Efficient Breach or Slavery

-- By RachelGholston - 15 Feb 2012

Why do we have a legal concept that allows people to break their word at a certain cost? Because forcing someone to keep her word, would amount to slavery. Slavery in our society is reserved to those who are tried and convicted. Freedom can in one sense be characterized by the ability to breach contracts.

Efficient Breach

The theory of efficient breach as I understand it is the theory that society is better off when allowing someone to breach a contract for a better opportunity. Society's goal is for the positive externalities of the new opportunity to outweigh the negative externalities of the breach. Our devotion to capitalism and the monetary system often leads to the conclusion that the breach is efficient if the net gain for the breach is greater than the loss to the non-breaching party. The loss to the non-breaching party is measured by money rather than the intrinsic, idiosyncratic value of the subject of the contract. If we take the notion that “The fortune is the measure of intelligence,” then efficient breach is an intelligent endeavor.

Slavery

The Constitution ended the chattel slavery of African Americans with a brief note: “Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction. Congress shall have power to enforce this article by appropriate legislation.” One would argue that enforcing a contract is not slavery, because the person voluntarily entered into the agreement. Indentured servants often voluntarily entered into their servitude, but the threat of slavery necessitated the ban on such practices. Today’s at-will-employment is based on the idea of instantaneous liberty. Despite the absence of an absolute present, only our present liberty has legal recourse. Slavery is so abhorrent that one cannot enslave his future self. The creation of slaves is the sole right of the government of the United States through its legislative and judiciary branches. Through the magical process that Jerome Frank describes for the way the law operates on men, the citizen is morphed into a slave, duly convicted of course.

A weak form of Social Control

Contract law is not a form of social control at all. It creates checks and balances, which serve to reinforce our value system, expressed commonly by monetary value. Efficient breach is the best support for the claim I just made. In contract law, morality turns on fairness. Fairness is a matter of compensation. In this train of thought, morality turns on compensation. Reputation and continuous relationships keep contracts in tact better than our compensation system. “Social control” stems from social interactions. Legal control stems from legal interactions, like trials. The only way the legal system can force behavior is through enslavement. Who does the system of juridical slavery typically target? Those who cannot afford to live morally…meaning fairly…meaning with the ability to compensate when they breach contracts.

Murder and Efficient Breach

Society can be characterized as a series of social contracts. One such contract is the contract not to kill another person. For most homicides, the killer does not have enough capital to make the breach efficient, so she goes to jail for murder or manslaughter. Homicide can be considered an efficient breach if the murderer has more social value free in society than the murdered possessed when alive. A rich man can kill a poor man and not go to jail by feeding into the monetary system with high-powered attorneys and bribes to higher-ups. Poor people do not have the means to efficiently brief social contracts, so their breaches result in some form of slavery.

Conclusion

Specific performance is a form of slavery. Because of the value placed on instantaneous liberty, any attempt to force someone to perform in a way they do not wish to perform is enslavement. It is the deprivation of liberty. To uphold the 13th amendment and the values it represents, the law allows for breach of commercial contract. The concept behind the breach of commercial contract is that the contract will always involve something of monetary value, something we can substitution for money. Social contracts are contracts where the breach does not have an easily identifiable monetary substitute, though one can be discerned by the court in most instances. Specific performance of social contracts is inherent in criminal law. When those contracts are breached, slavery ensues. To efficiently breach a social contract, one must be able to compensate, because that’s fair and fair is moral. We only punish the immoral in our society, the person who cannot compensate.

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I think there is a spectrum of alternatives between efficient breach and specific performance, so the extreme outcomes you are concerned can be easily alleviated without undermining specific performance entirely. For example, It is also possible to retain the invalidity of certain contracts (such as selling one’s self into slavery) while promoting specific performance as the default option in cases where such undesirable outcomes are unlikely. Alternatively, we could factor in some form of default punitive damages to represent the broader externalities not captured under typical efficient breach analysis. Another likely benefit of having specific performance as the default is reduced litigation costs, since there would be no need to speculate and argue over calculation of damages, contributory liability, et cetera in most cases. Such issues would be confined to the limited cases where specific performance was unsuitable.

-- By RohanGrey - 9 April 2012