Cooperation in Transactions and Disputes: A Problem-Solving Legal System?

Abstract:     
Prevention of harm, distribution (compensation, risk allocation, or redistribution of income) and controlling administrative costs are the generally accepted goals of the civil justice system. Is optimal cooperation, defined in this paper as using the problem-solving method of negotiation, a valuable fourth goal? If the legal system can successfully support problem-solving negotiations, without endangering other objectives, this is likely to lead to creation of value in terms of the preferences of the parties, to reductions in the costs of dispute resolution, and probably also to lower costs of transacting. Thus, optimal cooperation in the problem-solving manner seems to be a goal that is consistent with the perspective of welfare economics, in which the well-being of individuals is the criterion for normative evaluation.

The net benefits of accepting this objective will depend on how the legal system can actually support problem-solving. This article discusses seven possible areas of implementation. A legal system attuned to problem-solving will be more open towards different types of interests and will stimulate the parties to find creative value-maximizing solutions. The perspective of problem-solving underlines the need to improve access to court, and more in general to reduce bargaining ranges by enhancing the way the legal system provides 'batnas'. If this is done, distribution of value will become easier and the effects of bargaining power can be diminished. Stressing the use of objective criteria, the perspective contains an invitation to redesign the rules of substantive private law so that they give better help to the negotiating parties when they deal with distributive issues. Useful objective criteria for distributive issues may be continuous instead of binary. Multiple objective criteria can exist next to each other. They do not have to be binding, but can be adjustable to individual differences in valuation of interests, different ways of creating value, and dissimilar external circumstances. The perspective of problem-solving also invites us to rethink the processes of contracting and dispute resolution, the role of blaming, and the principle of autonomy. Although many of the proposals suggested by this perspective are not new, it may help to develop a more coherent vision on reform of the civil justice system.

Keywords: cooperation, contract, tort, dispute resolution, problem-solving, negotiation theory

Working Paper Series