Passage A
Economic analysts of law have long defended the doctrine of efficient breach, which posits that a party to a contract should be legally permitted—even encouraged—to breach an agreement if the financial gains from breaching exceed the expected net benefits of performance, provided the non-breaching party is fully compensated via expectation damages. Under this wealth-maximizing framework, a contract is not a solemn moral pledge to perform, but an option: to perform or pay damages equivalent to performance. By prioritizing the reallocation of resources to their highest-valued use, expectation damages ensure that no party suffers a net welfare loss while aggregate economic efficiency is maximized. Legal moralists who view contractual breach as an inherent ethical wrong fail to recognize that rigid adherence to performance often locks valuable goods into suboptimal transactions, stifling economic dynamism and misallocating capital.
Passage B
Proponents of relational contract theory and deontic jurisprudence rightly question the foundational assumptions of the efficient breach model. By reducing contracts to mere financial options, the economic framework ignores the essential role of trust and promissory obligation in commercial life. In practice, compensatory remedies such as expectation damages rarely make the aggrieved party whole: subjective valuation, litigation expenses, disruption costs, and unquantifiable reputational harm are routinely excluded from judicial awards. More fundamentally, treating breach as a morally neutral calculation commodifies legal promises, eroding the social norms of reliability that underwrite functioning markets. When deliberate breach is legitimized so long as court-sanctioned damages are paid, parties are incentivized to engage in opportunism, necessitating costlier, more protective contract drafting and excessive monitoring. Far from maximizing systemic efficiency, the normalization of breach introduces pervasive market friction.
Based on the passages, which of the following statements express claims that BOTH the author of Passage A and the author of Passage B would accept? Select all that apply.
- The doctrine of efficient breach conceptualizes a contract as an option to either perform or pay compensatory damages rather than as an inviolable moral commitment.Cevap
- BJudicial awards of expectation damages reliably ensure that non-breaching parties suffer no uncompensated economic losses when an agreement is broken.
- A contracting party's decision whether to fulfill or breach an agreement produces economic consequences that extend beyond that party's own immediate financial return.Cevap
- DSystemic commercial efficiency is diminished because the threat of intentional breach forces contracting parties to expend additional resources on defensive drafting and monitoring.
- ELegal systems should impose punitive financial sanctions on breaching parties to eliminate the economic incentive for deliberate nonperformance.