Contract Law

Performance and Breaches

Breach: 违约

Airplane Purchase Example

$A$: Airline Builder. $B$: Buyer

$B$ agrees to pay 350,000, while his value of this is 500,000. $A$ expect the cost to be 250,000.

• If penalty is too small, Contract Law has no bite.
• If penalty is too large, promises might get kept even when that becomes inefficient. $⟹$ Our goal: to design a method to get breach of contract only when it’s efficient to breach.

When benefit of breach > social cost of breach $\to$ Efficient

That is, when promisor’s cost > promisee’s benefit $\to$ Efficient.

However, in reality, the truth might be:

That is, when promisor’s cost > Liability from breach $\to$ Efficient.

So, if we set the liability from breach exactly the same of promisee’s benefit from performance, the promisor will breach exactly when it’s efficient. This is called the Expectation Damages

In the Airline Example, the expected damage would be $500,000-350,000=150,000$.

So we could conclude that:

The promisor’s payoff would be:

• Perform: $p-c$
• Breach: $-D=-(v-p)$
• So he would breach if and only if $c>v$

Another Way to Think about Expectation Damages: Eliminating an Externality

Contract and Optimal Performance

• Reliance damages

Types of Breach:

In the event of a contract breach, there are a few types of monetary damage awards the court may impose:

• Expectation damages;
• Reliance damages;
• Opportunity cost damages.

1. 期望损害赔偿（Expectation Damages）：旨在补偿承诺接受人因合同履行期待而可能获得的利益。这被称为“正面损害赔偿”，因为它们补偿你预期从合同中获得的积极利益。

2. 依赖损害赔偿（Reliance Damages）：补偿承诺接受人在依赖合同承诺时所作的任何投资成本，但不包括他预期获得的额外利益。这旨在将承诺接受人恢复到签订合同之前的福利水平。民法传统将这些称为“负面损害赔偿”，因为它们是为了消除实际发生的负面影响（即损害）。

3. 机会成本损害赔偿（Opportunity Cost Damages）：赋予承诺接受人他从其次优选择中可能获得的利益。目的是使承诺接受人在违约发生时与履行最佳替代合同时处于无差别状态。机会成本损害赔偿可以看作是依赖损害赔偿的延伸，其中放弃另一个机会被视为一种依赖，即是一种基于所作出的承诺的投资。