Theorising about contract law is flourishing. One more piece of evidence is the formidable collection Philosophical Foundations of Contract Law, edited by Gregory Klass, George Letsas, and Prince Saprai. The book contains 17 essays that range from high abstraction to policy recommendation to doctrinal analysis. Anyone interested in theoretical discussions of contract law would be well advised to read this book. As noted in the book's introduction (p. 13), there remain many important topics and perspectives on contract law that this volume does not get to, but, as the text indicates, that is the inevitable product of trying to maintain a volume of moderate size (and expense).
The book is entitled The Philosophical Foundations of Contract Law – a title set by the Oxford University Press Series in which it appears. It is worth considering what it means to be looking for (or asserting that one has found) the philosophical foundations of a doctrinal area of law like contract. Gregory Klass states at the beginning of this collection: “Contract theory is not one thing, but a collection of related inquiries” (p. 1). In particular, he notes, one can approach the topic variously, by focusing on “contract law's function, its justification, [or] its conceptual structure” (p. 2). However, there remains a prior question that is not considered in the volume: why assume that there is a general theory of contract law (a theory of all current or possible systems of contract law), rather than viewing the appropriate theoretical focus as being the contract law of a particular legal system at a particular time? What reason is there to think that there is some monolithic thing, “contract law”, that is constant across societies and over time? And there is also a concern one might have about many contract theories: that there might be a bias towards the rules and principles of a small number of jurisdictions. For example, in this volume, almost all of the contributors teach or were trained in either Britain or the US, and most of the cases and doctrinal rules cited come from English or American law (Liam Murphy's contribution is a rare instance where the discussion at least touches on the contract law of other countries). One might suspect that contract law would be viewed differently if the theorists’ focus were more on (say) certain civil law legal systems. Additionally, the volume contains hardly any references to other authorities that loom large in contracting law and practice: e.g. the United Nations Convention on the International Sale of Goods (the “CISG” or “Vienna Convention”), which governs most international sale of goods, the UNIDROIT Principles, or the EU directives on consumer transactions.
However, it is better to focus on what the book does offer rather than what it does not. And the book offers a treasure of scholarly material to satisfy a wide range of interests. For example, for those who are most interested in the more abstract questions, there are excellent exchanges between Charles Fried and Randy Barnett (is contract essentially about promise or about consent?) and between Joseph Raz and David Owens (is the obligation to keep promises grounded on the promisor's interest in being able to shape her life and the promisee's interest in normative assurance; or primarily grounded on the promisee's authority interest?).
Dori Kimel explains how the role of autonomy and fault in promise and contract are more complicated than often assumed. James Penner argues that contracts are best seen as basically about agreements, not about promises. Both Kimel and Penner, in their pieces, display the insights available when looking at promises in the social contexts in which they are usually made.
Charles Webb argues for maintaining a clear distinction between a descriptive and historical analysis of the reasons participants have for a practice (like promising and contracting) and a full (moral) evaluation of those practices. Webb also offers a thoughtful overview of a natural law approach to contract law. Liam Murphy advocates a sophisticated form of instrumental justification for contract law, while showing how the arguments usually offered for expectation damages are inadequate. Avery Katz offers a thoughtful overview of (three distinct) law and economics approaches to law in general, and contract law in particular. Aditi Bagchi maintains that we have underestimated the role that distributive justice does and should play in contract law and contracting practice (e.g. taking into account personal responsibility not to exacerbate injustice, and the limits of consent to overcome or deflect responsibility to share losses).
Margaret Jane Radin criticises the current doctrinal and theoretical responses to “boilerplate” – standard terms in consumer contracts whose purpose or effect is to remove effective recourse for business torts and breaches of contract. Radin recognises the limitations in using the unconscionability doctrine (in the US and some other common law countries) to respond to the problem of boilerplate, and offers a different analytical structure. This structure, for use by either courts, legislatures, or administrative agencies, focuses on the extent to which the rights that the boilerplate provisions (effectively) delete are or should be alienable, the quality of the consent to waiver, and the number of people affected by the provisions. Central to Radin's analysis (and her critique of “boilerplate” generally) is the view that legal redress should generally not be subject to (express or implicit) sale. This is Radin's response to the argument, offered by many commentators and theorists, that boilerplate is justified by the lower prices for the services and products associated with boilerplate waivers. At the least, she argues, such “alienations” of the right to legal redress should be subject to strict scrutiny (regarding the quality of consent, how many people are affected, and other factors).
While Lisa Bernstein's contribution focuses on some quite narrow questions relating to the American Uniform Commercial Code (“UCC”), her critique has broader applications to contextualist approaches to contract interpretation. Contextualist approaches, Bernstein contends, may have the unintended consequence of reducing flexibility in long-term contracts (because any accommodation might be held to be a modification of, or binding interpretation of, the contractual terms). Bernstein also raises doubts regarding the existence, prevalence, and proof of trade usages (a source of contractual terms for the UCC, CISG, and other approaches that take a contextualist approach).
Daniel Markovits offers the intriguing theory that the obligation of good faith (in the US, the obligation to perform a contract in good faith) “establishes the character of contract relation … a distinctively contractual form of recognition and respect” (p. 280). It is an intriguing view, especially if one adds (consistently with the views of many commentators) that currently courts are reading the obligation of good faith (in US law) far more narrowly than they did 20 or 30 years earlier. Does a changing understanding of good faith thus indicate a changing view about “recognition and respect”, or at least a different moral or policy-based balancing of “how contracting parties must balance self- and other-regard” (p. 280)? Or does it merely indicate a widely shared error either in the earlier broader understanding of good faith or in the current narrower understanding? Also (this returns to the question of theoretical scope), while good faith in US contract law applies only to performance, other legal systems understand the obligation of good faith as extending to negotiations. It would seem, under Markovits's analysis, that the essence of contract law, or at least the essence of contractual relations, in those (non-US) legal systems must be seen as different from their US counterparts. Should we also conclude that those legal systems have a different understanding of what it means to “recogni[se] and respect” those with whom we contract?
Mindy Chen-Wishart, developing ideas from H.L.A. Hart's early work, provides a two-step defeasibility approach to understanding contractual defences like misrepresentation, mistake, duress, and undue influence; this defeasibility analysis improves upon the more conventional one-step analysis grounded on party consent and voluntariness. George Letsas and Prince Saprai offer a fairness-based analysis of mitigation, which they reason is superior to an earlier analysis by Charles Fried based on altruism. Stephen Smith argues (contrary to the views of John Gardner, Joseph Raz, Ernest Weinrib, and others) that many forms of contract law damages are best understood as the redress of a wrong (of breach of contract), rather than as simply enforcing (giving effect to) the original contractual right. As part of the same analysis, Smith claims that damage orders should be seen as creating new duties, not simply reporting existing duties (or inchoate duties). And Gregory Klass explains the idea of “efficient breach” in a way far more sophisticated than the conventional (non-economist) understanding – an explanation that displays clearly certain important connections between remedies, price, and efficiency, and between efficiency, non-efficiency objectives, and contract design.
The book contains occasional misstatements (e.g. when Liam Murphy states that “reliance damages … is nowhere awarded for breach of contract” (p. 162) – but see, for example, Restatement (Second) of Contract Law §349 (“As an alternative to the measure of damages stated in §347 [expectation damages], the injured party has a right to damages based on his reliance interest”) and G.H. Treitel, An Outline of The Law of Contract (6th ed., Oxford, 2004, p. 377 (reliance damages)), but these are rare. The primary impression the collection leaves is quite different: Philosophical Foundations of Contract Law is exemplary in the consistently high quality of the pieces, from first to last.
