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.

I'm not sure I understand this. Specific performance for a contract of personal service might raise such a question, though the presence of an anterior promise seems something of a distinction. But the rule that specific performance is available to compel transfer of real estate contracted for is still good law, and it would be hard to say that a rule compelling the delivery of fungible goods after payment of the agreed price is different from a rule compelling the delivery of unique goods from the "enslavement" point of view. So is your point not about efficient breach, but instead about specific performance for services? And what of damages for services in a rising market, in which the cover price the breaching defendant must pay is higher than the cost of performing the services himself?

Slavery in our law 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.

I don't see what the proverb has to do with the point. I'm also not sure why it requires 123 words to define "efficient breach." A breach is efficient when the gain to the breaching party more than suffices to pay expectation damages to the party losing the benefit of performance. What are the other hundred words for?

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.

There isn't a ban on such practices. Apprenticeships are still common, unpaid internships are to be found all over the economy, and H1B? visas still require lengthy work commitments to the same employer on pain of deportation. "Involuntary servitude" and "indentured servitude" are not synonyms.

Today’s at-will-employment is based on the idea of instantaneous liberty. Only our instantaneous liberty has legal recourse. Slavery is so unnatural that one cannot enslave his future self. The creation of slaves through the law is a 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.

What did this paragraph add to the argument?

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.

I don't understand the point of these sentences in general, but the last is particularly obscure. Imprisonment for civil contempt is constitutional, and fines can also be used to coerce behavior, e.g., compliance with an injunction.

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.

Yes, but that characterization will have enormous problems associated with it. Why do you want to borrow this trouble?

One such contract is the contract not to kill another person.

Unless the word contract has ceased to have any connotation of consent, this lost us more clarity than it gained. There's no implied consent to an agreement not to commit acts mala in se. They're forbidden regardless of consent.

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.

Even if this account of the situation were true uniformly, it would constitute an extra-legal observation, not a legal one, and I don't see what light it would shed on the legal rules concerning measure of damages that you're discussing.

Conclusion

Specific performance is a form of slavery.

Is every injunction?

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.

You've just rewritten the entirety of the law of equitable remedies, or maybe just ignored it.

It is the deprivation of liberty. To uphold the 13th amendment and the values it represents, the law allows for breach of commercial contract.

Do you have a 13th amendment case anywhere that says this?

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.

You seem to be eliding the cases involving unique goods.

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.

This is an idiosyncratic definition, isn't it? I don't know any source that uses the phrase this way.

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.

This attempt to draw the line between contract and crime is interesting, but it's not true. Larceny offenses where restitution has been made come to mind. Also all attempts at crimes against property.

The central idea of the draft is interesting, and leads you to some valuable speculations. It's also wrong, however, so the way forward is to get the benefit of the idea's implications without misunderstanding or misstating the law. I've marked a number of the places where you've either mischaracterized the law of remedies, or overlooked the presence of additional relevant situations.

One of the basic analytical problems is the distinction between efficient breach and specific performance. Obviously, even in those cases where specific performance is not available, damages doctrine will either support or subvert an "efficient breach" point of view. And you haven't explained why, if at all, exemplary or punitive damages should not be available in contract cases. That question should be sufficient to distinguish your argument against specific performance from an argument in favor of efficient breach.

From my point of view, then, there are two important steps to a better draft. First, follow out the arguments about damages to determine whether you are actually writing about efficient breach, or only specific performance. Second, review both the doctrines concerning specific performance that don't touch on delivery of personal services, and the doctrines concerning in personam coercive remedies—including injunctions requiring affirmative performance of acts impairing legal rights, and civil contempt—in order to put appropriate legal bounds around your overbroad statements concerning what is and is not "slavery" in law. You might also want to take a look at the Thirteenth Amendment cases, so as to be able to give the reader a clearer and more accurate sense of the actual constitutional doctrine as it concerns civil justice. The history of the relationship between the Thirteenth Amendment and the labor injunction would be particularly fruitful, if disappointing to you, I think.

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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