Opportunistic Breach of Contract

38 Pages Posted: 26 May 2023

See all articles by Francesco Parisi

Francesco Parisi

University of Minnesota - Law School; University of Bologna; University of Miami, School of Law

Ariel Porat

Tel Aviv University; University of Chicago - Law School

Brian Bix

University of Minnesota Law School

Date Written: May 24, 2023

Abstract

Law and economics scholarship has traditionally analyzed efficient breach cases monolithically. The standard analysis holds that breach is efficient when performance of a contract would generate a negative total surplus for the parties. By grouping efficient breach cases together, this literature treats the subjective motives and the distributive effects of the breach as immaterial (Posner, 2009). The Restatement (Third) of Restitution and Unjust Enrichment (2011) §39 introduced a distinction based on the intent and the effects of the breach, allowing courts to use disgorgement remedies in cases of “opportunistic” breach of contract (i.e., “deliberate and profitable” breaches). The introduction of disgorgement remedies for opportunistic breach of contract has been met with mixed reactions by legal academics. In this paper, we carry out an analysis of the limits and merits of the Restatement’s innovation, focusing on the effects of disgorgement remedies on allocative and productive efficiency, information-forcing and competitive effects, and restraint of breach-searching incentives. We show that, even from a purely consequentialist perspective, disgorgement remedies may be normatively warranted. Recent experimental evidence revealed that the preferences and reactions of ordinary people are in line with our evaluation of the effects of opportunistic breach.

Keywords: disgorgement damages, opportunistic breach, efficient breach

JEL Classification: K12, D86, C9

Suggested Citation

Parisi, Francesco and Porat, Ariel and Bix, Brian, Opportunistic Breach of Contract (May 24, 2023). Minnesota Legal Studies Research Paper No. 23-10, Available at SSRN: https://ssrn.com/abstract=4459667 or http://dx.doi.org/10.2139/ssrn.4459667

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

University of Miami, School of Law ( email )

Ariel Porat

Tel Aviv University ( email )

Ramat Aviv
Tel Aviv, 69978
Israel
972-3-6408283 (Phone)
972-3-6407260 (Fax)

HOME PAGE: http://english.tau.ac.il/profile/porata

University of Chicago - Law School ( email )

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

HOME PAGE: http://www.law.uchicago.edu/faculty/porat

Brian Bix

University of Minnesota Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States
612-624-2505 (Phone)
612-625-2011 (Fax)

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