What information should courts utilize when assessing contract damages? Should they award damages that were rationally foreseeable at the ex ante stage (ex ante expected damages)? Or should they award damages at the ex post level, incorporating new information revealed after contracting (ex post...

In this paper, we study contracts with two-sided incomplete information. Prior literature on contract remedies does not formally account for the nonbreaching party's option to not sue for damages upon breach, when her expected payoff from suing is negative, given the contractual terms and her...