SPECIFIC PERFORMANCE: ON FREEDOM AND COMMITMENT IN CONTRACT LAW.

• Author: Dagan, Hanoch

INTRODUCTION 1324 I. THE STATE OF THE ART IN SPECIFIC PERFORMANCE 1328 A. The Common Law in Comparative Perspective 1328 1. The Civil Law Comparison 1328 2. The Common-Law Baseline 1330 B. The Best Economic Account and Its Limits 1332 1. The Winding Path to Joint Maximization 1332 2. The Built-in Limits of Welfarist Analysis 1334 C. The Most Adamant Critique and Its Pitfalls 1336 1. Contract and Promise 1336 2. The Transfer Theory Core, and Why It's Wrong 1338 II. SPECIFIC PERFORMANCE AND THE FUTURE SELF 1340 A. Autonomy in Contract 1341 1. The Moral Virtue of Expectation Damages 1341 2. Why Choice Matters 1343 B. The Current and Future Self 1345 1. The Freedom to Change Your Mind 1345 2. The Line-Drawing Challenge 1348 3. What About Contractors' Preferences? 1349 C. justifying the Common-Law Baseline 1351 D. The Uniqueness Exception and Personal Services Exclusion 1353 1. What is "Uniqueness"? 1353 2. Uniqueness as a Default 1356 3. Personal Service Contracts 1356 III. REFORM IMPLICATIONS AND HARD CASES 1357 A. Circumscribing the Land Sale Exception 1357 1. The Traditional View 1357 2. The Path to Reform 1359 B. The Proper Limits for Opt-Ins 1361 1. Expanding the Scope of Opt-In 1361 2. Equity's Troubling Legacy 1363 3. The Proper Limits on Party Choice 1364 C. Employment Contracts 1366 1. The Autonomy Basis for the Personal Services Exclusion 1366 2. The Asymmetry of Employer and Employee 1369 3. Noncompete Agreements and Autonomy 1371 CONCLUDING REMARKS 1372 INTRODUCTION

When should specific performance be available for breach of contract? Civil-law systems make it the primary remedy for breach, while the common-law jurisdictions treat it as a humble exception with limited application. The same sharp split exists in legal theory on this foundational question of contract, with philosophers tending to endorse the civil-law tradition and economists praising the common-law. (1)

The net result: the law and theory of specific performance oscillates between incompatible values and reforms.

There is a better approach. This Article shows how autonomy, rightly understood, explains when specific performance should be available, and it offers well-grounded reforms that can bring doctrine closer to its animating principles. By anchoring this contract remedy in a conceptually coherent and normatively attractive framework, we can break the decades-long logjam in one of the field's foundational debates.

We understand our task in this Article as an exercise in charitable interpretation and reconstruction of private law. Like other reconstructive efforts, our reading builds on existing practices, reaffirms much of existing law, and offers targeted proposals for justified reforms. We do not pretend to divine the intention of the lawmakers and judges who developed the doctrine we analyze. We do not focus on the accidental historical origins of common-law specific performance in equity courts. Nor do we claim that the common law is, in any systemic sense, superior to its civil-law counterpart--indeed, in another private-law context, we've criticized the common law and shown how the civilian tradition is truer to the law's liberal commitments.'- In this Article, what we do offer is an understanding of how freedom and commitment drive contract law. We do this by decoding specific performance and grounding it firmly in the most fundamental normative commitments of contract law in a liberal polity.

At root, contract is an empowering practice that is, and should be, guided by an autonomy-enhancing mission. (3) Contract's operative doctrines--including the choice of remedy--allow people legitimately to recruit others to their future plans by committing their own future selves in return. This commitment necessarily curtails the self-determination of the promisor's future self--and it's the key to understanding specific performance.

Contract-keeping is justified because and only to the extent that the claimed dominion of the present self over the future self can itself be justified. This seemingly simple proposition encapsulates both the moral premise of the common law and its challenges. The common-law baseline of compensation--and not specific performance--serves as a stronghold for the autonomy of promisors' future selves. Covering a promisee's expectation interest is qualitatively less imposing on the future self s self-determination. Therefore, other things being equal, contract's autonomy-enhancing mission requires that disappointed promisees should be entitled to damages, rather than specific performance.

The requirement that "other things be equal" must be unpacked. This is the terrain on which we do the analytic work to delineate specific performance's proper boundaries. Most contracts can achieve their mission of facilitating promisees' plans by liquidating breach into money. Where this is true, allowing the promisor's current self to encumber her future self with the obligation to specifically perform, rather than to cover the promise's value, cannot be justified by reference to her self-determination. This means, at least for liberal contract law, that it cannot be justified, period.

Other things, however, are not always equal. The first challenge therefore is to identify categories of cases in which liquidating the promisor's performance does significantly frustrate contract's function as a planning tool. Those categories, at least a priori, do justify specific performance. For the most part, the common law correctly identifies these categories. A second, related challenge is to help parties signal cases in which they consider the contract's actual performance significant for their own particular plans, even though their contract does not fall within the usual categories. Here, the common law falls substantially short. Parties have a hard time ensuring they will get specific performance when that's what they want from their contracts. The third challenge pushes in the opposite direction. Here, contract law faces categories of cases, notably involving employment, where specific performance is bound to threaten the self-determination of the future self to such a degree that it cannot be justified--even if excluding such a remedy diminishes contract's empowering potential.

These three challenges in turn yield three practical takeaways. First, we show how the so-called "uniqueness" exception in the common law--covering cases in which specific performance is regularly provided--can and should be refined so it more carefully tracks its (reconstructed) normative foundation. As a practical matter, this means, for example, distinguishing in real estate transactions between sales of residential and commercial property, and between breaches by sellers and buyers. Second, we criticize the resistance of the common law to parties' attempts to opt into specific performance (and to penalty clauses, as we'll show) to remedy breach of their contract. One instance where specific performance should be more readily available is when an employer breaches a promise to continue to employ an employee. Finally, we highlight what may well be the most challenging normative question for liberal contract law: how to address cases in which empowering the current self s constitutive exercise of self-authorship threatens self-determination of the future self. Noncompete agreements vividly illustrate the problem that arises when law overly facilitates the current self's pursuit of welfarist interests. We show the path forward.

Let us state our bottom line plainly. From the standpoint of autonomy, (1) specific performance must not be the default remedy; (2) specific performance should nonetheless be available where monetary recovery cannot substantially avoid the disruption breach causes to a promisee's plan; (3) translating #2 into a workable rule implies that specific performance should be the default if the promisee is a buyer of a unique good for personal use, paradigmatically, a personal residence; (4) because #3 is only a proxy for #2, parties should be able to opt into specific performance, so long as they do not violate #5; (5) specific performance should not be awarded against providers of personal services.

The dominant economic analysis of specific performance also arrives at these five principles, raising the question whether our account is just economic analysis in disguise. It is not. Our five principles derive from contract's autonomy-based leos and lead to a distinct reform agenda. In our account, #2 and #3 are normative defaults. Contra the economists, they do not arise from or depend upon the current majoritarian preferences of contracting parties (as we discuss in subsection II.B. 3 below). (4) On #4, relational justice constrains party opt in, an autonomy-regarding limit missing from the economic account. Finally, #5 yields a mandatory rule. Contra the economists, it is not contingent on people's imperfect foresight, which technology may ameliorate.

Taken together, these normative commitments constitute an autonomy-enhancing law of specific performance--one that supports contracting parties as they trade off terms and remedies in the service of their self-determination. We show that the common-law baseline (5) deserves moral praise--contra the economists' pragmatic apology and the philosophers' moral condemnation. (6)

Our account suggests a new perspective on specific performance, one that offers useful legal reforms and highlights new questions that must he addressed if contract law is to be fully loyal to its liberal commitments. Part 1 briefly outlines the existing terrain of specific performance; Part II shows how autonomy, particularly, the challenge of respecting the future self, unlocks the key to understanding specific performance; Part III lays out the doctrinal and reform takeaways.

1. THE STATE OF THE ART IN SPECIFIC PERFORMANCE

   We briefly outline the existing terrain of specific performance, first considering...