Tortious Interference with Contract versus "Efficient" Breach: Theory and Empirical Evidence

Fred S McChesney

The Journal of Legal Studies, 1999, vol. 28, issue 1, 131-86

Abstract: Tortious interference is bothersome, normatively and positively, to scholars espousing the economic model of "efficient breach" of contract because it penalizes third-party inducements to breach. Scholars nonetheless find innovative second-best arguments to justify the coexistence of tortious interference with "efficient" breach. This article shows normatively why tortious interference would be part of a first-best legal system. Tortious interference provides property protection to contract rights in ways that apparently (absent data to the contrary) lower transaction costs when a third party values a promisor's performance more than does the promisee. Positively, the law of tortious interference corresponds to the first-best model posited here. Regression analysis of tortious interference cases shows more definitively that the second-best factors proposed by efficient-breach analysts explain little of the case outcomes. Factors identified in the first-best model here do significantly affect case results. Copyright 1999 by the University of Chicago.

Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlstud:v:28:y:1999:i:1:p:131-86

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