Specific performance

Abstract: In bilateral trading problems, the parties may be hesitant to make relationship-specific investments without adequate contractual protection. We postulate that the parties can sign noncontingent contracts prior to investing, and can freely renegotiate them after information about the desirability of trade is revealed. We find that such contracts can induce one party to invest efficiently when courts impose either a breach remedy of specific performance or expectation damages. Moreover, specific performance can induce both parties to invest efficiently if a separability condition holds. Expectation damages, on the other hand, is poorly suited to solve bilateral investment problems. (forthcoming, The American Economic Review.) Please contact the Program in Law and Economics at Boalt Hall School of Law, UC Berkeley, Berkeley, CA 94720 for a copy of this paper.

Abstract: The purpose of contract remedies is to place a disappointed promisee in as good a position as he would have enjoyed had his promisor performed.' Contract law has two methods of achieving this \"compensation goal\": requiring the breaching party to pay damages, either to enable the promisee to purchase a substitute performance, or to replace the net gains that the promised performance would have generated; or requiring the breaching party to render the promised performance. Although the damages remedy is always available to a disappointed promisee under current law, the remedy of specific performance is available only at the discretion of the court. Moreover, courts seldom enforce contract clauses that explicitly provide for specific performance in the event of breach. This Article argues that the remedy of specific performance should be as routinely available as the damages remedy. Part I reviews the current doctrine governing specific performance. Part II argues that the damage remedy is undercompensatory more often than is generally supposed and establishes that promisees have economic incentives not to elect specific performance unless the damage remedy is likely not to provide adequate compensation. Thus, expanding the availability of specific performance would not give promisees an incentive to exploit breaching promisors. Part III goes on to show that making specific performance generally available is unlikely to result in the efficiency losses predicted by other commentators.2 Part IV argues that expand-

Abstract: This article considers a situation where the buyer or the seller of a good must engage in expenditures on specific capital before the exchange either to prepare to use the product or to prepare to sell it. It is assumed that postbreach bargaining is possible and carried out in a cooperative fashion, and that buyers and sellers form expectations about the outcome of such bargaining in a specific way. Without enforceable contracts, the potential appropriability of specific rents results in inefficiently low levels of investment. Three damage measures commonly used to enforce contracts are shown to produce inefficiently high levels of investment and to be Pareto-ranked from best to worst as follows: specific performance, expectation damages, and reliance damages.

Abstract: "Introduction Compensatory damages I: general principles of assessment Compensatory damages II: damages for the different types of loss Compensatory damages III: miscellaneous issues Non-compensatory damages Restitutionary remedies The award of an agreed sum Specific performance Injunctions Other remedies"