In standard models of contracts, efficient incentives require the promisor to pay damages for nonperformance and the promisee to receive no damages. To give efficient incentives to both parties, we propose a novel contract requiring the promisor to pay damages for nonperformance to a third...

This article develops an economic theory of expressive law. By expressing social values, law can tip a system of social norms into a new equilibrium. This process can create or destroy a social norm without changing individual values. In addition, law can change the individual values of rational...

The total social harm caused by everyone is often verifiable, and the harm that each actor causes is often unverifiable. In these circumstances, the authorities lack the information necessary to implement the usual liability rules or externality taxes. We propose a novel solution: hold each...

When legal and social norms regulate the same behavior, an act can trigger both legal and nonlegal sanctions. Should courts deduct the nonlegal sanction suffered by the wrongdoer from damages owed to the victim? We provide the answer for a legal system that seeks to minimize social costs....

Like constructing a building, performance on many contracts occurs in phases. As time passes, the promisor sinks more costs into performance and less expenditure remains. For phased performance, we show that optimal liability for the breaching party decreases as the remaining costs of completing...

As applied by courts, the Hand Rule balances the injurer's burden of precaution and the victims' reduction in risk. In this application, risk to oneself does not increase the duty owed to others. Economists, however, use the Hand Rule to minimize social costs, which requires balancing the burden...