A Theory of Facts and Circumstances

Abstract

The legal consequences of an action often depend on information that only the actor knows. This information is typically inferred from the observable “facts and circumstances” attending the actor’s conduct, which creates a seemingly unresolvable tension in legal design. On the one hand, these unstructured inquiries give free rein to the factfinder’s judgment about which facts justify an inference to the hidden information. On the other hand, specifying the facts that will be used to draw that inference would provide a roadmap for actors to strategically adjust their conduct to manipulate the factfinder’s conclusions. I argue that this tension can be resolved by applying insights from the economics literature on asymmetric information. These insights help answer both the substantive question of which facts and circumstances should be taken into account and the procedural question of whether they should be specified by the legislature or left to the courts.