Abstract: This Article presents results from three experiments offering evidence that parties see breach of contract as a form of that makes 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 effect of each of three factors separately. Our results support hypothesis that when breach of contract cues an schema, people become angry, offended, and inclined to retaliate even when retaliation is costly. This theory offers a useful advance because 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, sucker theory provides an explanatory framework for recent experimental work showing that individuals view breach as a moral harm. We describe implications of this theory for doctrinal problems like liquidated damages, willful breach, and promissory estoppel. We then suggest an agenda for further research. I. INTRODUCTION Contract law lacks a realistic theory of injury caused by breach. Most judges follow Holmes and instruct that the duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it, - and nothing else.1 But ordinary people think that breach is morally wrong and believe that contract damages should reflect ethical culpability of breaching party.2 They prefer specific performance to monetary damages, deny that expectation interest remedies moral harm caused by breach, and resist breaching their own contracts even when it is wealthmaximizing to do so.3 In short, individuals act as if breach is as not as morally inert as doctrine says it ought to be. To decide if this gap between lay intuition and legal rules presents a problem that law needs to fix, we need to know more about why individuals feel they way they do. Data points from empirical and theoretical scholarship describe various commonsense moral distinctions between different kinds of breaches, such as willful breaches, breaches of duty of good faith, and efficient breaches.4 But we lack a framework that would explain broader pattern of findings. We propose that people often consider breach of contract to be a form of and a violation of norm of reciprocity.5 Psychological research has shown that people are highly sensitive to suspicion that they are being exploited,6 and this Article demonstrates that breach of contract is particularly offensive when it makes promisees into regretful, embarrassed suckers. (For purposes of our discussion, we will use terms exploited, suckered, duped, and taken advantage of interchangeably, though we recognize that there are cases in common usage in which one term might apply but others would not.) To illustrate relationship between breach of contract and aversion, this Article reports on results of an experimental series asking participants to react to circumstances involving breaches of several kinds of simple contracts. The contracts were designed to create certain exploitation schemas to determine what, if any, particular aspects of breach would cause an individual to feel like a sucker. To be a sucker - as term is used in this Article - a person must consent to participate in some problematic or failed transaction, believe breacher is profiting from non-breacher's loss, and believe that breacher has acted intentionally. In experiment described in this Article, these three factors predict moral outrage in response to breach of contract. As we show, sucker framework illuminates several puzzling results from current research on psychology of contract damages as well as aspects of contract doctrine, ranging from law of willful breach to promissory estoppel. …
Publication Year: 2010
Publication Date: 2010-05-01
Language: en
Type: article
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Cited By Count: 13
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