IDEAS home Printed from https://ideas.repec.org/a/ucp/jlstud/v24y1995i1p139-63.html
   My bibliography  Save this article

Contract Remedies and Options Pricing

Author

Listed:
  • Mahoney, Paul G

Abstract

This article examines the choice between money damages and specific performance as the remedy for contract breach by drawing on the theory of options valuation. The ability to breach and pay money damages is analogous to granting the breaching party an option to buy back his performance for a strike price equal to the damages award. The option affects the parties' returns from the contract and the variance of those returns. The parties' ex ante preference for money damages or specific performance should therefore depend, among other things, on their ability to value the option and their attitudes toward risk. The article examines the parties' ability to determine the option value and the effects of that value on their preferences under various assumptions. It concludes that the options analogy helps to explain the common law's choice of money damages as the normal remedy and the most common exceptions. Copyright 1995 by the University of Chicago.

Suggested Citation

  • Mahoney, Paul G, 1995. "Contract Remedies and Options Pricing," The Journal of Legal Studies, University of Chicago Press, vol. 24(1), pages 139-163, January.
    • Handle: RePEc:ucp:jlstud:v:24:y:1995:i:1:p:139-63
    DOI: 10.1086/467955
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/467955
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: https://libkey.io/10.1086/467955?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zervogianni, Eleni, 2004. "Remedies for damage to property: money damages or restitution in natura?," International Review of Law and Economics, Elsevier, vol. 24(4), pages 525-541, December.
    2. Tai-Yeong Chung & Alan Chan, 2004. "Contract Damages and Investment Dynamics," Econometric Society 2004 Far Eastern Meetings 683, Econometric Society.
    3. Triantis, Alexander J & Triantis, George G, 1998. "Timing Problems in Contract Breach Decisions," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 163-207, April.
    4. Camille Chaserant, 2007. "Autorité et flexibilité : quand la théorie des options interroge," Working Papers hal-04139207, HAL.
    5. Elli Kraizberg & Moshe Arenst, 2000. "Efficient Contract Remedies And the European Unification," European Journal of Law and Economics, Springer, vol. 10(1), pages 93-112, July.
    6. Jacobi Osnat & Sher Noam, 2015. "A Commitment Mechanism to Eliminate Willful Contract Litigation," Review of Law & Economics, De Gruyter, vol. 11(2), pages 231-266, July.
    7. Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jlstud:v:24:y:1995:i:1:p:139-63. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Journals Division (email available below). General contact details of provider: https://www.journals.uchicago.edu/JLS .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.