in law school academic circles, the professional term sometimes bandied about is “efficient breach”. Some academics describe contractual breaches in terms of efficiency and argue that contract law should encourage efficient breaching.

In other words, i think, the argument goes, people shouldnt be held to contracts any longer where it doesn’t maximize the utility of both partiesbecause the ultimate goal of contract law isn’t the enforcemt of some sort of unwritten moral code in our dna, but instead, maximizing the utilitya nd happiness of all of us here in the actual world.

. Where it is more efficient to breach — when the sum total of happiness and utility increases with breach — the contract should be breached, and the gains if any divided among the parties.

I don’t remember enough to apply it to the issue at hand, but the overwhelming sense from a lawyering point of view is that contracts are not moral bonds, but agreements for mutual benefit that may not suit the parties at a later date, and that breach is a good thing, like divorce, an expected possible outcome, necessarily always built in as an escape hatch, not for just unforeseen bad things, but for good things as well.

For instance, if a doctor is making 100k serving middle class people whilst living in l.a. and is upside down on his mortgage, but could get out and go to another state and make 300k serving the underserved population, it would be more efficient for society if the contract is breached, people would get healthc are theyotherwise wouldnt get, doc is out from an oppressive mortgage in an underpaying state, and the gains divided up according to the previous agreement, contract terminated.

in that case there are gains to be divided; in most mtgs there are not. but that doesn’t mean the pricniple is any different. where the mortgage owner will be ahppier withoutt he mortgage, better able to look for work elsewhere, or just have more money available for going to dinner and for stuff, then the parties should act to maximize that utility and split the gains, if any according tot he contract they agreed on.

i never much liked this theory, but it pervades thinking about contracts. the problem i think, is that this is not really a contract beween a bank a nd a debtor. this is a contract we all have to pay out on. that’s different. there is of course a cost for efficient breaching, in that is business people may not trust you, but if you’ve truly breached efficiently, you work your way through it.

but in any event it’s pretty clear the law doesn’t try to codify some ethical impulse. it assume a bad dude, and tries to circumscribe his behavior and scare him into compliance with some bare minimum of decency. See, e.g., the 10 commandments.