| Most people think that breaking a promise is immoral, and that a breach of contract is a kind of broken promise. However, the law does not explicitly recognize the moral context of breach of contract. In these studies, I considered the effect of moral intuitions in three contracts contexts: assigning damages after a breach, making a decision about whether or not to breach a contract when it would be efficient to do so, and breaching a contract that stipulates the damages in the body of the agreement. Using a series of web-based questionnaires, I asked subjects to read breach of contract cases and answer questions about the legal, financial, and moral implications of each case. In Section 1, I found that subjects' moral intuitions affected their assessment of appropriate damages for breach. Subjects were more punitive toward the breacher when the motivation appeared to be greed than when the motivation appeared to be fear. When presented with identical losses, one from an intentional breach of contract and the other from a negligent tort, subjects were more punitive toward the breacher than the negligent tortfeasor. Section 2 asked subjects to consider the breach decision from the point-of-view of the would-be breacher. When asked to put themselves into the position of a promisor who must decide whether to exploit an efficient breach opportunity, subjects were much less likely to breach than an economic hypothesis would predict. Subjects' predictions about the legal ramifications of breach indicated that they thought that specific performance and punitive damages were both likely results, and that even when they were informed that damages would not exceed expectation level, they were still averse to breach. Section 3 attempts to reconcile the importance to subjects of moral norms of promising with the economic efficiency of some breaches of contract. In the last experiment, subjects were asked to think about the effect of a liquidated damages clause on their intuitions. Subjects required less money to breach contracts with liquidated damages than otherwise identical contracts. |
