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Enforcing Contracts: Should Courts Seek the Truth?

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  • Claude Fluet

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.

Suggested Citation

  • Claude Fluet, 2002. "Enforcing Contracts: Should Courts Seek the Truth?," Cahiers de recherche 0202, CIRPEE.
    • Handle: RePEc:lvl:lacicr:0202
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    References listed on IDEAS

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    1. Lewis, Tracy R & Poitevin, Michel, 1997. "Disclosure of Information in Regulatory Proceedings," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 13(1), pages 50-73, April.
    2. Fluet, Claude, 1999. "Régulation des risques et insolvabilité : le rôle de la responsabilité pour faute en information imparfaite," L'Actualité Economique, Société Canadienne de Science Economique, vol. 75(1), pages 379-399, mars-juin.
    3. Demougin, Dominique & Fluet, Claude, 2006. "Preponderance of evidence," European Economic Review, Elsevier, vol. 50(4), pages 963-976, May.
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    9. Hylton, Keith N, 1990. "Costly Litigation and Legal Error under Negligence," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 6(2), pages 433-452, Fall.
    10. Daughety, Andrew F & Reinganum, Jennifer F, 2000. "On the Economics of Trials: Adversarial Process, Evidence, and Equilibrium Bias," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 16(2), pages 365-394, October.
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    Citations

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    Cited by:

    1. Robert Cooter & Winand Emons, 2004. "Truth-Bonding and Other Truth-Revealing Mechanisms for Courts," European Journal of Law and Economics, Springer, vol. 17(3), pages 307-327, May.
    2. Dominique Demougin & Claude Fluet, 2008. "Rules of proof, courts, and incentives," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 20-40, March.
    3. Fluet, Claude, 2020. "L'économie de la preuve judiciaire," L'Actualité Economique, Société Canadienne de Science Economique, vol. 96(4), pages 585-620, Décembre.
    4. Baker, Matthew J. & Miceli, Thomas J., 2021. "Crime, credible enforcement, and multiple equilibria," International Review of Law and Economics, Elsevier, vol. 68(C).
    5. Bruno Deffains, 2008. "Civil Justice Reform: A Mechanism Design Framework. Comment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(1), pages 68-71, March.
    6. Robert Cooter & Winand Emons, 2003. "Truth-Revealing Mechanisms for Courts," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 159(2), pages 259-279, June.
    7. Dominique Demougin & Claude Denys Fluet, 2004. "Deterrence vs Judicial Error: A Comparative View of Standards of Proof," CIRANO Working Papers 2004s-38, CIRANO.
    8. Fluet, Claude, 2010. "Liability rules under evidentiary uncertainty," International Review of Law and Economics, Elsevier, vol. 30(1), pages 1-9, March.
    9. Dominique Demougin & Claude Fluet, 2005. "Deterrence versus Judicial Error: A Comparative View of Standards of Proof," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(2), pages 193-206, June.
    10. 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.
    11. Benjamin Bental & Bruno Deffains & Dominique Demougin, 2020. "Interpreting contracts: the purposive approach and non-comprehensive incentive contracts," European Journal of Law and Economics, Springer, vol. 50(2), pages 241-265, October.

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    More about this item

    Keywords

    adjudication; contract; enforcement; rules of evidence; standard of proof; value of information.;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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