Two Views of Contract Law
I don’t teach contracts, so perhaps I’m going to say something that’s obvious, but here goes. When you look at the current problems in the housing market, two distinct views of contract law emerge. The first comes from the folks who just walked away from their bad mortgages. Law students are taught pretty early on that a contract is (as Holmes said) a promise to pay damages if you breach and nothing more. Indeed, the theory of efficient breach holds that society will be better off in many instances if a contract is not performed, because one or both parties can make a better deal.
The other view, though, is that walking away from a mortgage is immoral. Contract law (and, I think, most of contract theory) finds this position hard to understand. It’s a bit like asking an economist to explain altruism. Nevertheless, in the real world many people hold this view and are suffering under crippling debt as a result. What, if anything, do contract scholars have to say about this?