efficiency
Efficiency refers to a result that produces the greatest possible net benefit. To identify the most efficient decision or legal rule, a cost-benefit analysis should be applied to each available option. The strength of an efficiency argument depends on how many relevant variables are considered and how accurately the costs and benefits are assessed. In law, efficiency plays a role in many areas, including how damages are allocated, how contracts are negotiated, and whether it is more cost-effective to breach a contract than to perform it.
See: economic efficiency, efficient breach, and law and economics.
[Last reviewed in July of 2025 by the Wex Definitions Team]
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