Duality in Contract and Tort
Georgetown University Law Center Research Paper No. 2023/31
(2024). Georgetown Law Faculty Publications and Other Works. 2582.
31 Pages Posted: 19 Feb 2024
Date Written: June 04, 2024
Abstract
We study situations in which a single investment serves the dual role of increasing the expected value of a contract (a reliance investment) and reducing the expected harm of a post-performance accident (a care investment). We show that failing to account for the duality of the investment leads to inefficient damages for breach of contract and inefficient standards for due care in tort. Conversely, we show that accounting for the duality yields contract damage measures and tort liability rules that provide correct incentives for efficient breach and reliance in contract and for efficient care in tort.
Keywords: contract, duality, efficiency, externalities, tort. JEL classifications: K12, K13
JEL Classification: K12, K13
Suggested Citation: Suggested Citation