Law Commons^™

Enforcing Coasian Bribes For Non-Price Benefits: A New Role For Restitution, Tamar Frankel, Wendy J. Gordon

Faculty Scholarship

In Boomer v. Muir,¹ a subcontractor on a hydroelectric project continued to provide goods and services even though the value of the performance far exceeded the contract price. The general contractor, who was receiving these goods and services, breached the contract even though he was paying less than market price for them.²

In many states, a supplier in the subcontractor's position has among her options the choice of "rescission and restitution."³ That means the supplier may rescind the contract and seek, under the label of "restitution", payment set at market price (or at her cost)⁴ for …

Contract Renegotiation, Mechanism Design, And The Liquidated Damages Rule, Eric L. Talley

Faculty Scholarship

The common law practice of refusing to enforce contractual penalties has long mystified law and economics scholars. After critiquing the prevailing law and economics analyses of the common law rule, Eric L. Talley reevaluates the penalty doctrine using the game theoretic technique of mechanism design, which facilitates the analysis of multiparty bargaining situations under various assumptions. Using this technique to model the allocational consequences of various enforcement regimes that courts might adopt with respect to stipulated damages clauses, Mr. Talley finds that penalty nonenforcement can increase economic efficiency by discouraging strategic behavior by the parties, thereby inducing more efficient contract …