Contract Law Basics = Foundations of Contract Law

Author: (American) Krauswell, (American) 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 perspectives. The emphasis on these papers reflects a certain preference (which we feel quite justified about). We focus on these two analytical methods because we aim to achieve three goals through this book: First, we hope to clearly demonstrate our stance on the values of contract law through this collection of papers. 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 articulated their stance on legal values in modern times. Second, we hope this book can help 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 has profoundly impacted legal research, so this collection also includes some articles on this topic. Third, we hope this collection can address specific contract law issues covered in the first-year law school course. We aspire for the series of papers 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 rarely includes 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 or the scope of liability in contract negotiation in Hoffman v. Redlich. In fact, we adopt a practical principle: understanding of normative theories is achieved through examining how specific issues are resolved, rather than solely through 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 is validly formed but one party fails to perform. Chapter 3, "Defining the Scope of Performance Obligations," also 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 issue of contract formation. 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 on rescission and restitution (pp. 115–126) actually concerns whether one party has "substantially performed" the contract, and this content could have been placed in Chapter 3, "Defining the Scope of Performance Obligations," rather than Chapter 2, "Remedies for Breach of Contract." The discussion on "unconscionability" (pp. 160–174) in Chapter 3, combined with "unilateral or mutual mistake," would have been more appropriately 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 study at any stage of the contract law course. Placing these topics at the beginning of the collection does not necessarily mean the course must start with them (we never teach in this order). The arrangement of the book’s sections is designed to accommodate different teaching styles of contract law as needed. If these topics were scattered throughout the discussion of specific legal principles, the flexibility of our arrangement would be compromised. This collection was originally intended for use in first-year contract law courses in American law schools but is also aimed at a broader readership. The papers in this collection provide a comprehensive reflection of the theories on contractual behavior developed by legal scholars, economists, and philosophers with normative thinking 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 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 help of many people. We are particularly grateful to the editor of this series, Roberta Romano. Ian Ayres, David Carroll, Jason Johnston, and David Schlossman provided useful suggestions and feedback on the book’s development. Stacy Cole, Hanoch Dagan, and Terence Garland assisted with our research. Excerpts from papers are marked with ellipses, but omitted footnotes and subtitles are not marked. Richard Krauswell Alan Schwartz Los Angeles New Haven December 1993