Rules of Evidence and Liability in Contract Litigation: The Efficiency of the General Dynamics Rule

We study the effects of different rules of evidence and liability in con- tract litigation. When a contracting firm fails to perform, it may blame the buyer for withholding private information. We show that the evidentiary and liability rules used by the Supreme Court in General Dynamics v. U.S. lead to a more efficient outcome than either a strict liability rule or an evidentiary rule requiring the disclosure of the buyer's private information for use by the contractor in litigation.