The expectation interest remedy requires the promisor to transfer a sum equal to the promisee's expected gain from performance if the promisor reallocates her resources to another use. The theory of efficient breach justifies the remedy because the promisor will either perform, when the...

The common law developed over centuries a small set of default rules that courts have used to fill gaps in otherwise incomplete contracts between commercial parties. These rules can be applied almost independently of context: the market damages rule, for example, requires a court only to know...

This paper explores the possibility for efficient long term contracts among traders with changing and privately known incentives for exchange. We analyze a negotiation process that enables parties to adapt the default rules of exchange to changes in their preferences for trade. The selection of...

This Essay briefly reviews where law and economics has been, and then sets out important problems it now faces. My primary theme is that law and economics faces two culture problems: between scholars who self- identify as being in a field - contracts, torts - and who do not use economics in...

We defend contract law’s preference to protect the expectation with a liability rule against prominent doctrinal and moral critics who argue that a promisee should have a right to specific performance or to a restitutionary remedy. These critics argue that liability rule protection limited to...

This article is a comparative economic analysis of the disparate doctrines governing the good faith purchase of stolen or misappropriated goods. Good faith purchase questions have occupied the courts and commentators of many nations for millennia. We argue that prior treatments have misconceived...

Market damages - the difference between the market price for goods or services at the time of breach and the contract price - are the best default rule whenever parties trade in thick markets: they induce parties to contract efficiently and to trade if and only if trade is efficient, and they do...

This paper explores how the opportunity to recontract affects investment and trade in contractual relationships when it is assumed that renegotiation is costly. In this world, recontracting retains much of the benefit that has been ascribed to it, including the realization of any surplus that is...