Abstract
This paper analyzes the problems of non-disclosure in the context of an asset sale between a buyer and a seller. The seller can have important information about the asset and can opportunistically decide not to disclose that information to the buyer, and the buyer may sue the seller ex post for remedy. The buyer and the court have a choice over different types of remedy. The paper considers three different remedy regimes: (1) no liability; (2) voidance; and (3) damages. Under voidance, the buyer can rescind the transaction (return the asset and get the price back), while with damages, the buyer receives monetary compensation from the seller. The analysis shows that, when comparing between voidance and damages, while voidance regime does poorly in deterring the opportunistic non-disclosure, by undoing inefficient transactions ex post, it can perform better than either damages or no liability. The paper analyzes circumstances under which one regime performs better than the others and also different types of damages.
Disciplines
Contracts | Law and Economics | Torts
Date of this Version
9-1-2025
Working Paper Citation
Choi, Albert H. and Spier, Kathryn E., "Remedies for Non-Disclosure in Asset Sales: Voidance vs. Damages" (2025). Law & Economics Working Papers. 301.
https://repository.law.umich.edu/law_econ_current/301