Journal Article

Incomplete Contracts with Asymmetric Information: Exclusive Versus Optional Remedies

Ronen Avraham and Zhiyong Liu

in American Law and Economics Review

Published on behalf of The American Law and Economics Association

Volume 8, issue 3, pages 523-561
Published in print January 2006 | ISSN: 1465-7252
Published online January 2006 | e-ISSN: 1465-7260 | DOI: http://dx.doi.org/10.1093/aler/ahl011
Incomplete Contracts with Asymmetric Information: Exclusive Versus Optional Remedies

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Scholars have been debating for years the comparative advantage of damages and specific performance. Yet, most work has compared a single remedy contract to another single remedy contract. But contract law provides the non-breaching party with a variety of optional remedies to choose from in case of a breach, and parties themselves regularly write contracts which provide such options. In this article, we start filling this gap by studying multi-remedy contracts. Specifically, we compare a contract that grants the non-breaching party an option to choose between liquidated damages and specific performance with an exclusive remedy contract, which restricts the non-breaching party’s remedy to liquidated damages only.

Journal Article.  12176 words.  Illustrated.

Subjects: Law ; Economics

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