The Best Puffery Article Ever

Abstract

This Article provides the first extensive legal treatment of an important defense in the law of fraud and contracts: puffery. Legal authorities commonly say they make decisions about whether defendants should be able to utter exaggerated, optimistic, lies based on assumptions about buyer behavior, concluding that consumers do not rely on such speech. However, as the Article shows, such analyses are proxies for a deeper analytical question: does the speech encourage or discourage a type of consumption activity that the court deems welfare maximizing? The Article presents a novel constitutional analysis of puffery doctrine that focuses on the meaning of misleading speech, a term of art at the heart of the Supreme Court's contested and still evolving commercial speech jurisprudence. Missing from that jurisprudence is a satisfactory account of how consumers and investors react to speech that is not literally false but which has false implications. I present such an account, focused on the incentives and capabilities of sellers to exploit buyers' cognitive vulnerabilities. I draw on economic, marketing, psychology and consumption literatures. * I conclude by offering a novel liability proposal. Because legal authorities are incapable of satisfactorily drawing a line between harmful and innocuous puffery, the law should make sellers presumptively liable if their speech contains exaggerated, but vague boasts. This approach would place the onus on sellers to balance the costs and benefits of puffery, and thus lead both to more satisfying doctrine and a more optimal level of fraud.

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