The application of the theory of efficient breach in contract law: a comparative law and economics perspective

This thesis analyzes the theory of efficient breach in three different legal systems, including English sales law, European Union contract law and Chinese contract law. The existing legal systems provide contract parties with more solutions, other than “efficient breach” to avoid inefficient performance. Generally, all the three systems allow parties to stipulate liquidated damages for breach of contract and expectation damages are chosen as the basic damages measures by English law and EU law. In this sense, paying monetary equivalence to performance is one option to contract promisors for avoiding inefficient contracts. Besides shaping contract parties’ incentives to perform or breach a contract via remedy rules, all the three legal systems have set out specific rules dealing with the circumstances where performance of a contract is inefficient.