About Efficient Breach Theory
According to Macneil R. Ian (1982), the term efficient breach is when the people or companies that violate increases the societal welfare if their profits supersede the loses of the promise. For instance, people engaging in routine labor and commercial contracts for economic reasons could get full compensation for getting injuries due to breaches. Basing in the provided case, between Athos, Porthos, and Aramis, the theory of efficient offense helps to solve the standstill. If the concept stopped Athos from transacting with Aramis, it could “waste its investment without giving economic gain to Porthos” (Macneil 2). This guideline could restrain Athos by criminalizing the breach of contract hence penalize or order its specific performance, something the law isolates. Although the objective compels parties to adhere to the agreement, the economics and maybe common sense applauds the intentional breach. The efficient breach theory allows intentional violation because it has the framework of solving the emerging conflict.
The above analysis also shows the relationship between efficient beach theory and beach damages. It is a fact that this theory allows Athos to breach a contract and pay costs if this option would prevail as “economically efficient instead of performing under the agreement” (Macneil 2). The expectation damages, in theory, motivate parties to breach in the presence of insufficient performance. The author has emphasized on transaction costs and externalities because the only way one can describe the economic efficiency of a given “financial outcome or allocation is in the presence of the latter” (Macneil 4). In the case the transaction in the externality happens with low transaction costs, the bargaining could result in Pareto efficient results regardless of the original allocation of the commodity.
Conclusively, entitlements are the ability of a person or company to act or maintain a given property. In this context, when such an entity’s act creates some externalities, the system must establish or suggest a law to address the standoff between the said action and another party’s commodity or ability to act as in the case of Athos, Aramis, and Porthos.