MAKING ‘THE PRINCIPLE OF HONESTY’ (OBJECTIVE GOOD FAITH) MEASURABLE AND DATA-DRIVEN THROUGH THE THEORY OF ‘CONTRACT WITH THE EFFECT OF THIRD PARTY PROTECTION’: AN EXAMPLE FROM EUROPEAN CIVIL LAW COUNTRIES
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Abstract
The principle of honesty (objective good faith), as an ethical principle, is the basis of the theory of ‘contract with the effect of third party protection’ in civil law countries. According to the principle of relativity of contracts, damaged third parties, who are not parties to the contract, must apply to tort liability for compensation. However, breach of contract rules for damaged third parties are more adventageous in terms of burden of proof, lapse of time and liability for acts of associates. Therefore, the theory of ‘contract with the effect of third party protection’ helps damaged third parties to apply breach of contract rules for compensation within the framework of the principle of honesty. The problem is to determine in which particular situations can third parties benefit from the protection of ‘contract with the effect of third party protection’. Doctrine uses unmeasurable, non data-driven and speculative criteria called ‘social contact test’ (Schuldverhältnis aus Socialem Kontakt) that is not consistent with economic efficiency, legal certainty and legal security. Alternatively, this paper offers a measurable and data-driven criteria to determine the number of beneficiaries (damaged third parties) of ‘contract with the effect of third party protection’. Alternative criteria measures the inequality between loss of damaged third parties and monetary value of accepted risk which is determined by a public survey (‘wisdom of crowd’). Data-driven or data-based determination and interpretation of the number of damaged third parties who can benefit from the theory of ‘contract with the effect of third party protection’ makes the principle of honesty measurable that ensures economic efficiency, legal certainty
and legal security. Our proposed method is better than actual determination and interpretation of principle
of honesty by judges. In other words, our proposed method helps judges to make the the principle of honesty
measurable and data-driven where legal order allows it.
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