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Enforcing Contracts: Should Courts Seek the Truth?

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  • Claude Fluet

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Abstract

I examine the case where fulfillment of a contractual commitment is only imperfectly verifiable and ask whether the court should then "tell the truth" regarding the action in dispute. I show that truth seeking does not maximize the expected surplus from contractual relationships. From the parties' viewpoint, the enforcer should disregard some of the available information and should sometimes rule in favor of one party, even though his understanding is that the other party is most probably right. The analysis provides a justification for rules of evidence in common law and for the use by courts of neutral normative priors regarding contending claims. J'analyse le cas où la réalisation d'un engagement contractuel n'est qu'imparfaitement vérifiable. La question posée est de savoir si le tribunal doit alors « dire le vrai » quant aux actions faisant l'objet d'un litige. Je montre que, du point de vue des contractants, la cour devrait faire abstraction d'une partie de l'information disponible et qu'elle devrait parfois statuer en faveur d'un des contractants, même si elle considère plus probable que l'autre ait raison. Cette analyse fournit une justification à certaines règles de procédure en droit civil et elle justifie le recours à des a priori normatifs neutres dans le règlement des différends.

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Bibliographic Info

Paper provided by CIRANO in its series CIRANO Working Papers with number 2002s-76.

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Date of creation: 01 Sep 2002
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Handle: RePEc:cir:cirwor:2002s-76

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Keywords: Adjudication; contract; enforcement; rules of evidence; standard of proof; value of information; Jugements de cour; exécution des contrats; règles de procédure; standard de preuve; valeur de l'information;

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References

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  1. Polinsky, A Mitchell & Shavell, Steven, 1989. "Legal Error, Litigation, and the Incentive to Obey the Law," Journal of Law, Economics and Organization, Oxford University Press, vol. 5(1), pages 99-108, Spring.
  2. Hylton, Keith N, 1990. "Costly Litigation and Legal Error under Negligence," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(2), pages 433-52, Fall.
  3. Daughety, Andrew F & Reinganum, Jennifer F, 2000. "On the Economics of Trials: Adversarial Process, Evidence, and Equilibrium Bias," Journal of Law, Economics and Organization, Oxford University Press, vol. 16(2), pages 365-94, October.
  4. Kaplow, Louis & Shavell, Steven, 1994. "Accuracy in the Determination of Liability," Journal of Law and Economics, University of Chicago Press, vol. 37(1), pages 1-15, April.
  5. Paul R. Milgrom & John Roberts, 1985. "Relying on the Information of Interested Parties," Cowles Foundation Discussion Papers 749, Cowles Foundation for Research in Economics, Yale University.
  6. Dominique Demougin & Claude Fluet, 2002. "Preponderance of Evidence," Cahiers de recherche CREFE / CREFE Working Papers 150, CREFE, Université du Québec à Montréal.
  7. Tracy Lewis & Michel Poitevin, 1995. "Disclosure of Information in Regulatory Proceedings," CIRANO Working Papers 95s-01, CIRANO.
  8. Claude Fluet, 1998. "Régulation des risques et insolvabilité: le rôle de la responsabilité pour faute en information imparfaite," Cahiers de recherche du Département des sciences économiques, UQAM 9802, Université du Québec à Montréal, Département des sciences économiques.
  9. Froeb, Luke M & Kobayashi, Bruce H, 1996. "Naive, Biased, Yet Bayesian: Can Juries Interpret Selectively Produced Evidence?," Journal of Law, Economics and Organization, Oxford University Press, vol. 12(1), pages 257-76, April.
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Cited by:
  1. Fluet, Claude, 2010. "Liability rules under evidentiary uncertainty," International Review of Law and Economics, Elsevier, vol. 30(1), pages 1-9, March.
  2. Fares, M’hand, 2005. "Quels fondements à l’incomplétude des contrats?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 81(3), pages 535-555, Septembre.
  3. Dominique Demougin & Claude Fluet, 2008. "Rules of proof, courts, and incentives," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 20-40.
  4. Cooter, Robert D. & Emons, Winand, 2000. "Truth-Bonding and Other Truth-Revealing Mechanisms for Courts," Berkeley Olin Program in Law & Economics, Working Paper Series qt35j9s08h, Berkeley Olin Program in Law & Economics.
  5. Dominique Demougin & Claude Fluet, 2004. "Deterrence vs Judicial Error: A Comparative View of Standards of Proof," CIRANO Working Papers 2004s-38, CIRANO.

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