Changing Your Mind: The Law of Regretted Decisions.

• Author: Posner, Eric A.
• Position: Review

CHANGING YOUR MIND: THE LAW OF REGRETTED DECISIONS. By E. Allan Farnsworth. New Haven: Yale University Press. 1998. Pp. xi, 271. $30.

Professor Farnsworth's(1) topic is what he calls the "law of regretted decisions," those laws "that apply when you change your mind and reverse a decision" (p. ix). One finds such laws across many doctrinal divisions. Contract law influences the decision to change one's mind about keeping a promise. Tort law influences the decision to change one's mind after starting to rescue another person. The law of wills influences the decision to change one's mind about the distribution of one's assets among heirs. Farnsworth believes there are general principles that underlie the law of regretted decisions. Although there are some "anomalies," Farnsworth hopes to "further the rationalization of legal concepts and the identification and eventual correction of their deficiencies" (p. ix). The rationalization of legal concepts appears to mean the identification of the common principles that underlie them and the revision of the legal concepts that violate those principles.

What are these principles? Farnsworth identifies six: reliance, intention, dependence, public interest, anti-speculation, and repose. But only the first two play an important role in Farnsworth's argument. The dependence principle, which appears to refer to cases in which conduct (rather than promising) puts others in a vulnerable position, is summoned to explain why a person might be liable in tort for beginning but failing to complete a rescue, and why family law holds a stepfather liable for child support after divorce if he has cut off the child's relationship with the natural father (pp. 93-96). The public interest principle, which is apparently a principle of economizing judicial resources, is ushered in to explain a handful of rules of civil procedure that discourage parties from changing their arguments.(2) The anti-speculation principle is hauled out to explain why certain "elections" -- by the victim of breach, to choose one remedy rather than another, or to terminate the contract, or by the victim of fraud to avoid the contract -- are irreversible (p. 184). If they were not, the victim would in effect have a valuable option, but "there is a pronounced judicial distaste for allowing one party to speculate at the other's risk" (p. 184). And the repose principle is trotted out to explain why statutes of limitation bar claims even when there is no reliance on the claim holder's inaction (p. 194). These arguments may be reasonable, but they are peripheral, and unsurprising as well, so I will not focus on them.

The reliance principle has the starring role in Farnsworth's book, with the intention principle playing a supporting part. The reliance principle holds that the law should protect people who (reasonably?) rely on the representations or actions of others. The intention principle holds that the law should protect people's intentions. Farnsworth's grand claim appears to be -- he is nowhere very specific -- that the law of regretted decisions can be explained using these two principles (when the other four do not intervene). The law does not allow a person to change his mind (and, more important, act on that change of mind) when doing so harms someone who has (reasonably?) relied on the initial representation or action. When the reliance principle fails to explain a law, the intention principle is called upon. The law does not let a person change his mind when he did not intend to leave himself the opportunity to do so.

The argument runs into trouble quickly. Farnsworth correctly points out that the reliance explanation is circular (p. 40). If the law did not enforce promises, people would not rely on them -- or at least people would not rely on them being legally enforced. So reliance cannot be the reason why the law enforces promises.

To understand this argument, observe initially that frequently the law does not enforce promises on which people rely. For example:, if you break your promise to give me $100 as a gift, courts generally will not award me a remedy even if, relying on your gift, I buy a $100 widget on credit. Or, if you break your promise to buy my house, but I did not accept by making a return promise to sell my house and then rely on your promise by firing my real estate agent, courts will not give me a remedy. Or even if I did accept, but we never reduced the contract to writing, courts generally will not give me a remedy even if I rely in some way. In all these cases, I rely on your promise, but would not receive a remedy.

Even when the law enforces promises, it does not always provide a remedy that compensates a person to the full extent of his reliance. Consider a construction contract between an entrepreneur and a contractor that provides that the contractor will complete a new store on a certain date. Making no allowance for delay, the entrepreneur orders stock to be delivered on the day after the completion date. When the contractor fails to finish on time, the entrepreneur claims as damages the cost of providing additional transportation and storage for the stock.(3) A court will not usually award such damages. Reliance is protected only when it is reasonable.

But the theory that the reliance principle protects reasonable reliance, rather than any reliance, is not useful without an account of what is reasonable. To understand what reasonable reliance is, one needs a separate theory about what counts as reasonable reliance and what counts as unreasonable reliance.(4) The claim that contract law reflects the influence of a reliance principle, without more, does not provide such a theory.

Farnsworth understands all this. Yet he says:

These objections ... ignore the certain outcry from those in the workaday world if the value of a promise had to be as deeply discounted as it would if the law did not protect the resulting expectations or reliance. The circularity argument overlooks the possibility that, regardless of legal consequences, a promise may arouse expectations or induce reliance because the promisee supposes that the promisor will be encouraged to perform by extralegal restraints. [p. 40] The first point confuses the explanation and the thing that is to be explained. Everyone agrees that the legal enforcement of promises is sensible, but that does not settle the question of why legal enforcement of promises is sensible. That's what one needs a theory for, a theory different from the reliance theory. The "workaday world" would not object to learn that a theory other than the reliance principle explains why people can rely on promises; it would not care. Farnsworth's second point needs further development to be convincing. If extralegal restraints are effective, why is it necessary for the law to replace them? If they are not effective, why would people rely on them?

The most plausible answer to the question of why promises are enforced, is that by enforcing promises, the law enables people to make commitments that they would otherwise not be able to make, and these commitments allow people to obtain good things in return (cash, services, goods). If I cannot legally commit myself to repay loans with interest, banks will not lend me money to buy a house. One does not need to be a thoroughgoing Benthamite to recognize the value of laws and institutions that enable people to accomplish goals that are important to them and enhance their well-being. Indeed, Farnsworth, who does not seem to be a thoroughgoing Benthamite, agrees with this welfarist explanation for the enforceability of promises (see Ch. 1 and pp. 38, 42). But he does not attempt to reconcile the welfarist view and the reliance view that he adopts; indeed, he does not even say what he thinks is the relationship between these two explanations.

The circularity problem dissolves as soon as one sees that the promisor and promisee have a joint interest in taking actions that maximize the expected value of their contractual...