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Market damages and the invisible hand

Research output: Contribution in Book/Report/Proceedings - With ISBN/ISSNChapter (peer-reviewed)

Published
Publication date10/02/2016
Host publicationComparative contract law: British and American perspectives
EditorsLarry A. DiMatteo, Martin Hogg
Place of PublicationOxford
PublisherOxford University Press
Pages297-312
Number of pages16
ISBN (Print)9780198728733
Original languageEnglish

Abstract

In previous work I have tried to argue that Macaulay’s concepts of the non-use of contract and the non-contractual relationship, despite their enormous productivity, should now be abandoned. Further progress in understanding the empirical phenomena of contracting depends, as Macaulay himself is perfectly well aware, on properly understanding the role plays in shaping welfare enhancing economic action, even when that role categorically is not one of direct prescription by the law of the empirical forms of contracting.

In this paper I will attempt to explain the apparent non-use, as indicated by an absence of decided cases, of the law of market damages under The Sale of Goods Act 1979 and the Uniform Commercial Code, focusing on buyer’s remedies under ss 51, 52 and 53 of the former and arts 2-712 and 2-713 under the latter. Though the Sale of Goods Act has no concept of cover, its provisions are to the same effect as 2-712, and cover is so effective a remedy for both the buyer and the seller that it normally produces cooperative contracting behaviour and obviates the need for ostensible legal action. This is not non-use. It is a law so well designed that it provides the legal framework for cooperation which seems to arise from the operation of the invisible hand. This is so successful a regulatory design that the legal regulation seems to disappear.

This argument will be supported by reference to those aspects of ss 53 and art 2-713, which allow a buyer opportunistically to avoid taking cover and seek supra-compensatory damages. These provisions allow of purely self-interested action by the buyer, which must be contrasted to the cooperation evidenced by cover. It is the latter which is legitimate market behaviour.