Efficiency refers to a result that yields the largest possible net benefit. To find the most efficient decision or legal rule, a cost-benefit analysis should be done for every available option. The strength of any argument about efficiency largely boils down to the quantity of variables considered and the quality in how costs and benefits are calculated. In law, efficiency appears in numerous contexts, including determining how to allocate damages, in negotiations on contracts, and determining whether breaching a contract is cheaper than abiding by the contract.
See Economic efficiency, Efficient breach, and Law and economics.
[Last updated in May of 2023 by the Wex Definitions Team]