Moral Judgment and Moral Heuristics in Breach of Contract

Most people think that breaking a promise is immoral, and that a breach of contract is a kind of broken promise. However, the law does not explicitly recognize the moral context of breach of contract. Using a series of web‐based questionnaires, we asked subjects to read breach of contract cases and answer questions about the legal, financial, and moral implications of each case. Our results suggest that people are quite sensitive to the moral dimensions of a breach of contract, especially the perceived intentions of the breacher. In the first study, we framed the motivation for a contractor's breach as either the chance to make more money or the chance to avoid losing money. Subjects were more punitive when the motivation appeared to be greed (breach to gain) than when the motivation appeared to be fear (breach to avoid loss). In the second study, we manipulated the timing of the negotiation over damages, comparing cases in which the promisor asks to negotiate damages before definitively breaching (as in a liquidated damages clause) with cases in which the breach has already occurred. We predicted that once the contract is breached, the moral violation becomes very salient, and we found that subjects were more punitive when setting damages ex post than ex ante. Finally, results from the third study suggest that subjects believe that intentionally breaking a contractual promise is a punishable moral harm in itself. When presented with identical losses, one from an intentional breach of contract and the other from a negligent tort, subjects were more punitive toward the breacher than the negligent tortfeasor. They treated willful breach as an intentional harm.