Chapter 7 - Efficient Breach and Re-Negotiation in English Sales Law

Summary

According to law and economics theory, contract law should facilitate transactions and hence promote welfare maximization. In the absence of complete contracts, it is necessary for the system of remedy rules to shape the parties’ incentives to make efficient contracts ex-ante and to act optimally after the contract has been concluded. Accordingly, contract remedy techniques, such as techniques to encourage accurate evaluation, to promote efficient precaution, to avoid performance when it is inefficient to do so and to optimally allocate future risks are desirable. Moreover, contract law may also include particular rules dealing with risks that fall out of the scope of a contract. This chapter will apply the theory of efficient breach to English sales law by analysing its remedy rules and rules in relation to unexpected risks. After a basic introduction to English sales law in section 1, section 2 of this chapter will provide the framework of a buyer's remedies, including the remedy of specific performance, monetary damages and remedies stipulated by contract parties. Afterward, section 3 will analyse the English doctrines of frustration and hardship, which deal with contracts falling into the efficient breach zone. An economic analysis of English law will be made in section 4 in order to examine to what extent a seller is motivated to adhere to the contract as well as to analyse the role of party-autonomy in dealing with breach and performance of commercial sales contracts. Section 5 will conclude.

Introduction to English Sales Law

What we call English sales law mostly refers to the modern law of sales which dates from the end of the 19^th century. Before the Sales of Goods Act 1893 (hereinafter SGA 1983), the law of sales basically consisted of common law and a few enactments applying to the general aspect of contracts. Originally, it was the criminal statutes, for instance, rules prohibiting “the use of false measures.or the adulteration of food” that regulated sales transactions and actions on sales were majorly based on deceit, relating to fraud or breaches of express warranty.