The Relational Constitution of Remedy (1)

Abstract

Abstract As the recent argument for recognition of ‘the performance interest’ shows, a focus on the solipsistic self-interest of the claimant leads to a belief that the function of the remedies for breach of contract should, allowing tolerated exceptions, be to enforce the performance of primary obligations. The positive law of remedies for breach of contract poses the problem for the performance interest as it appears absolutely replete with exceptions but this is because its function is radically different. Based on a default remedy of damages quantified so as to compensate for lost expectation, these remedies create ‘the Holmesian choice’ and ‘the efficient breach’. Far from this being a shortcoming, the law of remedies in this way facilitates the optimal response by contracting parties to the breaches which are inevitable when parties contract, as they must, with bounded rationality, so that the risk of error always attends an agreement to undertake primary obligations. The many great difficulties which attend our understanding of even such central doctrines as remoteness and mitigation, indeed that compensatory damages are the default remedy for breach, may be largely solved if we see the law of remedies as shaped by mutual recognition of the interests of both claimants and defendants.