6.6 Economic Rationale for Legal Rules

(The heart of the unit for a lawyer: why the doctrines exist in efficiency terms — with the Nepalirule to anchor each.)1. Contract law — the economics: contract as commitment technology — making promises credible so that reliance and trade can happen (the enforcement system as the precondition of the market); remedies as prices: the famous efficient breach doctrine — breach when performance costs exceed the promisee's expectation is wealth-increasing (the theory'sscandal and its logic: expectation damages make the promisor internalise the promisee's loss, and breach only when the use-value has risen elsewhere); damages rules compared: expectation (the efficient benchmark), reliance (under-deters), specific performance (the civil-law and Nepali leaning — the Contract Act 2056's specific-relief emphasis: efficiency's cost in the administrative burden of supervision); default rules and gap-filling (the incomplete contract — law supplying the terms parties would have chosen (the majoritarian default) — the behavioural lesson: defaults stick); penalty clauses' limits (the deterrence-vs-punishment line).2. Property law — the economics: property rights as incentive infrastructure (Demsetz: rights emerge to internalise externalities — the owner invests because he captures); the bundle-of-rights analysis (use, exclude, transfer — each stick an incentive lever); first possession and acquisition rules; the tragedy of the commons (Hardin) and its law (privatise, regulate or — Ostrom — communalise: Nepal's community forestry as the world's case); the anti-commons…