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Full-Text Articles in Legal Remedies
Market Damages, Efficient Contracting, And The Economic Waste Fallacy, Alan Schwartz, Robert E. Scott
Market Damages, Efficient Contracting, And The Economic Waste Fallacy, Alan Schwartz, Robert E. Scott
Faculty Scholarship
Market damages are the best default rule when parties trade in thick markets: They induce parties to contract efficiently and to trade if and only if trade is efficient, and they do not create ex ante inefficiencies. Courts commonly overlook these virtues, however, when promisors bundle services that are not separately priced. For example, a promisor may agree to pay royalties on a mining lease and later to restore the promisee's property. When the cost of completion is large relative to the "market delta " – the increase in market value – courts concerned with avoiding "economic waste" limit the …
Uncertainty, Reliance, Preliminary Negotiations And The Hold Up Problem, Juliet P. Kostritsky
Uncertainty, Reliance, Preliminary Negotiations And The Hold Up Problem, Juliet P. Kostritsky
Faculty Publications
Recently, two scholars, Alan Schwartz and Robert Scott, have cast doubt on the conventional view that courts would find liability and award reliance damages in precontractual cases that resembled the famous Hoffman v. Red Owl case. They have argued that courts deny recovery for reliance in cases involving precontractual preliminary negotiation but regularly grant reliance recovery following a preliminary agreement. They identify a pattern or sequence in which success is likely and then provide an analytical framework to justify liability. When parties reach a preliminary agreement that also includes an agreement that they both invest simultaneously and one party strategically …