The Foundations of the Principle of Legitimate Reliance in Iranian Contract Law

Abstract

One of the clearest issues that cannot be reconciled with the theory that contractual obligations and obligations arising from promises are founded on the voluntary assumption of liability is the doctrine known as the objective standard of contractual liability. Under this doctrine, what matters is the outward expression of intention, whereas the actual internal intention is ordinarily of little significance. Where a person becomes bound by a promise or contract contrary to their actual intention or understanding, their liability is not based on the voluntary assumption of an obligation, but rather on another concept, which in most cases is legitimate reliance. Nevertheless, the Civil Code, as the principal source of Iranian contract law, addresses this matter in a manner that appears to disregard the principle of legitimate reliance and its necessity. To establish the existence of this principle, legal scholars have invoked the sources of legal reasoning in Islamic jurisprudence, including the Qur’an, tradition, reason, and consensus, and have sought to demonstrate the authoritative validity of legitimate reliance in Imami jurisprudence. The circumstances in which this doctrine applies resemble those relating to unilateral or independent stipulations in Iranian jurisprudence and law. Although, from an ethical perspective, compliance with such a stipulation is desirable, according to the predominant view among Imami jurists, it is not legally binding. The principal justification for this position is the absence of consideration. Furthermore, the existence of reliance and the incurrence of loss are not, by themselves, sufficient to establish contractual liability.