Morality, Compensation, and the Contractual Obligation

Journal of Empirical Legal Studies, Volume 16, Issue 1, 119-142, March 2019

32 Pages Posted: 24 Sep 2016 Last revised: 25 May 2021

See all articles by Sergio Mittlaender

Sergio Mittlaender

Getulio Vargas Foundation (FGV) - Fundação Getulio Vargas Law School at São Paulo; Max Planck Institute for Social Law and Social Policy

Date Written: March 01, 2019

Abstract

This article presents empirical estimates that most people do not perceive breach of contract followed by compensation for the promisee as immoral. In the absence of compensation, it reveals that individuals commonly perceive the moral value of breach depending on the consequences thereof, with the unfairness of the outcome – and not the inefficiency – as the preponderant factor. Contract law reflects observed interpersonal morality and allows courts to rescind the contract on grounds of impossibility, impracticability, or frustration if the breach is fair and the promisor avoids exceptionally high losses, but not if the breach is unfair and the promisor breaches to profit from a substitutive transaction. The law, moreover, does not punish breach, nor inevitably requires performance by the promisor, but rather aims at compensating the victim, thereby reflecting how most individuals perceive breach followed by compensation, from a normative standpoint: as not morally wrong.

Keywords: Breach of Contract, Compensation, Morality, Experiment, Contract Law, Promise

JEL Classification: K12

Suggested Citation

Mittlaender, Sergio, Morality, Compensation, and the Contractual Obligation (March 01, 2019). Journal of Empirical Legal Studies, Volume 16, Issue 1, 119-142, March 2019, Available at SSRN: https://ssrn.com/abstract=2842577 or http://dx.doi.org/10.2139/ssrn.2842577

Sergio Mittlaender (Contact Author)

Getulio Vargas Foundation (FGV) - Fundação Getulio Vargas Law School at São Paulo ( email )

Rua Rocha 233
São Paulo, SP 01330-000
Brazil

Max Planck Institute for Social Law and Social Policy ( email )

Amalienstraße 33
München, 80799
Germany
+49 89 3860 2407 (Phone)

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