"Money Can't Buy Me Love": A Contrast between Damages in Family Law and Contract

"`Cause, I don't care too much for money, Money can't buy me love." -John Lennon (1964). IMAGE FORMULA89 As my contribution to this symposium in David's honor, I submit the law and economics section of the damages chapter of our joint enterprise, Understanding Contracts. Because of David's failing health, my own involvement with the publisher never reached contract stage.1 The chapter concludes with a problem that illustrates some of the intricacies of mixing family law and contract. David and I grappled for some time with the answer to the problem, coming at it from our different points of view. On one occasion, David, with a twinkle, told me there was only one place where I was "absolutely wrong." So here is our attempt to fuse two disciplines, followed by my analysis of why we had such problems (and such fun) doing it. The family law problem does not illuminate every single part of an exploration of damages or every aspect of damages that might apply to family transactions. I leave that task for another time. It does, however, illustrate problems with predicting and planning for the future, problems that plague all contracts, but that make use of contract analogies (or any other theory) particularly frustrating in family law. I suggest that the enhanced IMAGE FORMULA91 earning cases featured here be analogized to a particular kind of commercial contract, the sort involving specific investments needed not only by the contracting parties but also by the economy as a whole. I. THE LAW AND ECONOMICS OF (COMMERCIAL) CONTRACT DAMAGES In section 13.01 of Understanding Contracts, we set forth the general goal of contract damages: to put aggrieved parties in as good a position (to the extent money can) as they would have been in had the other party performed as promised, subject to certain limitations (the aggrieved party should mitigate and avoid harms, while damages should be reasonably foreseeable).2 If one thinks carefully about this goal, one should realize it has aspects that are both forward-looking ("reasonably foreseeable") and backwardlooking (limitations on what turn out to be losing contracts). The goal speaks directly only to the current contract and not to future dealings between the parties or to contracts in general. Lawyer-economists see the goal, and therefore the aspects, of contract damages somewhat differently. Most of their writing is more concerned with forward-looking aspects and with shaping the behavior of future contract-makers and writers3 than with what transpired after the contract was made. Some of these academics (for there are few judges who are adherents of the school,4 and fewer practicing attorneys) also claim that an ideal system of contract law would promote getting the goods (or services) in the hands of those who value them most,5 regardless of whether such movement of resources involves the incidental ("efficient") breach of an existing contract.6 Others of the school place more value on the ability of contract-makers to be secure that the promised duties will be carried out.7 The law and economics writers agree that remedies for breach affect incentives,8 although they may disagree about what those incentives should be.9 Followers of the law IMAGE FORMULA95 and economics school, like economists in general, make simplifying assumptions about people who make contracts. Though the assumptions may seem unrealistic and abstract, by varying the assumptions one at a time, economists hope to learn something about what happens in the real world of contracts. The goal is fourfold: (1) to encourage parties to create contracts that will leave at least one of the parties better off and neither party worse off;10 (2) to encourage parties to write contracts that will cause the parties to perform when it is efficient for them to do so; (3) to encourage efficient performance of valid contracts; and (4) to enforce contracts in ways that advance the preceding three goals. …