Berkeley Program in Law and Economics

In order to analyze the problem of efficiency in braches of contracts we must work under the hypothesis of positive transaction costs. To assume a world of zero transaction costs imply the inexistence of the problem, for that any inefficient contract would have been voluntarily terminated. I argument that problems of contractual breach focus on disputes emerged between parties that already know each other, which permits us to grant them a great informational advantage over courts. For this reason, it is possible to adopt a initial presumption that specific performance rules will be, generally, the most efficient remedy on an ex post transaction cost perspective. On an ex ante transaction cost perspective, I defend that it is reasonable to presume that a specific performance rule shall mean smaller search, negotiation and contractual drafting costs, and that these economies in ex ante transaction costs shall be dispersed throughout the economy. In the end, I conclude bringing up the position of Brazilian law in force.