Disagreement, Conflict, and Retaliation in Breach of Contract

This chapter studies how the promisor may breach in circumstances in which the promisee might expect performance, and how retaliation to breach is, in the absence of legal relief, often the expected and observed final product of the parties’ unresolved dispute. It identifies different reasons for why parties might disagree on whether the promisor should have performed or breached, including the incompleteness of contracts, conflicting understandings of the morality of breach, disagreement on what consequences of breach are undesirable, and different cognitive biases. Moreover, the three theories of contract and contract law studied in the second chapter do not provide a definitive answer to the question of whether the promisor should have performed or breached. Instead, they often conflict with each other, as for example when the promisor breaches the contract because breach is socially efficient and, in doing so, violates the moral norm of keeping promises and commits a transgression. Since each party is apt to have her own understanding on the proper course of conduct, contractual disputes acquire a normative character, and the danger is that they escalate to a real conflict.