Tuesday, February 16, 2021
William Perdue's Legacy Lives on at Duke Law: Specific Performance Clauses in Action
Last September, we blogged about a paper by Theresa Arnold, Amanda Dixon, Madison Whalen, and Mitu Gulati on The Myth of Optimal Expectation Damages. I have subsequently learned that the research for that paper was funded by a grant to the Duke University School of Law from the family of William Perdue. The fund was meant to encourage collaborations in the vein of Lon Fuller and William Perdue from the 1930s. At the time they wrote their pathbreaking works on the reliance interest, Lon Fuller was on the Duke faculty, and William Perdue was a 3L!
When I was a 3L, I was fortunate to contribute to a book project organized and overseen by Thomas M. Franck (pictured). The experience of working closely with a faculty member and seeing a project through to completion with him was a great supplement to the note-writing experience. My chapter was not as successful as William Perdue's 3L writings, but it initiated me into the world of legal scholarship. Another student contributor to that project, Kristen Boon, also joined the legal academy and teaches, among other things, international business transactions. I benefitted tremendously from working with Tom Franck, Kristen, and the other fellows. Each year, Professor Franck would work with a different group of students and international law scholars on a conference that would yield an edited collection of essays. The students who participated in these projects were known as Franck fellows and, over the years, dozens became law professors. That hidden legacy is a vibrant part of Tom Franck's contribution to the scholarly community.
The papers in the Duke Law series appropriately focus on damages. A new paper in the series is forthcoming in the Wisconsin Law Review This one is authored by Theresa Arnold, Amanda Dixon, Madison Sherrill, Hadar Tanne, and Mitu Gulati and is entitled "Lipstick on a Pig": Specific Performance Clauses in Action. Here is the abstract from SSRN:
The black letter law says that money damages are the preferred remedy for contract breach under US law. Specific performance is reserved for extraordinary circumstances. Contract theory tells us that default rules generally reflect what a majority of contracting parties would agree to, had they considered the matter. But do contracting parties agree with the law’s preference for money damages over specific performance? In a data set of more than 1000 M&A contracts, we find that in over 80% of transactions, parties choose specific performance as their preferred remedy. Using interviews with senior M&A lawyers we seek to unpack the reasons why parties are contracting around the law’s distaste for specific performance and default rule of money damages.
You may discern a pattern. Both papers discussed in this space challenge our assumption that expectation damages, the default measure of contract damages, are what the parties would agree to if left to their own devices.