This article shows that up-front payments can eliminate the overinvestment effect identified by Shavell (1980) , by controlling which party breaches a contract. At the same time, "Cadillac" contracts (contracts for a very high quality or quantity) can protect against underinvestment due to Williamsonian holdups. This combination provides efficient investment incentives when courts use expectation damages as a remedy for breach. The expectation damages remedy is therefore well-suited to

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... nsional but one-sided investment problems, in contrast to specific performance, which is well-suited to two-sided but umdimensional investment problems. This essay expands upon earlier research (Edlin, 1993: Section 3.3). I thank Tai-Yeong Chung for his extensive comments and also thank two referees,