Theory Of Contract Law Research Articles

Grotius’s Impact on the Scandinavian Theory of Contract Law

This article discusses to what extent the widely accepted hypotheses of Hugo Grotius’s crucial impact on the theory of contract law – also in Scandinavia – may be maintained or even positively confirmed. Although few direct references to the works of Grotius can be found in Scandinavian legal literature of the seventeenth and eighteenth century, it would be premature to draw a negative conclusion. An impact of Grotius’s thoughts may rather be demonstrated by thoroughly analysing patterns of argumentation concerning specific contractual topics both in legal literature and case law. The article provides the reader with necessary information on the institutional and intellectual preconditions for the reception of Grotius in the Scandinavian legal orders before discussing the impact of the ‘will-theory’ on the requirements of a legally binding contractual agreement in the works of selected influential legal scholars and in case law in more detail. The analysis confirms that Grotius’s work contributed substantially to shaping the intellectual framework in which the first contract law doctrines in Scandinavia evolved.

Why Autonomy Must Be Contract’s Ultimate Value

In “The Choice Theory of Contracts”, we develop a liberal theory of contract law. One core task of the book was to persuade advocates of economic analysis that they must situate their enterprise within our liberal framework. Autonomy, rightly understood, is the telos of contract. Oren Bar-Gill pushes back strongly in “Choice Theory and the Economic Analysis of Contracts”. He offers a penetrating – perhaps devastating – critique of our approach. Bar-Gill notes the substantial convergence between choice theory and a welfarist view. If he is right, then what does choice theory add? Our task in Part I of this Essay is to demonstrate that welfare economics cannot simply absorb contractual autonomy. We show that choice theory has irreducible normative and reformist value along the four dimensions that are core to Bar-Gill’s critique: (a) contract’s regard for the future self, (b) the special role it ascribes to relational justice, (c) its distinction between utility and community, and (d) its prescription of intra-sphere multiplicity. We go further: welfare economics is indefensible without autonomy as its foundation. Parts II and III respond to sharp critiques of “Choice Theory” by Yotam Kaplan, Prince Saprai, Ronit Levine-Schnur, Sharon Shakargy, and Ohad Somech. We discuss the proper place of contract values besides autonomy in a liberal contract law; explore the distinctive role contract plays in a liberal polity; and show how intra-sphere contract type multiplicity limits, rather than augments, state power. Since publishing “Choice Theory”, we have engaged dozens of critiques, including the six in this Volume. All this rigorous debate confirms for us one core point: contract’s ultimate value must be autonomy, properly refined. It cannot be welfare. Nor can foundational value pluralism possibly suffice. Autonomy justifies contract.

Unfair contract terms: A new dawn in Australia and New Zealand?

Australia finally regulated unfair contract terms under its Australian Consumer Law and New Zealand has included unfair contract terms in its Fair Trading Amendment Act 2013 (NZ), which will come into force on 18 March 2015. Traders will in effect bear the burden of proving that terms are fair by showing that they are reasonably necessary to protect the trader’s legitimate interests. While the regulation of unfair contract terms is welcome, there is concern that the Australian and New Zealand courts may not give proper effect to the provisions and so would allow unfair contract terms to continue to be used. The courts must accept that the classical theory of contract law, in relation to consumers, is dead, and so too is the rational consumer. This paper argues that for the unfair contract term law to achieve the legislatures’ desired outcome of eliminating unfair contract terms in standard form consumer contracts, the courts in both New Zealand and Australia must move from their traditional focus on procedural fairness to addressing substantive fairness and give effect to both the wording and purpose of the provisions. Moreover, there are legislative lapses in both Australia and New Zealand that require urgent attention.

Economic Theories of Contract and Contract Law, the Catalysts for Economic Development in Ghana through Pareto Distribution of Resources

Every economy in the world is deserving of proper and adequate management for sustenance of same with the view to promoting the well being of the citizenry. The economy must be managed to the extent that the citizenry will be free to enter into any bargain of their choice to make a living. It is an undisputable fact that contract is the linchpin of the relationship that exists among the people in the business community. The striving economy has, as its movers and shakers, the people who constitute the business community to move it along. The basis of providing congenial working environment is, among other things, for pareto improvement distribution of resources in order to create wealth among the people whilst poverty is reduced. It is against this backdrop that this paper seeks to analyze the economic theories of contract and contract law to unearth their potentialities as the catalysts for the economic development in Ghana. In so doing, the paper looks at the economic functions of contract law, the default rules, standard form contract, damages and penalty clauses from which to make inferences and draw conclusions.

Contractual Liability and the Theory of Contract Law

This article considers the character of contractual liability and its implications for theories of contract law. Contractual liability has seemed to legal theorists to stand in need of explanation because it is ‘strict’: a contracting party may be answerable for breach regardless of whether her conduct is faulty. In efforts to account for this approach, theorists have invoked a number of well-known general theories of contract, including Holmesian, economic, moral, voluntarist (or choice-based) and rights-based theories. The article contends that none of the existing theories is fully satisfactory. To develop an alternative account, the article suggests we should reconsider the nature of contractual liability in the common law, attending more closely to certain features that theorists have so far tended to overlook. Having done this we will be able to see that another very well-known general theory is capable of accounting for the standard of contractual liability: the theory of contract as promise.

Carrying the Choice Theory of Contracts Further: Transfers, Welfare, and the Size of the Community

Abstract The Choice Theory of Contracts is an ambitious, concise, and largely successful contribution to contract theory. Choice Theory is a liberal theory of contract law, grounded in a rich notion of autonomy, which stresses the obligation of the legal system to enhance our autonomy by ensuring the multiplicity of contractual types within the spheres of family, employment, home, and commerce.This article mitigates three shortcomings in The Choice Theory of Contracts and tries to carry Choice Theory further. A first shortcoming of the book is that the critique of transfer theory fails to acknowledge its analytical value. Second, in Part II of the book, Dagan and Heller overlap two issues: what the goods of contract are, and the compatibility of Choice Theory with the key concepts used by mainstream contract theories. Finally, Dagan and Heller do not fully acknowledge that the value of our autonomy is related to our ability to choose well. These revisions are useful to channelling scholarly attention on the implementation of Choice Theory and to sharpening the conceptual tools needed to do so.To show the potential of Choice Theory, this article carries it further. First, the economic concept of consumer sovereignty extends the programme of autonomy-grounded economic theories of contracts. Second, the size of the communities in which contractual relationships are created helps understand how various doctrines and even entire branches of the law foster the autonomy-enhancing capacity of contracts.The article concludes with a series of suggestions for carrying Choice Theory even further.

Justice for Contracts

This Article develops a theory of just contractual relationships for a liberal society and demonstrates its manifestations in vast areas of modern contract law. As a liberal theory, properly-called, our account is premised on the canonical commitments of liberalism to self-determination and substantive equality. As a theory of contract law, it focuses on the parties’ interpersonal interaction, rather than on the justice of the social order as a whole. As a theory of just contractual relationships, it attends to the justness of both the formation of contracts and of their implications. After surveying and criticizing the leading competing theories of contractual justice, we explain how relational justice – namely: reciprocal respect for self-determination and substantive equality – both justifies the enforcement of contracts and prescribes a mandatory floor of contractual justice. This floor explains the rules that regulate the parties’ bargaining process in a way that goes beyond the traditional laissez faire mode of proscribing only the active interference of one party with the other’s free will. It thus accounts for the expansion of the law of fraud beyond the traditional categories of misrepresentation and concealment to include also affirmative duties of disclosure. The same conceptual expansion also underlies doctrines as diverse as unilateral mistake, duress, anti-price-gouging laws, and admiralty rules of salvage. Finally, concern for relational justice offers the most charitable explanation of unconscionability doctrine and some of its modern regulatory cognates. The justice of an on-going contract presents an additional challenge because the typically sequential contractual performance generates heightened interpersonal vulnerability. This is why modern contract law solidifies a cooperative conception of contract performance that goes beyond the mandatory floor of relational justice. The duty of good faith and fair dealing, which sets up the contractual rules of the game, stands at the core of this web of doctrines. The substantial performance doctrine in service contracts and the principle against forfeiture in applying the condition/promise distinction, as well as the burden to mitigate and the choice of the expectation interest as the default measure of recovery can likewise be interpreted as belonging to this cooperative framework. All these doctrines require contractual parties to assist each other up to a point. Here, relational justice is functioning not as a floor, but rather as an aspirational idea, one that informs contract law’s normative defaults.

Unity and Multiplicity in Contract Law: From General Principles to Transaction-Types

Abstract Modern contract law is characterized by a certain kind of unity and multiplicity. On the one hand, it establishes fundamental principles that apply to all contracts in general. But at the same time, it specifies further principles and rules for particular kinds of contracts or transaction-types that mark out their distinctive features, incidents and effects. Clearly, a viable theory of contract law should be able to provide a suitable account of both aspects. The central critical contention of The Choice Theory of Contracts is that all prior approaches, in particular rights-based theories, have failed to do so. Indeed, Dagan and Heller argue that only a theory that explains the settled rules of contract law as teleologically oriented toward facilitating individuals’ pursuit of their different substantive goods, and thus as primarily power-conferring in this particularly robust sense, can provide the needed account. Such a theory, they believe, would be not only interpretatively accurate with respect to the actual law but also fully acceptable as a liberal view of contract. This Article challenges the core contentions of choice theory, suggesting why it may be unable to meet its own goal of explaining how contract law coherently specifies and integrates the general and specific dimensions of enforceable agreements. The Article looks into basic contract doctrines in order to specify a general conception of the contractual relation that can meet this desideratum and it sketches how, beginning with that conception, contract law unfolds a rich multiplicity of transaction-types. The resulting view is liberal but rights-based rather than teleological, and it proposes an alternative understanding of how the rules of contract law are power-conferring as well as duty-imposing.

Against Parochialism in Contract Theory: A Response to Brian Bix

In a recent article, Brian Bix has raised some important concerns about general and universal theories of contract law. Particularly, he has claimed that differences within doctrinal areas like contract law, and across different jurisdictions, undermine the plausibility of general and universal theories, which might end up being descriptively inaccurate, and even legitimizing unjust practices. This article is a partial response to Professor Bix’s insights, and argues why, despite his legitimate concerns, universal theories of contract law are plausible—and preferable over local theories.

The Best and Worst of Contracts Decisions: An Anthology

The common law of contract is an intellectual and political triumph. In its mature form, it enables judges whose ideological goals may differ to apply doctrines that provide the right to make enforceable promises; with legislation, the common law also provides proper limits on that right. Lately, scholars have produced a flood of contract law theory that enriches our thinking about and grounding for contract law norms. But the real work of common law development has always occurred in the trenches — in judicial decisions. In those trenches and on the framework built there, some decisions matter far more than others, and jurists, scholars, and teachers draw on these key decisions to do their work. In the following collection of essays, scholars deeply familiar with judicial opinion in the common law of contract — twenty authors who have a collective 497 years writing, teaching, and thinking about contract law — identify the best and worst of contracts cases. Many of the cases are staple examples for practical and theoretical contracts scholarship. Many are taught to thousands of students each year. Many are routinely cited by courts. The essays explain, rebuke, extol, entertain, and inspire. They are brief but substantive. They set a basis for future commentary and establish a collective standard against which contracts decisions may be judged. They are vital study for contract law adjudication, scholarship, and teaching.

Roman Theory of Contract Law in the Polemics of Johann Weyer and Jean Bodin

Roman Theory of Contract Law in the Polemics of Johann Weyer and Jean Bodin

Νοn-Classical Paradigms in Contract Law in the American, European and Russian Legal Doctrines

Thematic justification: In many regions of the world, scholars have renewed a discussion on the nature and properties of contracts as a legal phenomenon, leading to the emergence of so-called ‘non-classical theories of contract’: contract as a promise, relational contract, contract as a network etc.
 This article’s aim is to compare non-classical approaches to contract and check the possibility of creating a modern holistic theory of contract. This article’s methodology is based on the functional method, the use of which provides a comparative perspective, meaning that each of the explored approaches to the theory of contract should be studied in the context of its causes and problems it solves.
 The article systematizes problems solved by non-classical theories of contracts and concludes that the development of a new theory means the appearance of a new solution, not only for the problem for which it was designed but also for some others from the list. No theory solves all the problems of contract law. Numerous theories of the 20th and 21st centuries have shown the directions, in which it is necessary to carry out research and to seek approaches whose combinations and mutual critical evaluations will allow the formation of a met theory of contract law, the further development of which can lead to a dominant paradigm shift in response to the emergence of an integrative legal theory of contract viewed in a holistic manner as a multifaceted phenomenon.

A Bargain, the Best I Never Had: Hypothetical Bargains and the Morality of Efficient Breach

This article defeats Shavell’s prominent view in contract theory regarding the morality of breach. His theory was at the vanguard of the current movement of economic theorists to square their approval of efficient breach with the moral intuition against it. The theory offers a bargaining-based model of the moral force of promises and concludes that efficient breaches are never immoral. I show that this model makes for a shoddy theory of contract law and promises. Further, I illustrate how the model is underdeveloped from an economic perspective. Finally, I consider the assumptions needed to develop the model while maintaining Shavell’s conclusion. I demonstrate that these assumptions are not met in the vast majority of cases. As result, the intuitive disdain laypeople have toward efficient breach remains a serious problem for economic theories of contract.

From Langdell to Law and Economics: Two Conceptions of Stare Decisis in Contract Law and Theory

In his classic monograph, The Death of Contract, Grant Gilmore argued that Christopher Columbus Langdell, Oliver Wendell Holmes, and Samuel Williston trumped up the legal credentials for their classical bargain theory of contract law. Gilmore's analysis has been subjected to extensive criticism, but its specific, sustained, and fundamental charge that the bargain theory was based on a fraudulent misrepresentation of precedential authority has never been questioned. In this Essay, I argue that Gilmore's case against the classical theorists rests on the suppressed premise that the precedential authority of cases resides in the express judicial reasoning used to decide them. In contrast, I argue that the classical theorists implicitly presuppose that the precedential authority of cases consists in the best theory that explains their outcomes, even if that theory is inconsistent with the case's express judicial reasoning. The classical view of precedential authority completely defuses Gilmore's charge of fraud. In Gilmore's view, merely demonstrating the inconsistency between the proposition for which the classical theorists cited a case and the express reasoning in that case suffices as proof of misrepresentation. But in the classical theorists' view, the express reasoning in a case is simply a theory of its precedential authority, which, like any theory, can be wrong. Thus, the classical theorists simply reject Gilmore's claim that a case cannot properly be cited for a proposition inconsistent with its express reasoning. The real dispute, then, between Gilmore and the classical theorists is over the nature of precedential authority and not the content of contract law. Having reframed the classic death-of-contract debate, I then trace these competing conceptions of precedential authority through the major schools of contemporary contract theory. I argue that a contract theory's embrace of one view instead of the other can be explained by the relative priority it accords to each of the two components in a conception of adjudicative legitimacy. A conception of adjudicative legitimacy consists in a theory of what it means for a decision to be based on law and a theory of what is required for law to be justified. I explain why theories according priority to the former tend to subscribe to the precedents-as-outcomes view, while theories according priority to the latter tend to favor the express reasoning view. The Essay concludes by arguing that the economic analysis of contract law subscribes to the precedents-as-outcomes view and therefore is the contemporary jurisprudential successor to the late nineteenth-century classical theorists.

Bermuda Triangle: the supply of services (implied terms) act 2003 and the competing theories of exemption clauses

Patton and Cook v Bank of Bermuda is a judgment that undermines the legal certainty which should have been brought about by the implementation of the Supply of Services (Implied Terms) Act 2003, and raises questions of broad importance for all contracts governed by Bermuda law – particularly as the decision has not been overturned in the years since, and remains the only authority to engage directly with the effect of section 6 of the 2003 Act; arguably its most important provision. The key issue that will be explored in this paper is whether the distinction drawn in Patton between contracting out of a duty of reasonable skill and care, and contracting out of liability for breach of that duty is, as a matter of contract law theory and jurisprudence, valid and meaningful, or whether it is a distinction without a difference.

The Promise and Problems of Universal, General Theories of Contract Law

AbstractThere are a growing number of general theories of contract law and of other doctrinal areas. These theories are vastly ambitious in their aims. This article explores the nature of these claims, and the motivations for offering such theories, while considering the challenges to success. It is in the nature of theorizing to seek general categories, including doctrinal categories, and to try to discover insights that hold across those categories. However, differences both within a doctrinal area and across legal systems undermine the case for universal and general theories. Also, unjustifiably general theories may distract us from developing properly contextual legal rules, and might even have the unintended effect of legitimating unjust rules.

The Emerging Global Right to Investment: Understanding the Reasoning behind Foreign Investor Rights

The international investment regime is probably the most controversial area of international law today. This article argues that looking at the interpretation of foreign investor rights can help us to better understand this regime and the challenges it poses to states and local actors. Relying on property and contract law theory, this article shows that the arbitral interpretation of foreign investor rights privileges wealth maximization over propriety. This leads arbitrators to draw on particular theories of property and contractual reliance. The analysis of these interpretative moves brings to the front crucial normative and distributive implications of the international investment regime.

Justice, Fault, and Efficiency in Contract Law

This article explores some of the core concepts that underlie contract law. It rejects the feasibility of a uniform theory of contract law including a critique of the economic analysis of contract law. The importance of efficient contract rules and efficient contracts is not disputed, but efficiency’s explanatory power is limited due to the breadth of contract law, as well as the complexity and dynamism of modern contracting. Behavioral law and economics is introduced as a method for making law and economics more predictive of real world contracting. The article selects three core principles for analysis—justice, fault, and efficiency that help explain the essence of contract law. It also reflects on the tension between freedom of contract and paternalism.

Self-Driving Contracts

Ex post gap filling is a central function of contract law. This is about to change. Predictive capabilities created by big data and artificial intelligence increasingly allow parties to draft contracts that fill their own gaps and interpret their own standards without adjudication. With these self-driving contracts, parties can agree to broad objectives and let automated analytics fill in the specifics based on real-time contingencies. Just as a self-driving car fills in the driving details to get its passenger to a designated end point, the self-driving contract fills in the contract details to achieve the parties’ designated outcome. This development suggests a new focus for the doctrine and theories of contract law. Our primary goal in this Article is to introduce and develop that new focus. For example, self-driving contracts are both complete and incomplete. They are complete in that they specify actions for every contingency. This reduces the likelihood of breach and renegotiation. It also means that notions of efficient breach and ex post hold-up will be of reduced importance in contract law. At the same time, self-driving contracts are also incomplete in ways that render current notions of definiteness and mutual assent irrelevant or at best misleading. Perhaps most importantly, with contracts being interpreted by their own internal software, contract law will have to focus on where that software comes from and how it operates. Markets will arise for third-party vendors who either certify or provide independent contract programming. In some cases, these will be new markets; in others, they will evolve from existing markets such as the market for contract arbitrators. Law will play a role in supporting and overseeing these markets. We explore that role, and how it will differ in markets for contracts between sophisticated parties and in markets for consumer contracts.

Henry Maine’s “Modern Law”: From Status to Contract and Back Again?†

In this Article, I conduct a long overdue assessment of Henry Maine’s “from Status to Contract” thesis in light of two essentially modern phenomena: contract standardization and relational contracting. Drawing on comparative legal history, classical sociological and anthropological literature, contemporary contract law theory, and recent works in the field of (behavioral) law and economics, I discuss the claim that modern private law is witnessing a reverse movement “from Contract to Status.” I show that this claim is historically inaccurate and conceptually simplistic in that it attributes shades of meaning to status that Maine never contemplated. I dedicate the remainder of the Article to exploring why—in the face of clear countervailing evidence—modern private law scholars continue to engage in Mainean “status”-speak. For this purpose, I tease out several interesting parallels between status as part of Maine’s theory and “status” as part of modern private law discourse. I firstly suggest that scholars mirror Maine’s thesis with their argument that interpersonal rights and obligations frequently result from naturally occurring societal processes that the law normatively reflects; conversely, that said rights and obligations are not necessarily the result of private-autonomous agreements between freestanding individuals. While this argument strikes me as plausible, the conceptual problems that transplanting Maine’s categories into contemporary private law discourse entails call for additional justification. I therefore, secondly suggest that it is the directional appeal of Maine’s linear or absolutist view that has led modern private law scholars to engage in Mainean “status”-speak. In order to assess the defensibility of this claim, I consider whether the “from Status to Contract and back again” thesis has any merit. Are we witnessing a reverse movement from the mostly private-autonomous creation of contractual rights and obligations to the heteronomous imposition of such rights and obligations on the part of society or the state? To answer this question, I examine a variety of conceptual forces struggling for dominance in modern private law. Two complementary tensions present themselves as relevant to my discussion: the tension between freedom of contract and constitutional paternalism, and the tension between perfect contracting solutions and second-best alternatives. I go on to show that “status”-like elements—i.e., elements that play on the rhetoric and directionality rather than the substance of Maine’s thesis—and contractual elements interact to mediate both tensions. Linear (or absolutist) and dialectical (or “pendulum swing”) theories of socio-legal evolution consequently fall short. Mainean “status”-speak is equally unable to account for the conceptual interaction that my discussion brings to light. To clarify any such interaction between “status”-like and contractual elements, I introduce, explain, and to some extent defend, two hybrid types—contract-status and status-contract. These hybrid types, I argue, go some way toward capturing current tendencies in modern private law. Inconsistencies, however, remain even if we reconstruct modern private law along the lines of contract-status and status-contract. Hence, I call for an update of modern private law’s terminological toolbox. To this end, it is imperative to draw on Maine’s very own methodological postulates. Contemporary scholars intent on saying anything of interest about modern private law would thus be well-advised to emulate Maine’s approach of combining empirical inquiry into economy and society with categories and concepts from the realm of legal theory—all the while freeing themselves from the overbearing influence of his original, loaded categories. In light of these exhortations, I look at one final answer to the question of why modern jurists continue to engage in Mainean “status”-speak. Might increasing references to Maine’s conceptual categories be evidence of a rediscovery of the value of macro-historical approaches for engaging critically with (private) law as a fundamental social institution? I contend that employing such macro-historical approaches is indeed necessary if modern jurists are to take seriously their duties as members of the legal profession, as participants in a broader intellectual and academic discourse, and as citizens of their respective societies.