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9 Eur. J.L. & Econ. 5 (2000)

handle is hein.journals/eurjlwec9 and id is 1 raw text is: European Journal of Law and Economics, 9:5-19 (2000) @ © 2000 Kluwer Academic Publishers. Manufactured in The Netherlands. Precontractual Duties of Disclosure: A Comparative and Economic Perspective HEIN KOTZ koetz@mpipriv-hh.mpg.de Max Planck Institut fur auslundisches und internationales Privatrecht, Mittelweg 187, 20148 Hamburg, Germany Abstract If during precontractual negotiations a person deliberately keeps quiet about facts which he knew or should have known were of particular importance to the other party that party may avoid the contract on the ground of deceit if, and only if, a duty of disclosure can be found to exist. What are the conditions that must be satisfied to assume the existence of such a duty of disclosure? The European legal systems merely offer vague formulas with little or no operational power. Can economic theory provide more precise criteria? The general principle should be that a negotiating party must proffer information in his possession which is material to the other party's decision. However, economic analysis suggests that a party should be allowed to withhold material information if the information is productive and was costly to obtain unless its acquisition and disclosure were owed under a contract for value. These rules are discussed in the light of a number of cases from various European jurisdictions. Keywords: Disclosure duties, precontractual negotiations, informational asymmetry, contract law, comparative law JEL Classification: K12 When it was announced that I would have the honour and pleasure of giving this lecture a quick look at the formidable list of my predecessors showed that you have only rarely taken the risk of inviting a lawyer. This was undoubtedly wise. Eco- nomics is not my field. All I can boast of is that, as a lawyer and interested outsider, I have for a number of years followed a development of a new approach to the law that is now generally called economic analysis of law. It seeks to answer two basic questions about legal rules: What are the effects of legal rules on the behaviour of individuals? Are these effects socially desirable? In answering these two questions the method used is that used in economic analysis generally: The behaviour of individuals is assumed to be forward looking and rational, and the framework of welfare economics is adopted to assess social desirability. It is not only the law and legal rules that have been analyzed in this way. To a degree virtually unthinkable 20 years ago economists are now engaged with problems thought to be within the province of other social science disciplines.

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