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Foundational Principles of Contract Law$
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Melvin A. Eisenberg

Print publication date: 2018

Print ISBN-13: 9780199731404

Published to Oxford Scholarship Online: October 2018

DOI: 10.1093/oso/9780199731404.001.0001

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Disclosure in Contract Law

Disclosure in Contract Law

Chapter:
(p.595) Forty-Four Disclosure in Contract Law
Source:
Foundational Principles of Contract Law
Author(s):

Melvin A. Eisenberg

Publisher:
Oxford University Press
DOI:10.1093/oso/9780199731404.003.0044

Chapter 44 concerns the following issue: suppose A and B propose to make a contract for the purchase and sale of a commodity. A knows a material fact, F, concerning the commodity, and also knows or has reason to know that B does not know F. Is it permissible for A not to disclose fact F to B, or is disclosure required? The principle that should govern this type of case (the Disclosure Principle) is as follows: In a contractual context, disclosure of material facts that one party knows and knows or has reason to know the other party does not know should be required except in those classes of cases in which a requirement of disclosure would entail significant efficiency costs. This principle puts a thumb on the scale—in effect, creates a presumption—in favor of disclosure because of the moral and efficiency reasons that support disclosure. To overcome this presumption it is not enough that in a given class of cases a requirement of disclosure would entail some efficiency costs. Instead, the presumption is overcome only if disclosure would entail significant efficiency costs.

Keywords:   disclosure, nondisclosure, material fact, efficiency costs, Disclosure Principle

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