Is Breach of Contract Immoral?

30 Pages Posted: 7 Dec 2005

See all articles by Steven Shavell

Steven Shavell

Harvard Law School; National Bureau of Economic Research (NBER)

Date Written: November 2005

Abstract

When, and why, might it be thought immoral to commit a breach of contract? The answer to this fundamental question is not obvious, because, as is stressed, and as has been overlooked in addressing the question, contracts do not usually provide explicitly for the particular events that are observed to occur. When a contract does not expressly address a contingency that occurs, the morality of breach is assumed here to depend on what the contract would have said had it addressed the contingency. This assumption is explained to imply that breach is not immoral if expectation damages would have to be paid for breach, but that breach might be immoral if damages are less than the true expectation, as is probable. This conclusion is related to the results of a survey that was conducted of individuals' attitudes toward the morality of breach. The conclusion is also related to the views of commentators on the morality of breach and of those on the "efficiency" of breach.

JEL Classification: D8, K12

Suggested Citation

Shavell, Steven, Is Breach of Contract Immoral? (November 2005). Harvard Law and Economics Discussion Paper No. 531. Available at SSRN: https://ssrn.com/abstract=868592 or http://dx.doi.org/10.2139/ssrn.868592

Steven Shavell (Contact Author)

Harvard Law School ( email )

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617-495-3668 (Phone)
617-496-2256 (Fax)

National Bureau of Economic Research (NBER)

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