Abstract

http://ssrn.com/abstract=251730
 
 

Citations (5)



 
 

Footnotes (47)



 


 



Pre-Contractual Reliance


Lucian A. Bebchuk


Harvard Law School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)

Omri Ben-Shahar


University of Chicago Law School


Journal of Legal Studies, Vol. 30, pp. 423-457, 2001
Harvard Law and Economics Discussion Paper No. 319, 2001
U of Michigan Law & Economics, Olin Working Paper No. 00-009

Abstract:     
During contractual negotiation, parties often make (reliance) expenditures that would increase the surplus should a contract be made. This paper analyzes decisions to invest in pre-contractual reliance under alternative legal regimes. Investments in reliance will be socially suboptimal in the absence of any pre-contractual liability - and will be socially excessive under strict liability for all reliance expenditures. Given the results for these polar cases, we focus on exploring how "intermediate" liability rules could be best designed to induce efficient reliance decisions. One of our results indicates that the case for liability is shown to be stronger when a party retracts from terms that it has proposed or from preliminary understandings reached by the parties. Our results have implications, which we discuss, for various contract doctrines and debates. Finally, we show that pre-contractual liability does not necessarily have an overall adverse effect on parties' decisions to enter into contractual negotiations.

Number of Pages in PDF File: 55

Keywords: Contracts, bargaining, negotiations, reliance

JEL Classification: C78, D23, K12

Accepted Paper Series





Download This Paper

Date posted: December 11, 2000 ; Last revised: May 10, 2009

Suggested Citation

Bebchuk, Lucian A. and Ben-Shahar, Omri, Pre-Contractual Reliance. Journal of Legal Studies, Vol. 30, pp. 423-457, 2001; Harvard Law and Economics Discussion Paper No. 319, 2001; U of Michigan Law & Economics, Olin Working Paper No. 00-009. Available at SSRN: http://ssrn.com/abstract=251730 or http://dx.doi.org/10.2139/ssrn.251730

Contact Information

Lucian A. Bebchuk (Contact Author)
Harvard Law School ( email )
Cambridge, MA 02138
United States
617-495-3138 (Phone)
617-812-0554 (Fax)
HOME PAGE: http://www.law.harvard.edu/faculty/bebchuk/
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)
Omri Ben-Shahar
University of Chicago Law School ( email )
1111 E. 60th St.
Chicago, IL 60637
United States
Feedback to SSRN


Paper statistics
Abstract Views: 4,512
Downloads: 742
Download Rank: 16,854
Citations:  5
Footnotes:  47

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.344 seconds