Journal of Legal Research

Journal of Legal Research

A Legal and Economic Analysis of Transactions Involving Information Rents

Document Type : Original Article

Authors
1 PhD in Private Law, Faculty of Law, University of Science and Culture, Tehran, Iran.
2 Associate Professor, Department of Private Law, Faculty of Law, University of Science and Culture, Tehran, Iran.
3 Associate Professor, Department of Private and Islamic Law, Faculty of Law and Political Science, University of Tehran, Tehran, Iran.
Abstract
Transactions involving information rents are agreements in which one party, by virtue of their position or connections, gains access to material economic information that has not yet been made public and uses it to enter into a transaction for personal gain. Such information is often held by public officials and persons connected to them. Despite the prevalence of these transactions, Iranian legislation has not expressly addressed their contractual validity. Moreover, these transactions are economically inefficient and divert society's resources towards unproductive activities. The issue has also received relatively little attention in legal scholarship. Using a descriptive-analytical method, this article examines the legal status of such transactions. The findings indicate that a party possessing privileged information is under a duty to disclose it to the other contracting party. If this duty is breached, the injured party may rescind the contract on the ground of fraud (khiyār al-tadlīs) or seek restitution of the excess gains obtained.
Keywords

Adams, John & Roger Brown. (1994). Understanding Contract Law. Fontana. (In English)
Ameri, Parviz and Seyed Mehdi Navaei. (1388). Liability Arising from Unlawful Enrichment in Iranian and French Law. Journal of Legal Studies of Shiraz University, 1(3). (in Persian)
Ansari, Mehdi. (1393). Economic Analysis of Contract Law. Tehran: Javdaneh Publications. (in Persian)
Araqi, Zia al-Din. (1414 AH). Maqamat al-Usul. Vol. 1. Qom: Islamic Thought Foundation. (in Arabic)
Bahramand, Hamid and Amir-Hossein Ahmadi Gheidari. (1399). Misuse of Information by Government Officials in Iranian and American Criminal Law, with an Emphasis on Criminal Prevention. Crime Prevention Approaches Quarterly, 3(3). (in Persian)
Bayler, Edward. (2009). A Doctrine of Good Faith in New Zealand Contractual Relationship. Master Dissertation. University of Canterbury. (In English)
Beal, Hugh. (2012). Mistake & Non-Disclosure of Facts. Oxford: Oxford University Press. (In English)
Borden, Michael J. (2008). Mistake & Disclosure in a Model of Two-Sided Information Inputs. Missouri Law Review. (In English)
CFR & 2635-703, Use of Nonpublic Information. (2011). (In English)
Cooter, Robert & Thomas Tulen. (2004). Law & Economics. 4th ed. Massachusetts: Addison Wesley. (In English)
Craswell, Richard. (2006). Taking Information Seriously: Misrepresentation & Non-Disclosure in Contract Law & Elsewhere. Virginia Law Review, 92. (In English)
Dadgar, Yadollah and Hamedeh Akhavan Hezareh. (1401). Law and Economics. Tehran: Nour-e Elm. (in Persian)
Fazelinejad, Seifollah and Morteza Ahmadian. (1389). Rentier Economy in Iranian Law and Ways to Overcome It. Monthly Review of Economic Issues and Policies, (11-12). (in Persian)
Ghasemi Hamed, Abbas and Habib Taleb Ahmadi. (1390). Pre-Contractual Disclosure. Legal Studies, 3(4). (in Persian)
Haeri, Abdolkarim. (n.d.). Durar al-Fawa'id. Vol. 1. Qom: Mehr Printing House. (in Arabic)
Harberger, Arnold C. (1959). Monopoly and Resource Allocation. American Economic Review, 54. (In English)
Hashemi Shahroudi. (1423 AH). Mawsu'at al-Fiqh al-Islami Tabaqan li-Madhhab Ahl al-Bayt. Qom: Institute for the Encyclopedia of Islamic Jurisprudence According to the School of Ahl al-Bayt. (in Arabic)
Hondis, E. H. (2004). Towards a European Civil Code. Kluwer Law International. (In English)
Hosseini Ameli, Seyed Javad ibn Mohammad. (1419 AH). Miftah al-Karama fi Sharh Qawa'id al-Allama. Qom: Islamic Publications Office. (in Arabic)
Hosseini-Moghadam, Seyed Hassan and Ali-Akbar Izadi-Fard. (1399). The Effect of Prohibition on Transactions from the Perspective of Principles of Jurisprudence and Iranian Law. Studies in Islamic Jurisprudence and Legal Foundations, 14(42). (in Persian)
Izanloo, Mohsen and Hassan Pak-Tinat. (1391). A Substantive and Procedural Study of the Joinder and Choice of Tort and Contractual Liability with Respect to Contracting Parties. Private Law Studies Quarterly, 42(1). (in Persian)
Kasnavi, Shadi. (1396). An Examination of the Jurisprudential Rule Prohibiting Unlawful Consumption of Property from the Perspective of Law and Economics. Fiqh and Principles, 49(4). (in Persian)
Katouzian, Nasser. (1390). General Principles of Contracts. Vol. 1. Tehran: Enteshar Joint Stock Company. (in Persian)
Katouzian, Nasser. (1390). Quasi-Contractual Liability: Civil Liability. Tehran: University of Tehran Publications. (in Persian)
Khezri, Mohammad and Mohsen Renani. (1383). Rent-Seeking and Its Social Costs. Mofid Letter, (45). (in Persian)
Khezri, Mohammad. (1382). Rent-Seeking and Economic Development. Quarterly Journal of Economic Research and Policies, (28). (in Persian)
Khodkar, Reza and Parviz Rahmati. (1399). Unilateral Mistake and an Examination of Its Effectiveness in Iranian and English Law. Legal Encyclopedias, 3(7). (in Persian)
Kronman, Antony T. (1978). Mistake, Disclosure, Information and the Law of Contracts. Journal of Legal Studies, 1. (In English)
Laidlaw v. Organ, 15 U.S. 2 Wheat. 178 (1817). (In English)
Lotfi, Ehsan. (1400). The Duty to Provide Information in Contract Law. Tehran: Amjad Publications. (in Persian)
Makarem Shirazi, Nasser. (1425 AH). Anwar al-Fiqaha: Kitab al-Bay'. Qom: Imam Ali ibn Abi Talib School. (in Arabic)
Mamaqani, Mohammad-Hassan. (1316 AH). Ghayat al-Amal fi Sharh Kitab al-Makasib. Qom: Islamic Treasures Foundation. (in Arabic)
Miceli, Thomas J. (2004). The Economic Approach to Law. California: Stanford University Press. (In English)
Mirshakari, Abbas. (1400). Practical Treatise on Contract Law. Vol. 1. Tehran: Enteshar Joint Stock Company. (in Persian)
Mirza Shirazi, Mohammad-Taqi. (1412 AH). Hashiyat al-Makasib. Qom: Al-Sharif al-Radi. (in Arabic)
Mortazavi, Abdol-Hamid and Hassan Ebrahimi. (1390). The Rule of Unjust Enrichment in Iranian Law and Common Law. Defender Quarterly, (2). (in Persian)
Mousavi Bojnourdi, Seyed Hassan. (1419 AH). Al-Qawa'id al-Fiqhiyya. Qom: Al-Hadi. (in Arabic)
Mousavi Khoei, Seyed Abol-Qasem. (1418 AH). Al-Tanqih fi Sharh al-Urwa al-Wuthqa. Qom: Under the Supervision of Lotfi. (in Arabic)
Mousavi Khomeini, Seyed Ruhollah. (1415 AH). Al-Makasib al-Muharrama. Qom: Institute for Compilation and Publication of Imam Khomeini's Works. (in Arabic)
Na'ini, Mohammad-Hossein. (1373 AH). Minyat al-Talib fi Hashiyat al-Makasib. Vol. 1. Tehran: Al-Maktaba al-Mohammadiyya. (in Arabic)
Palda, F. (2000). Improper Selection of High-Cost Producers in Rent Seeking. Public Choice, 105. (In English)
Posner, Richard A. (1979). Utilitarianism and Legal Theory. The Journal of Legal Studies, 8(1). (In English)
Ramsay, Marc. (2006). The Buyer/Seller Asymmetry: Corrective Justice and Material Non-Disclosure. University of Toronto Law Journal, 56(1). (In English)
Safaei, Seyed Hossein and Habibollah Rahimi. (1400). Civil Liability (Non-Contractual Obligations). Tehran: Samt Publications. (in Persian)
Safaei, Seyed Hossein. (1364). Reliance on Unjust Enrichment Despite the Existence of a Contractual Relationship. Collection of Civil and Comparative Law Articles. (in Persian)
Shavell, Steven. (1994). Acquisition and Disclosure of Information Prior to Sale. RAND Journal of Economics, 25(1). (In English)
Shaykh al-Shari'a Isfahani, Fathollah ibn Mohammad-Javad Namazi. (1398 AH). Nukhbat al-Azhar fi Ahkam al-Khiyar. Qom: Dar al-Kitab. (in Arabic)
Sheikh-Eslami, Mohammad-Ali. (1397). A Jurisprudential Examination of the Ruling on Income Derived from Rent-Seeking Based on the Verse on Trade. Civil Jurisprudence Teachings, (18). (in Persian)
Stanzler, Jordan S. (2009). Bad Faith in Insurance Coverage Disputes and the Public Nature of Insurance – Understanding the Recovery Tools. (In English)
Taheri, Habibollah. (1397). Civil Law. Qom: Office of Islamic Publications. (in Persian)
The Stop Trading on Congressional Knowledge (STOCK) Act. (2012). (In English)
Tullock, G. (1967). The Welfare Costs of Tariffs, Monopolies and Theft. Western Economic Journal, 5. (In English)
United Nations Convention Against Corruption. (2003). (In English)
Whitaker, Simon. (1395). Principles of Contracts in French Law. Translated by Hassan Rah-Peyk. Tehran: Khorsandi. (in Persian)
Wooned, Christopher T. (2007). Efficiency and Conservation. University of San Diego School of Law, 30. (In English)
Zhou, Qi. (2008). An Economic Perspective on the Doctrine of Unilateral Mistake in English Contract Law: A Remedy-Based Approach. Northern Ireland Legal Quarterly. (In English)
Zhou, Qi. (2009). Contractual Mistake and Misrepresentation. In: Encyclopedia of Law and Economics. Edward Elgar. Available at SSRN: https://ssrn.com/abstract=1335748 (In English)
Zhu, Yong. (2014). Information Disclosure and Transmission in Contract Law: An Economic Analysis. Journal of Applied Sciences. (In English)
Zwiler, Kathryn. (2005). Common Law – Disclosure Duties & The Sin of Omission: Testing the Meta Theories. George Town Law. (In English)