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1、DODGETOPRINTER.DOC04/29/994:24PMDukeLawJournalVOLUME48FEBRUARY1999NUMBER4THECASEFORPUNITIVEDAMAGESINCONTRACTSWILLIAMS.DODGE†ABSTRACTThemajorityofAmericanjurisdictionsdonotallowpunitivedam-agesforbreachofcontractunlessthebreachconstitutesanindepend-enttort.Increasingly,courtsandc
2、ommentatorshavereliedonthethe-oryof“efficientbreach”toexplaintheruleagainstpunitivedamagesincontracts.InthisArticle,ProfessorDodgearguesthateconomicef-ficiencysupportsadifferentrule—oneallowingpunitivedamagesforanywillfulbreachofcontract.Willfulbreachesfallintotwocategories:thos
3、ethatare“opportunistic”andthosethatare“efficient.”An“opportunistic”breachdoesnotincreasethesizeoftheeconomicpie;thebreachingpartygainssimplybycapturingalargershareofthepieattheexpenseofthenonbreachingparty.An“efficient”breach,bycontrast,in-creasesthesizeofthepie,allowingthebreac
4、hingpartytocompensatethenonbreachingpartyandstillcomeoutahead.Deterringoppor-tunisticbreacheswiththethreatofpunitivedamagesisefficientbe-causesuchbreachesbydefinitiondonotincreasesocietalwealth.Thus,punitivedamagesshouldberoutinelyavailableincasesofop-†AssociateProfessor,Univers
5、ityofCalifornia,HastingsCollegeoftheLaw.B.A.,YaleCollege,1986;J.D.,YaleLawSchool,1991.IwouldliketothankVikAmar,IanAyres,AshBhagwat,JoeGrodin,LorenHemachandra,ChuckKnapp,DougLaycock,DavidLevine,Cal-vinMassey,UgoMattei,RichardPosner,H.G.Prince,TomUlen,andBillWangforcommentsonanear
6、lierdraft,aswellasparticipantsintheHastingsWorks-in-ProgressProgram.ChadEllistonandJohnO’Connorprovidedoutstandingresearchassistance.629DODGETOPRINTER.DOC04/29/994:24PM630DUKELAWJOURNAL[48:629portunisticbreach,suchaspretextualtermination,stonewalling,andbadfaithrefusaltopayadebt
7、.Efficiencyalsosupportsextendingliabilityforpunitivedamagestothosebreachesthatare,intheory,“efficient.”Thethreatofpunitivedamageswillnotrequireinefficientperformancebecausethepoten-tiallybreachingpartymaynegotiatewiththeotherpartyforarelease.RelyingonCalabresiandMelamed’sdistinc
8、tionbetween“propertyrules”and“liabilityrules,”P
