented or deterred because …

A Critique Of The Efficient Performance Hypothesis, Jody S. Kraus

Faculty Scholarship

The classic economic justification of contract law’s default remedy of expectation damages is grounded on the efficient breach hypothesis: that promisors should be permitted and encouraged to breach when the net gains from breach exceed the net gains from performance. Expectation damages ensure that all and only efficient breaches will occur because promisors will find breach profitable only if its benefits exceed the value of performance to the promisee. The efficient breach hypothesis, and the defense of expectation damages that rests on it, has long been criticized for being inconsistent with the moral intuition that promisors necessarily forfeit their right …

Contracts – Only With Consent, Ronald J. Mann

Faculty Scholarship

My friend and former colleague Omri Ben-Shahar has established a reputation for providing nuanced and well-grounded applications of economic analysis to important problems of contract law. In recent years, he has undertaken the ambitious task of exploring a significant topic at the boundary of contract law: liability for problems that arise out of efforts to form a contract. The essay to which I reply, Contracts Without Consent: Exploring a New Basis for Contractual Liability, is his second work on that topic, following his 2001 article with Lucian Bebchuk entitled Precontractual Reliance. Collectively, these pieces provide a comprehensive analysis …

Embedded Options In The Case Against Compensation In Contract Law, Robert E. Scott, George G. Triantis

Faculty Scholarship

Although compensation is the governing principle in contract law remedies, it has tenuous historical, economic, and empirical support. A promisor's right to breach and pay damages is only a subset of a larger family of termination rights that do not purport to compensate the promisee for losses suffered when the promisor walks away from the contemplated exchange. These termination rights can be characterized as embedded options that serve important risk management functions. We show that sellers often sell insurance to their buyers in the form of these embedded call options, and that termination fees, including damages, are in essence option …

A Radical Restatement Of The Law Of Seller's Damages: New York Results Compared, Robert J. Harris

Fordham Law Review

No abstract provided.