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...

Our paper offers the first justification for the U.S. bankruptcy code, in which firms are not allowed to commit themselves ex-ante in their lending agreements either to (Chapter 7) liquidation or to (Chapter 11) reorganization in case of distress ex-post. If fire-sale liquidation imposes...

It is widely agreed that capital cost reduction should be among the goals that a business bankruptcy law should pursue. This Essay argues that capital cost reduction should be the only goal, and that a bankruptcy system seriously committed to this goal would be both smaller and less centralized...

The fees of experts (financial advisors, lawyers, accountants) are a substantial fraction of bankruptcy costs. Scholars have considered how best to reduce these costs, but have not considered how they should be allocated among creditors. The allocation issue is important because creditors can...

The regulatory compliance defense holds firms liable whose products or product warnings fail to satisfy federal regulatory standards, but does not exculpate firms that comply. Rather, compliance is relevant evidence for a jury to consider in a products liability action. This article argues that...

Creditors and the insolvent firm are required to use the state supplied bankruptcy procedure if they cannot agree on a private resolution after financial distress has occurred. While these ex post workouts are legal, parties cannot agree in the lending contracts to use a bankruptcy procedure...

This paper asks whether market competition can ameliorate the effect of cognitive error. Competition is possible because consumers differ cognitively, some consumers being more prone to err (the quot;naivequot;) than others (the quot;sophisticatedquot;). The approach here is to create a search...