The Cost of Guilty Breach

22 Pages Posted: 18 Feb 2021 Last revised: 12 Apr 2021

See all articles by Theresa Arnold

Theresa Arnold

McGuireWoods LLP

Amanda Gray Dixon

Duke University School of Law, Students

Madison Sherrill

Duke University School of Law, Students

Hadar Tanne

Duke University School of Law, Students

Mitu Gulati

University of Virginia School of Law

Date Written: February 14, 2021

Abstract

The traditional framework of U.S. private law that every first-year student learns is that contracts and torts are different realms: contracts is the realm of strict liability and tort, of fault. Contracts, we learn from the writings of Holmes and Posner, are best viewed as options: they give parties the option to perform or pay damages. The question we ask is whether, in the real world, that is indeed how contracting parties view things. Using a dataset made up of a thousand M&A contracts and thirty in-depth interviews with M&A lawyers, we find that there is at least one significant area of transactional practice that rejects the “fault is irrelevant to contract breach” perspective.

Keywords: damages, contracts, option, M&A

JEL Classification: K12, K22

Suggested Citation

Arnold, Theresa and Dixon, Amanda and Sherrill, Madison and Tanne, Hadar and Gulati, Mitu, The Cost of Guilty Breach (February 14, 2021). Boston College Law Review, Vol. E. Supp. (forthcoming Spring 2021), Duke Law School Public Law & Legal Theory Series No. 2021-23, Available at SSRN: https://ssrn.com/abstract=3785574 or http://dx.doi.org/10.2139/ssrn.3785574

Theresa Arnold

McGuireWoods LLP

434 Fayetteville Street
Suite 2600
Raleigh, NC 27601
United States

Amanda Dixon (Contact Author)

Duke University School of Law, Students ( email )

Durham, NC
United States

Madison Sherrill

Duke University School of Law, Students ( email )

Durham, NC
United States

Hadar Tanne

Duke University School of Law, Students ( email )

Durham, NC
United States

Mitu Gulati

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

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