The moral impossibility of contract.

• Author: Alces, Peter A.

Contract theory is incoherent; so Contract is amoral. Let me explain.

The function of theory is heuristic. The object of theory is either normative or positive. The best theorists are able to blur the distinction, often for rhetorical purposes. Legal theory (at least in some of its iterations) depends upon a posited conception of doctrine (and doctrine, too, is heuristic). That is, theory either explains or corrects doctrine. (1) To accomplish that, legal theory is dependent upon a theory of legal doctrine. Contract theory, whether deontological, consequentialist, or pluralist, begins and must end with the doctrine, and must have something to say about doctrine that serves a heuristic purpose (as well as, perhaps, other purposes). My interest is not so much with what Contract theorizing tells us, heuristically, about Contract doctrine; my concern is more with what Contract theory, in all of its extant phases, assumes about the nature of Contract doctrine. In this paper, I will engage each of the foregoing observations about the theory-doctrine dynamic and try to say something by drawing conclusions about the relationships among them.

In efforts to formulate the deontological or consequentialist conceptions of Contract, or to demonstrate that Contract is neither wholly explicable in terms of one or the other type of theory, claims are necessarily made about the nature of Contract as a body of doctrine, claims about what doctrine is. I do not mean simply that theorists disagree about what a particular doctrine entails, such as what a court should do in order to apply, for example, the consideration, frustration, or unconscionability doctrines correctly. I acknowledge that reasonable minds disagree about the substance and constituents of those common law Contract doctrines. That is not my point. Instead, I am curious about what it means for a set of rules (say, the set of rules that fixes the parameters of "agreement") to be doctrine, the phenomenon that theory would try to explain.

Heretofore we have assumed the accessibility of doctrine as an idea set. Though we might disagree about the theory or theories needed to make sense of that idea set (or the relationship among plural theories), we have largely taken for granted that we are all talking about the same kind of thing when we use the term "doctrine" to describe what it is theory rationalizes. Examination of the nature of doctrine qua doctrine could reveal something that would explain why particular Contract theory fits particular doctrine uneasily and why Contract theory generally cannot do the work we would have it do, as we would have it do that work. If we were able to arrive at an adequate Contract theory, we would have established the perspective from which to explain (2) and correct. We could appraise the efficacy of certain Contract rules and the results of those rules' application and operation in terms of the theory. In other words, if Contract theory tells us that Contract accomplishes X, we could decide that Contract fails or succeeds in terms of its realization of the goal Contract theory has identified. For example, were Contract really about facilitating Pareto superior moves, we could consider a Contract rule's operation and decide whether it serves or frustrates that object. Alternatively, if Contract is about autonomy, we could appraise its efficacy at vindicating free will, or a particular deontological theory's conception of autonomy. To the extent that theory is serving a positive function, we could test a particular theory's ability to tell the future, notwithstanding epistemological limitations that might frustrate the predictive efficacy of even the best theory. (3) But ultimately, I argue, we cannot arrive at an adequate Contract theory, one that can appraise and predict Contract doctrine, because Contract doctrine resists theory.

My conclusion is that, given the nature of Contract doctrine, theory cannot make sense of Contract, that is, cannot make sense of Contract in any way particularly useful to morality. So, at least as far as theory is concerned, Contract is a failure, an abject failure at that. It does not "fly," at least it certainly should not. But bumble-bee-like it does. Somehow it does. How can that be? I propose that Contract seems not to fly as a theoretical matter because we have misunderstood (or, perhaps, incompletely understood) the fit between theory and doctrine. Once we appreciate the theory-doctrine fit, in terms of Contract, we will see how it is that Contract flies, such as it does.

There is something artificial in the lines Contract theory would draw, so therefore something imprecise about the way we would determine what (doctrine) Contract must explain. If we say that our theory of Contract must account for why it is that certain promises are enforceable at law (which seems a pretty good shorthand for the task confronting Contract theory), then does that theory as well have to explain the consequences of promise breach, the damages, or what it means "to enforce" a promise? And if those damages are not always based on the bargain, but say, the expectation interest, does Contract theory have to tell us why Contract can settle on a different measure? If that different measure is indistinct from damages based on another theory, such as restitution or promissory estoppel, does a theory of Contract have to explain why that other measure is appropriate (or inappropriate)?

The temptation to limit the work we would have Contract theory do is powerful. It is usually easier to explain less than it is to explain more. But we fail to explain all that we need to explain at our peril: if our theory under-explains, it is not a theory of Contract. (4) There are two phases of that conclusion.

First, a theory of Contract must explain the work that Contract does. If we look to Contract to determine the rights of parties to a consensual relation, when events subsequent to the formation of their contract reveal gaps in their understanding, Contract should provide an answer. So Charles Fried, as far as I am concerned, conceded the failure of his promise theory when he concluded that "[i]t would be irrational to ignore the gaps in contracts, to refuse to fill them. It would be irrational not to recognize contractual accidents and to refuse to make adjustments when they occur. The gaps cannot be filled, the adjustments cannot be governed, by the promise principle." (5) It is all right that Fried so fixes the limits of his promise principle, but then it would be best to conclude that the promise principle only explains some of Contract--that part of Contract which Fried believes is based on promise; his is not a theory of Contract.

Second, though a theory of Contract must not embrace legal mistakes, decisions where the courts simply get it wrong, the theory must correct mistakes. Indeed, that is a principal role of theory: theory separates the chaff from the grain. But "mistake" becomes a matter of experience. If a "mistake" happens frequently enough, or is followed often enough (and it is not clear what "enough" would certainly be) then it becomes part of Contract and our theory of Contract must account for it. That does not mean that the theory could not provide the means to compare resolutions of recurring controversies and indicate the superiority of one over another; to the contrary, theory must provide the means to do that. So if Peevyhouse v. Garland Coal & Mining Co. (8) reached the correct conclusion, and Groves v. John Wunder Co. (7) reached the wrong conclusion, theory needs to tell us why that is so. In fact, I would go so far as to say that a (perhaps "the") test of a theory is its ability to tell us which of two divergent contracts decisions is correct and why, or at least why what appear to be divergent decisions in fact are not. (8) A theory which cannot do that is not a theory of Contract, though it may be a theory of something else, such as "promising," (9) that would have significance (perhaps even legal significance) both within and without Contract.

Those two objects of the theoretical enterprise--"explanation" and "correction" would be a useful shorthand--determine, then, the sum and substance of the theoretical enterprise. (10) The observations about the relationship between doctrine and theory that follow concern the nature of doctrine that theory must understand in order for theory to be able to explain and correct. What has been lacking in theoretical study of Contract heretofore has been an appreciation of the nature of doctrine in its relation to theory. Theory not grounded in a proper appreciation of the nature of doctrine cannot be coherent theory because it cannot explain and correct. And morally motivated Contract theory that cannot serve normative functions--explanation and correction--ultimately can only be amoral.

Part I of this Essay will present an important but not atypical doctrinal challenge: the nature of agreement after Judge Easterbrook's opinion in ProCD, Inc. v. Zeidenberg. (11) That presentation will set the stage by providing the opportunity to posit concretely the nature of doctrinal inquiry Contract theory must engage. But still before we can appraise the value of coming to terms with the nature of Contract doctrine and its relation to theory, it is worthwhile to present the prevailing iterations of Contract theory, in broad categories. Part II will do that, albeit summarily, and will take account of both "horizontal" and "vertical" conceptions of theories' interrelation as a concession to pluralism. But just as a theory will not do the work we need Contract theory to do, an amalgam of theories too will not quite do the trick. Even such an amalgam would have to understand doctrine differently than we now do in order to convince. Part III will formulate doctrine in terms that (1) are true to doctrine's operation, and (2) reveal why no single theory of Contract or...