Force-majeure and Frustration are contract principles which are very significant in the present context of Covid-19 pandemic. This article is a study on the said contract principles with various judicial pronouncements on the applicability of force-majeure and frustration.
{"title":"Force-Majeure under Contract Law in the Context of Covid-19 Pandemic","authors":"R. Mathew","doi":"10.2139/ssrn.3588338","DOIUrl":"https://doi.org/10.2139/ssrn.3588338","url":null,"abstract":"Force-majeure and Frustration are contract principles which are very significant in the present context of Covid-19 pandemic. This article is a study on the said contract principles with various judicial pronouncements on the applicability of force-majeure and frustration.","PeriodicalId":404809,"journal":{"name":"LSN: Rights & Remedies (Private Law - Contracts) (Topic)","volume":"41 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123168777","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The assessment of economic loss and compensatory damages for contract breach has traditionally navigated between two practical difficulties: judicial uncertainty and technical complexity. Judicial uncertainty is particularly high when objective data are missing. And when data exist, current financial and statistical methodologies are too complex and costly for most cases. This leads to inefficient bargaining, unnecessary litigations and/or unpredictable judicial decisions.
Hence there is a need for alternative methods that are both objective and simpler than current quantitative methods. One of those methods would be to develop damages scales for certain types of economic losses as they exist for personal injury. A good way to start is to study case law and to survey rulings that can be used as precedents for different classes of economic damages.
We have selected three types of business situations where we think the use of simple quantitative methods is most relevant to assess damages: breach of an agreement to negotiate, damage to commercial reputation, lost profits for a new business. For each of those situations we successively designed hypothesis of the findings we were looking for, developed a template with fact specific criteria, searched and identified several hundreds of relevant cases and built a comprehensive database. We then used the database to validate or amend the initial hypothesis, to identify patterns or correlations and to suggest damage ranges or scales.
We observe a certain consistency for the basic metrics: win rate and recovery rate. The trends are upward in French law and downward in American law but they both converge towards similar rates. International law gives slightly higher rates. However we also observe wide deviations from those metrics averages. The performed empirical analysis to-date leads us to four main arguments as to how and why cases deviate from the average.
The first argument is a clear negative correlation between the quantum of the plaintiff’s claim and the recovery rate. This is true for most situations in all three laws. The gap between claim and defense widens when claim increases, so court decision logically reflects this wider gap. That may also indicates there is a “psychological” ceiling for the compensatory damages courts will eventually grant. “Hidden punitive damages” cannot be excluded either when extremely high damages are granted to plaintiffs while courts mention bad faith of defendants.
Secondly, there is a positive correlation between the sophistication of the methodology used by the claimant and the successful outcome of the case for that claimant. Sophistication of the methodology developed by the claimant in support of her claim has logically a positive impact on the win rate and the recovery rate. This is true in all three situations for US law and French law. However that positive driver remains weaker than the above mentioned negative driver
{"title":"Criteria Influencing the Damages Granted as a Remedy for Contract Breach","authors":"Frank Giaoui","doi":"10.2139/ssrn.3197596","DOIUrl":"https://doi.org/10.2139/ssrn.3197596","url":null,"abstract":"The assessment of economic loss and compensatory damages for contract breach has traditionally navigated between two practical difficulties: judicial uncertainty and technical complexity. Judicial uncertainty is particularly high when objective data are missing. And when data exist, current financial and statistical methodologies are too complex and costly for most cases. This leads to inefficient bargaining, unnecessary litigations and/or unpredictable judicial decisions. <br><br>Hence there is a need for alternative methods that are both objective and simpler than current quantitative methods. One of those methods would be to develop damages scales for certain types of economic losses as they exist for personal injury. A good way to start is to study case law and to survey rulings that can be used as precedents for different classes of economic damages. <br><br>We have selected three types of business situations where we think the use of simple quantitative methods is most relevant to assess damages: breach of an agreement to negotiate, damage to commercial reputation, lost profits for a new business. For each of those situations we successively designed hypothesis of the findings we were looking for, developed a template with fact specific criteria, searched and identified several hundreds of relevant cases and built a comprehensive database. We then used the database to validate or amend the initial hypothesis, to identify patterns or correlations and to suggest damage ranges or scales.<br><br>We observe a certain consistency for the basic metrics: win rate and recovery rate. The trends are upward in French law and downward in American law but they both converge towards similar rates. International law gives slightly higher rates. However we also observe wide deviations from those metrics averages. The performed empirical analysis to-date leads us to four main arguments as to how and why cases deviate from the average. <br><br>The first argument is a clear negative correlation between the quantum of the plaintiff’s claim and the recovery rate. This is true for most situations in all three laws. The gap between claim and defense widens when claim increases, so court decision logically reflects this wider gap. That may also indicates there is a “psychological” ceiling for the compensatory damages courts will eventually grant. “Hidden punitive damages” cannot be excluded either when extremely high damages are granted to plaintiffs while courts mention bad faith of defendants.<br><br>Secondly, there is a positive correlation between the sophistication of the methodology used by the claimant and the successful outcome of the case for that claimant. Sophistication of the methodology developed by the claimant in support of her claim has logically a positive impact on the win rate and the recovery rate. This is true in all three situations for US law and French law. However that positive driver remains weaker than the above mentioned negative driver ","PeriodicalId":404809,"journal":{"name":"LSN: Rights & Remedies (Private Law - Contracts) (Topic)","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-06-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124298074","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This Essay examines the dramatic increase in business networks in recent decades and considers whether the law can play a useful role in supporting the efficient functioning of these inter-firm relationships for coordination and cooperation. Repeat play, reputational sanctions, and norms of trust and reciprocity are the common explanations for the flourishing of networks in many industries and places. But the evidence also shows that a certain class of networks often fail to survive or function effectively and beneficial cooperation among these network members is impaired. These fragile networks develop organically without a controlling party or hierarchy at the center of the network to facilitate network formation. Lacking a controlling entity, they are “webs without any spider.” Clusters of industrial districts are traditional examples of this class of networks. More recently, the information revolution has stimulated a dramatic increase in another type of “spiderless” network: networks of strategic alliances are now a common means of organizing collaborations among firms in high technology and R & D intensive settings. In both types of spiderless networks there are no legal mechanisms to control moral hazard and free riding risks during the period of network formation and operation. We show how in theory the law could support spiderless networks by allowing firms who externalize benefits to other firms in the network to recover for those benefits. Practical considerations may limit the implementation of a full-blown right of restitution. Nevertheless, by recognizing a limited right to recover for uncompensated costs and benefits in appropriate cases, the law can function as a background norm for sharing costs and benefits among network members, motivating them to overcome daunting coordination problems. We consider several implementation issues, show how they might be resolved, and apply our analysis to a set of well-known spiderless networks.
{"title":"Can Restitution Save Fragile Spiderless Networks?","authors":"A. Porat, R. Scott","doi":"10.2139/ssrn.2946404","DOIUrl":"https://doi.org/10.2139/ssrn.2946404","url":null,"abstract":"This Essay examines the dramatic increase in business networks in recent decades and considers whether the law can play a useful role in supporting the efficient functioning of these inter-firm relationships for coordination and cooperation. Repeat play, reputational sanctions, and norms of trust and reciprocity are the common explanations for the flourishing of networks in many industries and places. But the evidence also shows that a certain class of networks often fail to survive or function effectively and beneficial cooperation among these network members is impaired. These fragile networks develop organically without a controlling party or hierarchy at the center of the network to facilitate network formation. Lacking a controlling entity, they are “webs without any spider.” Clusters of industrial districts are traditional examples of this class of networks. More recently, the information revolution has stimulated a dramatic increase in another type of “spiderless” network: networks of strategic alliances are now a common means of organizing collaborations among firms in high technology and R & D intensive settings. In both types of spiderless networks there are no legal mechanisms to control moral hazard and free riding risks during the period of network formation and operation. We show how in theory the law could support spiderless networks by allowing firms who externalize benefits to other firms in the network to recover for those benefits. Practical considerations may limit the implementation of a full-blown right of restitution. Nevertheless, by recognizing a limited right to recover for uncompensated costs and benefits in appropriate cases, the law can function as a background norm for sharing costs and benefits among network members, motivating them to overcome daunting coordination problems. We consider several implementation issues, show how they might be resolved, and apply our analysis to a set of well-known spiderless networks.","PeriodicalId":404809,"journal":{"name":"LSN: Rights & Remedies (Private Law - Contracts) (Topic)","volume":"31 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121530646","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This Article reveals a clear, but thus far overlooked, pattern in the comparative law of contracts. The civil law places more limits on the scope of contractual obligations, whereas the common law more forcefully constraints the remedies available for breach of contract. It then offers two interpretations for these differences. On the one hand, the civil and common law systems reflect a different role of the state in contract law. In the civil law, the state plays a greater part in all respects: it goes further in providing and policing the substantive terms of the agreement but, once the contract passes muster, it is willing to sanction breaches with more severe consequences. Common law systems embrace the opposite, more restrained, approach: the state is less willing both to meddle with contract terms and to supply strong remedies for non-performance. On the other hand, the treatment of contract rights and remedies in each legal tradition can be viewed as complementary. Policing the terms of the contract and limiting the consequences of breach serve as alternative, though not equivalent, strategies to mitigate the effects of harsh bargains.
{"title":"The Role of the State in Contract Law: The Common-Civil Law Divide","authors":"M. Pargendler","doi":"10.2139/ssrn.2848886","DOIUrl":"https://doi.org/10.2139/ssrn.2848886","url":null,"abstract":"This Article reveals a clear, but thus far overlooked, pattern in the comparative law of contracts. The civil law places more limits on the scope of contractual obligations, whereas the common law more forcefully constraints the remedies available for breach of contract. It then offers two interpretations for these differences. On the one hand, the civil and common law systems reflect a different role of the state in contract law. In the civil law, the state plays a greater part in all respects: it goes further in providing and policing the substantive terms of the agreement but, once the contract passes muster, it is willing to sanction breaches with more severe consequences. Common law systems embrace the opposite, more restrained, approach: the state is less willing both to meddle with contract terms and to supply strong remedies for non-performance. On the other hand, the treatment of contract rights and remedies in each legal tradition can be viewed as complementary. Policing the terms of the contract and limiting the consequences of breach serve as alternative, though not equivalent, strategies to mitigate the effects of harsh bargains.","PeriodicalId":404809,"journal":{"name":"LSN: Rights & Remedies (Private Law - Contracts) (Topic)","volume":"291 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-10-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122298144","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This year NFL fans were forced to wait an extra week after the NFL canceled the 2016 game out of safety concerns that resulted from mismanaged field construction. Several NFL analysts and former players applauded the league’s judgment in canceling the game out of player safety concerns. Not surprisingly, though, fans were not as pleased with the league’s seemingly last-minute decision to cancel the game.
{"title":"Last-Minute Hall of Fame Game Fumble May Be Costly","authors":"Timothy Liam Epstein","doi":"10.2139/SSRN.2844279","DOIUrl":"https://doi.org/10.2139/SSRN.2844279","url":null,"abstract":"This year NFL fans were forced to wait an extra week after the NFL canceled the 2016 game out of safety concerns that resulted from mismanaged field construction. Several NFL analysts and former players applauded the league’s judgment in canceling the game out of player safety concerns. Not surprisingly, though, fans were not as pleased with the league’s seemingly last-minute decision to cancel the game.","PeriodicalId":404809,"journal":{"name":"LSN: Rights & Remedies (Private Law - Contracts) (Topic)","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-09-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130238103","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In Dream Property v Atlas Housing [2015] 2 A.M.R. 601; [2015] 2 M.L.J. 441, the Federal Court of Malaysia recognised unjust enrichment as an independent source of legal obligation. The precise way they went about this revolutionised the general understanding of the law in Malaysia. And they also discussed restitutionary awards for wrongs. The case may prove to be a poisoned chalice. As I explain in this note, the Federal Court’s reasoning and its application of the legal concepts to the facts leave a lot to be desired.
In Dream Property v . Atlas Housing [2015] 2 A.M.R. 601;[2015] 2 M.L.J. 441，马来西亚联邦法院承认不当得利是法律义务的独立来源。他们的做法彻底改变了人们对马来西亚法律的普遍理解。他们还讨论了对错误的赔偿。这个案子可能会被证明是一个有毒的圣杯。正如我在本说明中所解释的那样，联邦法院的推理及其对事实的法律概念的应用还有很多需要改进的地方。
{"title":"A Dream Case?","authors":"Frederick Wilmot-Smith","doi":"10.2139/SSRN.2911502","DOIUrl":"https://doi.org/10.2139/SSRN.2911502","url":null,"abstract":"In Dream Property v Atlas Housing [2015] 2 A.M.R. 601; [2015] 2 M.L.J. 441, the Federal Court of Malaysia recognised unjust enrichment as an independent source of legal obligation. The precise way they went about this revolutionised the general understanding of the law in Malaysia. And they also discussed restitutionary awards for wrongs. The case may prove to be a poisoned chalice. As I explain in this note, the Federal Court’s reasoning and its application of the legal concepts to the facts leave a lot to be desired.","PeriodicalId":404809,"journal":{"name":"LSN: Rights & Remedies (Private Law - Contracts) (Topic)","volume":"299 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122696204","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We analyze the effect of liquidated damage rules in exclusive contracts that are negotiated in a sequential bargaining process between one seller and two buyers with endogenous outside options. We show that assumptions on the distribution of bargaining power influence the size of the payment of damages and determine which contractual party benefits from including liquidated damage rules. Furthermore, we show that the effect of the payment of damages on the efficiency of the consummated deals depends on the possibility to sign more than one contract. Only if this is not possible, damage rules may prevent the breaking and entering of contracts and thus lead to inefficient deals in the market of corporate control, or allow for ‘naked’ exclusion in the context of supplier contracts with externalities.
{"title":"'Breaking and Entering' of Contracts as a Matter of Bargaining Power and Exclusivity Clauses","authors":"S. Rosenkranz, U. Weitzel","doi":"10.2139/ssrn.2227337","DOIUrl":"https://doi.org/10.2139/ssrn.2227337","url":null,"abstract":"We analyze the effect of liquidated damage rules in exclusive contracts that are negotiated in a sequential bargaining process between one seller and two buyers with endogenous outside options. We show that assumptions on the distribution of bargaining power influence the size of the payment of damages and determine which contractual party benefits from including liquidated damage rules. Furthermore, we show that the effect of the payment of damages on the efficiency of the consummated deals depends on the possibility to sign more than one contract. Only if this is not possible, damage rules may prevent the breaking and entering of contracts and thus lead to inefficient deals in the market of corporate control, or allow for ‘naked’ exclusion in the context of supplier contracts with externalities.","PeriodicalId":404809,"journal":{"name":"LSN: Rights & Remedies (Private Law - Contracts) (Topic)","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-03-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122843842","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2012-07-02DOI: 10.5040/9781474200790.ch-022
C. Daly, C. Mitchell
Discusses Millett LJ's 1999 judgment on the limitation rules governing claims for breach of constructive trust in Paragon Finance plc v DB Thakerar & Co.
{"title":"Paragon Finance Plc v DB Thakerar & Co (A Firm) (1999)","authors":"C. Daly, C. Mitchell","doi":"10.5040/9781474200790.ch-022","DOIUrl":"https://doi.org/10.5040/9781474200790.ch-022","url":null,"abstract":"Discusses Millett LJ's 1999 judgment on the limitation rules governing claims for breach of constructive trust in Paragon Finance plc v DB Thakerar & Co.","PeriodicalId":404809,"journal":{"name":"LSN: Rights & Remedies (Private Law - Contracts) (Topic)","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-07-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126021246","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Le present article offre une vue d’ensemble des causes d’exoneration du transporteur maritime des marchandises contenues dans les Regles de Rotterdam et les Regles de La Haye-La Haye/Visby. L’objectif de notre analyse est d’identifier les modifications les plus importantes apportees par les Regles de Rotterdam aux causes d’exoneration existantes sous les Regles de La Haye-La Haye-Visby. La jurisprudence et la doctrine du Canada, du Royaume-Uni et des Etats-Unis portant sur les causes d’exoneration des Regles de La Haye-La Haye/Visby fournissent la base de notre etude comparative.
{"title":"Overview of Ocean Carrier Liability Exceptions under the Rotterdam Rules and the Hague-Hague/Visby Rules","authors":"Marel Katsivela","doi":"10.7202/1026957AR","DOIUrl":"https://doi.org/10.7202/1026957AR","url":null,"abstract":"Le present article offre une vue d’ensemble des causes d’exoneration du transporteur maritime des marchandises contenues dans les Regles de Rotterdam et les Regles de La Haye-La Haye/Visby. L’objectif de notre analyse est d’identifier les modifications les plus importantes apportees par les Regles de Rotterdam aux causes d’exoneration existantes sous les Regles de La Haye-La Haye-Visby. La jurisprudence et la doctrine du Canada, du Royaume-Uni et des Etats-Unis portant sur les causes d’exoneration des Regles de La Haye-La Haye/Visby fournissent la base de notre etude comparative.","PeriodicalId":404809,"journal":{"name":"LSN: Rights & Remedies (Private Law - Contracts) (Topic)","volume":"53 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-12-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126187571","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The majority of American jurisdictions do not allow punitive damages for breach of contract unless the breach constitutes an independent tort. Increasingly, courts and commentators have relied on the theory of “efficient breach” to explain the rule against punitive damages in contracts. In this Article, Professor Dodge argues that economic efficiency supports a different rule — one allowing punitive damages for any willful breach of contract.Willful breaches fall into two categories: those that are “opportunistic” and those that are “efficient.” An “opportunistic” breach does not increase the size of the economic pie; the breaching party gains simply by capturing a larger share of the pie at the expense of the nonbreaching party. An “efficient” breach, by contrast, increases the size of the pie, allowing the breaching party to compensate the nonbreaching party and still come out ahead. Deterring opportunistic breaches with the threat of punitive damages is efficient because such breaches by definition do not increase societal wealth. Thus, punitive damages should be routinely available in cases of opportunistic breach, such as pretextual termination, stonewalling, and bad faith refusal to pay a debt.Efficiency also supports extending liability for punitive damages to those breaches that are, in theory, “efficient.” The threat of punitive damages will not require inefficient performance because the potentially breaching party may negotiate with the other party for a release. Relying on Calabresi and Melamed’s distinction between “property rules” and “liability rules,” Professor Dodge shows that requiring the potentially breaching party to negotiate for a release is more efficient than allowing her to breach and pay damages because the transaction costs of negotiation, while not negligible, are generally lower than the assessment costs of litigation. He also explains why other forms of “property rule” protection, like specific performance and penalty clauses, are insufficient to ensure that negotiation occurs before breach.
{"title":"The Case for Punitive Damages in Contracts","authors":"William S. Dodge","doi":"10.2307/1373069","DOIUrl":"https://doi.org/10.2307/1373069","url":null,"abstract":"The majority of American jurisdictions do not allow punitive damages for breach of contract unless the breach constitutes an independent tort. Increasingly, courts and commentators have relied on the theory of “efficient breach” to explain the rule against punitive damages in contracts. In this Article, Professor Dodge argues that economic efficiency supports a different rule — one allowing punitive damages for any willful breach of contract.Willful breaches fall into two categories: those that are “opportunistic” and those that are “efficient.” An “opportunistic” breach does not increase the size of the economic pie; the breaching party gains simply by capturing a larger share of the pie at the expense of the nonbreaching party. An “efficient” breach, by contrast, increases the size of the pie, allowing the breaching party to compensate the nonbreaching party and still come out ahead. Deterring opportunistic breaches with the threat of punitive damages is efficient because such breaches by definition do not increase societal wealth. Thus, punitive damages should be routinely available in cases of opportunistic breach, such as pretextual termination, stonewalling, and bad faith refusal to pay a debt.Efficiency also supports extending liability for punitive damages to those breaches that are, in theory, “efficient.” The threat of punitive damages will not require inefficient performance because the potentially breaching party may negotiate with the other party for a release. Relying on Calabresi and Melamed’s distinction between “property rules” and “liability rules,” Professor Dodge shows that requiring the potentially breaching party to negotiate for a release is more efficient than allowing her to breach and pay damages because the transaction costs of negotiation, while not negligible, are generally lower than the assessment costs of litigation. He also explains why other forms of “property rule” protection, like specific performance and penalty clauses, are insufficient to ensure that negotiation occurs before breach.","PeriodicalId":404809,"journal":{"name":"LSN: Rights & Remedies (Private Law - Contracts) (Topic)","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1999-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134213897","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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