(A) Is it necessary for both parties to benefit from the breach in order to be “efficient”, or does it only require that neither party is worse off? (B) Also, is there a distinction between the Pareto Optimal and efficient breaches?
Efficient breach references a economic-based theory of justice. One such theory is that those actions which maximizes social wealth are just. Consequently, a breach that increases social wealth, even if one party is left worse off, is just.
Pareto suggests that justice requires that benefiting society (or one party) should not come at the expense of the other. His definition of efficient changes requires one party gaining (in wealth), but also not the other losing.
Pareto efficiency, as a conception of justice, requires putting the non-breaching party where they would have been had the contract not been breached (protecting the expectation interest). If we don’t do that, then this party is worse off.
Sounds good, but we don’t give the non-breaching party lawyers’ fees. So, they will be worse off. But, the breach might nonetheless increase social wealth generally (including lawyers’ wealth) (or lawyers might be dead-weight costs).
So, we would want to liquidate the damages as much as possible (to make them cheaply available). But . . .
Or, we would want to act such that our contracting parties would not forsake us when they get a better option, by . . .
SOME REMEDIES REVIEW PROBLEMS
A student emailed me: “If the Offeree presents a counter-offer that terminates the original offer and even if the Offeree tries to accept the original offer the Offeror is free to reject him/her.
You said you did not agree with this and thought that “classical contract law” in this regard was out-dated.
I’m wondering if I tried to make an argument in favor of this practice on an exam, would I be considered wrong merely because you think the practice does not makes sense, or if I make a reasonable argument would I still be given credit for my efforts?
Basically would my argument be futile simply because you think the practice is unfair or don’t agree with it…”
In prior education, you may have been expected to regurgitate the professor’s theories (or other nonsense) on exams. Garbage in, garbage out.
Not so in this class, and I hope not so throughout your law school career. Please re-read the “Introduction to the Course.” The focus of professional education is on you, not on the professor. If we are doing our job, we are like guide dogs helping you get to the destination you desire (our default assumption is that you want to become an excellent attorney).
If you make a good argument, you get points on the exam.
The issue is not whether I or the common law gets it right. The reason that I brought up the issue is for you to focus on the issue of perspective, that whether there is an offer is determined by what the offeree is justified in understanding. In particular, this focus can challenge classical rules.
I believe that an ethical negotiator would feel reasonably bound to their offers and would not use the offer/counteroffer rules to reject the offeree’s acceptance of the original offer. But that is a weak argument and would lose me points on the exam. The stronger argument, what I am trying to lead you to understand, is that the offeree is justified in believing that the original offer remains open. (In negotiation theory language, that it is a “cover offer” for the negotiations.)
But, to the main point. Don’t worry about me. Worry about your ability to serve your future clients.
I grade based on how you apply the law (as it exists) to the facts. You may find on the exam that the law as it exists doesn’t help your client and you may need to make arguments for the extension, modification, or reversal of the law. Unsurprisingly, you may find that I have modeled or made similar arguments in class.
Bottom line, don’t worry about my political or social views. Worry about my views about the law only to the extent that they reveal something about the law (not me). I am not trying to spoon feed you. If I succeed, you will come to understand the beauty of contract law and the ways in which you can find fulfillment working and developing it.
This is our course blog. It will contain postings of important information about our course. It also will contain discussions, usually generated by your questions. If you go to the Prior Posts link on the right, you will see how students in prior years raised questions and we engaged in a dialogue to clarify the material. When we discuss a subject this year, you might find these prior posts edifying. For example, you will find two different briefs of the first case that we will discuss. I hope you will add your own questions so that students in future years can benefit from your insights and confusions.
There is a link on the right to “Blog Mechanics”
Let’s have a great semester!