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Valparaiso Univ. Law School

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Tuesday, September 29, 2009

The Sucker Theory of Contract

Do individuals view breach of contract as a moral harm?  Dave Hoffman (Temple) and Tess Wilkinson-Ryan (UPenn) explore this question by way of psychology and offer an explanatory theory of contract: we view the unrequited promisee as a sucker.  Their engaging paper "Breach is for Suckers" is forthcoming in the Vanderbilt Law Review.  Here's the abstract:

This paper presents results from three experiments offering evidence that parties see breach of contract as a form of exploitation, making disappointed promisees into “suckers.” In psychology, being a sucker turns on a three-part definition: betrayal, inequity, and intention. We used web-based questionnaires to test the effect of each of the three factors separately. Our results support the hypothesis that when breach of contract cues an exploitation schema, people become angry, offended, and inclined to retaliate even when retaliation is costly. This theory offers a useful advance insofar it explains why victims of breach demand more than similarly situated tort victims and why breaches to engorge gain are perceived to be more immoral than breaches to avoid loss. In general, the sucker theory provides an explanatory framework for recent experimental work showing that individuals view breach as a moral harm. We describe the implications of this theory for doctrinal problems like liquidated damages, willful breach, and promissory estoppel, and we suggest an agenda for further research.

[Meredith R. Miller]

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