Offer, Acceptance, and Efficient Reliance

• Published in: Stanford law review 1996-02, Vol.48 (3), p.481-553
• Main Author: Craswell, Richard
• Format: Article
• Language: English
• Subjects: Business structures; Contract law; Contracts; Cost; Court decisions; Economic aspects; Efficiency metrics; Expected values; General contractors; Law; Laws, regulations and rules; Mailbox rule; Offer and acceptance; Promissory estoppel; Reasonable time; Subcontractors; United States
• ISSN: 0038-9765; 1939-8581
• DOI: 10.2307/1229277

In this article, Professor Craswell explores efficient reliance as an implicit economic rationale underlying courts' decisions in contract formation cases. Contracting parties often fail to express their intentions clearly and courts must later decide what the parties would have wanted ex ante. When negotiations fail, one party (S) may deny ever making a commitment, while the other party (B) may claim to have relied on the first party's statements or conduct. Professor Craswell observes that courts often find a binding commitment by S when reliance by B would have been efficient. After explaining when reliance is efficient, and why the nonrelying party might prefer it, Professor Craswell shows that courts appear to apply an efficient reliance rationale under a variety of common law doctrines. But because the question of whether B's reliance was efficient is highly fact specific, Professor Craswell concludes that bright line rules would not, as a general matter, guarantee a more efficient result.