ABSTRACT
Efficient breach is an essential concept in the law and economics of contract. It provides that a promisor should renege on his contractual obligations where a third party would benefit from his performance more than the original promise. Damages should compensate parties who do not receive the performance for which they bargained under the contract. This chapter explores three major forms of remedies: expectation, reliance, and restitution damages. Expectation damages bestow upon promises a monetary reward equivalent to the performance for which they contracted. Such damages make a promise indifferent between receiving damages. Reliance damages put promises in the same position in which they would have been if they never contracted. They thus deprive promises of the benefit of their bargain. Restitution damages require promisors to return all value that promises conferred pursuant to the contract. As these damages do not provide promises with the full value that they would have enjoyed had the promisor performed, they facilitate inefficient breach.
