Court awards of damages take place ex post, and anticipation of those awards provides ex ante incentives to fulfill promises, while leaving the flexibility to breach contracts when it is efficient to do so. The parties to a contract may also write into the contract contingencies in the event of breach. This liquidated damages approach is ex ante and is based on the principle that ________.

Question

Quizplus · Accepted Answer

The principle behind the liquidated damages approach is that more complete contracts can be more efficient. This approach allows the parties to write contingencies for breach into the contract in advance. Option A is incorrect because damages are not intended as penalties. Option B is incorrect because damages should be limited to compensation for harm. Option D is also incorrect because the misuse of a product is not related to the principle behind the liquidated damages approach.

Court Awards of Damages Take Place Ex Post, and Anticipation