The information good is without no doubt one of those that raise more difficulties to some one who tries to examine its importance from the point of view of law thoroughly.

The one who thinks that in a free-market there is a sub-production of information - due to the easiness with which the no-producers can take possession of it - shares with the most important legal systems the idea that it is necessary to create incentives in order to induce a great number of investments in research.

In such a system information is protected for a certain period of time through the use of patents, trade-marks and copyrights.

On the other hand the one who thinks that the market produces an optimal quantity of information without need of any help or investment. Each individual will herself sufficiently thanks to the information she has without any government's protection, security of free-market competition except.

The one who buys shares at Wall Street, after having made some a sequel of deductions on the expectations of the company he decided to invest, has only one enemy: the insider trader.

The last kind of approach we can analyze is the one of whom thinks that market creates a super-production of information and that investments place themselves above each other, and in this way they originate some kinds of diseconomy.

In this case the only possible solution would be to limit competition while granting exclusive right to the producer.

The necessity of the greatest efficiency in the mass media services had been for a long period of time one of the reasons why the only presence of the state in the television market had been justified.

Some authors suggest that each of these different theories could be useful according to different kinds of situations we have to deal with. The easiness with which the good information is exchanged and spread out - with or without the consent of whom it owns it - and its importance in any kind of transaction lead to think about a further role of it compared with the prospected one of the above mentioned solutions.

The information-good seems to be inescapable from the concept of contract. There is not any transaction or agreement without a preventive although small exchange of information. The apple or the banana that two monkeys exchange between each other in a forest contains a set of information that allows the transaction to take place.

This is, no more nor less, what happens with the contracts, the balance-sheet and the wharehouse of two companies that wanted to merge themselves.

If the contract is the free-trade preeminently in our society, and if the market is nothing else than the sum of all the exchanges that every day in it take place, the relation between information and contract is then even closer.

While overturning completely the classical theory of competition, Von Hayek1 considered a single highly competitive system was able to offer information and knowledge2.

The austrian author considers the market - the total result of all the exchanges, thus an infinite number of contracts - as the only correct source of information.

According to Hayek's evolutionary dynamics, the contract or, better, the price of all goods that through it are exchanged, seems to be a source of information and a product at the same time.

In relation to contracts, the "information" good can be considered in two ways: on one side there is the information as the main object of the transaction. This is the case of press agencies and accountant's.

On the other side, and they are much more common, we have the cases in which the obligation to give a certain set of information is purely secondary.

From this point of view we could say that the underneath fact in every kind of contract is the exchange of a good equipped with a certain set of information.

When I purchase a software program I do purchase not only the information that is inside the floppy to offer certain services to the user, but also the floppy thanks to another set of information that I received gathered or that it seems to be in the thing I buy: this means, its compatibility with my hardware, its up-to-date state and other aspects.

The moment in which the exchange of information between the parties plays the most important role it is the one of the pre-contractual bargain. In this scenario contractual liability and tort liability fade one into the other. Economic analysis, mathematics and psychology offer from time to time different instruments through which try to test the efficiency of the legal rule devised by the different legal systems.

Is the Disclosure a Duty of the Parties?

A first year law students class facing the problem if an oil company, before making an offer, had to disclose to a couple of old farmers the presence of an oil field under their land, react in a different way depending how the question's issues are described.

If the offeror is an oil company and the farmers are poor the approach is contractarian3, the students want to avoid the abuse and are looking in the law a solution similar to their feelings.

Yet the feelings are different if the offeror is not an oil company, but a daring geology expert, exploiting his studies; and are even more different if the old couple of farmers is rich, or doesn't know about the fortune concealed in its land because of distrust in a very well known news in the area.

We will try to see how the contracts laws, respectively, of the USA, the UK, France and Italy are solving the same kind of problem and we will soon become aware of the fact that the Courts and the Legislators of these countries are not behaving in such a different way from the young lawyers class.

Aim of our writing is to find, if they exist, some parameter giving us more certainties, compared to those which are offered from the simple feelings.

The problem doesn't seem to be new; Cicero4 provides an example that illustrated his opinion on the duty of disclosure in commercial transaction: "suppose, for example, a time of dearth and famine at Rhodes, with provisions at fabulous prices; and suppose that an honest man has imported a large cargo of grain from Alexandria and that to his certain knowledge also several other importers have set sail from Alexandria, and that on the voyage he has sighted their vessels laiden with grain bound for Rhodes; is he to report the fact to the Rhodians or is he to keep his own counsel and sell his own stock at the highest market price?

Cicero was answering following the thought of Antipater that considered the dissimulation contrary to good faith, while Thomas Aquinus5 following the teaching of Diogenes thought that the merchant might lawfully withhold the information which he had of the arriving of others ships and sell his corn at the current price.

Even now the answers are not unambiguous, any of the legal systems has solved the question of the exact amount of information a seller has the duty to provide to the buyer and in many of them the solutions are contrasting.

A general overview could lead us to say that the United States and the United Kingdom have followed in Diogenes and Thomas Aquinus footsteps proclaiming the rule of caveat emptor, while Fance and Italy have been more influenced by the Cicero's solution and in the latters countries the parties should oportere ex fide bona.

It was a civilian, Rudolf von Jhering, who, in 1861, first put forth a theory of culpa in contrahendo. His topic, however, remained very circumscribed. Von Jhering originally developed his theory to address the specific problem presented by a party who, having taken the initiative to enter into a contract, then sought its nullity on the ground that he had been in error. The autor's concern was to protect the co-contractor who had relied on the appearanceof a valid contract and had suffered a prejudice flowing from the fact that his legitimate confidence had been deceived. Von Jhering's theory was incorporated into some provisions of the 1896 German Civil Code. Article 122 even went further by making the party in error liable to his co-contractor for reliance damages regardless of whether or not he had been at fault6.

The influence of the German doctrine in France and mostly in Italy gave origin in both the systems, even if in a differnt way, to the concept of pre-contractual liability, which was connected to the more general idea of good faith of the co-contractors7.

A synthesis of the civil law approach to the pre-contractual liability could be the following: until the meeting of the minds the party could be liable, in case of a faulty change of mind, for reliance damages as in a tort situation, after we have reached a contract, the magical meeting of the minds has happened, though we will be facing a contractual liability situation and the party breaching could be asked of expectation damages.

The good faith an its limits will be the rule to be sought in the civil law systems, but this is not enough to say if the merchant in Rhodes or the oil company have to disclose their information.

The Common Law System

United States

In 1871 Chief Justice Cockburn, considering an hypothetical case of a sale of land under which were valuable mineral deposits known to the purchaser but not to the vendor, said that it was a case in which "a man of tender conscience and high honour would be unwilling to take advantage of the ignorance of the seller; but there can be no doubt that the contract would be binding"8.

The Laidlaw v. Organ 9 case was the first that the U. S. Supreme Court had to solve concerning the disclosure of information and the decision followed the english caveat emptor doctrine10.

The caveat emptor formula means "the buyer beware", it appeared in England around the XVI century. Its first developing was due to the the filure of the administrative and court machinery to keep the fraud and abuses of the manufacturers and sellers at a minimum. Thus the purchaser, of necessity had to protect himself against them and notice of that necessity was given by the pervasiveness fo the doctrine of caveat emptor.

Second, the creation of the established marketplaces, in turn, created a powerful merchant class that used its growing power selfishly to discourage regulations favoring consumers. Third the rise of individualism in the XVIII century also facilitated the rise of this doctrine11. The great Blackstone, whose writings so influenced the circuit riders in young America, considered that caveat emptor provided an out for the merchant "against defects that are plainly and obviously the object of one's senses", and attributed liability to the seller only for a "defect that cannot be discovered by sight and is a matter of skill or collateral proof"12.

In the XIX century the growth of the railroad and the emergence of the american infant industrial system influenced the courts to extol individualism in business. Caveat emptor not only was a sound legal precept, it was the patriotic thing: "how could a man shift for himself on the frontier unless he could survive in the marts of commerce?"13.

The buyer, in accordance with this doctrine, must beware for the seller-merchant can cheat, or giving to the doctrin a less negative description, the legal system could not take care of the naives!

The solution that justice Qua gave to Swinton v. Whitinsville Savings Bank14 is conferming what we have said so far: law could not solve the problem of the parties every time they think not having done a good bargain.

If this is the rule the number of exceptions and their relevance, within the positions subsatined by the doctrinal theories particularly after World War II are giving a much more detailed imagine.

Let see the development of the idea of good faith in the Far-west's America, the root of a solution opposite to the caveat emptor could be already seen in the first two decisions taht we analyzed.

In Laidlaw Chief Justice Marshall said "each party must take care not to say or do any thing tending to impose upon the other", and we have a first sign of the doctrine forbidding active concealment.

When one of the parties isi using any kind of artifice in order to keep secret a certain information, then we have fraud 15, which admit the party to the torts remedies.

In Swinton the exceptions are even more, the Court in the analysis of the case is enumerating all the situations that should have excluded the application of the caveat emptor principle: "there is no allegation of any false statement or representation, or of the uttering of a half truth which may be tantamount to a falsehood. There is no intimation that the defendant by any means prevented the palintiff from acquiring information as to the condition of the house. There is nothing to show any fiduciary relationship between the parties, or that the plaintiff stood in a position of confidence toward or dependence upon the defendant". After having found no evidence of active concealment or fiduciary relationship, the Court is applying the common law solution that wants the buyer beware.

The fiduciary contracts are that in which the parties must show the utmost grade of good faith. Waddams16 defines these contracts as uberrimae fidei contracts, they belong to this group: the contract of 1) insurance, the contract of 2) partnership and the contracts regarding 3) family settlements17. The Court is even referring to the employment contract situation as a typical fiduciary relationship example18, while Waddams doesn't considered it as a fiduciary relationship contract.

The fiduciary situations is not the only solution offered by the case law to avoid the harsness of the caveat emptor rule.

A number of decisions is establishing a duty to correct prior statement. Indeed, when a a party later learns that the representation is no longer true and it has not yet been acted upon, must inform the counterparty, there is a duty to disclose the information to correct the prior statement19.

A similar situation is given when a party volunteers to speak or does so in response to questions, the response must be complete and full20.

This rule was set forth by the California Supreme Court almost half a century ago21, which referred to the situation as the principle of partial or ambiguous statement saying that if a party "undertakes to do speak, either volountarily or in response to inquiries, he is bound not only to state truly what he tells but also not to suppress or conceal any facts within his knowledge which will materially qualify those stated.

Others Courts have decided that there is a duty to disclose when one party has a superior knowledge. Where one party has superior knowledge and the unknowing party takes action the party might not otherwise have taken, one's duty to disclose is particularly compelling. Thus, the courts treat the possession of superior knowledge as sufficient to trigger a duty to disclose information22.

The new statutesconcerning trade's regulations, particularly franchising, are requesting the parties to deal using the utmost good faith and revealing all the information in their possession23.

So far the solutions of a great number of cases seem to agree with the Scheppele idea that the american courts, expecially in the second half of this century, are applying a sort of contractarian24 approach when they are facing a legal secret25.

Indeed, particularly the decisions that are recognizing a duty to inform the weaker party on the basis of the superior knowledge principle seem to be strongly inspired by the rawlsian theory.

The rawlsian approach to the duty to disclose is that the rule might be set from the standing point of the least well off.

The rules must be dictated under the "ignorance voile" which conceal the future positions of the individuals. Then the risk inclination of the legislators will admitt some rules which will consent the strategic use of the information in some cases.

Following this approach, first all the secrets might be disclosed, whether kept could create serious problems to someone of the citizens, second they might be disclosed the secrets that are impossible to known if not dislosed and the secrets protect by too high barriers.

No disclosure will be asked for simple secrets, which will be discovered with an investement in search proportional to the importance of the information.


The authors like Waddams, Scheppele and Palmieri26 think that the american common law is moving towards a stronger protection of the good faith and fair dealing in the pre-contractual bargaining, while the English common law, according to Legrand and Nicholas27, is not clearly following the same path.

Yet, like in the american law we see a mitigation of the caveat emptor in the english system too. Nicholas in its overview of this subject is pointing out a series of new solutions.

The first of them is the implied term condition 28, they constitute a large inroad on the basic principle of the caveat emptor, but they have much still unaffected. They are confined to contracts of sale of goods (though they may be extended by analogy to other related contracts) and such sale only when is made in the course of business. In the sale of land and buildings there is still no liability for non-disclosure of defects of quality (except in the case of the sale by a builder of a new house), though there is probably a duty to disclose unusual defects of title which a reasonably prudent buyer would not discover.

The second innovation is in the interpretation that the court are giving of what constitutes a representation, if a prospective party to a contract makes a representation of fact which he knows to be false and which would affect the judgement of a reasonable man who was contemplating entering into the contract and if the other party relies on this representation, that other party may claim damages and/or may rescind the contract if he has entered into it. There is therefore a duty not to make a false positive representation of fact and what constitute a positive representation has been extensively interpreted29.

Third, like in the american system, there is a duty to speak in the contracts of utmost good faith, like the insurance contract or the contracts concerning a fiduciary relationship.

It is very interesting, particularly from a comparative standing point to see how the english law is dealing with the mistake. It is clear that if the facts are like a mistake by one party, known to the other, about a quality of the subject-matter of the contract there is no ground for avoding the contract, even though it is that quality which determines the consent of the mistaken party. It is, though, very difficult to apply the mistake doctrine to the disclosure situations, the only relevance of it is in the cases where the mistake leads the mistaken party to express his offer or acceptance incorrectly, as where the offer was expressed in terms of a price per pound, whereas the offeror intended a price per piece and the other party knew this30.

Fifth situation is arising in cases in which the non disclosure is putting in circulation things that might be dangerous31.

In England, then, like in the States there has been a fair amount of statutory or regulatory intervention requiring that information of various kind should be given, usually in consumer contracts32. In general the british legislator has preferred to promote higher standard of fair dealing by encouraging the development of self-regulation by trades or professions. Some twenty codes have been agreed, covering matters such as the sale and repair of cars, domestic appliances, or footwear, or the provision of services such as package-holidays, dry-cleaning, or funerals. Many of them includes provisions requiring the giving of information and most establish procedures for reconciliation and arbitration. There is yet, however, no indipendent evidence of the extent to which the codes are actually implemented. And their whole operation is, of course, entirely outside the law.

This fast overview throught the english system lead us to the conclusion that there's not a duty to disclose information so defined as in the american system. If in so far a definition along these lines has been attempted, it has, consistently with English law's habitual objective approach, been in terms of what whould have determined a reasonable man to buy or, more precisely and more practically, in terms of whether a reasonable man, with full information, would have bought the goods without a substantial reduction of price.

The only element that could save the english buyer is the requirement of representation, but the representation gives a narrow remedy, particularly considering that it should be one of fact.

Some comments

The comparison between United States and England seems to lead us to the conclusion that the first of these two countries has moved rather further than the second towards the principle of good faith and fair dealing in the pre-contractual bargaining.

English law remains more negative (one cannot deceive or misrepresent), individualist (every party must acquire the necessary knowledge for himself), and abstract (every party is deemed to have the same ability to see his interest)33.

The United States law, in particular with the last editions of the Restatements34 on Contracts and Torts, has extended the idea of representation as far as to transform from negative to positive the duty of the better informed party of disclose, and to create a real duty of contracting with good faith and fair dealing.

The § 161 of the Restatement of Law of Contracts 2d attempt to sum up the resulting law as follows:

Section 161. When Non-disclosure Is Equivalent to an Assertion.

A person's non disclosure of a fact known to him is equivalent to an assertion that the fact does not exist in the following cases only: ...

(b) where he knows that the disclosure of the fact would correct a mistake of the other party to a basic assumption on which that party is making the contract and if nondisclosure of the fact amounts to failure to act in good faith and in accordance with reasonable standards of fair dealing ...

The § 551 of the Restatement of the Law of Torts 2d is formulated rather in a different way, but to much the same effect:

Section 551. Liability for Nondisclosure.

(1) One who fails to disclose to another a fact that he knows may justifiably induce the other to refrain from acting in a business transaction is subject to the same liability to the other as though he had represented the nonexistence of the matter that he has failed to disclose, if, but only if, he is under a duty to the other to exercise reasonable care to disclose the matter in question.

(2) One party to a business transaction is under a duty to exercise reasonable care to disclose to the other before the transaction is consummated ...

(e) facts basic to the transaction if he knows that the other is about to enter into it under a mistake as to them, and that the other, because of the relationship between them, the customs of the trade or other objective circumstances, would reasonably expect a disclosure of those facts.

Both the provisions are very close to the principle of diligentia in contrahendo typical of the civil law countries.

The insert of the idea of good faith and fari dealing in the american common law arises many questions35.

Legal commentators have differed with regard to the manner in which good faith and fair dealing should be defined, at the end the majority of commentators seems to recognize it is probably better that the definition remains amorphous so that the doctrine can be applied on a case-by-case basis36, typical in the common law world.

The fact that the restatements are a collections of cases has to make us noticing that the idea of good faith is not a very last minute legislative creation.

On the contrary the Courts since from the end of the 18th century started to consider good faith as an implied duty of the co-contractors37.

Presently, courts in the vast majority of American jurisidictions38 agreed that a general obligation of good faith and fair dealing is implied in every contract; this implied obligation arises as soon as the contract is executed, even though there may be a subsequent closing.

The general recognition of the duty of good faith and fair dealing has been substantiated by the commentators39 and has become so widely accepted that it has been recognized in areas where there has been a traditional reluctance to apply the duty, one of them is the pre-contractual bargaining.

It is substantially correct to say that the days of laissez-faire economics and caveat emptor in which courts often noted that the law was not coextensive with ethics and morality have gone, but at the same time there are situations in which the disclosure of information could collide with others rights, which could claim pair dignity from the ethical point of view.

In Fuller v. De Paul University, the lack of disclosure of information between the parties is the origin of a suit in which a teacher of a religious school is trying to conceal his troubled past, claiming his right of privacy; while the Institution want him to disclose all his past40.

The introduction of ethical standards at law is often seeable in many institutes of the american law like the promissory estoppel41 or the unconscionability doctrine.

The Civil Law System


Legislation and Doctrine

In a recent article Pierre Legrand42 devided in three different periods the devlopment of the French approach to the duty of disclosure.

The Transition Period, till the end of the Fifties, when the silence by itself didn't amount to dol (fraud); the New Model, when the Court de Cassation started to affirm a duty of disclose within the fair dealing principle, untill the end of the Seventies. The last period is the complete development of the duty to inform, particularly in the contrat d'adhesion and in the relationship between professionals and normal citizens.

The duty to disclose is considered treshold rule in the situation in which there is an asimmetry of information.

The Code Civil doesn't have any disposition directly referring to the pre-contractual liability, neither to the liability for non-disclosure of information in the bargaining process.

The position of the less informed co-contractor is defended by the dispositions regarding the mistake (erreur) and the fraud (dol), dealing with the defrauding or mistaken party's consent43.

The french system developed besides these two articles a welfare legislation, similar to the american, which brought to the promulgation of many statutes enforcing duty of disclosure between certain parties. Moreover we can observe a judge-made law not only on liability in tort, but also on the defects of consent, especially in the development of fraudulent silence (réticence dolosive) and on related matters, such as warranty against latent defects. It becomes thus possible to separate out an obligation to give information which covers the whole field of contract and it is emerging a new kind of pre-contractual obligation called obligation de renseignement.

As long as 1945 M. de Juglart44, on the basis of a survey of various legislative positions, filled out by some joudicial decisions, asserted the existence of an "obligation of information in contracts", nevertheless it was possible until relatively recently to hold that there existed in our law no pre-contractual obligation of disclosure.

The general rule was that no one was bound to give information to his co-contractor unless an obligation to do so was imposed by statute, by agreement, or unless his failure to do so had in fact given rise to fraud or to an essential mistake (erreur substantielle).

Since then, however, more enphasis has been placed on the inequality of the parties, especially in relations between laymen and professionals and in contracts of adhesion, and this has set off an evolution of the law which has brought the previous analysis. This evolution is one manifestation of the increased demand for good faith in contractual relations which is characteristic of contemporary law of contracts.

Some of the authors wanted to see in this phenomenon the assertion of a "devoir de collaboration"45, as a result of the switch between the laissez-faire period with the ages of the ésprit de solidarité.

We are thus assisting to a situation where more important and more dangerous contracts are concerned, a series of specials enactments, which have for some years now been steadily increasing in number, calls for precise information, the omission if which makes an agreement void.

The number and growing importance of these information requirements give weight to the argument that the law recognizes a general obligation to give fair information to the other party, at least when one of the parties has the advantage of a privileged position46.

Some authors47 are complaining that the main obstacle to the effectivness of the statutory provisions is the fact that they remain largely unknown to those whom they are designed to protect48.

What we have said so far is pointing out, the presence of three areas, at least, in which the french law is protecting the less informed co-contractor.

In the area of the defects of consent it is sufficient to recall the principle, now strongly laid down by the jurisprudence, that "fraud can consist in the silence of one party concealing form his co-contractor a fact which, had it been known to him, would have prevented him from entering into the contract". This sanctioning by the jurisprudence of fraudulent silence (réticence dolosive) constitutes, at least indirectly, a recognition of an obligation of disclosure49.

More directly, the awarding of damages on the basis of the article 1382 of the Code civil, whether collaterally to an annulment for mistake under article 1110, or in place of an annulment for fraud or mistake, likewise implies the violation of an obligation of disclosure , a violation which constitutes a pre-contractual fault, sanctioned by delictual liability50.

The area which has seen the greatest development is the one of the liability of professional sellers, particularly regarding the latent defects. The warranty against latent defects can therefore be seen as providing the sanction for an obligation to give information, and that information will often be pre-contractual51. The defects is not discovered, it is true, until after the contract has been performed, but it will often have been in existence before the contract was made.

The Art.1645 of the Civil Code says that: "if the seller knew of the defects in the thing, he is liable, in addition to making the restitution of the price which he has received, to make good all the buyer's damage. The Cour de Cassation is going further treating the seller as they always were aware of any hidden defects. The sellers cannot take advantage of the art. 1643 to contract out their liability.

This evolution of the encted and the judge-made law provides the justification for the attempt at generalization made as long ago as 1945 by M. de Juglart and resumed in recent studies which have taken account of new developments.

We must now identify the requirements for the existence of this obligation. The absence of information must have determined the giving of consent. The pre-contractual obligation of disclosure is irrelevant unless the information to be disclosed was capable of influencing the consent of the other party to the extent that, had he been aware of it, he would either not have entered into the contract or would have done so only on a more favorable terms. If the buyer had knew that the car had had an accident he would not have bought it, or he would have done it at a lower price.

The accident is one the kind of information, which are relevant on the consent, thus foundamental on the negotiations and on the formation of the contract.

The same argument could be found into the art. 164152 of the Civil Code for the warranty against latent defects. And it is enshrined in the case-law on mistake and fraud. In the field of tort it is the influence on consent of the lack of information which constitutes the measure of the damage caused by the fault of the party bound by the obligation of disclosure.

The source of the obligation to disclose is in the inequality of the information available to the parties. This inequality gives to one party an advantage such to destroy the equilibrium of the contract. The consent of the parties is then no longer a valid instrument of commutative justice. The pre-contractual obligation presupposes therefore that one of the parties disposed of information which was not known to the other. Ordinary, principles of liability require in addition, however, that any ignorance of either party should be justifiable. There will be a tendency to place the person who ought to have known on the same footing as the person who actually did know. The obligation of disclosure can therefore be said to have been breached only if the creditor of the obligation can show that the debtor knew and that he himself was ignorant.

Case law

It is important to see what the french courts are saying on this subject in order to have a clear picture of it, we will try to collect them on the basis of the rules of law, which are asserting.

The knowledge of the debtor of the obligation of disclosure - It is necessary that the co-contractor debtor had the information, otherwise the contract, if both arties were ignorant, can be impugned on the ground of the 1110, if it is a case of common mistake. An exception could be the rules on products liability, where there is a general law of tortious liability53. The Cour de Cassation has held, for example, that because of his professional character a garage-owner "could not be ignrant of the fact that the odometer showed a kilometrage much below what the car had done in reality and has found a liability for fraudulent silence (réticence dolosive)54.

The case-law has gone further when, in the case of a professional dealing with a layman, has deemed to be a duty of the information debtor to inform oneslef in order to provide the necessary information55.

In a case decided by the Court of Cassation56, the ground of recourse was that the appelate court had annulled a sale of building land by a professional seller on the ground of fraud, whithout having found that the acts or failures to disclose on which the decision had been founded were intentional. The court rejected the recourse and in doing so grounded its decision deliberately on the pre-contractual obligation of disclosure. It held that the judgment of the appellate court "decides correctly that the vendor company and its manager professionally engaged in real estate transactions were under a duty to the buyers, who had ni experience in urban develpment, to check the position of the parcel of land sold from the point of the view of roads and services and had wilfully failed to do so".

Particularly interesting is a case solved by the Tribunal de Grande Instance of Paris, where the Congregation of the Sisters of Saint Charles du Puy had sold the contents of an attic to a dealer for 6,800 francs. Among the objects sold was a picture which was later acquired for 4,000 francs by a young picture restorer. After a patient restoration and considerable research, particularly in Italy, he established that the painting was a genuine work of Lorenzo Lotto. He the sold this Carrying of the Cross to the State, for the Louvre, for 3,250,000 francs. The court rejected a claim of ownership made by the Congregation, but opened the way to a solution which, on the one hand, would allow the sellers to invoke their mistake (provided that in the circumstances it was excusable) and thus to obtain the annulment of the initial and the subsequent sales, and on the other hand, would allow the "discoverer" to retain a significant part of the value added to the painting as recompense for his "work" and his "perspicacity". The legal basis for this solution could be unauthorized management of another's affairs (gestion d'affaires), as it is now understood by the jurisprudence.

The french judges, in this case, chose a solution surprisingly correspondent with the economic analysis approach to the problem57.

We can sum up the rules so far examined saying that the obligation debtor must have the knowledge of the information and know that the disclosure of it will strongly determined the consent of the creditor to the contract.

In the area of defects of consent the annullment of the contract on the basis of article 1110 presuppose that the defendant knew or ought to have known of the foundamental importance attached by the mistaken party to the characteristic or quality to which the mistake related; the same is true of nullity for fraud, since the wish to conceal certain facts shows the party who engineered the concealment knew what its influence would be on the consent of the other party.

The ignorance of the creditor of the obligation of disclosure - It is not sufficient for the creditor of the obligation to show that he was ignorant. He must show in addition that this ignorance was justifiable.

At the beginning of this century the Court of Cassation used to declare that the "contracting party who made a mistake by beeing too credulous or careless in checking his information has only himself to blame", "the careful buyer", "knows that must be on the alert"58.

Traditionally, then, the duty to inform oneself sets the normal limit to the pre-contractual obligation of disclosure placed on the other party. The concept of inexcusable mistake is conferming this analysis and it leads to the idea that in such cases the mistake was both culpable and at the same time improbable59.

We finished the previous chapter referring to the doctrines of unconscionability and reliance as two lines leading towards a complete protection of the the weaker party, we are now finding in the french system tha same solutions under different labels.

The impossibility of the creditor of the obligation of disclosure being himself aware of the information - There is an objective impossibility and a subjective impossibility. The objective is related to the nature of the subject-matter60, particularly its technical character, or to circumstances in which the contract is made. The subjective impossibility may result from a lack if ability in one of the parties. In regard to the question whether the mistake is excusable or not, decided cases refer variously to the age, occupation, or experience of the party concerned. The courts confine themselves to require that a skilled person, acting within his area of specialization, should have shown an appropriate degree of care, the absence of which would make his mistake inexcusable.

There are many decisions conferming that in the judge-made law the good faith principle to disclose is enforced even whether the "creditor" of it is a professional: "as far the pre-contractual liability is concerned, the person dealing with a professional is not dispensed from furnishing him with information which is in his possession and the absence of which affects the consent of his co-contractor"61.

Justifiable reliance of the creditor of the obligation of disclosure - The courts recognized an obligation of disclosure in contracts which presuppose a special confidence between the parties62. This is not a matter of simple good faith, but of a particular reliance which is founded either on the nature of the contract or in the identity and quality of the other party, or finally, on the incorretness of the information supplied to him.

As in the common law system there is a tendency towards the strong enforcement of the "transparency" between the co-contractors in case of utmost faith contracts. It is particularly true in the contract of mandate and justifies the annulment of agreements in which the agent has secretly allowed his own interests to conflict with those of his principal, or of the contract of partnership or that of employment, which requires the employment, which requires the employee "to make clear to his new employer with the utmost honesty to the extent of his freedom to commit himself, having regard to the agreements into which he has already entered", such as a covenant in restraint of competition63.

The special relationships between the parties are rising the fair dealing's standards in the duty of disclosure. This arises primarly when the contract is between members of the same family, even if some decisions, by contrast, said that an agreement between spouses that have divorced no longer entails such mutual reliance64.

But today it is essentially the inequality between professional and the lay party which is the ground for the increasing acceptance that the lay party's reliance is justifiable and that there is a correlative obligation of disclosure on the professional. The technician must enlighten the layman ... Good faith entails for the professional the obligation to place the layman on his own level of knowledge so that they can deal with each other on an equal footing"65.

The courts are strict when the profession or the qualifications of a party justify a special reliance, for example, if he is a notary66 or a critic67, specializing in old pictures and used as an expert by the tribunal. In the same way are treated the real estate broker68, the bank69, the building cooperative70 and the construction company71.

The courts are deeming more strictly these situations, for the "creditor" of the obligation to disclose is paying less care, being convinced that the "debtor" is giving him all the necessary information.

Aticle 2268 of the Code Civil says that good faith must always be presumed. In general a party who is in bad faith may not set up against the other party that party's failure to obtain sufficient information. This is what accounts for a mistake's being held to be excusable when the other party has provoked it by deception or flasehood, whether the legal basis for this is article 1116 or article 1110 of the civil code.


Legislation and Doctrine

The non-disclosure liability in Italy had a similar development to the french one.

As the French scholars as the Italians72 set the violation of the duty to inform in the doctrine of the lack of consent faults and link them to the article 1439 of the civil code, according which the contract is void, when "the tricks used by one party have been such that, without them the other would not have given her consent", the text is not so different from the 1116 of the French code civil.

At the very basis of the idea of "dolo" (fraud), there is the postulatum, result of the will theory, in accordance to which the contract must be free, otherwise is faulted73; from the concept of fraud to the one of duty of disclosure there's still a long way to do.

As in France we have to distinguish between different moments of development of the liability for faulty consent, injury or abuse against the other party.

First the only legislative source is the 1942 codice civile (civil code), which enphasizes the protection of the free will trhough the articles ordering the voidness of the contracts invalidated by mistake, fraud or violence (artt. 1427 - 1440) and the articles ordering the rescission of contracts made under the threat of a danger or a need (art. 1447 ss.) or under diminished responsability (art. 428).

Second we assist to to the birth of new cases in which the legislator must give more effective answers to new lack of consent situations.

The susrprise, the subliminal advertisment, the monopoly or the dominating position of one of the party and the asymmetric information had been regulated out of the code mostly following the European Community directions, now assuming the rank of general provisions74.

The 1942 Italian civil code has a specific article in order to prevent the bad faith in the precontractual bargaining process: art. 1337.

1337 - Bargaining and pre-contractual liabilities - The parties in the pre-contractual bargaining and during the contract drafting must behave in good faith.

This article was created in order to avoid the culpa in contrahendo75 has not already given the expected results called for by some authors76. The decisions recalling this article in order to oblige a party to disclose the information she has are just a few, while the courts are using it to sanction the unjustified recess from the bargaining process.

The art.1337 ask for a general duty of fair dealing in the pre-contractual negotiations, if there's bad faith we have a fraud case regulated by the art. 1439. The case law interpreataton seems not having the elements to find out if the art. 1337 is repressing even the dolus bonus, the fraud through the non-diclosure or the simple non-disclosure; the EEC derivated regulations are now offering a model for the kind of fairness in the negotiations that our legislator decided to keep.

The foundamental step to admitt the declaration of voidness of a contract because of a non-disclosure could be found out through the use of the negative fraud (dolo negativo), that is the fraud perpetrated through the failure to declare something, unfourtunately this solution has not been developed yet by the Italian courts.

The authors which wanted to highlight the presence of this kind of contract failure do not have a specific regulation to adopt and they must follow the path suggested by Sacco77.

Let try to follow the last authors reasoning: we have a negative fraud when there is a non-disclosure of elements, which if were known, would have brought the party to create a different kind of contractual obbligation. The silence by itself does not mean fraud78, unless there were a fraudulent concealment of true facts or were violated an esplicit duty to speak enforced by the law79. We have a code disposition, the art. 1337, yet, that forsees a duty to behave in good faith. The last article might be read in order to oblige the parties do inform each other when they discover the other party's mistake.

The case law doesn't make an extensive use of the duty to inform, but there's going to be a fast evolution accorting to the French example and considering the strong influence of the European regulations in our system.

The door-to-door contracts80, the securities sales regulations81, the glasnost in the bank and financial services82, all these statutes deal with a new concept of relationship between the simple citizen and the professionals.

Other new statutes are asking to third parties to give the information necessary to let the contracting party to ponder better their consent. This is the case of the mandatory companies balance certification and publication83 or the mandatory publication of the towns zone plan, the expiration date on the pharmaceutical and food products, the duty of giving a truthful summary table of the companies that will be quoted at the Stock-exchange84 and the prohibition of the deceptive advertising85.

Some authors86 analyzed the development of the contract law related to the new European legislation, and pointed out a series of important characteristics.

On one hand the principle of "transparency" is emerging and could be forseen an extension of its application to different kind of situations, even outside the specific legal issues for which it was introduced87.

On the other hand we are more and more abandoning, at least on the doctrinal and legislative side, the volountaristic principles heading towards solutions similar to the German law on the überraschende Klauseln, and to the American law when is invoking the reasonable expectation of the unconscionable party88.

The Banca Manusardi case is conferming the forseen development, given the strong influence of the Court of Appeals of Milan decisions all over the Country89. A bank which didn't disclose the information concerning the economic situation of a company, whose convertible loan stocks it wanted to sell90.

The difference between the parties (lay person and professional) in the ability to collect information is so huge that we have to consider in a kind of diminished responsability situation the non-informed party91.

Case Law

An old Court of Appeals of Rome92 decision solved a case of mistake on the paternity of a painting declaring the purchase contract void for lack of consent ex art. 1429, n.2: a Carraccio painting had been sold for few Italian liras.

The facts are surprisingly similar to the paradigmatic example of our issue: A has an information on the B's good, A doesn't reveal the information to B and exploit her knowledge in order to purchase the good at a price lower than the market price.

The Italian court used the code principle of mistake on essential quality in a very similar way to the French case of the Lorenzo Lotto93 painting, but in the Italian case no reward was attributed to the discoverer. The Court concentrated its effort refuting the defense thesis, subsatining that a contract to sale an art work is too uncertain to be rescinded because of a laesio ultra dimidium.

The typical example of non-disclosure in our case law is the sale of a building without revealing that because of the enactment of a new zone plan the value of it or its utility will change in a substantial way94.

Mostly we have cases in which the non-disclosure is due to the presence of duties or prohibitions enforced by the public administration and related to the fit for habitation permit.

The courts in those cases applied sometime the art. 1489, which make provision for the resolution of the contract when there are duties or third party's rights insisting on the real estate property; some other they use the efficacy erga omnes of the planning regulations. There is a doubt left about the correct use of the basic principle ignorantia legis non excusat, given that in this way the uninformed buyer will be deprived of the chance of seeking for the voidness of the contract for mistake ona substantial quality (the flat does not have the license attesting that it fits for the habitation) or resolve the contract because of the conditions at art. 148995.

The most attentive authors96 often invoked, in these cases, the use of the art. 1337 which would give to re-establish the economic equilibrium troubled by the misrepresentation giving a duty of good faith to the seller.

The Economic Analysis of Law and the Efficient Disclosures

Information and Contract

The increase of the investment on information will give first an increase of the satisfaction that the parties will receive from a contract, but after a while the marginal utility from the research will start to decrease, the result will be that the satisfaction from the contract is not directly related to the investment on information (see annex A).

For the classic economics thought three assumptions of rational individual decisionmaking can be isolated in the model of perfect competition. First the rational decisionmaker can rank outcomes in order of preference. Second the decisionmaker's opportunities are constrained so that he can achieve some, but not all, of his objectives. Third he will naturally choose the best feasible outcome.

In additions to the assumptions about individual rationality, the competitive model includes four important assumptions about the environment in which contracts are made. The first assumption is that there are no adverse third-party effects. The second important assumption about the environment of perfect competition is that each decisionmaker has full information about the nature and consequences of his choice. If information is incomplete rather than full, a decision that appears to be rational may prove to be irrational if the decisionmaker could only have viewed the decision with full information. The third assumption is that they are enough buyers and sellers. The fourth is that carrying out a transaction has no cost.

Only in this situation we will face a perfectly efficient contract, based on the utility maximazation principle97: "all the individuals act in order to maximize the difference between cost and benefits"98.

The Economic Analysis and the Disclosure of Information

The Law and Economics authors offered different kind of approaches to the problem; most of them deems the contract to be resolved when there is an ineffciency in the information distribution not strenghtened by a valid incentive99.

Kronman and Posner have a similar approach to the disclosure of information in the pre-contractual negotiations problem. They think that the information must be disclosed when the most of it has been acquired by chance. Viceversa, the information acquired at a high price or after a long search can be concealed.

The Laidlaw100 case is the usual example to describe Kronman's theory: if Organ got by chance the information on the Ghent treaty, though the Supreme Court was wrong when found out for a property right on it and keeping the contract valid.

Otherwise, if it were clear that he got the news through his own ability in creating an intense friendship and realtionship's network, carefully organized, then the Court was right when protected his right on the information101.

The distinction between deliberately and casually acquired information helps us to understand the pattern exhibited by the cases in which a duty to disclose is asserted by one party or the other. By and large, the cases requiring disclosure involve information which is likely to have been casually acquired. The cases permitting nondisclosure, on the other hand, involve information which in the whole, is likely to have been deliberately produced.

The foundamental issue is that would be better to have investments on information research, while should be avoided the free-riding on the information casually acquired, otherwise it could be possible a lowering in useful information production.

The Kronman theory is assuming that the courts could easily distinguished between the casually acquired information and the deliberately searched for information. A wrong decision could transform in a huge loss the investment on information made by the party, if the court will void a right contract102.

Pretty similar is the Posner103 stand point, even if it is stressing more on low transaction cost of the information and the huge cost of research. If we do not admitt the individuals to take advantage from the exploitation of the information which they got we will strongly harm the incentive to produce new information.

Through his tobacco order Organ exploited the information he had, at the same time he created a demand of tobacco and though he impliedly gave his information to the market104.

Posner made another difference between the duty to disclose information on our personal privacy, the trade secrets and the communications.

The private information has a too high fence around it to be discovered through a search, the extraordinary high transaction cost should convince the legislator not to protect it105. On the other hand, the trade secrets are the result of high investments and must be protected. The information exchanged through communications (telephone, mail or e-mail) are in a completely different position if they were not protected the circulation of discrediting news would be too easy.

The rationalization of the problem will consist in a calculation in which we should have, on one side the the value of the information given by the research cost and on the other the value of the incentive of not disclose them. The cost of research minus the value of the incentive will tell us where to allocate the right of disclosure.

The doubts arising when we face a system so far far from the reality must not be underestimated, economy tried too many time to create its theory as the phisics theories, but there is not just a way of thinking about science: "the rational choice model makes some strong assumptions about the cognitive abilities of decisionmakers. To caricature the matter only slightly, the conventional model assumes that decision makers know, or can know, all the feasible alternative actions open to them, that they know, or can easily discover, all the relevant prices, and that they know their wants and desires..."106.

There are situations in which the complessity of the real world, whom the law has to deal with that can be hardly be explained by the economic analysis, without risking to roughly simplify and achieve unsatisfactory results.

The different roles of economics and law approaches might not, however, be confused. The first is a descriptive science, which through the simplification tries to make the solution of the problems easier, the second is a case by case problem solving approach, used to give an answer to the societal every day problems.

The basic information that the ecomics could give to our research are two. First, the increase of the information is related to the increase of the marginal utility that a party could get from a contract, till a certain moment; second, the concealment of information could create incentive in useful research investments.

Let see if mathematics and psychology could help the lawyers to decide which is the optimal amount of information that we have to collect in order to draft the right contract.

The Optimal Choice

The Mathematics' Approach

During World War II some mathematicians were asked to solve he problems that testing the bombs was taking a lot of time, but was necessary, in order to avoid that an air-mission did not succeed because the bombs did not work.

They came out with the optimal stopping rule107, it was a system to calculate when was efficient to interrupt the collection of information without corrupting the measuring accuracy.

The idea is to calculate how many bombs must be checked to be pretty sure that the most of them is going to explode.

When we try to describe the problem with the mathematics we can say that in the sequential observation of a random variable, which has a joint distribution (given y1 and y2, the probability that yn is equal to a certain parameter depends from the previous y1...yn - 1), the observer will be right to stop observing when she will reach the reward point, Xn , function of the observed variables:

Xn = ( (y1 ...yn)

in which will be possible to maximize the expectation of Xn in a way in which the augmentation of the marginal utility of continuing the observation will be insignificant compared to the real possibility of reaching a better result, in our example a bigger number of bombs without defects:

Xn = (E[Xn])

The optimal stopping rules are not deterministic but random, they don't tell us which is the exact value of marginal increase of Xn , but only the probabilities that it will be lower of a certain value if we stop at the yn observation.

If we repeat the observation further than Xn the absolute certainty will only be reached in an infinite time.

Mathematicians gave us this kind of optimal model in order to have a sure method to calculate the exact amount of information that we might collect to achieve a satisfactory result.

Decison Making and Bounded Rationality

The economists during the same period of time were investigating a theory capable to solve the military problems concerning the logistic and the resource allocation108.

Optimization techniques were transported into management science from economics, and new optimization techniques were invented and developed.

Models construction under these stringent conditions has taken two directions. The first is to retain optimization, but to simplify sufficiently so that the optimum (in the simplified world) is computable. The second is to construct satisficing models that provide good enough decisions with reasonable costs of computation: "in-principle unattainble optimization is sacrificed for in-practice attainable satisfaction"109.

Mathematics and economics adapted to the war problems in the meanwhile Simon bacame a supporter of a new approach to the decision making problem solving, in which the key was to be aware of the bounded rationality limits.

In an hypothetical situation of zero research and information processing costs individuals capacity of achieve a complete information should be perfect, the decision making therefore should be optimal.

In fact, of course, searching for and processing information does involve costs. Normally actors either don't want to expend the costs required for comprehensive search and processing would not be achievable at any realistic cost. Furthermore, human computational and calculating ability are not perfect110.

The classical approach to decision making is very well synthesize by Stigler111: "let assume that actors can and do determine the marginal costs and returns of search and information processing, and make their procedural decisions on the basis of those determinations".

The alternative model developed by Herbert Simon does not make that assumption. Under Simon's model, prior to search an actor sets an initial level of aspiration or satisfaction concerning how good an alternative he should find112.

Whereas economic man maximizes - sselects the best alternative from among all those available to him, his cousin, administrative man, satisfices - looks for a course of action that it satisfactory or "good enough"113. It is important to notice that when search and information costs are taken into account, satisficing can maximize an actor overall utility, because the utility shortfall from from substituting a satisfactory substantive decision for an optimal substantive decision is traded off for tthe utility gain from substituting the lower cost of satisficing for the higher cost of perfect search and information processing.

However, although the decision to satisfice may be rational, the search and information-processing procedures the actors employs may not be optimal. Indeed, these procedures may even be irrational, in tha sense that they systematically produce results that the actor could efficiently improve upon. Furthermore, even optimal satisficing procedures will often produce a nonoptimal substantive result, and the tendency of a class of actors to satisfice in a class of transactions may systematically and adversely affect the terms of those transactions.

Eisenberg tried to apply the satisficing process to a certain number of typical juridical problems, the results are surprisingly consistent with the bounded rationality theories114.

The Game Theory

If we want to give a complete picture of a negotiation related problem as the disclosure of information is, we cannot forget the game theory. Once again the aim of the scholars was to avoid the faulty solutions given by the classical economics thought, forget all the assumptions and incorporate the higher possible number of variable in order to get the closest they could to a real world situation.

The game theory application to law is a quite common approach in the United States115 and has been done with excelent results in Italy by Daniela Caruso116.The tools offered by the game theory approach seem to be much more sharped than the tools of the classical economics analysis used by the law and economics.

The "aim of the game" is to succeed in forcasting a certain equilibrium, tthat is a decision making path, which the individuals cannot abandon given certain inputs. As in a chess game all the moves are forseable, given the first of a determinated series, till chessmate or stallmate117.

The example of the negotiations about the Helmtree House created by Raiffa118 can easily explain how the game theory approach is working in the pre-contractual bargaining process.

Before passing to the parties behavioral problems in the negotiations we have to see how many individuals are in the game, if it is a repeatable game, if there is more than one issue, if threats are possible, which are the limits set by the time and the costs of negotiating, if it is a public or private negotiation, if a third party intervention is possible.

The owners of a house would like to sell it, they know how much they paid it and how much it will cost to move to a new one in a better area, this two information sets will give the treshold under which they will not go down. The offerer-buyer knows the objective utility achievable from the house and will have a different figure over which he will withdraw the negotiation.

In the moment of the reciprocal bids declaration we will face a situation in which the Bayesian119 models will perfectly fit: the more the bids are close to the mean of the two figures, the more a positive conclusion will be possible (see diagram in annex B).

The interesting result of the game theory approach is that in this kind of situation, if the parties do not make a full disclosure of the information they have they are good probabilities that the contract does not happen, with a disadvantage for both of them.

The margins of a positive results are limited by the "reserve prices" of the parties (the minimum sum of money asked by the seller and the maximum figure proposed by the seller), and they are narrower and narrower because of a non-disclosure by both party misrepresent the contractual negotiation situtation.

We agree with the authors120 which deem this kind of approach far from giving useful solutions to the law. The game theory does not tell us when we have to disclose the information, nor which are the good faith standard that the parties must observ during the negotiations, nor the standards the legislator has to enforce, nor whether it has to.

In the calculation that the two players are doing the good faith requirement is nothing more than a variable limiting the economic feed-back of a certain behavior.

In others words when the parties know that they cannot keep a certain secret will have a wider range of opportunities to reach an agreement.

There are several possible approaches at the negotiation problem according to the different standing point we observe it. Whether the research aim is a prescriptive one the individuals must be imagined iper-intelligent, fully rational, able to forsee everything and the results will be more and more precise the further they are from the real world, this is, however, the most important application of the game theory.

When, indeed, the analysis is descriptive we have to worry about the real individuals, with their fears, idiosyncrasies and cognitive limits will deal with the disclosure of the information in a negotiation. Webelieve this is the better perspective in order to solve the problems originated by the non-disclosure in the negotiation.

The Psychology's Approach

The studies121 on the way the human brain is processing the information it has confirm the idea that the bounded rationality approach can be very important for the legal thought.

In 1956 Miller122 came out with a similarity between measuring the information and the phisycal object. When we have a large variance, we are very ignorant about what is going to happen. If we are very ignorant, then when we make the observation it gives us a lot of information. On the other hand, if the variance is very small, we know in advance how our observation must come out, so we get little information from making the observation.

This almost "esoteric" reasoning was the preface to a new way of measuring human cognitive capacity: every human receptive channel (touch, sight, hearing, taste and smell) is not able to afford our brain with enough information to give correct answers when the number of the one-dimensional representations is bigger than seven123.

Beside the magic number seven there are narrow limits on the number of information we are able to receive, process and remember.

The psychologists used the bounded rationality approach to study the human decision making ability inn a very similar way to the economists.

The optimal choice models are constatly violated in the real world decision making because of the cognitive limits of the human being.

Basic points of the decision making theory are the "transitivity" (if A is preferred to B and B is preferred to C, then A is preferred to C) and the "substitution" principles (if A is preferred to B, than even the chance of obtaining A or C is preferred to the chance of obtaining B or C).

These two axioms were strongly contested and the scholars found out other two principles that seemed better explain the human rationality: "dominance" and "invariance". Dominance demands that if prospect A is at least as good as prospect B in every respect and better than B in at least one respect, than A should be preferred to B. Invariance requires that the prefernce order between prospects should not depend on the manner in which they are described.

The use of the bayesian probabilistic calculation in the decision making problems lets the psychologists to introduce uncertainty variables in the exam of the human brain decision making ability and creates a lot of trouble to the economists that were using a game theory approach, particularly on the descriptive validity side124.

First victim of the experiment was the "invariance" axiom, the examples comes from a study of preferences between medical treatments. Respondents were given statistical information about outcomes of two treatments of lung cancer. The same statistics were presented in terms of mortality rates and to other in terms of survival rates. The respondents then indicated they preferred treatment. The information was presented as follows.

PROBLEM 1 (Survival frame)

Surgery: Of 100 people having surgery 90 live through the post-operative period, 68 are alive at the end of the first year and 34 are live at the end of five years.

Radiation Therapy: Of 100 people having radiation therapy all live through the treatment, 77 are alive at the end of one year and 22 are alive at the end of five years.

PROBLEM 2 (Mortality frame)

Surgery: Of 100 people having surgery 10 die during surgery or the post-operative period, 32 die by the end of the first year and 66 die by the end of five years.

Radiation Therapy: Of 100 people having radiation therapy, none die dring treatment, 23 die by the end of one year and 78 die by the end of five years.

The inconsequential difference in formulation produce a marked effect. The overall percentage fo respondents who favored radiation therapy rose from 18% in the survival frame to 44% in the mortality frame. The advantage of radiation therapy over surgery evidently looms larger when stated as a reduction of the risk of immediate death from 10% to 0% rather than as an increase from 90% to 100% in the rate of survival. The framing effect was not smaller for experienced physicians or for statistically sophisticated business students than for group of clinic patients125.

Others scholars show that as a systematic matter people are unrealistically optimistic126, the actors are showed under certain circumstances to be systematically "irrational", that is, actors are often likely not to make rational decisions even within the bounds of the information they have acquired127.

The experiments made by Tversky and Kahneman128 showed indeed how the actors used an irrational decision making in a pathologic way, the results are strongly compromising the validity of the "dominance" principle.

Every time we have to make a decision based on probability we do it in a subjective way, following believes not rationally founded and we are not able to deal with tthe figures in an efficient way, then129.

First we do not respect the suggestions which could come from observing similar situations, from the representativeness as the following examples reveal.

- We do not respond to the influence of a basic datum in a contest: given a group of person 70% of which are engeneers and 30% are lawyers, if asked to tell who is what, after a short description of a personality, we do not take in account the bayesian probabilistic datum, which should make the decision be more likely for an engeener.

- We do not respond to the smaple dimension, we do not evaluate that the probability could change according to the percentage considered (for instance the average height of 1000, 100 or 10 persons).

- We are often victims of wrong presumptions about casualty; this situation is called gambler's fallacy. We are easily mislead, for example, by the sequencies of the flips of a coin, we believe the frequency A-B-A-A-B more probable, than A-A-A-B-B-B, which does not seem casual and we are upset by a A-A-A-A-B-A frequency that indicate a sort of unfairness by the coin itself ! This kind of approach denote a lack of capacity to understand the statistics builted over the small numbers.

Another problem arises from the availability of istances principle: the decisions depending on a probabilistic calculation are not based on the objective success probability, but on the data our memory saved and which are easier to recall.

Two lists of famous people, women and men, are submitted for a few seconds to the respondents. The first contain women a bit more famous than the men and the second is the other way around. The respondents will say that in the first list the number of women is higher, viceversa for the second, because it is easier for our brain to recall the name of the most famous people in the lists.

A frequent mistake made by our brain is to be inable to adequate its decision to a given datum, adjustment from an anchor.

There is a general tendency to overestimate the possibility that uncertain events happen, notwithstanding the incidence of them is known; this kind of incapacity brings an unjustified optimism in the evaluation of the success of a plan or the completion of a work within a certain time.

Under the weight of this huge number of examples is difficult not to agree with the psychologists on the human deceptive capacity in the decision making, but a further analysis must be done on the way in which a decision is processed by our limited brain.

The decision makin is oriented much more towards satisficing than maximizing; two are the logic process used by the average consumer facing the problem of choosing between an Alfa Romeo Spider or a Volvo Station Wagon: noncompensatory and compensatory choice.

The noncompensatory choice consists first of all in the selection of an important set of attributes through which choose the good we are interested in (in the car example can be the design, the brand and the comfort).

Consumers decide, then, the minimal value that every attribute has to have for a good to be considered, thus they analyse the numbers of alternatives untill they find the first product having the attributes coinciding with the set values.

The compensatory method is used mostly with the goods which are often bought, in this case the consumers are taking in account all the salient attributes of the different products considered, there is a compensatory choice because it can happen that a product which has a low value in one of the attribute could be compensated with the high value in another.

The experiment condicted by the psychologists revealed a clear evidence on the way in which the decision methods are used by consumers alternatively according to the situations, but always in order to simplify the internal and external decision making costs130.

The human being cognitive tools seem to be made in a way to save energy when there are to many data to analyze before making a decision; the saving is more often happening through different mechanisms, that maybe is too simplistic define mistakes.

A Comparative Analysis and Conclusion

This long ride through four different legal systems and half dozen of discipline must be concluded with a series of reflections.

First there are not many differences left between common law and civil law countries, the common law system is moving towards a full recognition of the good faith principle in the pre-contractual dealing, as a consequence should be easier to introduce a clear duty to disclose in the common law systema and, indeed, some courts decisions are moving towards this kind of solutions.

However is not clear if the civil law solution, where a general duty of disclosure of essential information is deemed necessary for an informed consent to a contract is always the right solution.

The selfevident product of the legal development, indeed, seems to eliminate the "dogma" of the free will of the parties in the contract from the stage of the justice theatre, though it might not make sense to reintroduce the necessity of the freedom of the parties from the backdoor of the disclosure of information.

Gilmore declared the death of contract in the sense in which the contract was conceived in the nineteenth century and one of the reason was the minimal influence of the parties will in the final drafting, more and more infuenced by the statutory disposition and formed on previous form contracts.

Moreover, bounded rationality as it has been applied by economists and psychologists seems to confirm a general decline of the information search as a basic in the decision making process.

The general feeling is that the number of information we can collect is not strictly related to the decision we make: all the human beings seem to be in a state of diminished responsability.

This point is creating not small problems to the law and economics approach, whose principal contribution to the non-disclosure issue was to try to justify the reason of concealing as a "reward-incentive" to the party who collects information and expends money in a certain search.

The disclosure problem gives birth to two possible solutions, on one hand we have the moral and economic grounds asking for a certain amount of disclosure which let people feel free to decide which kind of contract they want to agree with; on the other hand we almost have a deterministic approach to decision making, not ruled by the law yet, where the wills of the parties are contained in a form contract and the influence of the choice is made only on the basis of a satisfactory and often erroneous search (mostly ruled by a kind of physichal impossibility to process information in more effective way).

How often happen the real solution could be found half way; the economic and moral approach is a very intersting one, but it lacks of certainty, it depends too much from the ethical stand point of the judges and from the economics' assumptions.

The bounded rationality approach is solution-less, no decision is possible, we could never talk about a selfconscious choice, the real world is too complicated for the human brain.

However, the reality shows that decisions are taken every second and parties are saying yes or not to contracts every day.

Maybe, a general rule dealing with the disclosure of the information should take in account the ethical-economic approach to try to fix up a definite standard after which the disclosure of a bit of information will be necessary, meanwhile the bounded rationality approach in order to excuse ex-post the non-disclosure that would have been irrelevant to the decision made.

The Roman laesio ultra dimidium seems to become surprisingly useful to indicate a possible standard of judgment of the importance of a non-disclosure.

That institute was, at the same time, giving an economical and moral treshold, if you did not disclose an information and the value of the good will be, because of that wrong, for more than a double. In both cases if the price was too high or too low, than the contract could be void.

In a more soft approach, we could decide to allocate the burden of prove to one party or the other when there is the suspect of an ultra dimidium violation131.

Moreover the bounded rationality perspective would not be forgot, for the rigid standard is recognizing the human impossibility to create a perfect rule of interpretation of the value of the different bits of information.

1 F. VON HAYEK, Law, Legislation and Liberty, italian trad., Milano, 1989, pp. 154. His main philosophical contribution could be summarized in the idea that the information exchange among subjects has not to be forbidden by the state's laws. He sustained that it was possible to talk of justice just while referred to rewards or prices determined in a free-trade market, without deceit, fraud or violence, and while aknowledging to the legislator just a duty to protect the correctness of the information exchange. 2 F. VON HAYEK, Knowledge, Market and Planning, italian trad., Bologna, 1988, p. 298. While the traditional economical theory assumes as a starting point the perfect information and knowledge, hayek says, on the contrary, that the competittive process of the market is the only way that leads to the diffusion and the use of information and knowledge. 3 See K. L. SCHEPPELE, Legal secrets, Chicago, 1988, passim. 4 M.T. CICERO, De Officiis, III, 319 (translation Walter Miller 1938). 5 THOMAS AQUINUS, Summa theol., II, ii, lxvii, 3. 6 R. von JHERING, De la Culpa in contrahendo ou des dommages-intérêts dans les conventions nulles ou restées imparfaites", french translation in O. de Meulenaere, ed., Oeuvres choisies (Paris, Marescq, 1893), p. 1 at pp. 1-100. 7 In Italy the reception of the Jhering's idea will be through the influence of the doctrine on the 1942 Civil Code. This code has a specific disposition concerning the pre-contractual liability. art. 1337: "The party must behave in good faith in the pre-contractual bargaining and in the drafting of the contract". The influence of the Jhering's thought, stronger than the code disposition itself, could be noticed in the italian court trend of recognizing the culpa in contrahendo only in case of withdrawal from the pre-contractual negotiations. In France the reception happened through the work of the case law's interpretation, see MONATERI, La sineddoche, Milano, 1986, for other french examples of reinterpretation of code dispositions from the judges. In an early version of the 1804 Civil Code, some words had been inserted to make explicit that art. 1134, para 3, reached back to the formation of the contract. Portalis asked for them to be removed not because he disagreed, but on the ground that he thought them superfluous; see P.A. FENET, Recueil complet des traveaux préparatoires du Code civil, vol. XIII (Paris, 1828), 54. 8 Smith v. Hughes (1871) LR 6 QB 597, 604. 9 Laidlaw v. Organ, 15 U.S. (2 Wheat.) 178 (1817). The plaintiff Organ was a New Orleans merchant in the tobacco trade. He had learned from a friend that peace had been concluded between the British and American forces. Before the information had been made public, he had contracted to purchase a large order of tobacco from Laidlaw. Before the sale was completed Laidlaw asked Organ whether he knew any information that would affect the price of the tobacco; from the record it is unclear whether the plaintiff had made any reply, and if so, what he had said. When the peace was announced the price of tobacco advanced between 30 and 50 percent and Laidlaw, who had delivered the tobacco to Organ, repossessed it by force. Organ brought suit for damages for the loss of the tobacco. The key question in the case was whether their prior agreement, pursuant to which the tobacco was transferred, was vitiatited by fraud or nondisclosure. The jury found that Organ was entitled to the tobacco, whereupon Laidlaw appealed. After extensive argument Marshall C.J., issued a brief opinion: "the question in this case is, whether the intelligence of extrinsic circumstances, which might influence the price of the commodity,and which exclusively whithin the knowledge of the vendee, ought to have been communicated by him to the vendor? The court is of opinion that he was not bound to communicate it. It would be difficult to circumscribe the contrary doctrine within proper limits, where the means of intelligence are equally accessible to both parties. But, at the same time, each party must take care not to say or do any thing tending to impose upon the other. The court thinks that the absolute instruction of the judge was erroneous, and that the question, whether any imposition was practised by the vendee upon the vendor ought to have been submitted to the jury. For these reasons the judgement must be reversed, and the cause remanded to the district court of Louisiana, with directions to award a venire facias de novo". 10 The american courts have followed Laidlaw v. Organ considering the silence not a misreresentation amounting to fraud every time in which there's not a duty to speak. For the most recent cases see Simpson Timber Co. v. Palmberg Constr. Co., 377 F.2d 380, 385 (9th Cir. 1967); Bank of Red Bay v. King, 482 So. 2d 274, 284 (Ala.1985); In re Marriage of Travlos, 578 N.E. 2d 1267, 1273 (Ill. app. Ct. 1991); Greene v. Gulf Coast Bank, 593 So. 2d 630, 632 (La. 1992); Wilson v. Donegal Mut. Ins. Co., 598 A.2d 1310, 1316 (Pa. Super. Ct. 19919; Sutfin v. Southworth, 539 A. 2d 986, 988 (Vt. 1987). 11 C.T. LE VINESS, Caveat emptor versus, caveat venditor, 7 Md. L. Rev. 177, 182 (1943); A. SQUILLANTE, J. R. FONSECA, 2 Williston on sales, § 15-12, 1974, 364. 12 W. BLACKSTONE, Commentaries on the Laws of England, 165-166, American ed. 1772. 13 LE VINESS, op.cit., p.184. 14 Swinton v. Whitinsville Savings Bank, 311 Mass. 677, 42 N.E. 2d 808 (1942). The declaration alleges taht on or about September 12, 1938, the defendant sold the palintiff a house in Newton to be occupied by the plaintiff and his familyas a dwelling; that at the time of the sale the house "was infested with termites, an insect that is most dangerous and destructive to buildings"; that the defndant knew the house was so infested; that the plaintiff could not readily observe this condition upon inspection; that, "knowing the internal destruction that these insects were creating in said house", the defndant falsely and fraudulently concealed from the plaintiff the true condition; that the palintiff at the time of this purchase had no knowledge of the termites, exercised due carethereafter, and learned of them about August 30, 1940; and that, because of the destruction that was being done and the dangerous condition that was being created by the termites, the plaintiff was put to great expense for repairs and for the installation of termite control in order to prevent the loss and destruction of the said house. There is no allegation of any false statement or representation, or of the uttering of a half truth which may be tantamount to a falsehood. There is no intimation that the defendant by any means prevented the palintiff from acquiring information as to the condition of the house. There is nothing to show any fiduciary relationship between the parties, or that the plaintiff stood in a position of confidence toward or dependence upon the defendant.So far as appears the parties made a business deal at arm's length. The charge is concealment and nothing more. If this defendant is liable on this declaration every seller is liable who fails to disclose any nonapparent defect known to him in the subject of the sale which materially reduces its value and which the buyer fails to discover.The law has not yet reached the point of imposing upon the frailties of human nature a standard so idealistic as this. That the particular case here stated by the palintiff possess a certain appeal to the moral sense is scarcely to be denied. But the law cannot provide special rules for termites and can hardly attempt to determine liability according to the varying probabilities of the existence and discovery of different possible defects in the subject of trade. 15 The elements of the common law Fraud are (1) material misrapresentation of presently existing or past fact, (2) made with knowledge of its falsity or reckless disregard for its truth (scienter), (3) with the intention that the other party rely, and (4) resulting in justifiable reliance by the party to its detriment. 37 AM. JUR. 2d Fraud and Deceit § 12 (1968). 16 S.M. WADDAMS, Pre-contractual duties to disclosure, in "Essays for Patrick Atiyah", Toronto, 1991. In certain situations the law ask for the utmost good faith between the parties, the author arises a number of doubts on the demand of good faith in this kind of contracts. 17 H: RAIFFA, The Art and Science of Negotiations, Cambridge, Mass., 1982, agrees with the idea of dealing the obligations between parties in a particular kind of relationship following different rules; the game theory is presuming a full cooperation between these kind of players. 18 For a complete list see N.W. PALMIERI, Good faith disclosures required during precontractual negotiations, 24 Seaton Hall 70 (1993-1994), pp.127-128: the author thinks that in these kind of fiduciary relationship situations the good faith and fair dealing concept have found their first application in the american case law on pre-contractual liability; the fiduciary relationships are defined such in a vague way that set the Courts free to find these kinds of situations in almost an infinite number of cases. 19 Mc Grath v. Zenith Radio Corp., 651 F2d 458, 468 (7th Cir. 1981) (applying California law) (it is incumbent upon a party to correct material representations when prove to be false, even though they were believed to be true when made); Stevens v. Marco, 305 P.2d 669, 683 (Cal. Dist. App. 1957); St. Joseph Hosp. v. Corbetta Constr. Co., 316 N.E. 2d 51, 71 (Ill. App. ct. 1974); U.S. Fidelity and Guarantee Co. v. Black, 313 N.W.2d 77, 89 (Mich.1981). 20 V.S.H. Reality, Inc. v. Texaco, Inc., 757 F.2d 411, 414 (1st Cir. 1985); Southeastern Fin. Corp. v. United Merchants & Manufacturers, Inc., 701 F.2d 565, 566-67 (5th Cir. 1983). 21 Pashley v. Pacific elec. Co., 153 P.2d 325, 330 (Cal. 1944). 22 States ex rel. Bussen Quarries, Inc. v. Thomas, 938 F. 2d 831, 834 (8th Cir. 1991); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. First Nat'l Bank, 774 F.2d 909, 913 (8th Cir. 1985); U.S. Concord Inc. v. Harris Graphics Corp., 757 F. Supp. 1053, 1057 (N.D. Cal. 1991); Washington Pub. Power Supply Sys., 744 P.2d 1032, 1069 (Wash. 1987). In Strong v. Reptide, 213 U.S. 419, 431 (1909), the U.S. Supreme Court recognized that "special facts" may give rise to a duty to disclose in the security transaction context; are following the same solution: SEC v. Texas Gulf Sulphur Co., 401 F.2d 833, 848 (2d Cir. 1968); Jordan v. Duff and Phelps, Inc., 815 F.2d 429 (7th Cir. 1985). Similar to the inequality of knowledge is the doctrine of special facts, created by the New York courts. In Congress Financial Corp. v. John Morrell & Co. has neen decided that John Morrell & Co. could not claim fraudulent concealment, for there was none of the elements require by the special facts doctrine: "(1) one party must have superior knowledge, (2) that knowledge must be readily available to the other party, and (3) the party with the knowledge must know that the other party is acting on the basis of mistaken knowledge". Congress Fin. Corp.v. John Morrell & Co., 790 F. Supp. 459, 475 (S.D.N.Y. 1992), is the first decision in which was abandoned the Justice Blackmun solution in Chiarella v. United States, 445 U.S. 222 (1979), where the special facts doctrine was created. In his opinion Justice Blackmun relied on a number of cases involving the purchase of property. In Jenkins v. Mc Cormick, 339 P.2d 8, 9 (Kan. 1959), a purchaser of a home brought a fraudulent concealment action against the builder for damages related to a latent defect in a basement floor. It is important to notice that only a few courts are using the special facts doctrine, beside the New York courts, generally the same situations are solved throught the superior knowledge doctrine: Brass v. American Film Tech., Inc., 987 F.2d 142, 151-52 (2d Cir. 1993); Grummann Allied Indus. v. Rohr Indus., Inc. 748 F.2d 729, 736-39 (2d Cir. 1984); Aaron Ferer & Sons, Ltd. v. Chase Manhattan Bank, 731 F.2d 112, 123 (2d Cir. 1984). 23 Uniform Sales Act, 3a U.L.A. 452 (1906), Uniform Commercial Code, il Securities Act (1933), 15 U.S.C. §§ 77a-77aa (1988), the Truth in Lending Act (TILA), 15 U.S.C. §§ 1601-1067(c) (1988) at the subparagraph I of the Consumer Credit Protection Act, the Land Sales Full Disclosures Act, 15 U.S.C. §§ 1701-1720 (1988); on the franchising regulations 62B Am. Jur. 2d Private Franchise Contracts §307 (1990). 24 I define as contractarian the solutions that are on the shadow of the J. RAWLS, A Theory fo Justice, Cambridge, Mass., 1982. 25 K.L. SCHEPPELE, op.cit., p.66. 26 WADDAMS, op.cit.p.253; SCHEPPELE, op.cit., pp.178; PALMIERI, op.cit., p.109; are conferming this position some decisions: Obde v. Schlemeyer, 56 Wash. 2d 499, 353 P.2d 672, (1960), Weintraub v. Krobatsch, 64 N.J. 445, 317 A 2d 68 (1974) are both overuling Swinton and conferming what was already forseen by Keeton in his famous article Fraud-Concealment and Non-Disclosure, 15 Tex. Law Rev.1, 1936, 14-16. 27 LEGRAND, Pre-contractual disclosure and information: english and french law compared, in 6, Oxford Journal Legal Studies, 322 (1986), p.348; NICHOLAS, The pre-contractual obligation to disclose information, in Harris & Tallon, Contract Law Today. Anglo-French Comparisons, Oxford, 1989, pp. 151-166. 28 It is important to remember here the dispositions on the implied terms set in the Sale of Goods Act 1979: §14(2) - the goods are of merchantable quality, except (a) as regards defects specifically drawn to the buyer's attention, (b) if the buyer examines the goods, as regards defects which that examination ought to reveal; § 14(3) - that the goods are reasonably fit for any particular purpose for which the goods are bought, provided that the buyer expressely or by implication makes that purpose known to the seller. 29 The extensive interpretation has started already with Ward v. Hobbs (1878) 4 App. Cas. 13; the seller sent to the market, for sale by auction, a number of pigs which, to his knowledge were infected with typhoid. The pigs were sold "with all faults" and all but one died, as did others belonging to the buyer. The buyer's claim for damages failed, as did his appeal to the House of Lords. In this Housefollowed a similar decision in 1811 in which it was said that "where an article is sold with all faults ... it is quite immaterial how many belonged to it within the knowledge of the seller, unless he used some artifice to disguise them and prevent their being discovered by the purchaser". It was argued that since the sending of infected pigs into any public place constituted a criminal offence, the seller's conduct in sending the pigs to market amounted to a representation that tthey were not infected, but this rather remote inference was held to be insufficient to displace the express esclusion. Others decisions are going further and they are affirming the same rules that we have seen in the american law. Notts Patent Brick and Tile Co. v. Butler (1886) 16 QBD 778: "a statement of a partial truth may constitute a representation of the unstated untruth as where a sollicitor for the seller of premises said (correctly) that he knew of no legal restrictions on their use, but did not say that he had made no inquiries"; With v. O'Flanagan (1936) Ch. 575; "failure to correct a statement which was true (or believed to be true) when it was made, but which has since been falsified (or found to be false), may consitute a representation". 30 Hartog v. Colin & Shields (1939) 3 All ER 566; the question of mistake was indeed in the issue of Smith v. Huges (1871) LR 6 QB 597; this leading case was involving the sale of a specific parcel of oats. The buyer wanted old oats and believed that the oats in question indeed was old. The seller knew that the oats were in fact new, but did nothing either to encourage the buyer's belief that they were old or disabuse him of it. And the buyer had an opportunity of examining sample of the oats. Cockburn CJ said: "where a specific article is offered for sale, without express warranty, or without circumstances from which the law will imply a warranty... and the buyer has full opportunity of inspecting and forming his own judgment, the caveat emptor applies". 31 The dangerous situation could be like the situation generated by the infected pigs in Ward v. Hobbs; a recent case has come out with a different solution. Hurley v. Dyke (1979) RTR 265, a garage-owner entered a car for a sale by auction, where it was sold "as seen with all its faults and without warranty". The car was in fact dangerously defective. The purchaser, an inexperienced young man, drove it away and not long afterwards was involved in an accident caused by the latent defect. The House of Lord and the majority of the Court of Appeal held that he most that could be said was that the buyer was aware of a "very real potential danger". On that footing it was held that the clear statement that the car was sold without warranty was sufficient to discharge the seller's duty to take precautions. In that occasion Lord Denning, taking the view that the seller knew that the car was a "death-trap", was of the opinion that nothing short of a voluntary acceptance of the risk could exempt the seller. 32 There are elaborate requirements under the Consumer Credit Act 1974 that credit advertisments should give quite comprehensive information of the credit facilities offered and their true cost and that corresponding information should be contained in any contract made. And the prospectus of a company must by statute contain a body of specific information. The Prices Act 1974 (sections 4, 5) provides for the making of orders for the marking of prices or the posting of price-range notices, but so far only one order has been made, requiring the display of prices at petrol stations. The Trade Description Act 1968, section 8, provides for the making of Marking Orders. 33 For a new tendency in the very last english decisions see: Sidaway v. Bethlem Royal Hospital Governors and others, 1 QB 493, 1984, where the Court of Appeal deemed that a doctor must inform the patient on the possible risks of a suregery. Many are the cases where the accountents are considered to have a duty of disclosure: Mahfouz and others v. Morris and others, Court of Appeal Civil Division, 138 SJ LB 19 (1993); Price Waterhouse v. BCCI Holdings SA, Chancery Division (1991); In Re DPR Futures Ltd., Chancery Division (1989); Bank of Credit and Commerce International SA v. Aboody & Another, 30 QB (1987). 34 The Restatements are a series of volumes authored by the American Law Institute that tell what the law in a general area is, how is changing, and what direction the authors think this change should take; the most important examples are the Restatement of the Law of Contracts and the Restatement of the Law of Torts. 35 Definitions of good faith are given both by the Restatement of Law of Contrcts 2d and Uniform Commercial Law. The latter is one of the Uniform Laws drafted by the National Conference of Commissioners on Uniform State Laws governing commercial transactions (sales of goods, commercial paper, bank deposits and collections, letters of credit, bulk transfers, warehouse receipts, bills of lading, iinvestment securities, and transactions). The U.C.C. has been adopted by all states except Louisiana. UCC § 1-201 (19) (1989) says that good faith consist in honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade, when a merchant is involved. While the comment to § 205 of the Restatement of Law of Contracts 2d states that: "good faith performance or enforcement of a contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party; it excludes a variety of types of conduct characterized as involving "bad faith" because they violate community standards of decency, fairness or reasonableness. 36 C. FRIED, Contract as a promise, 83 (1981), is talking about reasonable standards of fairness in business; E. A. FARNSWORTH, Good faith performance and commercial reasonabless under the UCC, 30 U. Chi. L. Rev. 666, 671 (1963), considers it decency as fairness and reasonableness; R. HILLMAN, Policing contract modifications under the UCC: good faith and the doctrine of economic duress, 64 Iowa L. Rev. 849, 877 (1979), he defines it simply as fairness. 37 In 1893 the New York Court of Appeals, Genet v. President of Delaware & Hudson Canal Co., 32 N.E. 1078 (N.Y. 1893), announced that courts when intepreting contracts, should infer that the contracting parties fully contemplated good faith in performance. 38 English v. Fisher, 660 S.W.2d 521, 522 (Tex. 1983); Morris v. Macione, 546 So.2d, 969, 971 (Miss. 1984); In Re Stevenson Ass'n, Inc. 777 F.2d 415, 421 (8th Cir. 1985); K Mart Corp. v. Ponsock, 732 P.2d 1364, 1370 (Nev. 1987); TSC Indus.Inc. v. Tomlin, 743 S.W.2d 169, 173 (Tenn. Ct. App. 1987); Garret v. Bank West, Inc., 459 N.W.2d 833, 841 (S.D. 1990); Idaho First Nat'l Bank v. Bliss Valley Foods, Inc., 824 P.2d 841, 862 (Idaho 1991); Daniels v. Army Nat'l Bank, 822 P.2d 39, 43 (Kan. 1991); Ranier v. Mount Sterling Nat'l Bank, 812 S.W.2d 154, 156 (Ky. 1991); Watson Truck & Supply Co. Inc., v. Males, 801 P.2d 639, 642 (N.M. 1991). 39 Some of the wtritings on this subject are: S.J. BURTON, Breach of Contract and the common law duty to Perform in Good Faith, 94 Harv.L.Rev. 369 (1980); R.A. NEWMAN, The Reinassance of Good Faith in contracting in Anglo-American law, 54 Cornell L. Rev. 553 (1969); R.S. SUMMERS, The general Duty of Good Faith - Its recognition and conceptualization, 67 Cornell L. Rev. 810 (1982); S.W. THOMAS, Utmost Good Faith in Reinsurance: A Tradition in need of Adjustment, 41 Duke L.J. 1548 (1992). 40 Fuller v. De Paul University, 12 N.E. 2d 213 (Ill. 1938). 41 § 90 of the Restatement of Law of Contracts 2d introduced the promissory estoppel, remedy which could be used when injustice could be avoided only by imposing the therms of the concluding contract. D. FARBER, J, MATHESON, Beyon Promissory Estoppel: Contract Law and the "Invisible Handshake", 52 U. Chi. L. Rev. 903, 906 (1985). 42 P. LEGRAND, op. cit., pp.332 ss. 43 Art. 1116: Fraud (dol) is a cause of nullity of the agreement when the artifices (manoeuvres) practised by one party are such that it is evident that without those artifices the other party would not have contracted. Art. 1110: Mistake (erreur) is a cause of nullity of the agreement only if it relates to the very substance of the thing which is the object of the agreement. It is not a cause of nullity when it relates only to the person with whom one intends to contract, unless the consideration of that person is the principal cause of the agreement. 44 M. DE JUGLART, L' obligation de reseignements dans les contrats, in Rev. trim. dir. civ. 1945, 1-22. 45R. DEMOGUE, in Traité des obligations en général, vol. VI: Effets des Obligations, Parigi, 1931, 9-10 e 17-44, had already talked about a duty to inform; HENRI e LEON MAZEAUD, Traité théorique et pratique de la responsabilité civile délictuelle et contractuelle, vol. I, 6a ed. directed by A. Tunc, Paris, 1965, 802 ss. 46 On this wave of thinking there are a lot of statutes: Decree of 22 March 1978, ordered by the Statute 10 January 1978, regarding the consumer protection and the Statute 24 January 1984, regarding the civil procedure; the Loi Quillot, 22 June 1982 and the decree of 2 February 1983 which require anyone who proposes to lease property to another and any vendor of a building used for living accomodation to give to the other party a catalogue of information on the location and construction of the premises, the amount of the rent, etc. 47 GHESTIN, op.cit., pp.154. 48 An example of this kind is in the EU legislation on the door-to-door sale, ECC direction 89/298. 49 Cour App. Montpellier, 24 April 1986; the court deemed to see a fraudulent silence, applying the articles 1110 and 1116 of the civil code, where a party did not give correct information on the financiary condition of a company. 50 Art. 1382: Any human action (fait) whatever which causes damage to another obliges the person by whose fault the damage has occurred to make it good. 51 TGI Paris, 19 November 1984; unpublished. In the course of negotiations for a commercial lease conducted though an estate agent, the lessor had given incorrect information as to outgoings for the previous year, and the tribunal awarded to the lessee, as damages for misinformation, the difference between the true figure and the the figure actually given, adjusted for inflation to the end of the lease. 52 Art. 1641: "The seller warrants the absence of latent defects in the thing sold which nake it unfit for the use which is intended or which so diminish its fitness for that purpose that the buyer, if he had known of the defect, would not have bought the thing, or would have bought it only at a lower price". 53 Thesis also adopted by V.G. VINEY, La résponsabilité des fabricants et distributeurs, Paris, 1975, pp. 69 ss. 54 Cass. civ., 19 January 1977, in Bull. Civ., I, 40, p.30. 55 TGI Argentan, 15 October 1970, D. 1971, 718, note Ghestin. 56 Cass. civ., 3 February 1981, D. 1984, 457, note Ghestin. 57 See the position of A. KRONMAN, Mistake, Disclosure, Information and the law of Contracts, in Jo. Leg. Studies 7, 1978. 58 We are not far away from the common law formula "buyer beware"; see Req. 15 November 1927, in Gaz. Pal., 1928, 1, 80; C. App. Paris, 29 January 1861, and Req. 14 july 1862, S., 1862, 1, 849; Req. 7 January 1901, D.1901, 1, 128. 59 Cass. civ., 24 October 1972, in Bull.Civ., III, n. 543, p.396. 60 An example could be the Lorenzo Lotto's painting case. 61 Cass civ, 24 November 1976, in Bull. Civ., I, 370, 291. 62 Most of the jurisprudence in this matter is on the liability of the constructor towards the owner for the defects in the building: Cass. civ., 13 July 1994, LEXIS; C. App. Bordeaux, 9 July 1987; C. App. Lyon, 2 July 1987; C. App. Lyon, 21 May 1987; C. App. Montpellier, 19 May 1987; C. App. Bordeaux, 19 May 1987; C. App. Lyon, 16 April 1987; C. App. Lyon, 12 March 1987; C. App. Lyon, 5 March 1987; C. App. Lyon, 5 February 1987; C. App. Lyon, 22 January 1987; C. App. Lyon, 8 January 1987. Cass. civ., 8 June 1994, is talking about a duty of disclosure in the relationship between an insurance broker and his client; Cass. civ. comm., 3 May 1994, is asking for an obligation de renseignements spontanés when this duty has been forseen from the contract between a consulting company and its client; Cass. civ., 16 March 1994, is declaring that "the physician must fully inform the patient which wants to submit himself to a non urgent surgery treatment, in order that the patient could give his consent in a conscious way". Cass. civ., 26 gennaio 1994, demeed to be liable for not disclosure of information the development agency of the Languedoc-Roussillon that concealed some basic information to the comapnies which wanted to invest in the region. 63 Cass.soc., 3 January 1964, JPC 1964, II, 13551, note Lindon. 64 Cass. civ., 21 June 1961, in Bull.Civ., I, 339, 279. 65 Ivainer, JCP 1972, I, 2495. 66 Cass. civ., 21 June 1960, Bull.Civ., I, n.339, p.279; which annuls the contract on the basis of fraudulent silence (réticence dolosive). 67 Paris, 22 January 1953, JCP, 1953, II, 7435. 68 C.App. Lyon, 21 November 1985, LEXIS, is considering liable a real estate broker which didn't inform the buyers of a café in Lyon that the underground had change its way and for that reason the value of the real estate should have deeply decreased. 69 Cass. civ., 24 January 1995; Cass.civ., 4 january 1995; Cass. civ., 10 January 1995; LEXIS; are considering liable the bank which didn't disclose the financial situation of its debtor to a client. 70 Cass.civ., 25 April 1978, Gaz. Pal., 1978, 274. The court held that a building co-operative was liable for having given incomplete and inaccurate information to the acquirer of an appartment built by the co-operatative as to the conditions on which the loans which the acquirer had incurred were covered by a life policy. Rennes, 9 July 1975, D., 1976, 417; where the same approach had, morover been adopted earlier in an action brought against a building society which was held to be under duty in its capacity as a "professional lender" to "inform its clients of the conditions, both principal and accessory, on which the loans were incurred and in particular of the terms of repayment in case of the borrower's disability". 71 Cass.civ., 24 June 1971, Bull.Civ., III, 406, 288. The court upheld the pre-contractual liability of a developer "who was under a duty to give accurate information to future buyers instead of offering them a promise drawn up in ambiguous terms. On the same line of thought see Paris, 21 November 1975, D. 1976, Som. 50. 72 The Italian authors who wrote on the subject are a particularly large number, the liability sourcing from a non-disclosure is always dealt along with the pre-contractual good faith obbligations. The last works are by D. CARUSO, La culpa in contrahendo.L'esperienza statunitense e quella italiana, Milano, 1993; GRISI, L'obbligo precontrattuale di informazione, Napoli, 1990; NANNI, La buona fede contrattuale, Padova, 1988, 1-143; BENATTI, Culpa in contrahendo, in Contratto e Impresa, 1987, 287 ss.; BENATTI, La responsabilità precontrattuale, Milano, 1963; CUFFARO, voce Responsabilità precontrattuale in Enciclopedia del diritto, XXXIX, Milano, 1988, 1265 ss.; CHIOLA, voce Informazione, in Enciclopedia giuridica Treccani; FERRARINI, Investment banking, prospetti falsi e culpa in contrahendo, in Giur. comm., 1988, II, 585; FUSARO, Fondamenti e limiti della responsabilità precontrattuale, in Giur. It., 1984, I, 1, 1199; LOI e TESSITORE, Buona fede e responsabilità pre contrattuale, Milano 1975; RASI, La responsabilità pre contrrattuale, in Riv. dir. civ., 1974, 496; G. VISINTINI, La reticenza nella formazione dei contratti, Padova, 1972; BESSONE, Rapporto precontrattuale e doveri di correttezza, in Riv.trim.dir.proc.civ., 1955, I, 360. To this huge number of articles had not corrisponded, till now, an as such numerous case law. 73 R. SACCO, G. DE NOVA, Il Contratto, in Trattato di Diritto Civile, directed by Rodolfo Sacco, Turinm 1993, vol. I, 310. We agree with the authors the certainty that the "complete freedom, the complete thought, the full consciousness of the party are unatteinable ideals". 74 See GAMBARO, entry Codice Civile, in Digesto IV, Torino, 1988, on the relationship between the importance of the civil code and the business transactions. The civil code rules are not able to regulate the new deal of the world economy. A world wide market is now taking over the internal one, the exchange of goods between individuals has been substituted by the trade between economic groups, or between these groups and the individuals, provoking a huge change in the contractual relationships. 75 See the role of the culpa in contrahendo in the Italian and in the United States in the excellent work of D. CARUSO, op. cit.. 76 R. SACCO, G. DE NOVA, op. cit., I, 356; Sacco forsee a development of the 1337 use as contract liability treshold rule, giving all the needed protection through the comparative evaluation of the parties behavior and considering that the unjustice prevention in the contract is in the bad faith prevention. 77 R. SACCO, G. DE NOVA, op. cit., vol. I, 423 ss. 78 This statement could be found in a decision of the Trib. Verona, 18 november 1946, in Foro Pad.., 1947, 199. The sale of a truck, without disclosing that was belongin to the State, was considered fraudulent and voided. 79 The civil code contains an esplicit duty to disclose in the artt. 1892-1893 concerning the insurance contracts. 80 L. 7 june 1974, n. 216, D.L. 8 april 1974, n. 95, modified by the EEC direction 89/298, enacted by the d.lg.vo 25 january 1992, n.85, L. 29 december 1990, n.428. 81 L. 2 january 1991, n.1, in G.U. 4 january 1991, n.3. 82 L. 17 february 1992, n. 154. 83 D.p.r. 31 march 1975, n. 136. 84 EEC direction 80/310, L.4 june 1985, n. 281 and L.29 december 1990, n.428. 85 D.leg.vo 25 january 1992, n.84. 86 G. ALPA, La "trasparenza" del contratto nei settori bancario, finanziario e assicurativo, in Giur. It., 1992, IV, 409, and DE NOVA, Informazione e contratto: il regolamento contrattuale, in Riv. trim. dir. civ., 1993, 705. 87 The "transparency" principle is visible in all the Italian legislation of European derivation (see all the previous cited statutes: nn.80, 81,82, 83, 84, 85). It could be divided in a "direct principle" and the "indirect principle", the first is when the information is given straight from the bargaining party altogether with the contract text, the title or the good, through informative notes, annexes, prospect tables or advertising messages; the second is when the information is in the hands of a third party, which has the duty to disclose it in a truthful way, this is the case of the accountants, the banks or the finance brokers. The consumer protection and the favor for the lay person are connected to the transparency principle. 88 The contract is becaming more and more a frame in which the parties'wills are no more such important as a they were, and the legislator, through the courts interpretation of the law is trying to oblige the parties to respect the rule of the game. This is where the western legal systems are heading to. The AGB Gesetz, § 3, 1977, says: "the conditions in a form contract do not become part of the contract when they are very unusual". 89 App. Milan, 2 february 1990, in Giur. It., 1992, I, 2, 49, note by M. ARIETTI. 90 The damages were awarded in the negative interest given by the lost of other investments chances, because of the contract. That is what the investors should have earned if they had not been convinced by the bank to exchange the Italian State Bond with the bankrupt ompany stocks. 91 We agree with this part of the Italian doctrine that thinks that the issue of the lack of consent (artt. 1427-1440) might be considered as a whole issue together with the contract rescission (art. 1447 ss.) and the contract signed in a deminished responsability situation (art. 428), as ROPPO, Il contratto, Bologna, 1977, 202; MIRABELLI, Dei contratti in generale, in Commentario al codice civile, Torino, 1980; G. VETTORI, Anomalia e tutela dei rapporti di distribuzione tra le imprese, Milano, 1983, 98-148; SACCO, DE NOVA, Il contratto, in Trattato di diritto privato directed by Sacco, I, Torino, 1993, 328. The majority of the Italian authors has the opposite thought: GALGANO, Diritto privato, Padova, 1983, 25 ss. and 38 ss.; N. DISTASO, I contratti in generale, in Giurisprudenza sist. civ. e comm. directed by Bigiavi, Torino, 1980; BIGLIAZZI-GERI, BUSNELLI, NATOLI, Istituzioni di diritto civile, Genova, 1980; L. FERRI, Lezioni sul contratto, in Corso di diritto civile, Bologna, 1982. 92 App. Rome, 23 november 1948, in Riv. dir. comm., 1949, 192 note by R. SACCO. 93 See supra p.25. 94 See Cass. civ. 23 ottobre 1992, n. 11568, in Giust. Civ., 1993, I, 374; Cass. civ., 17 maggio 1974, n.1464, in Giur. It.1974, 407; App. Milano, 16 january 1973, in Mon. Trib., 1973, 349; Cass. civ. 30 december 1968, n.4081, in Foro It., 1969, I, 1203. 95 See the nteresting picture of the problem given by Trib. Bologna, 2 november 1974, in Giur. It., 1976, I, 2, 392, note by L. CABELLA PISU. 96 G. VISENTINI, La reticenza nella formazione dei contratti, Padova, 1972. 97 MEYERSON M., The efficient consumer Form Contract: Law and Economics meets the real world, in 24 Georgia Law Rev. 583, 600 (1990). 98 Economics facing the problem of applying the Pareto efficiency to the real world more often uses the Kaldor-Hicks efficiency: nobody is damaged by a transaction and the overall benefits are one unit higher than the overall losses. KALDOR, Welfare Propositionof Economics and Interpersonal Comparisons of Utility, 40 Econ. J. 549 (1939); HICKS, The Foundation of Welfare Economics, 49 Econ. J. 696 (1939). MEYERSON, op. cit., 586, gives a very interesting example of this kind of efficiency: if A owns a tractor worth $100 to her but worth $150 to B, they will both be better off if B purchases the tractor for any sum dbetween $100 and $150. Presumably, in a free market, the sale will take place. Moreover, societal wealth will also be increased by the sale since both parties' individual wealth has increased. In mathematical terms, and assuming a sale price of $ 135, societal wealth could be computed as follows: A0 = A's wealth before the sale B0 = B's wealth before the sale W0 = Societal wealth before the sale A1 = A's wealth after sale B1 = B's wealth after sale W1 = Societal wealth after sale A0 + B0 = W0; 100 + 135 = 235 = W0 A1 + B1 = W1 ; 135 + 150 = 285 = W1 . 99 See A. KRONMAN, Mistake, Disclosure Information and the law of Contracts, in Jo.Legal Studies 7, 1978 and POSNER & KRONMAN, The economics of contract law, Boston, 1979. 100 See supra note 9, p.7 for the description of the case's facts. 101 The Kronman theory seems to start from the point of view of the impossibility of the market in producing enough information without any incentive. 102 KRONMAN, op. cit., p. 18, in his exam of the american case law the author cites Neil v. Shamburg, 158 Pa. 263, 27 Atl. 992 (1893) and Leich Gold Mines Lts. v. Texas Gulf Sulphur, 1 Ontario Reports 469, 492-493 (1969), in which he deemed his theory has been followed. Both cases are similar to the ipothetycal example submitted to the first year law school students: oil and mineral field had been discovered under the land of an unaware seller. 103 POSNER, Economic Analysis of law, Boston, Toronto, London, 1992, 109. 104 It is easy to see an Hayekian influence in this position; POSNER, op. cit., 111, makes a distinguish between nondisclosure and misinformation, while the concealment of an information, as we have seen, could be useful to the societal wealth, the investment on a lie is always unefficient. 105 Typical example is the Fuller v. de Paul University case, see footnote n. 40. 106 T. ULEN, Cognitive Imperfections and Economics Analysis of Law, 12 Hamline L. Rev., 385 (1989). 107 SHIRYAYEV, Optimal Stopping Rules, New York, 1978; CHOW, ROBBINS, SIEGMUND, Great Expectations: the theory of Optimal Stopping, New York, 1971, 41. 108 See a further comment on the influence of the II World War on the patents regulations in the United States, R. MERGES, Intellectual Property in the New Technology Age, draft 1995, 9: "the attack on the patent systems ended when the attack on Pearl Harbor began ...". 109 H. SIMON, Rational Decision Making, in 69 Am. Economic Rev. 493 (1979), 499. 110 MARCH, SIMON, Organizations, 171 (1981). SIMON, Models of Bounded Rationality: Behavioral economics and Business Organizations, vol. 2, Cambridge MA., 1982. 111 STIGLER, The economics of Information, 69 Jo. Pol. Sci., 213 (1961). 112 The author admits that this level of aspiration may be fine-tuned during search; SIMON, op. cit., 465. 113 SIMON, Administrative Behavior, Cambridge MA, 3d ed., 1976, xxix. 114 EISENBERG, The Limits of Cognition and the limits of Contract, draft 1994, Berkeley. 115 R. CRASWELL, Precontractual Investigation as an Optimal Precaution Problem, in 17 J. L. Stud., 401 (1988); ID., Performance, Reliance and One-Sided Information, in 18 J. L. Stud.365 (1989); I. AYRES, R. GERTNER, Filling Gaps in Incomplete Contracts: an Economic Theory of the Default Rules, 99, Yale L.J., 87 (1989); e L.A.BERCHUK, S. SHAVELL, Communication about the value of performance and Liability for Breach of Contract: The Rule of Hadley v. Baxendale, 13 J. L. & Econ. Org., 1991. 116 D. CARUSO, Relazioni pre-contrattuali e teoria dei giochi, in Quadrimestre, 1992, 810. 117 The wellknown Prisoner's Dilemma is a classical example of "Nash equilibrium"; J. NASH, Equilibrium Points in n-Person Games, in 36 Proceeding of the National Academy of Sciences, 1, 48 (1950). 118 H. RAIFFA, The art and science of Negoatiation, Cambridge, MA., 1982, p.20. 119 The Bayesian modelling is based on the revision of the previsions according to the evaluation of the probabilities that a certain event could happen; the Bayesian equilibrium is often considered a synonimous of the Nash equilibrium. 120 D. CARUSO, La culpa in contrahendo ..., op. cit., 199 ss. 121 TVERSKY, KAHNEMAN, Judgement under Uncertainty; Heuristics and Biases, in Judgement under Uncertainty, 1,11; 1982; KAHNEMAN, TVERSKY, Choices, values and frames, 39 Am. Psych. 341 (1983); WEINSTEIN, Undue optimism about future life events, 39 J. Personality and Social Psychology, 806 (1980); FISKE, TAYLOR, Social Cognition, 270 (1981). 122 MILLER, The magic number Seven Plus or Minus Two, in Psych. Rev. 63 (1956), 81-97; see page 43 for a correlation between psychology and mathematics. 123 The experiment on the hearing was, for example, to let the individual hear a tones series in a certain order, then to invert it; when the sequence was formed only by two or three tones any of the listener got confused, while the number of mistakes with more than seven tones is extremely high. 124 TVERSKY, KAHNEMAN, Choices, values and frames, in 39 American Psycologist, 1984, 341, 343 ss. 125 TVERSKY. KAHNEMAN, Choices, Values and Frames, op.cit., the same result is achieved through the following example: given a sure gain of $800 and 85% chance to gain $1000 the majority choice the sure gain, while given a sure loss of $800 and 85% chance to lose $1000 the same majority prefer the probability. 126 WEINSTEIN, Undue optimism..., 809. Ninety-seven percent of consumers believe that they are above the average in their ability to avoid accidents from bycicles and power mowers. 127 K. ARROW, Risk perception in Psychology and Economics, 20 Jo. Economics Inquiry, 1, 5 (1982); on a review of the empirical evidence he concluded that "it is a plausible hypothesis that individuals are unable to recognize that there will be many surprises in the future; in short, as much ... evidence tends to confirm, there is a tendency to underestimate uncertainties". 128 TVERSKY, KAHNEMAN, Judgment under uncertainty: Heuristic and biases, Cambridge, MA., 1982, p. 3. 129 See M. SINGER, The vitality of mythical number, in TVERSKY, KAHNEMAN, Judgment under uncertainty..., p.405 ss. 130 MALHOTRA, Information Load and Consumer Decision Making, in 8 j. consumer Research, 419 (1982). 131 GORDLEY, Equality in exchange, 69 California Law Rev., 1583 (1981), seems to follow a similar approach to the problem.