Efficient Contract Remedies And the European Unification
This paper applies theoretical results that are derived from financial-economic principles to the issue of efficient contract remedies in view of the European Unification. Common Law favors the ‘expectation damages’ remedy, according to which a party who is aggrieved by a breach of contract expects an ex-post damages award, while this paper demonstrates that if the subject of the contract is traded continuously with observable values, an alternative remedy is equally efficient and just. The alternative remedy is rationalized on an ex-ante basis, and thus, courts intervention in the event of a breach of contract may not be essential. The EU aims to establish a “uniform commercial code superior to all national law.” This goal reflects current cultural differences and lacks of homogeneity, such as expectations and risk preferences across EU Member States. Lacks of homogeneity, can not, however, invalidate the above conclusion, as long as prices are continuously traded and a ‘single price’ regime prevails. Accordingly, this paper predicts that since price differentials across Member States are likely to disappear faster than other non-homogeneous factors, the Court of Justice will show a tendency to rule, utilizing the rationale underlying the ‘ex-ante regime,’ and perhaps, to overturn country-specific rulings by National Courts, which favor the ‘expectation damages regime.’
The Myth that Promisees Prefer Supracompensatory Remedies: An Analysis of Contracting for Damage Measures
Courts will not enforce liquidated damage clauses when a stipulated sum exceeds (i) the harm that the promisee could reasonably expect to suffer from breach or (ii) the actual harm that breach turned out to cause.' Courts traditionally have not awarded punitive damages "for a breach of contract unless the conduct constituting the breach is also a tort for which punitive damages are recoverable."2 Courts also will not grant specific performance "if damages would be adequate to protect the expectation interest of the injured party," nor will courts enforce contracts that accord promisees a right to specific relief.3 These three rules share the goal of limiting a promisee's recovery to his lost expectation. The liquidated damage rule prevents the promisee from contracting for a supracompensatory remedy, and the punitive damage rule prevents courts from awarding such a remedy. The specific performance rule achieves the law's goal indirectly. A promisee who has a right to specific performance can compel the promisor to perform even when the promisor's loss from performance would exceed the promisee's gain. A promisor can purchase her freedom, but sophisticated promisees sometimes will demand more than their expectation as the price. Permitting specific performance only when damages could not protect the expectation interest limits the ability of promisees to obtain supracompensatory payments by threatening to seek specific relief. The ban on "specific performance clauses" prevents a promisee from obtaining by contract he power that the general specific performance rule aims to abolish.
Complexity, Network-Decisions And Alternative Risk Premia: Some New Theories Of Structural Change And Portfolio Decisions.
Structural Change is the basis for many decisions such as government fiscal and monetary policies, government interventions, corporate-expenditure decisions, corporate strategic decisions, portfolio management decisions in finance; household allocation decisions, etc.. Structural change in industries and national economies is increasingly more difficult to detect partly because of the growth and dominance of Complex Systems and “Networks” in modern industries and economies – such Networks and Complex Systems include GVCs (global value chains), retail store networks; franchising networks; internet networks; services networks; credit-chains in industries; online social networks; etc.. The relationship between Complexity and Structural Change is well established in the physics, applied math and economic dynamics literatures. Traditional definitions and modeling of structural change have erroneously focused on changes in labor, technological progress, market share, and or capital – which are grossly inadequate in the new economy and post- global financial crisis (as confirmed by changes in the global retailing and housing industries and other industries). Also the modeling of structural change seems to be constrained by the availability of data, and often omits the relationship between structural change on one hand, and globalization, financial stability and international financial contagion. This article: i) introduces the Operations Strategy Model of structural change, explains how it differs from the Lewis Model of Structural Change; and explains the often omitted relationship between operations strategy (of companies and government agencies) and structural change; ii) introduces other new Complexity-based models/theories of Structural Change in industries; iii) reviews the relationships among Operations Research, Complexity and Structural Change; iv) explains the symbiotic relationship between structural change on one hand, and economic growth, financial stability, financial contagion and globalization; v) discusses the significant gap between academic research and practice and explains some issues and factors that should be considered in the development and testing of structural change models; vi) explains how alternative risk premia can be generated from new models of Structural Change.