Implied Duty to Give Information During Performance of Contracts
| Date | 01 July 1992 |
| DOI | http://doi.org/10.1111/j.1468-2230.1992.tb00932.x |
| Published date | 01 July 1992 |
CASES
Implied Duty to Give Information During
Performance of Contracts
Hugh
Collins
*
During the performance of contracts, information may be acquired by one party
in
which the other has a vital interest. The information may concern facts which
affect performance or events which trigger alterations in the terms of the contract.
To what extent and
in
what circumstances must such information be disclosed?
Questions about a duty of disclosure are usually raised in connection
with
the
formation of contracts. Here, the common law tends to deny the existence of any
general duty of disclosure of facts outside fiduciary relationships, relations of
confidence within the doctrine of undue influence, and contracts
uberrime
jidei.
The law takes a more paternalist approach to disclosure of the terms of the contract;
the common law requires reasonable efforts to bring the content of the terms to
the attention of the other contracting party,
I
and statutes impose detailed require-
ments as to the manner and type of information about the terms to be communicated
to consumers.* The economic justification for the rejection of a duty of disclosure
of facts is that information is generally expensive to acquire and,
in
order
to
reap
the reward of investment
in
discovering information, the information may
be
withheld
so
that any bargaining advantage obtained from this knowledge is preserved.
These considerations do not apply to disclosure of the terms of contracts but, on
the contrary, obscure or hidden terms are likely to impede the competitiveness of
markets,
so
the economic arguments point the other way
in
favour of a duty to provide
full
disclosure. But do these economic considerations similarly rule out an implied
duty to disclose information during the performance of contracts?
Consider a case of a contract of carriage of goods by road, where the owner of
the goods hears on the radio that the main road is blocked due to an accident. Should
the owner give this information to the carrier
so
that the delivery is not delayed,
or can the owner simply leave the carrier to fend for itself, with the result that the
carrier breaks the contract by delivering the goods late? Here, the economic analysis
points towards a duty to disclose the information. The failure to disclose the
information would simply increase the costs of performance to the carrier to the
extent of the damages payable for delay and the opportunity costs caused by having
a lorry stuck in a traffic jam, with no benefit to the owner of the goods. Since these
costs could be avoided at the price of a telephone call, the criterion of wealth
maximisation suggests that an implied duty of disclosure of this information should
be imposed.
A
similar conclusion emerges from an alternative analysis of this example
in
terms
of the value of co-operation.4 If we assume that the common law recognises a
~
*Professor of
English Law, London School
of
Economics.
I
2
3
Interfoto Picture Library Ltd
v
Stilletto Visual Programmes Ltd
[
19891
QB
433.
eg Consumer Credit Act 1974.
ss
60,
63.
Kronman, 'Mistake, Disclosure. Information and the Law
of
Contracts' (1978) 7
Journal
ofkgal
Studies
I;
Nicholas, 'The Obligation
to
Disclose Information' in D. Harris and
D.
Tallon
(eds),
Contract
hw Today
(Oxford, 1989)
p
184.
H.
Collins,
The
Law
of
Contract
(London, 1986) ch
10.
7he Modern Law Review
55:4
July
1992 0026-7961
4
556
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