Damage Measures and Incomplete Contracts

Jim Leitzel

RAND Journal of Economics, 1989, vol. 20, issue 1, 92-101

Abstract: I present a model of two-party contracts that allows for incomplete specification of future states and actions. I examine various damage measures under the assumption that courts protect only reasonable reliance expenditures so that parties make efficient reliance choices. The expectations damage measure is preferred to the alternative damage measures no matter what the contractual terms are.

Date: 1989
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