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III. Contracts

Foundational Materials

Useful collections of readings on contract law include: FOUNDATIONS OF CONTRACT LAW (Richard Craswell & Alan Schwartz, eds., 1994); CONTRACT THEORY (Randy E. Barnett, ed., 1995); READINGS IN THE ECONOMICS CONTRACT LAW (Victor Goldberg, ed., 1989); and THE ECONOMICS OF CONTRACT LAW (Anthony T. Kronman & Richard A. Posner, eds., 1979).

For an overview of the law and economics literature on various aspects of contract, consult Chapter 4 of RICHARD POSNER, ECONOMIC ANALYSIS OF LAW. For a contrast of Posner’s strong defense freedom of contracting with Cardozo’s more fluid contracting doctrine, see, Lawrence A. Cunningham, Cardozo and Posner: A Study in Contracts, 36 WM AND MARY L. REV. 1379 (1995).

E. ALLAN FARNSWORTH, WILLIAM F. YOUNG, AND CAROL SANGER, CONTRACTS: CASES AND MATERIALS (6th ed. 2001). The standard one-volume law student reference work on the subject. For a highly accessible treatise, which can be used as a starting point for further research in any area of contract law, see FARNSWORTH ON CONTRACTS (4th ed. 2004). Professor Farnsworth has a particularly keen appreciation for freedom of contract, and is considered the preeminent living contracts authority, whose work has sought to develop a coherent theory across the field of contract law. See, e.g., E. Allan Farnsworth, Precontractual Liability and Preliminary Agreements: Fair Dealing and Failed Negotiations, 87 COLUM. L. REV. 217 (1987) (arguing that existing doctrines of contractual interpretation, imaginatively applied, may resolve problems of fair dealing, lost expenses, and lost opportunities that arise in complex modern business negotiations);  E. Allan Farnsworth ‘Meaning’ in the Law of Contracts, 76 YALE L. J. 939 (1967) (analyzing errors made by courts in interpreting contractual language, and offering suggestions for change).

RANDY E. BARNETT, PERSPECTIVES ON CONTRACT LAW (3d ed. 2005).  Casebook by one of the nation’s foremost libertarian thinkers.

MARVIN A. CHIRELSTEIN, CONCEPTS AND CASE ANALYSIS IN THE LAW OF CONTRACTS (4th ed. 2001). A good, one-volume student text. Chirelstein’s analysis is crisp and concise.

Theoretical Models of Contract

ROBERT S. SUMMERS, LON L. FULLER (1984). This biography offers a good discussion of the noted legal philosopher’s view of contract, which included due regard for freedom, responsibility, and the value of preserving expectation interests.

CHARLES FRIED, CONTRACT AS PROMISE (1981). This ambitious book seeks “to show how a complex legal institution, contract, can be traced to and is determined by a small number of basic moral principles. . . .” In spinning his moral theory of contract—in which the enforcement of a contract flows from a party’s obligation to keep his promise—Professor Fried finds himself at odds with the law-and-economics view of the subject at several points. For a concise (12-page) libertarian critique of the “promise” theory of contracts, see Randy E. Barnett, Some Problems with Contract as Promise, 77 CORNELL L. REV. 1022 (1982).  Amongst Professor Barnett’s criticisms is the fact that a moral theory of promising alone would have courts enforcing purely moral commitments, “which is tantamount to legislating virtue.”  In contrast, Professor Barnett’s “consent theory” of contract premises enforceability upon a party’s objectively manifested consent to the transfer of his rights.  See Randy E. Barnett, A Consent Theory of Contract, 86 COLUM. L. REV. 269 (1986).

GRANT GILMORE, THE DEATH OF CONTRACT (1974). In this short book, Professor Gilmore made the case that “‘contract’ is being reabsorbed into the mainstream of ‘tort’.” Many writers took issue with Gilmore’s diagnosis, and indeed his death certificate for contract now looks to have been signed all too soon. However, for evidence that all is not well along the contract-tort boundary, see Walter Olson, Tortification of Contract Law: Displacing Consent and Agreement, 77 CORNELL L. REV. 1043 (1992). For a fascinating discussion of the book, see Symposium: Reconsidering Grant Gilmore’s The Death of Contract, 90 NW. U. L. REV. 1 (1995).

Readings on Individual Topics Within Contract Law

MICHAEL J. TREBILCOCK, THE LIMITS OF FREEDOM OF CONTRACT (1993). The best-known Canadian practitioner of law and economics examines such topics as externalities, coercion, information failures, paternalism, and discrimination, and their implications for free contract.

Eric A. Posner, Economic Analysis of Contract Law After Three Decades: Success or Failure?, 2003 YALE L.J. 829 (2003).  An argument that although economic analysis provided clarity to earlier contractual concepts, it is unlikely to produce an “economic theory” of contract law.  Moreover, economics cannot explain contract law and does not provide the normative grounding for a reform of contract law either. For a partial response to E. Posner, consult, Avery Katz, The Economics of Form and Substance in Contract Interpretation, 104 COLUM. L. REV. 496 (2004), which examines contract interpretation approaches and makes recommendations for private actors on how to make practical use of economic analysis in contract law.

Stewart Macaulay, An Empirical View of Contract, 1985 WIS. L. REV. 465. In 1963 Professor Macaulay called into question the real-world importance of formal contract terms and contract law in his landmark article Non-Contractual Relations in Business: A Preliminary Study, 28 AM. SOC. REV. 55 (1963). The 1985 article offers his more mature thoughts on the subject, as well as a synopsis of his 1963 article.

A large literature is devoted to the question of what circumstances justify a court in refusing to enforce a contractual agreement. Three particularly good discussions of this subject are Richard A. Epstein, Unconscionability: A Critical Reappraisal, 18 J. L. & ECON. 293 (1973); Anthony T. Kronman, Contract Law and Distributive Justice, 89 YALE L.J. 472 (1980); and Randy E. Barnett, A Consent Theory of Contract, 86 COLUM. L. REV. 269 (1986). For an argument against judicial “gap-filling” in cases of mistake or frustration, see Andrew Kull, Mistake, Frustration, and the Windfall Principle of Contract Remedies, 43 HASTINGS L.J. 1 (1991). For an assessment of the frequency of paternalistic contract decisions, see E. Allan Farnsworth, Developments in Contract Law During the 1980s: The Top Ten, 41 CASE W. RES. L. REV. 203 (1990).

Robert Cooter & Melvin Aron Eisenberg, Damages for Breach of Contract, 73 CALIF. L. REV. 1434 (1985). A thorough discussion of different contract remedies, including an economic analysis of them.

Richard Crasswell, Against Fuller and Perdue, 67 U. CHI. L. REV. 99 (2000).  Critique by a leading scholar of the traditional tripartite classification of damages – expectation, reliance, and restitution – and a proposal for a modern classification of damages into: remedies above expectation, remedies that approximate expectation, and remedies below expectation.

Saul Levmore, Explaining Restitution, 71 VA. L. REV. 65 (1985). A useful examination of claims for payment made by providers of non-bargained benefits to silent or disclaiming recipients.

Avery Katz, When Should an Offer Stick? The Economics of Promissory Estoppel in Preliminary Negotiations, 105 YALE L.J. 1249 (1996).  Examination of certain instances when promissory estoppel can be economically efficient and recommendations for regulators on how to apply the doctrine to create optimal reliance by parties intending to contract.

Omri Ben-Shahar, Contracts Without Consent: Exploring a New Basis for Contractual Liability, 152 U. PA. L. REV. 1829 (2004).  Exploration of the mutual assent doctrine as an all-or-nothing approach to contract formation, and a contrasting proposal for an alternative doctrine of “no-retraction” that provides ever-greater contractual liability as consensus between parties nears.

Steven Shavell, Specific Performance Versus Damages for Breach of Contract: An Economic Analysis, 84 TEX. L. REV. 831 (2006).  Analysis of when parties would prefer specific performance over damages in a breach of contract situation, with a conclusion that they will prefer specific performance for conveyance of existing goods and that they will prefer damages for production of goods or services.

Alan Schwartz & Robert E. Scott, Contract Theory and the Limits of Contract Law, 113 YALE L.J. 541 (2003).  A powerful normative argument that contract theory should be used exclusively to allow contracting parties to maximize their joint gains from transactions.  Profs. Schwartz and Scott argue against the UCC and much modern scholarship and find that the best way to achieve such maximization is through a textual approach to contract interpretation.

Mark L. Movsesian, Rediscovering Williston, 62 WASH. & LEE L. REV. 207 (2005).  A favorable reexamination of the writings of contracts scholar Samuel Williston.  Prof. Movsesian argues that much of Williston’s work – his insistence that doctrine must be justified by real-world consequences, his assertion that rules carry only presumptive weight, and his institutional reasons for judicial restraint – finds common ground with the new formalist movement and can even be considered pragmatic when understood in the context of Williston’s goals and intended audience.

Last updated October 2008

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