An Information Theory of Willful Breach

23 Pages Posted: 29 Jan 2009

See all articles by Oren Bar-Gill

Oren Bar-Gill

Harvard Law School

Omri Ben-Shahar

University of Chicago Law School

Abstract

Should willful breach be sanctioned more severely than inadvertent breach? Strikingly, there is sharp disagreement on this matter within American legal doctrine, in legal theory, and in comparative law. Within law-and-economics, the standard answer is "no" - breach should be subject to strict liability. Fault should not raise the magnitude of liability in the same way that no-fault does not immune the breaching party from liability. In this paper, we develop an alternative law-and-economics account, which justifies super-compensatory damages for willful breach. Willful breach, we argue, reveals information about the "true nature" of the breaching party - that he is more likely than average to be a "nasty" type who readily chisels and acts in dishonest ways, and may have acted in other self-serving, counter-productive ways, which went undetected and unpunished. Willful breach triggers extra resentment for what underlies it - for all the other bad things that the breaching party likely did, or, more basically, for the ex ante choice he made to engage in such pattern of behavior. Thus, when the party is caught in the act of willful breach, he is punished not merely for this act, but for the (probabilistically) inferred mesh of bad conduct. This account provides a concrete foundation for the notion that willful breach violates the "sanctity of contract." We show that some remedial doctrines are consistent with the information-based account.

Suggested Citation

Bar-Gill, Oren and Ben-Shahar, Omri, An Information Theory of Willful Breach. U of Chicago Law & Economics, Olin Working Paper No. 450, Michigan Law Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1334316

Oren Bar-Gill

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

Omri Ben-Shahar (Contact Author)

University of Chicago Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

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