Liquidated Damages in California

An Austrian Perspective on the Law of Liquidated Damages: the Case for an All-enforcement Rule

At common law, courts will not enforce liquidated damages clauses unless the stipulated sum bears a reasonable relation to either the anticipated or actual losses that result from breach. Penalty clauses, intended to compel performance, are per se unenforceable. Commentators have set forth arguments both for and against this common-law rule on the basis of efficiency. One of the main principles...

Contract Renegotiation, Mechanism Design, and the Liquidated Damages Rule

Risk and Uncertainty Program TITLE: A matter of interpretation: ambiguous contracts and liquidated damages AUTHORS:

We focus on syntactic aspects of differential awareness that give rise to contractual disputes. Boundedly rational parties use a common language, but do not share a common understanding of the world, leading to ambiguity in both syntactic and semantic forms. In contractual relationships, ambiguity leads to disagreement and disputes. We show that the agents may prefer simpler less ambiguous cont...

A matter of interpretation: Ambiguous contracts and liquidated damages

An experimental comparison of reliance levels under alternative breach remedies

Breach remedies serve an important role in protecting relationship-specific investments. The theoretical literature predicts that some commonly used types of breach remedies may protect too well, in the sense that they induce overinvestment. The driving forces behind this result are the complete insurance against potential separation that breach remedies may provide, and the possibility to prev...