In October, I hire a guy I know, Charlie, to shovel snow for me all winter,...

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In October, I hire a guy I know, Charlie, to shovel snow for me all winter, and agree to pay him $1,500 for the season. In late November, someone else offers him $2,600 to shovel for them, and he doesn't have time to do both, so he tells me I need to find someone else. In October, I could have found someone else for $1,750; by late November, however, all other snow shovelers are fully booked, and I end up shoveling my own snow all winter, which gives me disutility of $2,200. I sue Charlie for damages. (a) Was Charlie's breach of contract efficient? Why or why not? (b) How much are expectation damages? How much are opportunity cost damages? (c) I sue Charlie for specific performance and win. He asks if he can negotiate a payment for me to let him quit and take the other job instead. What are our threat points? What are the gains from cooperation? If we split the gains evenly, how much would he pay me to let him out of our agreement? After he agreed to work for me, Charlie continued to hunt for a better-paying job. This is the opposite of an investment in performance - he was investing time in something that made him more likely to breach our contract. (d) Under expectation damages, would Charlie have an incentive to keep searching for another job more than, less than, or the efficient amount? Why? (e) Under opportunity cost damages, would Charlie have an incentive to keep searching for another job more than, less than, or the efficient amount? Why? (f) Under a remedy of specific performance, would Charlie have an incentive to keep searching for another job more than, less than, or the efficient amount? Why? In October, I hire a guy I know, Charlie, to shovel snow for me all winter, and agree to pay him $1,500 for the season. In late November, someone else offers him $2,600 to shovel for them, and he doesn't have time to do both, so he tells me I need to find someone else. In October, I could have found someone else for $1,750; by late November, however, all other snow shovelers are fully booked, and I end up shoveling my own snow all winter, which gives me disutility of $2,200. I sue Charlie for damages. (a) Was Charlie's breach of contract efficient? Why or why not? (b) How much are expectation damages? How much are opportunity cost damages? (c) I sue Charlie for specific performance and win. He asks if he can negotiate a payment for me to let him quit and take the other job instead. What are our threat points? What are the gains from cooperation? If we split the gains evenly, how much would he pay me to let him out of our agreement? After he agreed to work for me, Charlie continued to hunt for a better-paying job. This is the opposite of an investment in performance - he was investing time in something that made him more likely to breach our contract. (d) Under expectation damages, would Charlie have an incentive to keep searching for another job more than, less than, or the efficient amount? Why? (e) Under opportunity cost damages, would Charlie have an incentive to keep searching for another job more than, less than, or the efficient amount? Why? (f) Under a remedy of specific performance, would Charlie have an incentive to keep searching for another job more than, less than, or the efficient amount? Why?

Answer rating: 100% (QA)

Solution a Charlies breach of contract is efficient from an economic standpoint When he received a b... View the full answer