Law Commons^™

Duality In Contract And Tort, Tim Friehe, Joshua C. Teitelbaum

Georgetown Law Faculty Publications and Other Works

We study situations in which a single investment serves the dual role of increasing the expected value of a contract (a reliance investment) and reducing the expected harm of a post-performance accident (a care investment). We show that failing to account for the duality of the investment leads to inefficient damages for breach of contract and inefficient standards for due care in tort. Conversely, we show that accounting for the duality yields contract damage measures and tort liability rules that provide correct incentives for efficient breach and reliance in contract and for efficient care in tort.

Formalism In Contract Exposition, Gregory Klass

Georgetown Law Faculty Publications and Other Works

Formalism in contract law has had many defenders and many critics. What lawmakers need, however, is an account of when formalist approaches work and when they do not. This article addresses that need by providing general theory of the rules of contract interpretation and construction and identifying several ways those rules can be more or less formalist. The theory draws from legal philosophy, the philosophy of language, economic contracts scholarship, and caselaw.

The result is a distinction between two forms of formalism in contract law. Formalities effect legal change by virtue of their form alone, thereby obviating interpretation. Examples from …

Convergence By Design: Who Contracts And The Plural Purposes Of Contract Law, Gregory Klass

Georgetown Law Faculty Publications and Other Works

A theory is robustly pluralist if it maintains that law is justified by multiple independent nonordered principles. Some have argued that robustly pluralist theories are deficient because they can provide no practical guidance when those principles conflict. The objection is misplaced when applied to pluralist theories of contract law.

This article demonstrates the possibility of a robustly pluralist and practically relevant theory of contract law by modeling a multipurpose law of contract. Five simple models are constructed to illustrate several purposes a contract law might serve, depending on preferences of the populace (self-interested utility maximizers, a preference for sharing, a …

What Might Contract Theory Be, Gregory Klass

Georgetown Law Faculty Publications and Other Works

Few contract theories begin with so comprehensive a discussion of method as does Stephen Smith’s book, Contract Theory. In the first chapter, “What Is Contract Theory,” Smith describes an interpretive approach guided by four goals: fit with the existing law, internal coherence, moral attractiveness, and transparency to legal actors.

This chapter, to appear in the forthcoming Understanding Private Law: Essays in Honour of Stephen A. Smith, does a deep dive into Smith’s description and defense of those goals. Smith pictures the contract theorist as an observer standing outside legal practice, interpreting the law but not participating in it. …

Brief Of Amicus Curiae Gregory Klass In Support Of Plaintiff-Appellee, Gregory Klass

Georgetown Law Faculty Publications and Other Works

This scholar’s amicus brief in the Fifth Circuit argues that tort remedies play an important role in the contract ecosystem, including promoting efficiency in exchanges; that a party who has been defrauded in the formation of a contract is not bound by contractual limitations on tort liability; and that worries about the tortification of contract law are overblown and out of date.

Misrepresentation And Contract, Gregory Klass

Georgetown Law Faculty Publications and Other Works

Contract theorists naturally focus on the duty to perform. This chapter argues they should also pay attention to duties of candor in the contracting context. The most obvious example of such duties can be found in the misrepresentation defenses, which aim to ensure that contractual undertakings are sufficiently voluntary and to allocate the costs of defective consent. But other laws of deception, such as the torts of negligent misrepresentation and deceit, are also integral to the law of contracts. Separate liability in tort for both pre- and post-formation misrepresentations helps parties who mistrust one another determine whether an exchange is …

How To Interpret A Vending Machine: Smart Contracts And Contract Law, Gregory Klass

Georgetown Law Faculty Publications and Other Works

A smart contract is software designed to do the job of a legal contract: ensuring the performance of parties who might not otherwise trust one another to do so. By running a smart contract on blockchain, users can lock themselves into future performances without relying on a third-party enforcer or platform host, thereby realizing a “fully trustless” exchange. This new technology has wide range of potential applications, and contracts are likely to become an increasingly common part of the economy.

Some have argued that smart contracts represent a new type of legal contract, analogizing the software’s code to a contractual …

A Process For Politics, Anna Gelpern

Georgetown Law Faculty Publications and Other Works

I argue that consistent and public process observance has a distinctly valuable function in sovereign debt restructuring, with no precise equivalent in national insolvency regimes. National regimes reflect the distribution bargains of their enactment, presumptively legitimate and binding. Debtors and creditors allocate insolvency losses in their shadow, with liquidation as a backstop and politics just outside the frame. All else equal, the restructuring process has a harder job with sovereign debt. There is no liquidation backstop and no default distribution scenario. Each crisis resolution episode must allocate losses from scratch among the country’s citizens, foreign and domestic creditors, and other …

Mass Arbitration, J. Maria Glover

Georgetown Law Faculty Publications and Other Works

For decades, the class action has been in the crosshairs of defense-side procedural warfare. Repeated attacks on the class action by the defense bar, the U.S. Chamber of Commerce, and other defense-side interest groups have been overwhelmingly successful. None proved more successful than the “arbitration revolution”—a forty- year campaign to eliminate class actions through forced arbitration provisions in private contracts. The effects for civil justice have been profound. Scores of claims vanished from the civil justice landscape—claims concerning civil rights, wage theft, sexual harassment, and consumer fraud. The effects for social justice, racial justice, gender justice, and economic justice were …

Arthur Linton Corbin, Gregory Klass

Georgetown Law Faculty Publications and Other Works

This chapter on Arthur Linton Corbin will appear in the forthcoming collection, Scholars of Contract Law. The chapter provides a brief summary of Corbin’s life, then discusses five topics: Corbin’s Socratic approach to the classroom and his introduction of the caselaw method at Yale; Corbin’s analytic approach, which was inspired by Hohfeld and is illustrated by Corbin’s definitions of “contract” and “consideration”; Corbin’s evolutionary theory of the common law, his understanding of the relationship between law and social mores, and his insistence that legal rules always be treated as mere “working rules”; Corbin’s occasional appeal, despite his general aversion …

Considering Law And Macroeconomics, Anna Gelpern, Adam J. Levitin

Georgetown Law Faculty Publications and Other Works

The worst financial and economic crisis to hit the world’s richest economies since the Great Depression inspired a flood of scholarship that straddled the disciplines of law and macroeconomics. With few exceptions, this crisis scholarship did not set out to build a new interdisciplinary movement and did not claim the legacy of earlier efforts to mine the intersection of law and macroeconomics. What are we to make of this moment ten years on? Could Law and Macroeconomics (#LawMacro for short) be an important new turn in legal and economic thought, a casual interdisciplinary tryst on the margins of a hundred-year …

Promise, Agreement, Contract, Gregory Klass

Georgetown Law Faculty Publications and Other Works

It is natural to wonder about contract law’s relationship to the morality of promises and agreements. This Chapter distinguishes two ways to conceive of that relationship. First, parties’ agreement-based moral obligations might figure into the explanation of contract law—into an account of its functions or justifications. Contract law might serve to enforce parties’ first-order performance obligations, to enforce second-order remedial obligations, to support the culture of making and keeping agreements more generally, or at least to do no harm to that culture or to people’s ability to act morally. Second, contract can be understood as the legal analog to promise. …

One-Legged Contracting, Ian Ayres, Gregory Klass

Georgetown Law Faculty Publications and Other Works

This response to Robin Bradley Kar & Margaret Jane Radin, Pseudo-Contract and Shared Meaning Analysis, 132 Harv. L. Rev. 1135 (2019), makes three broad points. It criticizes as arbitrary and essentializing Kar and Radin’s insistence of shared meaning as the core of contracting. It argues that even if shared meaning were the sine qua non of contracting, their proposal fails to achieve it because it does not assure that the terms would be cooperatively communicated. And it argues that their proposed enforcement standard would in practice severely limit freedom of contract and likely reduce consumer welfare. There is a …

Contractual Communication, Lawrence B. Solum

Georgetown Law Faculty Publications and Other Works

In this Response, I will investigate the foundations of both shared and unshared meaning in legal communication. Part I takes a step back from contractual communication and offers a preliminary sketch of a general model of legal communication; the sketch draws on speech act theory and the work of Paul Grice, extending and modifying many of the insights developed by Kar and Radin. Part II turns to contractual communication, differentiating distinct “situations of contractual communication” and interrogating Kar and Radin’s Shared Meaning Analysis. Part III interrogates Kar and Radin’s distinction between “contract” and “pseudo-contract.” The conclusion of the Response briefly …

Cacs And Doorknobs, Anna Gelpern, Jeromin Zettelmeyer

Georgetown Law Faculty Publications and Other Works

In response to debt crises, policy makers often feature Collective Action Clauses (CACs) in sovereign bonds among the pillars of international financial architecture. However, the content of official pronouncements about CACs suggests that CACs are more like doorknobs: a process tool with limited impact on the incidence or ultimate outcome of a debt restructuring. We ask whether CACs are welfare improving and, if so, whether they are pillars or doorknobs. The history of CACs in corporate debt suggests that CACs can be good, bad or unimportant depending on their vulnerability to abuse and the available alternatives, including bankruptcy and debt …

Boilerplate And Party Intent, Gregory Klass

Georgetown Law Faculty Publications and Other Works

It is commonly recognized that parties often do not read or understand contract boilerplate they agree to, and that such parties might not intend all the terms in it. Less often noticed are decisions that favor boilerplate over evidence of the parties’ contrary intent for the very reason that it is boilerplate. This article discusses that phenomenon. It identifies decisions in which courts favor boilerplate terms over other evidence the parties’ intent because it is boilerplate, discusses the rules that explain those outcomes, and examines the reasons behind the rules.

A contractual writing, whether individually negotiated and drafted or boilerplate, …

Empiricism And Privacy Policies In The Restatement Of Consumer Contract Law, Gregory Klass

Georgetown Law Faculty Publications and Other Works

The Draft Restatement of the Law of Consumer Contracts includes a quantitative study of judicial decisions concerning businesses’ online privacy policies, which it cites in support of a claim that most courts treat privacy policies as contract terms. This Article reports an attempt to reproduce that study’s results. Using the Reporters’ data, this study was unable to reproduce their numerical findings. This study found in the data fewer relevant decisions, and a lower proportion of decisions supporting the Draft Restatement position. It also found little support for the Draft’s claim that there is a clear trend recognizing privacy policies as …

Parol Evidence Rules And The Mechanics Of Choice, Gregory Klass

Georgetown Law Faculty Publications and Other Works

Scholars have to date paid relatively little attention to the rules for deciding when a writing is integrated. These integration rules, however, are as dark and full of subtle difficulties as are other parts of parol evidence rules. As a way of thinking about Hanoch Dagan and Michael Heller’s The Choice Theory of Contracts, this Article suggests we would do better with tailored integration rules for two transaction types. In negotiated contracts between firms, courts should apply a hard express integration rule, requiring firms to say when they intend a writing to be integrated. In consumer contracts, standard terms …

Contracts, Constitutions, And Getting The Interpretation-Construction Distinction Right, Gregory Klass

Georgetown Law Faculty Publications and Other Works

Interpretation determines the meaning of a legal actor’s words or other significant acts, construction their legal effect. Using contract law and then two nineteenth century theories of constitutional interpretation as examples, this Article advances four claims about interpretation, construction, and the relationship between the two. First, many theorists, following Francis Lieber, assume that rules of construction apply only when interpretation runs out, such as when a text’s meaning is ambiguous or does not address an issue. In fact, a rule of construction is always necessary to determine a legal speech act’s effect, including when its meaning is clear and definite. …

Interpretation And Construction In Contract Law, Gregory Klass

Georgetown Law Faculty Publications and Other Works

Interpretation determines the meaning of a legal actor’s words and actions, construction their legal effect. Although the interpretation-construction distinction has a long pedigree, contract scholars today rarely attend to it, and the relationship between the two activities remains understudied. This Article provides an account of the interplay between interpretation and construction in contract law.

It begins with the history of the concepts, focusing on the works of Lieber, Williston and Corbin. It adopts Corbin’s complimentary conception, according to which interpretation alone never suffices to determine speech act’s legal effects; a rule of construction is always required. The Article departs from …

Contract Exposition And Formalism, Gregory Klass

Georgetown Law Faculty Publications and Other Works

Formalism in contract law has had many defenders and many critics. What courts need, however, is an account of when formalist approaches work and when they do not. This article addresses that need by developing a general theory of the rules of contract interpretation and construction—contract “exposition.” The theory distinguishes inter alia two forms of formalism. Formalities effect legal change by virtue of their form alone, and thereby obviate interpretation. Examples from contract law include “as is”, the seal and boilerplate terms. Formalities work when parties intend their legal effects, that is, when they perform juristic acts. Plain meaning rules, …

The Rules Of The Game And The Morality Of Efficient Breach, Gregory Klass

Georgetown Law Faculty Publications and Other Works

Moralists have long criticized the theory of efficient breach for its advocacy of promise breaking. But a fully developed theory of efficient breach has an internal morality of its own. It argues that sophisticated parties contract for efficient breach, which in the long run maximizes everyone’s welfare. And the theory marks some breaches—those that are opportunistic, obstructive, or otherwise inefficient—as wrongs that the law should deter, as transgressions that should not be priced but punished. That internal morality, however, does not excuse the theory from moral scrutiny. An extended comparison to Jean Renoir’s 1939 film, La Règle du Jeu (“The …

The Importance Of Being Standard, Anna Gelpern

Georgetown Law Faculty Publications and Other Works

Contract standardisation in the sovereign debt market saves time and money in preparing documents and endows widely-used terms with a shared public meaning, which in turn saves investors the costs of acquiring information, facilitates secondary market trading and reduces the scope for mistakes in the judicial interpretation of contract terms. Sovereign debt issuers and investors claim to value standardisation and list it as an important contractual objective. Issuers generally insist that their bond contracts are standard and reflect market practice. Variations from past practice and market norm must be explained in disclosure documents and through market outreach. Standardisation is not …

The Puzzle Of Pdvsa Bond Prices, Anna Gelpern, Paolo Colla, Mitu Gulati

Georgetown Law Faculty Publications and Other Works

Market reports in the summer of 2016 suggest that Venezuela is on the brink of default on upwards of $65 billion in debt. That debt comprises of bonds issued directly by the sovereign and those issued by the state-owned oil company PDVSA. Based on the bond contracts and other legal factors, it is not clear which of these two categories of bonds would fare better in the event of a restructuring. However, market observers are convinced — and we agree — that legal and contractual differences would likely impact the payouts on the bonds if Venezuela defaults. Using a comparison …

Sovereign Debt: Now What?, Anna Gelpern

Georgetown Law Faculty Publications and Other Works

The sovereign debt restructuring regime looks like it is coming apart. Changing patterns of capital flows, old creditors’ weakening commitment to past practices, and other stakeholders’ inability to take over, or coalesce behind a viable alternative, have challenged the regime from the moment it took shape in the mid-1990s. By 2016, its survival cannot be taken for granted. Crises in Argentina, Greece, and Ukraine since 2010 exposed the regime’s perennial failures and new shortcomings. Until an alternative emerges, there may be messier, more protracted restructurings, more demands on public resources, and more pressure on national courts to intervene in disputes …

What If Fiduciary Obligations Are Like Contractual Ones?, Gregory Klass

Georgetown Law Faculty Publications and Other Works

This essay, to appear in Contract, Status, and Fiduciary Law (Miller & Gold, 2016), explores three ways fiduciary obligations might be like contractual ones: in the methods lawmakers use or should use to determine the content of the obligation; in the private voluntary acts that generate the obligation; and in the fact that the obligation is a default that parties have the power to alter. The thesis is that to the extent that these similarities exist, they are not especially revealing. Theorists who emphasize the similarities commonly treat contract law as a private power-conferring rule, then analogize the law of …

Count The Limbs: Designing Robust Aggregation Clauses In Sovereign Bonds, Anna Gelpern, Ben Heller, Brad Setser

Georgetown Law Faculty Publications and Other Works

On August 29, 2014, the International Capital Market Association (ICMA) published new recommended terms for sovereign bond contracts governed by English law. One of the new terms would allow a super majority of creditors to approve a debtor’s restructuring proposal in one vote across multiple bond series. The vote could bind all bond holders, even if a series voted unanimously against restructuring, so long as enough holders in the other series voted for it. An apparently technical change, awkwardly named “single-limb aggregated collective action clauses (CACs)” promised to eliminate free-riders for the first time in the history of sovereign bond …

From Hierarchies To Markets: Fedex Drivers And The Work Contract As Institutional Marker, Julia Tomassetti

Georgetown Law Faculty Publications and Other Works

Judges are often called upon today to determine whether certain workers are “employees” or “independent contractors.” The distinction is important, because only employees have rights under most statutes regulating work, including wage and hour, anti-discrimination, and collective bargaining law. Too often judges exclude workers from statutory protection who resemble what legal scholars have described as typical, industrial employees — long-term, full-time workers with set wages and routinized responsibilities within a large firm. To explain how courts reach these counterintuitive results, the article examines recent federal decisions finding that FedEx delivery drivers are independent contractors rather than employees. It argues that …

Gatsby And Tort, Robin West

Georgetown Law Faculty Publications and Other Works

The Great Gatsby is filled with potential tort claims, from drunken or reckless driving to assault and battery. In a pivotal passage Nick Carraway, the narrator of The Great Gatsby, judges Daisy and Tom as “careless people,” who “destroy creatures and leave others to clean up the mess.” The carelessness, negligence, and recklessness portrayed by Fitzgerald’s characters shows an absence of due care, long regarded as the foundation for tort law. Although there are torts, tortfeasors, and tortious behavior aplenty in The Great Gatsby, the novel is void of even a mention of tort law. Why?

The first part of …

Contracts Symposium Issue: Featured Speaker: The Right To Contract As A Civil Right, Robin West

Georgetown Law Faculty Publications and Other Works

The "right to contract," whether originating in the Constitution, common law, or natural law, has been long and widely felt to be in tension with our civil rights, broadly conceived. The individual himself, we generally believe, and only the individual, should decide the scope and terms of his affirmative, voluntary, and other-regarding undertakings. When he does so through contract, the individual and only the individual should determine the terms under which he will perform those duties. The civil rights laws of the nineteenth, twentieth, and early twenty-first centuries, and the various rights they create interfere with these natural freedoms.

So, …