Contracts Commons^™

The Continuum Of Contractual Commitment, David Snyder

Scholarly Articles in Law Reviews & Journals

Contracts frequently call for one or more differentiated levels of contractual commitment. Although contractual liability in the common law is said to be strict liability, and a claim that a good attempt was made is said to be no defense, often a party promises only to try. Contract theory in the United States struggles with departures from the paradigm of strict liability, and it has failed to fully consider the continuum of contractual commitment. To encompass the range of assent-based commitment and its consequent liability, U.S. contract theory needs to distinguish more clearly between (1) promises to try, which do …

The Autonomy Default Paradigm In Contract Law, Hanoch Dagan, Michael A. Heller

Faculty Scholarship

You can scribble an agreement on a napkin or hire lawyers to negotiate a hundred-page contract. Either way, most of your contractual obligations will not be in your document. They will be in the background rules contract law applies absent your express agreement. Justifying these defaults is a core task of contract theory; getting them right is a core task of contract law.

This Article introduces the autonomy default paradigm, a conceptually coherent and normatively attractive account of contract law defaults. We show that defaults are justified to the extent they enhance our autonomy, understood as self-determination. They vindicate our …

The Legal Framework Of Foster Care In Egypt: A Gender Analysis Of Alternative Families And Patrilineal Structures, Amira Fadel

Theses and Dissertations

The thesis explores women’s legal representation and agency over their non-biological children, and how the foster care system in Egypt either reinforces or deconstructs existing gender roles. Hence from a sociological perspective, it accounts for foster and alternative care laws in Egypt and the amendments thereof, to examine social relationships against the backdrop of more conventional, biological families, and kinship relations. In simple terms, studying foster and alternative care laws in Egypt is crucial to grasp how non-biological families are shaped in comparison to the more conventional bonds within biological families and traditional kinship relations, while accounting for the Christian …

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 in 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. That picture results in …

Two Forms Of Formalism In Contract Law, Gregory Klass

Georgetown Law Faculty Publications and Other Works

Formalism in contract interpretation has had many defenders and many critics. What lawmakers need, however, is an account of when formalism works and when it does not. This article addresses that need by providing general theory of contract exposition and differentiating between two salient forms of formalism in contract law. Formalities effect legal change by virtue of their form alone, thereby obviating interpretation. Examples include “as is”, the seal, and sometimes contract boilerplate. Evidentiary formalism, in distinction, limits the evidence that goes into interpretation. Plain meaning rules are an example of evidentiary formalism. The article provides a detailed analysis of …

Contractual Landmines, Robert E. Scott, Stephen J. Choi, Mitu Gulati

Faculty Scholarship

Conventional wisdom is that the standardized boilerplate terms used in large commercial markets survive unchanged because they are an optimal solution to the contracting problems facing parties in these markets. As Smith and Warner explained, “harmful heuristics, like harmful mutations, will die out.” But an examination of a sample of current sovereign bond contracts reveals numerous instances of harmful landmines — some are deliberate changes to standard language that increase a creditor’s nonpayment risk, others are blatant drafting errors, and yet others are inapt terms that have been carelessly imported from corporate transactions. Moreover, these landmines differ from each other …

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 …

Can Contract Emancipate? Contract Theory And The Law Of Work, Hanoch Dagan, Michael A. Heller

Faculty Scholarship

Contract and employment law have grown apart. Long ago, each side gave up on the other. In this Article, we re-unite them to the betterment of both. In brief, we demonstrate the emancipatory potential of contract for the law of work.

Today, the dominant contract theories assume a widget transaction between substantively equal parties. If this were an accurate description of what contract is, then contract law would be right to expel workers. Worker protections would indeed be better regulated by – and relegated to – employment and labor law. But contract law is not what contract theorists claim. Neither …

Taxing Choices, Tessa R. Davis

FIU Law Review

Tax has a choice problem. At all stages of the making of tax, choice plays a role. Lawmakers consider how tax will impact the range and appeal of choices available to an individual. Scholars critique how tax may drive an individual toward or away from a given choice. Courts craft stories of how an individual had either free or deeply constrained choice, using their perception of the facts to guide their interpretation of tax law. And yet for all the seeming relevance of choice to tax, we have no clear definition of what we mean when we talk about choice …

A Philosophy Of Contract Law For Artificial Intelligence: Shared Intentionality, John Linarelli

Scholarly Works

This is a chapter for the forthcoming book, Contracting and Contract Law in the Age of Artificial Intelligence, edited by Martin Ebers, Cristina Poncibò, and Mimi Zou, to be published by Hart Publishing. The aim of this chapter is to offer a general theory of contract law to account for the inclusion of artificial intelligence in contract practices. Artificial intelligence brings out that what makes contract law a distinctive form of legal obligation is shared intentionality. I refer to this insight as the shared intentionality thesis. Shared intentionality is the psychological capacity of one agent to share and pursue a …

Contract Design When Relationship-Specific Investment Produces Asymmetric Information, Albert H. Choi, George Triantis

Articles

Under conventional contract theory, contracts may be efficient by protecting relationship specific investment from holdup in subsequent (re)negotiation over terms of trade. This paper demonstrates a different problem when specific investment also provides significant private information to the investing party. This is fairly common: for example, a manufacturer invests to learn about its buyer's idiosyncratic needs or a collaborator invests to learn about a joint venture. We show how such private information can lead to subsequent bargaining failure and suboptimal ex ante relationship-specific investment. We also show that this inefficiency is worse if the parties enter into a binding and …

Coming To Terms: Using Contract Theory To Understand The Detroit Water Shutoffs, Marissa Jackson Sow

Law Faculty Publications

After the City of Detroit underwent financial takeover and filed the largest municipal bankruptcy in American history in 2013, the city’s emergency manager encouraged mass water shutoffs as a way of making the city’s water utility a more attractive asset for sale—and for privatization—by ridding the water department of its association with bad debt. The sale never took place, but the water shutoff, too, became the largest ever in American history, with over 141,000 homes subjected to water disconnections over a period of over six years. The governor of the State of Michigan ordered that the shutoffs be temporarily suspended …

Contract Design, Default Rules, And Delaware Corporate Law, Jeffrey Manns, Robert Anderson

Washington and Lee Law Review

Incomplete contract theory recognizes that contracts cannot be comprehensive and that state law necessarily has to fill in gaps when conflicts arise. The more complex the transaction, the more that lawyers face practical constraints that force them to limit the scope of drafting and broadly rely on legal defaults and open-ended terms to plug holes and address contingencies. In theory Delaware law serves as lawyers’ preferred jurisdiction and forum for merger and acquisition (M&A) transactions and other high-end corporate deals because of the state’s superior default rules for corporate law and its judiciary’s expertise in discerning the “hypothetical bargain” of …

Contract Lore As Heuristic Starting Points, Colin P. Marks

Faculty Works

This article examines the concept of “contract lore,” a term used to describe commonly repeated propositions about contract law that may not accurately reflect how courts actually decide cases. Prior scholarship has suggested that the persistence of such statements reflects aspirational thinking among contract scholars and practitioners, maintained through a form of cognitive dissonance. This article challenges that explanation and instead argues that many examples of contract lore are better understood as heuristic starting points used in legal analysis. Rather than functioning as definitive statements of law, these propositions provide an initial framework from which students, lawyers, and judges begin …

The Case Against Equity In American Contract Law, Jody S. Kraus, Robert E. Scott

Faculty Scholarship

The American common law of contracts appears to direct courts to decide contract disputes by considering two opposing points of view: the ex ante perspective of the parties’ intent at the time of formation, and the ex post perspective of justice and fairness to the parties at the time of adjudication. Despite the black letter authority for both perspectives, the ex post perspective cannot withstand scrutiny. Contract doctrines taking the ex post perspective – such as the penalty, just compensation, and forfeiture doctrines – were created by equity in the early common law to police against abuses of the then …

Contract Damages, Moral Agency, And Henry James’ The Ambassadors, Jennifer Nadler

Articles & Book Chapters

This paper enters the dispute over the proper interpretation of the expectation measure of damages in contract law. Should damages be measured by the plaintiff’s financial loss or by the cost of acquiring a substitute performance (“cost of cure”)? I begin by presenting a moral (as opposed to an economic or a pragmatic) justification for the traditional contract principle that a plaintiff has a right to compensation for the financial loss flowing from breach but no right to performance. I do so by showing that implicit in the principle that the plaintiff has a right to compensation for financial loss …

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 …

Choice Theory: A Restatement, Michael A. Heller, Hanoch Dagan

Faculty Scholarship

This chapter restates choice theory, which advances a liberal approach to contract law. First, we refine the concept of autonomy for contract. Then we address range, limit, and floor, three principles that together justify contract law in a liberal society. The first concerns the state’s obligation to be proactive in facilitating the availability of a multiplicity of contract types. The second refers to the respect contract law owes to the autonomy of a party’s future self, that is, to the ability to re-write the story of one’s life. The final principle concerns relational justice, the baseline for any legitimate use …

Contracts Ex Machina, Kevin Werbach, Nicolas Cornell

Articles

Smart contracts are self-executing digital transactions using decentralized cryptographic mechanisms for enforcement. They were theorized more than twenty years ago, but the recent development of Bitcoin and blockchain technologies has rekindled excitement about their potential among technologists and industry. Startup companies and major enterprises alike are now developing smart contract solutions for an array of markets, purporting to offer a digital bypass around traditional contract law. For legal scholars, smart contracts pose a significant question: Do smart contracts offer a superior solution to the problems that contract law addresses? In this article, we aim to understand both the potential and …

The Choice Theory Of Contracts – Preface & Introduction, Hanoch Dagan, Michael Heller

Faculty Scholarship

This concise landmark in law and jurisprudence offers the first coherent, liberal account of contract law. "The Choice Theory of Contracts" answers the field's most pressing questions: What is the “freedom” in “freedom of contract”? What core values animate contract law and how do those values interrelate? How must the state act when it shapes contract law? Hanoch Dagan and Michael Heller show exactly why and how freedom matters to contract. They start with the most appealing tenets of modern liberalism and end with their implications for contract law. This readable, engaging book gives contract scholars, teachers, and students a …

Contract Remedies In Action: Specific Performance, Yonathan A. Arbel

West Virginia Law Review

No abstract provided.

A New And Old Theory For Adjudicating Standardized Contracts, Eric Mills Holmes, Dagmar Thürmann

Georgia Journal of International & Comparative Law

No abstract provided.

Introduction To Philosophical Foundations Of Contract Law, Gregory Klass

Georgetown Law Faculty Publications and Other Works

This Introduction to Philosophical Foundations of Contract Law (Gregory Klass, George Letsas & Prince Saprai eds., Oxford University Press, forthcoming) describes the field of contract theory and locates the essays in the volume within that field. The volume includes chapters from Aditi Bagchi, Randy Barnett, Lisa Bernstein, Mindy Chen-Wishart, Charles Fried, Avery Katz, Dori Kimel, Gregory Klass, George Letsas and Prince Saprai, Daniel Markovits, Liam Murphy, David Owens, J.E. Penner, Margaret Jane Radin, Joseph Raz, Stephen Smith, and Charlie Webb.

Sex Matters: Considering Gender In Consumer Contracts, Amy J. Schmitz

Faculty Publications

We hear about the so-called “War on Women” and persisting salary gaps between men and women in the popular media, but contracts scholars and policymakers rarely discuss gender. Instead, dominant voices in the contracts field often reflect classical and economics-driven theories built on assumptions of gender neutral and economically rational actors. Furthermore, many mistakenly assume that market competition and antidiscrimination legislation address any improper biases in contracting. This Article therefore aims to shed light on gender’s importance by distilling data from my own e-survey of Colorado consumers along with others’ research regarding gender differences in contract outcomes, interests and behaviors. …

Contract Theory And The Failures Of Public-Private Contracting, Wendy Netter Epstein

All Faculty Scholarship

The market for public-private contracting is huge and flawed. Public-private contracts for services such as prisons and welfare administration tend to result in cost savings at the sacrifice of quality service. For instance, to cut costs, private prisons skimp on security. Public law scholars have studied these problems for decades and have proposed various public law solutions. But the literature is incomplete because it does not approach the problem through a commercial lens. This Article fills that gap. It considers how economic analysis of contract law, in particular efficiency theory and agency theory, bear upon the unique problems of public-private …

Strategic Default: The Popularization Of A Debate Among Contract Scholars, Meredith R. Miller

Scholarly Works

A June 2010 report estimates that roughly 20% of mortgage defaults in the first half of 2009 were “strategic.” “Strategic default” describes the situation where a home borrower has the financial ability to continue to pay her mortgage but chooses not to pay and walks away. The ubiquity of strategic default has lead to innumerable newspaper articles, blog posts, website comments and editorial musings on the morality of homeowners who can afford to pay but choose, instead, to walk away. This Article centers on the current public discourse concerning strategic default, which mirrors a continuing debate among scholars regarding whether …

A Contractual Approach To Shareholder Oppression Law, Benjamin Means

Faculty Publications

According to standard law and economics, minority shareholders in closely held corporations must bargain against opportunism by controlling shareholders before investing. Put simply, you made your bed, now you must lie in it. Yet most courts offer a remedy for shareholder oppression, often premised on the notion that controlling shareholders owe fiduciary duties to the minority or must honor the minority's reasonable expectations. Thus, law and economics, the dominant mode of corporate law scholarship, appears irreconcilably opposed to minority shareholder protection, a defining feature of the existing law of close corporations.

This Article contends that a more nuanced theory of …

Where Is Emily Litella When You Need Her?: The Unsuccessful Effort To Craft A General Theory Of Obligation Of Promise For Benefit Received, Edwin J. Butterfoss, Henry Allen Blair

Faculty Scholarship

No abstract provided.

Braiding: The Interaction Of Formal And Informal Contracting In Theory, Practice, And Doctrine, Ronald J. Gilson, Charles F. Sabel, Robert E. Scott

Faculty Scholarship

This Article studies the relationship between formal and informal contract enforcement. The theoretical literature treats the two strategies as separate phenomena. By contrast, a rich experimental literature considers whether the introduction of formal contracting and state enforcement "crowds out" the operation of informal contracting. Both literatures focus too narrowly on how formal contracts create incentives for parties to perfom substantive actions, while assuming that informal enforcement depends on preexisting levels of trust. As a result, current scholarship misses the relationship between formal and informal contract mechanisms that characterizes contemporary contracting in practice. Parties respond to rising uncertainty by writing contracts …

Intent To Contract, Gregory Klass

Georgetown Law Faculty Publications and Other Works

There is a remarkable difference between black-letter contract laws of the United States and England. In England, the existence of a contract is supposedly conditioned on the parties' intent to be legally bound, while section 21 of the Second Restatement of Contracts states that "[n]either real nor apparent intention that a promise be legally binding is essential to the formation of a contract." There are also differences within U.S. law on the issue. While section 21 describes courts' approach to most contracts, the parties' intent to contact can be a condition of validity of preliminary agreements, domestic agreements and social …