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The concept of “efficient breach”—the idea that a contracting party should be encouraged to breach a contract and pay damages if doing so would be more efficient than performance—is probably the most influential concept in the economic analysis of contract law. It is certainly the most controversial. Efficient breach theory has been criticized from both within and without the economic approach, but its most prominent criticism is that it violates deontological ethics—that the beneficiary of a promise has a right to performance, so that breaching the promise wrongs the promisee. This essay argues that this criticism is misplaced, and that efficient breach theory, properly understood, is not inconsistent with parties’ complying with their deontological obligations. Instead, the intuitive resistance that most people experience to the concept may be better explained by aretaic concerns—specifically, that failing to complete a contractual relationship is not conducive to virtuous character or to the maintenance of a flourishing community. While efficient breach can be squared with deontological ethics, it cannot be squared with virtue ethics unless one is prepared to argue that seeking efficiency is a virtue, or at least that it is not a vice. . .
Charles Fried’s Contract as Promise stands as a model of principled legal argument. It took a single, integrating thought—that a promise lies at the heart of every contract—and then reconstructed broad swaths of doctrine as elaborations of that thought.
The book’s argument is all the more impressive because the promissory ideal in whose name it seeks to unify contract law is not straightforward. On the contrary, grounding contract in promise highlights two of contract law’s most distinctive yet least understood features: that the law establishes liability strictly, rather than based on fault; and that it creates forward-looking rather than the usual backward-looking entitlements, entitlements to be made better off rather than to secure the status quo ante. These features of promissory obligation have long been considered mysterious by a chain of thinkers whose pedigree goes back at least to David Hume and, in the law, to Lon Fuller and William Perdue.
Fried understood the unusualness of promissory obligation and hence the shaky foundation that emphasizing promise places beneath contract law. He thus began Contract as Promise by addressing the problem of establishing the ground of promise head on, in two separate ways. . . .
To a generation of law students, lawyers, and legal scholars, Contract as Promise has provided a liberal theory of contract that explains fundamental features of contract law and provides a normative foundation for evaluating the legal doctrine. As is well known by now, the promissory theory of contracts justifies the legal enforcement of contracts in terms of respect for individual freedom and autonomy to make binding commitments. The touchstone of contractual analysis from this perspective is the intent of the promisor. Together with other moral theories of promising, this perspective on contract law has generated voluminous scholarship. Thirty years after the book’s publication, I am unlikely to shed new light on the merits of the perspective. Rather, I take the occasion of this symposium as an opportunity to explore how economic analysis since the book’s publication might elaborate its thesis. . .
The promise principle and its roots in a certain type of morality of individual obligation, which play the central role in Charles Fried’s vision of contract law, have importantly contributed to rescuing contract law from absorption into tort law and from the imposition of externally imposed standards that are collective in origin. The principle makes a mammoth contribution to alerting us to the tyranny of interference with individual self-determination. However, this Essay questions whether a promise-centered system, derived from a moral philosophy of promising (without an observable and testable foundation in reality) and geared to internal individual obligation and duty, can provide the basis on which the public law can decide the hard cases in contract law. First, the promise-sufficient principle will not help when the promises are incomplete. Second, this Essay hypothesizes that there is an evolutionary trend toward efficient social contracts (or institutions of any kind). Therefore, if different communities at different times, using the latitude that our cultural genetic makeup allows, choose to veer away from that trend, they will suffer by comparison with communities that do not. It is as if they are competing. In understanding what contract law should look like normatively, we must move beyond the purported internally reflective, a priori processes of individual will and understand, through casual and formal empirics and comparisons among economies, the background of how parties’ externally expressed natural impulses act to coordinate on social problems in the games of life. The law should look to how parties act to coordinate through exchange and produce improving welfare when they construct contracts and the rules of contractual enforcement. In that way, contract law will develop around, and not in a manner at odds with, naturalistic sources for normative principles; ones that are consonant with the parties’ own expressions. . .
Contract as Promise, Charles Fried’s modern classic, argues that contract law has a “moral basis” in the “promise principle.” It was written, of course, in response to scholars who foresaw the “Death of Contract.” According to them, it is a mistake to think of contract as a distinct domain of law, with a distinct foundation. Properly understood, contract is just an instantiation of the more basic category of tort, with the latter understood as law that requires persons who wrongfully cause losses to compensate their victims.
Contract-as-tort scholars made their point in different ways. Patrick Atiyah took a historical route, arguing that promising was only center stage in contract law for a brief period in the late-nineteenth and early-twentieth centuries, and has little to do with modern transactions. “Relationalists” downplayed the importance of specific agreements and formal legal rules, instead highlighting the enforcement of extra-legal interpersonal norms. Grant Gilmore combined these and other themes with a healthy dose of sarcasm, decrying the rules of classical contract law as barriers to justice. Despite these differences, all subscribed to the idea that contract collapses into tort. As Fried put it so memorably, to these scholars, a breach of contract “is like a pit I have dug in the road, into which you fall. I have harmed you and should make you whole.” The fact that D harms P by breaking their deal rather than by breaking P’s nose is of no consequence. . .
Contract theory has long been preoccupied with the common law. Contracts is taught in the first year of law school along with the other “common law subjects.” The rise of the modern view of contracts as involving mutually dependent undertakings—as opposed to the earlier independent covenants model—was carried out by the common law courts. Contracts are usually enforced with damages, the classic common law remedy. From proto-realists like Holmes, through the realists and their successors in law and economics, theorists have emphasized the law and downplayed the special role of equity, as developed over the centuries by Chancery and building on a tradition of thought going back at least to Aristotle. Equity is treated either with disdain as useless moralizing or with impatience as a mere proto-version of freewheeling contextualized inquiry that the law courts should be engaging in without artificial constraints of a separate “equity.” Whether they have been antimoralists, formalists, realists, or consequentialists, commentators have been quite unified in their preference for contract law over equity. . .
Pluralism is on the agenda of contract theory. Maybe pluralism is a budding movement, the next big thing; maybe it is just a rehashing of pragmatic muddling through that either shuns or doesn’t deserve the name “theory.” But whatever our predilections or eventual evaluations, it is worth noting that pluralism has become a question for theorists interested in contracts. Some of the scholars articulating what I will call pluralism have adopted this moniker themselves; others have developed pluralist insights without calling on the label. This paper has two goals. The first is to draw together a number of works that develop a pluralistic view in contract theory and to map out some of the different approaches they offer. The second goal is to take some combination of those pluralistic insights further (some will say, aside) in developing a relatively encompassing (though woefully preliminary) pluralistic conceptualization of contract. . .
This essay was part of a symposium on the thirtieth anniversary of the publication of Charles Fried’s Contract as Promise and revisits Fried’s theory in light of two developments in the private-law scholarship: the rise of corrective justice and civil-recourse theories. The structural features that motivate these theories—the bilateralism of damages and the private standing of plaintiffs—are both elements of the law of contracts that Contract as Promise sets out to explain. I begin with the issue of bilateralism. Remedies—in particular the defense of expectation damages—occupy much of Fried’s attention in Contract as Promise, and he insists that this particular remedial response flows from a commitment to promissory morality. I am skeptical of this claim and seek to show the implausibility of grounding compensatory damages in a duty to keep a promise. Rather, to explain this feature of contract law, the duty to keep a promise must be joined with principles of corrective justice. I next turn to the issue of private standing. First, I seek to demonstrate that our plaintiff-centered system of contract law is a genuine puzzle. We cannot dismiss the issue of private standing as a pragmatic and ad hoc response to problems of enforcement. Rather, I argue that a better candidate can be found in the work of civil-recourse theorists who seek to elucidate the value of victims in a liberal society by holding wrongdoers accountable for their wrongs. Finally, I address some of the problems associated with the arguments presented in this essay. How exactly do promissory morality, corrective justice, and civil recourse relate to one another? My conclusion is that, at best, there is an uneasy and ill-defined relationship between these different goals. On the other hand, I hope to show that promissory theories of contract nevertheless must take the issue of private law seriously. The bilateral structure of liability and the system of private standing are major institutional features whose existence must be acknowledged and accounted for in future efforts to defend a promissory vision of contract. . . .
At the time Contract as Promise was written, there were two views of the subject in the field: a traditional, doctrinal and not particularly theorized view that saw contract as the law’s way of allowing private parties to create and enforce the terms that would govern transactions and long-term undertakings, and a burgeoning literature that saw contract law as a tool of social control imposing obligations on parties growing in part, but only in part, from dealings into which they had voluntarily entered. This latter view saw contract law disappearing into tort law, which is quite frankly a means for adjusting—on grounds of perceived fairness, social utility or redistribution—relations between parties. The former was associated with an individualistic ethos friendly to capitalism and free markets, the latter with a more socializing, communitarian ethos. The signal works of this latter movement were Grant Gilmore’s The Death of Contract and Patrick Atiyah’s The Rise and Fall of Freedom of Contract. Atiyah nicely captured the time’s anti-individualist and anti-capitalist tone. . .
As divorce rates in the United States continue to skyrocket, couples keep searching for new ways to protect their relationships and their wallets. Thanks to the contractual nature of the marital relationship, the wary fiancé or exhausted spouse may dictate certain terms relating to his impending marital union or dissolution in the form of a prenuptial or separation agreement. While both agreements are widely accepted options for defining and restricting the rights and liabilities one assumes upon entering or ending a marriage, many jurisdictions recently began entertaining and sanctioning a third method, the postnuptial agreement. The conditions and components required to produce a legitimate postnuptial agreement, however, differ radically from state to state.
Massachusetts, having declined to address the issue in the past despite acknowledging the opportunity, recently spoke up in the case of Ansin v. Craven-Ansin, rejecting the theory that postnuptial agreements are per se against public policy. Instead, the court held that such agreements are valid, provided, however, that the circumstances prompting the agreement and the terms of the agreement satisfy certain requirements. The Massachusetts standard for upholding postnuptial agreements is moderate as compared to other states’ approaches. Ohio, for instance, falls at one end of the spectrum, statutorily abolishing postnuptial agreements as per se against public policy, while Utah takes the opposite position, treating postnuptial agreements no differently than prenuptial agreements.
This Note will first look at how marital law has evolved, specifically focusing on the Massachusetts law that paved the way for the Ansin decision. It will then address the general policy concerns associated with postmarital contracting, focusing on the differing levels of scrutiny that select state courts and legislatures apply to postnuptial agreements, all while exploring the underlying philosophies fueling these decisions. In doing so, it will also consider how the Massachusetts approach, as reflected in the Ansin decision, comports with not only these assorted viewpoints but also with the state’s position on related topics pertaining to marriage, namely, how the judiciary’s rationale behind defending same-sex marriage ought to be considered when assessing the appropriateness of its present approach to postnuptial contracting. Lastly, this Note will consider the most effective means of protecting the policy concerns, such as threats of unfair bargaining power and general inequities, ultimately concluding that Massachusetts may wish to bolster its standard of review as the current considerations may not provide adequate protection. . .