Professional Documents
Culture Documents
SSRN Id1030634
SSRN Id1030634
Curtis Bridgeman*
CONTENTS
INTRODUCTION
* James Edmund and Margaret Elizabeth Hennessey Corry Professor of Law, Florida State
University College of Law. Earlier drafts of this work benefited from feedback from numerous
people, including participants in workshops at Ohio State University, the Benjamin N. Cardozo
School of Law, American University, the University of Florida, and Florida State University.
Particular thanks for comments and/or conversation go to Peter Alces, Amitai Aviram, Brian Bix,
Mark Fenster, Larry Garvin, Richard Gerberding, Andrew Gold, Bob Hillman, Alexandra Klass,
Wayne Logan, Mark Movsesian, Dennis Patterson, Stefan Sciaraffa, Scott Shapiro, Paul Shupack,
and Manuel Utset. Special thanks to Karen Sandrik for invaluable research assistance.
1 Frederick Schauer, Formalism, 97 YALE L.J. 509, 510-14 (1988).
1443
scenario the parties later discover themselves saddled with terms they
never even considered at the time of drafting. (In between are those
cases where parties who know about the default rules but do not want
them draft around them in their contract.)
While Langdell (allegedly)8 saw unjust or absurd results as
irrelevant, the drafters of the U.C.C. took pains to avoid them, often by
including normative language in the rules themselves. Every contract is
said to include a requirement of good faith and fair dealing. And one
can hardly find a page in the text of the U.C.C. that does not include the
term “reasonable,” “commercially reasonable,” “reasonable under the
circumstances,” or something similar. The general strategy was not
only to avoid absurd results, but also to incorporate the norms and
practices from relevant industries and to pay special attention to the
circumstances of the parties involved. While classical contract law was
accused of mechanically applying rules that had little to do with justice
or even reason, and which often led to injustice in particular cases, the
U.C.C. and Second Restatement refer explicitly to norms such as
reasonableness in the rules themselves, and to the particular
circumstances of the parties involved. The Second Restatement of
Contracts later followed suit, echoing much of the informal language of
the U.C.C.9
Over the last two decades, many have argued that modern anti-
formalism in contract law goes too far, and that its flexibility has led to
too much uncertainty and increased litigation costs.10 Judge Kozinski of
the Court of Appeals for the Ninth Circuit claimed in frustration that
under the law of California:
even when the transaction is very sizeable, even if it involves only
sophisticated parties, even if it was negotiated with the aid of
counsel, even if it results in contractual language that is devoid of
ambiguity, costly and protracted litigation cannot be avoided if one
party has a strong enough motive for challenging the contract. While
this rule creates much business for lawyers and an occasional
windfall to some clients, it leads only to frustration and delay for
most litigants and clogs already overburdened courts.11
In response, some courts have arguably moved back toward a more
formalistic approach (to the consternation of some commentators, who
claim the rigidity of formalism leads to injustice in particular cases),12
8 In fact, Langdell’s approach was much more complicated than this one quotation that is
frequently cited by his critics would suggest. See infra note 29 and accompanying text.
9 See generally RESTATEMENT (SECOND) OF CONTRACTS (1981).
10 See infra note 159.
11 Trident Ctr. v. Conn. Gen. Life Ins. Co., 847 F.2d 564, 568-69 (9th Cir. 1988).
12 See Ralph James Mooney, The New Conceptualism in Contract Law, 74 OR. L. REV. 1131
(1995); see also Movsesian, supra note 2, at 115 (“It is a truth universally acknowledged, that we
live in a formalist era.”).
13 See Robert Hillman, The “New Conservatism” in Contract Law and the Process of Legal
Change, 40 B.C. L. REV. 879 (1999).
14 See, e.g., Symposium, Formalism Revisited, 66 U. CHI. L. REV. 527 (1999); Thomas C.
Grey, The New Formalism (Stanford Law Sch., Pub. Law & Legal Series, Working Paper No. 4,
1999), available at http://ssrn.com/abstract=200732.
15 See infra notes 159, 160, 162 and accompanying text.
16 See infra Part II.
whether it makes sense to have formal legal rules that are binding
irrespective of their content, it makes sense to ask why the positivists
would see the validity of law as having nothing to do with its content.
The answer the positivists give is instructive. Law performs a valuable
function: it settles disputes about moral or prudential matters, thereby
making society possible in the face of disagreements among its
members. In particular, Part II will draw from some very thoughtful
recent work in the positivist tradition called the planning theory of law,
according to which law is meant to solve the problems associated with
people living in unplanned communities. It does so by promulgating
plans. Just as in our own everyday practical reasoning, these plans are
very often initially partial, with the details then filled in over time.
Many important legal questions may be usefully thought of as involving
how government can best accomplish this process of filling in plans,
and whom it should trust to do so.
With a basic understanding of formalism in place, and a basic
understanding of the positivists’ functional account of law, in Part III
we can finally turn to evaluating the informalities of modern contract
law. The anti-formalist solution to formal law’s norm-insensitivity was
to refer to norms specifically in the law itself. However, this approach
raises a potential problem, which I illustrate with the simpler example
of the promise theory of contract. The promise theory holds that the
law of contract is based on our moral duty to keep our promises.17 It
might seem at first that such an inclusion of moral terms in legal rules
would disqualify them as law. We learned from the positivists that law
is meant to settle disputes about controversial issues such as moral duty,
and therefore it might seem that a rule that referred to the moral duty
itself could not thereby be law. This imagined objection is based on a
misguided understanding of positivism, as I will show.
However, positivism is a theory of what law is, not what it should
be. A norm-laden theory like the promise theory, or modern contract
law (with its ubiquitous references to justice, reasonableness, good
faith, etc.) can still be a theory of law. But what we want to know is
whether such a law would be a good law. Although positivism does not
directly answer that question, the lesson from positivism is that we have
law in order to guide conduct in the face of disagreement. Vague,
norm-laden rules can, in principle, provide reasons for legal actors, but
it seems such rules would be unable to provide effective guidance. Just
because they qualify as law does not mean they are good law, the kind
of law we would want. It seems they would leave us with just as much
disagreement as before.
To see how such norm-laden rules could be not only valid but also
18 See Scott J. Shapiro, Laws, Plans, and Practical Reason, 8 LEGAL THEORY 307 (2002)
[hereinafter Shapiro, Laws, Plans, and Practical Reason]; Scott J. Shapiro, Interpretation and the
Economy of Trust (unpublished manuscript, on file with author) [hereinafter Shapiro,
Interpretation and the Economy of Trust].
19 See RESTATEMENT OF CONTRACTS § 512 (1932) (“A bargain is illegal . . . if either its
formation or its performance is criminal, tortious, or otherwise opposed to public policy.”); see
also RESTATEMENT (SECOND) OF CONTRACTS § 178 (1981) (stating that a promise or term within
an agreement may be unenforceable if it is against public policy).
20 For example, in one section alone in the Second Restatement (and there are several similar
sections), six comments with nineteen illustrations are used to demonstrate what is and what is
not an immoral promise. RESTATEMENT (SECOND) OF CONTRACTS § 178. One such illustration
found in section 178 is as follows:
11. A promises to pay B, a competitor, $10,000 if he will refrain from competing with
A for a year. Although B’s refraining from competing with A would not in itself be
improper, A’s promise unreasonably tends to induce B to refrain from competition (§
186) and is unenforceable on grounds of public policy.
litigating each case. The problem is not only that such rules are partial
plans that need to be specified, but also that they are actually designed
to resist specification in any manner other than on a case-by-case basis.
Making them resistant to specification in this way gives away much of
the benefit gained by planning, and by having law in the first place. We
would be better off returning to the more formal rules of classical
contract law, such as a more strictly enforced parol evidence rule.
the parties.31
An early example of a debate over formal requirements in contract
law is the famous debate over promissory estoppel and the
consideration doctrine during the drafting of the First Restatement of
Contracts.32 As any first-year law student can attest, contracts generally
are not enforceable absent some form of consideration, i.e., something
for which a promise was exchanged.33 A promise to make a gift without
receiving anything in return (a “gratuitous” or “donative” promise)
would not be enforceable. The consideration doctrine might be seen as
legal formalism in the sense that the operation of a legal rule prevents
certain arguments about what justice might require.34 The promisor
may well have a moral duty to keep her promise, and the promisee may
even be a victim of an injustice if she does not (especially if the
promisee has relied to her detriment). But without meeting the formal
requirement of a bargained-for exchange, the law would not provide a
remedy.35 These sorts of restrictions were maddening to the anti-
formalists, who saw no reason that courts should fail to provide justice
just for the sake of strict adherence to rules, especially when the
justification for a rule like the consideration doctrine was a matter of
some debate.36
Grant Gilmore, perhaps the most vocal (and quotable) critic of
classical formalism in contract law, is a particularly good example of
such an anti-formalist. Gilmore conjectured that classical contract
theory seemed “to have been dedicated to the proposition that, ideally,
no one should be liable to anyone for anything.”37 That was apparently
the only explanation Gilmore could imagine for the seemingly arbitrary
barriers to the enforcement of contracts erected by the classical view.
The consideration doctrine was the “balance-wheel of the great
machine,”38 according to Gilmore, a machine he was tempted to call
“monstrous.”39 This balance wheel of consideration was practically
invented, or at the very least “newly reformulated and put to some
hitherto unsuspected uses” by Holmes, Langdell, and Williston.40 But it
31 See David Charny, The New Formalism in Contract, 66 U. CHI. L. REV. 842, 842 (1999).
32 See GILMORE, supra note 27, at 65-71.
33 See RESTATEMENT OF CONTRACTS § 75 (1932); RESTATEMENT (SECOND) OF CONTRACTS
§ 75 (1981).
34 For a famous discussion of the consideration doctrine as a legal formality, see Lon L.
Fuller, Consideration and Form, 41 COLUM. L. REV. 799 (1941).
35 See RESTATEMENT OF CONTRACTS § 75; RESTATEMENT (SECOND) OF CONTRACTS § 75.
36 See generally Fuller, supra note 34; GILMORE, supra note 27. The debate on this topic
continues in the present era. Compare FRIED, supra note 17, at 28-39 with Peter Benson, The
Unity of Contract Law, in THE THEORY OF CONTRACT LAW 118, 153-84 (Peter Benson, ed.,
2001).
37 GILMORE, supra note 27, at 14.
38 Id. at 18.
39 Id. at 17.
40 Id. at 18.
had nothing to do with the real world; instead, it was an “ivory tower
abstraction . . . [whose] natural habitat was the law schools . . . .”41
By the early part of the twentieth century, some courts had begun
to use the doctrine known as promissory estoppel to enforce donative
promises made to charities if the promise had induced reasonable,
detrimental reliance on the part of the promisee.42 Anti-formalists, most
of whom opposed the consideration doctrine as a bar to the enforcement
of promises, favored a broadening of promissory estoppel so that it
would be available generally and not just for promises made to
charities.43 Formalists resisted inclusion of promissory estoppel in the
First Restatement.44 Although the consideration doctrine was preserved
in Section 75 of the Restatement, a broad (in the sense that it was not
limited to claims by charities) promissory estoppel remedy was added in
Section 90.45
The inclusion of promissory estoppel was a more significant
triumph for the anti-formalists than it might at first seem. In practice
promissory estoppel limits the consideration doctrine, a legal rule the
point and purpose of which were a mystery to many scholars, most of
whom attributed its existence in contract law more to historical
accident46 than to its justification.47 But Section 90 struck a blow for
anti-formalism in a more general way as well. It called for relied-upon
promises to be enforced to avoid injustice.48 There is no bright-line test
41 Id.
42 See Allegheny Coll. v. Nat’l Chautauqua County Bank, 159 N.E. 173 (N.Y. 1927) (citing
cases). The justification for the promissory estoppel doctrine was that having made the promise
in a situation when she knew it might induce the promisee to rely to his detriment, the promisor
ought to be estopped from asserting the consideration doctrine as a defense when the promisee
does so rely. The doctrine is a cousin to the doctrine of equitable estoppel, according to which
one who asserts a fact at one time may, under some circumstances, be estopped from denying that
fact later.
43 GILMORE, supra note 27, at 65-72.
44 Id.
45 Gilmore claimed that Williston opposed the inclusion of promissory estoppel but was
talked into it by Corbin; this claim has been taken to be received wisdom. Id. More recently,
however, Mark Movsesian has argued persuasively that unlike other formalists, Williston himself
was always in favor of promissory estoppel as a safety valve to the consideration doctrine.
Movsesian, supra note 24, at 247-53.
46 Indeed, Gilmore implies rather strongly that it may have been no accident:
It seems apparent to the twentieth century mind, as perhaps it did not to the nineteenth
century mind, that a system in which everybody is invited to do his own thing, at
whatever cost to his neighbor, must work ultimately to the benefit of the rich and
powerful, who are in a position to look after themselves and to act, so to say, as their
own self-insurers.
GILMORE, supra note 27, at 104.
47 See, e.g., id. at 19-37; see also FRIED, supra note 17, at 28-39.
48 See RESTATEMENT OF CONTRACTS § 90 (1932) (“A promise which the promisor should
reasonably expect to induce action or forbearance of a definite and substantial character on the
part of the promisee and which does induce such action or forbearance is binding if injustice can
be avoided only by enforcement of the promise.”) (emphasis added).
excluding anything not in the writing, the U.C.C. invites evidence not
only of prior communications between the parties, but also of industry-
specific customs, both to explain and to supplement written contracts.55
The only limitation is that the proposed evidence may not contradict the
written contract, and even that slim constraint has been eroded in some
rather dubious decisions.56 As the official comments to the U.C.C.
explain, these rules are designed to ensure that “the true understanding
of the parties as to the agreement may be reached.”57 Stating a goal of
reaching the parties’ “true understanding” when interpreting contracts
would seem banal without the previous decades of debate over the parol
evidence rule and its role as a frequent obstacle to such understandings.
Clearly, Llewellyn and the other Article 2 drafters did not want form to
preclude an examination of substance, substance in these circumstances
meaning an accurate reading of the parties’ actual understanding of their
agreement at the time of contracting.
These two examples—the inclusion of promissory estoppel as a
limit on the consideration doctrine and the whittling away of the parol
evidence rule—illustrate two distinct but related themes in anti-
formalism. The first is a complaint that sometimes legal rules,
especially legal rules inherited through the historical accidents of
common-law development, can often be insensitive to concerns of
justice, fairness, or morality, concerns that may be termed “normative.”
Doctrines like the consideration doctrine provide seemingly arbitrary
barriers to the enforcement of promises, often even in the face of
normative concerns.58 Promissory estoppel provides a normative safety
valve. It is not only an exception to the consideration doctrine, it is an
exception that is applied “as justice requires.”59 The strategy is to avoid
what might be called “norm-insensitivity” by including normative
content in the law itself. And, in fact, this theme has become common
in modern contract law. Modern contract law contains many more
direct references to norms than classical contract law did, both in the
eliminate the presumption that a written contract is a total integration.”). Recall, too, Judge
Kozinski’s now famous complaint about the ineffectiveness of the U.C.C.’s parol evidence rule.
See supra note 11 and accompanying text.
55 U.C.C. § 2-202 (2003).
56 Perhaps the most infamous is Hunt Foods & Industries, Inc. v. Doliner, 270 N.Y.S.2d 937
(App. Div. 1966) (holding that a written agreement giving the plaintiff an option to purchase the
defendant’s stock was not inconsistent with an alleged oral agreement that the option to purchase
would be conditional on the grounds that the writing did not specifically claim to be free of
conditions). For a criticism of Hunt Foods, as well as a discussion of different approaches in
similar cases, see JAMES. J. WHITE & ROBERT S. SUMMERS, UNIFORM COMMERCIAL CODE 94-
102 (5th ed. 2000).
57 U.C.C. § 2-202 cmt. 2.
58 Another oft-cited example is contract’s mailbox rule. See supra note 6 and accompanying
text.
59 Calabro v. Calabro, 15 S.W.3d 873, 878 (Tenn. Ct. App. 1999); see also RESTATEMENT
(SECOND) OF CONTRACTS § 90 (1981).
60 See, e.g., U.C.C. § 2-316 (“Words or conduct relevant to the creation of an express
warranty . . . shall be construed wherever reasonable. . .”); id. § 2-714 (the buyer “may recover as
damages . . . as determined in any manner which is reasonable).
61 See, e.g., RESTATEMENT OF CONTRACTS § 90, RESTATEMENT (SECOND) OF CONTRACTS §
90; U.C.C. § 2-611.
62 U.C.C. § 1-304 (explaining that the U.C.C. “imposes an obligation of good faith in its
performance and enforcement”); see also RESTATEMENT (SECOND) OF CONTRACTS § 184
(requiring that a party seeking partial enforcement of an otherwise unenforceable agreement be
acting “in good faith and in accordance with reasonable standards of fair dealing”).
63 See, e.g., E. ALLAN FARNSWORTH, FARNSWORTH ON CONTRACTS § 7.2 (2d ed. 1998);
PERILLO, supra note 50, at 127-28.
64 U.C.C. § 2-202.
65 Id. § 2-202 cmt 1(b).
66 Id.
67 Id. § 2-202(b).
68 Id. § 1-303.
parties69 and the industry standards for similar contracts and similar
parties.70 All of this is established in order to find the “true
understanding” of the parties.71 There are many other examples in both
the U.C.C. and the Second Restatement where particular attention is
called to the particular context or circumstances in which the agreement
took place.72 Sometimes norm-insensitivity is addressed simultaneously
with context-insensitivity, as when the statute calls for an outcome that
is “reasonable under the circumstances.”
Eventually, I will argue that addressing norm-insensitivity by
including norms in the rules is a problematic, though perhaps workable,
solution, but that addressing context-insensitivity by including
references to context in the rule is unacceptable. My argument is based
not on the empirical question of which set of rules would maximize
welfare, as most recent criticisms of anti-formalism have been.73
Instead, my argument proceeds from a certain understanding of what
law most fundamentally is, and what function it performs. In the next
section, I will briefly describe the family of views known as legal
positivism. It is beyond the scope of the paper to argue for positivism.
Instead, I will use its conclusions as a starting point. Its basic claim is
that law is a social artifact,74 and it follows from this that it is possible to
have valid law that is morally objectionable.75 It seems natural,
therefore, to examine positivism when asking if rules should ever be
binding just because they are rules without regard to their justification.
Positivism is a descriptive account of what law is, not a claim about
what law ought to be, but its arguments will be instructive
nonetheless.76
69 Id. § 1-303(b).
70 Id. § 1-303(c).
71 Id. § 2-202 cmt 2.
72 See supra notes 60-62.
73 See infra note 172 and accompanying text.
74 See Brian Leiter, Legal Realism, Hard Positivism, and the Limits of Conceptual Analysis,
in HART’S POSTSCRIPT: ESSAYS ON THE POSTSCRIPT TO THE CONCEPT OF LAW 355, 356 (Jules
Coleman ed., 2001)[hereinafter HART’S POSTSCRIPT].
75 See id.; see also JOHN AUSTIN, THE PROVINCE OF JURISPRUDENCE DETERMINED—
LECTURE V 157 (Wilfrid E. Rumble ed., 1995) (“The existence of law is one thing; its merit or
demerit is another.”).
76 Leiter, supra note 30, at 1150.
77 JULES COLEMAN, THE PRACTICE OF PRINCIPAL 75 (2001); Leiter, supra note 74, at 356.
78 “Hard” or “exclusive” legal positivists argue that law and morality must as a conceptual
matter be distinct, while “soft” or “inclusive” legal positivists argue that the test for what counts
as valid law can in some way incorporate moral constraints if a society so chooses. Leiter, supra
note 74, at 356-57.
79 Thanks to Jules Coleman, this tenet is now typically called the “Practical Difference
Thesis.” See COLEMAN, supra note 77, at 121-23.
80 Scott J. Shapiro, On Hart’s Way Out, in HART’S POSTSCRIPT, supra note 74, at 175-77.
81 Ronald Dworkin has been the most famous and consistent critic of positivism. See, e.g.,
RONALD DWORKIN, TAKING RIGHTS SERIOUSLY chs. 2 & 3 (1977). For a useful discussion, see
Scott J. Shapiro, The “Hart-Dworkin” Debate: A Short Guide for the Perplexed, in RONALD
DWORKIN 22 (Arthur Ripstein ed., 2007).
82 Positivists disagree as to whether it is even possible for there to be such a moral test of
legality. See supra note 78 and accompanying text. But all positivists agree, unlike natural-law
theorists, that it is at least possible that there could be valid law that is morally unacceptable.
83 THOMAS HOBBES, LEVIATHAN 89 (Richard Tuck ed., 1991)(1660).
84 Id. at 117-21.
85 THE FEDERALIST NO. 51, at 349 (James Madison) (Jacob E. Cooke ed., 1961).
86 Larry Alexander, Law and Formalism (San Diego Legal Studies Paper No. 07-18, Oct.
2005), available at http://ssrn.com/abstract=829327. See generally Alexander, supra note 30;
LARRY ALEXANDER & EMILY SHERWIN, THE RULE OF RULES: MORALITY, RULES, AND THE
DILEMMAS OF LAW (2001).
87 Gregory S. Kavka, Why Even Morally Perfect People Would Need Government, 12 SOC.
PHIL. & POL’Y. 1 (1995).
88 JOHN RAWLS, POLITICAL LIBERALISM xviii-xxii, xxxix, 54-58 (1993).
89 See also H.L.A. HART, THE CONCEPT OF LAW 128 (2d ed. 1994).
90 Alexander, supra note 86, at 25-27; Alexander, supra note 30, at 549; see also HART, supra
note 89, at 128 (“Put shortly . . . the necessity for such choice [between open alternatives] is
thrust upon us . . . because we are men, not gods. It is a feature of the human predicament . . .
that we labor under two connected handicaps whenever we seek to regulate. . . . The first
handicap is our relative ignorance of fact: the second is our relative indeterminacy of aim.”).
91 See ALEXANDER & SHERWIN, supra note 86.
92 See Shapiro, supra note 80, at 172-75.
93 JOSEPH RAZ, THE AUTHORITY OF LAW: ESSAYS ON LAW AND MORALITY 30 (1979).
94 Id. at 30-33; see also Leiter, supra note 74, at 363.
95 See H.L.A. HART, ESSAYS ON BENTHAM: JURISPRUDENCE AND POLITICAL THEORY 253-
54 (1982).
104BRATMAN, INTENTION, PLANS, AND PRACTICAL REASON, supra note 103, at 28-49.
105BRATMAN, FACES OF INTENTION, supra note 103, at 61; BRATMAN, INTENTION, PLANS,
AND PRACTICAL REASON, supra note 103, at 29.
106 BRATMAN, FACES OF INTENTION, supra note 103, at 59; BRATMAN, INTENTION, PLANS,
AND PRACTICAL REASON, supra note 103, at 2-3.
107 Shapiro, Interpretation and the Economy of Trust, supra note 18, at 4, 11-12.
108 Id.
109 BRATMAN, INTENTION, PLANS, AND PRACTICAL REASON, supra note 103, at 29.
110 Shapiro, Interpretation and the Economy of Trust, supra note 18.
111 Id. at 16-24.
112 As far as I know, no one has yet applied the planning theory of law or Bratman’s work on
the role of plans in practical reasoning to contract law in particular in any systematic way. Both
Daniel Markovits, Contract and Collaboration, 113 YALE. L.J. 1417 (2004), and Manuel A.
Utset, see Reciprocal Fairness, Strategic Behavior & Venture Survival: A Theory of Venture
Capital-Financed Firms, 2002 WIS. L. REV. 45, 83-84 (2002), briefly mention the possibility that
Bratman’s work could be helpful in contract theory. But Markovits focuses on Bratman’s account
of what Bratman calls joint intentional activities, rather than on the role of plans. Markovits also
quickly departs from Bratman by using the concepts to build a moral theory of contract. For a
discussion of Markovits’s very thoughtful work, see Curtis Bridgeman, Contract as Plans
(unpublished manuscript, on file with author). Utset’s work is more on point but is also merely
suggestive. Conversations with Utset (who is now a colleague, though we started working on
these ideas independently) have been very helpful.
113 The anti-positivists include primarily the natural law theorists and Ronald Dworkin
(assuming we take him at his word that he is not a natural law theorist as well). Jules L. Coleman
& Brian Leiter, Legal Positivism, in A COMPANION TO PHILOSOPHY OF LAW AND LEGAL
THEORY 241, 242 (Dennis Patterson ed., 1996).
114 See supra note 81.
115 See supra notes 74-75 and accompanying text.
116 For a particularly thoughtful example, see Seana Valentine Shiffrin, The Divergence of
Contract and Promise, 120 HARV. L. REV. 708 (2007).
124 FRIED, supra note 17, at 1-2 (emphasis added, footnotes omitted).
125 We will see later that this is actually too simple a formulation of the positivists’ position,
but it will suffice for the current point.
126 One must be careful here not to confuse the incorporation of moral rules into primary rules
like the law of contract with the claim that a test for what law is in the first place could
incorporate moral rules. The inclusive, or “soft” positivists argue for the possibility of the latter
form of incorporation. See supra, note 78. Again, for the most part, I believe I can safely avoid
that debate in this discussion.
127 Although passages like the one above suggest that Fried’s contract theory is that contract
law includes the moral content associated with promising just because legal officials have chosen
for it to include that content rather than because people have a natural-law duty to keep their
promises, I ultimately wonder whether that is the correct reading of Fried. To see if Fried is truly
committed to an account of contract law consistent with the requirements of positivism, consider
the following test. Suppose the following two statements are true:
1. Promisors have a LEGAL duty (because of historical facts about decisions made by the
appropriate legal officials) to keep whatever promises they are morally required to
keep.
2. Promisors have a MORAL duty to keep their gratuitous promises.
Notice that while (1) is a legal truth, (2) is a moral truth, i.e., a truth about what morality requires
independently of any legal institution. Now suppose further that:
3. All appropriate legal officials, knowing (1), debate in the appropriate manner the
morality of breaking gratuitous promises, and decide, unanimously but, as it happens,
incorrectly (i.e., contrary to (2)), that promisors do NOT have a moral duty to keep
gratuitous promises.
Here is the test: under these conditions, does Jones have a legal duty to keep the particular
gratuitous promise P that he has made?
The legal positivist must answer no. Law is determined by social facts, not moral facts.
The fact that law is a social construct does not prevent legal actors from referring to morality in
legal rules, but ultimately social facts about legal officials will determine the content of law, not
moral facts. If it were otherwise, law would be incapable of performing its function, viz. guiding
the conduct of citizens. Citizens would be left always to wonder and debate whether undisputed
facts about legal officials were trumped by moral facts. Even supposing there are objective moral
truths, those truths would still be up for debate among legal actors, and could not trump contrary
statements by the appropriate legal officials. It is the job of law, and of legal officials, to give
practical guidance in the face of such debates. Of course, in this case, the practical guidance
would conflict with the moral truth—according to the hypothetical—that promisors have a duty
to keep gratuitous promises, and therefore this law may not be the best one a society could have.
But we must be careful to distinguish the question of what the best law is from what it means for
something to be law in the first place.
It is hard to know for sure how Fried would respond to the hypothetical. One might argue
that for Fried, the mistake that legal officials make about morality leads to their being mistaken
about legal duties. Again, the legal duties of contract are “determined by a small number of basic
moral principles,” moral truths which do “not depend on fashion or favor.” FRIED, supra note 17,
at 2. And in fact, Fried struggles to explain the consideration doctrine (which, roughly speaking,
entails (3)). At first he dismisses the consideration doctrine as an objection to his theory simply
because the doctrine is “too internally inconsistent to offer an alternative at all.” Id. Ultimately,
though, Fried seems to recognize that the truth of (3) means that at least as a matter of “positive”
law, there is not a legal duty to keep gratuitous promises:
[T]he life of contract is indeed promise, but this conclusion is not exactly a statement
of positive law. There are too many gaps in the common law of promises to permit so
bold a statement. My conclusion is rather that the doctrine of consideration offers no
coherent alternative basis for the force of contracts, while still treating promises as
necessary to it.
Id. This conclusion does not mean that Fried is a positivist, of course, even about contract
law, since although he admits the conflict between positive law and the requirements of
morality, he does not commit himself to the notion that all law is positive law.
128 “At most,” again, because of the dispute between exclusive and inclusive positivism. The
exclusive positivists argue that there can never be a moral test for law. The inclusive positivists
argue that while it is by definition possible to have valid law that contains no moral test, it is also
possible to have such a test for the validity of law. For the inclusive positivist, whether there is
such a test is a matter of contingent fact. See supra note 78.
135 See Alexander, supra note 30; Alexander, supra note 86.
136 See Schwartz & Scott, supra note 133, at 594-609.
137 See supra note 109.
138 Timothy A.O. Endicott, Raz on Gaps—the Surprising Part, in RIGHTS, CULTURE, AND THE
LAW: THEMES FROM THE LEGAL AND POLITICAL PHILOSOPHY OF JOSEPH RAZ 99, 105 (Lukas H.
Meyer et al. eds., 2003).
question legitimately arises: What was he doing as part of the Restatement crew? Why
was he not outside on the barricades leading the revolutionary troops with Llewellyn,
perhaps, as his principal aide? I simply do not know the answer to the question.
GILMORE, supra note 27, at 60.
145 Much has been written on Cardozo’s role in reforming the common law and his historical
fit between the classical period and the later realists. See, e.g., NEIL DUXBURY, PATTERNS OF
AMERICAN JURISPRUDENCE 77 (1995) (describing Cardozo as a “proto-realist”); SEBOK, supra
note 24, at 76 (describing Cardozo as a “pre-realist”); Curtis Bridgeman, Allegheny College
Revisited: Cardozo, Consideration, and Formalism in Context, 39 U.C. DAVIS L. REV. 149, 181-
86 (2005) (describing Cardozo’s contracts jurisprudence as an attempt to adapt the classical
formalities of contract law to modern business practices). For an excellent study of Cardozo’s
role in re-conceptualizing duty in tort to fit an industrialized world, see John C.P. Goldberg &
Benjamin C. Zipursky, The Moral of Macpherson, 146 U. PA. L. REV. 1733 (1998).
146 Zipporah Batshaw Wiseman, The Limits of Vision: Karl Llewellyn and the Merchant Rules,
100 HARV. L. REV. 465, 503 (1987)
147 Id. at 537.
148 Id.
149 Sometimes this position is manifest explicitly in Article 2. See, e.g., U.C.C. § 2-609 cmt. 3
(2003) (“Subsection (2) of the present section requires that “reasonable” grounds and “adequate”
assurance as used in subsection (1) be defined by commercial rather than legal standards.”).
150 Ingrid Michelsen Hillinger, The Article 2 Merchant Rules: Karl Llewellyn’s Attempt to
Achieve the Good, The True, The Beautiful in Commercial Law, 73 GEO. L.J. 1141, 1163-64
(1985).
151 Wiseman, supra note 146, at 503-19.
152 Id. at 512 (quoting REVISED UNIF. SALES ACT (Report and Second Draft, 1941)).
153 See Nanakuli Paving & Rock Co. v. Shell Oil Co., Inc., 664 F.2d 772 (9th Cir. 1981).
154 See Frigaliment Importing Co. v. B.N.S. Int’l Sales Corp., 190 F. Supp. 116 (S.D.N.Y.
1960).
155 Wiseman, supra note 144, at 515.
156 Id. at 513 (quoting REVISED UNIF. SALES ACT (Report and Second Draft, 1941)).
strong financial incentives to adopt rules that would favor their own
personal situations in later cases.157 The fact that judges are removed at
some distance from commercial practices is in many ways beneficial.
In addition, many of the recent complaints about the informalities
of Article 2 have much more to do with drafting than with
interpretation. Complaints from so-called “new formalists” about the
U.C.C.’s default-rules project are good examples.158 One part of Article
2’s anti-formalist project was to provide a stable of default rules that
would become part of all contracts for the sale of goods unless parties
specifically opted out of these rules by drafting around them.159 While
classical formalism would have insisted that the parties state the terms
of the contract themselves,160 anti-formalists thought that contract law
should better reflect business practices.161 If commercial-law experts
could decide which rules most parties want, it would be better to make
those rules statutory defaults and save parties the trouble of writing the
rules into the contracts themselves. The law could simply incorporate
the already-existing norms of business rather than forcing business
people to make their practices fit into arbitrary and often counter-
intuitive legal formalities.
Unfortunately, despite the good intentions of the drafters, in the
eyes of many, the U.C.C.’s default-rules project has been a “flop,”162
and has led to a surge in “anti-antiformalism” (so called to distinguish it
from classical formalism).163 Some of the objections concern the very
possibility of incorporating such norms. It has been claimed, for
example, that there simply are no national norms to incorporate, a result
that should not be surprising given that Article 2 covers such a huge and
diverse territory, i.e., the sale of goods.164 The norms in Article 2 are
called vague and meaningless because they have been watered down in
order to cover too many different kinds of transactions. And although
there have been few in-depth studies of localized, industry-specific
norms, those studies reveal that parties often prefer a very formalized
model of contract.165
Other criticisms are based on who can be trusted to craft the
specific rules. For example, it has been argued that even if localized
customs do exist, they may be inefficient or otherwise unworthy of
incorporation into a national code.166 Indeed, given localized political
and market pressures, we should expect local norms to be flawed in
many ways, or at least to be unsuitable for adoption as national norms.
National norms drafted by a panel of experts or legislators may not be
much better, as those actors will also be subject to political pressure
from interest groups.167 Even if we could create efficient or otherwise
favorable national norms, local groups still might prefer to employ non-
legal sanctions for as long as possible,168 but then to apply rigid, formal
rules in those cases where they must resort to legal sanctions.169
Most of these critics actually have the same basic goals for contract
law that Llewellyn had. Although they are often lumped together as
“new formalists,”170 that is a name they seldom use themselves. They
seem to follow Holmes’s advice to avoid the “fighting tag,”171 perhaps
because of its association with the essentialism of classical formalism.
Instead, most recent critics of anti-formalism come from a law-and-
economics perspective and use wealth- or welfare-maximization as the
primary test for contract law or any proposed reform. Although the
point is often not appreciated, Llewellyn himself had that same goal.172
Llewellyn wanted to bring contract law more into line with business
practices not to respect the autonomy of contracting parties, but rather
in order to decrease transaction costs and increase welfare.173 Llewellyn
simply trusted business experts and social scientists more than common-
law judges as creators of contract law. Turning away from traditional
legal scholarship and toward the social sciences for insight into law
165 Lisa Bernstein, Merchant Law in a Merchant Court: Rethinking the Code’s Search for
Immanent Business Norms, 144 U. PA. L. REV. 1765 (1996).
166 Charny, supra note 31, at 843.
167 Robert E. Scott, The Rise and Fall of Article 2, 62 LA. L. REV. 1009, 1009-12 (2002); Alan
Schwartz & Robert Scott, The Political Economy of Private Legislatures, 143 U. PA. L. REV. 595,
610-11 (1995).
168 Bernstein, supra note 165; David Charny, Nonlegal Sanctions in Commercial
Relationships, 104 HARV. L. REV. 373 (1990); Robert E. Scott, Conflict and Cooperation in
Long-Term Contracts, 75 CAL. L. REV. 2005, 2039-46 (1987).
169 Bernstein, supra note 165.
170 Charny, supra note 31. Similar terms used include “new conceptualism,” Ralph James
Mooney, The New Conceptualism in Contract Law, 74 OR. L. REV. 1131 (1995), and “new
conservatism,” Robert A. Hillman, The New Conservatism in Contract Law and the Process of
Legal Change, 40 B.C. L. REV. 879 (1998)).
171 Patrick J. Kelley, A Critical Analysis of Holmes’s Theory of Contract, 75 NOTRE DAME L.
REV. 1681, 1684 n.10 (2000).
172 Alan Schwartz, Karl Llewellyn and the Origins of Contract Theory, in THE
JURISPRUDENTIAL FOUNDATIONS OF CORPORATE AND COMMERCIAL LAW 12, 15, 18 (Jody S.
Kraus & Steven D. Walt eds., 2000).
173 Id. at 18.
174 Interestingly, the new formalists, with their faith in social science over traditional legal
scholarship, in some ways have more in common with the classical positivists of the nineteenth
century like Bentham and Mill than with the classical formalists.
175 Schwartz, supra note 172, at 18.
176 Charny, supra note 31, at 850.
177 See Schwartz & Scott, supra note 133, at 594-609.
178 Id.
179 See, e.g., Schwartz & Scott, supra note 133; Jody S. Kraus & Steven D. Walt, In Defense
of the Incorporation Strategy, in THE JURISPRUDENTIAL FOUNDATIONS OF CORPORATE AND
COMMERCIAL LAW, supra note 172, at 193.
180 See Shapiro, Interpretation and the Economy of Trust, supra note 18.
181 See id. at 16-24.
lesser evil if we do not trust juries to dispense justice based on the facts.
And once juries are out of the picture, we can have rules that demand
context-specific (fact-specific) justice.
On the other hand, perhaps the issue here is not entirely one of
trust. Suppose that the basic factual question is: What is “reasonable
under the circumstances?” According to Gilmore’s way of thinking, the
classical common law replaced such inquiries with inquiries into
contract formalities such as offer and acceptance, privity, and
consideration, because we do not trust civil juries to judge what is
reasonable in given cases.188 Judges, by contrast, particularly those with
good “situation sense” (to use Llewellyn’s term), may be better at
saying what should be deemed reasonable under any given set of
circumstances, and therefore we can do away with the formalities now
that we have done away with civil juries.
But there is another possible explanation for why we might prefer
the formal inquiries of classical contract law to a law that simply asks
what is reasonable under the circumstances. The problem is not that
juries cannot be trusted to say what is reasonable under the
circumstances, but rather that such a rule provides no guidance to the
parties prior to litigation. It could be the case that the formal laws of
classical contract law were a way of breaking down broad normative
inquiries into discrete, manageable questions that give more guidance to
citizens. Recall once again Professor Alexander’s point that we have
laws not just because people disagree about which principles apply, but
also because people disagree about how those principles apply in given
cases.189 Surely we all accept that we ought to do what is reasonable
under the circumstances, yet we still have countless contract disputes
despite (perhaps even because of) this universally accepted rule. The
real question is, “What is reasonable in this case?”
It could be that rules such as the consideration doctrine are an
attempt to specify further how the requirements of such broad principles
of justice or fairness are to be applied in particular cases. To be sure,
the question of whether the consideration doctrine may play any
defensible role as part of a further specification of any broad principle
of justice is quite open. But such rules at least provide guidance to
future parties. Our intuitions will likely vary a good deal on a broad
question like the (moral) enforceability of donative promises. The fact
that we all agree that contract law ought to enforce promises that are
morally enforceable is likely to be of little help in evaluating the facts of
a particular case. The consideration doctrine helps us to narrow the
range—or at least it did before promissory estoppel. And even
promissory estoppel specifies which facts (for example, reliance) are
188 Id.
189 See supra note 86 and accompanying text.
190 BRATMAN, INTENTION, PLANS AND PRACTICAL REASON, supra note 103, at 29.
191 Of course, my description here is itself an unfair caricature of Article 2, which obviously
does provide some more specific guidance than simply “whatever is reasonable under the
circumstances.” But there can be no doubt that Article 2 also aims to provide more escape from
doctrine, in particular by directing the court’s attention to the particular facts or circumstances of
the parties. See supra notes 64-71 and accompanying text.
192 See HART, supra note 89, at 125-27.
193 Id.
194 Id.
195 Martin Stone, Formalism, in THE OXFORD HANDBOOK OF JURISPRUDENCE & PHILOSOPHY
OF LAW 166, 179 (Jules Coleman & Scott Shapiro eds., 2002).
197 That is not to say that such rules will forever lead to hard cases in every case. I leave open
the possibility that some circumstances will so clearly call for one result that they will be easy
cases in the first sense despite the vague language. For an interesting discussion of the possibility
that such gaps might always result from vague language, see ENDICOTT, supra note 138.
what we want law to do, I have not argued that we should be as formal
as possible, or that more formalism is always better. For example, a
rule that allowed a promisee to enforce any contract so long as she
could somehow, by hook or by crook, get the promisor to sign on the
dotted line would obviously be unacceptable, despite the fact that it
would guide the parties’ behavior very effectively by predicting the
outcome of potential litigation with a high degree of certainty. A rule
that leads to systematic injustices does not become acceptable just
because it offers predictability. There is no easy test for finding the
right balance of form versus substance in law. But I am optimistic that
perhaps we can best find this balance by returning to the classical, not
just as a passenger on Gilmore’s swinging pendulum of intellectual
fashion, but instead with a renewed critical yet sympathetic eye for
classical contract law. If we can try better to understand its doctrines
more charitably, we will be in a better position to judge them and, more
importantly, to learn from them.
This Article is but one step in a larger project in that spirit. I have
argued that the planning theory of law can help us to understand how
formal our law of contract should be. My more ambitious conjecture is
that understanding contracts as plans, and contract law as a plan for
private planning, will be more broadly instructive.215 I find persuasive
Shapiro’s thesis that law is a form of government planning for its
citizens, and I think that we have much to gain by thinking about law in
this fashion. I would add that contract law is a vehicle for private
planning by citizens for themselves, a way for them to create specially
tailored legal obligations that govern their own situations and that
provide practical guidance. Hopefully, by thinking of contracts as plans
we can both better understand and better justify many of the otherwise
somewhat perplexing doctrines of contract law, especially those of the
classical period. But that is a larger project that must wait for another
day.
215 Curtis Bridgeman, Contracts As Plans (unpublished manuscript, on file with author).