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
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: Suggested Citation