Question

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

Answer 1

This liquidated damages approach is ex ante and is based on the principle that more complete contracts can be more efficient. Liquidated damages are restricted to reparation for harm and are not meant as penalties for certain actions. When it is problematic to determine the actual damages incurred as a consequence of a breach, the courts may provide relief in the form of specific performance.