Promissory Fraud: A Cost-Benefit Analysis
22 Pages Posted: 27 Sep 2004
Date Written: 2004
Abstract
The purpose of this comment is to analyze the potential benefits and costs of the doctrine of promissory fraud, prompted by the generally positive evaluation of the doctrine contained in an accompanying article by Ian Ayres and Gregory Klass. The analysis is premised upon the notion that the principal effect of the doctrine of promissory fraud is to encourage prospective promisors who believe that there is a low probability that they will perform their promises either to disclose this information or to refrain from promising. However, using the doctrine of promissory fraud in this fashion only seems likely to be beneficial in circumstances where the promise is not otherwise enforceable under contract law. Moreover, in these circumstances, for a variety of reasons, the threat of liability for promissory fraud is likely to discourage promisors from making certain types of socially beneficial promises. These costs have to be balanced against any benefits associated with the doctrine, keeping in mind the fact that to the extent that the doctrine qualifies as a default rule both its costs and benefits are limited by the costs of contracting around it.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Common Law Disclosure Duties and the Sin of Omission: Testing the Meta-Theories
-
Defective Products and Fraud and Misrepresentation Claims in Minnesota
-
Law and Economics of Fraudulent Misrepresentation
By Qi Zhou
-
Trust, Power (A)Symmetry and Misrepresentation in Negotiation
By Mara Olekalns and Philip Smith
-
Economic Analysis of the Legal Standard of Deceit in English Law
By Qi Zhou
-
New Rules for Promissory Fraud
By Ian Ayres and Gregory Klass
-
Asymmetric Information in Consumer Contracts: The Challenge that is Yet to be Met
-
By Qi Zhou
-
Mistake and Disclosure in a Model of Two-Sided Informational Inputs