Damages for Repudiation : An Ex Ante Perspective on the Golden Victory

The remedy of damages for repudiation modifies not only the parties’ behaviour after the contract is repudiated (ex post behaviour), but also their behaviour in making and performing the contract (ex ante behaviour). In this paper, a law-and-economics approach is adopted to analyse the House of Lords’ majority decision in Golden Victory, arguing that this decision is economically justified because: (1) it encourages the parties to solve the uncertainty of measuring damages; (2) it enforces the parties’ contractual allocation of risks; and (3) it encourages the early disclosure of the intention to breach. This paper differs from the existing literature in two ways. First, rather than examining the impact of Golden Victory on ex post behaviour, it focuses on ex ante behaviour. Secondly, unlike most existing literature, which criticises the Lords’ decision, this paper supports it from a law-and-economics perspective