In the famous case of Taylor v. Caldwell, 3 B. & S. 826, 122 Eng. Rep. 309 (K.B. 1863), the plaintiff, Taylor, leased the defendant’s concert hall for four nights at 100 pounds sterling to be paid to Caldwell after each performance. Shortly after the first performance, the concert hall was destroyed by fire. Taylor sued Caldwell for breach of contract and asked the court to award him as damages the expenses he incurred in preparation for the last three performances. The defendant sought to be excused from performing on the ground that it was literally impossible for him to perform the contract after the fire.
a. What factors enable one party to prevent a risk better than another?
b. What factors enable one party to insure against a risk better than another?
c. Do these factors tend to converge or diverge, or is their association merely coincidental?
d. How would you decide this case in light of economic analysis?