Tortious Interference with Contract Versus 'Efficient' Breach: Theory and Empirical Evidence

Posted: 9 Jun 1999

Abstract

Tortious interference is bothersome, normatively and positively, to scholars espousing the economic model of "efficient breach" of contract because it penalizes third-party inducements to breach. Scholars nonetheless find innovative second-best arguments to justify the coexistence of tortious interference with "efficient" breach. This article shows normatively why tortious interference would be part of a first-best legal system. Tortious interference provides property protection to contract rights in ways that apparently (absent data to the contrary) lower transaction costs when a third party values a promisor's performance more than does the promisee. Positively, the law of tortious interference corresponds to the first-best model posited here. Regression analysis of tortious interference cases shows more definitively that the second-best factors proposed by efficient-breach analysts explain little of the case outcomes. Factors identified in the first-best model here do significantly affect case results.

Suggested Citation

McChesney, Fred S., Tortious Interference with Contract Versus 'Efficient' Breach: Theory and Empirical Evidence. Available at SSRN: https://ssrn.com/abstract=161456

Fred S. McChesney (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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