Abstract
Traditional legal theories have been against efficient breach of contract through the use of right-based or interest-based discourses. The economic analysis of contract opposes these traditional theories from the viewpoint of legal realism which consists of two characteristies. First, legal positivism which states that contract law should be interpreted without morality, and therefore, freedom of breach of contract should be acknowledged on the basis of efficiency. Second, scientific cognition which states that traditional discourses not based on objective fact are "transcendental nonsense". The meanings of contract law should be determined according to its empirical function to promote efficiency.
The theory of efficient breach of contract is, however, contradictory to its own realistic requirements. First, it cannot calculate the amount of the damage incurred precisely, and in particular it ignores non-monetary idiosyncratic values. This is because economic analysts mistake the reality derived by their own discourses for the true reality. The efficient breach theory is a narrative as well as a legal discourse. Second, an economic narrative excludes "solidarity" which regulates and enables contractual relation. But if solidarity is understood scientifically, for example as transaction cost, it loses its normative factor, and therefore cannot solve the Hobbesian problem.
True realism, therefore, requires us not to enact contractual orders from the transcendental viewpoint as an author, but to interpret social solidarity constituting participants' perspectives as a reader.
