When commercial parties enter into contracts for the sale of goods they presumably do so with the expectation that the contract will be performed on both sides. Thus, one would expect that parties would prefer legal default rules that prevented the other party from avoiding its contractual obligations simply because it regretted having entered into the contract in the first instance. Nevertheless, commercial parties also understand that breaches of contractual obligations sometimes occur, often without any malice or intent on the part of the breaching party. When that happens, presumably commercial parties would want to minimize the costs related to breach, either by allowing the breaching party to remedy the situation or by allowing the aggrieved party to seek – in the case of the buyer – an alternative source of supply or – in the case of the seller – an alternative outlet for its products. Buyers and sellers cannot know in advance which counterparties will breach their contracts. If they did, they likely would not enter into those contracts in the first instance. Thus, buyers and sellers will likely incorporate the risk of breach – and its related costs – into the prices that they are willing to pay or for which they are willing to sell the relevant goods. Sellers will charge more, and buyers will be willing to pay less as uncertainty about the performance of the other and the costs related to those breaches that do occur increase. Thus, legal rules that reduce both uncertainty of performance and the costs of...
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