Bai, Mao and Tao, ‘Breach Inducement Activities and Performance of Breach Remedies’

This paper offers an explanation for why the courts generally prefer expectation damages instead of specific performance or liquidated damages. The paper takes into account the possibility of breach inducement activities – actions taken by one contracting party to make it more costly for the other party to perform the contract between them. The findings show that expectation damages discourages such breach inducement activities, whereas specific performance and liquidated damages encourage them, hence the optimality of the former over the latter two when one party or both make productive relationship-specific investments.

Bai, Chong-En and Mao, Wenzheng and Tao, Zhigang, Breach Inducement Activities and Performance of Breach Remedies (August 2018).

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