The Economics Of Civil Law Contract And Of Good Faith

Prepared for the Symposium in honour of Michael J. Trebilcock, 1-2 October 2009, in Toronto

In his 1993 book on the Limits of Freedom of Contract, Michael Trebilcock acknowledged the difficulties of trying to set criteria for correcting informational asymmetries. Informational asymmetries are one opening for opportunism and it has been generally acknowledged that one of the fundamental objectives of legal systems is to curtail opportunism. A civil-code based legal system has the ambition of being closed, i.e. covering all difficulties in private relationships within its purview. To accomplish this, it has to rely on open-ended concepts that can be used in unforeseen circumstances; yet legal certainty requires that such concepts be used sparingly and that recurrent circumstances calling for their application be particularised into more specific concepts having their own more detailed legal regime. The paper seeks to make the case that good faith in civil law systems is the exact opposite of opportunism; that it is one of the residual open-ended concepts 'closing' the system; and that it is particularised in a number of civil code concepts. These developments allow us to illustrate the difficulties Michael foretold in his book.

Summary.................................... 1 Introduction............................... 2 Preliminary thoughts: On civil law systems. 3 I. The general function of contract law . 4 II. Opportunism and good faith............ 10 A. Opportunism......................... 10 B. Good faith.......................... 13 Conclusion................................. 15 Bibliography............................... 16