For example, in a variant of the Acme Hotel hypothetical, Overbidder may offer to buy the Acme from Seller without Seller having solicited the offer, because Overbidder independently identified the Acme as a desirable purchase.
Similarly, as I will show in Section III.B, in a case like Acme Hotel, even if Seller finds Overbidder through the exercise of skill and diligence, Seller's gain from breach should not be apportioned between Seller and Buyer, because Seller wrongfully breached the contract by searching for an overbidder after she had contracted to sell to Buyer.
I will call the most significant of these paradigms--indeed the poster-child of the theory--the Overbidder Paradigm.
(34) In the context of the Overbidder Paradigm, the theory of inefficient breach is incorrect for three reasons: (1) it rests upon incorrect factual predicates; (2) it does not have any support in efficiency; and (3) if widely followed, it would lead to inefficiency.
In the context of the Overbidder Paradigm, the theory of efficient breach rests on two basic factual predicates, both of which feature in Posner's illustration, and both of which are incorrect.
In the context of the Overbidder Paradigm, if the theory of efficient breach had any validity at all, it would normally be limited to contracts for differentiated commodities.
The theory of efficient breach contemplates only unilateral termination by breach, and in the context of the Overbidder Paradigm, the theory incorrectly assumes that a breaching seller will have full information about the value the buyer places on the contracted-for commodity at the time of breach.
Even assuming, counterfactually, that the predicates of the theory of efficient breach are correct, in the context of the Overbidder Paradigm the encouragement of breach would not promote efficiency.
In short, in the context of the Overbidder Paradigm there is no convincing efficiency justification for the theory of efficient breach.
Most important for present purposes, in the context of the Overbidder Paradigm the theory of efficient breach would inefficiently remake the parties' contract.
Let us apply this algorithm to the theory of efficient breach in the context of the Overbidder Paradigm.
