When is a Willful Breach 'Willful'? The Link Between Definitions and Damages

Abstract

The existing literature on willful breach has not been able to define what should count as "willful." I argue here that any definition we adopt has implications for just how high damages should be raised in those cases where a breach qualifies as willful. As a result, both of these issues -- the definition of "willful," and the measure of damages for willful breach -- need to be considered simultaneously. Specifically, if a definition of "willful" excludes all breachers who behaved efficiently, then in theory we can raise the penalty on the remaining inefficient breachers to any arbitrarily high level ("throw the book at them"). But if, instead, a given definition of willful would catch even some efficient breachers in its net, the damages assessed against willful breachers should be more limited. In that case, damages for willful breach might still justifiably be raised, but they should be raised only to the level that is economically efficient.

Keywords: contract, breach, remedies, damages, penalties, negligence, strict liability

JEL Classification: K12, K13