Reflections on Fuller and Perdue\u27s \u3ci\u3eThe Reliance Interest in Contract Damages\u3c/i\u3e: A Positive Economic Framework

Fuller and Perdue\u27s classic article, The Reliance Interest in Contract Damages, is regarded by many contemporary contracts scholars as the single most influential law review article in the field. For those of us who teach and think about contracts from the perspective of law and economics, the consensus would probably be close to unanimous. The article displays an approach highly congenial to an economic perspective. The connection goes beyond Fuller and Perdue\u27s explicitly functional approach to law (which law and economics shares with other schools of thought descended from the legal realists) and beyond Fuller and Perdue\u27s focus on commercial policy. Fuller and Perdue\u27s analysis of the relationships among the various damage interests they identify, and of the social purposes served by their protection, reveals a sophisticated understanding of the role and limits of economic incentives in influencing the behavior of contractual parties. Fuller and Perdue\u27s article made two major related claims. The first claim was primarily descriptive or positive: that common- law courts deciding contracts cases had actually been attempting to protect people\u27s reliance expenditures, notwithstanding the fact that the doctrinal focus of the cases was often elsewhere, or that courts often claimed to be protecting people\u27s expectations. The second claim was primarily normative: that the reliance interest, rather than the expectation interest, was the appropriate object of judicial protection