Johnny gets into Posnerish
law & economics considerations.
Economists talk about efficiency rather than fairness. The policy goal of contract enforcement
should be the efficient distribution of resources. So there may well be a case when breach of
contract plus enforcement of expectation damages may yield a better result
overall than if the parties were forced to follow through with the contract.
Basically, if circumstances
arise where the promisor would benefit a lot from not following through
on the contract, in fact, so much so that they’d be happier not doing the
contract but paying the other person enough to make them as well-off as if the
contract had been performed, then whaddya know! It’s Pareto optimal not to perform the
contract! If this is true, we ought not
keep it from happening.
Questions
1.
Johnson
mustn’t sell to Liberty Mills at $1.16 on July 29th, because he would
be taking away the good deal that he promised to Acme. It’s a good deal in this case because Acme
would be getting the wheat at 13 cents under that day’s market price. If Johnson sold to Liberty Mills, Johnson
would be found liable for 13 cents times the number of bushels. If I make a contract that says I’m going to
sell you, at today’s market price, my Barry Bonds rookie card one week
after Barry Bonds is elected to the Hall of Fame (or, let’s say, one week after
his death), I’d be hurting you by breaking that contract and selling the card
to someone else, assuming that the card will be worth more at Bonds’s death
than right now. If I promise to sell
you, at today’s market price, my Franklin Mint collectible Kelly
Clarkson American Idol commemorative plate ten years from now, I’m not going to
be liable for breach of contract assuming this artifact will be worthless in
ten years.
2.
Let’s
consider each of the parties in turn.
a.
It
appears the breach was good for Johnson because he got more money sooner than
if he had sold the wheat to Acme later.
However, it’s an important fact of the case that Johnson didn’t know
that the price of wheat was going to drop, and in fact he thought it was going
to rise.
b.
The
breach was good for Acme because it would have been locked into a bad deal if
the performance of the contract had taken place.
c.
The
breach was neutral for
3.
The
standard for determination of “opportunism” is whether the promisor is
attempting to get the “benefit of the bargain” without incurring the cost. Johnson’s sale to