Document Type

Article

Publication Date

2000

Abstract

A long and distinguished line of law-and-economics articles has established that in many circumstances fully compensatory expectation damages are a desirable remedy for breach of contract because they induce both efficient performance and efficient breach. The expectation measure, which seeks to put the breached-against party in the position she would have been in had the contract been performed, has, therefore, rightly been chosen as the dominant contract default rule. It does a far better job of regulating breach-or-perform incentives than its leading competitors-the restitution measure, the reliance measure, and specific performance. This Essay does not directly take issue with the economic literature demonstrating the general desirability of expectation damages. Rather, it suggests that the literature is implicitly based on the assumption that it is costless for the breached-against party to reveal the information necessary to establish the magnitude of expectation damages. It then argues that in real-world transactional contexts characterized by asymmetric information and the availability of broad pretrial discovery rights, the expectation measure may not be as desirable a remedy as the existing literature suggests.


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