Would joe breach be efficient overall

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Reference no: EM132244587

Suppose Al hires Joe to build him a house. At the time they signed the contract, Al valued the house at $500,000, it would cost Joe $200,000 to build the house, and they agree on a price of $300,000. After the contract is signed (but before any money changes hands), Joe’s costs go up to $350,000, and Joe considers breaching the contract.

a. Would Joe’s breach be efficient overall? Why or why not? What would expectation damages be (the number)?

b. Assuming he would have to pay expectation damages if he breached, describe Joe’s decision (with numbers) between performing the contract and breaching. Would his decision be efficient overall, and why or why not?

c. How high would Joe’s costs have to go to make him prefer to breach (and pay expectation damages) rather than perform the contract? Would this be an efficient breach?

d. What would happen between Al and Joe if the judge ordered specific performance? Would this outcome be efficient, and why or why not?

Reference no: EM132244587

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