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New Rules for Promissory Fraud

16 Pages Posted: 12 Oct 2006 Last revised: 18 Sep 2015

Ian Ayres

Yale University - Yale Law School; Yale University - Yale School of Management

Gregory Klass

Georgetown University Law Center

Date Written: October 12, 2006

Abstract

This article summarizes the authors’ recommended reforms to the law of promissory fraud. These recommendations are presented as a Draft Prestatement of the Law of Insincere Promising. The basic propositions of the Prestatement are taken, with some modification, from the authors’ book, Insincere Promises: The Law of Misrepresented Intent (2005). This article adds extensive comments, in the style of the Restatements, and a prose introduction identifying three reforms we deem most important. First, courts should drop their insistence that every promise represents an intent to perform, and treat that representation instead as a default. Second, courts faced with claims of promissory fraud should pay more attention to scienter. This means both that promissory fraud claimants should be required to produce separate evidence of intent or recklessness, and that courts should recognize the largely overlooked possibility of negligent promissory misrepresentation. Finally, courts should acknowledge that promissory representations of intent are material only because they say something about the objective probability of performance, and should interpret a representation of intent to perform as saying, absent evidence to the contrary, that there is at least a fifty-percent chance that the promisor will perform.

Keywords: promissory fraud, fraud, promise (law), declaration of intention, contract, breach of contract

JEL Classification: K12, K13

Suggested Citation

Ayres, Ian and Klass, Gregory, New Rules for Promissory Fraud (October 12, 2006). Arizona Law Review, Vol. 48, 2006; Yale Law & Economics Research Paper No. 331; Georgetown Law and Economics Research Paper No. 936869. Available at SSRN: https://ssrn.com/abstract=936869

Ian Ayres

Yale University - Yale Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States
203-432-7101 (Phone)
203-432-2592 (Fax)

Yale University - Yale School of Management

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Gregory Klass (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

HOME PAGE: http://www.law.georgetown.edu/faculty/klass-gregory.cfm

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