Law and economics scholarship has traditionally analyzed efficient breach cases monolithically. By grouping efficient breach cases together, this literature treats the subjective motives and the distributive effects of the breach as immaterial. The Restatement (Third) of Restitution and Unjust Enrichment introduced a distinction based on the intent and the effects of the breach, allowing courts to use disgorgement remedies in cases of ‘opportunistic’ breach of contract (i.e., ‘deliberate and profitable’ breaches). In this article, we evaluate this approach, focusing on the (...) effects of disgorgement remedies on allocative and productive efficiency, information-forcing and competitive effects, and restraint of breach-searching incentives. We show that, even from a purely consequentialist perspective, disgorgement remedies may be normatively warranted, especially when involving sellers’ breach. Recent experimental evidence revealed that the preferences and reactions of ordinary people are in line with our evaluation of the effects of opportunistic breach. (shrink)

In standard economic models, two basic assumptions are made: the first, that actors are rational, and the second, that actors’ preferences are a given and exogenously determined. Behavioral economics — followed by behavioral law and economics — has questioned the first assumption. This Article challenges the second one, arguing that in many instances, social welfare should be enhanced not by maximizing satisfaction of existing preferences but by changing the preferences themselves. The Article identifies seven categories of cases where the traditional (...) objections to intentional preference change by the state and the law lose force and argues that in these cases, such a change warrants serious consideration. It then proposes four different modes of intervention in people’s preferences, varying in intensity, on the one hand, and in the identity of their addressees, on the other, and explains the relative advantages and disadvantages of each form of intervention. (shrink)

Holtby, Allen and Fairchild are both recent and revolutionary decisions that address an important aspect of the indeterminate causation problem that frequently arises in tort litigation. In Holtby and Allen, the Court of Appeal departed from the traditional binary approach, under which a tort claimant either recovers compensation for his or her entire injury or is altogether denied recovery—depending on whether his or her case against the defendant is more probable than not. Holtby and Allen substituted this approach by the (...) proportionate recovery principle, under which the defendant compensates the claimant for a fraction of his or her injury that represents the defendant's statistical share in that injury. This article analyses this development within the particular domain of indeterminate causation, over which the proportionate recovery principle has been licensed to exercise control. The article claims that this development would constitute an improvement of the law from the perspectives of both optimal deterrence and corrective justice, if the courts properly formulate its scope. First, the proportionate recovery principle needs to be explicitly confined to cases that deal with recurrent wrongs. Second, determination of the defendant's share in the claimant's injury ought to be grounded on the probability of causation, rather than the risk of inflicting that injury. Third, judges must not apply unarticulated intuitions in determining the magnitude of the relevant risk or probability: their decisions in that area would be better informed by the statistical principle of ‘insufficient reason’, also known as the ‘indifference principle’. Fourth, courts are yet to relieve the doctrinal tension between the proportionate recovery principle, as recognized in Holtby and Allen, and the previous rejection of that principle by the House of Lords. Subsequently, the article analyses the House of Lords' decision in Fairchild—yet another instance of indeterminate causation in which proportionate recovery is preferable to the ‘all or nothing’ approach. In this case, the House of Lords allowed the claimants full recovery. This holding was grounded in the Law Lords' innovative approach to indeterminate causation, and the article unfolds the problematics of this approach. Finally, the article offers an adoption of yet another legal mechanism—the ‘evidential damage doctrine’—that replaces liability under uncertainty with liability for uncertainty. (shrink)

Lawmakers regularly delegate authority to agents. Such delegation is accompanied by mechanisms that attempt to ensure that the agents adhere to the will of the lawmakers. But these mechanisms are often ineffective or inefficient. Moreover, at times the very imposition of constraints distorts the agents’ incentives and impels them to adopt skewed policies. We suggest that it is possible to reduce such wasteful enforcement costs by delegating authority to certain types of agents who will pursue the lawmaker’s policies without constraints (...) imposed by the lawmaker. In this Article we focus on agents who are impartial — but not indifferent! — and skillful enough to identify the proper course of action. The Article encompasses two main arguments. The normative argument is that when skillful and impartial agents can be identified, it makes sense to delegate to them decision-making powers with only limited constraints. Moreover, in such instances it may be more cost-effective to provide agents with incentives to act impartially rather than develop enforcement mechanisms to impose impartiality. The positive argument is that the law — sometimes explicitly and sometimes implicitly — is compatible with our normative argument in various fields. Although our argument is general in scope and applies to many areas of law, in this Article we begin by focusing on tort law and on international law. We distinguish five categories of cases where the law relies on agents and detect in some of them impartial and skillful agents. This analysis demonstrates that, in some of these categories, the law in fact relies on agents with only minimal constraints and that, in other situations, the constraints imposed by the law are counterproductive. Our normative argument thus serves an explanatory role in understanding many legal doctrines and principles, but, at the same time, offers a critical view on other doctrines and principles, which are not compatible with that argument. (shrink)

A doctor who lapses and injures her patient, and a driver who lapses and causes an accident, are liable under negligence law for the harm done. But lapse is not necessarily negligence, since reasonable people lapse from time to time. We show that tort liability for “reasonable” lapses distorts doctors’, drivers’, and manufacturers’ incentives to take care. Furthermore, such liability provides potential injurers with incentives to substitute activities which are less prone to lapses with activities which are more prone to (...) lapses, even if such substitution is inefficient. We propose several solutions to the inefficiencies that result from liability for lapses, and argue that under certain circumstances injurers should be entitled to invoke a “lapse defense.”. (shrink)

The book provides a comprehensive and principled account of the uncertainty problem that arises in tort litigation. It presents and critically examines the existing doctrinal solutions of the problem, as evolved in England, the United States, Canada, and Israel, and also offers a number of original solutions, such as imposition of collective liability and liability for evidential damage. Among the issues dealt with by the book are rapidly developing areas of tort law, such as mass torts, liability for imposing risk (...) and the like. The book combines the traditional doctrinal depiction of the law with general theoretical insights that include economic analysis. (shrink)

Negligence law is built around the paradigmatic case of a person who unreasonably preferred his own interests to those of others and, as a result, caused damage to another person. However, this case is not representative of all instances of negligence. In some cases, the negligent injurer failed in balancing between the interests of the victim alone; in other cases, he failed in balancing between the victim’s interests and those of a third party; sometimes the injurer failed in balancing the (...) victim’s interests and the interests of the public or of society as a whole; and in yet other instances, he failed in balancing between his own interests. This article argues that the law should not treat in the same manner the different types of instances of failure in balancing between interests. Both justice and deterrence considerations mandate different treatment for the different types of instances, in accordance with the type of interests that the negligent injurer failed to balance. The article focuses on the typical types of balances of interests that the potential injurer is required to conduct before taking action, with the aim of determining the degree to which it is crucial to impose tort liability in each type of case. The article also examines whether prevailing negligence law is compatible with the thesis developed in the article and proposes tools for achieving such compatibility. (shrink)