What Do Contract Formalities Do?
In 1941, Lon Fuller published his classic Consideration and Form. Among other things, the article articulated three famous functional claims for consideration: it evidences bargains, channels parties’ behavior, and cautions signers by “check[ing] against inconsiderate action,” and “induc[ing] the circumspective frame of mind appropriate in one pledging his future.” How? By signaling to prospective signers of contracts that the law was drawing near. Thus, he hypothesized that seals (“symbol[s] in the popular mind of legalism and weightiness”), the “requirement of a writing,” “attestation, notarization,” and recitals of consideration all induce individuals to feel and behave in a more committed way to the underlying term supported by the formal recitation.
I’ve been studying what individuals think about contract formalities in a series of papers. That work, combined with other recent scholarship about contracting behavior, made me skeptical that contract language reciting obligation — or disclaiming it — had the straightforward effects that Fuller proposed. So, with Zev Eigen (Northwestern/visiting Yale), I decided to test Fuller’s foundational & empirical intuition. In A Fuller Understanding of Contractual Commitment, Zev and I suggest that the conventional account is unrealistic:
“Contract recitals are ubiquitous. Yet, we have a thin understanding of how individuals behave with respect to these doctrinally important relics. Most jurists follow Lon Fuller in concluding that when read, contract recitals accomplish their purpose: to caution against inconsiderate contractual obligation. Notwithstanding the foundational role that this assumption has played in doctrinal and theoretical debates, it has not been tested. This Article offers what we believe to be the first experimental evidence of the effects of formal recitals of contract obligation — and, importantly too, disclaimers of contractual obligation — on individual behavior. In a series of online experiments, we found that participants were less likely to back out of an agreement, forgoing personal gain, when they were endowed with a small extra sum of money at the time of contracting, and when they acknowledged that they were not forming a contract. They were more likely to back out of their original commitment when their agreeing was accompanied by a recital of consideration, and in a control condition in which the natural consideration of bargained-for exchange prevailed. Younger, male respondents were generally more likely to back out of their agreements across all conditions than were women and older participants. The reported experimental results suggest both the descriptive weakness of theorized accounts of private control over contract enforceability and the general value of experimental work about contracting behavior.”