Remedies in Public Contract Law: Apt to Encourage Efficient Breach?

Abstract

<p>The ordinary common law of contracts prefers to protect the promisee’s entitlement to contractual performance through a liability-rule remedy in the form of expectation damages. This preference is generally justified by reference to the theory of efficient breach, according to which the repudiation of contractual obligations should be encouraged where the promisor is able to profit from a repudiation after placing the promisee in as good a position as the promisee would have occupied had performance been rendered. A question that arises in turn is whether, as the theory of efficient breach teaches us, government suppliers of goods and services should also be encouraged to breach public contracts. In view of the peculiar nature of public contracts, this article’s analysis suggests that the theory of efficient breach has no place in public procurement. The article’s main argument is that the courts of competent jurisdiction in the legal systems concerned should be more receptive to remedies (such as specific performance and punitive damages) that discourage suppliers from breaching public contracts, not least in cases where a public contract specifically provides for such remedies.</p>