The DCFR does not take the view (occasionally heard but rarely supported and never adopted) that default rules should be so unreasonable that the parties are pushed to negotiate and think things out for themselves. In cases involving only the parties to a transaction, it tries to base the default rules on what the parties would probably have agreed but for the costs of trying to do so. Such rules should produce efficient outcomes since that is presumably what the parties would have wanted.

Efficiency for wider public purposes

58.General. The rules in the DCFR are in general intended to be such as will promote economic welfare; and this is a criterion against which any legislative intervention should be checked. The promotion of market efficiency could be a useful outcome of the CFR project as a whole but that is not the aspect with which we are here concerned. The question here is the extent to which market efficiency is reflected in and promoted by the model rules within the DCFR. It is a matter of regret that the condensed timescale for the preparation and evaluation of the DCFR did not allow the evaluative work of the Economic Impact Group within the CoPECL project to be taken into account in the formulation of the model rules from the earliest stages. However, that evaluative work will form a valuable part of the corona of evaluation which will surround the DCFR and will be available to those taking the project further. What follows is a very brief note of a few areas in which it could be said that this aspect of efficiency is exemplified in the DCFR.

59.Information duties. Rules which might be said to promote market efficiency (at least when compared to some more traditional approaches) are those on information duties in Book II.128 There is

128II. – 3:101 to II. – 3:107. In De Geest and Kovac, “The Formation of Contracts in the DCFR – A Law and Economics Perspective” (publication forthcoming in Chirico/Larouche (eds.), Economic analysis of the DCFR

– The work of the Economic Impact Group within the CoPECL network of excellence (Munich 2009)) the authors cast doubt on the continued value of rights to avoid contracts on the basis of defects of consent and on

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a public value in better-informed decision making across the board. Interferences with freedom of contract may be justified on the ground that they can serve to promote economic welfare if there is reason to think that because of some market failure (such as that caused by inequality of information) the agreement is less than fully efficient. Consumer protection rules, for example, can be seen not only as protective for the benefit of typically weaker parties but also as favourable to general welfare because they may lead to more competition and thus to a better functioning of markets. This holds true in particular for information duties, where consumers’ lack of information about either the characteristics of the goods sold or the terms being offered leads to forms of market failure. Rules that, in relation to the making of a contract of a particular type or in a particular situation, require one party (typically a business) to provide the other (typically a consumer) with specified information about its nature, terms and effect, where such information is needed for a well-informed decision and is not otherwise readily available to that other party, can be justified as promoting efficiency in the relevant market. Indeed a legislator should consider whether this is the justification for the proposed intervention, or whether it is based on a protective notion that consumers simply should have the right in question. The answer to that question may influence the choice of the extent and form of intervention.

60. Remedies for non-performance. The Article on stipulated payments for non-performance129 could be said to be more favourable to market efficiency than rules which regard penalty clauses as completely unenforceable.130 Questions might be asked about the second

the way in which the rules on invalidity for mistake etc are formulated in the DCFR.

129III. – 3:712.

130See Schweizer, “Obligations and Remedies for non-Performance: Book III of the DCFR from an Economist’s Perspective” http://www.wipol.uni-bonn. de/fileadmin/Fachbereich_Wirtschaft/Einrichtungen/Wirtschaftspolitik/ Mitarbeiter/Prof._Dr._Urs_Schweizer/DCFRSchweizerRev.pdf; Ogus, “Measure of Damages, Expectation, Reliance and Opportunity Cost” (publication forthcoming in the work cited in fn. 128).

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paragraph of the Article which allows a stipulated payment to be reduced to a reasonable amount when it is grossly excessive in relation to the loss resulting from the non-performance,131 but here there are considerations of justice to weigh in the balance. The allowance of damages for pure economic loss seems to be preferable from the point of view of efficiency to the denial of such recovery, as happens under some systems.132 It is difficult to see any justification for distinguishing between pure economic loss and loss caused by damage to property or injury to the person. The question of whether the other rules on damages are optimal from the point of view of general efficiency seems to be a matter of debate.133

61. Other rules. The rules on prescription in Book III, Chapter 7 are designed to promote efficiency by encouraging the prompt making of claims before evidence becomes stale and expensive to provide and by freeing assets which might otherwise be held against the possibility of old claims being made. The rules on withholding performance and terminating the contractual relationship in cases of anticipated non-performance134 are designed to promote efficiency by not requiring the creditor to wait until non-performance actually happens. There are also rules which promote efficiency by discouraging the providing of unwanted performance.135 The rules denying effect to contractual prohibitions on the alienation of assets are also designed to promote general efficiency by favouring the free circulation of goods and other assets.136 The same applies to the rules on acquisition in good faith or by continuous possession.137 A core aim of the rules in Book IX on proprietary security in movable assets is the facilitation of economic activity and economic welfare by enabling credit to be obtained on favourable terms against the provision of proprietary security.

131Ibid.

132Schweizer, cited above, at p.9.

133See e. g. the differing views of Schweizer and Ogus cited above.

134III. – 3:401 and III. – 3:504.

135See III. – 3:301(2), IV. C. – 2:111 and IV. D. – 6:101.

136See III. – 5:108 and VIII. – 1:301.

137See VIII. – 3:101 and VIII. – 4:101.

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