A New Empirical Study of Contract Remedies

A basic distinction within the law of contractual remedies is between remedies aiming to compel promisors to perform the very thing they have undertaken to do—to deliver goods, to convey real property, to complete a construction project, to refrain from competing with the other party, and so forth—and between substitutionary monetary remedies, primarily damages. Interestingly, there are few issues in contract law that are more controversial than the question whether the law should generally enforce contractual obligations in kind, or whether it should content itself with monetary relief. The controversy is not merely theoretical. Dozens of articles have been written on this question from a moral, economic, or an institutional perspective. It is also a doctrinal and comparative topic: whereas the primary remedy in common law systems is damages, in civil law systems it is specific performance. However, it is unclear to what extent the differing points of departure actually result in differences in practice. Here too, there are differing opinions among comparative law experts. While some insist that doctrinal differences result in very different practices, others claim that the practical differences, in terms of plaintiffs’ choice of remedies and courts’ awards, are not that significant. The latter question is ultimately empirical. 

In a forthcoming paper in the American Journal of Comparative Law, we report the results of a large-scale empirical study that aims to explore this issue. We took advantage of the fact that Israeli contract law experienced a 'legislative shock' in 1970, when the Contracts (Remedies for Breach of Contract) Law fundamentally transformed the law of contract remedies. Prior to 1970, Israel followed the common law rule, according to which specific performance is an equitable remedy that is available in exceptional cases—primarily in the context of real estate transactions. After 1970, enforced performance—a term encompassing specific performance, injunctions, and orders to repay a debt—is considered the primary remedy, to which the injured party is entitled as a matter of right, subject to a few exceptions (such as obligations to render personal services). The common wisdom among Israeli judges and scholars is that the 1970 Act transformed the law of contract remedies, making enforced performance the ordinary remedy for breach. We doubt this consensus. Based on a multitude of theoretical insights, lessons from comparative law, doctrinal analyses, and practical considerations, we hypothesized that the actual resort to enforced performance by plaintiffs and courts is similar before and after the Remedies Act. To examine these conflicting hypotheses, we encoded the accessible judgments of the Israeli Supreme Court that deal with remedies for breach of contract, from the establishment of the State of Israel in 1948 until the end of 2016, as well as a large sample of district court judgments from the past two decades. We compared plaintiffs’ choice of remedies and courts’ award of them in the two periods, taking into account numerous variables, including the type of contract, type of plaintiff (a firm or an individual), year of judgement, and legal training (common law or civil law) of judges who studied law abroad (as most of them did, primarily in the early decades). 

To our surprise, neither the common wisdom, nor our sceptical hypothesis, were borne out by the empirical findings. In fact, plaintiffs’ choice of the remedy of enforced performance dramatically decreased from 61% of the cases before 1970 to 44% after 1970. There was also a decline in the courts’ willingness to award enforcement remedies, when they were initially claimed. Out of those cases, the award of enforcement remedies by the district courts, when some remedy for breach of contract was awarded, declined from 87% before 1970 to 81% afterwards, and a comparable decline from 89% to 84% was found in Supreme Court judgments. The combined effect of the decline in plaintiffs’ inclination to claim enforcement remedies and in courts’ inclination to award them is a sharp decrease in the award of enforcement remedies by the Supreme Court from 56% of the cases in which some remedy was awarded before 1970, to 37% afterwards. 

We thus found no evidence that the Remedies Act of 1970 has increased the resort to enforcement remedies. Inasmuch as we can offer an explanation for the surprising results, it is based on the change in the length of legal proceedings over time. The average length of proceedings in the cases included in our dataset was around three years from 1948 until the 1970s. Then, during the 1980s and 1990s, it gradually rose to about seven years, and remained around this number in the past twenty years. Thus, it appears that the main reason for the decline in the use of enforcement remedies after 1970 has to do with the fact that legal proceedings in that period have become much lengthier. Non-monetary enforcement remedies become considerably less attractive, the longer it takes to get them. 

Our empirical findings suggest that mundane considerations, such as the length of legal proceedings, most likely have a greater impact on the choice of remedies by plaintiffs and their award by courts than the formal legal rules or the complex policy considerations underpinning them. Thus, if legal policymakers wish to increase the use of enforcement remedies, they should focus on shortening legal proceedings rather than changing the substantive law on contractual remedies.

Leon Yehuda Anidjar is an Adjunct Lecturer at the Faculty of Law and the Federmann School of Government and Public Policy, Hebrew University of Jerusalem.

Ori Katz is a Research Fellow at the Faculty of Law, Hebrew University of Jerusalem.

Eyal Zamir is the Augusto Levi Professor of Commercial Law at the Faculty of Law, Hebrew University of Jerusalem.