June 2009 Vol. 107 No. 8 THE REVIEW

The Fault Principle As the Chameleon of Contract Law: A Market Function Approach

Stefan Grundmann

This Article begins with a comparative law survey showing that all legal systems do not opt exclusively for fault liability or strict liability in contract law, but often adopt a more nuanced approach. This approach includes intermediate solutions such as reversing the burden of proof, using a market (“objective”) standard of care, distinguishing between different types of contracts, and providing a “second chance” to breaching parties. Taking this starting point seriously and arguing that it is highly unlikely that all legal systems err, this Article argues that the core question is how and when each liability regime should prevail or how and when the regimes should be combined. It then argues that there is no either-or, but only the question of intelligent combination. When asking how best to combine the regimes, the simple answer is that market expectation, and specifically the ability to compare offers, should be the core criterion. This Article therefore argues that a market function approach is needed. Such an approach answers the question of which factors are most important in which situations and thus helps to shape the combination. Some core criteria are developed in a last, more concrete section.

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