Anticontract

Abstract

AbstractShould a court ever second‐guess a contract, ignoring what the parties said and imposing something different? Contractual purists insist that the answer is no. But the messy nature of reality counsels otherwise. We have long appreciated that creating a “complete” contract, one that efficiently treats every potentially relevant contingency, is impossible. In particular, systematic risks that affect the entire economy fall beyond contract's realistic reach. When such events occur, they upset contractual frameworks, leaving parties shackled with obligations suited to a world that never came to be. At least in that context, second‐guessing is vital. And that second‐guessing can be understood according to a concept called anticontract. When systematic risks fundamentally upend contractual frameworks, this inversion of contract's basic principles paradoxically fulfills contract's goals. Anticontract does the opposite of all that contract law does: it adjusts rather than enforces; it looks ex post rather than ex ante; it prioritizes the public rather than the parties; and it provides no general rules, only particular results. It operates, in short, irregularly rather than regularly. In the face of realized systematic risks, anticontract thus paradoxically fulfills contract's goals by doing contract's opposite. In so doing, it redistributes losses to those most able to bear them at the microlevel, curing macroeconomic ills at their source. In essence, it creates social insurance for systematic risks that private contract cannot manage. In all this, anticontract can be understood as an instance of a broader phenomenon, the completion of law through equity. Anticontract thus represents an important way to understand the limits of contract and when to violate the principles of contract law.