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The Myth of Efficient Breach: New Defenses of the Expectation Interest (with Alan Schwartz)

By Daniel Markovits and Alan Schwartz

Abstract

CONTRACT remedies have long sought to protect the gains that parties contract to realize. Although the Restatement rec ognizes three distinct contractual interests—expectation, reliance, and restitution—it expressly privileges the expectation interest over the other two. Courts \u22[o]rdinarily . . . enforce[] the broken prom ise by protecting the expectation that the injured party had when he made the contract.\u22 In recent years, both courts and scholars have begun to question how the law should protect a promisee\u27s expectation. This question once had a conventional—indeed, assumed—answer. Courts, the Restatement observes, ordinarily protect the promisee\u27s expecta tion \u22by attempting to put him in as good a position as he would have been in had the contract been performed\u22; that is, by \u22giv[ing] the injured party the \u27benefit of the bargain.\u27\u22 The Uni form Commercial Code similarly recites that contract remedies are designed to put the aggrieved party \u22in as good a position as if the other party had fully performed.\u224 Conventional contract law thus does not put the promisee in the position of receiving the promised performance but rather puts him \u22in as good a position\u22 by requir ing the promisor to pay money damages that equal the benefit of the promisee\u27s lost bargain. In the current lexicon, contractual expectations conventionally receive liability rather than property rule protection

Topics: Law
Publisher: Yale Law School Legal Scholarship Repository
Year: 2011
OAI identifier: oai:digitalcommons.law.yale.edu:fss_papers-5664
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