Private Law, Punishment, and Disgorgement: Optimal Penalties in Contracts
Article from: TDM 6 (2007), in Compensation and Damages in International Investment Arbitration
Introduction
Contract law's liquidated damage rules prevent enforcement of contractual damage measures that require the promisor, if it breaches, to transfer to the promisee a sum that exceeds the net gain the promisee expected to make from performance; but these rules permit the promisor to transfer less than the promisee's expectation. We define a contractual damage multiplier as any number between zero and infinity by which the promisee's expected gain-its expectation interest-is multiplied. Multipliers of one or less thus comply with the liquidated damage rules while multipliers that ...