The Philosophy of Contract Law and Shameless Self-Promotion

In the category of shameless self-promotion, I note that my paper “The Failure of Economic Interpretations of the Law of Contract Damages” (forthcoming from Washington & Lee Law Review) is now up on SSRN. Here is the abstract for those that are interested:

signing contract.jpgThe law of contracts is complex but remarkably stable. What we lack is a widely accepted interpretation of that law as embodying a coherent set of normative choices. Some scholars have suggested that either economic efficiency or personal autonomy provide unifying principles of contract law. These two approaches, however, seem incommensurable, which suggests that we must reject at least one of them in order to have a coherent theory. This article dissents from this view and has a simple thesis: Economic accounts of the current doctrine governing contract damages have failed, but efficiency arguments remain key to any adequate theory of contract law. Contractual liability – like virtually all civil liability – is structured around the concept of bilateralism, meaning that damages are always paid by defeated defendants to victorious plaintiffs. Ultimately, economic accounts of this basic feature are unpersuasive. This criticism, however, leaves untouched many of the key economic insights into the doctrine of contract damages. The limited failure of economic interpretations points toward a principled accommodation of both autonomy and efficiency in a single vision of contract law where notions of autonomy provide the basic structure and economics fills in most of the doctrinal detail.

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3 Responses

  1. Patrick S. O'Donnell says:

    Nice paper Nate. I especially appreciate the fact that the notes are of relatively modest number and length, not interfering with the ‘readability’ of the paper. Admittedly I’m dispositionally inclined to look with favor upon any argument that doesn’t simply serve to further fortify common propositions from the ‘law and economics’ genre (I’m not being dismissive here, simply noting a wish that it not have hegemonic influence in various domains of the law, including contract law, wherein it has most prima facie plausibility and persuasiveness). And so I’ll have to think more about your conclusion that ‘economics fills in most of the doctrinal detail.’ One question: on which side do questions of fairness (or distributive justice) sit?–if only because this has deep implications for determinations of ‘efficiency’–cf. Gordley’s Aristotelian approach in his essay in the volume edited by Peter Benson).

    Also, if perhaps you’ve not already seen it, you may be interested in Jeff Lipshaw’s recent paper. Indeed, I’d be interested in your take on his elaboration of the conclusion(s) we might draw from his contention that the fundamental principles of contract law come from outside law proper and the related futility of ‘morality’ (read Fried) v. ‘efficiency’ debates (read Posner, et al.) in contract law.

  2. Patrick S. O'Donnell says:

    I should have provided a link to Jeff’s paper, ‘The Futility of Justifying Contract Law as Self-Referential System’: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=976033

  3. Matthew Hartogh says:

    Posted by Matthew Hartogh Maastricht NL Nate,

    True, the fundament of contract law is quite stable even as it has evolved. As you know, Justice Marshall’s last great case Ogden v. Saunders (1827) presaged this evolution. In true Holmesian style Marshall’s dissent was prescient to the movement which was going to transform American jurisprudence. This was a revolution of legal epistemology in the 19th century which disaggregated tort from contract law and did not invalidate the principles of existing contract law.

    A new domain of public law, torts, was spun off from the doctrine of implied contracts but the Constitutional injunction embodied in vinculum legis was still very much in force and so, the obligation of a particular contract was not seen in Ogden v. Saunders to inhere in the contract itself proprio vigore but in the municipal or state law applicable to the contract.

    Matthew Hartogh