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Incomplete Contracts with Asymmetric Information: Exclusive Versus Optional Remedies

39 Pages Posted: 4 Apr 2005  

Ronen Avraham

University of Texas at Austin - School of Law

Zhiyong Liu

Indiana State University - Scott College of Business

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Abstract

Scholars have been debating for years the comparative advantage of damages and specific performance. Yet, most work has compared a single remedy contract to another single remedy contract. But contract law provides the non-breaching party with a variety of optional remedies to choose from in case of a breach, and parties themselves regularly write contracts which provide such options. In this article, we start filling this gap by studying multi-remedy contracts. Specifically, we compare a contract that grants the non-breaching party an option to choose between liquidated damages and specific performance with an exclusive remedy contract, which restricts the non-breaching party's remedy to liquidated damages only.

Suggested Citation

Avraham, Ronen and Liu, Zhiyong, Incomplete Contracts with Asymmetric Information: Exclusive Versus Optional Remedies. American Law and Economics Review, July 2006; Northwestern Law & Econ Research Paper No. 05-05. Available at SSRN: https://ssrn.com/abstract=695561 or http://dx.doi.org/10.2139/ssrn.695561

Ronen Avraham (Contact Author)

University of Texas at Austin - School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States
(512) 232-1357 (Phone)

HOME PAGE: http://www.utexas.edu/law/faculty/profile.php?id=ra22397

Zhiyong Liu

Indiana State University - Scott College of Business ( email )

Scott College of Business
Indiana State University
Terre Haute, IN 47809
United States

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