Damages For Breach Of Contract: An Economic Analysis

The law and economics since the inception of the 1960s, after the development of nearly 40 years, has made tremendous achievements in the theory. The doctrine has affected the country's policy-making and national legislation. Its impact on social life has not been simple economics imperialism can summarize. In Western countries, especially the United States, the law and economics have become the important courses in law schools. it is also an important part of vocational training for the legal workers. Its theoretical thinking deeply influenced the common law judges and judicial practice. It plays an important role especially at the legislative level. The law and economics study the use of modern economic thinking in the law and legal system, the legal system of human behavior, economics and law and academic accumulation integration and more deeply explore the human social development, the pursuit of human well-being. It reflects the harmony and common progress. Although some people believed that this subject has entered a phase of diminishing returns, but the law and economics development path and the way forward have made it clear that the law and economics will be a bright future.The contract, from the social phenomenon to become a legal issue, to economics object, then to an important component of the law and economics analysis, reflects the advancement of human society from identity to contract and progress of from the right to lease. The contract law and economics uses the basic concept of economics, from the simplest transactions units to complex the relationship contract, until the economic growth, uphold the unity of micro and macro, reveals the main market trading relationship between the body of the market and the government, law. The contract law and economics open out that the law as a variable in economic relations interplay with economy. The law as important parameters has changed people's legal awareness. At the same time, it combines traditional civil law and the rights and obligations of the contract theory, which development tends to fully respect the choice of the parties and encourage the parties to establish a mechanism to choose. The idea of autonomy will change the new world and stimulate the economic bodies'energy that it promotes individual autonomy. The visible law makes the invisible hand play to institutional strength.The contract law and economics discuss economical efficiency. If you leave the discussion of the efficiency, contract law and economics's academic strength would be considerably less. But the contract law and economics is not absolute efficiencyism or supremacy. Her efforts are seeking coordination of efficiency and equity. Because they are not absolute conflict in societal value, they are complementary beneficial relationship. The objectives of social development are not a single economic development but harmonious interpersonal relations and the pursuit of common economic and cultural benefits. So the efficiency of the same mind in the pursuit of the ultimate achievement, or the main objective of this subject more in favor of economic progress, do not abandon other social value judgments. If academic research also can be divided, law and economics will force more efficiency in the realization than the traditional law.In the contract law and economics, the damages for breach of contract are more on the issue of compensation measures the efficiency. Through the discussions, we found that damages for breach of the important measures to achieve a more efficient incentive are imperfect. Because of the limited rational and information asymmetry's constraints, including selfish parties opportunism, damages for breach on efficiency of investment incentives and prevention of violations of the largest remaining contract is not perfect. Because the law targets are human provisions, including man-made law itself, there are bound to be such problems. it might be academic research in this exploration is to play the role of the reality means near infinite ideal. But the expectation damages, the reliance damages, the liquidated damages, and the specific performance, are not perfect remedies.The expectation damages can improve efficiency. It can interiority people contract profits, and help they decided to violations or to perform with appropriate incentive. It also help parties decided prevention input. When parties believe perform and breach are not difference, the expect damages is complete. But it's very difficult to calculate; especially precise calculation of the existing law is unrealistic. This raises the legislative technical theory difficulty and the new legislative issues. Because the expectation damages have shortcomings, the corresponding legal system designs to be adjusted, so as to play a more powerful role. Hadley rule, mitigation rule, improved expectation damages for the role of the force that the basic direction desired path towards social development. From the perspective of law and economics, the shortcomings of the expectation damages are the information asymmetry problem. The corresponding institutional arrangements have emerged, which goals are to encourage the parties to disclose relevant information to overcome the contradictions inherent in the transaction.The reliance damage is an important contract theoretical result that based on the principle of honesty-credibility and theory of equity. It inspirits parties to practice efficient behaviors. As an important system of contract law, the reliance damage insists on the legal rights of fair dealing and the protection of transactions. Though the reliance damage also is unsatisfactory in the economics sense for the efficiency, and it can not achieve the best academic design, including creating new theoretical results to solve the incomplete of contracts. So the imperfect of the reliance damage gives us a new theoretical issue. Affronting this issue, scholars and judicial practice have made a response. Most principles of the various regulations aim to improve the system in order to achieve the most optimal outcome.For the liquidated damages, the discussing in contract law is not enough, especially, as the subject of contract law and economics analysis, it is related little. Because there are many areas of the liquidated damages need research, they need particularly the efforts of economists. Because the liquidated damages in business practice are widely used, they are unavoidable topics of the contract research. The legal supervisions will directly affect parties in contracting and the transaction costs, even important impacting on the socio-economic development. Under the assumption that rational people, in pursuing freedom of contract era, we should respect the right of parties to agree to liquidated damages. In addition, liquidated damages have played an important role in business practice. In the private law-making sector, the contract is the main representative and liquidated damages are concentrated expression. As long as we pursue growth in social welfare, or simply expressed as efficiency, the respecting for the right of agreeing liquidated damages is deserved.In fact,the contract law and economics, particularly the economic analysis of beach remedies is only a start. The dissertation is made under the guidance of the predecessors academic achievements. The dissertation devotes my mind to several legal systems of damages for contractual breach with contract law and economics. The dissertation adheres to the principle of contracts efficiency consistently and regards analysis of the economic benefits as the main goal, but do not give up the concerns on other social values. The dissertation believes that the freedom of contract is the life of business and that contracts ought to protect the rights of the parties'contracting to promote efficiency, but also adhere to the laws and regulations. The dissertation actively advocates the academic view of the contract law and economics and make full use of modern economics concept of the legal system and legal issues, but does not exclude other theories of contract law. The dissertation insists that damages for breach of contract are important ways of remedies and accord with economic efficiency goals, but do not denial other remedies means for the application. The dissertation upholds that the liquidated damage is efficient, but it also fully affirmed the effect of the expectation damages and the reliance damages.