Reflections on Fuller and Perdue’s The Reliance Interest in Contract Damages: A Positive Economic Framework

Fuller and Perdue’s classic article, The Reliance Interest in Contract Damages, is regarded by many contemporary contracts scholars as the single most influential law review article in the field. For those of us who teach and think about contracts from the perspective of law and economics, the consensus would probably be close to unanimous. The article displays an approach highly congenial to an economic perspective. The connection goes beyond Fuller and Perdue’s explicitly functional approach to law (which law and economics shares with other schools of thought descended from the legal realists) and beyond Fuller and Perdue’s focus on commercial policy. Fuller and Perdue’s analysis of the relationships among the various damage interests they identify, and of the social purposes served by their protection, reveals a sophisticated understanding of the role and limits of economic incentives in influencing the behavior of contractual parties.