Specific Performance versus Damages for Breach of Contract

39 Pages Posted: 7 Dec 2005  

Steven Shavell

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

Date Written: November 2005

Abstract

When would parties to a contract want performance to be specifically required, and when would they prefer payment of money damages to be the remedy for breach? This fundamental question is studied here, and an answer is provided that is based on a simple distinction between contracts to produce goods and contracts to convey property. Setting aside qualifications, the conclusion for breach of contracts to produce goods is that parties would tend to prefer the remedy of damages, essentially because of the problems that would be created under specific performance if production costs were high. In contrast, parties would often favor the remedy of specific performance for breach of contracts to convey property, in part because there can be no problems with production cost when property already exists. The conclusions reached shed light on the choices made between damages and specific performance under Anglo-American and under civil law systems, and they also suggest the desirability of certain changes in our legal doctrine.

JEL Classification: D8, K12

Suggested Citation

Shavell, Steven, Specific Performance versus Damages for Breach of Contract (November 2005). Harvard Law and Economics Discussion Paper No. 532. Available at SSRN: https://ssrn.com/abstract=868593 or http://dx.doi.org/10.2139/ssrn.868593

Steven Shavell (Contact Author)

National Bureau of Economic Research (NBER)

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Harvard Law School ( email )

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