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American Law and Economics Review Advance Access published online on July 28, 2006
American Law and Economics Review, doi:10.1093/aler/ahl011
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© The Author 2006. Published by Oxford University Press on behalf of the American Law and Economics Association. All rights reserved. For permissions, please e-mail: journals.permissions@oxfordjournals.org

Article

Incomplete Contracts with Asymmetric Information: Exclusive Versus Optional Remedies

Ronen Avraham 1 * and Zhiyong Liu 2

1 Northwestern University School of Law, Chicago
2 Robinson College of Business, Georgia State University

* To whom correspondence should be addressed.
Ronen Avraham, E-mail: r-avraham{at}law.northwestern.edu


  Abstract

Scholars have been debating for years the comparative advantage of damages and specific performance. Yet, most work has compared a single remedy contract to another single remedy contract. But contract law provides the non-breaching party with a variety of optional remedies to choose from in case of a breach, and parties themselves regularly write contracts which provide such options. In this article, we start filling this gap by studying multi-remedy contracts. Specifically, we compare a contract that grants the non-breaching party an option to choose between liquidated damages and specific performance with an exclusive remedy contract, which restricts the non-breaching party’s remedy to liquidated damages only.


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