Misreading Oliver Wendell Holmes on Efficient Breach and Tortious Interference

Abstract:     
Oliver Wendell Holmes' most notorious statement about contract law was that "the duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it,-and nothing else." This has generally been interpreted to mean that a contracting party has a lawful option to perform or not. Holmes, however, was speaking of remedial limitations and did not espouse the belief that a contracting party had a right to breach. In other writings he equated a contractual breach with the commission of a tort. As a judge he labeled contract breaches as "wrongs."

The misreading of Holmes has given comfort to theorists who espouse the notion of "efficient breach." The paper demonstrates that, whatever the merits the theory of efficient breach may have as an economic model, it has none as a legal postulate. Moreover, theorists who espouse the efficient breach theory, have difficulty in explaining why the law regards interference with a contract as a tort. Holmes, however, was one of the prime architects of the modern law of tortious interference.

Accepted Paper Series