The Myth of Efficient Breach: New Defenses of the Expectation Interest

Abstract

Contract remedies have long sought to protect the gains that parties contract to realize. Although the Restatement rec ognizes three distinct contractual interests—expectation, reliance, and restitution—it expressly privileges the expectation interest over the other two. Courts "[o]rdinarily . . . enforce[] the broken prom ise by protecting the expectation that the injured party had when he made the contract."1 In recent years, both courts and scholars have begun to question how the law should protect a promisee's expectation. This question once had a conventional—indeed, assumed—answer. Courts, the Restatement observes, ordinarily protect the promisee's expecta tion "by attempting to put him in as good a position as he would have been in had the contract been performed";2 that is, by "giv[ing] the injured party the 'benefit of the bargain.'"3 The Uni form Commercial Code similarly recites that contract remedies are designed to put the aggrieved party "in as good a position as if the other party had fully performed."4 Conventional contract law thus does not put the promisee in the position of receiving the promised performance but rather puts him "in as good a position" by requir ing the promisor to pay money damages that equal the benefit of the promisee's lost bargain. In the current lexicon, contractual ex pectations conventionally receive liability rather than property rule protection.