The Construction Industry in the U.S. Supreme Court: Part 1, Contract Law

• Author: By Carl J. Circo
• Pages: 6-17

THE CONSTRUCTION LAWYER6 Spring 2021

Published in

The Construction Lawyer

, Volume 41, Number 2, Season 2021. © 2021 American Bar Association. Reproduced with permission. All rights reserved. This information or any portion

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LEGAL FOUNDATIONS

The Construction Industry in the U.S.

Supreme Court: Part 1, Contract Law

By Carl J. Circo

For roughly 100 years, the

U.S. Supreme Court regularly

resolved common law issues.

During this time, the Court

issued many opinions that

helped shape construction law,

especially through a series of

decisions establishing or rening

contract law principles in the

construction industry context.

Even after the Erie Doctrine pretermitted its common

law role,1 the Court’s decisions resolving federal con-

tract disputes continued to inuence construction law.

This continued until around the middle of the 20th cen-

tury, when the Court’s construction law jurisprudence

faded, virtually disappearing except when construction

industry cases raised issues under the U.S. Constitution

or under federal statutes, regulations, or procedural rules.

This declining inuence on construction law corresponds

to the Court’s need to “husband its scarce adjudicatory

resources for the most fundamental constitutional and

statutory questions.”2 When new and important ques-

tions arise in federal contract disputes today, they can

normally be resolved in the highly specialized federal

agency boards and the U.S. Court of Federal Claims (for-

merly the Claims Court), with the U.S. Court of Appeals

for the Federal Circuit functionally serving as the court

of last resort.3

This article, the rst of a two-part review of the Court’s

decisions on construction industry disputes, addresses the

opinions most directly involving construction contracts.

The second part, to be published separately, will cover

the Court’s other construction industry decisions, includ-

ing those resolving constitutional issues, and applying a

range of federal legislation.

The U.S. Supreme Court and the Formative Period

of Contract Law

Unlike property and tort law, the fundamental princi-

ples of contract law only began to solidify in the 18th

century.4 The body of law we know today as U.S. con-

tract law truly blossomed during the late 19th to early

20th centuries. At that time, U.S. contract law at least

nominally embodied what scholars often call the clas-

sical theory of Williston and of the rst Restatement of

Contracts. Its devotion to individual freedom of contract

and the sanctity of express promises promoted xed rules

governing exchange relationships. The classical concep-

tion offered certainty and predictability, and it tended

toward dogma. By early in the 20th century, the legal

realists came onto the scene and an alternative concep-

tion of contract emerged. It advocated relatively exible

principles over rigid rules, embracing such indetermi-

nate standards as reasonableness, good faith, and fair

dealing, and tolerating a signicant degree of judicial

discretion in resolving contract disputes. It allowed for a

more contextual framework that featured guiding prin-

ciples applying variably to distinct transaction types. In a

word, it was contextual. “Instead of just contracts, there

are contracts for the sale or lease of personal and real

property, construction, personal and professional services,

transportation, the creation of security interests, the orga-

nization of businesses, and the settlement of disputes.”5

These notions became the core of neoclassical contract,

best illustrated by Article 2 of the Uniform Commer-

cial Code, the Restatement (Second) of Contracts, and

Corbin’s scholarly vision.

The chronological and theoretical dividing lines, how-

ever, were not nearly so neat and simple. Even during the

so-called classical contract era, in the courts, if not in the

academy, contract law evolved in more eclectic patterns

that evidenced uneven admixtures of classical and neo-

classical concepts. Then, after the legal realists’ movement

had set the stage, multiple alternative schools of thought

followed. In recent decades, economic analysis, critical

legal theory, relational principles, and neoformalism all

garnered adherents, each gathering support at different

times and in varying degrees, albeit more in the academy

than in the courts.

6

To this day, the abiding tension in

the cases continues to pit classical formalism and textu-

alism against the more exible and contextual principles

of neoclassical contract.

By serendipity, the Supreme Court’s most active

engagement with construction industry disputes coin-

cided with the golden age of U.S. contract law. Many of

the cases involved only claims by or against the federal

government, but those opinions eventually inuenced

state court decisions on similar issues. In this way, the

Court indirectly participated in the evolution of U.S. con-

tract law. For construction lawyers, the most famous of

these precedents came in the Court’s 1918 decision in

United States v. Spearin, establishing the widely accepted

principle that a project owner impliedly warrants the suf-

ciency of detailed plans and specications it provides

Carl J. Circo