The Scope of a Bargain and the Value of a Promise

Abstract:     
In domestic sales contracts, a seller's promise is legally enforceable if it creates an express warranty. Although the criteria for determining whether a promise creates an express warranty include a bargain test, the application of the test by most courts still owes much to the tort principles on which warranty law was originally based. Thus, whether a promise becomes part of the basis of the bargain usually depends on whether the promisee relied on it. The logic, of course, is that a promise that was not relied upon could not have been truly bargained-for. The application of the bargain test has therefore significantly limited the enforceability of promises in sales transactions. Some courts, for instance, have held that a seller is not liable for promises made in advertisements the buyer did not see, read, or hear. Others have held that a seller is not liable for promises the buyer had reason to doubt based on her experience with the good. This essay argues that both economic efficiency and social ethics would be better served if courts generally held manufacturers and sellers to strict legal obligations for any promises they make in the marketing and sales of their goods.

Number of Pages in PDF File: 50

Keywords: Promise, Consideration, Reliance, Basis of the Bargain, Asymmetric Information, Lemons Problem, Express Warranty

JEL Classification: K12, K20, N40

Accepted Paper Series