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Rules of evidence and liability in contract litigation: The efficiency of the General Dynamics rule
Author(s) -
Radoias Vlad,
Wilkie Simon J.,
Williams Michael A.
Publication year - 2017
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12279
Subject(s) - liability , compromise , private information retrieval , supreme court , outcome (game theory) , economics , law and economics , american rule , business , strict liability , law , actuarial science , political science , microeconomics , computer science , computer security
We examine rules of evidence and liability in contract litigation. When a contractor fails to perform, it has a legal defense that the buyer withheld private information relevant to the performance of the contract. Suppose the buyer claims that admitting evidence for the defense would compromise a valuable secret, for example, a state secret, what should the legal rule be? We show that the evidentiary rules introduced by the Supreme Court in General Dynamics v. U.S . lead to a more efficient outcome than either a strict liability rule or an evidentiary rule requiring the disclosure of the buyer's private information.