Fundamentals of Contract Law

Author: Robert C. Klasek (USA) Schwartz
Publisher:
Publish Date: 2005-05-01
Features: Most of the papers in this book employ economic methods for theoretical analysis, while some use ethical theories to explain viewpoints. The emphasis on these types of papers reflects a certain preference (which we feel is well-justified). We value these two analytical approaches because we aim to achieve three goals through this book: First, we hope to clearly articulate our stance on the values of contract law through this collection of essays. In selecting the papers, we intentionally excluded those that specifically interpret the current state of case law. However, this selection criterion also overlooks other important analytical methods that traditionally do not engage directly with normative legal theory. For example, historical analysis is rarely addressed in this book (Clair Dalton’s article is an exception). In fact, only economists and philosophers (or legal practitioners deeply influenced by these principles) have clearly demonstrated their stance on legal values in modern times. Second, we hope this book helps explain the motivations behind parties entering into contracts. Recently, economists have developed extensive theories to explain contractual behavior. Many of these theories are built upon mathematical tools and rigorous econometric methods. However, we have excluded such articles as well. Nevertheless, the influence of technical economic theories on legal research is profound, so this collection includes some articles that touch on this field. Third, we hope this collection addresses specific contract law issues covered in the first-year law school curriculum. We aspire for the series of essays in this book to accompany students throughout the entire semester or even academic year of studying contract law, rather than being classified as mere "theoretical overviews" at the beginning or end of the course. Therefore, the book contains few articles that discuss the entire contract law system, with most being thematic discussions, such as the limitation on compensation for indirect damages in Hadley v. Buxton and the scope of liability in contract negotiation in Hoffman v. Redlich. In fact, we adopt a practical principle: understanding normative theory is achieved through examining how specific issues are resolved, rather than relying solely on abstract analysis of the theory. Of course, this standard excludes articles that explain the overall theory of contract law without addressing specific issues. The organization of this collection reflects our goal of aligning with a first-year contract law course. The core of the collection consists of Chapters 2–5, structured according to Lon Fuller’s "reversed" or remedial approach. Thus, Chapter 2 explains legal remedies for breach of contract, assuming the contract was validly formed but one party failed to perform. Chapter 3, "Defining the Scope of Performance Obligations," still assumes a validly formed contract and discusses what obligations are required under the contract. This chapter explores topics such as implied excuses (impossibility, frustration of purpose, mistake) and implied warranties. It also includes recent theories on long-term "relationship" contracts. Finally, Chapters 4 and 5 discuss the formation of valid contracts. Chapter 4 addresses consideration and traditional offer-and-acceptance issues, while Chapter 5 covers topics such as unconscionability and other defenses in contract formation. Clearly, this classification is somewhat arbitrary. For example, the discussion of rescission and restitution (pp. 115–126) actually concerns whether one party has "substantially" performed the contract, and this could have been placed in Chapter 3, "Defining the Scope of Performance Obligations," rather than Chapter 2, "Remedies for Breach." The discussion of "non-disclosure" (pp. 160–174) in Chapter 3, combined with "unilateral or mutual mistake," would have been better placed in Chapter 5, "Defenses in Contract Formation." These examples merely illustrate that the law is an intricate web. From a practical standpoint, we have strived to make each section of the book "self-contained" (though references are cross-referenced between chapters), allowing for flexible reading order. This "self-contained" or "modular" principle is also reflected in Chapter. The articles in this chapter have potential connections to every part of a contract law course, discussing three issues: the implementation of promises, the selection of breach of contract rules, and the distributive effects of contract law. These topics are closely related to both contract formation and breach of contract remedies, making them suitable for any stage of the contract law course. Placing these articles at the beginning of the collection does not necessarily mean the course must start with these topics (we never teach in this order). The arrangement of the book’s sections is designed to accommodate different teaching styles in contract law at any time. If these topics were interspersed within discussions of specific legal principles, the flexibility of our organization would be compromised. This collection was originally intended for use in first-year contract law courses in U.S. law schools but is also aimed at a broader readership. The essays in this book provide a comprehensive reflection of the theories on contractual relationships developed by legal scholars, economists, and philosophers over the past 15 years. Contract theory has flourished during this period. Therefore, this book can be used in pre-law academic seminars (as we have already tried), as well as in undergraduate or graduate courses on law and economics or contract theory. The publication of this collection was made possible by the assistance of many people. We are particularly grateful to the editor of this series, Roberta Romano. Ian Ayres, David Carroll, Jason Johnston, and David also provided useful suggestions and feedback. Stacy Cole, Hanoch Dagan, and Terence Garland assisted with our research. Excerpts from articles are marked with ellipses, but omitted footnotes and subtitles are not marked.
Robert C. Klasek
Alan Schwartz
Los Angeles, New Haven
December 1993