At the time Contract as Promise (1) 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, (2) 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 (3) and Patrick Atiyah's The Rise and Fall of Freedom of Contract (4) Atiyah nicely captured the time's anti-individualist and anti-capitalist tone:
Promise-based liability rests upon a belief in the traditional liberal values of free choice. Many still admire these values but they bring with them, inescapably, many other consequences which are today less admired, especially in England. They bring, in particular, the recognition that some individuals are better equipped to exercise free choice than others, through natural aptitude, education, or the possession of wealth. And the greater is the scope for the exercise of free choice, the stronger is the tendency for these original inequalities to perpetuate themselves by maintaining or even increasing economic inequalities. (5) Atiyah is particularly concerned to associate with these, he thinks, increasingly obsolete values of promise-based contractual liability, the enforcement of purely executory contracts and a damage regime measured by the expectation that such contracts generate. To this purely promissory and forward-looking ground for contractual obligation, he contrasts the more sympathetic, backward-looking grounds of liability based on the harm that a disappointed promisee suffered when he acted in reliance on the promise, or on the benefit that the disappointed promisee has conferred on the faithless promisor. These grounds of liability would cause contract law to disappear into the backward-looking grounds of tort and restitutionary liability, and that absorption of contract into tort was indeed the thesis of Gilmore's book.
The socializing thrust of this critique of contract law was also associated with the legal realist movement, which had a long history in American law, and its post-1960s, often frankly Marxist-tinged avatar, the critical legal studies movement. The critical legal studies movement disputed, indeed mocked, the pretensions of standard contract doctrine to provide a neutral framework for discerning and implementing the terms of agreements freely arrived at. The analysis not only delighted in showing that these supposedly neutral doctrines were often contradictory and incoherent but also that the real energy behind contract adjudication--as elsewhere in the law--were social forces implementing social agendas. What those agendas were depended on the interests of those in power and those whom they represented or with whom they made common cause. The signal work in this genre was Duncan Kennedy's Form and Substance in Private Law Adjudication (6)
Against these intellectual and cultural themes, Contract as Promise sought to assert the coherence of standard contract doctrine as providing the structure by which actors could determine for themselves the terms of their interactions and cooperation--whether in commercial or in personal relations. The thesis was avowedly moralizing. it was based on a morality of autonomy, respect for persons and trust. Promise is a kind of moral invention: it allows persons to create obligation where there was none before and thus give free individuals a facility for extending their reach by enlisting the reliable collaboration of other free persons. That we must not harm another and that we must fulfill the terms of special relationships that may not have been of our choosing are moral obligations that are laid upon us. The obligation of a promise we lay upon ourselves. To be sure, this remarkable feature of promises can be trivialized by saying that the institution of promising and its obligations precedes any particular promissory obligation we may assume, but the fact remains that until we invoke the institution and do so with the very purpose of activating its obligations, those distinct obligations do not exist. It is a remarkable feature of the institution that what before was--or may have been (7)--morally indifferent or optional becomes nonoptional, and becomes nonoptional because we want it to be so as a way of achieving our purposes.
This is not to say that promissory obligation in general does not have its roots in deeper, more general moral soil. The institution, as such, is not an invention ex nihilo. It depends on the deeper morality of trust and respect for persons. It is an institution, like language, that allows us to accomplish an infinite variety of ends. But the efficacy of language depends in general on a morality of truth-telling. If communications had no more than a random relation to the truth, language would be useless to accomplish its (our) ends. And truthfulness depends on trust, and trust on a morality of mutual respect. Trust may be (mis)represented as merely providing a more or less secure prediction of another's future behavior. ("Trust him to lie, cheat and steal if he thinks he can get away with it.") But trust allows a particular kind of prediction, coordination and collaboration. It allows coordination based on an infinite and transparent mirroring of mutual recognition and respect. We start with respect, which allows trust, which allows language, and finally comes to the institution of promising. In each step along the way our moral powers are amplified, as if each raised to a higher power the one before. And, as was said in Contract as Promise, what starts as a means for enlarging human purposes becomes--perhaps only adverbially--an end in itself: it is desirable to attain our ends by the route of trust and promising, even if we could get there, and quite innocently, just as well without them. (8)
Thirty years later, the intellectual fashion that provoked Contract as Promise has faded from prominence. In its place has arisen a vibrant, voluminous and often intricate literature offering alternative accounts and justifications for what might be called the classical law of contract. (9) Indeed, the economic analysis of law may today be the dominant intellectual approach to legal institutions generally and contract law in particular. The law and economics movement certainly shares nothing of the nihilistic and anti-free-market dispositions of the critical legal studies movement. Work in the economic analysis of contract law genre takes two closely related forms: one normative, one neutrally analytical. The analytic takes as its premise that rational actors seek to maximize their long-term advantage and will prefer legal arrangements that facilitate this choice. In respect to contract, legal institutions may be analyzed as either serving this disposition of the contracting parties, or if they do not, as serving the interests of some other class of actors, or as being irrational. (10) The normative law and economics account starts with a premise quite similar to that embraced by Contract as Promise: the law should be designed to allow people in a voluntary relationship to structure that relationship in the way that they judge will serve their interests over the long run. (11) Respect for the moral status of individuals requires that they be treated as the best judges of their own interests. This premise builds on several background premises that also accord with Contract as Promise: for instance, that the arrangement does not impose costs on third parties that those third parties have any right to complain about; (12) that the individuals are at least ordinarily competent judges of their own welfare; that neither individual has been forced or deceived into entering the relationship. Most distinctive for both the law and economics analysis of contracts and the morality of promising that underlies Contract as Promise is the assumption that individuals (promising or contracting) have a certain persistence as entities over time, so that what an individual chooses for his future, he is choosing for himself, not for another person who may happen to have the same name and DNA; and what he gets by that choice he may not complain of, as if it had been chosen for him by someone else. (13)
Given the similarity of the premises of the law and economics school and of Contract as Promise, it is not surprising that the two should arrive at similar conclusions on many of the main points of contract doctrine. The former is utilitarian and proceeds from a premise of consumer sovereignty or subjective measure of welfare; (15) the latter is avowedly Kantian and more or less takes its cue from Kant's The Metaphysical Elements of Justice. (16) In their deepest premises, the two analyses are quite dissimilar, differences that come to the fore when the issue is the effect of social arrangements on the overall welfare of groups, (17) as opposed to the joint welfare of two contracting parties. The convergence is particularly salient in the design of institutions that facilitate the coordination through agreements of the energies of two otherwise independent persons. Legal regimes by their nature are concerned with institutional design, and both the Kantian and utilitarian perspectives focus on maximizing the preferences of individuals ex ante; that...