Abstract

http://ssrn.com/abstract=1684091
 


 



Optimal Remedies for Bilateral Contracts


Francesco Parisi


University of Minnesota - Law School; University of Bologna

Barbara Luppi


Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics; University of St. Thomas School of Law

Vincy Fon


George Washington University - Department of Economics

September 28, 2010

Journal of Legal Studies, Forthcoming
Minnesota Legal Studies Research Paper No. 10-56

Abstract:     
In several contract situations, parties exchange promises of future performance, creating reciprocal obligations. In this paper, we extend the standard models of contract remedies to consider the incentives created by contracts where both parties provide only executory consideration and where the parties’ obligations are yet to be performed. We show that the legal remedies that govern these contracts provide valuable enforcement mechanisms that are not available when parties enter into a contract where they exchange a promise for an actual performance. We show that when the values of the parties’ performances are interdependent, contracts with executory consideration create effort incentives that are superior to the incentives of contracts with executed consideration. In contracts with independent values, contracts with executory consideration also offer a valuable instrument to correct enforcement imperfections. Such imperfections include imperfect compensation and litigation costs.

Keywords: Executory Contracts, Remedies for Breach, Defense of Non-Performance, Preclusion Rule

JEL Classification: K12, K41

Accepted Paper Series


Not Available For Download

Date posted: September 28, 2010  

Suggested Citation

Parisi, Francesco and Luppi, Barbara and Fon, Vincy, Optimal Remedies for Bilateral Contracts (September 28, 2010). Journal of Legal Studies, Forthcoming; Minnesota Legal Studies Research Paper No. 10-56. Available at SSRN: http://ssrn.com/abstract=1684091

Contact Information

Francesco Parisi (Contact Author)
University of Minnesota - Law School ( email )
229 19th Avenue South
Minneapolis, MN 55455
United States
University of Bologna ( email )
Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy
Barbara Luppi
Università degli studi di Modena e Reggio Emilia (UNIMORE) - Faculty of Business and Economics ( email )
Viale Berengario 51
41100 Modena, Modena 41100
Italy
University of St. Thomas School of Law
MN
United States
Vincy Fon
George Washington University - Department of Economics ( email )
2115 G Street, N.W.
Monroe Hall, #366
Washington, DC 20052
United States
202-994-7580 (Phone)
202-994-6147 (Fax)
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