TY - JOUR
T1 - Opportunistic Breach of Contract
AU - Parisi, Francesco
AU - Porat, Ariel
AU - Bix, Brian H.
N1 - Publisher Copyright:
© 2024 Cambridge University Press. All rights reserved.
PY - 2024/2/28
Y1 - 2024/2/28
N2 - Law and economics scholarship has traditionally analyzed efficient breach cases monolithically. By grouping efficient breach cases together, this literature treats the subjective motives and the distributive effects of the breach as immaterial. The Restatement (Third) of Restitution and Unjust Enrichment introduced a distinction based on the intent and the effects of the breach, allowing courts to use disgorgement remedies in cases of ‘opportunistic’ breach of contract (i.e., ‘deliberate and profitable’ breaches). In this article, we evaluate this approach, focusing on the effects of disgorgement remedies on allocative and productive efficiency, information-forcing and competitive effects, and restraint of breach-searching incentives. We show that, even from a purely consequentialist perspective, disgorgement remedies may be normatively warranted, especially when involving sellers’ breach. Recent experimental evidence revealed that the preferences and reactions of ordinary people are in line with our evaluation of the effects of opportunistic breach.
AB - Law and economics scholarship has traditionally analyzed efficient breach cases monolithically. By grouping efficient breach cases together, this literature treats the subjective motives and the distributive effects of the breach as immaterial. The Restatement (Third) of Restitution and Unjust Enrichment introduced a distinction based on the intent and the effects of the breach, allowing courts to use disgorgement remedies in cases of ‘opportunistic’ breach of contract (i.e., ‘deliberate and profitable’ breaches). In this article, we evaluate this approach, focusing on the effects of disgorgement remedies on allocative and productive efficiency, information-forcing and competitive effects, and restraint of breach-searching incentives. We show that, even from a purely consequentialist perspective, disgorgement remedies may be normatively warranted, especially when involving sellers’ breach. Recent experimental evidence revealed that the preferences and reactions of ordinary people are in line with our evaluation of the effects of opportunistic breach.
KW - contract damages
KW - contract law
KW - efficient breach
KW - opportunistic breach
KW - promissory theory of contract
UR - http://www.scopus.com/inward/record.url?scp=85186888167&partnerID=8YFLogxK
U2 - 10.1017/cjlj.2023.20
DO - 10.1017/cjlj.2023.20
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AN - SCOPUS:85186888167
SN - 0841-8209
VL - 37
SP - 199
EP - 230
JO - Canadian Journal of Law and Jurisprudence
JF - Canadian Journal of Law and Jurisprudence
IS - 1
ER -