Monthly Archives: May 2012

‘Utmost Good Faith’ Between Adversaries?

Not much has yet been written about the quasi-adversarial relationship that obtains between consumers and the companies from which they buy goods and services, at least not in those terms.

And it’s clear, I think, that the relationship is quasi-adversarial. In game-theoretic terms, it’s a ‘mixed motive’ game — one in which cooperation of some form is useful, but in which each party has some incentive to deviate from maximally cooperative behaviour. When Apple sells me a computer, they would ideally like to squeeze as much money out of me as possible, while giving me a product as cheap-to-produce as possible. And my own preferences are the exact opposite. We both benefit from doing business together, but our interests in the interaction are not quite aligned. In fact, in terms of pure dollars and cents, the transaction between Apple and me is a zero-sum game: every extra dollar they charge for their computer is a dollar out of my pocket and into their corporate coffers. It’s not a fully-adversarial relationship, but it’s still one that needs some rules to keep it civilized.

In this regard, it’s good to know about the legal concept of uberrima fides. This is a legal doctrine, relating specifically to insurance contracts, which says that “all parties to an insurance contract must deal in good faith, making a full declaration of all material facts in the insurance proposal.” The relationship between insurer and insured, in other words, is a game that must be played by very strict rules.

The concept of uberrima fides doesn’t mean the insurer and insured are on the same team, metaphorically speaking. So it implies a relationship quite different from, say, a fiduciary one. A fiduciary relationship, as a famous legal judgment once put it, requires “the punctilio of an honor the most sensitive.” In a fiduciary relationship (e.g., the relationship between lawyer and client), the commercial aspect of the relationship takes a back seat, and one party (e.g., the lawyer) is expected to put the other party’s interests ahead of their own. In a relationship subject to the uberrima fides standard, the relationship is still at least partly adversarial, but the adversaries in question are expected to play very strictly according to the rules. This makes particular sense for the relationship between insurer and insured, presumably, because both parties are so highly vulnerable to gamesmanship and dissimulation on the part of the other.

This suggests, I think, that we think of various kinds of buyer/seller relationships as existing along a spectrum, from the aggressively adversarial to the utterly fiduciary. The question, then, is not which rules should apply to buyer/seller relationships in general. The question, rather, is which rules should apply to what kinds of buyer/seller relationships, and why.

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