Compensation for deceived person's losses by paying a price difference (Jurisprudential, legal and economic analysis)

دانشنامه حقوق اقتصادی

Article 2, Volume 26, Issue 16, December 2019, Pages 25-48   

Document Type: Scientific research

DOI: 10.22067/le.v26i15.68556

Authors

mohamad abedi^* ; abdollah khodabakhshi

mashhad ferdowsi

Abstract

From the view point of jurisprudence and civil code, and according to what has already been inferred, we have seen in the judicial procedure in the event of the deception, the deceived person (usually the plaintiff) is limited to one of two options: "termination" or "maintaining the contract". Thus, a difference in the value of the subject of transaction cannot be demanded if termination of the contract is not plausible for the deceived person. The deceiver, could not, however, prevent the termination of the contract by paying the difference in value of the disputed subject.
 Economic analysis while preserving justice demands a strategy that must be adopted and to be presented a new plan; formulating a rule that can impede the termination of the transaction by asking for or paying the price difference and to move on in accordance with the principles of Pact Sent Servando and retention of contract, which is rooted in economic custom and the community's desire for stability and security of contracts. This line of argument has been initiated in the judgment of the Court of Appeal of Markazi Province, where the court heard the claims of the price difference from deceived person (judgment number 9609978617000383, 22 November 2016). This is a wise view that seems to be against the established principles of Iranian law, but the economic and fair analysis of the basis of the judgment and some jurisprudence and legal trends confirms that.
 The innovative effort of the Court of Appeal of Markazi Province has not yet been reported in judicial procedure. Judicial procedure is even more important in the law-based legal systems, because in the face of economic developments and customary precedence, new ways are found that lead to better and more meaningful compensations, namely the maintenance of contract and the economic equilibrium of both parties.
The question arises as to why the deceived person should control the termination of the contract and acquire the economic value of the subject of the date of the contract at deceiver expense? We know that the value of property in the majority of cases increases over time. In this case, if the deceived person is not able to compensate the difference between the actual price and the contract price, he will actually be losing and the Pacta Sunt Servando is also distorted. From a legal point of view and with respect to proper economic considerations, the contract should remain and prevent the revocation of documents, because compensation of the deceived person is a solution that results in more efficiency. The result that the deceiver must adhere to that.
 It is noted that lawyers are used to traditional systems and principles, especially procedural laws in the current century with more than a thousand years history (in jurisprudence) regarding deception and so, change is not always welcomed. In particular, the fundamentals of the right to terminate are not so much strictly linked with economic developments, whilst the courts have a little information about these developments. In this case, it is difficult to change and re-design the basic principles. The analysis of some academic lawyers is that the right to revocation of the contract is based on the implicit condition and some based on the rule of Prohibition from harm. It seems that the preference should be given to the recent rule and the provisions of civil code should be justified on this basis, because this is based on economic analysis and, for example, if the base of the deception is for the compensation of the damages, why paying the difference between the price cannot be prevented from dissolving the contract? Some jurists and legal professors answer this question positively but this time, a judicial procedure has also come into force which recognizes the right to receive money in return for payment.
In economics, there is a theory of "exchange cost", which includes those unforeseen costs which are imposed on the other party due to the non-compliance of one of its obligations. In other words, the costs of the exchange are those that parties incur in the process of economic exchange to define and guarantee their property rights. It will include the cost of obtaining information about the seller and the buyer and the quality of the goods or the service that is exchanged, the costs of contract and oversight of the opposing party and, most importantly, the costs of defining property rights and ensuring the enforcement of these rights. Such analysis also affects the foundation of deception.
In economic developments, instead of insisting on the technical rules of the contract and its dissolution instruments, solutions move toward balance and efficiency. However, when efficiency gains are prioritized over the rule of abuse of the right, one hopes that contracts change the way to balance and better compensate for the weaker (deceived) party and flexible and efficient rules replace those which are technical and non-flexible.
 

Keywords

(Key words: Cucumber; General Court; Appeals Court; Economic Analysis; Arsh (indemnity

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