Private Law Theory

ABSTRACT
One of the most debated questions in the literature on contract law is what the optimal measure of damages for breach should be. The standard casebook answer, drawing from the theory of efficient breach, is expectation damages. This standard answer, once considered a major contribution of the law and economics field, has increasingly come under attack by theoreticians within that field itself. To shed an empirical perspective on the question, we look at data in one setting (prepayment clauses in international debt contracts) on what types of damages provisions parties themselves actually contract for. In our empirical analysis, we find evidence of a wide range of clauses but very little preference for the expectations damages measure.

Arnold, Theresa and Dixon, Amanda and Whalen, Madison and Gulati, Gaurang Mitu, The Myth of Optimal Expectation Damages (April 10, 2020). Marquette Law Review, forthcoming.

First posted 2020-05-07 06:11:54