The Theory of Efficient Breach: Contrasting Halachic and Secular Perspectives

Abstract

The theory of 'efficient breach' permits, and even encourages, contractual breach that advances economic efficiency. It rejects the notion that breach is a moral failure, and advocates contractual breach that moves goods and services to higher valued uses. Efficient breach has been fiercely debated by judges, legal scholars, economists, and moral philosophers since it was first proposed.1 The theory of efficient breach lies at the intersection of law, morality, and economics. This makes the theory an ideal forum to compare and contrast 'secular' perspectives on efficient breach with those of halachah. A comparative study reveals divergent understandings of promise-keeping, economic efficiency, and the role of law. Although many consider efficient breach to be on the “cutting edge of contract law,”2 the classic halachic sources provide a sophisticated understanding of contract law, and a different lens with which to evaluate efficient breach. The differing approaches have important implications for public policy, economics, and modern markets