Comparative Contract Law 1849804516, 9781849804516, 9781785369179

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COMPARATIVE CONTRACT LAW

Pier Giuseppe Monateri - 9781849804516

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RESEARCH HANDBOOKS IN COMPARATIVE LAW Series Editors: Francesco Parisi, Oppenheimer Wolff and Donnelly Professor of Law, University of Minnesota, USA and Professor of Economics, University of Bologna, Italy and Tom Ginsburg, Professor of Law, University of Chicago, USA The volumes in this series offer high-level discussion and analysis on particular aspects of legal systems and the law. Well-known scholars edit each handbook and bring together accessible yet sophisticated contributions from an international cast of top researchers. The first series of its kind to cover a wide range of comparative issues so comprehensively, this is an indispensable resource for students and scholars alike. Titles in this series include: Comparative Constitutional Law Edited by Tom Ginsburg and Rosalind Dixon Methods of Comparative Law Edited by Pier Giuseppe Monateri Comparative Law and Society Edited by David S. Clark Comparative Labor Law Edited by Matthew W. Finkin and Guy Mundlak Comparative Tort Law Edited by Mauro Bussani and Anthony Sebok Comparative Competition Law Edited by John Duns, Arlen Duke and Brendan Sweeney Comparative Law and Economics Edited by Giovanni B. Ramello and Theodore Eisenberg Comparative Criminal Procedure Edited by Jacqueline E. Ross and Stephen C. Thaman Comparative Law and Regulation Understanding the Global Regulatory Process Edited by Francesca Bignami and David Zaring Comparative Contract Law Edited by Pier Giuseppe Monateri

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Comparative Contract Law

Edited by

Pier Giuseppe Monateri Professor of Comparative Law, Department of Law, University of Turin, Italy

RESEARCH HANDBOOKS IN COMPARATIVE LAW

Cheltenham, UK

+

Northampton, MA, USA

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© The editor and contributing authors severally 2017 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA

A catalogue record for this book is available from the British Library

Library of Congress Control Number: 2016944271

This book is available electronically in the Law subject collection DOI 10.4337/9781785369179

ISBN 978 1 84980 451 6 (cased) ISBN 978 1 78536 917 9 (eBook) Typeset by Columns Design XML Ltd, Reading

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Contents

List of contributors

vii

Introduction Pier Giuseppe Monateri PART I

1

CONTRACT LAW: THEORIES AND GENEALOGIES

1 Theories of contract law Brian H. Bix 2 In defense of Roman contract law James Gordley 3 The authoritarian theory of contract Pier Giuseppe Monateri 4 Contract and the comparatist: should we think about contract in terms of ‘contracticles’? Geoffrey Samuel 5 Critical comparative contract law Giovanni Marini 6 Contract law and regulation Giuseppe Bellantuono PART II

7 19 47

67 95 111

MARKET VALUES AND THEIR CRITIQUES: PRIVATE GOVERNANCE AND NORMATIVE REGULATIONS

7 Enforcing bilateral promises: a comparative law and economics perspective Francesco Parisi, Marta Cenini and Barbara Luppi 8 Spontaneous order and freedom of contract Carlo Ludovico Cordasco 9 ‘Party autonomy’ Horatia Muir Watt 10 Who is the contracting party? A trip around the transformation of the legal subject Maria Rosaria Marella

145 173 193

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11 Freedom of contract and constitutional values: some exceptional cases from the Colombian Constitutional Court Pablo Moreno Cruz PART III

REPRESENTATIONS AND NARRATIVES

12 The unburiable contract: Grant Gilmore’s discontinuous parabola and the literary construction of American legal style Cristina Costantini 13 Queering the contractual paradigm between law and political theory Flavia Monceri 14 Contracts in literature: from Doctor Faustus to vampires Daniela Carpi 15 Women and contracts in Angela Carter’s postmodern revision of the fairy tale Sidia Fiorato PART IV

216

245

303 322

361

GLOBAL CONTEXT AND LOCAL FRAMES

16 The wrecking ball: good faith, preemption and US exceptionalism Peter Goodrich 17 Technological contracts Massimiliano Granieri 18 Contractual interpretation: the South African blend of common, civil and indigenous law in comparative perspective Andrew Hutchison 19 Promissory estoppel Paolo Pardolesi 20 Party autonomy in global context: an international lawyer’s take on the political economy of a self-constituting regime Horatia Muir Watt Index

385 408

451 469

512

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Contributors

Giuseppe Bellantuono is Associate Professor of Comparative Private Law at the University of Trento, Faculty of Law. His research interests include the comparative analysis of regulatory systems, methodologies of comparative law, interdisciplinary approaches to legal studies, law and technology, comparative energy law, and comparative communications law. Among his recent publications are: Contratti e regolazione nei mercati dell’energia (2009); Law, Development and Innovation (coedited with F. Lara, 2015); and Convergences and Divergences Between the Italian and the Brazilian Legal Systems (co-edited with F. Puppo, 2015). Brian H. Bix is Frederick W. Thomas Professor of Law and Philosophy, University of Minnesota. He was a Visiting Professor of Law at Georgetown University Law Center during the Spring semester of 2000 and at George Washington University Law School in the Fall of 1999. Professor Bix was the Lecturer in Jurisprudence and Legal Reasoning at King’s College, University of London, from 1991 to 1993. He is a Member of the Bar of the States of Minnesota, Connecticut and Massachusetts, and a member of the American Law Institute. His publications are primarily in the areas of contract law, legal philosophy and family law, and include: Contract Law: Rules, Theory, and Context (2012); A Dictionary of Legal Theory (2004); and Jurisprudence: Theory and Context (7th ed., 2015). Daniela Carpi is Professor of English Literature at the Department of Foreign Languages and Literature at the University of Verona. She is the President of AIDEL and a member of Academia Europaea. She is a member of AIA, Associazione Italiana di Anglistica; of the European Society for the Study of English, ESSE; and of IASEMS, Italian Association of Shakespearean and Early Modern Studies. She is on the editorial board of the journals Symbolism: A Journal of Critical Aesthetics (New York), Anglistik (University of Heidelberg), Cardozo Law Bulletin (University of Trento), La Torre di Babele (University of Parma), Law and Humanities (University of Warwick) and CoSMo (Comparative Studies in Modernism) (University of Turin). She co-founded and co-directs the journal Polemos. Her fields of research are vii

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literature and law, literature and science, literature and visual arts, Renaissance theatre, postmodernism, critical theory. Her latest monograph is Fairy Tales in the Postmodern World. No Tales for Children (2016). Marta Cenini is Researcher of Private Law at the University of Milan. In 2013 she obtained the National Scientific Qualification (Law no. 240 of 30 December 2010, article 16) to the position of Associate Professor in Private Law. She holds a Ph.D in Private Law and she has published in English and Italian in the fields of contractual damages and tort law, remedies for breach of contracts, legislation concerning circulation of goods, securities, and, recently, environmental liability, always using as research tools the comparison with laws of different countries and the economic analysis of law. Among her publications, Gli acquisti a non domino (2009); Cases and Materials on Italian Private Law (with Rossella Esther Cerchia, 2016). Carlo Ludovico Cordasco is Ph.D Candidate in Political Philosophy at the Department of Politics at the University of Sheffield and Visiting Scholar within the Politics, Philosophy and Economics Program at the University of Pennsylvania. Cristina Costantini is Associate Professor of Private Comparative Law at the University of Perugia. She is member of AIDC (Associazione Italiana di Diritto Comparato), AIDEL (Associazione Italiana di Diritto e Letteratura), Selden Society (London), ESSE (The European Society for the Study of English), and AIA (Associazione Italiana di Anglistica). She is Managing Editor of Cardozo Electronic Law Bulletin; member of the Scientific Committee of the review CoSMo (Comparative Studies in Modernism); Assistant Editor of Pólemos: A Journal of Law, Literature and Culture; member of the Editorial Board of Comparative Law Review and Comparazione e Diritto Civile. Her main fields of research include the comparative construction of legal traditions, the history of English common law, the intellectual assessment of the liminal thresholds within the humanities (law and literature; law and philosophy; law and religion). Among her numerous publications: La Legge e il Tempio. Storia comparata della giustizia inglese (2007); The Keepers of Traditions: The English Common Lawyers and the Presence of Law (2010); Representing Law: Narrative Practices, Poetic Devices, Visual Signs and the Aesthetics of the Common Law Mind (2013). Sidia Fiorato is Researcher of English Literature at the University of Verona. Her fields of research include detective fiction and the legal thriller, law, literature and culture, literature and the performing arts,

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Contributors ix

Shakespeare studies, the fairy tale. Among her publications, Il Gioco con l’ombra. Ambiguità e metanarrazioni nella narrativa di Peter Ackroyd (2003); The Relationship Between Literature and Science in John Banville’s Scientific Tetralogy (2007); and essays on the contemporary novel, Shakespearian adaptations, Victorian literature. Peter Goodrich is Professor of Law and Director of the Program in Law and Humanities at Cardozo School of Law, New York. He was the founding dean of the department of law, Birkbeck College, University of London, where he was also the Corporation of London Professor of Law. He has written extensively in legal history and theory, law and literature and semiotics and has authored 12 books. He is managing editor of Law and Literature, and was the founding editor of Law and Critique. His most recent book is Legal Emblems and the Art of Law (2013); and to this coruscating and lucifugous erudition can be added co-writing and co-producing the award winning documentary Auf Wiedersehen:’Til We Meet Again (Diskin Films, 2012). James Gordley is W.R. Irby Professor of Law at Tulane Law School and Shannon Cecil Turner Professor of Jurisprudence Emeritus at the University of California School of Law at Berkeley. He is a member of the American Academy of Arts and Sciences, a Corresponding Fellow of the British Academy, and a membre titulaire of the Académie international du droit comparé. Massimiliano Granieri is Associate Professor of Comparative Private Law, Department of Mechanical and Industrial Engineering of the University of Brescia Health and Wealth (Italy) and adjunct faculty of European Private Law at the Widener Law School (United States). He holds a JD from the LUISS Guido Carli School of Law, a Ph.D from the University of Florence and an LLM from the University of California at Berkeley, Boalt Hall. He was the Jemolo Fellow at Nuffield College, Oxford (United Kingdom). Andrew Hutchison is an Associate Professor in the Department of Commercial Law at the University of Cape Town, South Africa. His affinity for contract law began during his LLM studies at UCT (2005–6), and was carried through to his Ph.D thesis on fundamental change of circumstances in contract law (hardship), completed in 2010. He has published a body of work in leading South African and international law journals on contract law. His main research interests are general principles of contract law, specific and commercial contracts, insurance law, constitutional development of contract law, decolonization

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of law/customary law (with reference to contracting), comparative contract law, and legal interpretation. Barbara Luppi is Assistant Professor of Economics, University of Modena. She holds a Ph.D in Political Economy from the University of Bologna and a Ph.D in Economics from the London School of Economics and Political Science. She has held visiting positions at the Eitan Berglas School of Economics at Tel Aviv University and at the University of Minnesota. Her recent research has focused on law and economics, finance and behavioural economics and bounded rationality. Among her main publications, ‘Deterrence of Wrongdoing in Ancient Law’ in G. Dari Mattiacci, Roman Law and Economics (2015); ‘Behavioral Approach to Tort Law’ in J. Teitelbaum and K. Zeiler (eds), Handbook of Behavioral Law and Economics (Edward Elgar Publishing, 2015); ‘RentSeeking in the Law’ in R. Congleton and A. Hillman (eds), Companion to the Political Economy of Rent-Seeking (Edward Elgar Publishing, 2015). Maria Rosaria Marella is Full Professor of Law at the University of Perugia Faculty of Law, where she teaches Private Law and heads the Law Clinic on Health, Environment and Territory. She is a member of the Société de Législation Comparée, the International Academy of Comparative Law, the Association of Italian Private Law Scholars and the Italian Society of Feminist Legal Scholars (GIUdIT). She has been awarded the Canadian Studies Faculty Research Award twice (in 2008 and 2010). Her current fields of study concern comparative family law and the law of property with a focus on the tension between the traditional private property paradigm and alternative forms of ownership and use of resources. She has recently published a book on family law as a governmental apparatus, Di cosa parliamo quando parliamo di famiglia (with G. Marini, 2014) and a book on the commons and their legal regulation, Oltre il pubblico e il privato. Per un diritto dei beni comuni (M.R. Marella ed., 2012). Other recent publications include: ‘The Commons as a Legal Concept’, Law & Critique (forthcoming); ‘The Contractualisation of Family Law in Italy’ in F. Swennen (ed.), Contractualisation of Family Law – Global Perspectives (2015); ‘Famille’ (with Giovanni Marini) in M. Troper and D. Chagnollaud (eds), Traité international de droit constitutionnel (2012); and ‘Critical Family Law’, American University Journal of Gender, Social Policy & the Law (2011). Giovanni Marini is Full Professor of Law at the University of Perugia Department of Law, where he teaches Private Comparative Law. He received his law JD from the Università degli studi di Roma, La Sapienza (Rome, Italy) and the MCL from Michigan Law School (Ann Arbor,

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Contributors xi

United States) where he was Fulbright fellow. He has been a researcher at European University Institute (Fiesole) and a visiting professor at Yale Law School (New Haven, United States), Max Plank Institute (Hamburg, Germany), Harvard Law School (Cambridge, United States) and Université Paris I, Sorbonne (Paris, France). He has published papers and books in many areas of interest, such as comparative law, comparative jurisprudence, tort law, property and contract law and family law. Pier Giuseppe Monateri is Visiting Professor at Sciences Po, Paris and Professor of Comparative Law at the University of Turin. He is titular member of the International Academy of Comparative Law (New York); member of Accademia delle Scienze (Bologna); Profesor Honorario Universidad San Marcos (Lima); Vice-President of AIDEL (Associazione Italiana di Diritto e Letteratura). He is former Vicarious Rector of the University of Trento and Past-President of the Italian Association of Comparative Law. He has been the first Director of the Department of Private Law of the State, Scuola Superiore della Pubblica Amministrazione (Rome) and former member of the Board of the Italian Society for Law and Economics. He has been honoured as Jean Monnet Professor of European Law at the University of Trento. His main fields of research include comparative law, contract law, tort law, and law and humanities. Among his publications are The Italian Legal System: An Introduction (with M. Livingston and F. Parisi, 2015); Classics in Comparative Law (with T. Ginsburg and F. Parisi, 2014); Methods of Comparative Law (2012); Black Gaius: A Quest for the Multicultural Origins of the Western Legal Tradition (2000). Flavia Monceri is Associate Professor of Political Philosophy, Università del Molise, Italy, where she teaches Political Philosophy, Gender Studies and Multiculturalism and Intercultural Communication. Her research interests include continental philosophy (from Nietzsche on), queer and transgender theories, disability studies, intercultural communication, film philosophy, complexity and systems theories, East Asian cultures, religions, and institutions (especially Japan). Pablo Moreno Cruz is Professor of Comparative Law at the University Externado de Colombia. He is currently also teaching Theory of Comparative Law in the Master’s on Global Rule of Law and Constitutional Democracy at the University of Genoa, and a module of the course Law of the Americas at the University of Ferrara. Between 2011 and 2015 he taught Comparative Law at the University of Genoa, Imperia. He holds a law degree from the University Externado de Colombia (2000), a Master’s in European Private Law from the University of Roma, La

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Sapienza (2005) and a Ph.D in Comparative Law from the University of Ferrara (2010). He has been a visiting scholar at the University of Pennsylvania, Penn Law School (2008). He is a member of the editorial board of Revista de derecho privado published by the University Externado de Colombia. Horatia Muir Watt is Professor at the Law School, Sciences Po Paris, where she currently co-directs the speciality Global Governance Studies within the Master’s in Economic Law. She teaches and publishes in the field of private international law and comparative law, where she develops critical and interdisciplinary approaches. She was elected in 2013 to the Institute of International Law. She is Editor in Chief of the Revue critique de droit international privé and on the editorial board of various international law reviews or journals (Journal of Private International Law, European Review of Contract Law, Transnational Legal Theory) and co-editor of various collections: International Studies in the Theory of Private Law, Private Law in European Context, and ‘A droit ouvert’ chez Dalloz (with Antoine Lyon-Caen). Her books include Aspects économiques de droit international privé (2005); Common law et tradition civiliste (with Duncan Fairgrieve, 2006) (a pocket comparative study); Droit international privé (with Dominique Bureau, 2007, now in its 3rd edition, 2014), and a Que sais-je on the same subject (also with Dominique Bureau, 2009). She co-edited The Making of European Private Law: Regulatory Strategies and Governance (with Fabrizio Cafaggi, vol. I 2008, vol. II 2009). She is co-editor of Private International Law as Global Governance (with D. Fernandez Arroyo, 2014). Representative publications in article form include, ‘Private International Law Beyond the Schism’ in Transnational Legal Theory (2011); ‘Dette souveraine et main visible du marché: de nouveaux enjeux du droit international privé des contrats’ in Revue critique de droit international privé (2015); ‘Conflicts of Laws Unbounded: The Case for a LegalPluralist Revival’ in Transnational Legal Theory (2016). Paolo Pardolesi has a Ph.D in Comparative Private Law from the University of Trento and was Official Visiting Researcher at Yale Law School. He is currently Associate Professor of Comparative Law at the University of Bari, Aldo Moro, Italy, and a lawyer enrolled in the Bari Bar Association. Francesco Parisi is the Oppenheimer Wolff and Donelly Professor of Law at the University of Minnesota, Law School and a Professor of Economics at the University of Bologna, Department of Economics. From 2002 to 2006 he held a Chair in Private Law at the University of

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Milan (Statale), where he was appointed Professore Ordinario per Chiara Fama. From 1993 to 2006 he taught at George Mason University where he served as Professor of Law and Director of the Law and Economics programme, and as an Associate Director of the J.M. Buchanan Center for Political Economy. Geoffrey Samuel is Professor of Law at the Kent Law School, University of Kent, and a Professor affilié at the Sciences Po Law School. He holds doctorates from the universities of Cambridge and Maastricht and an honorary doctorate from the University of Nancy 2. His research interests are in the areas of comparative law theory, legal epistemology and the law of obligations. His most recent books are An Introduction to Comparative Law Theory and Method (Hart Publishing, 2014) and A Short Introduction to Judging and to Legal Reasoning (Edward Elgar Publishing, 2016).

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Introduction Pier Giuseppe Monateri

Contract has never been more alive than nowadays and pervasively dominates world transactions. Notwithstanding its enduring presence and the complex apparatuses of technicians devoted to managing clauses and interpretation, the inquiry on the proper nature of contract, on its status and collocation within private legal taxonomies continues to be a controversial exercise. This comprehensive book, which collects the contribution of different scholars from different backgrounds, offers a thoughtful survey of theories, issues, cases, in order to reassess the present vision of contract law. The adjective ‘comparative’, prominent in the title, refers both to the specific kind of methodologies implied, and to the polyphonic perspectives collected on the main topics, with the aim of superseding the conventional forms of representation. In this perspective, the work engages a critical search for the fault-lines, which cross traditions of thought and globalized landscapes. Moving from a vast array of dissimilar inclinations, which have historically produced heterogeneous maps of law along with protean representative aesthetics, the book is built around four main groups of insights, including: the genealogies of contractual theoretical thinking; the contentious relationship between private governance and normative regulations; the competing styles used to stage contract law, and the concurring opinions expressed within the domain of other disciplines, such as literature and political theory; the tensions between global context and local frames and the movable thresholds between canonical expressions and heterodox constructions. Part I (‘Theories and Genealogies’) deals with fundamental epistemological issues and aims to dissect the underlying structure of the most accredited conceptual frameworks. How can we critically rebuild a theory of theorizing contract law as a separate field of law? How can we reassess the genealogy of contract law, managing the darker legacies embedded in Roman tradition? As it has been noted, despite the long history and the recent increase in theorizing about contract law, the nature and purpose of such theorizing remain under-discussed and many basic questions remain unanswered. Competing visions have framed the intellectual debate: autonomy theories have confronted property and 1

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2 Comparative contract law

reliance theories and from their impact, if not from their collision, a new creature, a hybridized form of scientific construction has taken shape. On a parallel level, the trans-historical and inter-cultural investigation paves the way to the possible corruption or contamination of the normative purity predicated to contract law by legal science. A deeper look reveals the quest for new taxonomies, for other schemes of intelligibility apt to valorize the specific role played by ‘contracticles’, namely by different types of transactions to be found at the lowest level of generality. In this perspective, a supplementary bulk of fragmented knowledge opens meaningful fissures within the body of systematized codes. The reflection on the actual morphology of contract rules also reveals the growing influence of social justice in private law and uncovers the failures that can be ascribed to the liberal conceptions of classical legal thought. In the present context, an intriguing and illuminating exercise could be to explore the relationship between what would be called ‘traditional’ contract law and ‘regulatory contract law’. This is not a well-established topic in the comparative law literature and rouses broader and more systematic inquiries. Part II (‘Market Values and Their Critiques: Private Governance and Normative Regulations’), developing the arguments introduced at the end of Part I, reports the most interesting positions on the relation between private governance and normative regulation. Once again, the issues of complexity and spontaneous order are under scrutiny, in order to pursue a strategic response to decisive questions, such as: how is it possible to maximize the satisfaction of the largest number of compatible goals in complex systems such as contemporary societies? How is it possible to secure an acceptable degree of certainty and to have efficient rules in order to achieve cooperation? On these premises, the contributors rediscover the various political representations of private autonomy and detect the key function fulfilled by the principle of ‘party autonomy’ within the political economy of private ordering in today’s global scenery. According to a skeptical view, it could be argued that even one of the most powerful creations of the legal science underlying classical legal thought, which lasted almost unchanged through the second globalization of law, has now come to an end or, in any case, has been dramatically transformed. A critical perspective aims both to trace and dissect the epiphanies of this substantial crisis and to propose new re/de-constructive projects. Another important and closely related topic is the tense relationship between freedom of contract and judicial intervention on the agreement. In particular, the ‘jurispathic’ power asserted by national courts is scrutinized both in its theoretical foundations and in its operational way of functioning. The judicial creation of exceptions, of

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Introduction 3

cases of contractual terms’ inapplicability, seems to construct a kind of supra-competence of the judiciary, enhancing a newfangled sovereign order, based on a hyperbolic claim. Part III (‘Representations and Narratives’) stages a compelling portraiture of the representational models, which have structured the multifarious narratives on contract law. Law, literature and politics are here intersected in a fruitful interplay of mutual illuminations. The literary emplotment of legal traditions is disclosed with its inner strategic potentialities. A particular attention is reserved to the wavering shifts which have animated the American legal debate, from the assertive and dogmatic rise of a classical theory of contract to its fall and disintegration under the fierce attacks of legal realism. The unresolved alternation of order and crisis, stability and change, certainty and instability is captured and expressed by the means of the texts written by distinguished intellectuals. The polyphonic voices are juxtaposed and assembled; legal tradition is de- and re-composed through the accepted discourses and the prospective imaginations of scholars and judges, here presented as mindful ‘legal humanists’. In a corresponding way, literature comes to vivify the normative world in which a community lives: novels, poetry, fairy tales, dramas and other genres express aspirations and perceptions, evaluations and expectations. Law lives in literature and is questioned by literature. Prospecting an unavoidable bond, an inseparable relation between law and literature, the volume offers a bright ensemble of diachronic examples, which substantiate the literary lecture of contractual theories and rules from the Renaissance to the Victorian era, and also reproduce the deep quest engaged by postmodern compositions. The interdisciplinary approach allows us to disclose the inconsistencies of the contractual paradigm (the tenet according to which the social institution we are used to naming the ‘State’ has been established by means of a (social) ‘contract’), as one of the most appealing ideas in the history of modern and contemporary Western political thought. In fact, searching for the identification of who is entitled to sign the ‘original’ contract, one could find that this abstract contractor is concretely personified and identifies as a male, white and Christian human being. The two most important requirements for a man to become such a full member are heterosexuality and able-bodiedness or ableness. Part IV (‘Global Context and Local Frames’) focuses on the process by which global ideas, principles and institutions could eventually be reinterpreted through local frames of reference. Dealing with the main arguments introduced in Part I, in this renovated de-contextualization and

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re-contextualization framework, the theorization refers to a disembedding/re-localizing strategy. On this ground, the theoretical paradigms through which a contract may be read are previously identified in broader terms, emphasizing their essential characteristics and, subsequently, are measured and operationally tested with regard to the specificities of selected jurisdictions. An analogous exercise is meant to make clear the proper functioning both of doctrines and of remedies. Therefore, the doctrine of good faith is scrutinized according to its general scope and to the exceptional application made in recent decisions of US Courts. Analogously, Part IV presents a critical genealogy of promissory estoppel, dwelling upon the sharp break from the traditional approach and the paradigm shift from the reasonableness of the conduct during the negotiations and moves in the direction of the obligation to act in good faith. A stimulating analysis, conducted through comparative methodologies, probes the binomial technology/contracts and provides the observer with a comprehensive view of local responses to common universal problems and developments posed by use of technology in contracts. Comparative Contract Law is intended to be an original contribution to the ongoing elaboration of contractual theories and a contemplative effort to explore uncharted paths of inquiry at the intersection of different fields of research.

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PART I CONTRACT LAW: THEORIES AND GENEALOGIES

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1. Theories of contract law Brian H. Bix

INTRODUCTION Theorizing about contract law has a long history – its origins coincide with the origins of thinking of about contract law as a separate area of law.1 However, there has been a particular flourishing of work (at least in English) on contract theory in recent decades, prompted in large part by the publication of Charles Fried’s influential book, Contract as Promise2 (about which, more below). Despite the long history and recent increase in theorizing about contract law, the nature and purpose of such theorizing remains under-discussed and many basic questions remain unanswered. In this chapter, section I will discuss general considerations relating to theorizing about contract law, section II offers an overview of some major types of theories, and section III raises some of the skeptical challenges to theorizing in this area.

I.

THEORIZING ABOUT CONTRACT LAW

A basic question about theories of contract law is, what is the nature and purpose of such a theory? Surprisingly, while there is a growing literature regarding which is the best theory of contract law, there is relatively little discussion of this foundational inquiry. At a basic level, a theory of a social practice could be descriptive (describing what is the case), prescriptive (making claims about how the practice should be organized or how existing practices should be reformed), or interpretive (sometimes called ‘rational reconstruction’, this is a combination of description and prescription, where existing practices are reformed or at least re-characterized to make them better: more coherent, more legitimate, etc.). It is crucial to understand what sort of claim is being made for or 1

See Simpson (1981). See Fried (2015). The first edition of the book (published by Harvard University Press) came out in 1981. 2

7

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by a theory, though this is a matter that theorists (and their critics) too often leave undiscussed. Sometimes a theory and its critics are talking past one another: it is not a fair criticism of a purely prescriptive theory that it does not accurately describe current practices, and so on. Additionally, we need to know something about a theory’s purported scope. Is the theory meant to be (at one end of the spectrum) about the contract law of a particular jurisdiction at a particular time, (at the other end of the spectrum) about all existing, past or possible contract law systems, or something in-between? For example, when Charles Fried offers a ‘theory of contract Law’,3 is it a theory of American (or, perhaps, Anglo-American) contract law, a theory about (say) ‘American, English, and similar common law’ legal systems, or about all possible legal systems? Fried never makes that clear.4 In the different area of general theories about the nature of law, it is often reported that the theories are ‘conceptual’ – meaning that they are true of any existing or possible legal systems, that they describe simply and basically what must be true for something to be a legal system.5 Would it make sense to make comparable claims for a theory of contract law (or tort law or property law), that there are certain characteristics that must be true for something to be contract law? One could certainly imagine a functional-style theory of this sort, e.g., that ‘contract law’ is whatever set of legal remedies are made available for the enforcement of promises, exchanges and transactions. At times the claims made regarding a doctrinal area of law are said to be ‘explanatory’, but in a way that is more abstract or metaphorical. When contract law is said to be ‘essentially about promise’6 (or tort law to be ‘essentially about corrective justice’7), the theorist is usually not saying that every rule, principle and practice of this doctrinal area perfectly reflects that value, but more that this value pervades the practice and is the primary component of the practice’s justification. One final line of questioning regards the data that grounds the theory: is the theory meant to explain or justify the outcome of particular cases or is the theory meant to operate at a more general level, e.g., explaining the rules or principles that cover whole categories of cases? To put the issue another way, when it is said on behalf of a theory on contract law that it ‘explains’ or ‘justifies’ contract law, what precisely within or about 3 4 5 6 7

Ibid. See Bix (2012a). See, e.g., Raz (2005). See Fried (2015). See, e.g., Coleman (1992).

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contract law is being explained or justified? The alternatives are perhaps more sharply differentiated in common law legal systems (like those of the United States and England), where (a) much of the contract law has developed from judicial decisions rather than being stated in or derived from a Code or other collection of statutes; and (b) the law continues to be developed (modified) by contemporary judicial decisions (which also bind lower courts and, generally, later decisions by the same court). At least in relation to common law legal systems, one can reasonably ask whether the ‘data points’ that the theory purports to explain are the particular case outcomes, or rather the ‘black-letter’ rules (and principles) that one may find in treatises, Restatements, and other summaries of the field (but which have no authoritative status in (most) legal systems).8 It has already been mentioned that one type of theorizing about contracts would involve ‘interpretive’ claims, also known as ‘rational reconstruction’. Interpretation/rational reconstruction has the advantage of being similar to what lawyers do in many legal systems while arguing a case: lawyers offer arguments that take into account relevant legal texts and past judicial decisions, trying to offer a coherent and principled justification of the whole area. In legal practice, this form of theorizing is often part of advocating that the law be changed, filled in or clarified in a way that is advantageous to one side of a legal dispute. There is a robust argument that this is the best and most natural use for theories of doctrinal areas: to offer guidance to judges who need to decide novel questions of law (in a way that may also combine with the judges’ improvement of the legal rules).9 There are, of course, other kinds of theories of, or relating to, contract law, beyond those already mentioned. For example, Dagan and Heller have offered what could be thought of as a theory of contract law, though one that would be part of a larger moral or political theory, in that it focuses on how the state can and should use contract law to promote a good (and autonomous) life for its citizens.10 There is also, of course (and as already mentioned), room for purely prescriptive theories, suggesting what the ideal set of contract rules and principles would be (in general, or for a particular country). As already noted, it may be instructive to compare theories about doctrinal areas of law with the perhaps better established and more widely known and discussed theories about the nature of law – the type

8 9 10

See Kraus (2007). See Moore (2000). Dagan and Heller (2013).

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of theory one finds in general jurisprudential discussions, and the works of theorists like H.L.A. Hart, Hans Kelsen, Ronald Dworkin and John Finnis.11 There are parallel questions regarding whether the claims of these sorts of theories should be understood to be descriptive, interpretive or conceptual, and whether it makes sense to speak of a general or universal theory. One difference is that it may be sensible and valuable to have a parochial theory of contract law (e.g., a theory of German, or French, or American contract law) in a way that a ‘(general) theory of German, or French, or American law’ would likely seem less sensible and useful. There are obvious connections between the topic of this volume, ‘comparative contract law’, and the issues surrounding theorizing about contract law. ‘Comparative contract law’ starts by assuming something like the following: that there is a general category, ‘contract law’, such that there are examples of that category in many, and perhaps all, legal systems. And once one concludes (or assumes) that there are examples of ‘contract law’ in most, and perhaps all, legal systems, then it seems sensible, or at least possible, to have a theory of what all (actual, or perhaps actual and possible) members of that category (‘contract law’) have in common. Additionally, it might be said that one needs to have at least an intuitive sense of the nature and boundary lines of the category ‘contract law’ in order to do comparative contract law. One must know what to include and to exclude in comparing one legal system with another: for example, does comparative contract law extend to a country’s legal rules regarding pension obligations? Landlord-tenant rules? Mandatory terms for insurance policies? Requirements for separation agreements? Standards for when charitable pledges are enforceable? And so on. While having a category of ‘contract law’ gives one a subject for theorizing, it still of course leaves open the question of whether anything interesting can be said about that category, and also what are the nature of claims being made within the theory. As already noted, a theory of contract law could be making descriptive claims about what is true about all the contract law systems one knows, or it could be making a conceptual claim about what must be true of all contract law systems, about what makes something a contract law system as opposed to something else. (There is, inevitably, a certain amount of circularity in the conceptual inquiry: if one is trying to determine what makes

11 See, e.g., Hart (2012); Kelsen (1997); Dworkin (1986); Finnis (2011); see also Raz (2005).

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something ‘contract law’ as opposed to something else, one will look at all examples of what one calls ‘contract law’, to see what distinguishes them from other things, e.g., legal rules of tort or restitution, or moral rules about keeping promises. There is thus a certain ‘reflective equilibrium’ between conventional or intuitive views about what fits into a category, and potential theoretical views about what makes up the boundary lines of the category.) The next section considers some prominent examples of contract law theories.

II.

CURRENT THEORIES

A. Autonomy Theories This is a broad category that could include not only the will theories of contract that were popular in continental Europe in the nineteenth century,12 but also more recent examples, like Charles Fried’s promissory theory13 and Randy Barnett’s consent theory.14 These all qualify as ‘autonomy theories’ because they tend to focus on the choice of (potential) contracting parties, and the importance of respecting and enforcing such choices. The whole ideal of ‘freedom of contract’ (and its cognate, ‘freedom from contract’) is that contract law is distinctive (relative both to public law and many other parts of private law) in giving individuals significant power to choose which duties will bind them: in principle, one chooses whether one enters any contracts at all, and the terms of the contracts one does enter. And there is another tie to autonomy: contractual partners are able to create legally enforceable rights and obligations to help them achieve objectives it would be difficult to achieve without legal enforcement of those commitments.15 The most influential modern autonomy theory is probably the promissory theory. The impetus for a promissory theory of contract law is the likely connection between the generally accepted moral obligation to keep promises and the legal enforcement of contracts. However, there are theorists who have questioned the connection between promises and contracts;16 and, in any event, in almost all legal systems, a significant 12 13 14 15 16

Gordley (1991). Fried (2015). See, e.g., Barnett (1986); Barnett (2012). Kraus (2009). See, e.g., Pratt (2008); Shiffrin (2012).

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portion of promises are not legally enforceable (in common law systems, generally only promises that are part of an exchange are enforceable; in many civil law systems, there is a requirement that promises be sufficiently important before they are enforced). The fact that not all promises are enforced, and that courts often focus only on whether a party has sufficiently outwardly/publicly consented to the legal duties in question, has motivated the competing ‘consent’ theory of contract law.17 B.

Property Theories

Theories like Peter Benson’s theory of contract law posit that a contract involves a transfer of a property right, or something like a property right, at the time the contract is entered.18 The advantage of this approach is that it justifies the rule in many jurisdictions that in the case of a breach, the non-breaching party has the right to full performance, or its economic equivalent, even if the breach occurred so early that the non-breaching party has not suffered any harm from the breach and has not relied on the contract in any significant way. On one hand, while the assertion that some sort of entitlement passes between the contracting parties at the time the agreement is entered does justify certain doctrinal outcomes, it seems to do this by assuming what is to be proven. Perhaps more problematic: to claim that one party has an entitlement or property right against the other leaves open many of the intricate questions a working contract law system must answer regarding the contours of that right, e.g., when does the party have the right that a court order the other party to perform, and in the case of money damages, how are damages to be measured, and what are the limits of what can be recovered (e.g., in US contract law, there are limitations based on causation, foreseeability, mitigation and certainty)? The assertion that one has a property-like contractual right would only open the inquiry on such questions, and would seem to leave a great deal still to do before the questions are resolved. C.

Reliance Theories

Some theorists have noted that while the doctrinal rules in some legal systems may allow the recovery of significant damages for breach of contract at any point after the contract has been entered (as mentioned in the previous section), in practice parties may not expect to recover 17 18

See Barnett (1986); Barnett (2012). Benson (2001); Benson (2007).

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damages, and courts may be reluctant to award damages, unless the non-breaching party can prove that the breach caused significant damage (e.g., because of the non-breaching party’s reasonable reliance on the contract). It is additionally argued that, in any event, the moral claim for damages is strongest when there has been such reliance, and weak when no such detrimental reliance has occurred.19 This line of argument has sometimes been thought to make up a reliance theory of contract law, and some theorists have strongly urged a focus on (reasonable) reliance, though it is hard to find fully-worked-out theories of contract law along these lines.20 In any event, any theory that purports to ground the rights party do (or should) have on their reliance, will need also to have a theory regarding when such reliance is reasonable, and that will in turn require some reference to other values (promise? consent? efficiency?). D.

General Theories, with Application to Contract Law

Along with theories aimed particularly at contract law, there are also forms of legal theory whose scope is broader, but the scope includes an application to contract law. The most influential such general theory (at least in the United States) is ‘law and economics’. Speaking in very rough terms, law and economics involves the application of various resources of economic thought to the understanding of legal rules, practices and institutions, and argues that legal norms generally do, and generally should, promote economic efficiency. A large number of theorists have used economic analysis as a way to explain current contract law doctrine or to prescribe changes in the current contract law rules (within a particular legal system, though prescriptions may also range more broadly across legal systems).21 One advantage the economic analysis of law has over other (mostly ‘deontological’) approaches to contract law is that economic analysis has the resources to make recommendations regarding detailed contract law rules and principles (e.g., when in a breach of contract case should a non-breaching party be granted ‘specific performance’ as opposed to being confined to money damages? When should damages in a breach of a construction contract case be measured in terms of ‘cost of completion’ as against ‘diminution of value’? And when should a seller have a contract law obligation to disclose information?). A general reference to 19

See, e.g., Fuller and Perdue (1936–1937). The usual names here are Patrick Atiyah, e.g., Atiyah (1979) and Grant Gilmore, e.g., Gilmore (1974). 21 See, e.g., Posner (2011); Kronman and Posner (1979); Craswell (1989). 20

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‘autonomy’, ‘fairness’, ‘corrective justice’ or ‘property’ is unlikely to offer much guidance, while economically focused theorists at least purport to have recommendations on most detailed questions, based on efficiency.22 There are other comparably general theories with potential application to contract law: e.g., utilitarian moral theories,23 Marxist and other critical theories,24 feminist theories,25 and so on, with examples of such applications in the notes. E.

Mixed Theories

As there are arguments in favor of a variety of approaches, it is not surprising that some theorists have argued for a theory of contract law that combines different approaches: in particular, combining autonomy and consequentialism (law and economics).26 The difficulty with such mixed theories is they require the theorist to offer a meta-theory that can ground which justifications go to which part of the theory, or regarding what the priority will be among the theory’s justifications if and when they conflict.

III.

DOUBTS ABOUT THEORIES

There are theorists who have expressed skepticism about the possibility or value of any general theory of contract law. This skepticism has been grounded on a number of grounds, some of which are detailed below. A.

Basic Task

Contract law is a sub-category of law, and some of the same difficulties that come with theorizing about law apply to theorizing about contract law. In general, there are complications inherent in the task of offering a theory of an ongoing social practice. Social practices change over time, and vary from place to place. They are human creations, not defined by chemical composition or species category the way ‘natural kinds’ are. There are reasons to doubt that there is a stable category, ‘contract law’, 22

See Craswell (1989). See, e.g., Cohen (1933). Unger (1986); Feinman and Gabel (1990). See, e.g., Frug (1985). See, e.g., Kraus (2001); Kraus (2002).

23 24 25 26

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to offer theories about, and also reasons to doubt that there is anything valuable that could be said at a descriptive, analytical or conceptual level about contract law (even skeptics would allow for the option of a purely prescriptive theory of contract law, arguing for what would be the best contract law system for a particular country). B.

Pluralism

A number of theorists have rejected theories of contract law on the basis that it is mistaken or misleading to point to a single ‘essence’ or ‘nature’ of contract law, because, the argument goes, contract law serves a variety of goods. For example, in most legal systems, there are numerous limits to autonomy (‘freedom of contract’): one can be held to contractual terms even if one did not know about or fully understand them, and there are categories of terms that will not be enforced (e.g., on public policy grounds) even if the parties consented to them with full knowledge. Contract law systems generally include mandatory rules, default rules and rules of interpretation which may frequently serve interests other than respecting party choice (e.g., values of general fairness, protecting vulnerable parties and expressing different public policies on particular issues). And similar counter-examples can be raised to other alleged ‘essential’ values for contract law. Indeed, one might see the range of different essentialist or prescriptive theories as themselves giving proof of the variety of values that contract law can and should promote: e.g., while Ian Macneil famously argued that contract law does and should promote long-term relationships,27 other writers have emphasized the way that contract law does (and should) facilitate cooperation between those who have been, and will remain, strangers.28 The obvious response is that some types of contracts are primarily about supporting long-term relationships, and some types of contracts are primarily about facilitating short-term cooperation among strangers; contract law does and should promote these quite different values, and many other values as well. C.

Variation

The challenge of variety responds to the (express or implicit) scope of contract law theories that purport to be general, universal or conceptual. The argument is that the rules, principles and practices of contract law are sufficiently diverse over time, across jurisdictions, or even across 27 28

See Macneil and Campbell (2001). See, e.g., Kimel (2003).

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transaction types within a single jurisdiction, that no single theory can capture the whole range of contract law without either being so general, or so cumbersome and detailed, as to be of little value as a theory. For example, the analysis goes, across jurisdictions some contract law systems protect ‘naked promises’ (promises made without any return promise, and without any detrimental reliance upon the promise) and some do not; some jurisdictions prefer the remedy of ‘specific performance’ (a court order that a party perform what it promised) for breach of contract, while others do not; some jurisdictions allow awards of exemplary (punitive) damages or damages for pain and suffering and emotional distress while others do not, and so on. Some theorists have argued that we should favor theories of contract law that are general (at least within a single legal system) because reinforcing common contract law principles may prevent the rules and principles covering particular transaction types from being ‘captured’ by the interests and values of powerful groups (e.g., lawyers and lobbyists for insurance companies determining the law of insurance policies, or large businesses similarly determining the rules for consumer and employment contracts).29 However, there is also a concern sometimes expressed in the other direction: that the talk of a single essence to contract law, especially when this is part of legal education or part of a public image of contracts that presents them as paradigmatically involving two parties of equal bargaining power and sophistication negotiating terms at arm’s length, may be a way to hide (to legitimate) the real injustices and inequalities of contracting practices.30 D.

Summary

The debate between advocates of contract law theories and skeptics often seems to be primarily one of emphasis. For example, those favoring having a general theory of contract law will usually concede that there is significant variety across transaction types and across jurisdictions and that there are some rules and practices that do not fit neatly under a single rubric, but they urge that what is common and constant across contract law(s) is more important than what varies. From the other direction, skeptics of contract law theory do not deny that there are common principles, rules and themes across transaction types and across jurisdictions, likely based on shared intuitions about keeping promises

29 30

See Oman (2005). Bix (2012b).

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and the regulation of transactions, but argue that what is common is less important than what differs.31

CONCLUSION The area of contract law theory remains largely unformed and unsettled. Those offering such theories often ignore basic methodological questions regarding what such theories are meant to accomplish and what the criteria are for success. Two likely models for such contract law theories are to see them as efforts to ‘explain’ contract law, or to ‘rationally reconstruct’ its rules and principles. There remain issues as to whether such theories should be seen as covering all existing, past and possible contract law systems, or only contract law systems of the theorist’s home nation and perhaps comparable current systems. Those who challenge the possibility or value of contract law theories tend to emphasize the wide variety of rules, remedies and practices across jurisdictions, over time, and even across transaction types within a particular jurisdiction. Challenges may also focus on the plurality of goods that contract law rules and practices promote, arguing that contract law theories that focus on only one value inevitably distort the underlying contract law system too much to be useful.

REFERENCES Atiyah, P. (1979) The Rise and Fall of Freedom of Contract. Oxford: Oxford University Press Barnett, R. (1986) ‘A Consent Theory of Contract’, 86 Columbia Law Review 269–321 Barnett, R. (2012) ‘Contract is Not Promise; Contract is Consent’, 45 Suffolk University Law Review 647–65 Benson, P. (2001) ‘The Unity of Contract Law’ in P. Benson (ed.), The Theory of Contract Law: New Essays. Cambridge: Cambridge University Press, 118–205 Benson, P. (2007) ‘Contract as a Transfer of Ownership’, 48 William and Mary Law Review 1673–731 Bix, B.H. (2012a) ‘Theories of Contract Law and Enforcing Promissory Morality: Comments on Charles Fried’, 45 Suffolk Law Review 719–24 Bix, B.H. (2012b) Contract Law: Rules, Theory, and Context. Cambridge: Cambridge University Press Cohen, M. (1933) ‘The Basis of Contract Law’, 46 Harvard Law Review 553 Coleman, J.L. (1992) Risks and Wrongs. Cambridge: Cambridge University Press

31 Cf. ibid. at 128–62 (arguing against contract theory) with Oman (2005) (arguing for a general contract theory).

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18 Comparative contract law Craswell, R. (1989) ‘Contract Law, Default Rules, and the Philosophy of Promising’ 88 Michigan Law Review 489 Dagan, H. and Heller, M.A. (2013) Freedom of Contracts, available at http://papers. ssrn.com/sol3/papers.cfm?abstract_id=2325254 Dworkin, R. (1986) Law’s Empire. Cambridge, MA: Harvard University Press Feinman, J.M. and Gabel, P. (1990) ‘Contract Law as Ideology’ in D. Kairys (ed.), The Politics of Law: A Progressive Critique. New York: Pantheon Books, 373–92 Finnis, J. (2011) Natural Law and Natural Rights. Oxford: Oxford University Press, 2nd edn Fried, C. (2015) Contract as Promise. Oxford: Oxford University Press, 2nd edn Frug, M.J. (1985) ‘Re-Reading Contracts: A Feminist Analysis of a Contracts Casebook’, 34 American University Law Review 1065 Fuller, L.L. and Perdue, W.R., Jr. (1936–1937) ‘The Reliance Interest in Contract Damages: Parts I and II’, 46 Yale Law Journal 52–96; 373–420 Gilmore, G. (1974) The Death of Contract. Columbus, OH: Ohio State University Press Gordley, J. (1991) The Philosophical Origins of Modern Contract Doctrine. Oxford: Clarendon Press Hart, H.L.A. (2012) The Concept of Law. Oxford: Oxford University Press, 3rd edn Kelsen, H. (1997) Introductions to the Problems of Legal Theory (Bonnie Litschewski Paulson and Stanley Paulson (trans.)). Oxford: Oxford University Press Kimel, D. (2003) From Promise to Contract: Towards a Liberal Theory of Contract. Oxford: Hart Publishing Kraus, J.S. (2001) ‘Reconciling Autonomy and Efficiency in Contract Law: The Vertical Integration Strategy’ in E. Sosa and E. Villanueva (eds), Philosophical Issues: Social, Political and Legal Philosophy. Oxford: Basil Blackwell, vol. 11, 420–41 Kraus, J.S. (2002) ‘Legal Theory and Contract Law: Groundwork for the Reconciliation of Autonomy and Efficiency’ in E. Villanueva (ed.), Social, Political and Legal Philosophy, vol. 1, Legal and Political Philosophy. Amsterdam: Rodopi, 385–445 Kraus, J.S. (2007) ‘Transparency and Determinacy in Common Law Adjudication: A Philosophical Defense of Explanatory Economic Analysis’, 93 Virginia Law Review 287–359 Kraus, J.S. (2009) ‘Personal Sovereignty and Normative Power Skepticism’, 109 Columbia Law Review Sidebar 126–34 Kronman, A.T. and Posner, R.A. (eds) (1979) The Economics of Contract Law. Boston, MA: Little Brown Macneil, I. and Campbell, D. (2001) The Relational Theory of Contract: Selected Works of Ian Macneil. London: Sweet & Maxwell Moore, M.S. (2000) ‘Theories of Areas of Law’, 37 San Diego Law Review 731–42 Oman, N.B. (2005) ‘Unity and Pluralism in Contract Law’, 103 Michigan Law Review 1483–506 Pollock, F. (1885) Principles of Contract, London: Stevens and Sons Posner, R.A. (2011) Economic Analysis of Law. New York: Aspen Publishers, 8th edn Pratt, M. (2008) ‘Contract: Not Promise’, 35 Florida State University Law Review 801–16 Raz, J. (2005) ‘Can There be a Theory of Law?’ in Martin P. Golding and William A. Edmundson (eds), The Blackwell Guide to the Philosophy of Law and Legal Theory. Oxford: Blackwell Publishing, 324–42 Shiffrin, S.V. (2012) ‘Is a Contract a Promise’ in A. Marmor (ed.), The Routledge Companion to Philosophy of Law. London: Routledge, 241–57 Simpson, A.W.B. (1981) ‘The Rise and Fall of the Legal Treatise: Legal Principles and the Forms of Legal Literature’, 47 University of Chicago Law Review 632–79 Unger, R.M. (1986) The Critical Legal Studies Movement. Cambridge, MA: Harvard University Press

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2. In defense of Roman contract law James Gordley

Even those who understand and admire Roman contract law think that modern contract law is a great improvement. As has often been said, in contrast to the Romans, who had a law of particular contracts, we have a general contract law reflecting general principles. One principle is that contracts are binding upon consent, although there are exceptions such as the common law rules on consideration and the civil law requirement that certain contracts be notarized. Another principle is that the parties are bound to the terms to which they expressly agreed and, if their agreement is silent, to the terms on which they would have agreed had they given the matter thought. A third is that when one party fails to perform, the aggrieved party should receive a remedy that places him where he would have been had the performance been forthcoming. As I have described elsewhere, Roman law was first given a systematic structure based on general principles by a group of jurists who worked in the sixteenth and seventeenth centuries and are known to historians as the Spanish natural law school or the late scholastics. They synthesized Roman law with the moral philosophy of their intellectual heroes, Aristotle and Thomas Aquinas. Many of their conclusions were borrowed by the seventeenth century founders of the northern natural law school, Hugo Grotius and Samuel Pufendorf, paradoxically, at the very time when the Aristotelian philosophy on which these conclusions had been based was falling into disfavor. In the nineteenth century, the doctrinal structure was reworked by jurists we remember as will theorists. Their innovation was not to recognize the importance of the concept of will but, in A.W.B. Simpson’s words, to treat the concept as a sort of Grundnorm from which as many rules of contract law as possible were to be derived. The three principles just mentioned emerged from the work of the late scholastics as modified by that of the will theorists. Elsewhere I have discussed the difference between the work of the late scholastics and of the will theorists and its implications for modern law. Here I will discuss some aspects of Roman contract law for which the systematizers had no use. The late scholastics found no theoretical justification for them and so dismissed them as matters of Roman positive law. Many will theorists dismissed them as archaic features 19

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which modern law had outgrown, an opinion widely held today. I believe that the work of systematizing Roman law was a great achievement. Nevertheless, I will argue that these features were dismissed too quickly.

I.

WHEN CONTRACTS ARE BINDING

As has often been said, the Romans did not have a general contract law but a law of particular contracts. They began to use the term ‘contract’ at a comparatively late date, after most of the rules governing particular contracts had been settled. Gaius was the first to distinguish the general classes of obligations contractus and delictus.1 The distinction is similar to one that Aristotle drew between involuntary and voluntary commutative justice. Modern scholars believe that Gaius took it directly or indirectly from Aristotle.2 In any event, Gaius did not discuss its implications. Having drawn this distinction, he immediately turned to the rules that governed particular torts and contracts of Roman law. As Alan Watson observed, for the Roman jurists: Each individual type of contract, such as stipulation, loan for use, or loan for consumption, sale, hire, or mandate, remains intact with its own sui generis body of rules … [F]or a Roman jurist it was unthinkable … to write a commentary on the law of contracts or even on the law of a group of contracts, such as consensual contracts. The same is equally true of other fields, for instance of delicts.3

Some of these rules concerned when an agreement between the parties became binding. Although the Roman jurists recognized that the parties must consent for any contract to be binding, only some contracts, the ‘consensual’ contracts or contracts consensu, were binding by consent alone. Gaius mentioned sale, lease (or hire), partnership and mandate, which is a kind of gratuitous agency.4 Others, the ‘real contracts’ (contracts re) were binding when an object was actually delivered, for example, loans for use or for consumption, and deposit, all of which were gratuitous. Other contracts were binding upon the execution of a formality. The all-purpose formality was stipulatio, which was originally oral although eventually a writing could be used to prove that a stipulatio had 1

G. 3.88. See Zimmermann (1990) 10–11; Kaser (1959) 522; Honoré (1962) 100; Coing (1952) 59. 3 Watson (1995) 170. 4 G. III. 135. 2

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been made. One party would ask the other, ‘Do you promise such and such?’ and the other would answer that he did. For each party to be bound, each party would make a stipulatio in which his obligation was conditional on the other party’s fulfillment of his own. Eventually, a special formality, insinuatio, was required for the promises of gifts. The promise had to be officially registered. Finally, there were ‘innominate’ contracts, contracts ‘without names’, that were not enforceable before performance. An example was barter. A.

Rejection of the Roman Distinctions

Although some medieval jurists expressed surprise that barter, unlike sale, was not binding upon consent,5 the attack on the Roman distinctions among contracts began with the late scholastics. Luis de Molina thought that the Roman distinctions were wrong in principle. In a barter, ownership was transferred when the objects exchanged were actually delivered. Molina saw no reason why, if the parties so intended, they could not transfer upon consent the right to demand delivery. A court should ascertain their intent by examining the ‘circumstances’.6 Molina concluded that ‘everything, indeed, concerning … innominate and innominate contracts that was invented and introduced by the pagans more subtly than usefully should be abolished’.7 His contemporary Leonard Lessius agreed that the Roman distinction had no principled justification, but for a different reason. He claimed that Molina had failed to recognize that promises are binding simply because they are promises and not because of the precise intention with which they are made. A promise was a commitment to do something, not a mere statement about what one would do. Therefore every promise gave rise to an obligation.8 A promise to give one object in exchange for another was therefore binding without any need to inquire into the circumstances. In the seventeenth and eighteenth centuries, these arguments were repeated by the leaders of the northern natural law school, Hugo Grotius, Samuel Pufendorf and Jean Barbeyrac. Grotius and Barbeyrac made the argument of Molina. ‘Why’, Grotius asked, ‘may there not be transferred a right in personam either that ownership be transferred or that something 5

See, e.g., Iacobus de Ravanis, Lectura Super Codice to C. 4.64.3 (1519); repr. Opera iuridica rariora, vol. 1 (1967) (published under the name of Petrus de Bellipertica: on authoriship, see Meijers (1959) 72–77. 6 Molina (1614) disp. 262. 7 Ibid. disp. 258. 8 Lessius (1628).

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be done?’9 Barbeyrac concluded that ‘if a purely gratuitous promise can confer a true right, then the one to whom the promise was made has certainly lost a right that he had acquired’.10 Pufendorf conflated the arguments of Molina and Lessius. Every ‘perfect promise’ gave rise to an obligation because ‘it is a perfect promise when a man not only declares his will for a future time to perform something for another, but also shows that he gives him a right whereby the other is fully entitled to demand of him the thing promised’.11 The Roman distinctions among nominate and innominate contracts came to be regarded, at best, as a peculiarity of Roman positive law, and, at worst, as a mistake. Over the next century, they disappeared in jurisdictions that had adopted Roman law.12 They were abolished by statute in parts of Spain.13 German and Dutch jurists claimed that, unlike most of Roman law, they had never been received.14 So did the leading French jurists Jean Domat and Robert Pothier.15 Molina and Lessius launched the attack on the Roman distinctions with a simple argument: the parties should be able to make their agreement binding by consent if they so wished. Therefore, any of the contracts recognized by Roman law should be binding by consent if the parties so wished. The question that they did not face is whether or not the parties to every sort of voluntary arrangement did wish to be bound on consent. Molina said that a court should ascertain their intent by examining the ‘circumstances’.16 But he was so certain that the parties would wish to be bound upon consent that he said, ‘everything, indeed, concerning … innominate and innominate contracts … should be abolished’.17 Lessius thought that one who consented to a contract promised to abide by its 9

Grotius (1646) II.xi.1.3. Barbeyrac (1734) n. 10 to III.v.10. 11 Pufendorf (1688) III.v.7. 12 See Zimmermann (1990) 538–40, 544–45. 13 Molina (1614) 257–58. 14 Vinnius (1703) 3.14.2 § 11; Voet (1827) 2.14 § 9; Böhmer (1791) 2.14 § 25; Stryk (1739) 2.14 §§ 1–3; Brunnemann (1731) 2.14.7 no. 6. An exception was Lauterbach, who denied that an action could be brought on a mere agreement, Lauterbach (1707) 2. 4 §§ 19–20. As Nanz noted, Wesenbeck, in a commentary first published in 1565, was the first to make the claim that, according to usage, all agreements are enforceable, for which he miscited Bartolus and Baldus. Wesenbeck (1665) 2.14 § 9; Nanz (1985) 85. See Birocchi (1990) 146–55, 197–213. 15 Domat (1771) liv. I, tit. i, sec. 1, § 8; Pothier (1821) § 3, 1. 16 Molina (1614) disp. 262. 17 Ibid. disp. 258. 10

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terms, and therefore bound himself to do so before performance. It is possible, however, for parties to agree on the terms of a voluntary arrangement without wishing to be bound in advance of performance. Lessius would say that they did not consent or promise and that consequently their arrangement was not a contract. He did not deny that if the parties did not wish to be bound in advance of performance, they should not be. The question he did not address was when, typically, or more often than not, the parties who entered into the Roman real contracts and innominate contracts would wish to be bound. The conclusion that in principle, all contracts are binding upon consent was accepted by the nineteenth century will theorists virtually without argument. They defined contract in terms of the will or consent or agreement of the parties.18 They did not explain why the law should enforce contracts or why the expressed will of the parties should be respected. As Valérie Ranouil observed in her study of the French will theories, they took the binding force of contract for granted rather than demonstrating it.19 She quoted Gounot’s characterization of their view: ‘The contract is obligatory simply because it is the contract.’20 The question that needs to be addressed is when the parties would wish to be bound. We will examine that question, first, with regard to innominate contracts such as barter, and second with regard to real contracts such as loans for use and consumption and deposit. Then we will see that the same question should be addressed even in dealing with consensual contracts such as sale. B.

Innominate Contracts

In innominate contracts, one performance is given for another. There is no price, and so the contract is neither a sale nor a lease. In a passage ascribed to Paul but probably interpolated by Justinian’s compliers,21 there are said to be four such arrangements: either I give to you so that you give; or I give so that you do; or I do so that you give; or I do so that you do.22 We will discuss barter (permutatio), in which one thing is given 18

See, e.g., Savigny (1840) § 134; Puchta (1884) §§ 49, 54; Windscheid (1891) § 69; Demolombe (1882) § 12; Larombière (1857) 1, § 41; Laurent (1875) 15, §§ 424–27; Leake (1867) 7–8; Pollock (1885) 1–9; Langdell (1880) 1–21. See generally Gordley (1991) 161–213. 19 Ranouil (1980) 71–72. 20 Gounot (1912) 129, quoted in Ranouil (1980) 72 n. 31. 21 Zimmermann (1990) 534. 22 Dig. 19.5.5.pr.

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for another, although the same analysis would apply to other innominate contracts. It is not clear that the reasons why contracts such as sale should be binding in advance of performance normally apply to a barter. Modern scholars disagree over what these reasons are. I have discussed their opinions elsewhere,23 and argued that the best explanation is that of Melvin Eisenberg: one party may want to lock in a favorable bargain.24 It might seem as though the parties to a barter would want to lock in a favorable trade just as the parties to a sale might want to lock in a favorable price. Nevertheless, although the parties to a sale typically are seeking the best bargain they can make, it is hard to say what is typical of the parties to a barter. Moreover, even if the parties to a barter are seeking the best deal they can, it is not clear that they would want to lock each other in. Sometimes, the parties to a barter are not seeking the most favorable bargain. To intend to bind the other party legally would be repugnant to the reason they chose to barter instead of choosing to buy and sell. One party might want to acquire an object owned by the other party but, because they are friends, relatives, neighbours or colleagues, they might prefer to barter because a cash transaction seems commercial. Artists frequently trade their work with each other in part because it would be embarrassing for them to buy and sell for cash based on the estimated market value of the work of each artist. One of the parties might be trying to do the other a favor and wish to barter because the favor is less obvious than if he had adjusted the price. During the Depression my wife’s grandfather, a physician, used to accept cuts of lamb and beef from a local meat dealer in return for the medical services he provided. I suspect that my grandfather-in-law was receiving less meat than he could have purchased for his normal fee because he wanted to help his patients in hard times, but it may be that the dealer was giving him more meat than his normal fee would buy, having noticed that he was no longer buying choice cuts of meat. Even if each party to a barter were interested only in getting a good bargain, they might not want the transaction to be binding in advance as the parties typically do in a sale. Each party to a sale has the choice of taking the price that the other party proposes or waiting and looking for a better one. Because a sale is binding upon consent, each party insures himself against the loss he would suffer if he had waited and obtained a 23 24

Gordley (2006) 293–96. Eisenberg (2001) 223, 279.

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worse price by forfeiting the gain he would make if he had obtained a better one. If the parties are risk averse, they will both want to insure. In contrast, the parties to a barter may not be insuring themselves against such a risk. They may have chosen to barter rather than to buy and sell, not to avoid the risk of contracting on less favorable terms if they look further, but to take advantage of the fact that each happens to have the very thing that the other wants. Each may have something that the other regards as very special or difficult to obtain elsewhere. Or they may be bartering in order to avoid such extra costs as broker’s fees, taxes possibly, and, in any case, the time and money spent in looking for a good price. The reason one party would want the other party to bind himself in advance of performance is the fear that the other party will back out, not because he has found better terms, but because he has reconsidered and decided the exchange would make him worse off rather than better. But is that a reason both parties are likely to have? And if so, is it one the law should respect? It might be that one party is afraid that the other will back out because the other party has acted foolishly and will back out as soon as he realizes it. He realizes that the exchange is one to which no sensible person would agree. It is unlikely that both parties would want the other to be bound for this reason, each believing that he has gulled the other. If so, it is hard to see why the law should enforce an arrangement which is, in effect, a bet they have placed on which of them has been gulled. A more likely reason is that one party wants the other to be bound for fear that the other will decide the exchange is not to his advantage because of a change of circumstances or simply a change of mind. Is it likely that both parties would have this fear, and to such an extent that each would be willing to bind himself for fear the other party will not wish to be bound? If so, each party thinks it more likely the other will back out than that he will want to do so himself. Sometimes each party’s fear that the other will want to withdraw, and his confidence that he will not wish to, may be so great that each party will want the arrangement to be binding on both. But it would be odd if that were normally the case. Even if it were, it is hard to see why the fear that one party may decide the bargain is disadvantageous is a reason that the law should respect for holding them bound. A prime objective of contract law is to allow the parties to enter into contracts that make each of them better off, at least in his own estimation. Sometimes there is a good reason why the party who later finds the contract disadvantageous should not be able to withdraw: the purpose of the contract is place on one of the parties a risk that must be borne by someone. The party who bears that risk is compensated for doing so. He should not be able to withdraw if he loses

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when he might have won. Insurance contracts are binding for that reason. So, as we have seen, are sales which insure each party against the risk of finding worse terms if he waits and looks further. Suppose, however, that one party wants to lock the other in for fear the other party will discover that the deal will make him worse off. It is hard to see what good purpose is served by holding the parties bound in advance of performance. If each party is free to withdraw, and one party discovers that the deal on the original terms will make him worse off, it may still be possible to renegotiate the deal on terms that make both parties better off. If not, one party will have been made worse off and the normal purpose of contract law will have been frustrated. C.

Real Contracts

In Roman law, some contracts, the contracts re, were not formed until an object was delivered. Translators call them ‘real contracts’, using ‘real’ in the sense of ‘real estate’, not in the sense of ‘the real McCoy’. Among these contracts are loan for consumption (mutuum), loan for use (commodatum), and deposit (depositum). All three are gratuitous. No compensation is paid by the person who is allowed to consume or use a thing, or to a person who agrees to safeguard an object deposited with him. According to the late scholastics, as we have seen, all contracts should be binding on consent as long as the parties so intended. They assumed that when the parties consented, they intended to be bound as of that moment. Nevertheless, they recognized that the real contracts were different than others. One of the parties was doing the other a favor, and, indeed, a favor that he could do without cost to himself. The lender might have no other use for the object loaned, or the depositee for the storage space needed to keep the object deposited. That difference seemed to call for a difference in the treatment of these arrangements. Having assumed that the parties had promised to be bound before delivery, Lessius and Molina moderated the rigor of this conclusion by saying that they had promised subject to a condition: that the party doing the favor could perform at no cost to himself. If that party discovered that he needed the object loaned or the storage space, he could withdraw from the arrangement even after delivery.25 They reached this conclusion despite a Roman text: As lending rests on free will and decency, not on compulsion, so it is the right of the person who does the kindness to fix the terms and duration of the loan. 25

Lessius (1628) lib. 2, cap. 27, dub. 5; Molina (1614) disp. 294, nos. 8–10.

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In defense of Roman contract law 27 However, once he has done it, that is to say, after he has made the loan for use, then not only decency but also obligation undertaken between lender and borrower prevent his fixing time limits, claiming the thing back or walking off with it in disregard of agreed times … Thus, if you have lent me writing tablets for my debtor to enter a cautio, you will do wrong suddenly to demand them back. For if you had refused, I would have either bought some or made sure I had witnesses present. The same applies where you have lent timber to prop up a building and then hauled it away again or even knowingly supplied defective materials. Favors should help, not lead to trouble.26

Molina agreed, as a general principle, that one party should not be able to change their mind in a way that injures another. But, he argued, the borrower should have understood that the loan was made on the tacit condition that the lender continued to have no need for the object. If the need arose, it was an accident for which the promisor should not be held responsible.27 Thus, for the late scholastics, as for the Romans, mutuum, commodatum and depositum remained special contracts requiring special treatment because a favor could be done costlessly. The Roman solution had the advantage of simplicity: the party doing the favor could call the arrangement off before delivery or afterwards with no questions asked, unless he had set a time limit, in which case he must observe that limit. The late scholastic solution had the advantage that it required the party withdrawing from the arrangement to prove he had a good reason for doing so. But it did not protect the party with whom the Romans sympathized: a party who had changed his position expecting to receive a favor and now was hurt when the arrangement was cancelled before the time agreed. The reason, according to Molina, was that the consent of the party conferring the favor was subject to a condition: that doing would be costless. That conclusion seemed necessary because Molina and Lessius had assumed that the parties had consented to be bound in advance of performance, and they thought it unfair to hold him unconditionally bound. But if he promised subject to such a condition, then the party to receive the favor could not complain. Whether or not the late scholastic solution was fairer than that of Roman law, the late scholastics arrived at it, not by asking which solution was the fairest, but by assuming that, like other contracts, mutuum, commodatum and depositum were binding upon consent. Modern jurisdictions have adopted either the Roman rule, or the late scholastic rule, or some cross-variation. I edited a study in 2001 in which 26 27

Dig. 13.6.17.3. Molina (1614) disp. 279 no. 10.

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authorities from 12 Member States of the European Union were asked how their jurisdiction would resolve a series of problems concerning the enforcement of promises. One problem concerned the loan of a car which the owner later discovered that she needed for her own use.28 Here is a summary of the answer in civil law jurisdictions: In two civil law countries (Spain and Germany), and possibly in a third (Greece), a contract of loan for use is formed whether or not the car is delivered. In the rest, except for Scotland, such a contract is formed only if the car is delivered; otherwise the arrangement is a promise to enter into a loan for use (France, Belgium, the Netherlands, Portugal, Italy, Austria and possibly Greece). In Italy, possibly in the Netherlands, and conceivably in Spain and Portugal (where the majority opinion is to the contrary), the distinction matters because such a promise would not be binding. In France and Belgium, it matters because [the owner] can reclaim her car if circumstances have changed only if the contract is a loan for use. In Austria, it matters because [the owner] can reclaim her car for this reason only if the contract is not a loan for use … In Scotland, the promise is unenforceable (absent a writing or reliance) whether or not the car is delivered. … The Civil Codes of France, Belgium, the Netherlands, Italy, Austria, Germany and Greece all provide that, in a loan for use, the lender who has a grave and unforeseen need for the object loaned can reclaim it before the time agreed. The Spanish Code has a similar provision that speaks of the gravity of the need but not of its unforeseeability. The Portugese Code allows the lender to reclaim it if he has a ‘fair reason’. The Austrian Code provides that the lender cannot reclaim it.29

Another question dealt with a promise to store furniture without charge when the promisor later learned that he needed the space himself to store furniture he had just inherited:30 In two civil law systems, a contract of deposit is formed whether or not the furniture has been delivered (the Netherlands and Germany). In seven civil law systems a contract of deposit is formed only upon delivery; before then, the arrangement is a promise to enter into such a contract. In two of these systems, such a promise is enforceable (Belgium and Austria); in two it is enforceable according to the leading opinion (Greece) or that of most scholars (Portugal); in two it is uncertain whether it is enforceable (France and Spain); and in one it is not enforceable unless made in the economic interest of the promisee, as, possibly, if he were an antiques dealer or a professional storer 28 29 30

Gordley (2001) 171–92. Ibid. 191–92. Ibid. 118–50.

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In defense of Roman contract law 29 … In one system, the promise is not enforceable with or without delivery absent a writing or reliance (Scotland). … In six systems, even if [the person storing the furniture] is bound contractually, he will likely be excused because of a specific provision in the civil code that a depositee can return the goods before the time fixed if he has an ‘important reason’ (the Netherlands and Germany) or ‘fair motive’ or ‘fair reason’ (Spain and Portugal) for doing so, or if, due to changed and unforeseen circumstances, he cannot store them without harm to his own interests (Austria and Greece). In Belgium, [the depositee] may be excused on account of force majeure, even though performance has become more difficult rather than impossible. The reporters from France, Italy [and] Scotland … concluded that the reason for the change of mind is irrelevant. (It might be worth noting that in Italy, the promise is not binding without delivery; in France, whether it is binding is doubtful; in Scotland, it is not binding with or without delivery …) In the six systems in which the promise is enforceable with or without delivery, at least according to the prevalent opinion, [the depositee] would have an excuse (the Netherlands, Germany, Belgium, Portugal, Austria and Greece).31

Both of these solutions treat the Roman real contracts as special. They are subject to a special rule that does not apply to other contracts. The difference among modern civil law jurisdictions concerns what this rule should be: that these contracts are not binding before delivery, or that a party can back out if he finds the contract disadvantageous for a reason that he did not expect. The one rule is a legacy of Roman law. The other is a legacy of the late scholastics’ conclusion that the parties wished to be bound upon consent but not conditionally. But they did not reach that conclusion because it seemed to be fairer, but because it seemed to be necessary given their conclusion as to when all contracts were binding. Supposedly, common law jurisdictions do not accord any special status to these arrangements. If a promise was made in connection with them, the promise is binding if it has consideration. In the United States, it is binding even without consideration if the promisee changed his position in reliance that it would be kept. Yet the common law has been unable to ignore the special features of what the Romans called real contracts. Before the nineteenth century, the common law was not organized in categories such as contract and tort. It was organized by writs. In the Middle Ages, a writ was necessary to bring a lawsuit before the royal courts. Centuries later, whether the plaintiff could recover still depended on whether he could bring his case within a certain writ. If the defendant broke a promise, he could bring a writ of covenant if the promise had 31

Ibid. 149–50.

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been made under seal, by making an impression on a document containing that promise. He could recover in assumpsit if the promise had ‘consideration’. Traditionally, English courts had found ‘consideration’ in disparate cases in which it seemed sensible for the plaintiff to recover. Some of these cases were bargains or exchanges in the normal sense. Some were not: for example, some were of gratuitous loans and bailments32 including the types of voluntary arrangements that the Romans had called mutuum, commodatum and depositum. The courts held that there was consideration for the promise of the borrower or bailee to look after the object and to return it or repay the loan. In the nineteenth century, treatise writers, followed by courts, tried to rationalize and systematize the common law. Wanting to attach a definite meaning to ‘consideration’, they equated it with bargain or exchange. Sir Frederick Pollock explained bargain in an ingenious way that transformed into bargains cases such as those just mentioned which were not bargains in any ordinary sense. A promise had been bargained for if the promisor was induced to make it by some change in the legal position of the promisee.33 The promisee gave up a legal right, or promised to do so, and the promisor made his promise, in part, in order to induce the promisee to give up that right. That definition was adopted by his American friend, Oliver Wendell Holmes,34 and by Holmes’ admirer Samuel Williston,35 whence it passed into the first Restatement of Contracts36 and eventually into the Second Restatement.37 By this definition, once delivery was made, a gratuitous loan could be considered a bargain. The lender gave up his legal right to the use or consumption of his property. The borrower promised to give it back or take care of it, in part, to induce the lender to give up the legal right.38 The result was like that in Roman law. The contract was binding only after delivery was made. Yet supposedly, the reason was not that such 32

Simpson (1975) 416–52. Pollock (1936) 164. 34 Pollock sent him a copy of the manuscript of the first edition; Holmes wrote back that the account of consideration ‘was the best which I had seen’. Letter from Pollock to Holmes, 16 December 1875, in Holmes et al. (1961) 276. Holmes then published his own theory of consideration, which was similar. Holmes (1881) 293–94. 35 Williston (1914) 516–18. 36 Restatement of Contracts § 75 (1932). 37 Restatement (Second) of Contracts § 71(1) (1979). 38 See Restatement (Second) of Contracts § 71 cmt. c, illus. 8 (1979). 33

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contracts were subject to a special rule. It was that such contracts were bargains, and subject to the same rules as all other bargains. Williston accepted that explanation,39 although his friend Arthur Corbin found it artificial.40 A harder question was why there was consideration for the arrangement that the Romans called depositum. In the early case of Coggs v. Bernard, a carter had agreed to transport a keg of brandy free of charge, and then damaged the keg. The court said that ‘bare being trusted with another man’s goods, must be taken to be a sufficient consideration’.41 Pollock and Williston themselves admitted that in this situation the formula did not work.42 The carter was not promising, even in part, to induce the owner to entrust him with the goods. These problems were resolved, to the satisfaction of many jurists, when Williston, with Corbin’s assistance, wrote the doctrine of promissory estoppel into the first Restatement of Contracts. Under this doctrine, a promise was enforceable if it was relied upon, even if it lacked consideration.43 The result, again, and as in Roman law, was that a gratuitous loan or deposit is binding only upon delivery. But now the reason was said to be that, in making delivery, the lender or depository was relying on the other party’s promise to repay him, to return the property, or to safeguard it.44 Thus, the reason given was not that mutuum, commodatum and depositum are special contracts that require a special rule. It is that, as in the case of all promises, the promisor is liable if the promisee relies. That explanation is no more plausible than the claim that these gratuitous contracts are really bargains. One hopes a US court would 39

Williston (1920) 1, § 138, at 305–7. His notes to his 1919 edition of Anson’s Principles of the Law of Contract contain two of his principal ideas about contract formation. First, ‘[n]o single definition’ of consideration could explain all the currently approved decisions. Anson (1919) § 118, at 116 n. 3. Consequently, one should not try to fit all the cases into a single formula. Second, when courts find consideration they are sometimes holding the promisor liable because of ‘subsequent facts consisting of acts in reliance on the promise’. Ibid. § 118, at 116 n. 3. Although Corbin does not say so expressly, he seems to have been thinking of cases in which the courts found ‘consideration’ for gratuitous agencies and bailments. In the text Corbin was editing, Anson had listed them as an exception to the normal requirements of consideration. Ibid. § 122, at 119; §§ 133–35, at 132–35. 41 (1703) 92 Eng. Rep. 107, 114. 42 Pollock (1885) 174 n. (n); Williston (1920) para. 1038. 43 Restatement (First) of Contracts § 90 (1932). 44 Corbin (1963) para. 207, at 262–63; Boyer (1952) 665–74; Seavy (1951) 918. 40

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hold the promisor liable whether the promisee relied or not. Suppose that the owner of the keg of brandy who entrusted it to the carter had no other choice but to abandon it. The carter happened to be the only person on the pier when the owner was told he could not take it with him on a cruise ship he was about to board. In Shakespeare’s play, The Merchant of Venice, Antonio loaned money to his friend Bassanio to woo and win the fair Portia, a loan which could only be repaid if Bassanio succeeded. Suppose that Antonio were thoroughly convinced that Bassanio would not succeed, that the money would never be repaid, but loaned it to Bassanio anyway for fear of losing his friendship. An American lawyer would find it hard to explain why, if Bassanio did marry Portia, he had to repay Antonio. Antonio did not loan the money in reliance on Bassiano’s promise to do so. Portia, having studied Roman law, would have no trouble at all. The contract was a mutuum. D.

Consensual Contracts

According to Gaius, sale, lease, partnership and mandate (a kind of gratuitous agency) were contracts consensu. The reason was not that, in these instances, Roman law adopted the modern principle that contracts are binding on consent. Roman law was a law of particular contracts. Sale, lease, partnership and mandate were binding on consent because each was a kind of contract to which such a rule was appropriate. The Roman rules as to what constituted a sale, lease, partnership or mandate thus set a boundary to the contracts that were enforceable upon consent. Here, we will discuss one case in which those boundaries were later crossed: the enforcement of a generic sale, a sale-like contract that the Romans did not recognize as sale. In Roman law, the seller was bound to deliver an object whose identity could be specified at the time of sale. He could not be bound to deliver any goods that answered to a certain description, such as a certain amount of a fungible commodity such as wheat, or goods made to certain specifications. In Roman law, the owner of a barn that contained wheat could sell so many bushels of it although they had not yet been measured out.45 The owner of a field could sell wheat that had yet to be grown on it.46 A goldsmith could sell a ring he was yet to make.47 A fisherman

45 46 47

Dig. 18.1.35.5. Dig. 18.1.8. pr.; 18.1.39.1. Dig. 18.1.20.

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could sell whatever his net would catch on the next cast.48 But one could not sell or buy any wheat or any ring that met certain specifications.49 The medieval jurists lost track of this limitation. In the Ordinary Gloss to the Corpus Iuris of Justinian, Accursius, speaking of a sale of so many amphorae of wine, simply noted, ‘and so it is the sale of a quantity or of a genus, which is the same’.50 To the late scholastics, the northern natural lawyers, and the will theorists, the limitation did not matter. If, in principle, all contracts were binding on consent, then one did not have to decide whether a contract was a sale to determine when it was binding. Today, the Roman refusal to recognize a generic sale is considered a primitive feature of their law which we have wisely done without. According to Kaser, originally, sale-like transactions were executed on the spot. Consequently, every sale was of a specific object to be delivered immediately. The failure of Roman law to recognize generic sale was supposedly a relic of this earlier way of thinking.51 Nevertheless, the recognition of a generic sale in modern law has caused difficulties that do not arise with the sale of a specific object. As mentioned, one reason that it makes sense for the sale of a specific object to be binding in advance is that it allows the parties to lock in a price. The specific object, however, is either owned by the seller or will be owned by him, for example, as soon as the grain on his land ripens and is harvested. Because he is the owner of the goods he wishes to sell, he runs the risk that he will obtain a larger or smaller price when he does so. By selling, he transfers this risk to the buyer. Typically, however, in a generic sale, the seller does not yet own the goods that he sells. The buyer anticipates that he will need goods of a certain kind in the future, and will be hurt if the price of them rises. As Paul Joskow noted, the seller insures him against that risk.52 The parties enter into a contract of insurance cast in the form of a contract of sale. It does not follow, as Joskow believed, that the seller assumes the risk of a rise in price, however drastic.53 In a conventional insurance policy, the amount the insurer can lose will be no greater than the loss that the insured will suffer. An insurance company will not insure a house for more than its value. The reason is not simply a fear that the insured 48

Dig. 18.1.8.1. Buckland (1950) 484; Zimmermann (1990) 238. 50 Accursius, Glossa ordinaria to C. 4.48.2 to veneant (Venice, 1551). See generally Ernst (1997) 303. 51 Kaser (1955) 455. Similarly, Zimmermann (1990) 238. 52 Joskow (1977) 162. 53 Ibid. 49

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34 Comparative contract law

might burn the house down to collect the insurance. Parties are normally risk averse. A party who faces a probability p of a loss of L will pay another party more than pL to assume that risk. The other party will charge more than pL for assuming it. If a party were to insure for more than his loss, the parties would, in effect, have made a sidebet on whether the loss would occur. The insured party would not pay more than p times that extra amount; the insurer would insist on receiving more. The contract would not be made because risk-averse parties never gamble.54 In a generic sale, if the market price of the goods contracted for changes sufficiently, the ‘seller’ may owe far more than any loss against which the ‘buyer’ would have been willing to insure. Yet courts and commentators tried to resolve the problem as though the contract were a sale like that of a specific object. Consequently, they have seen only two possibilities when market prices rise to extraordinary levels between the time of contracting and that of delivery. One is to apply the Roman rule that the seller is liable for non-performance unless it is impossible for anyone to perform, that is, he is excused only for vis maior. The other expands the rule of vis maior to excuse a party when performance is still possible but has become extremely expensive. Until recently, French courts have opted for the first alternative. No relief could be given unless performance became actually impossible.55 The French Civil Code has now been changed by ordinance.56 It now provides that a party can demand renegotiation of the contract if ‘an unforeseeable change of circumstances … renders execution excessively onerous’.57 German courts took the restrictive approach in the early twentieth century and then flip-flopped. In 1916, the German court for civil matters, then called the Reichsgericht, held the defendant liable on a contract he had made to deliver brands of English tin even though the price skyrocketed a couple months later with the outbreak of World War I.58 In 1921, the Reichsgericht repudiated that position. A party who had 54 Consequently, I do not see how the analysis that Jeffrey Perloff applies to the case of a farmer selling his crops for future delivery can be carried forward, as he says it could be, to the case of a dealer who breaches because the price of his ‘inputs’ rises. The farmer is trying to adjust the risk on the crop he raises by selling forward. The dealer is insuring the other party against some loss he may suffer. Perloff (1981) 233. 55 Gordley (2006) 348–49. 56 Ordonnance n° 2016-131, 10 February 2016. 57 Code civil art. 1195. 58 Reichsgericht, 21 March 1916, RGZ 88, 172.

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sold ten tons of iron wire in October 1918, refused to deliver it when the price had soared due to the German military defeat. The court applied the doctrine of changed circumstances (clausula rebus sic stantibus) to relieve the seller of his obligation.59 The view of the German courts is still that the doctrine applies to radical and supposedly unforeseen changes in prices.60 In the United States, it is an open question whether a seller would receive relief in such a case under the doctrine of changed or unforeseen circumstances, or, in the language of the Uniform Commercial Code, of ‘commercial impracticability’.61 The question arose in the Westinghouse litigation.62 Westinghouse had agreed to provide a continuing supply of uranium at a fixed price to fuel nuclear generators. The price of uranium then skyrocketed due to the Arab oil crisis. The case was settled before appeal. The seller should be given relief in such a case, but the reason is not because the change in price was unforeseeable. It is because the Roman law of sales should have been limited to sale as the Romans conceived it. In the modern world, it is perfectly proper that parties dealing in fungible commodities would want to purchase price insurance. But that need should be met, not by ignoring the Roman distinctions among contracts, but by working out new rules for a new type of contract that would better meet their need. The proper solution, I have argued elsewhere, is, as in an insurance contract, to limit the plaintiff’s recovery to what one might call his ‘insurable interest’, the amount of the loss he might have suffered had he been forced to buy the goods for his own use on the open market. If the price rose to the point that he would make more by reselling the goods on the open market than by using them himself, he should not recover the excess.63

II.

CONTRACTS BONAE FIDEI AND STRICTI IURIS

In Roman law, sale, lease, partnership, mandate and loan for consumption were contracts bonae fidei, contracts of good faith. The parties were bound, not only to what they expressly agreed, but to do whatever good faith required. Others were contracts stricti iuris, contracts of strict law. 59 60 61 62 63

Reichsgericht, 29 November 1921, RGZ 103, 77, 78. On the development of German doctrine, see Dawson (1983) 1039. UCC § 2-615. See generally Joskow (1977). Gordley (2006) 350–51.

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The parties were bound only to the terms to which they agreed. The paradigm example was the formal contract of stipulatio. Initially, such a contract could only be made by the two parties face to face. One party would ask the other ‘Do you promise such-and-such?’ The other party would answer that he did. Tony Weir gave an example taken from the poem, ‘The Owl and the Pussycat’. The pussycat said to the owl, ‘Oh let us be married, too long have we tarried, but what shall we do for a ring?’ The owl overcame this obstacle with the help of a pig whom he asked: ‘Sir Pig, are you willing to sell for one shilling your ring?’ Said the piggy, ‘I will’.64 The owl and the pig thus made a contract of stipulatio. There was no requirement that such a contract be in writing. It became customary to write down the terms, at first, as evidence of what the terms were, and later, because a written contract was becoming a substitute for stipulatio. Supposedly, the parties still needed to be face to face. Yet Justinian provided that: the documents which indicate that the parties were present are to be regarded as conclusive unless the person who makes this suspect defense proves by the clearest evidence in writing or by respectable witnesses that for the entire day for which the contract was made he or his adversary was in another place.65

In the Middle Ages, this requirement was swept up in a serious of rules as to how many witnesses it would take to contradict a private document. The safe course was to have the document notarized.66 Notaries’ handbooks contained formulas for all sorts of agreements that, once notarized, would be binding as contracts by stipulatio. Some of them disadvantaged one of the parties. Critics charged that such provisions were inserted in contracts, not because of the will of the parties, but because they were incorporated in the notary’s form (ex tabellionum stylo).67 The protection the party would have received by hearing the terms of the contracts read aloud to him face to face had been lost. Some critics argued unsuccessfully that these provisions should only be binding if they were read aloud to the disadvantaged party or put in his handwriting.68

64

By the late Roman republic, the promisor did not have to repeat back the question that was put to him. Zimmermann (1990) 74. 65 I. III.20.12. 66 Accursius, Glossa Ordinaria to III.20 [vulg. 19].12 to omnino. 67 Covarruvias (1568) II, iii, no. 4. 68 Ibid. Covarruvias rejected this view.

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In the modern world, as Reinhard Zimmerman has noted, one who subscribes to a standard form contract lacks the protection once provided by stipulatio. As the promisor is made to listen to this question and to give an explicit, corresponding answer, there is little room for misunderstanding: much less than where contracts can be concluded inter absentes and/or by signing lengthy documents that have often not been read (let alone understood), such as (for example) modern standard form contracts.69

The attempt to protect those who sign standard form contracts is often criticized as an interference with freedom of the parties to contract on whatever terms they want. When, as Zimmermann observes, the parties sign documents which there is no realistic expectation they can read and understand, then terms contained in these documents are not those that they want. The solution has been to move in two directions, both prefigured in Roman law. One is to bind them by terms to which they should be bound as a matter of good faith, as Roman parties were in contracts bonae fidei. The other is to hold them bound to terms of which they were expressly made aware, as in stipulatio. Indeed, it is hard to police unfair terms without returning to the idea that certain terms normally belong, as a matter of good faith, to certain types of contracts, and that deviations from these terms are forbidden or, at least, need special justification. For example, according to section 307 of the German Civil Code: (1) Provisions in standard contract terms are ineffective when they unduly disadvantage the contract party of the party who supplies them contrary to the requirements of good faith. … (2) In doubt, an undue disadvantage is established when a provision: 1. is not in agreement with the basic ideas (Grungedanken) of the statutory regulation from which it departs, or 2. so limits essential rights and duties that result from the nature of the contract that the achievement of the purpose of the contract is endangered.

The German Civil Code contains ‘statutory regulation’ of each of the principal Roman contracts which sets forth the terms that will govern these contracts unless the parties agree otherwise. They are modernized versions of the terms that Roman law would have read into these 69

Zimmermann (1990) 68–69.

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contracts as a matter of good faith. Section 307(2)(1) sets limits to deviations from the ‘basic ideas’ behind these terms. According to section 307(2)(2), contacts have a ‘nature’ and ‘purpose’ which make certain terms appropriate as a matter of good faith and others inappropriate. We have returned to an approach more like that of Roman law in which the parties who enter particular types of contracts are bound to whatever good faith requires of them in those types of contracts, or, at least, they cannot stray from what it requires. One can see the same approach implicit in US cases on the unconscionability of contract terms. In Henningsen v. Bloomfield Motors, a case that played a major role in establishing the unconsionability doctrine,70 an automobile company had disclaimed liability for consequential damages resulting from defects in the cars it sold. Plaintiff sued over an injury resulting from an unconnected brake cable. Refusing to enforce the disclaimer, the court said that the ‘right [relinquished] is the most important and fundamental one resulting from the relationship’.71 The implied warranty was treated as a term which the contract ought to contain as a matter of fairness, not merely as an interpretation of the presumed will of the parties. The premise explicit in this cases is implicit in others. Not all the terms of a written contract come under scrutiny, but only those that depart from the terms the law would otherwise read in to such a contract. As in Roman law, those terms are taken to belong to that kind of contract as a matter of good faith. The second approach is to require that the parties be expressly made aware of the terms to which they are bound, as in stipulatio. The German Civil Code provides that the party asked to assent to standardized terms be given a reasonable opportunity to become aware of their content. He must be expressly told about terms with which he might otherwise be unfamiliar, or, if it is not feasible to do so, his attention must be called to them by a sign which is clearly visible and posted at the place of contracting.72 According to the Draft Common Frame of Reference, in a contract between a business and a consumer, terms that were not ‘individually negotiated’ may be considered ‘unfair’ on the sole ground that they are not ‘drafted and communicated in plain, intelligible language’.73 A term may also be considered ‘unfair’ if it ‘significantly 70

Although the problem it dealt with is now handled by imposing strict liability in tort for defects in manufacture. 71 161 A.2d 69, 92 (N.J. 1960). 72 BGB § 305(2). 73 Principles, Definitions and Model Rules of European Private Law: Draft Common Frame of Reference (Munich, 2009) II.-9.402.

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disadvantages the other party, contrary to good faith and fair dealing’, and one circumstance to be taken into account in determining whether it does is ‘the extent to which the consumer was given a real opportunity to become acquainted with the term’.74 The same approach is often taken in the United States. An example is the Uniform Commercial Code. According to the Code: ‘A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it’.75 In a variety of situations, terms or clauses that are conspicuous have greater force that those that are not. For example, ‘to exclude or modify the implied warranty of merchantability … the language … must be conspicuous’.76 If further progress is made, a modern contracting party may be nearly as well protected as a party was 2000 years ago.

III.

DAMAGES

A leading principle of modern contract law is that when a party fails to perform, the law should put the aggrieved party where he would have been if performance had been made. That principle is a generalization of instances in Roman law in which a party was compensated for what was later called damnum emergens and lucrum cessans, the loss he suffered and the profit he failed to make. Roman law was actually complicated, and, indeed, baffling. There were instances in which the aggrieved party recovered for damnum emergens and lucrum cessans, harm suffered and lost profit, but there was no general rule, at least, so far as one can see. The difficulty in trying to find a general rule about the recovery of damnum emergens can be illustrated by a single passage from Ulpian: If someone unknowingly leases out defective storage jars and wine runs out of them, he will be liable for the [lessee’s] interest, nor will his lack of awareness have been excused, so Cassius wrote as well. It is quite different if you leased out a pasture in which harmful weeds grew; in this case, if the cattle either died or lost value, the lessee’s interest is owing if you knew this, but if you were unaware of it, you may not sue for payment of rent, a view which Servius, Labeo and Sabinus also approve.77 74 75 76 77

Ibid. II.-9.403, II-9.407(2). UCC § 1-201(10). UCC § 2-316(2). Dig. 19.2.19.1.

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As Zimmermann notes, ‘[i]t is very difficult if not impossible to reconstruct the true position in Roman law’78 despite centuries of effort. The difficulty of finding a general rule about the recovery of lucrum cessans is illustrated by comparing a text ascribed to Neratius with one ascribed to Paul. According to Neratius, if I did not deliver a slave on time, ‘I should be held responsible not only for what I acquired through him but for what the buyer would have acquired had the slave already been delivered to him’.79 According to Paul, ‘When the seller is responsible for nondelivery of an object, every benefit to the buyer is taken into account provided that it stands in close relation to this matter. If he could have completed a deal and made a profit from wine, this should not be reckoned in.’80 Whatever distinctions the Roman jurists were attempting to draw were obscure to Justinian, who, as Zimmermann notes, ‘was not altogether pleased with the intricacies of the case law’.81 He placed a mechanical limit on the damages that the plaintiff could recover. They could not exceed twice the contract price ‘in cases which have a certain quantity or nature’.82 The limit was clear, although what cases had a ‘certain quantity or nature’ was not. The late scholastics sought order, once again, by borrowing from Aristotle and Aquinas. Aristotle had distinguished commutative justice in voluntary and involuntary transactions, a distinction which, as mentioned, had probably prompted Gaius to distinguish contract and tort. Commutative justice preserved each person’s share of resources. As we have seen, the late scholastics thought that by consent, one party to a contract transferred to the other the right to claim performance. Therefore, if the promise was broken, the aggrieved party was entitled to the value of the performance of which he had been deprived. They discussed whether his damages might extend beyond that amount. Aquinas had said that if a person’s thing was ‘actually taken’, for example, if his house was destroyed, he should be paid an ‘equivalent’: ‘the amount the house is worth’. If someone is harmed by another person ‘by preventing him from acquiring what he was on the way to having’ he should receive less.83 Lessius and Molina explained that as long as a person was deprived of a right, he should receive compensation 78 79 80 81 82 83

Zimmermann (1990) 366. Dig. 19.1.31.1. Dig. 19.1.21.3. Zimmermann (1990) 828. C. 7.47.1. Summa theologiae II-II, Q.62, a.4.

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for whatever he might have acquired by the use of that right, taking into account the labor it would have taken and the probability of acquiring it,84 an idea that approached the modern economic concept of expected value.85 Roman limitations on this principle were matters of Roman positive law, perhaps warranted for pragmatic reasons, but lacking support in principle The late scholastics explanation was founded on a clear principle. It passed into modern law by way of the seventeenth and eighteenth century natural law school, and then with the support of modern jurists.86 A disappointed promisee was entitled to be placed where he would have been if the promise had been kept. It might seem difficult in this instance to defend the Roman law. The modern approach is based on a clear principle. That of the Roman jurists was based on no clear principle at all. The confusion was such that Justinian stepped in and promulgated a mechanical but unprincipled rule: that the aggrieved party could recover no more than twice the contract price. Nevertheless, the Romans may have done well, and, indeed, better that we have done since. They recognized that recovery of damages in contract should be limited although they could not explain where and how. The limit Justinian imposed was mechanical but may have been more sensible that the limit imposed by modern law. Modern law, with some variations, limits the damages recoverable for breach of contract to those that were foreseen at the time the contract was made. That limit was recognized by the French jurist Robert Pothier, whence it passed into the French Civil Code and codes based upon it, and into English and US law in the famous case of Hadley v. Baxendale. The German variation, inspired by French law, is that if the damages are not foreseeable by the party who is to perform, the failure of the other party to explain the extent of these damages may constitute contributory negligence and so prevent recovery of unforeseeable damages. The foreseeability rule was taken by Pothier from the work a sixteenth century French jurist, Charles Dumoulin.87 He had been attempting to find a principled explanation for the mechanical rule laid down by Justinian. He claimed: 84

Lessius (1628) lib. 2, cap. 12, dub. 19, no. 137; Molina (1614) disp. 726,

no. 4. 85 So did Soto and Lessius in discussing wagers and insurance. Franklin (2001) 286–88. 86 Zimmermann (1990) 833. 87 Ibid. 829.

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42 Comparative contract law the particular rationale of the limitation in the cases of what is certain is that most likely it was not foreseen or thought that greater damage would be suffered or that there was a risk beyond the principal object than the principal object itself.88

Although Du Moulin had tried to explain Justinian’s rule in terms of foreseeability, Pothier turned the requirement of foreseeability into a rule in its own right I have argued elsewhere that Pothier’s rule, which is ubiquitous in modern law, makes less sense than the ancient rule of Justinian which it replaced precisely because it is a rule about foreseeability unlike Justinian’s, which was a rule about the disproportionality of damages.89 If the parties realize that non-performance by one party may cause disproportionately high damage to the other, they may or may not agree that the party who fails to perform should be liable. It depends on which party can best bear the risk. If the party who is to perform can best do so, then risk-averse parties will place the risk on him, and he will be compensated by an increase in the price. The fact that a party can foresee the harm suffered if he fails to perform does not mean that he can best bear this risk, let alone that he agreed to do so and that the price was adjusted to compensate him. It is not surprising, then, that courts that claim to be considering foreseeability have been unwilling to live with the consequences. They have denied recovery of damages that were disproportionately high, given the contract price, by claiming that the damages were unforeseeable, even when they could have been foreseen. In France, for example, when a contractor’s employee negligently set fire to the plaintiff’s chateau with a blow torch, the Cour de cassation said it was unforeseeable that the owner would have to borrow money at interest to fix the damage or that he would lose rentals while it was being fixed.90 The Cour de cassation refused to impose liability on a party responsible for the death of a race horse91 or the loss of a box with unusually valuable contents.92 The court said that although the type of harm was foreseeable, the amount was not. Yet it was surely foreseeable to a party entrusted with race horses or boxes that sometimes they will be extremely valuable. 88 89 90 91 92

Molinaeus (1589). Gordley (2011) 699. Cass., 1e ch. civ., 11 May 1982, Gaz. Pal. 1982.2.612. Cass. civ., 3 August 1932, D.H. 1932.572. Cass. civ., 7 July 1924, D.P. 1927.1.119.

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Similarly, in one German case,93 the defendant was to translate a brochure concerning motorcycle parts into Dutch, French, English, Spanish and Italian. The defendant sought damages on the grounds that brochures it printed were unusable because the translation was faulty. The court said that the plaintiff was at fault for not calling the defendant’s attention to the fact that it would print the brochures without having the translation checked. Was that really so unlikely? One suspects that the court’s real concern was that, in its words, ‘the damage that threatened, and which occurred, was forty times as large as the fee for translation’. Indeed, the same seems to have been true in Hadley v. Baxendale. A mill was stopped when the mill shaft broke, and the mill owners contracted with a transporter to carry the shaft to where it could be repaired. Due to the transporter’s delay, the mill remained stopped, and the mill owner sued the transporter for his lost profits. The court denied recovery, supposedly because the lost profits were not foreseeable. Yet, according to the headnote of the case, ‘the plaintiff told the defendant that the mill was stopped’. Is the headnote wrong, or was the court wrong to say that the loss was unforeseeable? Or did the court use Pothier’s rule to reach a result that did not in fact turn on foreseeability? The American Restatement (Second) of Contracts accepts the rule of Hadley v. Baxendale that ‘[d]amages are not recoverable for loss that the party in breach did not have reason to foresee … when the contract was made’.94 Yet in giving an illustration based on Hadley, it explains that the judge may deny recovery because damages are disproportionate: A, a private trucker, contracts with B to deliver to B’s factory a machine that has just been repaired and, without which B’s factory, as A knows, cannot reopen. Delivery is delayed because A’s truck breaks down. In an action by B against A for breach of contract the court may, after taking into consideration such factors as the absence of an elaborate written contract and the extreme disproportion between B’s loss of profits during the delay and the price of the trucker’s services, exclude recovery for loss of profits.95

93 94 95

OLG, Hamm, 28 February 1989, NJW 1989, 2006. Restatement (Second) of Contracts § 351(1) (1979). Restatement (Second) of Contracts § 351 Illus. 17 (1979).

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Indeed, there is a line of cases stretching back almost to Hadley v. Baxendale that deny recovery when damages were disproportionate but seem to be foreseeable.96 Roman law recognized that the problem is one of disproportionality and adopted a rule directed at that problem. Their rule was mechanical, and they explained the need for it poorly, but it may have been better than any we have found.

IV.

CONCLUSION

The Romans were not systematizers. Their gift was an insight into how concepts should be applied to reach good results in particular situations. From the time of the late scholastics to that of the German Pandektenschule, the work of systematizers seemed intellectually strong in part because of its ability to explain the Roman insights. In the process, as we have seen, some of these insights were neglected. Often they were neglected, not because they were unsound insights, but because the systematizers could not think of a principled justification for them. We should re-examine them, and when they were sound, look for principles by which they can be explained.

96

Postal Instant Press, Inc. v. Sealy, 51 Cal. Rptr. 2d 365, 373 75 (Ct. App. 1996) (no recovery by franchisor of future royalties from a franchisee); Sundance Cruises Corp. v. American Bureau of Shipping, 7 F.3d 1077, 1084 (2d Cir. 1993) (no recovery for loss caused by defects in a ship that the defendant had certified to have no defects); Armstrong Rubber Co. v. Griffith, 43 F.2d 689, 691 (2d Cir. 1930) (no recovery for injury to plaintiff’s business caused by defendant’s delivery of defective tires); McEwen v. McKinnon, 11 N.W. 828, 830 (Mich. 1882) (no recovery for profits lost on a steam mill and ‘salt block’ when the defendant failed to provide boilers on time); Snell v. Cottingham, 72 Ill. 161, 170 (1874) (no recovery against a defendant who failed to finish building a railroad for profits lost when the road could not be used); Moulthrop v. Hyett, 17 So. 32, 33–34 (Ala. 1895) (no recovery of profits lost when defendant failed to furnish a machine for drying bricks with as much capacity as promised, although the court added that damages were remote and speculative); Fleming v. Beck, 48 Pa. 309, 312 (1864) (no recovery of profits lost by a miller when defendant breached a contract to dress stones for his mill); Armstrong and Latta v. City of Philadelphia, 94 A. 455, 458 (Pa. 1915) (no recovery by the owner of machinery of the profit he would have made had it been returned to him on time). For other cases see Garvin (1998) 345–60.

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REFERENCES Anson, W.R. (1919) Principles of the Law of Contract with a Chapter on the Law of Agency. New York: Oxford University Press, 14th Eng. edn, 3rd US edn Barbeyrac, J. (1734) Le Droit de la nature et des gens … par le baron de Pufendorf. Amsterdam: Chez La Veuve de Pierre de Coup, 5th edn Birocchi, I. (1990) ‘La questione del patto nella dottrina tedesca dell’Usus modernus’ in J. Barton (ed.), Toward a General Law of Contract. Berlin: Duncker & Humblot, 146 Böhmer, H.J. (1791) Introductio in ius Digestorum. Halae Magdeburgicae: Orphanotropheum Boyer, B.F. (1952) ‘Promissory Estoppel: Principle from Precedents (Pt. 1)’, 50 Mich. L Rev. 665 Brunnemann, J. (1731) Commentarius in quinquaginta libros Pandectarum opus theoretico-practicum. Wittenbergae: Zimmermann Buckland, W.W. (1950) A Text-Book of Roman Law from Augustus to Justinian. Cambridge: Cambridge University Press, 2nd edn Coing, H. (1952) ‘Zum Einfluß der Philosophie des Aristoteles aud die Entwicklung des römischen Rechts’, 69 Zeitschrift der Savigny-Stiftung für Rechtsgeschichte, Rom. Abt. 24 Corbin, A. (1963) Corbin on Contracts. St Paul, MN: West Publishing Covarruvias, D. (1568) Varium ex iure pontifico, regio et caesareo resolutionum. Lyon Dawson, J.P. (1983) ‘Judicial Revision of Frustrated Contracts: Germany’, 63 BUL Rev. 1039 Demolombe, C. (1882) Cours de Code Napoléon. Paris: A. Durand, 3rd edn Domat, J. (1771) Les Loix Civiles dans leur ordre naturel. Paris: Chez la veuve David Eisenberg, M.A. (2001) ‘The Theory of Contracts’ in P. Benson (ed.), The Theory of Contract Law: New Essays. Cambridge: Cambridge University Press, 206–64 Ernst, W. (1997) ‘Gattungskauf und Lieferungskauf im römischen Recht’, 114 Zeitschrift der Savigny-Stiftung für Rechtsgeschichte /Romanistische Abteilung 272 Franklin, J. (2001) The Science of Conjecture Evidence and Probability Before Pascal. Baltimore, MD: Johns Hopkins University Press Garvin, L.T. (1998) ‘Disproportionality and the Law of Consequential Damages: Default Theory and Cognitive Reality’, 59 Ohio St L J 339 Gordley, J. (1991) The Philosophical Origins of Modern Contract Doctrine. Oxford: Clarendon Press Gordley, J. (ed.) (2001) The Enforceability of Promises in European Contract Law. Cambridge: Cambridge University Press Gordley, J. (2006) Foundations of Private Law. Oxford: Oxford University Press Gordley, J. (2011) ‘The Foreseeability Limitation on Liability in Contract’ in A.S. Hartkamp, M. Hesselink, E. Hondius, C. Mak and E. du Perron (eds), Towards a European Civil Code. Alphen aan den Rijn: Kluwer Law International Gounot, E. (1912) Le Principe de l’autonomie e la volonté en droit privé: contribution à l’étude critique de l’individualisme juridique. Paris: Rousseau Grotius, H. (1646) De iure belli ac pacis libri tres. Amsterdam: Jansonius Holmes, O.W. (1881) Common Law. Boston, MA: Little Brown Holmes, O.W., Pollock, F. and Howe, M.D.W. (1961) Holmes-Pollock Letters: The Correspondence of Mr. Justice Holmes and Sir Frederick Pollock, 1874–1932. Cambridge, MA: Belknap, 2nd edn Honoré, A.M. (1962) Gaius. Oxford: Clarendon Press Joskow, P.L. (1977) ‘Commercial Impossibility, the Uranium Market and the Westinghouse Case’, 6 J Leg. Stud. 119 Kaser, M. (1955) Römische Privatrecht. Munich: Beck

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46 Comparative contract law Kaser, M. (1959) Das Römische Privatrecht. Munich: Beck Langdell, C.C. (1880) A Summary of the Law of Contracts. London: Little Brown Larombière, L. (1857) Théorie et pratique des obligations. Paris: A. Durand Laurent, F. (1875) Principes de droit civil français, 15. Paris: A. Marescque, 3rd edn Lauterbach, W. (1707) Collegium theoretico-practici ad … Pandectarum libros. Tubingae: Cotta Leake, S. (1867) Elements of the Law of Contracts. London: Stevens Lessius, L. (1628) De iustitia et iure, ceterisque virtutibus cardinalis libri quatuor. Paris, lib. 2, cap. 18, dub. 2 Meijers, E.M. (1959) Etudes d’histoire du droit. Le droit romain au moyen âge, vol. III. Leiden: Universitaire pers Leiden Molina, L. (1614) De iustitia et iure tractatus. Moguntiae: Excudebat Nicolaus Heyll, sumptibus haeredum Joannis Godefridi Schonwederi Molinaeus, C. (1589) Tractatus de eo quod interest. Venice, no. 60 Nanz, K.P. (1985) Die Entstehung des allegmeinen Vertragsrechtsbegriff in 16. bis 18. Jahrhundert. Munich Perloff, J.M. (1981) ‘The Effects of Breaches of Forward Contracts due to Unanticipated Price Changes’, 10 J Leg. Stud. 221 Pollock, F. (1936) Principles of Contract. London: Stevens & Sons, 10th edn Pothier, R. (1821) Oeuvres de Pothier: I. Paris: M. Siffrein Puchta, G.F. (1884) Pandekten. Leipzig: J.A. Barth Pufendorf, S. (1688) De iure naturae et gentium libri octo. Amsterdam: apud Andream ab Hoogenhuysen Ranouil, V. (1980) L’Autonomie de la volonté: naissance et évolution d’un concept. Paris: Presses universitaires de france Savigny, F.C. (1840) System des heutigen römischen Rechts 3. Berlin: Veit und Comp Seavy, W.A. (1951) ‘Reliance upon Gratuitous Promises or Other Conduct’, 64 Harv. L Rev. 913 Simpson, A.W.B. (1975) A History of the Common Law of Contract. Oxford: Clarendon Press Stryk, S. (1739) Specimen usus modernus Pandectarum ad libros v. priores. Halæ Magdeburgicæ: Halle an der Saale: sumtibus Orphanotrophii(IS), Waisenhaus Vinnius, A. (1703) In quatuor libros Institutionum Imperialium commentaries. Amsterdam: Janssoni-Waesbergios, Boom & Goethals Voet, J. (1827) Commentarius ad Pandectas. Naples: Ex Typographia Ursiniana Watson, A. (1995) The Spirit of Roman Law. Athens: University of Georgia Press Wesenbeck, M. (1665) Commentarii in Pandectas Juris Civilis et Codicem Justinianeum olim dicti Paratitla. Amstelodami: apud Jacobum de Zetter Williston, S. (1914) ‘Consideration in Bilateral Contracts’, 27 Harvard Law Review 503 Williston, S. (1920) The Law of Contracts. New York: Baker, Voorhis & Co. Windscheid, B. (1891) Lehrbuch des Pandektenrechts: 1.XVI, 763. S. Frankfurt am Main: Rütten & Loening Zimmermann, R. (1990) Law of Obligations: Roman Foundations of the Civilian Tradition. Cape Town: Juta

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3. The authoritarian theory of contract Pier Giuseppe Monateri*

The encounter of contract (conceived as an autonomous field of law, as a set of rules, principles, doctrines) with the political strategies of authoritarian regimes brought ground-breaking theories and reshaped the internal articulation of operational taxonomies. This chapter will discuss three main issues. First of all, moving from a comparison among different authoritarian projects (namely the Fascist and National Socialist ones), the analysis will emphasize how private law was variously reassessed by the means of a proclaimed rejection or constraint of Liberal individualism. Secondly, it will be demonstrated how the inaugurated vision led to a new kind of ‘geopolitical’ distribution of legal rules and devices, to a divergent dislocation and re-articulation of competing forces. The morphology of private law was synthetically moulded in order to produce and, meanwhile, deal with a juridical exception: it was framed into a liminal threshold between tradition and innovation. Finally, the critical inquiry will dissect the specific declensions of Italian legal discourse during Fascism, in order to detect the structural dissonance which countered the rhetorical strategies introduced by legal scholars to subvert Liberal determinations with the conservative style preserved by Italian courts in the text of their decisions. Ultimately, the emerged incongruity seems to be responsible for the conscious choices of economic policy, discovering an unexpected contiguity between classic liberal thought and the Fascist appraisal of contract law as a cornerstone of the economic process.

* The chapter is based on reflections and arguments first discussed, written and published with Prof. Alessandro Somma, who subsquently modified his scientific opinion on some relevant issues. On the contrary, I remain persuaded of the intellectual legitimacy of the research project conducted and devoted to rediscover the darker legacies of European private law. In this perspective it can be demonstrated how contract law could be framed and moulded in similar terms both in totalitarian regimes and in market economies.

47

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I.

KEYWORDS AND FORMALISMS OF THE DEBATE ON JURIDICAL FASCISM

The reflection carried out by German authors on National Socialism and the law has taken on the dimension of a debate the features of which have impressed Italian scholars. First of all, it is a debate that involves a considerable number of jurists, and therefore it is not the marginal occupation of a limited circle of enthusiasts. In the second place, it is not a debate conditioned by the intent of preserving the scientific and moral integrity of the masters whose activity is under discussion or of complying with the protective instinct of their disciples. Finally, it is a debate characterized by a prominent interdisciplinary vocation and, therefore, by methods less susceptible to the charm of the formalistic approach. In Italian literature the features of the scientific discussion regarding law in the Fascist time are different. It is carried out against the background of a dispute about the role of the relationship between intellectuals and the Fascist regime stimulated by the intent of finding its most open supporters, thus neglecting the ample circle of those who simply made the totalitarian perversion possible by attitudes that were in other respects not so markedly referable to the dominant ideology.1 This approach becomes an expedient by which any continuity of the 20 years of Fascism with the immediately preceding or following periods can be denied. It combines with the intent of maintaining that intellectuals are substantially impervious to the regime, and that such condition concerns most of all the juridical science.2 In the wake of these specifications it is asserted that a sort of ‘extrinsic’ homage has been paid to the politics of the regime: no one historian who really considers the significant traits of these two decades can concretely talk about a ‘fascist theory of private law’, figuring a break with dogmatic methodologies and traditional schools of thought.3 A similar opinion is expressed with regard to the so-called Mussolinian codifications, insofar as the Italian codes promulgated from 1930 to 1942 are largely based on ancient codes and past doctrines, even if they were originated by a completely different political context: the new ideas and constructions were grafted on the elder legislation.4 1

See Somma (2001) 617. Such trend is developed in particular by those scholars who adopt the conception of Crocian origin elaborated by Bobbio (1973) 209. 3 Irti (1990) 138. 4 Biondi (1952). 2

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These opinions are founded on an implied premise: that the formulas used in legal texts and in doctrinary discussion are capable of expressing univocal constructions, regardless of the cultural context in which they are used. Such premise leads to a denial that the so-called lip service paid to the regime contributes to the definition of the rule. With specific reference to private law, it leads to insisting blindly on a jus-rationalist assertion, namely, the necessary Anti-Fascist value of a contract discipline claiming to be constructed around the principles deriving from Roman law.5 The link between Roman law and the liberal juridical culture is hinted at on different occasions, starting at least from the well-known dispute opposing the Bernhard Windscheid Romanists to the Otto Gierke Germanists in the course of drafting the German Civil Code currently in force. On the other hand, such link is disproved if one examines the life of the Bürgerliches Gesetzbuch (BGB): this text begins in the Germany of Wilhelm II and survives the Weimar Republic. The same text remained in force during National Socialism and after World War II, and has constituted for almost three decades the core of printed text of the German Democratic Republic’s private law. The reference to the National Socialist experience is therefore of certain interest for studying juridical Fascism: an interest that, in fact, is justified not only on a scientific level. As the existence and the features of National Socialist private law are largely agreed upon, identifying analogies with the Fascist experience actually contributes to temper the ideological conflict that, especially in the Italian context, still accompanies the investigations devoted to the theme which is the object of these notes.

II.

A POSSIBLE WAY OUT: COMPARISON WITH JURIDICAL NATIONAL SOCIALISM

There are many connections, mostly highlighted by the theories about Fascism as a European phenomenon, between the Fascist and National Socialist experiences. In particular, both regimes develop in a common economic and social background which at first feeds their revolutionary potential and later on, instead, calls for adaptation to the status quo: for this purpose, they start building a productive system formally based upon cooperation among the classes but, in fact, sensitive to the request of 5

Ibid. See Somma (2002) 153–82.

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major industry. Further, Fascism and National Socialism share the view of State organization as a power instrument in the hands of the leader and therefore the construction of a legal system aimed at minimizing and controlling individual action.6 Such circumstances lead, during the 20 years of Fascism, to a comparative study of Fascism and National Socialism, centred on themes of public and political importance in a broad sense: in particular about the idea of the State developed in both experiences by the scholars who were close to the political power. The system of private law is also of interest for the scholars of the time. Besides, both National Socialists and Fascists tackle problems connected with the codification of civil law and with overcoming of the values which inspire the texts in force at the time. And this is one of the aims of the Italian-German juridical committee, Comitato giuridico italo-germanico, constituted to coordinate the collaboration between the scholars of the two countries.7 Some passages of the Nationalsozialistische Deutsche Arbeiterpartei (NSDAP) programme are indeed devoted to the reform of the German legal system. It states that each German citizen has the duty of acting both spiritually and materially for the common interest (item 10) and that it is up to the State, in this perspective, to fight those who act to the prejudice of the common needs (item 18). It also says that it is necessary to substitute Roman law which is ‘subservient to the world-wide materialistic order’ with German common law: ‘Wir fordern ersatz für das der materialistischen Weltordnung dienende römische Recht durch ein deutsches Gemeinrecht’ (item 19).8 In private law, such intents lead to cancelling most laws and institutions based in different ways on the Kantian philosophy and therefore refusing the jus-rationalist perspective of the legal system as a complex of duties: ordnet der Nationalsozialismus den einzelnen der Gemeinschaft unter, so muss er auch das Rangverhältniszwischen Recht und Einzelwillen umkehren, den Gemeinwillen zum Herrscher, den Parteiwille zum Diener machen.9

Within the indicated perspective, the underrating of individual interests is clearly the element characterizing the National Socialist experience, 6

See De Grand (1999) and Tranfaglia (2001). The Committee is mentioned in art. 7 of the Cultural Agreement between the Italian Reign and the German Reich dated 23 November 1938. In this regard see Messina (1938). 8 See Simon (1989) 161. In the literature of the time see Jung (1934) 183. 9 Lange (1934). 7

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which identifies in the struggle against the Liberal ideology the only course to reconstruct a legal system based on the duties of individuals and on the glorification of the prerogatives pertaining to the group: ‘der Einzelne is nicht um seiner selbst, sondern um einer Stellung in der gemeinschaft willen von Bedeutung’.10 It is widely known that in the National Socialist ideology the group on which the destiny of the individuals depends, has in the first place a racial connotation. However, references to its economic value often prevail, and together with them, statements regarding subordination of the individual needs to the requirements of production: Nach der nazionalsozialistischen Rechtsidee ist der Vertragsabschluss schon rechtspolitisch eine Gemeinschaftsangelegenheit und daher kann die Hinwirkung des Staates auf den Abschluss von Verträgen … geboten sein. Alle dahingehende allgemeinen oder besonderen hoheitlichen Anoprdnungen sind Lenkungsmassnahmen … Diese Massnahmen sind Ausdruck der staatlich gelenkten Wirtschaft.11

As an implementation of this programme, a number of special laws are developed with regard to different aspects of the discipline of the relations among individuals. Most of all, the National Socialist doctrine intended to replace the Bürgerliches Gesetzbuch with a ‘popular’ code, the Volksgesetzbuch.12 However, this project did not appear to be a political priority of the regime, whose interest seemed rather to be directed to conditioning the application of the law and therefore to formulating keywords expressing a use of the law in force as an instrument to impose the Führer’s will.13

III.

COMPARISONS BETWEEN FASCIST AND NATIONAL SOCIALIST PRIVATE LAW, IN PARTICULAR THE DEBATE ON THE VALUE OF ROMAN LAW

National Socialists and Fascists are joined together in the fight against the values believed to be expressed by Liberal juridical thought. Even in 10

Lange (1933). In the same way see, e.g., Böhmer (1932), and Stoll (1943). Stoll (1943). In the same way see among others Larenz (1936). 12 In the literature of the time see, e.g., Hedemann (1941) 1913 and Lehmann (1942) 1492. 13 See in particular Frank (1936) 137 and ff. and Lange (1934). 11

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Italian literature, the individualist framework of the private system inherited from the past is criticized14 and especially those civil law codifications are attacked, which pursued the acknowledgment of individual interests, putting aside the relevance of social values and functions.15 As we have already seen, the National Socialist scholars conceive the struggle against Liberal laws as a glorification of the German juridical experience and a contextual abandoning of the Roman one. Some authors close to the Fascist regime expressed themselves in the same way, demanding the abandonment of the apologetic defence of Roman law, conceived as the juridical device used to support the fortunes of liberalism and the Fascist interpretation of the Code Napoleon.16 On the other hand, Italian scholars of the Fascist period did not approve of such statements and, on the contrary, claimed a solid link with Roman law.17 Actually, the Fascist authors work in a context which the traditional structures are still solid, and in this perspective they are interested in legitimating the regime by excluding a break with the past. This does not mean, however, promoting values alternative to those implied by the National Socialist reference to German law: for Fascists the Roman-Italic law is the living law of the Roman (authoritarian, hierarchic and expansionist) State.18 Thus, Dino Grandi was able to address the German jurists by stating that the Nazi-Socialists, inclined to preserve the purity of the German race and tradition, and the Fascists, devoted to promote and support Roman law as the better expression of Italic race, were united in destiny.19 Fascists and National Socialists also share the belief that private law is to be seen as a complex of duties assigned to the members of society for the common needs.20 Even among Italian scholars, the underrating of individuals is further aimed at defending race, conceived as the proper protection of the Italian family, of the Italian civilization and of the Italian law:21 such aim leads to establishing the rule according to which 14 As appears, for instance, from Scaduto (1939) 321 and ff. and Dominedò (1942). See also Bellomo (1936), and Costamagna (1940) 530. 15 De Semo (1942) 166. Similarly Maroi (1941) 65 and Panunzio (1936). 16 Costamagna (1938). 17 Among many others Maffei (1934). 18 Grandi (1940). 19 Grandi (1941). 20 See for all Asquini (1938). 21 Maroi (1941).

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the limitations of the juridical capacity based on race are provided by statutes (Italian Civil Code, article 1).22 On the other hand, in the Fascist literature the intent of supporting economic interests, and in particular the necessities of national production, prevailed. Italian authors substantially agreed in believing that such circumstance might be ascribed to the development of the corporative idea of the State23 and in underlining that it leads to exalting themes such as enterprise productivity and economic solidarity in the superior interest of the nation.24 For this purpose, the Labour Chart states that the production objectives are to be considered unitary, related to the welfare of the individuals and to the growth of national power, and argued that the organizer of the enterprise is held responsible before the State for production. Even with specific reference to the law of obligations, Fascists and National Socialists had the opportunity to draw the guidelines of a common development of the Italian and German legal systems. These aspects were dealt with in the course of a meeting of the Italian-German juridical committee, held in Rome in the summer of 1938. On this occasion, Alberto Asquini noted that the new law of obligations should be inspired by the political spirit of the reform. Similarly, Hans Carl Nipperdey observed that the Nazi and Fascist interpretations have transmuted the proper significance of ancient and fundamental principles (such as private property, freedom, free competition, private association), giving particular emphasis to the individual responsibility against community.25

IV.

NATIONAL SOCIALISM AND THE LAW OF CONTRACTS: FROM THE BILATERAL JURIDICAL TRANSACTION TO THE AGREEMENT FOR EXCHANGE OF GOODS AND SERVICES

Fascists and National Socialists devoted another meeting of the ItalianGerman juridical committee to the issue of contractual matter in Vienna in the spring of 1939. On that occasion, they discussed the principle of 22 For references to the Italian-German cooperation in building a racist legal system see Costamagna (1939a). 23 See Aquarone (1995). 24 In the literature of the time see among many others Pugliatti (1942). 25 See Nipperdey (1938).

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freedom of contract to affirm its value only within the limits of the new principles of public order and to specify that the same is abused not only in case of violation of express statutory prohibitions and morality, but also in case of violation of political order and fundamental economic principles.26 Along these guidelines the law of contracts was re-examined and in particular its traditional aspects referable to the theory of individual rights were removed. In Germany, first of all the equation identifying contracts with a bilateral juridical transaction was abandoned. In fact, the abstraction principle was criticized, and with it also the identification of contract aimed at the immediate transfer of real rights as an independent figure of the law of goods.27 It is also specified that the cases regarding the individual position in respect of the social formations, in particular in family law and in labour law, did not constitute contracts.28 In this way, the contract is confined to cases in which the parties exchange individual goods and services: Das Verlöbnis, die Eheschliessung, der Eintritt in ein Arbeitsverhältnis sind in unserem Sinne keine Verträge, weil sie nicht den Austausch einzelner Leistungen oder Güter zum Gegenstande haben, sondern die Eingliederung der ganzen Persönlichkeit in einer Gemeinschaft.29

Obviously, the limitation of contracts to the cases of exchange of goods and services depends on considerations regarding the emphasis on the act with respect to the contractual bond. Such limitation is also a means to underline subordination of the parties’ interests to those promoted by the legal system. And indeed, on one hand, in the National Socialist literature the relation between debtor and creditor is qualified as a bond between cooperating parties. On the other hand, it is said that the external control on the contract derives from considerations concerning the execution of its performance according to the bona fide principle: according to a communitarian view, the obligational relationship has not yet to be considered as a fight between creditor and debtor.30 It is worth noting that in this way the reference to good faith is not connected with the jus-rationalist fides: it does not lead, in fact, to suppress the principle of the freedom of contract to give prominence to 26 27 28 29 30

Vassalli (1939). See Wieacker (1941). See, e.g., Siebert (1941). Larenz (1939). Vassalli (1939).

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the opposite principle of contractual equity. The legal system, in fact, prevails on the private act for aims placed beyond the parties’ horizon and not corresponding to the intent of achieving the balance of performances. Such formulation was insisted upon during the drafting of the Volksgesetzbuch. On that occasion it was underlined in particular that the law of contract must be restricted to the exchange of goods and services. It was also confirmed that this institution must be reconstructed from the point of view of the bond, ignoring its formation. This latter suggestion is the maxim founding the theory of ‘de facto’ contractual relations, as suggested by legal writers close to National Socialist political power.31 However, in the intention of its founder it is not aimed at preventing the application of the Civil Code, but only at avoiding recourse to legal fictions. In this sense, it would not represent an element of crisis in the traditional doctrine of contracts, but simply an integration of the same.32

V.

FASCISM AND THE LAW OF CONTRACTS BETWEEN TRADITION AND INNOVATION

We have said before that Fascists and National Socialists recognized themselves in the statement according to which free private enterprise is a value to be re-examined in the light of the maxims formulated by the regime. In the Italian context, such idea caused a re-examination of the contractual matter in less strict terms than in the German formulation. And yet it led to the promotion of solutions characterizing the system of the sources of law in a public and corporativist perspective:33 unification of the law of obligations and of contracts is among these solutions.34 The patterns deriving from it often lay the accent on the productivity of the enterprise, on the economic solidarity and on the superior interest of the nation.35 A selection of material regarding the codification of private law allows some traditional solutions to be found together with interventions in the opposite sense. To the former kind belong the descriptions of the law of obligations as a subject matter moulded on the basis of the classic 31 32 33 34 35

Haupt (1943a). Ibid. Ferrajoli (1998). See mostly Teti (1990). Perlingieri (1978).

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paradigm of Roman law, considered as the ‘ratio scripta’. To the latter, instead, the glorifications of the law of contracts as a sector of the legal system in which obligations are strictly linked to the economic life.36 This second remark does not account for the statements regarding the patrimonial nature of the performance (Italian Civil Code, article 1174) and of the legal relation that is the object of the contractual relation (Italian Civil Code, article 1321). In both cases, such nature is included in the intent of coordinating the regulations of contracts with the damage compensation system centred on the principle of the patrimonial liability of the debtor.37 Nor are there any links with the Fascist doctrine of contracts, finally, in those comments on the legal definition of the concept that seem not to exclude its equivalence to the bilateral legal transaction and which, however, highlight its ‘nature’ of technical concept of private law.38 Different observations can be made with regard to the rule according to which debtor and creditor must behave according to the rules of correctness and to the principles of corporatist solidarity (Italian Civil Code, article 1175). Such provision, in fact, takes up the idea of cooperation of the parties to the obligation and in this perspective it reveals the influence exerted by Nazi-Socialist doctrines on our compilators.39 Similar influences seem to inspire the reflections aimed at relinquishing the equivalence of the contract to the bilateral legal transaction: equivalence that is recurrent in the literature influenced by the German doctrine of pandectist inspiration. On the basis of such intents, in the preliminary works it is stated that the contract is the juridical device used for the exchange of products and services and that it must be governed by provisions based on the Fascist rule of the prudential coordination of individual interests and of the pre-eminence of general, collective interest.40 Some indications about the contents of the mentioned maxim can be derived in particular from the comments to the regime of atypical contracts and from the regime of the essential elements of the contract. 36 Relazione della Commissione Reale al progetto del libro Obbligazioni e contratti, n. 5. 37 See Relazione del Guardasigilli al progetto ministeriale delle obbligazioni, n. 17. 38 Relazione del Guardasigilli al progetto ministeriale delle obbligazioni, n. 156. In the same sense, among the authors of the time Messineo (1943). 39 Di Majo (1985), who refers to opinions expressed by Pietro Rescigno. 40 Relazione del Guardasigilli al progetto ministeriale delle obbligazioni, n. 10.

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As regards the first aspect, the Civil Code provides that the parties can conclude even contracts which cannot be subsumed into a specific normative type, as long as they are intended to realize interests worthy of protection (Italian Civil Code, article 1322). In this respect it is specified that this rule intended to codify the maxim according to which the legal system acknowledges the private agreement only as much as the effects deriving from it realize at the same time interests outside the sphere of the parties: the new obligation law was inspired by the concept of autonomy of will instead of the one of dominion of will41 and saw in the equivalence of contract to law a formulation by which it can be stated that the autonomy could not legitimate interference in the rights of third parties.42 Similar considerations, as is well known, are the grounds of the rule that identifies ‘causa’ as one of the essential requisites of contracts and in particular of the formulation according to which it is the social-economic scope of the contract or is the scope of the contract socially appreciable.43 The same conclusions drawn with regard to the German experience may be inferred from the discipline of ‘cause’ and of atypical contracts: in the Fascist idea the supremacy of positive law on the covenant was mostly characterized as an instrument for the imposition of the will of the political power ‘per se’, and not as a means to affect the situation of the party whose interests the system decides to interpret. In other words, in the Fascist and National Socialist contract law the individual was not considered uti singulus, but always and only uti civis.44

VI.

PROTECTION OF THE WEAKER CONTRACTING PARTY IN JURIDICAL FASCISM AND NATIONAL SOCIALISM

Both Fascism and National Socialism developed reflections regarding protection of the weaker contracting party. On the other hand, they did not deviate from the principle according to which the prevalence of the legal system on contract was a mere mark of the power of the group on the individual. The weaker contracting party, in fact, is considered as such only insofar as he is party to a bond that the outside intervention 41

Relazione al Re, n. 603. Relazione al Re, n. 627. 43 Relazione del Guardasigilli al progetto ministeriale delle obbligazioni, nn. 193 and 194. 44 Costanza (1981) and Alpa (2001). 42

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intends to examine in the perspective of the common needs and not of the balance between performances. Such considerations are consistent in the first place with some of the proposals worked out during the drawing up of the National Socialist ‘popular code’, and in particular the one concerning the duty of the drafting party to formulate the general conditions of contract in accordance with the needs of society: Inbesondere müssen Abreden, die den Vertraginhalt für eine unbestimmte Zahl zukünftig abzuschliessender Verträge (Reihenverträge) festsetzen (allgemeine Geschäftsbedingungen), den Anforderungen des Gemeinschafts lebens entsprechen.45

In this sense, the general conditions of contract assumed a largely different meaning compared to the one attributed to them previously, in particular by the Liberal scholars. The latter had considered such conditions as a sort of generalization of the contents of bonds that certain categories of contracting parties would later conclude. The National Socialist scholars deemed such approach not to be a sufficient break with the traditional private system and maintained that it was necessary, on the contrary, to underline the prescriptive character of the general condition of contract. Only in this way, in fact, could they be efficiently coordinated with the super-individual interest: Die Vertragsordnung macht die Geschäftsbedingungen sichtbar, erleichtert so die öffentliche Kontrolle und die Einordnung der Wirtschaft des Einzelnen Unternehmers in die Volkswirtschaf und die Ordnung unseres Volkes überhaupt.46

Not all the proposals formulated by the National Socialist authors imply a discipline of mass contracts having the indicated features.47 On the other hand, those who justify the lawmaker’s intervention to subtract the scope for private autonomy without carrying out considerations regarding the matter of contractual equity are definitely prevalent.48 Even the Fascist experience tackles the protection of the weaker contracting party with different attitudes. In the Civil Code, some rules seem to take up 45

So para. 1 ‘Gesetzentwurf von Heinrich Stoll aus der Denkschrift des Ausschusses für Personen- Vereins- und Schuldrecht: Die Lehre von den Leistungsstörungen’. Schubert (1988); Schubert and Regge (1988). 46 Herschel (1942). 47 See, e.g., Haupt (1943b). 48 See for all Larenz (1936).

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models aimed at promoting values such as the balance between the performances provided for in contracts, in particular the provision stating usurious interests to be void (Italian Civil Code, article 1815) and the one deciding on the matter of annulment for injury, pointing out the general character of such remedy and setting aside the referability of the relevant hypothesis to the vices of agreement (article 1448). Quite different are some reflections devoted to protection of multi-party contracts. The authors who are close to the political power invoke in this regard an ‘imperative intervention’ that would place the ‘will of the State over the will of the individual’.49 Similar concerns seem to have inspired the discipline of the general conditions of contracts (article 1341) and of contracts stipulated through forms (article 1342). This latter is sometimes indicated as an instrument of protection of the contracting parties who are at a disadvantage because of the context in which the transaction is stipulated. However, the mentioned discipline is often based on the remark that mass negotiation is a factor of acceleration of productivity, to which the freedom of transaction has to be sacrificed.50 The underlining of such aspects is a feature of the Fascist and National Socialist contract law, which refers to the economic interests of the group and in such perspective pursues objectives such as an efficient allocation of assets: ‘Der Vertrag hat für die Gemeinschaft die Aufgabe, an einer sinnvollen Güterverteilung und zur Erreichung immer höherer Leistungen mitzuwirken’.51 Therefore, the invective of certain authors in the Fascist period claiming the distance of the new ideas from Liberal theories about the homo oeconomicus assume a merely propagandistic meaning, and in any case they seem to be inconsistent, as those theories were also founded on a view of the contract that set aside the parties’ horizon.52

VII. LAW OF CONTRACT IN THE FASCIST AND NATIONAL SOCIALIST COURTS A common feeling has thus been shown between the Fascist and the National Socialist literature interested in constructing a contract law alternative to the one inherited from the Liberal scholars. And we have seen that the spreading of the new ideas characterizes the German 49 50 51 52

Dominedò (1942). Relazione al Re, n. 612. Stoll (1943). See among others Ferri (1931) and Costamagna (1933).

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experience more than the Italian one. Similar considerations concern the application of the law. Fascists and National Socialists entrusted the judiciary with the task of implementing the political programme of the regime through re-examination of pre-existing rules; such task was undertaken by some scholars during the meeting of the Italian-German juridical committee, held in Vienna in March 1939.53 In this perspective, the National Socialists prepared a system of strict political control extended to the whole public service.54 The Fascists, on the contrary, issued rules aimed at favouring conditions on the judiciary that would not lead to political prosecutions55 and yet affecting a system of rules that proclaimed the autonomy of the judicial body just in principle.56 With specific reference to the law of contract, the German courts seem at first to resist the pressures of the National Socialist doctrine, in particular those regarding the use of general clauses as an instrument to emphasize the ‘general interest’ in construing the agreements between individuals.57 A different trend develops through the reference to the provision according to which ‘is void a contract against morality’ (BGB, section 138). On one hand, the good morals clause is apt to allow the introduction in contracts of the values promoted by the political power, particularly as judges apply it referring to a subsequent time with respect to the conclusion of the agreement.58 On the other hand, such clause is combined with the sanction of voidness of the private deed, thus not allowing reform of its contents. Especially, National Socialists deem that such impediment is not compatible with the intent of subduing individual ends to the exigence of the legal system. The Italian Civil Code also contains (obviously) provisions regarding contracts contrary to good morals. In particular, article 1119 provides that the obligation without cause or based on a false or illicit cause can have no effect, and the subsequent article 1122 specifies that the cause is illicit when it is prohibited by law, contrary to good morals or public order. 53

See the report by Costamagna (1939b). See Gestetz zur Wiederherstellung des Berufsbeamtentums (7 April 1933), in particular para. 4. 55 According to Aquarone (1995). 56 Neppi Modona (1973) 136. 57 RG, 9 July 1935, (1935) Entscheidungen des Reichsgerichts in Zivilsachen, 266. 58 RG, 8 January 1937, (1937) Entscheidungen des Reichsgerichts in Zivilsachen, 294. 54

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However, it seems that the Courts did not develop trends inspired by the intent of accepting the guidelines of the political power. Against the background of a concept of ‘causa’ other than the model used in the preliminary works,59 the Courts continued to interpret such formulation with reference to the ‘grade of middle morality’, thus establishing a continuity with the previous line of decisions.60 And they also provided that the unlawfulness of the cause has to be ascertained at the time of conclusion of contract.61

VIII. REVISION OF CONTRACTS BY JUDGES We have already remarked that through the good morals clause, the German Courts came to eliminate agreements that were not compatible with the maxims propagandized by the regime, without, however, affecting their contents. This latter result was obtained instead by recourse to certain constructions derived from application of BGB, sections 157 and 242, i.e. the provisions mentioning the good faith principle respectively in the matter of contract construction and performance fulfilment. It is well known that the use of good faith for the mentioned aims is not a remedy conceived by the National Socialist literature. It was established, in fact, during previous periods and is present, for instance, in the first doctrinal formulations of the ‘contractual grounds’ (Geschäftsgrundlage) theory, the whole of the events integrating the implied foundation of a negotiated agreement, the breaking of which justifies an intervention aimed at rebalancing the transaction. The theory in question is established in a period of German juridical history characterized by the intent of re-examining the cultural premises on which the civil codification is based, and in particular the intent of re-evaluating the rebus sic stantibus clause. In the Italian context it is precisely the recourse to this clause that allowed the courts during the Fascist period to justify certain interventions affecting the contract contents. Nothing being contained in the Italian Civil Code on this 59

See Cass. Civ., 1 August 1936, (1936) Repertorio della Giurisprudenza italiana, Entry ‘obbligazioni e contratti’ n. 44 and Cass. Civ. 23 April 1937, (1937) Repertorio della Giurisprudenza italiana, Entry ‘Obbligazioni e contratti’ n. 18. Later on see Cass. Civ. 11 December 1940, (1940) Repertorio della Giurisprudenza italiana, Entry ‘Obbligazioni e contratti’, n. 25. 60 See Cass. Civ., 11 May 1936, (1936) Giurisprudenza italiana at I, 1, 626. 61 Trib. Caltanissetta, 22 December 1933, (1934) Repertorio della Giurisprudenza italiana, Entry ‘Obbligazioni e contratti’, n. 59.

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matter, the judges used to this end the provision regarding good faith in the fulfilment of contracts (article 1124).62 On the other hand, in this way they did not promote principles formally referable to the Fascist private law. The provision, in fact, was interpreted in the light of the common intention of the parties (article 1131)63 on the equivalence of performances and led to solutions which did not subordinate the individual end to the general interest, as is shown by those decisions that refused to use the clause rebus sic stantibus in order to consider ineffective a ‘golden clause’, thus damaging the regime’s monetary policy.64 Even the scholars who were closest to the political power, in fact, did not seem to agree completely with the National Socialist writers’ trend. Many Italian authors were not in favour of giving judges discretionary powers to modify the contract which, according to the general principles of impossibility, should be declared resolved. It seems, rather, that the opinion fostering the limitation of political interventions in the monetary and economic order was prevalent.65 In the German Courts, the theory of the contractual grounds became, on the contrary, an instrument used to reform contract law in the light of the principles proposed by the National Socialist literature. This latter identified in the use of the institution in question one of the main devices apt to strike at Liberal individualism.66 The German judges did not cease to found such theory on the grounds of an individual character, as proved in particular by the references to the presumed intention of the contracting parties and the discipline of error. However, they emphasized new events capable of justifying external intervention on the act vitiated by loss of the ‘contractual grounds’. In order to determine the social and economic marginalization of Jews, the changes in the racial policy of the regime, in particular, were mentioned: Das verstärkte Hervortreten des Rassengedankens kann … ein Grund dafür sein, auch frühere Ruhegehaltsvereinbarungen mit jüdischen Angestellten dahin zu überprüfen, ob und wieweit sie noch mit nationalsozialistischen Volks- und Rechtsempfinden vereinbar sind.67 62

See Cass. Civ., 13 July 1942, (1942) Giurisprudenza italiana at I, 1, 606. See App. Palermo, 29 April 1938, (1939) Repertorio della Giurisprudenza italiana, Entry ‘Obbligazioni e contratti’, n. 16 and Cass. Civ., 24 June 1940, (1940) Giurisprudenza italiana at I, 1, 919. 64 See, among many others, App. Bologna, 20 July 1939, (1940) Giurisprudenza italiana at I, 2, 37 and ff. 65 Asquini (1938). 66 See for all Lange (1934) and Larenz (1936). 67 RG, 24 April 1940, (1940) Deutsches Recht, 1314. 63

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To increase political control on the productive system, on the other hand, circumstances such as the destiny of the popular economic system were referred to: Denn ein Festhalten am Vertrage würde nach ständiger Rechtsprechung insbesondere dann gegen Treu un Glauben verstossen, wenn infolge des Irrtums beider Parteien über das Bestehen einer sachlichen Geschäftsgrundlage ein Missverhältnis zwischen Leistung und Gegenleistung eingetreten ist … Auch die Heranziehung des volkswirtschaftlichen Gesichtspunktes in diesem Zusammenhang ist zu billigen.68

IX.

SOME FINAL CONSIDERATIONS: THE LAW OF CONTRACTS ‘FASCIST MALGRÉ SOI’

In consulting the Italian Fascist magazines cases and on Court decisions, therefore, one does not receive the impression that in the law of contract the Italian judges have behaved simply as executors of the regime’s policy, but at least not with as much zest as their German colleagues. The same does not apply, on the other hand, with regard to scholars. Certainly, they have not adopted the regime’s keywords with the same intensity as observed in the German authors, a circumstance due in part to the variety of positions in which the authors who were close to the political power have reflected themselves. And yet the comparison with National Socialist law has allowed the highlighting of certain features characterizing the Fascist doctrine on contract law. In particular, it has allowed us to remark that such doctrine is based on the subordination of agreements to the legal system for aims outside the pursuit of interests ascribable to the parties. The comparison with the German experience has also made it clear that the prevalence of the legal system is often functional to promotion of the economic structure decided upon by the political power. This leads to confining the matter to cases of exchange of goods and services, through certain devices that differentiate it from contracts of a jus-rationalist character. From this point of view, the Fascist and National Socialist experiences diverge from the preceding theories about functionalization of private action, even though they seem to imply a reconstruction of the relations between contracts and the legal system which is not always sensitive to the question of the balance between performances. 68 RG, 5 April 1939, (1939) Entscheidungen des Reichsgerichts in Zivilsachen, 257.

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If these are indeed the characteristics of the Fascist law of contracts, it is necessary to specify, in the first place, that they have been introduced in the civil law codification in force. And it is further to be underlined that this implies the presence of a juridical doctrine in some way participating in the construction of such law, even though only by virtue of distinguishing contents.69 The statements of those who think that it is possible to speak of juridical Fascism only if the scholars are united and conformed to the political power, concluding that this is not the case in a context where it merely formulates an external homage to the politics of regime, are therefore worthless. Even such homages, in fact, contribute to outline a law of contracts ‘Fascist malgré soi’.70 However, even without such express references to the Fascist contract law, for instance in the language that was substantially taken from the Liberal tradition, some constructions have emerged, capable of supporting the legal policies determined by the regime: a circumstance that was justified in the past by portraying Fascism as the ‘white guard’ of capitalism.71

REFERENCES Alpa, G. (2001) La cultura delle regole. Rome and Bari: Laterza Aquarone, A. (1995) L’organizzazione dello stato totalitario. Turin: Einaudi, 2nd edn Asquini, A. (1938) ‘Unificazione del diritto delle obbligazioni’, Lo Stato 413 Bellomo, P.B. (1936) Dallo stato liberale alla politica corporativa. Padova: Cedam Biondi, B. (1952) Il diritto romano cristiano. Milan: Giuffré Bobbio, N. (1973) ‘La cultura e il fascismo’ in G. Quazza (ed.), Fascismo e società italiana. Turin: Einaudi, 209–46 Böhmer, G. (1932) Einführung in das Bürgerliche Recht. Leipzig: Weicher Costamagna, C. (1933) ‘La riforma della scienza giuridica’, Lo Stato 563 Costamagna, C. (1938) ‘Professori ebrei e dottrina ebraica’, Lo Stato 490 Costamagna, C. (1939a) ‘Razza e diritto al convegno italo-tedesco di Vienna’, Lo Stato 129 Costamagna, C. (1939b) ‘Il giudice e la legge’, Lo Stato 193 Costamagna, C. (1940) ‘La Carta del lavoro nella Costituzione italiana’, Lo Stato 530 Costanza, M. (1981) Il contratto atipico. Milan: Giuffré De Grand, A.J. (1999) L’Italia fascista e la Germania nazista. Bologna: Il Mulino De Semo, G. (1942) ‘La riforma dei codici e la nuova partizione del diritto privato’, Diritto e pratica commerciale 166 Di Majo, A. (1985) Obbligazioni in generale. Bologna: Zanichelli Dominedò, F.M. (1942) ‘Studi sulle fonti del diritto’, I Rivista di diritto commerciale 203 Ferrajoli, L. (1998) La cultura giuridica nell’Italia del novecento. Rome and Bari: Laterza Ferri, C.E. (1931) ‘Il sepolcro dell’uomo economico’, Lo Stato 708 69 70 71

Lucarelli (1983). See Somma (2001), referring to Tomasz Giaro. Gramsci (1998).

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The authoritarian theory of contract 65 Frank, H. (1936) ‘Gesetzgebung und Rechtsprechung im Dritten Reich’, Zeitschrift der Akademie für Deutsches Recht 137 Gramsci, A. (1998) ‘I due fascismi’ in R. De Felice (ed.), Il fascismo. Le interpretazioni dei contemporanei e degli storici. Rome and Bari: Laterza Grandi, D. (1940) Tradizione e rivoluzione dei Codici Mussoliniani. Rome: Tipografia delle Mantellate Grandi, D. (1941) ‘Diritto romano-fascista e germanico-nazista di fronte alla rivoluzione del secolo XX’, Monitore dei tribunali 3 Haupt, G. (1943a) ‘Über faktische Vertragsverhältnisse’, II Festschrift der Leipziger Juristenfakultät für H. Siber zum 10. April 1940. Leipzig: Weicher 3 Haupt, G. (1943b) ‘Vertragsfreiheit und Gesetz’, Zeitschrift der Akademei für Deutsches Recht 84 Hedemann, H.W. (1941) ‘Arbeit am Volksgesetzbuch’, Deutsches Recht 1913 Herschel, W. (1942) ‘Die Vertragsordnung als Rechtsnorm. Zur praktischen Bedeutung der neuen Lehre von den allgemeinen Geschäftsbedingungen’, Deutsches Recht 753 Irti, N. (1990) ‘Diritto civile’ in VI Digesto delle discipline privatistiche, Sezione civile. Turin: Utet Jung, E. (1934) ‘Deutschrechtliches und Römischrechtliches zur Reform des Bürgerlichen Rechts’, Zeitschrift der Akademie für Deutsches Recht 183 Lange, H. (1933) Liberalismus Nazionalsozialismus und Bürgerliches Recht. Tübingen: Nomos Lange, H. (1934) Vom alten zum neuen Schuldrecht. Hamburg: Hanseat Verlanst Larenz, K. (1936) Vertrag und Unrecht, vol. 1. Hamburg: Hanseat Verlanst Larenz, K. (1939) ‘Neubau des Privatsrechts’, Archiv für die civilistische Praxis 93 Lehmann, H. (1942) ‘Vom Werden des Volksgesetzbuchs’, DRW 1492 Lucarelli, F. (1983) Diritti civili e istituzioni privatistiche. Padova: Cedam Maffei, G. (1934) ‘La concezione anti-romana razzista del diritto’, Lo Stato 674 Maroi, F. (1941) ‘La codificazione fascista del diritto civile’, Monitore dei tribunali 65 Messina, S. (1938) ‘Origini scopi ed organizzazione del Comitato’, in Lo Stato 387 Messineo, F. (1943) Manuale di diritto civile e commerciale. Padova: Cedam, 6th edn, vol. II Neppi Modona, G. (1973) ‘La magistratura e il fascismo’ in G. Quazza (ed.) Fascismo e società italiana. Turin: Einaudi, 136 Nipperdey, H.C. (1938) ‘Il comitato giuridico Italo-germanico per la riforma del diritto delle obbligazioni’, I Rivista di diritto commerciale 437 Panunzio, S. (1936) ‘Il problema dei codici e i limiti della codificazione’, Lo Stato 647 Perlingieri, P. (1978) ‘Scuole civilistiche e dibattito ideologico: introduzione allo studio del diritto privato in Italia’, I Rivista di diritto civile 44 Pugliatti, S. (1942) ‘L’ordinamento corporativo e il codice civile’, I Rivista di diritto commerciale 358 Scaduto, G. (1939) ‘Introduzione al libro primo del nuovo codice civile’, Rivista di diritto commerciale 321 Schubert, W. (1988) Volksgesetzbuch. Teilenwürfe, Arbeitsberichte und sonstige Materialien. Berlin: Verlag De Gruyter Schubert, W. and Regge, J. (eds) (1988) Akademie für deutsches Recht 1933–1945. Protokolle der Ausschüsse, vol. III.4. Berlin and New York: Springer Siebert, W. (1941) ‘Ergebnisse und Vorschläge zum System des deutschen Vermögensrechts’, Deutsches Recht 1506 Siebert, W. (1942) ‘Contrato y libertad de contratación en el nuevo sistema del Derecho alemán’, Revista de derecho privado 454 Simon, D. (1989) ‘Die deutsche Wissenschaft vom römischen Recht nach 1933’ in M. Stolleis and D. Simon (eds), Rechtsgeschichte im Nationalsozialismus. Tübingen: Nomos

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66 Comparative contract law Somma, A. (2001) ‘Fascismo e diritto: una ricerca sul nulla?’, Rivista trimestrale di diritto e procedura civile 597 Somma, A. (2002) ‘Roma madre delle leggi. L’uso politico del diritto romano’, Materiali per la storia della cultura giuridica 153–82 Stoll, H. (1943) Vertrag und unrecht, 3. Aufl., 1. Halbb. Tübingen: Mohr Teti, R. (1990) Codice civile e regime fascista. Milan: Giuffré Tranfaglia, N. (2001) Fascismi e modernizzazione in Europa. Turin: Bollati Boringhieri Vassalli, G. (1939) ‘Per un diritto unico delle obbligazioni’, Lo Stato 206 Wieacker, F. (1941) Zum system des deutschen Vermögensrechts. Erwägungen und Vorschläge. Leipzig: Weicher

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4. Contract and the comparatist: should we think about contract in terms of ‘contracticles’? Geoffrey Samuel

When asked to think about contract in a comparative law context, many academic lawyers and law students might well be tempted into thinking about the subject at a very general level. This should surprise nobody. Contract in both the civil law and the common law world is founded on a general theory which now finds concrete expression in a range of transnational codes.1 These codes would appear to be the fruits of work done by comparative lawyers who have toiled to harmonize the sometimes divergent principles that make up the various general theories in the nationalized systems.2 However, not all comparatists have envisaged contract in this way. And two in particular have produced work that might encourage a rather different approach to thinking about contract. The late Tony Weir expressed concern at the abstract nature of contract, especially when compared to the Roman law of contracts,3 while the late Emeritus Professor of Comparative Law at Oxford, Bernard Rudden, produced a key work in the law of torts which, by way of analogy, ought to provoke reflection about contract.4 Building on the ideas of these two eminent comparatists, this present contribution will investigate whether it would be epistemologically valuable to think about contract, not by way of a general theory, but by way of the very many and various types of contract. Might classification of contract by way of index, which has the potential capacity to identify not just the grand transaction such as sale and hire but equally the little contracts (‘contracticles’), provide knowledge that le grand plan cannot reveal? Indeed, such reflection might go further than classification given this reference to the index. Might not the idea of ‘clusters’ within the framework of contractual knowledge act as points of entry into this 1 2 3 4

See, e.g., Rampelberg (2005); Cabrillac (2012). See recently Schulze and Zoll (2013). See Weir (1992); Weir (1998). Rudden (1991–92).

67

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knowledge itself? By ‘cluster’ is meant a focal point that can consist of an empirical object (pork or peas), a descriptive concept such as commercial or public interest, reasonableness, damage or fault, or even a normative concept such as right or duty. These classification categories and these clusters cannot be linked or described relationally in terms of a contents plan or even a complex system;5 they are brought together only in an index whose linking scheme is of course the alphabet.6

I.

INTRODUCTION: THE WEIR AND RUDDEN DIMENSION

Tony Weir was perhaps better known as a tort rather than a contract lawyer but as a Roman law specialist and comparatist his tort knowledge must of course be appreciated within the context of the law of obligations as a whole. In fact, he published several contributions on contract and if one were to attempt to extract some memorable points there are two that are striking. The first was his (statistically correct) insistence that most claims for breach (or perhaps one should say non-performance) of contract were actions for debt rather than damages. Specific performance is, in other words, by far the most important remedy in English contract law. As Tony Weir put it: The critical matter is, what did the defendant promise to do and under what conditions? Here the principal distinction, as it seems to me, is between promises to pay money and all other promises.

As he goes on to point out, though ‘one would never suppose it from the books, the money promise is the commonest of all promises, and the one most commonly unperformed’. And so while consumers are always presented as victims, ‘the truer view is that they are people who don’t pay for what they’ve got’. Thus whatever ‘academics say or might like to think, courts are principally collectors of debts, not extractors of damages’.7 The second point is this: The civilian emphasis on the different kinds of contract rather puzzles the English lawyer, for he assumes that contract consists only of the general part and is strongly disinclined to pay much attention to the nature of the transaction in question. In complete contrast to his attitude to torts, his 5 6 7

Cf. Morin (2005). See further Samuel (2011b). Weir (1998) 72.

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Contract and the comparatist 69 approach to contract is abstract and unitary. The reason is that whereas the law of torts developed (as did the Roman law of contracts) under different forms of action – trespass, case, trover and so on – the English law of contract since the early seventeenth century had really only one form of action – assumpsit … A student asked to specify what kind of contract he has in mind will sooner think of replying ‘bilateral’ than ‘sale’ or ‘employment’ or ‘carriage’.8

And he continued: This abstraction is distractingly unrealistic … It is as if medical students had a first-year course entitled ‘Disease’, and consequently came to believe that diseases were all much of a muchness and that when it was a question of remedies, it did not really matter whether it was a case of nephritis or schizophrenia.9

This extract obviously provokes one into thinking about contract in terms of the various major transactions mentioned by Tony Weir.10 Yet is this the only classification structure which might act as a useful alternative? Tony Weir had already alluded to one, namely, the dichotomy at the level of remedies between debt and damages. This suggests that if one were to approach contract from the position of remedies, then a grouping under debt, damages, rescission, rectification, injunction, and so on could provide valuable insights. However, a closer examination not just of the cases but also of the legislative texts stimulates a range of other schemes. The distinction between a supply of goods and a supply of services contract suggests a dichotomy between an obligation of means and of result,11 while a sale of land contract has different effects than a sale of goods one.12 The difference between public and private law contracts is of course well known and has given rise to some literature,13 but the ever growing number of regulations coming from Brussels is adding a whole new meaning to Ulpian’s observation that there are more transactions than names that attach to them.14 Could being unaware of the differences between different kinds of contract have important practical implications? Are there not important pedagogical reasons for emphasizing different classes of contract? One is used to approaching contract from the 8 9 10 11 12 13 14

Weir (1992) 1638. Ibid. 1640. See further Samuel (2011a). UNIDROIT Principles of International Commercial Contracts, art. 5.1.4. Lawson and Rudden (2002) 56–62. See, e.g. Davies (2008). D.19.5.4.

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position of an over-arching general theory; but what if one were to adopt an index-based approach? With respect to the law of torts, Weir himself suggested not just that a general theory is an unintelligent way of thinking about torts in the common law but that there is no general theory. The only thing holding a torts book together is the binding.15 Bernard Rudden’s article on ‘torticles’ approaches the subject in a similar spirit.16 However, the important contribution that he makes is to suggest that classification through the alphabet will reveal a much richer undergrowth (so to speak) than a series of general chapters organized in accordance with some abstract plan. The idea of thinking about law through the alphabet has also been explored by Nicholas Kasirer and his original paper has stimulated a more general reflection as to whether an index can have an epistemological role.17 The topic of classification of contracts, which seems to be largely ignored by those writing general introductions to the subject, ought, then, to be given some more serious attention.

II.

WORDS AND THINGS

Following a lead provided by the late Peter Birks, some academic lawyers have started to interest themselves once again with questions of taxonomy. One of the tensions that emerges out of this debate is the dichotomy between words and things: classifying physical objects is perhaps not the same exercise as classifying things that have no physical (or immediate physical) existence.18 Indeed, the debate between what actually exist as physical objects and what are only names (nomina) is one that goes back at least as far as the Middles Ages, if not to Roman law. The debate has relevance to any discussion of classification by index in a subject like law because the index will always be a place where the empirical world meets the world of ideas. ‘Offal’ and ‘offer’ could well be close neighbours in a contract textbook, as could ‘pants’, ‘peas’, ‘personality’, ‘pork’ and ‘product’. Now classifying through categories such as ‘personality’, ‘property’ and ‘obligations’ would not be the same as classifying law through ‘bathroom’, ‘cat’ and ‘peas’. Yet these latter categories could actually be used as a means of conveying, ultimately, as 15 16 17 18

Weir (2006). Rudden (1991–92). Kasirer (2003); and see Samuel (2011b). See further Samuel (2000); Samuel (2004).

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much information as the former scheme if one reasons, not through a structure of genus and species, but through a progression by analogy. This point perhaps ought to be developed a little further. Hugo Mattei has written an article in which he suggests that the legal systems of the world should be classified according to three categories, namely ‘professional’, ‘political’ and ‘traditional’.19 No doubt this taxonomical scheme is open to criticism, but the point to be made here is that, arguably, one could arrive at the same information by starting out from the empirical categories mentioned above. It may seem a little bizarre that a ‘bathroom’ could stimulate a jurist into thinking about the relationship between the professional and the political, but the location of a bathroom in a local authority council flat came close to provoking a constitutional crisis in a case that, because of its sensitivity, ended up in the House of Lords.20 Lord Hoffmann managed to find a ‘professional’ way of solving the problem, but not before he had explained the ‘political’ implications of the case. One can move from this bathroom to others: the builder who fails to build one in conformity to the contract with a flat owner or the bathroom that leaks water into the flat downstairs. Again, the builder who fails to complete the construction of a bathroom, leaving valuable shower fittings and basins unfixed to the property. Can the builder reclaim these objects as his own? Moving, by way of analogy, from ‘bathroom’ to ‘flat’ and from flat to other buildings will allow one to raise all manner of obligation and property problems. Is not the notion of a ‘home’ one that brings in both ‘professional’ law and ‘tradition’?21 Indeed, the question has even been raised as to whether a building has legal personality.22 With regard to ‘cat’, an advertisement in the 1970s once asserted that ‘Your cat has the right to eat Whiskers’ (a particular tinned cat food). Do cats have rights? What are the legal problems here? It is easy to move from this creature to a much more political sensitive one: the unborn child in the womb. Does such a ‘person’ have ‘personality’ rights? Do these rights trump those of the mother who might desire an abortion? One has soon moved into the categories of ‘political’ and ‘traditional’. One can move in other directions. Your cat eats your neighbour’s goldfish: what are the legal implications?23 What if a vet fails to cure your cat’s illness or what if your neighbour tries to adopt your cat? 19

Mattei (1997). Birmingham City Council v. Oakley [2001] 1 AC 617. 21 See Attia v. British Gas Plc [1988] QB 304. 22 See Bumper Development Corp. v. Metropolitan Police Commissioner [1991] 1 WLR 1362. 23 See Animals Act 1971, s. 2(2). 20

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Perhaps these examples are entirely ‘professional’ ones, but if one moves by way of analogy to a horse, the legal implications become more interesting. A horse panics, jumps the fence of a field, and crashes into an oncoming car seriously injuring the driver. The injured driver it seems can get damages without having to prove fault.24 Yet, if there is a strict liability scheme for horses that cause car accidents, why is there not a liability without fault regime that attaches more generally to motor vehicles that cause accidents?25 Is this ‘professional’ law or is one in the realm of ‘tradition’? As for ‘peas’ they can lead one into a discussion, first, about defective products (the caterpillar in the tin of peas)26 and then, thanks to a case concerning an unfortunate piece of aerial advertising (‘Eat Batchelor’s Peas)’, about the effects of words on a group of understandably sensitive people.27 By way of analogy – pushing outwards from these facts – one can soon arrive at a whole range of problems about formation of contracts (does putting a tin of peas into one’s supermarket trolley constitute contractual acceptance?), about the effects of insulting, untrue or misleading words, about the futures market (buying peas before they are grown), about agriculture and land use, about government regulations with respect to food production and safety, and so on and so forth. Now, of course, it is very easy to raise objections to this empirical object and reasoning by analogy approach to understanding legal systems. ‘Peas’ are not, as such, all embracing categories like those of the ‘law of property’ or ‘professional’ and ‘political’ and thus such a category would have provoked ridicule from the late Peter Birks who regarded the alphabet as a scheme lacking epistemological credibility.28 Yet perhaps care must be taken. If one starts out from categories such as those suggested by Mattei there is a real danger that, for the comparative lawyer at least, one could end up taking a Eurocentric view of law as a knowledge system. If one adopts physical objects as the starting point there is the point that such objects are to be found in many very different kinds of cultures with the result that one is at least starting out with less culturally infused terms. No doubt ‘bathroom’ might not be a particularly suitable object but there are rough equivalents in many cultures and cats and green vegetables certainly are global things. Interestingly, the Gaian scheme of persons, things and actions is, by this test, more culturally 24 25 26 27 28

Mirvahedy v. Henley [2003] 2 AC 491. Mansfield v. Weetabix Ltd [1998] 1 WLR 1263. Smedleys Ltd v. Breed [1974] AC 839. Aerial Advertising Co. v. Batchelor’s Peas Ltd [1938] 2 All ER 788. See, e.g., Birks (1997) 34. See also Editor’s Preface at v.

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neutral than the Mattei scheme inasmuch as persons and things (if not actions) are empirical as well as rational categories. Gaius was, it could be argued, trying to classify objective social realities. The difficulty with trying to apply scientifically inspired taxonomical schemes (genus and species) to a discipline that essentially consists, if the rule theorists are to be believed, of words is that one is not classifying an independent object. Professor Birks tried to get around this problem by asserting that legal categories were responses to ‘causative events’.29 Actions in tort arose from wrongs while claims in contract were triggered by agreements. Wrongs and agreements were ‘things’ rather than words. Moreover, sub-classifications within tort were a matter of ‘interests’ (and thus ‘things’) and so distinctions had to be made between, for example, the bodily health, property, financial and reputation interests. The problem with this thesis is that the taxonomical scheme itself was as much implicated in determining the object as the objects themselves. Certainly, one can objectively distinguish between a bodily, financial and reputation interest; but many factual situations reveal ambiguity as to which interest is in play. Did Mr Spring, the victim of an untrue reference letter, suffer an invasion of his economic or his reputational interest?30 In asserting that he suffered an invasion only of the latter, Birks was in part asserting his own reality.31 High level abstract schemes in law cannot, then, rely on correspondence for their epistemological validity. This leaves only coherence and consensus.32 Tony Weir has suggested, as we have seen, that attempting to apply some kind of coherent scheme to tort is a fruitless task and, given his view on contract, even if such a scheme were possible it would be meaninglessly abstract. Medical reasoning cannot solve problems by reference to the category of ‘disease’. The legal scientist would no doubt agree but equally would argue that such high level categories are made relevant through a hierarchy of sub-categories, sub-sub-categories, and so on, until one arrives at a sufficiently empirical level to solve concrete cases. One is thus creating not just a set of empirically relevant categories such as ‘products’, ‘goods’, ‘services’ and the like but linking these categories within a rationalized structure that can be reduced finally to a single notion which sits atop of the pyramid or hierarchy. Scientific reductionism is what motivates many legal taxonomists. The index in contrast has only the alphabet as its organizing scheme, even if it is a site 29 30 31 32

Ibid. 17. Spring v. Guardian Assurance Plc [1995] 2 AC 296. Birks (1996) 4–6. Soler (2000) 43–45.

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where, as the law of contract demands, a pork chop can be distinguished from a lamb one33 and a café from a restaurant.34

III.

LEVELS OF CLASSIFICATION

One taxonomical question that emerges from this discussion is, accordingly, the level at which contracts might be classified. Much will depend upon the kind of problems to be solved. And so, for example, if the emphasis is on liability rather than, say, on the particular professional peculiarities of different classes of contract (architects, solicitors, shipping, and the like) one might look to comparative law and think in terms of fault (obligation of means) and strict liability (obligation of result).35 Here the distinction that emerges is one between a contract for the supply of goods, where liability is strict if the goods are defective,36 and a contract for the supply of services, where the duty is one only of professional skill and care.37 Nevertheless, as useful as this dichotomy is, one cannot really abandon the index since certain factual situations can prove awkward. A recent case is of interest in this respect. In Platform Funding Ltd v. Bank of Scotland,38 a bank brought an action for damages against a firm of surveyors for breach of contract. The bank had contracted with the surveyors for the latter to value a property to be used by the bank as security for a loan made to a third party. The surveyors gave a written valuation on the property after being shown around it by the third party borrower and the bank made the loan. When the borrower failed to keep up the loan repayments, the bank repossessed the property but then discovered that the wrong property had been valued with the result that the bank incurred a financial loss because the repossessed property was worth less than the valuation. Now the surveyors argued that it was not liable for breach of contract because it had not failed to exercise the skill 33

Heil v. Hedges [1951] 1 TLR 512. Lockett v. A & M Charles Ltd [1938] 4 All ER 170; cf. Donoghue v. Stevenson [1932] AC 562. 35 See UNIDROIT Principles for International Commercial Contracts, art. 5.4; Avant-projet de réforme du droit des obligations et de la prescription, art. 1149. 36 See traditionally Sale of Goods Act 1979, s. 14; and now Consumer Rights Act 2015, s. 9. 37 See traditionally Supply of Goods and Services Act 1982, s. 13; and now Consumer Rights Act 2015, s. 49. 38 [2009] QB 426. 34

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and care required of the reasonable valuer. In other words, this was a service contract and, despite valuing the wrong property, it was not, the valuer argued, actually negligent. The claimant, for his part, asserted that this argument was irrelevant since the contractual obligation to inspect the correct property was an absolute one. Fault did not enter into the equation, so to speak. In holding the valuer liable, Rix LJ, supporting the judgment of Moore-Bick LJ, observed that if the defendant’s argument were to succeed ‘the valuer who valued the wrong house (without any want of care), like the photographer who photographed the wrong wedding (equally without any want of care), could demand his fee: there has been no breach, for each has acted with all reasonable care’. This idea, he concluded, ‘is plainly flawed’.39 The judges were keen to stress that as a general rule service contracts were, as the civilian would put it, obligation of means rather than ends. However, in service contracts it would appear that whether the claimant is entitled to damages is answered by posing the question whether the defendant is entitled to claim his debt. If he was so entitled, then the issue of liability becomes one focusing on the quality of the performance. The emphasis is on the act or behaviour of the contractual party and such an emphasis leads naturally towards fault or its absence. If he was not so entitled, then the issue is different; it means that there has been no performance of the basic promissory obligation at all and in this situation the emphasis shifts to the object of the contract, the property valued (or not valued). Distinguishing between service and sale contract must, in consequence, be treated with caution. Is this because certain types of service have ‘goods’-like qualities or is it because the remedy of debt attracts its own rules which in turn can distort the transactional distinction? Certainly, debt has an interesting role. As Tony Weir stressed, the most common contractual promise is one to pay a sum of money but this obligation contains within it a question about the circumstances in which the debtor becomes obliged to pay. As Rix LJ says, payment can be refused if there is a complete non-performance of the service. The supplier of goods and the supplier of a service can therefore find themselves in an identical position if what they proffer as performance proves to be completely defective. They do not get paid. This point is not always appreciated in contractual cases. In Photo Production v. Securicor, the House of Lords had to consider whether or not a security company would be liable for the destruction of a client’s factory when 39

Ibid. para. 50.

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the company’s patrolman sent to guard the factory burned it down instead.40 Leaving aside the exclusion clause issue, one would have thought that the way to determine this question might have been to ask whether or not, after the fire, the security company could claim its fee. If not, then the company would, if Rix LJ is right, be liable to pay damages irrespective of the question about whether or not the patrolman was acting outside the course of his employment. Yet this was not the approach adopted and one reason is, surely, the very force of the facts themselves. Valuing the wrong factory is very different than burning a factory down. An employee who deliberately destroys the object of a contract is likely to be distinguished from the employee who makes a drastic misidentification. The point to be made here is that a classification distinction between contracts to supply goods and contracts to supply services is epistemologically wanting. Reference equally needs to be made to the distinction between debt and damages claims and to different types of objects such as buildings, photographs, paintings, arsonists, and so on. These low level facts (things) can be just as determinative as categories founded upon names (words). Other examples can be given. A claimant contracts with the defendant ship-owners for the latter to hire the former a ship; however, for some unexplained reason the ship explodes and sinks leaving the claimant without a vessel to transport their cargo. The claimant accordingly brings a claim for damages for failure to perform the charterparty (namely, to provide a ship) but the defendants argue that they are not liable as the contract is frustrated.41 Was the cause of the ship exploding due to some act or omission on the part of the owners or was it due to an event completely outside the control of the defendants? The civilian rule might prove useful here in that it suggests that where someone has promised to do something, the burden of proof should be on the promisor. If the promise is not performed, then the non-performer should be required, at the very least, to show absence of fault. Thus Scott LJ, in the Court of Appeal, seemingly adopting this approach, said that it was a ‘very simple case’.42 Yet this was not the approach adopted by the House of Lords. As soon as fault became a focal point the judges took the view that he who alleges fault ought to bear the burden of proving it. This the claimant could evidently not do since the explosion was unexplained and the result was that the defence of frustration was upheld. 40 41 42

Photo Production Ltd v. Securicor [1980] AC 827. Constantine (Joseph) SS Ltd v. Imperial Smelting Corp. [1942] AC 154. [1940] 2 KB 430, at 432.

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What provided the opportunity for a difference of opinion between the Court of Appeal and the House of Lords was the choice between two factual focal points, both in turn governed by quite separate normative propositions. The first was the fact of non-performance in turn linked to the explosion, and the second was fault. The non-performance and explosion was what made the case a simple one for the Court of Appeal, while the fault is what made it ‘not … a very simple one’ for the House of Lords.43 Now a critic might very reasonably argue in respect of this case that taxonomy is of considerable importance. The rule that he who alleges fault must prove it is one primarily belonging to the tort of negligence whereas the frustration rules belong in the law of contract. In the codes, therefore, non-contractual fault liability is in a quite separate section than fault liability in contract.44 Moreover, one might provide some support for criticizing the decision handed down from the House of Lords by arguing that not only did they indulge in some false dichotomies but the Law Lords equally have handed to contracting parties the possibility of escaping from the consequences of a non-performance by alleging frustration. A consumer hires a boat for a holiday on the Norfolk Broads which catches fire and sinks causing damage to the hirers. The boat owner can, it would logically seem, escape liability by alleging frustration unless the consumer himself can prove that the boat was defective (not reasonably fit), which might not be easy. However, when such a case came before the courts the judge observed that he was ‘entitled to say that, when a motor launch catches fire, apparently for an entirely unexplained cause, there is a presumption that the launch was not reasonably fit for that purpose’.45 The false dichotomy employed by the House of Lords was that between what a French jurist would call an obligation of result and an obligation of means.46 In the words of Lord Porter ‘there are some contracts absolute in their nature where the promisor warrants the possibility of performance’ and in these ‘he is bound to perform in any event or to pay damages, but there are other cases where the promisor is only obliged to perform if he can’.47 The Law Lord then went on to make the point that where a contracting party seeks damages for nonperformance of an ‘if he can’ contract in order to ‘make him liable his 43

[1942] AC at 160 per Viscount Simon LC. See, e.g., Code civil, arts 1231-1 and 1240. 45 Lewis J in Reed v. Dean [1949] 1 KB 188, at 193. 46 See Avant-projet de réforme du droit des obligations et de la prescription, art. 1149; Nicholas (1995) 339, 351. 47 [1942] AC at 203–4. 44

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fault must be proved by the party which alleges that it destroys his excuse’.48 This is a false dichotomy inasmuch as it seems to suggest that there are no ‘if he can’ (obligation of means) contracts where a non-performer might have to prove absence of fault. This is not true. For example, if a contract of services is defectively performed (a form of non-performance) it may be that the provider of the service will be obliged to prove an absence of fault before he can recover the agreed price. Thus, in a case about a defectively performed funeral service, the Court of Appeal refused to allow the funeral parlour to claim its debt.49 Consequently, when something goes wrong which undermines the performance the burden is not always on the person alleging fault; he can simply allege non-performance. In the exploding ship case, however, reasonableness seems to have crept in at the burden of proof level. He who alleges unreasonableness (fault), so it seems reasonable to say, must prove it. One can only assume that a contract involving a ship is different from a contract involving a boat or a funeral service, strongly suggesting that these terms should appear in the index. Having said this, the distinction between ships on the one hand, and boats and funeral service on the other, might be rationalized at a higher level of abstraction by reference to the consumer (equally to appear in the index). Consumers are treated differently in the law of contract than business professionals.50 This is certainly true with respect to exclusion and other unfair clauses, but formally classifying contracts into these two categories would beg a question as to whether this is a suitable level to operate. Might it not be better to operate at an even higher level of generality? Would it not be better to move to the more general level of status and to see the consumer as an issue of capacity? Certain types of contractual parties (consumers, dealers in the course of a business, distant sellers, professionals, and so on) attract their own particular rules.51 No doubt being aware that the status of a party is of importance, but formally classifying contracts in terms of a special status category, would probably not prove particularly helpful because the rules attaching to the different status groups vary quite widely. It would, surely, be better to make these distinctions in the index.

48

Ibid. 204. Vigers v. Cook [1919] 2 KB 475. 50 See now Consumer Rights Act 2015. 51 See, e.g., Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, SI 2013/3134. 49

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IV.

RIGHTS AND REASONABLENESS

Another possible criterion for categorization in respect of contracts is the dichotomy between rights and reasonableness. Could it be said that there are some contracts where the performance of the promises is judged in terms of strict rights and other contracts where the key to performance is reasonableness? Now in 1963, a Court of Appeal judge asserted that he would ‘be sorry to find a new concept of law introduced that a man may unreasonably exercise his right of termination, which was clearly given to him by the contract’.52 In the same year another Court of Appeal judge had declared that a person who had a right under a contract was entitled to exercise it ‘for a good reason, a bad reason or no reason at all’.53 These assertions seem to reinforce what is surely a common perception, namely, that the law of contract is about strict promissory obligations voluntarily assumed (for the most part) between two parties and which can be vindicated as a matter of right. Contract rights, in other words, are often not that far removed from property rights.54 These rights may be expressed orally or in writing or, depending on the transaction, implied by the law; but the key concept is that a ‘contract is an agreement between two or more persons which the law recognises as creating, altering or extinguishing legal rights and duties’.55 This common perception of rights capable of vindication is, it must be said at the outset, not a false one in respect of one of the most common promissory obligations which, as we have seen, is the promise to pay a fixed and determined sum of money in return for a service or for goods or other property supplied.56 Just as the courts do not inquire into the behaviour of an owner seeking to assert his right of ownership in an item of property,57 so they do not look beyond the formal question of whether the creditor has the right to the debt being claimed. If the court finds that the claimant is a lawful creditor, they condemn the defendant to pay and the judges do not generally inquire into the behaviour of the parties or into the substance of the transaction. Yet, are these normative concepts of rights and duties always capable in themselves of providing an understanding of how contractual liability cases are reasoned and decided or 52

Upjohn LJ in Financings Ltd v. Baldock [1963] 2 QB 104, at 115. Pearson LJ in Chapman v. Honig [1963] 2 QB 502, at 520. 54 Atiyah (1979) 102. Note that a debt is a form of property (a chose in action). 55 McGregor (1993) art. 1. 56 An action for debt or sum due: Zakrzewski (2005) 108. 57 See, e.g., Moorgate Mercantile Ltd v. Twitchings [1977] AC 890. 53

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do other, more moderating, notions or ideas have a role in contract cases? Are there more latent ideas to be found beyond the formality of a right? A recently published thesis in France suggests that there is such a concept or notion at work, often latent, within legal reasoning and that this concept or notion is that of ‘reasonableness’.58 This thesis is of course devoted to French law (although there are references to the common law), but it evidently raises important questions for English and for comparative lawyers. The most obvious question, prompted by Madame Ramparany-Ravololomiarana’s book, is this. Are those French private lawyers, like the preface writer to Madame RamparanyRavololomiarana’s thesis, who assume that the notion of reasonableness is taken for granted in the common law of contract, correct in their assumption?59 If the observations of the two Court of Appeal judges cited above are to be believed, it might well appear that the assumption should be treated with scepticism. Madame Ramparany-Ravololomiarana’s thesis, in other words, should be transplanted to England, if at all, only with great care. Yet perhaps the scepticism and the care should be directed less at the idea of reasonableness in itself and more at the way the question is formulated. Instead of asking some general question about reasonableness and contract it might be better to pose a series of ‘bottom-up’ questions. In other words, it might be better to take an index approach. Does reasonableness, for example, have a role to play in contract where one person is claiming to have been damaged by the other party’s failure to execute (or to execute fully) his promise? Can reasonableness have a role where one person is attempting to vindicate what appears to be a clear contractual right? Does reasonableness ever apply to the object of the contract? And, if reasonableness, does make appearances on occasions, how can it be reconciled with the idea that contract is about strict rights and duties? Before these questions concerning reasonableness can be properly tackled, one is faced both with the question of why this reasonableness question might be of importance and with some definitional problems. The question of reasonableness and contract could be an important one if it were to reveal a décalage between contract, on the one hand, as an abstract structure of rules, rights and duties60 and, on the other hand, as a series of liability cases which are reasoned and decided using methods 58

Ramparany-Ravololomiarana (2009). See Beauchard (2009) v. 60 See, e.g., McGregor (1993); Principles of European Contract Law (PECL); UNIDROIT Principles of International Commercial Contracts (UNIDROIT). 59

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and notions that may have little or no place in the textbooks, treatises and codes on the subject.61 Put another way, the question would be important if it were to indicate that there is a whole dimension of contract knowledge that is unrevealed by the traditional doctrinal material on contract. Do contract and legal reasoning inhabit different epistemological worlds? And can these different worlds only be revealed by an index? With regard to the definition problems there are a number of issues. What, actually, is meant by a ‘right’ and what is meant by ‘reasonableness’ (or ‘unreasonableness’)? In addition, if the notion of reasonableness does have a role in contract, there are questions about the level or levels at which this role might operate. For example, it is generally stated that consideration does not have to be ‘reasonable’ in the sense of ‘fair’ or ‘just’ (there is, in other words no doctrine of the just price). Consequently, it would seem difficult to assert that all contracts must be ‘reasonable’. Or, put another way, there is no doctrine prohibiting a person generally from making unreasonable contracts (although of course some will be prohibited by the law).62 Yet once one descends from this ‘holistic’ level to the individual parts of contract law – to the individual levels of formation, content, performance and remedies – the position becomes more complex (as indeed Madame Ramparany-Ravololomiarana indicates in respect of French contract law). Reasonableness cannot be so easily dismissed, as a glance at the exclusion clause legislation or some cases on performance indicates.63 As one might expect, Madame Ramparany-Ravololomiarana approaches reasonableness (le raisonnable) in terms of a notion that is difficult to grasp. She examines the various definitions and concludes, importantly, that it is not actually to be confused with other notions such as rationality, justice or equity.64 Equally, it is not to be confused with good faith.65 Perhaps, she suggests, it is to be understood in a negative sense: it is something that is not unreasonable.66 Thus it could be said 61

See, e.g., Samuel (2009). This principle finds expression in (to take a random example) Galbraith v. Mitchenall Estates Ltd [1965] 2 QB 473, although this is not to suggest that this case would be decided the same way today (although it might be: see Director General of Fair Trading v. First National Bank plc [2002] 1 AC 481). 63 See in particular the Unfair Contract Terms Act 1977 and now Consumer Rights Act 2015. 64 Ramparany-Ravololomiarana (2009) 2–5. 65 Ibid. 6–7. 66 Ibid. 7–8. 62

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that reasonableness is absent in situations of abuse or irrationality; but of course the danger here, as she recognizes, is that it can become confused with morality and this is dangerous because one important aspect of the notion of reasonableness is its pragmatic orientation.67 It is a means of moving away both from the irrationality of sentiment and passion and from the rigid rationality of formal deductivism towards a pragmatism in which an economic and (or) social functionalism can come into play. It is a means of adapting legal reasoning to the case in issue. And it does this by permitting the legal reasoner to switch from one scheme of intelligibility to another. One moves from formal structuralism (contract as a set of axioms) to a form of reasoning that takes its reference from, on the one hand, an idealized ‘actor’ (the reasonable person) and from, on the other hand, the economic supposed ends that the contract rule or principle is said to be pursuing. Accordingly, definitions of a right have tended to be based on structural schemes that are circular in their pattern. For example, one leading theory is that a ‘right’ is correlative to a ‘duty’ and so where a party is under a ‘duty’ to pay to the claimant £100 the latter has a ‘right’ to such a sum (which, presumably, can then be claimed ‘for a good reason, a bad reason or no reason at all’).68 Another structural approach is to see a right as being based on a relation between persona and res. Here the paradigm example is the right of ownership, in turn defined as ‘the right to enjoy and dispose of in the most absolute manner’,69 but the notion of a res can be extended to embrace all kinds of intangible things, including claims not just for something under a contract but for more ephemeral items such as liberty, wealth, privacy, dignity, education, and so on. A right under this scheme of intelligibility has the flavour of property talk and from a diachronic viewpoint is rooted in the history of the two Roman law terms of dominium and ius.70 Another definitional possibility is to add a functional dimension to the structural approach. Under this scheme a right is, for example, nothing more than a social interest recognized and protected by a legal action or claim, that is to say that the function of a right is to give priority to some empirical interests over others.71 However, lawyers are usually forced to adopt a dialectical scheme when it comes to deciding actual cases since many rights come into conflict, for example, the right to privacy often 67 68 69 70 71

Ibid. 9. Hohfeld (1919). Code civile, art. 544. See, e.g., Tuck (1979); Villey (2006). See generally Ionescu (1978) 141–49.

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finds itself in conflict with the right to press freedom or the right of ownership with the protection of third parties.72 The judges talk of balancing one right against another – although not it seems where ownership is concerned73 – and this, in turn, can force the legal reasoner towards an ‘actor’ approach whereby, for example, the courts create an agent such as the ‘reasonable journalist’ or the ‘reasonable businessman’.74 In short, definitions are in themselves of little help; what matters are the methodological schemes of intelligibility adopted by judges in individual cases concerning rights.

V.

INVASION AND BEHAVIOUR

Nevertheless one way of approaching rights, and possibly the most useful way for the purposes of comparing rights with reasonableness, is to contrast invasions with behaviour. As Lord Hobhouse once explained with respect to the law of tort: Typically, a tort involves the invasion by the defendant of some legally protected right of the plaintiff, for example, trespass to property or trespass to the person. Conversion is another example. Such conduct on the part of the defendant is actionable as such and the belief of the defendant as to the legality of what he did is irrelevant. It is no defence for the defendant to say that he believed that he had statutory or other legal authority if he did not. The legal justification must actually exist otherwise he is liable in tort.75

The Law Lord then went on to observe: On the other hand, where the plaintiff is not entitled to complain of the invasion of such a right but bases his claim on some loss which he has suffered consequentially upon some act of the defendant which the defendant mistakenly believed was authorised by the law, the defendant’s honest belief provides him with an answer to the plaintiff’s claim notwithstanding any actual illegality. Thus the holder of a public office who acts honestly will not be liable to a third party indirectly affected by something which the official has done even if it turns out to have been unlawful.76 72

See, e.g., Shogun Finance Ltd v. Hudson [2004] 1 AC 919. Ibid. 74 See Lord Hoffmann in Jameel (Mohammed) v. Wall Street Journal [2007] 1 AC 359, para. 55. 75 Lord Hobhouse in Three Rivers District Council v. Bank of England (No. 3) [2003] 2 AC 1, at 229. 76 Ibid. 73

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This distinction between the starting points of invasion and behaviour might be a useful analogy for approaching rights and reasonableness in contract. Is contractual liability about vindication – that is to say claiming something without having to prove anything more than nonperformance by the other contractual party (the ‘invasion’ of the right) – or is it about suffering loss through some act which itself must be proved, in substance, as unreasonable, the mere proving of a breach of promise not being sufficient to result in any substantive remedy? More generally one might say that the question comes down to one of vindication of rights contrasted with proof of unreasonableness.77 However this general question is not in itself sufficient as a vehicle for approaching the issue of reasonableness in contract. As Madame Ramparany-Ravololomiarana’s thesis indicates, where reasonableness does appear to have a role is at the level of individual aspects of contract law (problems concerning penal and exclusion clauses, change of circumstances (imprévision), performance expectations, and the like) and so what is needed is a scheme for analysing contract into parts that are relevant for this purpose. The obvious scheme is the one employed by contract codes and textbooks. Reasonableness can be assessed, first, at the various stages of contract and, secondly, at the level of the contractual obligation itself. Thus one might start at the pre-contractual (negotiation) stage, progressing to reasonableness in formation, in interpretation of content, in performance and in the enforcement of remedies. Yet the problem with this approach is that it fails to comprehend a further dimension to the problem. It may be that reasonableness is not a concept that can easily (if at all) be detached from the contractual liability cases so as to exist as some kind of abstract entity itself amenable to a consistent definition. Madame Ramparany-Ravololomiarana seemingly takes a somewhat different view it must be said; for she sees reasonableness as being some kind of general notion that has the function of adapting the various elements of contract to make it conform to the aim (la finalité) of the parties.78 Nevertheless, she might agree that reasonableness exists not only within the facts as an empirical idea and within a range of legal rules (even statutory ones) as a normative proposition but also as a vehicle capable of informing and explaining legal reasoning. As she says, the notion authorizes the judge to fill in gaps or adapt or declare void certain clauses which do not facilitate the achievement of the objective of the 77

An interesting case displaying such a conflict is Moorgate Mercantile Ltd v. Twitchings [1977] AC 890. 78 Ramparany-Ravololomiarana (2009) 399.

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parties.79 To a common lawyer this may sound as if it is a notion that explains everything and nothing and were it to be employed only at what might be called the large scale ‘mapping’ level the criticism would probably be valid. This is why one is forced back to an index approach. Time must be spent looking at the reasoning methods employed by the judges (no doubt inspired by counsel on occasions) in some contract cases. In other words the devil is in the detail and these details can only be accurately referenced through a well-constructed index.

VI.

SCHEMES OF INTELLIGIBILITY

These reasoning methods have been described in detail elsewhere.80 Nevertheless, it might be valuable to recall how they interrelate with contract decisions so as to permit the idea of reasonableness to enter into the equation. Several such methods, or schemes, have already been mentioned in passing. An ‘actor’ approach is one that permits the reasoner to construct an individual agent endowed with certain qualities and attitudes; this agent can then be called upon to make a judgement within particular sets of facts. What would the ‘reasonable man’ have done? How would the ‘reasonable bystander’ have interpreted the negotiations? The validity of this approach will, of course, depend upon the extent to which such a constructed individual enjoys consensual support amongst the audience at whom the reasoning is aimed. A structural scheme emphasizes the relations between elements, for example between persons, things and actions or between carefully defined categories and classes or again between abstract concepts such as rights, duties, liberties and privileges.81 Often such a scheme draws its validity from its coherence, the model being that of mathematics, and thus ideas such as symmetry and non-contradiction are fundamental. Indeed, the reasoning method usually employed by conceptual structuralists is logical deduction and the reliability of such reasoning depends on the perfection of the structure or the system.82 This aspect of legal

79 80 81 82

Ibid. 399–401. Samuel (2009). On structuralism as a scheme of intelligibility see Berthelot (1990) 70–72. Bouchon-Meunier and Nguyen (1996) 7–20.

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conceptualization has a long history in European legal thought.83 Reasonableness within this scheme would be a matter of axiomatic principle, but one linked to the circumstances of each case.84 One might add to this structural scheme a causal approach, that is to say the scheme of reasoning normally used in the natural sciences.85 Certain structural models might be employed to demonstrate how one object (in law a particular result or solution: S) is dependent upon a causal relation with another object (a rule or concept or norm: N). If N, then S. Thus if one is able to establish offer, acceptance and consideration in a set of facts (F) then one can conclude there is a contract (C); and if one can go on to establish an act that amounts to a breach of this contract (B) one can causally conclude there will be liability (L). Thus F causes C which causes B to be treated as L. In contrast to this structural scheme is a functional approach which puts the emphasis on the purpose or function of a rule, concept or category.86 What is the empirical role of the doctrine of consideration in contract? What economic or social objectives should the law of contract be attempting to achieve? A functionalist might, then, refuse to interpret a provision in a written contract in a way that will lead to an unreasonable economic or social result. One should add here that functionalism often makes its appearance in English law civil liability cases under the guise of ‘policy’. In asking what the policy is behind a particular rule a judge is often alluding to its social purpose. Other approaches that are of importance are hermeneutics and dialectics. A hermeneutical approach is one that sees a rule, word, concept, category or whatever as a sign whose deeper meaning – whose significance – is in need of discovery.87 For example, in statutory interpretation one often talks of the will of Parliament as the object to be discovered behind a word or expression in a legislative text; the role of the interpreter is thus to discover this will behind the written word. In contract one can talk of the will of the parties. Does the written text (contractual document) give a true expression of what the parties intended? Did the parties, for example, imply into the text a term that the two parties should perform the contract reasonably? A dialectical approach is one that emphasizes contradiction out of which will emerge 83 84 85 86 87

See generally Dubouchet (1990). See, e.g., European Sales Law Regulation (proposal), art. 5. Berthelot (1990) 62–65. Ibid. 65–70. Ibid. 72–75.

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some higher ‘truth’.88 This, of course, is a scheme that is inherent in the whole adversarial approach of the common law; out of arguments for and against (advocatus diaboli) will result the solution to a litigation or criminal prosecution problem. Judges might adopt this approach in contrasting two possible outcomes to a contract problem and then, after a careful comparative analysis, choosing the most appropriate (the most reasonable?) between them. One final point needs to be recalled with respect to these different schemes of intelligibility in reasoning. They are not mutually exclusive but, as already indicated, often combine to produce a set of reasons or justifications. Thus a causal approach, or indeed a functional approach, might be combined with an actor scheme; a hermeneutical scheme might be mixed with a dialectical one (as in medieval legal reasoning). Reasonableness, in other words, might be excluded in a scheme of intelligibility that emphasizes conceptual structure and causal logic; the solution (S) is caused by the juxtaposition of a given set of facts (F) and a conceptual scheme of norms or positive rules (N). Thus N juxtaposed with F causes S. However, reasonableness can be (re)introduced by the reasoner who adopts a different scheme, say functionalism or dialectics. As a Law Lord once said, a ‘preoccupation with conceptualistic reasoning may lead to [an] absurd conclusion’; and thus ideas ‘divorced from reality have never held much attraction for judges steeped in the tradition that their task is to deliver principled but practical justice’.89

VII.

CONTRACT CLUSTERING

How do these different reasoning schemes relate to the classification of contracts? In one sense they do not; they are forms of reasoning and not forms of contractual types. However, where they meet different types or categories of contract is in the index. The index becomes the place where taxonomical, conceptual (including reasonableness), institutional, factual, economic, political, social, moral and other notions meet. This ‘place’ is the means through which a reader can appreciate the complexity of law and legal reasoning. This complexity, rather than being rationalized through classification (at whatever level) of rules and transaction types, might be better reflected in a form of clustering that takes as its starting point a factual situation, a descriptive concept or a reasoning method. Instead, therefore, of understanding contract through a rule (or set of 88 89

Ibid. 82–83. Lord Steyn in Lister v. Hesley Hall Ltd [2002] 1 AC 215, para. 16.

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rules) like ‘offer’ and ‘acceptance’ it might be better to look at the details of contractual situations as reflected in differing factual situations such as supermarkets, transport, builders, ships, boats, motor vehicles, and so on. This is not to assert that rules such as offer and acceptance or consideration are irrelevant; they are not. However, they should be seen not as axioms as such but as the means of marking out relatively defined spaces in which a whole range of differing clusters are to be found. One might make an analogy with the theatre where the stage acts as a space for an enormous range of differing productions themselves involving complex relations between actors, props and scripts. Plays represent a ‘cluster’ within the defined space of the stage. In truth even the idea of contract rules determining a space within which contract problems are played out is misleading in that once one starts out from a factual situation such as the supermarket it becomes clear that certain problems do not fit neatly within a contract framework. The customer who picks up, and places in his trolley, a can of beans from a display marked ‘special offers’ and then, with a change of mind, replaces the can back in the display certainly raises an issue that is of interest to the contract lawyer. At what point is there a contract to purchase the tin? But what if the customer slips up and injures himself on some spilt yoghurt: is this equally a contract issue? One customer surreptitiously removes an item from the trolley of another customer because there are no more of these special offer items on the shelves: is this a contract issue? Now of course one might argue that this is exactly the problem with emphasizing the empirical context rather than the systematized conceptual structures of normative rules; contract norms become lost in a mass of other norms from other areas of the law. However, one may respond in saying that one of the advantages in viewing contract within specific empirical situations is that it actually emphasizes the artificiality of dividing up the law into tight normative categories of a type essentially inherited from Roman law. At the level of particular transactions in particular factual situations contract rules cannot often be divorced from tort, from property, from public or from procedural rules. This does not make the contract rules irrelevant as such, but the idea that there exists a body of pure contract norms is useful only in certain kinds of problem-solving situations where, for example, it might be ideologically useful (in a legal argumentation sense) to separate contract norms from administrative law or from property law norms. This point can be put another way. The construction of a set of contractual norms isolated from other areas of law such as status, wills, family relationships, employment, ownership and legal personality underpins much contemporary legal thinking in Europe, at least if the Draft

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Common Frame of Reference is to be believed.90 Such normative purity is usually regarded as a product of legal science. The methodology associated with this science is one based on the idea that one categorizes and analyses a factual situation in relation to the existence of this abstracted taxonomical normative structure. Yet do those working in the natural sciences problem-solve in this type of way? If one looks at an area of science that is perhaps the closest (in some ways) to law, namely medical reasoning, medics themselves do not seem to think that the methodology is founded upon comparing facts (symptoms) with an abstract and highly systematic taxonomical structure of diseases.91 The experienced doctor well knows that illnesses often do not manifest themselves in the way described in textbooks and that there is not a clear demarcation between being ill and not being ill. Medical reasoning is based as much on analogy as upon deduction.92 Much the same is true of law, although it must be stressed at once that there are different epistemological underpinnings between the two disciplines.93 As has been seen with respect to one of the cases already discussed, one arrives at the conclusion that the valuer who values the wrong building is strictly liable through the use of an analogy. The valuer is analogous to the painter who paints the wrong person or to the photographer who photographs the wrong wedding. How might contract clustering relate to contract classification? In order to try to answer this question one needs to return to the role of the index because classification and categorization can take many forms and operate at many levels. In addition, as we have seen, one has to factor in reasoning methods (induction, deduction and analogy) and schemes of intelligibility. What the index provides is a range of entry points in which one can understand the workings of contract law. Thus the distinctions between sale and hire, between contracts of service and contracts for the supply of goods, between interactions in a supermarket and in building construction sites, between distance selling contracts and financial services transactions, between expectations or interests and rights and

90

See DCFR Book I, art. 1:101. Masquelet (2006) 4–5. Medical reasoning is of course different in many ways to legal reasoning but they do share some similarities; for example, both doctor and legal practitioner have clients who have expectations which mean that they must reason in a manner that forms part of an ongoing relationship between reasoner and client: Masquelet (2006) 3. See Samuel (2015) 323. 92 Masquelet (2006) 41, 91–93. 93 Samuel (2015). 91

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duties, between rights and reasonableness, and so on and so forth, are all points of entry. Yet they all operate at different levels and in different dimensions which cannot be adequately embraced in a two-dimensional plan; they can only be listed in an index. ‘Contracticles’ – that is to say the many different types of transaction to be found at the lowest level of generality – are, in other words, just one aspect of a fragmented knowledge. This does not mean that systematized codes (or textbooks) of abstract contractual rules are irrelevant. They are not. They are, to use the mapping metaphor, like large-scale national motorways maps; yet the existence and undoubted utility of such maps does not render irrelevant the street plan map which in its own way is of equal utility. The index, then, is like a contract ‘street map’. It provides an entry into contractual knowledge from the bottom up. There are contract cases about, for example, offer and acceptance, rules of interpretation and frustration; but there are also contract cases about bailment, banks, buses, damage, debts, franchising arrangements, functional reasoning, funerals, heating systems, insurance, interests (commercial, public, and so on), knives, local authorities, peas, pork, property, reasonable business person, rectification in equity, telecommunications agreements, valuers, and so on and so forth. These clustering points have as much knowledge potential as offer and acceptance or any other notion to be found in a code or textbook. They may require, of course, a particular type of reasoning and scheme of intelligibility to unlock this knowledge potential.

VIII.

OBSERVATIONS AND CONCLUSIONS

These points are not particularly startling or original. The good indexer knows that his or her index should act as a kind of metaphorical X-ray which reveals the interior in all its detail and complexity of some defined area of knowledge. Equally, the civil lawyer has long thought in terms of particular types of contractual transaction and that classification of contracts is an important part of the introductory section in some codes and textbooks. Even the common lawyer has books on specific contracts. What perhaps has not been sufficiently appreciated is how these not particularly startling or original points have never really formed the basis of any serious epistemological thinking within legal subject areas. Tony Weir, it must be said, was contemptuous of epistemology despite his excellent epistemological point that thinking at the level of a general theory of contract was analogous to a doctor thinking at the level only of

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disease (as opposed to specific illnesses).94 But while jurists have been prepared to look at, for example, political or gender bias in cases and in legal reasoning, they (with one or two exceptions) have never really seemed that interested in thinkers such as Edgar Morin who has reminded scientists and social scientists of the importance of complexity. As Morin points out, science is based at one and the same time on consensus and conflict; there are permanent conflicts between rationalism and empiricism and between the whole and its parts. Complexity is a dialogue between order, disorder and organization.95 If one looks hard enough at certain legal rationalizations such as ‘reasonableness’ in contract one can see this conflict. Reasonableness is to be ‘objectively ascertained’ by ‘having regard to the nature and purpose of the contract, to the circumstances of the case and to the usages and practices of the trades or professions involved’.96 The epistemological emptiness of this assertion ought surely to be a warning sign that law as a rational discipline is in danger of becoming a kind of intellectual parody in which social reality is envisaged as a flat twodimensional framework full of one-dimensional subjects and objects linked by notions such as reasonableness that cannot ever have any abstract meaning. The idea that reasonableness can be ‘objectively ascertained’ in some sense divorced from the nature and purpose of the contract and the circumstance of the case is epistemologically absurd and seemingly works only because of the inductive formal framework (‘having regard to’) that gives the assertion the appearance of intellectual credibility. There is, in other words, a dialogue only between order and organization. It is not a dialogue that embraces the disorder of social complexity. Of course, there is a very strong ideological element to all of this. Law must be seen to be certain and free of internal contradiction. Equally, say some, it must be free of social functional reasoning; law is about rights not social ends.97 These rights theories are perfectly proper, but if they become dominant in comparative law or indeed in legal education then comparing laws and learning the law become a matter of ideological imperialism rather than epistemological investigation. Perhaps ideology is too strong a notion and so one might replace it with what Morin has called the paradigm of simplicity. This is a paradigm ‘which puts order in 94

See Weir (1992) 1616. See Morin (2005). 96 Proposal for a Regulation on a common European sales law (2011/0284 (COD)), art. 5(1). 97 See generally, e.g. Robertson and Wu (2009). 95

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the universe and chases disorder out of it’.98 It is a matter of continual reduction, of uncovering the simplicity that lies hidden behind the apparent complexity and disorder of phenomena. That comparative law is plagued by this paradigm is evident in these European general theory of contract codification projects in which highly complex notions such as reasonableness, or difficult problem areas like mistake, are reduced to normative assertions that are so general as often to be meaningless when applied to facts. It is, as Tony Weir obliquely suggested, like trying to harmonize all the illnesses in Europe by reducing them to the single notion of disease. No doubt they are all diseases, but this is hardly a notion that is of any use when it comes to medical problem-solving. Thinking at much lower levels of categorization – at least as low as all the different ‘contracticles’ thrown up by European Directives but probably on occasions one should go to the even lower idea of ‘clusters’ – has the advantage of being more ideologically neutral and more transparent with regard to the reasoning methods and schemes of intelligibility in play. For example, if one really wishes to appreciate the English law approach to mistake problems where there is no misrepresentation one can do no better than study Lord Atkin’s judgment in Bell v. Lever Brothers.99 No abstract normative proposition could ever capture the detail of this Law Lord’s analogies. Lord Atkin operated at the level of paintings, garages and horses.100 These are cluster point things that cannot be captured in any general theory plan; their epistemological location is only in an index where they can co-exist both with other low level categories such as ‘financial service’ contracts and ‘dry cleaning’ transactions and with other cluster focal points such as ‘interest’, ‘debt’ and ‘functional reasoning’. The good index is where the details of contractual and ‘near to’ contract knowledge can be discovered. The comparative lawyer keen on identifying difference (and indeed similarity) should, accordingly, become a lover of the index. Professor Birks, as has been seen, argued that the alphabet is not an epistemological scheme of any value, but Tony Weir has asserted that he could tell a hawk from a handsaw without the need of any theory of aerial predators.101 Somewhere between the two lies the good index – a scheme that, as this chapter has hopefully demonstrated, does have an important epistemological dimension – and this is the location where the enquiring comparatist ought to take up her residence. 98 99 100 101

Morin (2005) 79. Bell v. Lever Brothers [1932] AC 161. Ibid. 224. Weir (1992) 1616.

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Both Tony Weir and Bernard Rudden helped direct comparatists towards this location.

REFERENCES Atiyah, P. (1979) The Rise and Fall of Freedom of Contract. Oxford: Oxford University Press Beauchard, J. (2009) ‘Préface’ in H. Ramparany-Ravololomiarana, Le raisonnable en droit des contrats. Paris: LJDG Berthelot, J.-M. (1990) L’intelligence du social. Paris: Presses Universitaires de France Birks, P. (1996) ‘Equity in the Modern Law: An Exercise in Taxonomy’, 26 University of Western Australia Law Review 1 Birks, P. (1997) ‘Definition and Division: A Meditation on Institutes 3.13’ in P. Birks (ed.), The Classification of Obligations. Oxford: Oxford University Press, 1 Bouchon-Meunier, B. and Nguyen, H.T. (1996) Les incertitudes dans les systèmes intelligents. Paris: Presses Universitaires de France Cabrillac, R. (2012) Droit européen comparé des contrats. Paris: LGDJ Davies, A.C.L. (2008) The Public Law of Government Contracts. Oxford: Oxford University Press Dubouchet, P. (1990) Sémiotique juridique: introduction à une science du droit. Paris: Presses Universitaires de France Hohfeld, W.N. (1919) Fundamental Legal Conceptions. New Haven, CT: Yale University Press Ionescu, O. (1978) La notion de droit subjectif dans le droit privé. Brussels: Bruylant Kasirer, N. (2003) ‘Pothier from A to Z’ in J. Pineau, B. Moore, Mélanges Jean Pineau. Montréal: Éditions Thémis, 387 Lawson, F.H. and Rudden, B. (2002) The Law of Property. Oxford: Oxford University Press, 3rd edn Masquelet, A.C. (2006) Le raisonnement médical. Paris: Presses Universitaires de France Mattei, U. (1997) ‘Three Patterns of Law: Taxonomy and Change in the World’s Legal Systems’, 45 American Journal of Comparative Law 5 McGregor, H. (1993) Contract Code Drawn Up on Behalf of the English Law Commission. Milan: Giuffrè Morin, E. (2005) Introduction à la pensée complexe. Paris: Éditions du Seuil Nicholas, B. (1995) ‘Fault and Breach of Contract’ in J. Beatson and D. Friedmann (eds), Good Faith and Fault in Contract Law. Oxford: Oxford University Press, 337 Ramparany-Ravololomiarana, H. (2009) Le raisonnable en droit des contrats. Paris: LJDG Rampelberg, R.M. (2005) Repères romains pour le droit européen des contrats. Paris: LGDJ Robertson, A. and Wu, T.H. (eds) (2009) The Goals of Private Law. Oxford: Hart Rudden, B. (1991–92) ‘Torticles’, 6/7 Tulane Civil Law Forum 105 Samuel, G. (2004) ‘English Private Law: Old and New Thinking in the Taxonomy Debate’, 24 Oxford Journal of Legal Studies 335 Samuel, G. (2011a) ‘Classification of Contracts: A View from a Common Lawyer’ in F.J.A. Santos, C. Baldus and H. Dedek (eds), Vertragstypen in Europa: Historische Entwicklung und europäische Perspektiven. Paris: Sellier, 117 Samuel, G. (2011b) ‘What is in an Index? A View from a European Orientated Lawyer’ in C. Barnard and O. Odudu (eds), 13 The Cambridge Yearbook of European Legal Studies 2010–2011. Oxford: Hart Publishing, 333 Samuel, G. (2015) ‘Is Legal Reasoning Like Medical Reasoning?’, 35 Legal Studies 323

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94 Comparative contract law Samuel, S. (2000) ‘Can Gaius Really be Compared to Darwin?’, 49 International and Comparative Law Quarterly 297 Samuel, S. (2009) ‘Can Legal Reasoning be Demystified?’, 29 Legal Studies 181 Schulze, R. and Zoll, F. (eds) (2013) The Law of Obligations in Europe: A New Wave of Codifications. Munich: Sellier Soler, L. (2000) Introduction à l’épistémologie. Paris: Ellipses Tuck, R. (1979) Natural Rights Theories: Their Origin and Development. Cambridge: Cambridge University Press Villey, M. (2006) La formation de la pensée juridique modern. Paris: Presses Universitaires de France, 4th edn Weir, T. (1992) ‘Contracts in Rome and England’, 66 Tulane Law Review 1615 Weir, T. (1998) ‘Non-Performance of a Contractual Obligation and its Consequences in English Law’ in L. Vacca (ed.), Il contratto inadempiuto: Realtà e tradizione del diritto contrattuale europeo. Turin: G. Giappichelli, 71 Weir, T. (2006) An Introduction to Tort Law. Oxford: Oxford University Press, 2nd edn Zakrzewski, R. (2005) Remedies Reclassified. Oxford: Oxford University Press

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5. Critical comparative contract law Giovanni Marini

I.

INTRODUCTION: THE AESTHETICS OF THE ‘SOCIAL’

The course of the twentieth century is characterized by the growing influence of social justice within private law. The liberal conceptions of the classical legal thought failed to portray the actual transformation from a set of formal notions regarding private autonomy and freedom of contract to the idea that, in different contexts, individuals were not so autonomous and free to contract.1 In particular, this transformation imposed a limitation to the freedom of contract and its binding force and introduced a series of duties to protect the weaker party and to avert unfairness. Similarly, social justice within the law of property meant the introduction of the social function idea and the consequent elaboration of a series of limits to the classical concept of liability, based on fault in tort law.2 This social approach spread in European and North American legal systems on the one side mainly through legislation (and more rarely the judge through general clauses), which took a primary role through the legal protection of specific categories of weaker parties (workers, consumers) and on the other, through courts, which began deploying doctrines to pursue the socialization of private law.3 After World War II, in Europe the process continued with the new generation of constitutional charters. Several constitutions drafted during these years were profoundly influenced by social justice ideas: the Italian Constitution, for example, contains the duties of solidarity (article 2), the conception of substantial equality (article 3) and the idea of the social function of property (article 42). Similar pronunciations may be found in the constitutions of Germany, Spain, Greece and Portugal. The socialization of private law is 1 For a further focus on the globalization of the ‘social’, see Kennedy (2006a) 37 ff. See also, Hesselink (2008) 16 ff. 2 On the social function of property idea, see M.R. Marella, The Core of Property (unpublished paper available from the author). 3 See Kennedy (2006a) 44–46.

95

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pursued deploying the constitutional tools: contract, property and tort law are studied through the social principles stated in the constitutions. Moreover, this process of socialization of private law has profoundly affected European legal systems recalibrating the private/public divide and enhancing a new idea of private law as another tool to redistribute power among the different categories of individuals.4 The social seems now to be part of that whole of common interests, beliefs and values which constitute the European legal tradition. By the appeal to the social European tradition, some scholars working on issues of European integration seem sometimes to constitute a new contract law under their influence that can be used against the influence of US dominated global contemporary legal consciousness. In contracts, for instance, a conception grounded on altruistic good faith is pitted against a more individualistic American conception of contract. A similar position, grounded on social justice, is sometimes taken against EU private law and its functional approach.5 The European legal tradition is called on to slow down the harmonization projects. At the same time, the social has undergone a striking process of transformation. Legislation and intervention by the judge (through general clauses) which were the key tools of the second globalization, for its capacity to bring back into discussion the boundaries between law and policy with reference to social realities and to the creativity of the judge, have been redeployed. Now they are not used to react against an exceedingly individualistic approach in the name of the public interest. On the contrary, their goal is to enhance autonomy. Private autonomy as self-determination becomes a value, which is at the core of consumer protection – a value to be balanced eventually with other competing values.

II.

THE CONSTRUCTION OF LEGAL TRADITION

In this short sketch there are many features, which deserve a closer analysis from a comparative perspective. The first is the renewed focus on tradition. Tracing back the roots is a work of representation and its process of construction and reconstruction gradually occupies a central place in comparative studies. An investigation into legal tradition may better be understood as a self-reflection and 4

Kennedy (2006b) 19 ff.; Caruso (1997). On this point, see Hesselink (2001) 37–49; Wilhelmsson (2004) 712 ff.; Lurger (2005); Collins (2006). 5

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critical interrogation of the various and conflicting political projects underlying comparative law. Together with style, the way law is produced over and over again by its institutional actors and represented to get its legitimacy, canons, etc., that is tradition, plays a central role in our studies. It is a sign of the undeniable aesthetic dimension of law. The second is the emergence of distributive analysis, the analysis of the institutional structure that governs the discipline of transactions and economic relations, on which the power and possibilities of the parties depend.6 Every change in that institutional structure and its background rules is able to affect the power of the parties and the power of groups and categories to which these parties belong. This is a feature particularly important with reference to the ambiguity of the advocacy of certain (social) values. They look at wholly different features: the former at the representative moments and the latter at the operational rules (background rules). But both reinstate politics at the center of the stage in private law and in comparative law and both are necessary for a serious critical analysis. If it is necessary to move out of the ideological mechanisms and produce a critique of the process of meaning production, at the same time it is also necessary to avoid the trap of reducing everything to a discourse or an epistemic question. If the critique and the dismantling of the previous order may often reveal the marginalization or suppression of other discourses inherent to the text itself, what is at stake is not only the repression of a discourse but also the consequences of this repression.7 Law is simultaneously a body of ideological representations of space and a collection of material practices, which maintain social order and govern space. In fact, space is also a bundle of relations and networks that make social action possible. To reconstruct a national or regional identity is to redistribute wealth and power. It is therefore important to ask who wins and who loses. The different opinions may be better understood in terms of ideological disputes over the acceptable limits of redistributive projects. 6

The focus of the analysis is not on general notions defining contract or property but on those specific background rules that assure their operation, those rules that create limits to the parties of a contract. Within these limits, the parties can take advantage of their own specific competence, their information and even other resources, such as a social position or strength. 7 The material consequences they produce are assured by the means of a complex bulk of devices, such as ‘dispositifs’, conceived as an involved network of relations, which link different strategies and techniques together.

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As to the latter, it is also important to remember that advocacy of social values is not self-explanatory: It is not per se progressive or egalitarian. Some ambiguities arise when we move from the market to the family or privacy sphere. In the latter, the social may be identified with duties of solidarity or relation of authority, and is often connected to a traditionalist agenda of upholding the dominant morality. In that sphere, a progressive project seems better deployed by tropes such as selfdetermination or autonomy which would be considered conservative in the law of the market. Every legal intervention is open to biases and blind spots. Legal reforms or legal changes require in fact a more complex analysis, with a frank assessment of distributive effects. It is noteworthy to underline the cross-subsidy effect in which redistribution occurs within the same section of society.8 It is very interesting to note how often representations, theoretical statements and argumentations provided to explain legal rules may reveal the same legal rules to be redundant and even contradictory. This trend opens the way for a sort of ‘false consciousness’ very close to the ideology, just in the same light underlined by Marx a couple of centuries ago. As to the former, it is important to remember the increasing importance of legal tradition as a renewed tool for analysis in the field of comparative law, something totally different from the usual units of analysis such as functions, operational rules and their justificatory arguments. Legal traditions are not only a challenge to the old taxonomies in the name of a more dynamic and flexible approach. Very often legal traditions are deployed or used strategically to advance various projects, such as to resist or slow down integration, to negotiate a strategy to minimize how much to give up in the encounter with other legal systems. In this perspective, legal traditions are not only another exercise in re-mapping the world but also a tool to challenge the taxonomic exercise in itself. To map the world you combine and re-combine pre-existing elements according to a theory of the basic units and structure you think relevant and the respective weight you assign to the different elements. As ‘critical legal geographers’, comparative lawyers are interested in the way their discipline draws lines of inclusion and exclusion. In this work it is important to identify cultural and legal elements which can be 8

These effects require an accurate inquiry in order to clarify their general impact. In fact, costs may be reallocated, as is the case in all relations between professionals and consumers. See Kennedy (1982).

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included, and are actually included, in a tradition, the way in which tradition works combining and re-combining their constitutive elements and foundational myths, the way in which it adapts and maintain its distinctiveness and makes strategic use of law in relationship with other cultures.9 In this project it is possible to understand comparative law as the analysis of plural ways of combining cultural and legal elements with rhetorical devices ground a memory. The genealogical method can provide the tools to challenge the coherence of the reconstruction. Genealogy makes it possible to situate historical events not along a unique model of development, but alongside different paths of possibilities and shows other roads which, at the moment of the choice, were not followed. In this sense, the resulting choice is only the result of a series of contingent events. Any totalizing or organic understanding of tradition fails to take into account the role that individual actors can play in generating meaning and, in particular, it fails to account for conflicting understandings and views within every tradition. Tradition as context, tradition as culture is not smooth, but it is the product of conflicts. The focus of comparative law is on the ‘dissemination of discursive practices’, which shapes the legal consciousness of the authors and marks the boundaries within which hegemonic and counter-hegemonic projects can take place. Legal consciousness is the complex system of distinct and multiple building blocks, such as a common conceptual vocabulary, a set of potential rule solutions, typical arguments pro and con, organizational schemes, modes of reasoning, which are actually considered typical in each given experience. To study legal consciousness means to identify the elements of the system and the balance between forces (explicit and implicit) operating in a specific legal field on which depends the way in which the elements combine in any given period.10 9

Recently, the study of borders and limits. It has been proposed that there should be a more complex topology and a more critical approach to borders. Instead of the border in which what is in and what is out is clearly defined, in which you are included or excluded, we can imagine an in-between, a threshold of indistinction between inside and outside, inclusion and exclusion, a field which is characterized not by opposition but by a tension between poles that requires you think in a different way, a space which is not seized, impossible to map. 10 The medium is constraining but also plastic, its flexibility depending on the elements (signatures) which mark it and refer it to a specific interpretation and context.

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The assumption that not only the objects of the analysis but also the subjects are socially and culturally constituted is crucial. Thus the subjective side of knowledge moves to center stage in the comparative analysis and comparative law has to face the constraint of forms of knowledge production and their engagement with governance. By treating consciousness as a historical product, the analysis shifts attention to the constitution of the structure in historically specific situations and the way it contributes to the asymmetries in the abilities of individuals and social groups to define and realize their projects. The reference to ‘historical forms of consciousness or subjectivity’ emphasizes that subjects can work only within specific contexts which provide the language they can speak when they have to face a specific legal issue. The more relevant questions for comparative law become to understand the way in which the consciousness is shaped, who shapes it and what the purpose of the whole enterprise might be.

III.

FROM CLASSIC TO CONTEMPORARY COMPARATIVE LAW

This marks a strong difference between classic and contemporary comparative enterprise. Comparative studies turn to the humanities, the sciences which study the complex relationships between individuals and knowledge, individuals and culture. The encounter with various strands of critical theory had a very important impact on comparative law and its critique of the processes of meaning production. Combining the structural approach with the identity turn and then with the post-structuralist and the post-colonial turns, comparative law provides the basis for a critique of hidden assumptions, normative inconsistencies, fallacies and interests associated with particular imaginations and categories and a critique of the latent that limit, through a variable mix of consent, coercion and other technologies of domination the capacity to advance a project of emancipation. In comparative law, functionalism, due to its anti-formalist approach, emphasized the connections between law and social context. This perspective focused on the function of the legal instruments in order to address issues and problems in the society. The goal was to measure the distances between different legal systems, using the function as a tertium comparationis. Through this functional comparison, societies (or at least most of them) appeared to be facing the same issues, their solutions differed only because the tools employed to solve them are affected by the specific legal culture that influences the lawyers of each legal system.

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The variety of the different legal cultures influences the legal tools employed only and it doesn’t spread to the results. Such aspect allows this type of comparison to develop a critical approach towards those legal cultures, as for example the Italian, still affected by formalism. Functionalists rely on historical dimension and variability of legal institutions that can nevertheless be used to perform the same function in different legal systems as tools to weaken the reification of legal concepts.11 On the other hand, this method pushes them to identify which solution addresses better a specific legal issue. So, they determined (by using the comparative argument as an interpretative tool or as a possible de iure condendo answer) that some solutions are better than others and can be seen as models to imitate. Specific differences, related to irrational elements or historical accidents within a particular legal system, were easily dismissed. The faith in the function replaced the faith in the essence. Functionalism, in its pretension to universal science, faces two mortal enemies: first, the critique regarding its dismissal of every other (cultural) element, different from the function and secondly, the critical approach towards its adoption, through the functional paradigm, of determined cultural perspectives, deeply connected to specific legal systems and far from universal applications. The functionalist approach was, most of all, an attempt to grasp the interrelations between law and society. Essentially, functionalism was a response to conceptualism and the split between legal reasoning and social context. It sought to understand policy-oriented decisions that stand behind positive legal rules: how legal systems employ different tools to realize their specific policy. In this vision, law becomes both an instrument to drive the evolution of society and a key factor of change within society, reducing in this way the juxtaposition between application and creation of the law. Functionalism, as a theory of the relationship between law and society, had to struggle not just against the so called ‘dark sides’ of the regulation, but also with a task growing more and more difficult: matching the events produced within a particular society (social and economic phenomena) and a determined legal form. The solution identified by the functionalist approach, the functional analogue, turned out to be a double-edged sword.12 In fact, the intellectual efforts needed to detect these functional analogues and their uncontrolled proliferation 11

An emblematic text is Zweigert and Kötz (1998). In this sense, functionalism can be considered as subversive and so is the comparative law inspired by this method. Cf. Muir Watt (2000). 12

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weakened the functionalist theory, preventing its generalization. For these reasons, functionalists decided to focus on restricted and more generic goals, in which legal rules were employed as means to ensure predictability and stability of legal relations, a set of minimum conditions in order to preserve economic exchanges. Obviously, these struggles undermined further the method. By the end of the 1970s, an alternative approach gained importance within comparative legal studies. This method focused on the constitutive role of law, highlighting its capacity to provide visions of the world that are used to frame social relations and determine their concrete terms and on the resulting complexity in keeping law apart from culture and society. Unfortunately, the study has always remained on a high level of abstraction.13 Under these circumstances, it has been quite easy for the structural approach to strike down the functional method and so chop off the link between law and society.

IV.

THE LEGACY OF HETERODOXY

The success of Schlesinger’s factual approach during the 1960s offered an alternative way to overcome conceptualizations, beyond the strict boundaries of functionalism. In the course of the well-known Cornell seminars, the comparative endeavor focuses on how legal systems usually solve a particular legal issue: starting from a typical problem originated from a hypothetical case, focusing on the factual elements that characterize each solution, avoiding any type of national conceptual category. The rehash of the Cornell method by the structural approach allows significant progress in comparative legal studies, highlighting how, within every legal system, there is not always just one legal solution, on the contrary, there are various possibilities, as many as the formulations. Every single legal system is formed by a multiplicity of legal formulations that develop independently and whose interaction allows us to confer a meaning to legal rules. Due to several factors, such as the circulation of models from different legal systems, these formulations 13

The critique of functionalism moves from the critique of the generalization represented by the adoption of the function, the presumptio similitudinis to the use of ‘functional analogues’, a particular problem or issue within a given society cannot be the same in another (among the others, Frankenberg (1985); Husa (2003); Michaels (2007); Graziadei (2003) 100. The critique of functionalism is connected to the critique of scientism in Somma (2005) 3.

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may not only contradict each other (fundamental dissociation), as happens when the positive legal rule is different from the one established by the courts or elaborated by legal scholars. The contradiction can also be found within a single legal formulation (internal dissociation).14 Every formulation may elaborate both an operative rule (a set of factual elements that are necessary to provide a certain legal effect) and a declamatory rule that is meant to describe the rule itself and to affect the way these rules are perceived and evaluated. For these reasons, there is a plurality of possible solutions and also a plurality of possible justifications. So, the justifications, as we will see, can be related to the solutions in different ways: they can be completely overlapped, they can be superfluous or even contradictory. In the structural approach, the context is interpreted as structure and not as social background. The components of a legal system can be evaluated only in relation to each other.15 Structuralism allows legal comparison to become, at the same time, a theory of interpretation aimed at criticizing the conception of law as a merely linguistic construction, and a legal process theory aimed at analyzing the (dynamic) relationships between the different components within a particular legal system that operate in the production and the enforcement of law. For these reasons, two major changes were introduced within comparative legal studies. First, legal comparison didn’t dismiss but rather recognized and embraced blanks, ambiguities and conflicts inside the legal rule. According to the structural linguistics, legal structuralists emphasize the spread between significance and significant: the interpretation of the legal rule is arbitrary and depends on the complex composition and re-composition of legal formulations within each legal system. The structural approach could be considered as an anti-formalistic method. So, structuralism, as any other anti-formalism, could be involved in a scientific endeavor (reconstructive) or in a critical analysis (deconstructive). Within structuralism, it was possible to find both the tools to unpack the idea of completeness of the legal dogmatism, highlighting the multiplicity of different solutions and the conflict among them, and the instruments to affect this completeness. 14

The reference point is always represented by the coercive institution through market law and the rules that govern the relations among individuals; cf. Barcellona (2000); Marini (2008). 15 They both share the need to go beyond the concepts to focus instead on the substantial problem (cf. Zweigert and Kötz (1998)), or on solutions: a set of factual elements that determine a single legal effect (cf. Schlesinger (1968)).

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On one side, the different solutions provided by the legal formulations and their contradictions could enhance those alternative reconstructions that were eclipsed by the dominant ones. The former assumed the role of dangerous supplement, highlighting an aporia that showed how these dominant reconstructions were substantially partial and how they betrayed their coherence conditions. These premises made it possible to situate historical events not along a unique model of development, but alongside different paths of possibilities. In this sense, the chosen path wasn’t mandatory, only the result of a series of contingent events. This theory, applied to national legal systems and besides any deconstructive implications, is basely a critique of the internal coherence of single legal models and rules, very similar to the critical positions of American legal realism. On the other side, the analysis of the internal dynamics of law could have allowed us to predict the outcome of a possible conflict among the formulations. In fact, if it is possible to analyze the institutional conditions that characterize their competition, the factors that influence such competition, the official (theories) and unofficial (cryptotypes) facts, the implicit (cryptotypes again) and explicit connections – not necessarily determined by human actors – that can affect decisions, then this method can reduce or even reset the indefiniteness. At the same time, this approach cut the last ties that connected law to society. Through the observation of the different legal systems, Sacco showed how societies characterized by deeply different socio-economical structures have adopted the same legal rules, while on the contrary, societies which share the same socio-economic structure have chosen quite different legal rules.

V.

IDEOLOGY AND LEGAL ARGUMENTS

The study of the internal dynamics of law had unveiled another quite important aspect. We are talking about the need to explore not only the results provided by the different legal systems, but also the way in which (within a single framework delimited by the tools and the restrictions provided by the legal tradition) the outcome is produced, described and justified. If it is quite normal for interpreters to give motivations in order to legitimize their choices, it is very interesting to note how often representations, theoretical statements and argumentations provided to explain legal rules may be revealed to be redundant and even contradictory vis-à-vis the same legal rules. Interpreters are well aware of these

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aspects. These justifications influence the way in which rules are embraced and evaluated within every legal system. So, they can provide a ‘false consciousness’ of what the system actually produces. At the same time, justifications, as well as the whole system of representations provided by the interpretative practices, have an extremely important goal of social communication and social stability. The ideological aspect that affects these justifications and representations is now quite clear, understood as a ‘false consciousness’ of the reality. This phenomenon can be found typically in openly politicized legal systems, such as was once the Soviet one, but it is also quite normal in any other system, starting from those systems which, like the French legal system, were historically influenced by jus naturalism. It is no surprise that the Code was the ground where the synecdoche was tested, this figure of speech, in which a part is used to refer to the whole, allows and makes easier the separation between operational rule and declamation. The synecdoche makes room for ideology. This ideological component works on different levels. First, it operates at a more general level, where ideology involves interpretation and in which the whole interpretative process is considered purely technical. This legal reasoning can be exclusively deductive or policy-oriented, taking into account the social interests (often conflicting) protected by the legal rules. According to this representation, the interpreter denies his creativity, legitimizing the product of his work as neutral. At the same time, within the comparative legal studies, an ‘apologetic’ component appears: representations are useless to the elaboration of a solution, but they can be very helpful to provide and develop ‘visions of the world’, discourses and narratives that can be imitated and duplicated over and over again. Different representations are functional to elaborate projects for intellectual élites. For example, representations, which depict, through comparison, different legal models as prestigious can help realize projects in favor or against the particular legal system that originated the same model, inspiring or activating resistance and opposition. We are very close to the idea of using cultural products as tools to eliminate or to substitute a hegemony. Comparative law meets the disciplines which study the relationship between individuals and knowledge and individuals and cultures. It is at this juncture that comparative law goes beyond the identification of legal formulations and their deconstruction and turns to narratives and discourses. This aspect is strictly connected to the idea of belief systems: those collectively delimitated structures of thinking which, implicitly or explicitly, direct the way interpreters think. These intellectual paradigms

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of historical and contingent nature restrict the field where interpreters’ conditions of possibilities can work and determine the achievable outcomes. It is interesting to note that the ideological and apologetic component, underlined by the separation between the process of rule selection and its justifications, is quite common. In fact, the study of several specific discourses, that are used to explain and justify the adoption of particular legal rules of private law, can highlight the recurring division between theoretical declamations, rules presented and the outcomes obtained in different contexts.

VI.

CONTRACTUAL JUSTICE AS A LEGAL DISCOURSE: SOME EXAMPLES AND THEIR DISTRIBUTIONAL IMPACT

This is the case, for example, of those discourses that are connected to the application of several rules of contractual justice. This legal field perhaps represents the example of greater separation between theoretical justifications – historically inspired by deeply committed declamations in favor of the highest reconstructive principles distinctive of the various ages in which they established themselves – and operational rules that produced specific distributive outcomes. Within the contractual justice field, while justifications swung from the will theory, the ‘social’ and finally solidarity, operational rules often produced outcomes particularly difficult to match with these statements of principles. We only need mention how the classical legal thought grounded contractual remedies firmly on the will theory. Within this limited framework, however, it was possible to pursue projects of different types not always in line with their purported justifications. Thus by recognizing the actionability of the remedy only on behalf of the seller of land, French courts only ended up by protecting the landowner against speculation by bourgeois merchants. With respect to the ‘social’, the rules enacted by the German Civil Code in 1900 were seen as a necessary concession to the protection of the ‘weak parties’ (2 Bürgerliches Gesetzbuch (BGB), section 138). Their practical operation produced results often at odds with the spirit of innovation. By a narrow interpretation of the requirements (necessity, inexperience and carelessness) and preventing the judge from reshaping

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the contract, they depleted the remedy of any utility for the weak parties, who had to bargain again on the market for the performance. Today, regarding solidarity, which is at the core of many of the contractual justice discourses, particularly in EU law, it is necessary to perform the same kind of careful analysis to double check its operation in different contexts and settings with respect to its distributive impact. The forward expansion of the unconscionability clause to cover any kind of ‘excessive and unjustified advantage’ (UNIDROIT Principles, article 3.10) and ‘unjust profit or iniquitous advantage’ (Principles of European Contract Law (PECL), article 4:109), levelling the way towards an ‘adaptation’ of the contract by the judge, goes well beyond any remedy anticipated by national legislation. Nevertheless it is very possible that the remedy will work only to restore the functionality of the market, in particular the conservation of the contract with reference to the equilibrium that would have been reached in a comparable but ‘perfectly’ competitive market.16 This approach opens the way to another quite interesting development in the study of the effects of legal rules. This field of research is not entirely new, it is quite familiar to comparative legal studies that are usually connected to economic analysis in general and law and economics in particular. The idea of operational rules as a set of relevant elements necessary to produce a result allows not only a better approach for scholars interested to understand similarities and dissimilarities between the different legal systems, but also a series of other intriguing results. Beyond declamations and conceptual structures of each legal system, operational rules enhanced a more accurate analysis of how rules work within different societies, in particular they could unveil the effect (incentives) of these rules on the behavior of the components of given society. This formulation has also been used to test the efficiency of the rules with respect to allocating resources or reducing costs17 and consequently to evaluate which rule should be used within a project of harmonization of the law or which rule was the fittest in order to circulate it among the legal systems.18 The employment of the consideration and its functional analogues (causa) to select which promises and contracts should be considered 16 Consumer relationships deserve a close analysis in themselves for their many different cross-subsidy effects. 17 See Cooter (1991); Mattei (1994). 18 See the application of Calabresi’s Chart (Calabresi and Melamed (1972)) to the inter-proprietary conflicts in Mattei (1987).

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legally binding highlighted how decisions taken by the different legal systems in those circumstances are policy-oriented. Deciding that only those promises or bargains supported by a sufficient consideration or other relevant (in terms of efficiency) elements represents a huge step forward to prove that these outcomes could be considered really efficient. The result of the operational rules can also be compared to the declamations. Here, the patterns of the economic analysis allowed a critical control of the possible separation between declamations and the rules made by the courts, exposing the cleavage between the substantial level of the operational rules (remedies) and the formal level of the conceptualizations of a particular system.19

VII.

FINAL REMARKS: THE FOCUS ON BACKGROUND RULES

In any case, even with the more critical approaches, law and economics does not take into account any consequences different from the efficient allocation of resources. The idea was that the only possible goal – shared also by classical economic analysis – should have been to ensure to the entire society the ‘bigger cake’ (without any discussion about the way in which this cake should be divided). This aim was considered the only one legitimately pursuable using private law rules. The new stream restates the importance of distributive consequences that follow the operational rules. This approach does not lead to any Marxist analysis,20 in the sense that it does not take into consideration the fate of the capitalist system, but it focuses only on ‘local’ conflict with small interests at stake. So, it is necessary to rethink the role of operational rules: if once they were used only to evaluate the more efficient allocation, now they have become a way to understand how resources and power were distributed. The recent discussion regarding the projects of harmonization of contract law focused on the fact that an adoption or the modification of a particular legal rule – also through the simple consolidation of a judicial orientation – can change the outcomes of the conflict between the 19 The disagreement persists only regarding the criterion with which this aim must be pursued; this criterion allows us to state that the method is substantially neutral, but see Baker (1975) and Kennedy (1981). 20 In this sense, no rule is precise and strong enough to frame an entire system inside a particular logic.

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different parts, but also among the categories and the groups to which the parts belong (the related distribution of the resources). The debate does not involve configurations or general notions regarding contract, property or anything else, but it focuses on those background particular rules that assure their operation, those rules that create limits for the parties of a contract. Within these limits, the parties can take advantage of their own specific competence, of the information they can collect and even of other resources, such as social position or strength. Every change (even small) in the institutional structure that governs the discipline of transactions and economic relations is able to produce re-distributive effects relevant to the power of the parties and the distribution of resources.21 There is no field within private law that can be considered not affected by these effects. These rules create the substantial framework where the social and economic relations among the different groups operate. Such rules are normally considered neutral or at least scarcely relevant, but they decide the position of strength of each individual and also how much they can obtain through the relations of cooperation and competition between one another. This perspective also allows consideration of whether the presence of the same rule, or its possible modification, may alter the relationships of strength between groups and how much the individuals belonging to those groups may obtain when they enter into conflictual or cooperative rapport with the others.

REFERENCES Baker, E. (1975) ‘The Ideology of the Economic Analysis of Law’, 3 J Phil. and Pub. Aff. 3 Barcellona M. (2000) ‘La scienza giuridica italiana ed il marxismo, prima e dopo “l’uso alternativo” del diritto’, Riv. crit. dir. priv. 715 Calabresi, G. and Melamed, A. (1972) ‘Property Rules, Liability Rules, Inalienability Rules: One View of the Cathedral’, 85 Harvard L Rev. 1089 Caruso, D. (1997) ‘The Missing View of the Cathedral: The Private Law Paradigm of European Legal Integration’ 3 ELJ 3–32 Collins, H. (2006) ‘The Alchemy of Deriving General Principles of Contract Law from European Legislation: In Search of the Philosopher’s Stone’, 2 ERCL 213–26 Cooter, R. (1991) ‘Le migliori regole giuste’, Quadr. 526 21 These effects demand an accurate inquiry in order to clarify their general impact. In fact, as in all the re-distributive phenomena, sometimes costs can be re-allocated, as happens with the relations between professionals and consumers. See Kennedy (1982).

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110 Comparative contract law Frankenberg, G. (1985) ‘Critical Comparisons’, Harvard Int’l LJ. 411–45 Graziadei, M. (2003) ‘The Functional Heritage’ in P. Legrand and R. Munday (eds), Comparative Legal Studies: Traditions and Transitions. Cambridge: Cambridge University Press Hesselink, M. (2001) The New European Legal Culture. Deventer: Kluwer Hesselink, M. (2008) CFR and Social Justice: A Short Study for the European Parliament on the Values Underlying the Draft Common Frame of Reference for European Private Law: What Roles for Fairness and Social Justice?, Centre for the Study of European Contract Law Working Paper Series No. 2008/04 Husa J. (2003) ‘Farewell to Functionalism or Methodological Tolerance’, Rabels Zeitsschrift für auslandisches und internationals Privatrecht, 419 Kennedy, D. (1981) ‘Cost-Benefit Analysis of Entitlement Problems: A Critique’, 33 Stan. L Rev. 387 Kennedy, D. (1982) ‘Distributive and Paternalist Motives in Contract and Tort Law, with Special Reference to Compulsory Terms and Unequal Bargaining Power’, 41 Maryland Law Review 563–658 Kennedy, D. (2006a) ‘Three Globalizations of Law and Legal Thought’ in D. Trubek and A. Santos (eds), The New Law and Economic Development: A Critical Appraisal. Cambridge: Cambridge University Press Kennedy, D. (2006b) ‘Thoughts on Coherence, Social Values and National Tradition in Private Law’ in M. Hesselink (ed.), The Politics of a European Civil Code. The Hague: Kluwer Lurger, B. (2005) ‘The Future of Contract Law between Freedom of Contract, Social Justice and Market Rationality’, 1 ERCL 442–68 Marini, G. (2008) ‘Gli anni settanta della responsabilità civile. Uno studio sulla relazione pubblico/privato (parte II)’, Riv. crit. dir. priv. 229 Mattei, U. (1987) Tutela inibitoria e tutela risarcitoria. Milan: Giuffrè Mattei, U. (1994) ‘Efficiency in Legal Transplants: An Essay in Comparative Law and Economics’, 14 Int’l Rev. Law and Economy 3 Michaels R. (2007) ‘The Functional Method of Comparative Law’ in M. Reimann and R. Zimmermann (eds), The Oxford Handbook of Comparative Law. Oxford: Oxford University Press Muir Watt, H. (2000) ‘La fonction subversive du droit comparé’, Rev. int. dr. comp. 503 Schlesinger, R.B. (1968) Formation of Contracts: A Study on the Common Core of Legal Systems. New York: Oceana Publications Somma, A. (2005) Tecniche e valori nella ricerca comparatistica. Turin: Giappichelli Wilhelmsson, T. (2004) ‘Varieties of Welfarism in European Contract Law’, 10 ELJ 712 Zweigert, K. and Kötz, H. (1998) Introduction to Comparative Law. Oxford: Clarendon Press

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6. Contract law and regulation Giuseppe Bellantuono

I.

INTRODUCTION: MAPPING THE RELATIONSHIP BETWEEN CONTRACT LAW AND REGULATION

Suppose you want to know which rules apply to the contractual relationship between the operator of a communications or energy network and the users of that network. Or suppose you want to know the remedies available to an investor who has been damaged by an investment service provider. It is common knowledge that general contract law does not provide complete answers to such questions. Sector-specific rules must be consulted. What is less well known is that issues at the interface between general contract law and sector-specific regulation pop up with increasing frequency in a disparate set of fields and across developed and developing countries. This chapter sets out to explore the relationship between what will be called ‘traditional’ contract law and ‘regulatory contract law’. This is not a well-established topic in the comparative law literature. Therefore, what follows is just a mapping exercise that hopefully will help broader and more systematic inquiries. Before explaining why this exercise is needed, it is useful to point out three methodological challenges that must be faced when dealing with the relationship between contract law and regulation from a comparative perspective. First, both notions are highly variable across space, time and disciplines. This means that the definition of the research agenda risks starting from arbitrary assumptions about the kind of issues that should be taken into account by each branch, in a specific period and with specific analytic tools. Secondly, the relationship evolves along paths that are largely influenced by broader dynamics (e.g., the regional economic integration leading to the Single Market in the EU or the building of a regulatory state with distinctive features in developing countries). Therefore, it is quite difficult to disentangle the changes brought about by these dynamics from the influence they exert on contract law and regulation. Thirdly, the relationship may remain more or less hidden, with each branch living in its own separate sphere until it collides, overlaps or interferes with the other one. This means that in some legal systems no 111

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systematic assessment of the relationship is provided or discussion only takes place in some sectors. Despite these challenges, this chapter argues that more sustained attention to the relationship between contract law and regulation provides insights that risk being overlooked by an exclusive focus on one branch. Today, a not insignificant share of contractual relationships take place in markets that have been restructured or liberalized. In those same markets independent authorities were granted the power to produce contract rules and use a vast array of enforcement mechanisms. Moreover, in global markets contracts are used for many different purposes, including regulating transnational supply chains, regulating risks or providing the building blocks for private orderings. What seems increasingly clear is that the search for new governance tools in global markets and in multi-level regulatory systems has led to the belief that contracts are more or less interchangeable with other regulatory tools. More often than not, each tool competes with, clashes with, supplants or complements the other ones. While not pretending to explore all the facets of such an interplay, this chapter tries to shed light on the parallel dynamics of contract rules devised for traditional bilateral relationships and contract rules applied in regulated markets. Section II discusses attempts to classify the relationship between contract law and regulation. It suggests that the core issue is how to identify a set of rules that can be labelled regulatory contract law. Section III turns its attention to rule-making processes and tries to identify the main features of regulatory contract law in the European Union and the United States. Section IV deals with enforcement mechanisms and compares them across the two branches. Section V draws on examples from Brazil and China to understand what is the role played by regulatory contract law outside the Western legal tradition. Section VI identifies the most important policy choices to be made when using regulatory contract law. Section VII summarizes the analysis.

II.

TYPOLOGIES

Because of the multiplicity of meanings that can be attached to the notions of contract and regulation, it is useful to distinguish the different streams of the debate. This section tries to identify connections among related but distinct research areas and to clarify the relationship with non-legal disciplines.

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Let us start with a typology proposed by the literature on contract governance (Möslein and Riesenhuber 2009: 260 ff.; Grundmann et al. 2015: 42). Four different topics are singled out: (1) (2) (3) (4)

the institutional framework of contract rule-making (who produces contract law and how); governance of contractual relationships (the facilitative or enabling function of contract law); contract law as an instrument for achieving regulatory goals; collective self-regulation through contract.

The first two topics reflect the usual concerns of contract law literature about the bilateral relationship. The last two topics are the focus of this chapter, from the point of view of public and private regulation, respectively. Some preliminary observations about this functional typology are in order. First, it explicitly includes contract law among several other regulatory instruments. This approach plays both a descriptive and a justificatory role. But it runs the risk of overlooking the distinctive features of contract law. The latter include processes of rule-making, availability of enforcement mechanisms and interplay between private and public goals. Whether contract law can be employed for regulatory purposes is directly dependent on those features. Most importantly, local, national or regional institutional contexts shape those features and render them more or less amenable to adaptation for different purposes. This means that the assumption of an unbounded malleability of contract law might be wrong in most settings. Hence, contract law cannot be equated with other regulatory tools. Of course, none of the above mentioned observations prevents a comparison between contract law and other regulatory tools. Secondly, the typology conveys the impression that the first two and the last two topics listed above can be analysed separately. Indeed, the most troublesome issue is their interdependence. The contexts in which contract law and regulation interact show that rule-making can be directed both at the bilateral relationship and at the wider market environment, contract rules can be at the same time enabling and regulative, and private goals are intertwined with public ones. What we need is a theoretical framework that helps assess the wide implications of such coexistence.1 1 Micklitz (2015a: 132 ff.) suggests to merge the four categories into two (the first two concerning the structural level or governance and the second two

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Thirdly, the typology suggests an answer to the question whether there is something really new in the relationship between contract law and regulation. In a long-term perspective, one might observe that contract law has been ‘instrumentalized’ many times to pursue public goals (Jansen and Michaels 2008). However, signs of a real transformation can be detected in the multiplicity of the processes that lead to the production of contract rules besides the traditional legislative and judicial ones, as well as in the availability of new enforcement mechanisms. Additionally, the geographical reach of the contractual relationships to be managed today is much wider than in the past. Contract rules play a regulatory role both in multi-level regional systems and in global supply chains. What these developments show is that more general transformations about the role of the nation-state and the changing nature of global markets lead to a completely different set of contract rules, or to a parallel branch of contract law. Therefore, elements of change are both quantitative (the number of contexts in which contract rules play a regulatory role) and qualitative (how such a role is played). Fourthly, different disciplines may conceive of the relationship between contract law and regulation in different ways. To the extent each of them talks about different research problems, semantic assonances do not cause any misunderstandings. For example, the economic literature which focuses on infrastructure or concession contracts (Guasch et al. 2008; Stern 2012) or on the relationship between the regulators and the regulatees (Spiller 2013) employs a contractual language, but deals with issues related to the private-public interaction from a perspective that is clearly distinct from the one discussed here. Conversely, the need for interdisciplinary integration arises when there is overlap between the issues dealt with from different disciplinary perspectives (Repko 2012). For example, to the extent law and economics suggests a specific view of the relationship between contract law and regulation, its methodological premises must be compared with different perspectives and a synthesis should be sought. These preliminary observations help articulate a set of questions that will guide the discussion in the following sections: (a)

Do contract law and regulation live in separate spheres or do they interact? And what types of interactions can be observed? Which institutional factors shape the type of interaction? Is there any

the interplay of regulation and autonomy) and to add a procedural level that connects the structural and content levels.

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(b) (c)

observable difference between legal traditions or countries in different stages of economic development? How does the interaction work when public (statutory, judicial or regulatory) or private contract rules are involved? Can relevant differences be detected between contract law remedies and regulatory remedies?

Questions (a) and (b) have to do with rule-making processes and will be discussed in section III. Question (c) has to do with enforcement mechanisms and will be discussed in section IV.

III.

REGULATORY CONTRACT LAW IN THE MAKING: THE WESTERN LEGAL TRADITION

This section tries to establish to what extent the EU and the US legal systems accept and use some version of regulatory contract law. Here the focus is on differences between the processes aimed at producing the rules that make up traditional contracts and those aimed at producing regulatory contract law. To some extent, such processes overlap. Legislators, judges and private regulators are involved in the development of both types of contract rules. However, public regulators are only involved in the production of regulatory contract law. Even though the two types of rules cannot be distinguished from the point of view of the rule-maker, several distinctive features can be singled out: (1)

(2) (3) (4)

(5)

Timing: traditional contract law was developed over the centuries through doctrinal and judicial work; regulatory contract law is developed in a much shorter time span by private and public regulators. Stability: traditional contract law changes slowly; regulatory contract law changes quickly. Generality: traditional contract law includes rules with a higher degree of generality than those making up regulatory contract law. Public-private distinction: in traditional contract law public (legislative and judicial) processes of rule-making are clearly divided from private processes; in regulatory contract law private and public processes of rule-making are usually blended together. Systemic coherence: in traditional contract law coherence (with past decisions or other parts of the legal system) is a strong constraint; in regulatory contract law coherence plays a lesser role (although

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(6)

there are other types of constraints, for example, those imposed by judicial review). Democratic legitimacy and justice: in traditional contract law legitimacy and justice are taken for granted, but at the same time they are heavily constrained by the focus on the bilateral relationship; in regulatory contract law legitimacy and justice are widely disputed, but may find more channels to influence the contractual relationships.

This list proposes stark dichotomies, but they are much less clear-cut in practice. Moreover, the same contract rule could play a traditional and a regulatory role. Keeping these caveats in mind, the features described above highlight the close connection between contract rules and the rule-making processes available in a specific regulatory state. Moreover, those features alert to the fact that traditional contract law and regulatory contract law may well lead to different outcomes. At first sight, the EU market-building process shows a clearer connection with the evolution of EU contract rules. But we shall see that the relationship between the American and European versions of the regulatory state, on one hand, and contract law on the other hand does not lend itself to easy interpretations. The regulatory role of EU contract law has been the object of a lively debate. Collins (1999, 2004, 2008) argued, first with reference to English law and then to the future of EU law, that contract rules could play a much broader regulatory role in the three areas of rule-making, monitoring and enforcement. This position explicitly endorses the view that contract law and regulation belong to the same conceptual box of regulatory tools. Moreover, it claims that traditional contract law can incorporate public interests or values going beyond the private interests of the parties. For the purposes of this chapter, Collins’ most important contribution is the catalogue of strengths and weaknesses displayed by contract rules when employed for regulatory purposes. Whereas their reflective character allows adaptation to parties’ needs, overlooking of third parties’ externalities, insufficient particularity and lack of expertise by legislators or adjudicators may reduce their regulatory capacity. However, the bulk of the discussion is not addressed at the interplay with other bodies of regulation, but at the internal transformation of contract law. Collins delineates the contours of a new vision of instrumental contract law, but does not take a position on its relationship with other bodies of regulatory law.

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The interplay becomes the central issue in the approach to regulatory private law proposed by Micklitz (2005, 2009) and his co-authors (Micklitz and Svetiev 2012; Micklitz et al. 2014; also see Cafaggi and Muir Watt 2010). Regulatory private law is the product of the peculiar features of the EU rule-making process. The latter manufactures a new type of contract law that differs under several respects from traditional (national) contract law. How the pre-contractual stage is defined, the balance between default and mandatory rules, the type of available remedies, as well as the notions of private autonomy and justice fed into the new paradigm bear little resemblance to the branch of private law that was systematized in the European codifications and in English common law. Regulatory private law is tightly linked to the Single Market project and finds itself in an uneasy relationship with national contract laws. This analysis leaves open the possibility that the European and the national legal orders clash, converge or merge. The development of a new regulatory contract law is grounded on the choices made by the EU in a large number of sectors, ranging from financial markets to utilities. However, a different debate is also taking place within the EU, this time with reference to the replacement of national contract law with a new EU code. The legislative process on the regulation for a Common European Sales Law (CESL) is the most advanced project in this field. But its withdrawal in 2015 signals that Member States are only willing to transfer to the EU level more limited competences in the field of contract law. The two projects (regulatory contract law and CESL) are difficult, if not impossible, to reconcile. Whereas the former addresses real problems of a multi-level regulatory system in a host of sectors, the latter relies on arguments about the benefits of harmonization of a dubious quality. This is not the place to discuss the codification projects in any detail. For present purposes, the most important aspect is that the EU regulatory approach to private law has already transformed the European debate. The ‘excessive instrumentalization’ of contract law prompted by EU policies can be criticized (Schmid 2010), but the criticisms are not addressed to the instrumental approach per se. They suggest that the goals to be pursued should be different. For example, the Manifesto for Social Justice in European contract law claims that a balance must be struck between the Single Market agenda and the demands for distributive justice in economic relations (Brüggemeier et al. 2004). This claim implicitly accepts that contract law can and should pursue wider goals than those closely associated with the parties. Much the same point can be made about the role of fundamental rights in private law (Brüggemeier et al. 2010; Collins 2011) or about the principles to be applied to

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contracts playing a crucial role for self-realization and human development (Nogler and Reifner 2014).2 Looking at legislative interventions only provides a partial view of the changes taking place in EU contract law. Much of the transformative potential of the new paradigm resides in the daily activities of public and private regulators at European and national level. Although their rulemaking powers vary a lot from one sector to the other, in most cases they significantly impact on contractual relationships. This new source of contract law raises several issues. First, are regulators using the same concepts of traditional contract law? Or are they transforming and adapting them? Secondly, what is the relationship between contract rules produced by regulators and traditional contract law? We still lack final answers to these questions, but we can at least discern some emerging patterns. One of them has to do with the features displayed by the contract rules written by regulators. Another one relates to the interaction with more traditional sources of contract rule-making. With regard to the features of the rules produced by public and private regulators, an analogy with the process leading to the adoption of technical standards has been proposed (Micklitz 2009). The content of the new contract rules is decided within administrative procedures aiming at a wide participation from different categories of interest groups. In several cases, EU processes leave room for self- or co-regulatory processes (Cafaggi 2011). This means that regulatory contract rules can be qualified as soft or binding, but the distinction is much less relevant than the default-mandatory rules dichotomy in traditional contract law. What matters is the availability of mechanisms that, on one hand, allow the reaching of acceptable compromises and on the other hand, avoid abusive or anti-competitive behaviour. Plenty of examples can be found in the fields of network or market access in the electronic communications, energy, transport and financial sectors. At the same time, legal concepts are borrowed from traditional contract law, but they are embedded in a different context that changes their meaning. Hence, precontractual information rights can be used to increase the switching rate from incumbents to new entrants, contract formation rules can be used to avoid discriminatory behaviour in network access and rules about the quality of the performance can be used to increase the reliability of the infrastructures. Generally speaking, in most cases regulatory contract 2 It is possible to argue that the horizontal direct effect of fundamental rights only strengthens the interests of the individuals concerned (Colombi Ciacchi 2011), but what is suggested in the text is that the European debate thrives on the ambivalence between instrumental and non-instrumental arguments.

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rules display the features described in the list at the beginning of this section. Of course, they may be present with varying degrees of intensity. With regard to the interaction with traditional sources, it is tempting to conclude that the new regulatory contract law lives in a ‘separate room’ (Black 2004). While this could be true in some cases, it seems increasingly less so today because of the pervasive nature of the new regulatory contract law. The contemporary trend seems to be more in the direction of hybridity (in the sense proposed by Trubek and Trubek 2006), that is, a blend of new and old concepts to form a new one with a different meaning or role. To pick up just one example: in the financial sector the business conduct rules laid down by the Markets in Financial Instruments Directive (MiFID) may be interpreted as public standards without any relevance for contractual relationships, as a reference point for contractual duties and as a minimum threshold that does not prevent national courts from imposing broader duties on investment service providers (Cherednychenko 2014). What can be expected is not that the EU will come up with a single solution for conflicts between regulatory and traditional contract law, but that a range of mechanisms will be experimented with and gradually adopted to deal with vertical, horizontal and diagonal conflicts in the EU multi-level system (Joerges and Schmid 2011). To what extent does the European debate tally with the contemporary debate and evolution of US contract law? From a historical point of view, the starting point seems to be much different. US contract law was pushed in a direction that today shows few commonalities with the EU turn to regulatory contract law. But we shall see in a moment that there is more to this than meets the eye. The starting point in the evolution of US contract law can be identified in the loose ties connecting contracts to state sovereignty. Whereas the legal systems of continental Europe accepted the idea that contractual relationships can only exist within the boundaries set forth by the state, US thinking turned such perception upside down and granted priority to parties’ power to structure their private orderings (Caruso 2006: 24 ff.; Michaels and Jansen 2008: 76 ff.). The most important implication is a much narrower view of the proper scope of contract law. For example, mandatory rules can be described as something extraneous to the core of the relationship. The same view explains why remedies and enforcement are central issues in US contract theory. The historical processes that drove this perspective may have to do with the conception of the individual that became dominant in late nineteenth century American culture. The invention of a general contract law exclusively based on consent transformed any state intervention in an

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interference to be justified (Kreitner 2007). Of course, contract law as applied by the courts did not reflect this image. Several doctrines allowed the judges to impose limits on the parties or to fill gaps in the contracts. Though, still today the idea of a contractual relationship almost completely detached from public interventions has a looming influence. Consider the debate between instrumentalist and anti-instrumentalist approaches to private law and to law more generally (Tamanaha 2006; Kraus 2007). That such debate has been more heated in the United States than in other countries signals a strong resistance to the idea of pursuing external goals through contractual relationships. Moreover, even in the instrumentalist camp the arguments supporting the pursuit of external goals are usually confined to those interventions that are closely connected to the parties’ interests, not to some overarching or systemic public interest. Perhaps this approach has to do with the need to find a middle ground that sounds acceptable to both sides of the debate (Dagan 2008; Hedley 2009). Or perhaps it is a consequence of the normative preferences expressed by lawyer-economists, the group of scholars usually identified as the staunchest supporters of an instrumentalist view. More generally, it cannot be excluded that social and institutional factors make it more difficult for the US legal system to implement public policies with ex ante mandatory rules and easier to rely on ex post interpretative default rules (Bagchi 2014b). It might be surprising to find that instrumental arguments are more easily accepted in the EU, with its majority of civil law countries, than in the United States, where policy arguments are usually deployed by common law courts. However, a distinction must be made between types of policy arguments. To the extent that they refer to goals such as efficiency, fairness and deterrence, their close connection to parties’ interests allows the judges to embed them in their doctrines. However, common law judicial developments face several constraints when broader policy assessments are needed (Robertson 2009; Waddams 2011). Therefore, the institutional context of the common law does not automatically open the door to regulatory contract law.3 3 Interestingly, the US debate devotes more attention to the relationship between regulation and tort law (e.g., Rabin 2012; Geistfeld 2014). While by no means uncontroversial, the regulatory role of tort law seems to be received more favourably. Several reasons might explain such difference, including the absence of interferences between liability and consent, the supplementary role often played by tort law with respect to regulation, and the distribution of legislative powers between the federal and the state levels.

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Of course, the US contract literature does not speak with a single voice. It is not difficult to find positions much closer to the European idea of regulatory contract law. In the first half of the twentieth century the public dimension of contract law was underlined by American legal realists. They are still cited today, but they have been unable to displace the dominant approach (Kreitner 2007: 191). Much the same observation can be made about relational contract theory, another influential strand in the US debate. Stewart Macaulay’s work cuts across the private-public distinction and proposes a much broader view of contractual relationships (Gordon 2013). Similarly, Ian MacNeil pointed out that contractual relationships can be used to achieve ‘special public goals’ (MacNeil and Gudel 2001: 554 ff.). Both authors are also associated with a normative preference for regulated contracts akin to those available in US labour law (see critically Scott 2013). However, even the relational approaches are more interested in redefining the content of traditional contract law than in exploring its relationships with other branches. Much the same observation can be made about proposals for a pluralist approach to contract law (e.g. Kreitner 2012; Dagan and Heller 2013; Gilson et al. 2014).4 They all start from the premise that general contract law needs a more fine-grained articulation to account for the characteristics of a larger number of relationships. They do differ as to what characteristics should be considered. But the main thrust of the argument is the development of interpretative regimes that should guide the judges in deciding contract cases. Even when an explicit link with public or private regulation is proposed, it goes in the direction of extending to those areas the same interpretative regime which is proposed for other commercial relationships.5 Additionally, the many examples of private orderings analysed in the US legal system provide further support for the 4

There are also authors that defend a unitary view of contract law (e.g., Oman 2009). 5 See Gilson et al. (2014: 68 ff.) with reference to the regulation of agricultural commodities and self-regulation of food safety. The same authors praise the EU consumer protection regime because it clearly separates the mandatory regulation for unsophisticated parties from the common law rules of interpretation. However, they do not refer to the regulatory role played by EU consumer law. Also see Zamir (2014) for the observation that contemporary US books on contract law tend to eschew any reference to statutory contract rules and to expel consumer issues from general contract law. It seems that this approach reflects widespread opinions about the proper scope of contract law. See, e.g., Snyder and Mirabito (2014: 402 ff., 406 ff.) (suggesting that issues about consent in e-commerce and public policy defences are best left to regulatory authorities).

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argument that general contract law should not play any regulatory role at all. Hence, the US debate shows another peculiar feature: contractual concepts and ideas can be and are exported to regulated sectors, but the opposite track is much rarer.6 Should we conclude from the foregoing review that a deep cleavage is going to divide US and EU contract law? Perhaps so. But there are other corners of the US legal system we should look at before jumping to this conclusion. State-building throughout the nineteenth and the twentieth centuries has involved incremental changes in the balance of powers among the federal branches as well as between the federal and the state levels. Public interventions in the economy were made possible and at the same time shaped by those developments and by the legal infrastructures they produced (Carpenter 2001; Mashaw 2012). Strong analogies with the building of the EU regulatory state in the second half of the twentieth century can be identified (Egan 2013). However, the EU experience appears exceptional in the way it relied on private law to craft a peculiar version of a supranational market state (Micklitz and Patterson 2013). Conversely, in the US state-building took place mainly through changes in administrative law. This is not to say that the US regulatory state did not have to deal with the interface between public regulation and contract law. Judicial review of agencies’ decisions made it possible to work out several doctrines whose influence is still felt today. The filed rate doctrine is perhaps the most famous among them. It was already laid down in early twentieth century and is still applied across the utilities sectors (Rossi 2005: 131 ff.). Its meaning has changed somewhat in the passage from the monopoly to the competition era. Its usefulness has been contested and its abolition has been suggested (Bush 2006; Vaheesan 2013; Hovenkamp 2013). But the doctrine helps identify the borderline between contracts and regulation when it prevents any contractual (or antitrust) actions against a tariff (here intended in the broadest sense of a collection of contractual terms applied by a utility) which has been approved by a regulator. Much the same function is performed by another judicial doctrine developed in the energy sector. The Mobile-Sierra doctrine, named after two US Supreme Court cases in the 1950s, prevents the Federal Energy Regulator (FERC) from modifying a tariff which has been agreed upon in wholesale energy contracts, unless it adversely affects the public interest. 6

The most prominent examples are disclosure duties and default rules: see, e.g., Sunstein (2013); Porat and Strahilevitz (2014). For a European discussion of regulatory default rules see Möslein (2011).

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The practical effect of this doctrine is to carve out a space for private autonomy and avoid, or at least make more difficult, regulatory modifications of contracts. Developments of US energy markets in the early twenty-first century have re-opened the debate about the interpretation of the doctrine both in federal courts and at the FERC (McCaffrey 2009; Haskell 2010; Tewksbury et al. 2011; Keegan 2012; White 2012). However, the point to underscore here is that in the US legal system a body of judicial doctrines and regulatory decisions addresses the interface between contract law and regulation with sector-specific rules that balance the public and private interests at stake. This is exactly the same role that EU regulatory contract law tries to play. The important difference is that in the United States, sector-specific regulation affecting contracts shows fewer connections with general contract law than is the case in the EU. The difference becomes relevant in all the contexts that call for a diffusion of each model beyond the borders of the two legal systems. To the extent that the relationship between contract law and regulation becomes a problem to be addressed in transnational settings, the United States and the EU may try to export their different models. While the United States has been generally successful in exporting its contractual models and its drafting style (Cordero-Moss 2011), the EU has often been successful in exporting its regulatory choices (Bradford 2012; Roda 2014). What can be expected in the near future is that both of them will try to replicate the success of their strategies in a larger number of fields. The multiple forums that today help manage the extraterritorial effects of regulations in transatlantic relations (Scott 2014; Fahey 2014) may be employed to decide on the degree of mutual deference that each contract model is entitled to. A related issue, which will be addressed in section V, is the influence that Western models might have in non-Western countries. In the field of transnational private regulation, the battle between the two models may be ongoing already. Descriptions of private governance can emphasize the benefits of an extension of the contractual paradigm to areas previously monopolized by state interventions (Vandenbergh 2013) or see it as an extension of public regulation (Cafaggi 2013). Here we can begin to identify the dividends of a clearer understanding of regulatory contract law. Differences between the US and EU models might matter under two respects. First, the type of rules that are endorsed by each model might include to a larger or lesser extent the features listed at the beginning of this section. It can be expected that the contract rules proposed by the US model will resemble the boilerplate provisions of commercial relationships, while the contract rules proposed by the EU

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model will resemble the regulatory provisions adopted in public regulatory systems. Secondly, the content of the rules in the two models may differ from the point of view of the balance between public and private interests. Whereas in the US model it can be expected that public interests will be a side concern, the opposite should be true for the EU model.

IV.

CONTRACT REMEDIES VS REGULATORY REMEDIES

This section turns from rule-making to enforcement mechanisms. The interplay between contract and regulatory remedies will be analysed from the point of view of the usual dichotomy between public and private enforcement. We shall see that several countries are experimenting with the hybridization of different types of remedies. Also, references will be made to the interplay between remedies administered by public regulators and remedies administered by private regulators. From the vantage point of a remedial perspective, enforcement mechanisms grounded in regulatory and contract law may overlap in a significant number of cases. For instance, remedies against the infringement of regulatory law or competition law can be activated by parties to a contractual relationship. Furthermore, when the same infringement amounts to contractual non-performance, contract remedies may serve both to protect individual interests and to achieve regulatory goals. Finally, criteria to coordinate public and private enforcement are needed to avoid conflicting outcomes. But the choice of criteria depends on the content, effectiveness and costs of each type of enforcement. Hence, the traditional dichotomy is just the starting point for a more complex assessment of the range of available options (Cafaggi and Micklitz 2009). The same complexity must be acknowledged in a diachronic perspective. Traditionally, the US legal system has been identified with a preference for private enforcement, the European legal system with a preference for public enforcement. In light of the developments taking place in the last few decades, such distinction should be revised. As far as the US legal tradition is concerned, the priority granted to private enforcement in regulation and antitrust law can be traced back to some crucial institutional features (Carrington 2004; Gerber 2008). In the second half of the twentieth century private enforcement became a conscious political strategy deployed by the two major parties to overcome the veto points of the US legislative process and the lack of a presidential commitment to actively enforce the statutes they passed

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(Farhang 2010; Burbank et al. 2013). Since the 1980s, efforts at curbing private enforcement have largely failed. However, a stream of Supreme Court decisions has imposed substantive and procedural constraints on litigation before federal courts (Burbank and Farhang 2014). This means that private enforcement might become much less relevant in the US legal tradition. At the same time, the antagonistic stance of the Supreme Court toward private enforcement might have other repercussions, both internally, with an increase of litigation rates at state level, and externally, with a shift of some types of transnational litigation to other countries (Childress 2014). No less relevant are the developments that can be observed on the European side. They point in two opposite directions. On one hand, several initiatives on alternative dispute resolution (ADR), collective actions and competition law damages suggest that private enforcement could be on the rise (Hodges 2014a). These changes seem to support the hypothesis that the EU is developing its own version of adversarial legalism, or Eurolegalism (Kelemen 2011). On the other hand, it has been pointed out that the EU has tried to strengthen the enforcement powers of regulators, mostly at national level but in some cases at the EU level, too (Micklitz 2011a, 2015b). The latter development is tightly connected to the more general dynamics of EU-Member State relationships and to the new role played by European agencies and networks of national regulators in the rule-making and implementation phases. The stronger their influence in the EU decision-making process, the higher the probability that the powers of national regulators will increase (Bach and Ruffing 2013; Maggetti 2014). For the purposes of this chapter, the developments described above are rife with implications. To begin with, it is possible to follow the usual approach in the enforcement literature and assume that the main goal is to design a complementary relationship between regulatory and contract remedies. Rightly understood, complementarity should mean that each type of enforcement has its own sphere of application, there are no reciprocal interferences and their combined effect is to increase the probability of accomplishing the chosen goals. However, in both the US and the European literature there are plenty of analyses lamenting that such complementarity is difficult to achieve (e.g., Engstrom 2013; Lowe and Marquis 2014). Moreover, solutions to achieve complementarity may well differ from one sector to the other (Glover 2012; Burbank et al. 2013). This means that other types of interplay are possible and should be managed in some way. Two of them are worth discussing here: displacement of regulatory remedies by contract remedies and displacement of contract remedies by regulatory remedies.

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First, it is possible to observe a recourse to contract remedies in cases where competition law or regulatory law would apply. This choice may be due to lighter burdens of proof or to the limited availability of actions for competition law damages (Hviid and Peysner 2014). The main problem with this type of interplay is that the real impact of several contract actions decided by different courts may be difficult to gauge. Moreover, conflicts between judicial decisions and those of regulatory or competition authorities cannot be avoided. The only solution is to provide plaintiffs with the appropriate remedies in the field of regulation or competition law. The latter observation leads to the second type of displacement. What can be observed in both the EU and the United States is a tendency to introduce new regulatory remedies that go a long way toward providing the kind of redress that could be claimed with contract or tort actions. In the EU such a tendency is partly due to national developments and partly to the Europeanization process. For example, the United Kingdom granted sector regulators the power to award compensation to consumers. Remedial action includes paying an amount to affected consumers, preparing and distributing a written statement setting out the contravention and its consequences, or terminating or varying any contracts. In the latter case, the consent of the affected consumer is required. Regulatory orders can be enforced independently by consumers, who can also claim additional damages in ordinary civil actions (e.g., Ofcom 2012; Financial Conduct Authority 2014; Ofgem 2014). However, it can be argued that this type of regulatory remedy greatly reduces the need for private enforcement (Hodges 2014b).7 EU law, too, prompted national regulators to develop new remedies, mostly in the field of adjudication of disputes among operators or between operators and consumers (Bellantuono 2015). Of course, the shift from contract to regulatory remedies does matter for the final outcome. Adjudication by regulators or ADR bodies usually expands the set of available options. Some of them lie beyond the purview of civil courts (e.g., for the financial sector, Mak 2013). Whether this is an advantage for all the parties involved in these adjudicatory processes is 7

The UK Consumer Rights Act 2015 consolidates consumer enforcement measures and extends the redress powers to public enforcers for any breach of consumer law. Redress obtained from public enforcers will foreclose individual civil actions by consumers. The Secretary of State will be granted the power to extend enforcement measures to private enforcers like consumer bodies or other private organizations. See Twigg-Flesner (2016).

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highly debated in the literature on dispute resolution (e.g., Meili 2010 and the contributions collected in Steffek and Unberath 2013). Another open issue is the distribution of enforcement powers between the national and the EU level. Today, competences are shared unevenly and remedies are shaped haphazardly by both levels (Reich 2010; Johnston 2013). Calls for European harmonization have already been heard (Ottow and de Weers 2011). Though, the guiding principle in the area of remedies is still Member States’ procedural autonomy, to be read in light of the European Court of Justice case law on the principles of effectiveness and equivalence (Dougan 2011; Rott 2013). Hence, full harmonization does not seem practicable and more efforts should be devoted to the search for conflict management mechanisms. In the United States, both federal and state regulators have a long-term acquaintance with different types of regulatory remedies. Explanations about factors leading to the choice of each policy-making form and their likely effects have been proposed (Magill 2004; Morriss et al. 2005; Givati 2014). What is most interesting here is that the wide range of tools and the substantial flexibility enjoyed in using them may reduce the recourse to contract remedies. Regulatory settlements are examples of policy-making forms that may produce just that outcome when they make room for compensation to be awarded directly to final consumers or more generally damaged parties (Doucet and Littlechild 2006; Ramus and Zimmerman 2015). Similarly, the availability of informal and nonbinding policy-making tools increases the opportunities to press regulatees to adopt voluntary redress schemes or compliance programmes that decrease litigation in court. Of course, the impact of these regulatory measures is difficult to disentangle from other contextual factors, for example, the pressure exerted by the threat of a class action. Moreover, none of the policy-making forms aimed at informally pushing the regulatees toward the desired ends or at settling enforcement actions is free from doubts about accountability and fair distribution of benefits (Zimmerman 2011). Still, it is of relevance that in a legal system generally eager to incentivize private enforcement regulatory remedies play a central role and may at times displace contract remedies. A comparison between the United States and the EU can also be made from the point of view of the multi-level distribution of enforcement powers. It has been observed that the power to enforce federal law often granted to states’ Attorneys General provides a useful alternative to private enforcement, reduces the risk of under-enforcement by federal agencies and generates the benefits usually associated with the exercise of decentralized state authority (Lemos 2011). As we saw above, much the same arguments are made with reference to the role played by

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national regulators in the enforcement of EU law. However, in the United States, the availability of a federal judiciary and of federal agencies with full-fledged enforcement powers reduces the risks of conflicting decisions, over-enforcement or under-enforcement. Conversely, in the EU those risks loom larger and are kept under control with a mix of hard and soft mechanisms (for competition law see Wils 2013; for electronic communications see Simpson 2013). Because of these institutional differences, coordination of enforcement across levels is usually costlier in the EU and leads to more cases of interplay between regulatory and contract remedies. A complex relationship can also be detected in the interplay between remedies administered by public regulators and those administered by private regulators. The literature on regulatory governance underlines the benefits stemming from the enrolment of private regulators in enforcement activities. The limited availability of enforcement mechanisms at transnational level suggests that in that context private regulators may even represent the only credible option (see the contributions collected in Cafaggi 2012). At the same time, empirical evidence shows that private regulators provide effective enforcement mechanisms only under rather stringent conditions (e.g., Parker and Nielsen 2011; Black 2012). Moreover, it is usually quite difficult to identify the distinct contribution made by private enforcement mechanisms because they are intermingled with public ones (see the exchange between Börzel 2012 and Sabel and Zeitlin 2012). On a more general level, it should be acknowledged that the objectives of contractual remedies are different from those of regulatory or certification remedies (Cafaggi 2013: 1613 ff.). This means that the respective incentives provided by each mechanism may prevail in a specific context and leave unanswered the demand for other forms of redress. Moreover, it cannot be excluded that some private regulators (e.g., chain leaders) exploit the powers they have been conferred for regulatory purposes to increase their bargaining power (Killingsworth 2014). What the materials discussed in this section show is that the interplay between regulatory and contract remedies cannot be left to spontaneous coordination but must be managed with ad hoc strategies that take into account the hybrid character of enforcement. Hybridity can be found in the distribution of powers across different levels, in the variety of enforcement tools that can be employed for different purposes, as well as in the interaction between public and private regulators. Each of these facets should be included in an enforcement strategy suitable for multilevel and multi-enforcer settings. Arguably, contract remedies can play an

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important role in such a strategy, but only if they are fully integrated with all the other enforcement mechanisms.

V.

REGULATORY CONTRACT LAW BEYOND THE WESTERN LEGAL TRADITION

Is regulatory contract law a concept that only makes sense within the Western legal tradition? This section suggests that the concept cannot travel easily across different legal traditions because it is tightly connected to the peculiar version of the regulatory state that prevails in the EU and United States. However, countries developing their own versions of the regulatory state may benefit from a reflection on the interplay between regulation and contract law. Even though specific solutions cannot be transplanted, the governance issues entailed by that interplay need to be understood and interpreted in every regulatory system. An assessment of the relevance of regulatory contract law beyond the borders of the Western legal tradition should start from the observation that the public-private distinction does not have the same meaning everywhere. The two spheres are not easily distinguishable in areas of ‘limited statehood’, that is in the states (representing the vast majority still today) where public institutions lack the resources to implement and enforce rules. In those areas, governance is in the hands of non-state actors and non-hierarchical modes of social coordination are prevalent. While both features can also be found in the EU and United States, they take on a different meaning where no complementary relationship between state and non-state actors is possible (Risse 2011).8 The idea of regulatory contract law is heavily dependent on the assumption that the public and private spheres can be kept distinct. It is exactly because of this assumption that the interplay should be managed to avoid conflicts and to maximize the efficiency and effectiveness of each tool. As soon as the assumption becomes untenable in a different 8

To be sure, areas of limited statehood could be identified in the East European countries which still face problems in implementing EU standards of regulatory contract law (e.g., Cafaggi et al. 2013; Svetiev 2013; Caruso 2015; also see Dietz 2014 on the non-use of EU law in cross-border transactions between West and East Europe countries). Both within and outside the EU it seems useful to address the issue raised in this section, namely whether the strategy of regulatory contract law can be effectively implemented, should be dismissed or adapted to other contexts.

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institutional context, it is not useful to ask whether and how wellresourced regulators should balance public and private interests in contractual relationships. Such a strategy requires institutional capabilities that are not available. However, it still makes sense to ask whether a regulatory strategy relying on contracts can help overcome the dearth of public institutional resources. The benefits and costs of regulatory strategies involving contracts will depend on the main features of the regulatory state which prevail in a specific country or region. It has been pointed out that tools and institutions developed in the regulatory state of the global North acquire a new meaning in the regulatory state of the global South (Dubash and Morgan 2013). This observation matches with the comparative law literature that emphasizes the role of local interdependencies and interpretative practices in shaping the acceptance or rejection of foreign transplants in developing countries (e.g., Milhaupt and Pistor 2008; Gillespie and Nicholson 2012). If regulatory contract law is simply another tool of the global North, the main question is what meaning could it take in other types of regulatory states. Two examples, one from Brazil and one from China, may provide partial answers. Both suggest that the interplay between general contract law and regulation can be organized in ways that differ from the US and EU models. The 2002 Brazilian Civil Code states that freedom to contract shall be exercised by virtue, and within the limits, of the social function of contract (article 421; article 2035 sanctions with voidness agreements not fulfilling the social function). These rules were directly influenced by the broad recognition of individual and collective rights in the Brazilian federal Constitution of 1988. For example, the protection of consumers is connected to the fundamental principle of equality (article 5 XXXII) and the economic order should accord with the dictates of social justice, having due regard to, among other principles, the social function of property and, again, the protection of consumers (article 170). Explicit reference to the rights of users can also be found in article 175 on public utility services. The new constitutional framework was probably one of the factors driving the experimentation with a new type of relationship between the state and the economy (Trubek et al. 2013). The social function clause made it possible to argue that collective or diffuse interests should be taken into account by the parties to the contractual relationship. How exactly such a constitutional reading of contract law can be reconciled with its economic goals is still debated. The Brazilian case law has acknowledged that the social function can be invoked to protect the weaker party, but seems more reluctant to accept its most wide-ranging interpretations (Modenesi 2009; Albuquerque

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2012; Nalin and Sirena 2013; Torres and Ribeiro 2014). For our purposes, the most interesting observation is that in Brazil general contract law can drive the development of the regulatory approach. Whereas the Brazilian regulatory regime is often criticized because of its limited use of innovative policy tools (e.g., Queiroz-Cunha and Rodrigo 2013), interdependencies between the two branches show that an integrated approach is, at least in theory, possible. Conversely, both the US and the EU had to pursue a separation approach that keeps the two branches as distinct as possible. To be sure, the coordination between contract law and regulation is no less difficult to manage with an integrated than with a separation approach. Consider, for instance, Brazilian case law in the field of telecommunications. In a 2008 decision of the Superior Tribunal de Justiça, the legitimacy of the annual charge for the fixed telephone line was challenged on the ground that it hampered universal access to communications services and, as such, was against the social function of contract and more generally the social values listed in the Constitution. But that expansive reading was rejected by the Tribunal (Modenesi 2009: 201 ff.). Conversely, Brazilian Civil Code, article 421 does not prevent Anatel, the Brazilian telecom regulator, from forbidding any charges in case of reconnection of a previously interrupted communication service.9 These two decisions suggest that general contract law sets down the boundaries of regulatory action. At the same time, they make clear that general principles on the balance between private and social interests and on the degree of deference to be accorded to regulators are still missing. The Chinese example shows that contracts can be deployed in regulatory states with a high degree of public control to smooth out the transition to alternative regulatory regimes. In this case, the main advantage of contracts over other regulatory tools is to change the incentives transmitted to the parties while at the same time safeguarding public control. The 2012 reform of the relationship between coal suppliers and electricity utilities exemplifies this kind of strategy. China is the biggest producer and consumer of coal in the world; 80 per cent of its electricity generation is dependent on coal-fired plants. Because of this strategic role, the relationship between the coal and the electricity sector has traditionally been heavily regulated. However, since the 1990s, the coal market has been largely deregulated. Conversely, electricity 9 Tribunal Regional Federal da Primeira Região, decision of 8 August 2014, 17 ff., available at www.trfl.jus.br, rejecting the challenge against the General Regulation on the rights of consumers of telecommunications services, issued by Anatel with decision no. 632 of 8 March 2014, available at www.anatel.gov.br/.

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prices are still regulated. With coal prices becoming higher and more volatile in the 2000s, the gap between coal prices and electricity prices has become untenable. For several years, the Chinese government tried to force coal suppliers to sell at low prices. However, the high rates of non-compliance suggest that regulated prices could not be enforced effectively when the price gap widened. In 2011, unavailability of coal was among the causes of a power shortage (Zhao et al. 2012; Yang et al. 2012; Ming et al. 2013). The new regulation introduced in 2012 abolished price controls and left coal suppliers and electricity utilities the task of negotiating new agreements. Mismatches between coal and electricity prices can be avoided with different strategies, including vertical integration and arbitrage with international coal markets. Moreover, the risk of rising coal prices has been passed on to a large extent (90 per cent of the fuel cost changes) to grid operators (IEA Coal Industry Advisory Board 2014). It is still unclear whether the new regime is sustainable in the long run. But the interesting point here is that even regulatory states characterized by a strong component of state intervention in the economy can find innovative ways to deploy contracts for regulatory purposes. More specifically, the new regime for the coal-electricity relationship suggests a model of regulatory contract that helps remedy an enforcement gap. Taken together, the Brazilian and the Chinese examples confirm that a Western regulatory tool can take on a different meaning when transferred to another context. Moreover, for a specific regulatory problem more than one solution can be devised, each with different economic and distributive impacts (Kennedy 2013). We can now see more clearly that the separation approach adopted in the EU and United States is largely due to the peculiar path they followed in building their regulatory states. But an integration approach (Brazil) or a partial regulation approach (China) are equally possible in other institutional contexts. The features of regulatory contract law listed in section III are still relevant, but they should not be combined according to Western models. They should be designed taking into account local factors. Similar observations can be made about private regulation in nonWestern countries. It has been pointed out that the two main problems are the imposition of Western private standards and the lack of effective enforcement mechanisms (e.g., Lin 2009; De Schutter 2014). Both seem to suggest that regulating through private contracts could be more difficult in non-Western countries. However, such a conclusion is only justified with reference to the Western meanings of private standards and compliance. Different ways to organize a global supply chain, changes in governance regimes or in enforcement mechanisms may well prompt

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beneficial effects in developing countries (Maertens and Swinnen 2012; Colen et al. 2012; Coslovsky 2013). For public as well as private regulatory contract law, the key is to identify those contextual conditions that allow the selection of the most useful model of interplay.

VI.

POLICY CHOICES

It is highly probable that anti-instrumentalist scholars will not be convinced by arguments in favour of regulatory contract law. At the same time, some instrumentalist scholars might fear that regulatory contract law goes too far in imposing constraints on private autonomy, while other instrumentalist scholars might fear it does not go far enough in pursuing redistributive policies. What is important to underscore here is that the debate about instrumentalization has mainly developed with reference to traditional contract law. When the interplay with regulation enters the scene, the arguments discussed in that debate should be revised. Take, for example, the argument that invokes a minimalist contract law on the ground that generalist courts do not have the knowledge that would allow them to write efficient default rules (e.g., Schwartz and Scott 2003; Morgan 2013). Whatever its merits for judicial default rules of traditional contract law, the argument appears less plausible when interventions on contracts are made by regulators with a high degree of technical expertise and their decisions are reviewed by specialized courts. This is not to say that the regulatory decision-making process is error-free (Tasic 2011; Cooper and Kovacic 2012). What the developments discussed in this chapter suggest is that the pros and cons of regulatory contract law need to be assessed on empirical grounds. It is reasonable to assume that contracts can help regulators fulfil their tasks in some contexts, not in any context. Therefore, the institutional factors allowing successful management of contractual relationships for regulatory purposes should be identified. Moreover, the economic and distributive impact of regulatory contract law should be part of the analysis. This evaluation calls for an institutional diagnostic approach akin to those proposed by several streams of social sciences literature (McGinnis and Ostrom 2014; Rodrik 2007; Young 2008). The aim of those approaches fits well with comparative law inquiries. The core issue is to ‘unpack’ the main contextual factors which, across time and legal systems, could affect the policy issue to be understood. Moreover, the diagnostics approach explicitly assumes that the interaction among

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contextual factors, and not any single factor, is the key determinant of the final outcome. Of course, this kind of contextual analysis can also be undertaken with several other more or less interdisciplinary approaches proposed by the comparative law literature.10 Assuming the perspective of the diagnostic approach only helps to bridge them in a more integrated framework. Nothing prevents a diagnostic approach that blends together contributions from law, social sciences and the humanities. At the same time, efforts at integration should bring to light fundamental divergences on ontological and epistemological assumptions. It is beyond the goals of this chapter to suggest how such an integration could be carried out. But it is useful to illustrate its meaning by listing the contextual factors that every attempt to implement the strategy of regulatory contract law should take into account, as well as their possible interactions: (a)

(b)

The policy-makers should identify the (local, national, supranational or international) level of rule-making for regulatory contract law. This factor is important to understand the desirable or undesirable features of the rule-making process (section III). Most of the time, more than one level will be involved. Therefore, the type of relationship among levels should be identified. In some cases hierarchical relationships will be possible. But usually, relationships in multi-level regulatory regimes are more complex and fragmented. They tend toward polycentricity, that is shared competences along fuzzy boundaries. Virtues and vices of polycentricity (Aligica and Tarko 2012; McGinnis and Ostrom 2012) should be taken into account when choosing how to use regulatory contract law. Policy-makers should also identify the level and type of enforcement mechanism. This choice is closely related and to a large extent dependent on the choices made for the rule-making process. The debate about private and public enforcement in multi-level systems (section IV) provides useful insights. Hybridization strategies are now visible in several sectors and countries. They help exploit the advantages usually connected to contract and regulatory

10 See e.g. Grundmann et al. (2015: 4 ff.): ‘the governance perspective contributes to a genuinely interdisciplinary discussion. As opposed to law and economics, the range of disciplines that “collaborate” has greatly increased, and these various disciplines contribute on an equal footing, gathering together into one discourse community.’

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(c)

remedies. Also, they may reduce coordination costs more significantly than any attempt to design complementary relationships among different types of enforcers. Regulatory contract law is not neutral from a distributive point of view. At the same time, there is no reason to suppose it is inherently biased toward a specific class of interests. It has been observed that structural distributional effects of any regulatory system are usually dependent on the exclusion of specific categories of stakeholders (Büthe 2013). As the examples from non-Western countries show, regulatory contract law does not automatically prevent the consideration of any public interest. On the contrary, regulatory concepts like energy poverty or universal service broaden the range of distributive policies that can directly affect contractual relationships. Of course, like any other regulatory tool, those policies can be exploited for rent-seeking purposes (Wiener and Richman 2010). The crucial issues are: (1) to identify the old or new concepts of justice that should guide the policy-makers (Micklitz 2011b) and (2) to measure the impact of each regulatory choice. What is already clear is that traditional arguments about the arbitrariness of distributive justice in contract law, or about the risk of unintended consequences of distributive policies (Bagchi 2014a) lose much of their force when contracts are embedded in a broader regulatory system and explicitly contribute to achieve its goals.

VII.

CONCLUSIONS

In all the markets heavily dependent on some type of regulation, the interplay with traditional contract law is inevitable. What this chapter shows is that such interplay does not lead to a single outcome. Within the Western legal tradition, it is possible to identify an EU model, that leans toward the development of a completely new regulatory contract law, and a US model, that tries to negotiate a boundary-setting strategy with both common law and administrative law concepts. Outside the Western legal tradition, further variants of the interplay can be identified: they can be integrationist strategies (e.g., in Brazil) that deny any distinction between contract law and regulation, or they can be partial regulation strategies (e.g., in China), where the policy-makers try to exploit contractual incentives while at the same time maintaining a tight control on the economic activities. The regulation/contract interplay raises many theoretical and empirical issues that cannot find an answer in this chapter. Those issues are

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entangled in some of the most debated concepts in legal and non-legal comparative analysis, including the role and meaning of transplants, the North-South relationship and the causal links between each regulatory tool and a specific outcome. The mapping exercise attempted in this chapter was meant to alert readers to the relevance of regulatory contract law for those broader debates. Both the regulation literature and the contract law literature should pay more attention to what happens at the interface between the two fields. Talking about transnational or global contract law as if it is national contract law with a wider geographic scope risks being a worthless exercise. What is badly needed is an in-depth exploration of the contextual factors that, in each regulatory system, affect the interplay between contract law and regulation. Evidence collected through such an exploration should then lead to policy recommendations that help engineer the interplay. The ultimate goal is a fruitful exchange of ideas and concepts that changes for the better the world of traditional contract law and the world of regulation.

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138 Comparative contract law Dagan, H. and Heller, M. (2013) ‘Freedom of Contracts’, Tel Aviv University Law Faculty Papers, No. 176 De Schutter, O. (2014) Final Report: The Transformative Potential of the Right to Food, United Nations, Human Rights Council, Twenty-fifth session, 24 January, available at www.srfood.org Dietz, T. (2014) Global Order Beyond Law. Oxford: Hart Publishing Doucet, J. and Littlechild, S. (2006) ‘Negotiated Settlements: The Development of Legal and Economic Thinking’, 14 Utilities Pol’y 266–77 Dougan, M. (2011) ‘The Vicissitudes of Life at the Coalface: Remedies and Procedures for Enforcing Union Law Before the National Courts’ in P. Craig and G. De Burca (eds), The Evolution of EU Law. Oxford: Oxford University Press Dubash, N.K. and Morgan, B. (2013) ‘The Rise of the Regulatory State of the South’ in N.K. Dubash and B. Morgan (eds), The Rise of the Regulatory State of the South: Infrastructure and Development in Emerging Economies. Oxford: Oxford University Press Egan, M. (2013) ‘Toward a New History in European Law: New Wine in Old Bottles?’, 28 Am. U Int’l L Rev. 1223–55 Engstrom, D.F. (2013) ‘Agencies as Litigation Gatekeepers’, 123 Yale LJ 616–712 Fahey, E. (2014) ‘On the Use of Law in Transatlantic Relations: Legal Dialogues Between the EU and US’, 20 Eur. LJ 368–84 Farhang, S. (2010) The Litigation State: Public Regulation and Private Lawsuits in the United States. Princeton, NJ: Princeton University Press Financial Conduct Authority (2014) The Enforcement Guide Geistfeld, M. (2014) ‘Tort Law in the Age of Statutes’, 99 Iowa L Rev. 957–1020 Gerber, D.J. (2008) ‘Private Antitrust Enforcement in the U.S. and Europe: A Comparative Perspective’ in T.M.J. Moellers and A. Heinemann (eds), The Enforcement of Competition Law in Europe. Cambridge: Cambridge University Press Gillespie, J. and Nicholson, P. (2012) ‘Taking the Interpretation of Legal Transfers Seriously: The Challenge for Law and Development’ in J. Gillespie and P. Nicholson (eds), Law and Development and the Global Discourses of Legal Transfers. Cambridge: Cambridge University Press Gilson, R.J. et al. (2014) ‘Text and Context: Contract Interpretation as Contract Design’, 100 Cornell L Rev. 23–97 Givati, Y. (2014) ‘Game Theory and the Structure of Administrative Law’, 81 U Chi. L Rev. 481–518 Glover, J.M. (2012) ‘The Structural Role of Private Enforcement Mechanisms in Public Law’, 53 Wm and Mary L Rev. 1137–217 Gordon, R.W. (2013) ‘Is the World of Contracting Relations One of Spontaneous Order or Pervasive State Action? Stewart Macaulay Scrambles the Public-Private Distinction’ in J. Braucher et al. (eds), Revisiting the Contracts Scholarship of Stewart Macaulay. Oxford: Hart Publishing Grundmann, S. et al. (2015) ‘Contract Governance: Dimensions in Law and Interdisciplinary Research’ in S. Grundmann et al. (eds), Contract Governance: Dimensions in Law and Interdisciplinary Research. Oxford: Oxford University Press Guasch, J.L. et al. (2008) ‘Renegotiation of Concession Contracts in Latin America: Evidence from the Water and Transport Sectors’, 26 Int’l J Ind. Org. 421–42 Haskell, M.R. (2010) ‘Re-examining First Principles of Regulation: NRG Power Marketing, LLC v. Maine Public Utilities Commission’, 23 Elec. J 58–64 Hedley, S. (2009) ‘Looking Outward or Looking Inward? Obligations of Scholarship in the Early 21st Century’ in A. Robertson and T.H. Wu (eds), The Goals of Private Law. Oxford: Hart Publishing Hodges, C. (2014a) ‘Collective Redress: Breakthrough or a Damp Squibb?’, 37 J Consumer Pol’y 67–89

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Contract law and regulation 139 Hodges, C. (2014b) ‘Fast, Effective and Low Cost Redress: How Do Public and Private Enforcement and ADR Compare?’ in B.J. Rodger (ed.), Competition Law: Comparative Private Enforcement and Collective Redress Across the EU. Alphen aan den Rijn: Kluwer Law International Hovenkamp, H.J. (2013) Antitrust and the ‘Filed Rate’ Doctrine: Deregulation and the State Action, University of Iowa Legal Studies Research Paper No. 13-18, available at http://ssrn.com/abstract=2191566 Hviid, M. and Peysner, J. (2014) ‘Comparing Economic Incentives Across Member States’ in B.J. Rodger (ed.), Competition Law: Comparative Private Enforcement and Collective Redress Across the EU. Alphen aan den Rijn: Kluwer Law International IEA Coal Industry Advisory Board (2014) The Impact of Global Coal Supply on Worldwide Electricity Prices. Paris: OECD/IEA Jansen, N. and Michaels, R. (2008) ‘Private Law and the State: Comparative Perceptions and Historical Observations’ in N. Jansen and R. Michaels (eds), Beyond the State: Rethinking Private Law. Tübingen: Mohr Siebeck Joerges, C. and Schmid, C. (2011) ‘Towards Proceduralization of Private Law in the European Multi-Level System’ in A.S. Hartkamp et al. (eds), Towards a European Civil Code. Alphen aan den Rijn: Kluwer Law International, 4th edn Johnston, A. (2013) ‘Spillovers from EU Law into National Law: (Un)intended Consequences for Private Law Relationships’ in D. Leczykiewicz and S. Weatherill (eds), The Involvement of EU Law in Private Law Relationships. Oxford: Hart Publishing Keegan, M. (2012) ‘Bargaining for Power: Resolving Open Questions from NRG Power Marketing, LLC v. Maine Public Utilities Commission’, 65 U Miami L Rev. 99–146 Kelemen, R.D. (2011) Eurolegalism: The Transformation of Law and Regulation in the European Union. Cambridge, MA: Harvard University Press Kennedy, D. (2013) ‘Law and Development Economics: Toward a New Alliance’ in D. Kennedy and J.E. Stiglitz (eds), Law and Economics with Chinese Characteristics. Oxford: Oxford University Press Killingsworth, S. (2014) The Privatization of Compliance, available at http://ssrn.com/ abstract=2443887 Kraus, J. (2007) ‘Transparency and Determinacy in Common Law Adjudication: A Philosophical Defence of Explanatory Common Law’, 93 Va. L Rev. 287–359 Kreitner, R. (2007) Calculating Promises: The Emergence of Modern American Contract Doctrine. Stanford, CA: Stanford University Press Kreitner, R. (2012) ‘On the New Pluralism in Contract Theory’, 45 Suffolk U L Rev. 915–33 Lemos, M.H. (2011) ‘State Enforcement of Federal Law’, 86 NYU L Rev 698–765 Lin, L. (2009) ‘Legal Transplants Through Private Contracting: Codes of Vendor Conduct in Global Supply Chains as an Example’, 57 Am. J Comp. L 711–44 Lowe, P. and Marquis, M. (eds) (2014) Integrating Public and Private Enforcement of Competition Law: Implications for Courts and Agencies, European Competition Law Annual. Oxford: Hart Publishing MacNeil, I.R. and Gudel, P.J. (2001) Contracts: Exchange Transactions and Relations. New York: Foundation Press, 3rd edn Maertens, M. and Swinnen, J. (2012) ‘Private Standards, Global Food Supply Chains and the Implications for Developing Countries’ in A. Marx et al. (eds), Private Standards and Global Governance. Cheltenham: Edward Elgar Publishing Maggetti, M. (2014) ‘The Rewards of Cooperation: The Effects of Membership in European Regulatory Networks’, 53 Eur. J Pol. Res. 480–99 Magill, M.E. (2004) ‘Agency Choice of Policymaking Form’, 71 U Chi. L Rev. 1383–447 Mak, V. (2013) ‘The “Average Consumer” of EU Law in Domestic and European Litigation’ in D. Leczykiewicz and Weatherill (eds), The Involvement of EU Law in Private Law Relationships. Oxford: Hart Publishing

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140 Comparative contract law Mashaw, J.L. (2012) Creating the Administrative Constitution. New Haven, CT: Yale University Press McCaffrey, J.E. (2009) ‘Morgan Stanley Capital Group, Inc. v. Public Utility District No. 1 Revisits the Mobile-Sierra Doctrine: Some Answers, More Questions’, 30 Energy LJ 53–84 McGinnis, M.D. and Ostrom, E. (2012) ‘Reflections on Vincent Ostrom, Public Administration, and Polycentricity’, 72 Pub. Admin. Rev. 15–25 McGinnis, M.D. and Ostrom, E. (2014) ‘Social-Ecological System Framework: Initial Changes and Continuing Challenges’, 19 Ecol and Soc’y 30, available at www.ecologyandsociety.org Meili, S. (2010) ‘Consumer Protection’ in P. Cane and H.M. Kritzer (eds), The Oxford Handbook of Empirical Legal Research. Oxford: Oxford University Press Michaels, R. and Jansen, N. (2008) ‘Private Law Beyond the State? Europeanization, Globalization, Privatization’ in N. Jansen and R. Michaels (eds), Beyond the State: Rethinking Private Law. Tübingen: Mohr Siebeck Micklitz, H.W. (2005) ‘The Concept of Competitive Contract Law’, 23 Penn State Int’l L Rev. 549–86 Micklitz, H.W. (2009) ‘The Visible Hand of European Regulatory Private Law: The Transformation of European Private Law from Autonomy to Functionalism in Competition and Regulation’, 28 Yearbook Eur. L 3–59 Micklitz, H.W. (2011a) ‘Administrative Enforcement of European Private Law’ in R. Brownsword et al. (eds), The Foundations of European Private Law. Oxford: Hart Publishing Micklitz, H.W. (ed) (2011b) The Many Concepts of Social Justice in European Private Law. Cheltenham: Edward Elgar Publishing Micklitz, H.W. (2015a) ‘Herd Behaviour and Third Party Impact as a Legal Concept’ in S. Grundmann et al. (eds), Contract Governance: Dimensions in Law and Interdisciplinary Research. Oxford: Oxford University Press Micklitz, H.W. (2015b) ‘The Transformation of Enforcement in European Private Law: Preliminary Considerations’, 23 Eur. Rev. Private L 491–524 Micklitz, H.W. and Patterson, D. (2013) ‘From the Nation State to the Market: The Evolution of EU Private Law as Regulation of the Economy beyond the Boundaries of the Union?’ in B. Van Vooren et al. (eds), The EU’s Role in Global Governance: The Legal Dimension. Oxford: Oxford University Press Micklitz, H.W. and Svetiev, Y. (eds) (2012) A Self-Sufficient European Private Law: A Viable Concept?, EUI Working Papers Law 2012/31 Micklitz, H.W. et al. (eds) (2014) European Regulatory Private Law: The Paradigms Tested, EUI Working Papers Law 2014/04 Millhaupt, C. and Pistor, K. (2008) Law and Capitalism: What Corporate Crises Reveal About Legal Systems and Economic Development Around the World. Chicago, IL: Chicago University Press Ming, Z. et al. (2013) ‘China’s Large Scale Power Shortages of 2004 and 2011 After the Electricity Market Reforms of 2002: Explanations and Differences’, 61 Energy Pol’y 610–18 Modenesi, P. (2009) ‘Função social dos contratos: questões polêmicas na doutrina e na jurisprudência do STJ’, 39 Revista Trimestral de Direito Civil 185–208 Morgan, J. (2013) Contract Law Minimalism: A Formalist Restatement of Commercial Contract Law. Cambridge: Cambridge University Press Morriss, A.P. et al. (2005) ‘Choosing How to Regulate’, 29 Harv. Env. L Rev. 179–250 Möslein, F. (2011) Dispositives Recht. Tübingen: Mohr Siebeck Möslein, F. and Riesenhuber, K. (2009) ‘Contract Governance: A Draft Research Agenda’, 5 Eur. Rev. Contract L 248–89

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Contract law and regulation 141 Nalin, P. and Sirena, H. (2014) ‘Da estrutura à função do contrato: dez anos de um direito construído’, 2 Revista Instituto do Direito Brasileiro 13983–14024, available at www.idb-fdul.com/ Nogler, L. and Reifner, U. (eds) (2014) Life Time Contracts. Den Haag: Eleven International Publishing Ofcom (2012) Enforcement Guidelines Ofgem (2014) Statement of Policy with Respect to Financial Penalties and Consumer Redress Oman, N.B. (2009) ‘A Pragmatic Defense of Contract Law’, 98 Georgetown LJ 77–116 Ottow, A. and de Weers, K. (2011) Towards a European Enforcement Toolkit?, Europe Institute Working Paper 01/11 Parker, C. and Nielsen, V.L. (eds) (2011) Explaining Compliance: Business Responses to Regulation. Cheltenham: Edward Elgar Publishing Porat, A. and Strahilevitz, L.J. (2014) ‘Personalizing Default Rules and Disclosure with Big Data’, 112 Mich. L Rev. 1417–78 Queiroz-Cunha, B. and Rodrigo, D. (2013) ‘Assessing Regulatory Governance and Patterns of Regulatory Reform in Brazil’, Osservatorio sull’Analisi di Impatto della Regolazione Rabin, R.L. (2012) ‘Reflections on Tort and the Administrative State’, 61 DePaul L Rev. 239–69 Ramus, D.A. and Zimmerman, A.S. (2015) ‘The Corporate Settlement Mill’, 101 Va. L Rev. 129–91 Reich, N. (2010) ‘The Interrelation Between Rights and Duties in EU Law: Reflections on the State of Liability Law in the Multilevel Governance System of the Union: Is There a Need for a More Coherent Approach in European Private Law?’, 29 Yearbook Eur. L. 112–63 Repko, A.F. (2012) Interdisciplinary Research: Process and Theory. Thousand Oaks, CA: Sage Publishing, 2nd edn Risse, T. (2011) ‘Governance in Areas of Limited Statehood’ in T. Risse (ed.), Governance Without a State? Policies and Politics in Areas of Limited Statehood. New York: Columbia University Press Robertson, A. (2009) ‘Constraints on Policy-Based Reasoning in Private Law’ in A. Robertson and T.H. Wu (eds), The Goals of Private Law. Oxford: Hart Publishing Roda, J.-C. (2014) ‘L’influence des droits européens sur le droit américain’, Dalloz 157 Rodrik, D. (2007) One Economics Many Recipes: Globalization, Institutions, and Economic Growth. Princeton, NJ: Princeton University Press Rossi, J. (2005) Regulatory Bargaining and Public Law. Cambridge: Cambridge University Press Rott, P. (2013) ‘The Court of Justice’s Principle of Effectiveness and its Unforeseeable Impact on Private Law Relationships’ in D. Leczykiewicz and S. Weatherill (eds), The Involvement of EU Law in Private Law Relationships. Oxford: Hart Publishing Sabel, C.F. and Zeitlin, J. (2012) ‘Experimentalism in the EU: Common Ground and Persistent Differences’, 6 Reg. and Gov. 410–26 Schmid, C.U. (2010) Die Instrumentalisierung des Privatrechts durch die Europäische Union. Baden-Baden: Nomos Schwartz, A. and Scott, R.E. (2003) ‘Contract Theory and the Limits of Contract Law’, 113 Yale LJ 541–619 Scott, J. (2014) ‘Extraterritoriality and Territorial Extension in EU Law’, 62 Am. J Comp. L 87–125 Scott, R.E. (2013) ‘The Promise and the Peril of Relational Contract Theory’ in J. Braucher et al. (eds), Revisiting the Contracts Scholarship of Stewart Macaulay. Oxford: Hart Publishing

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142 Comparative contract law Simpson, S. (2013) ‘The Interactive Nature of “Soft” and “Hard” Governance in the EU Information Society’, 16 Information, Communication and Society 899–917 Snyder, F.G. and Mirabito, A.M. (2014) ‘The Death of Contracts’, 52 Duquesne L Rev. 345–413 Spiller, P.T. (2013) ‘Transaction Cost Regulation’, 89 J Econ. Behav. and Org. 232–42 Steffek, F. and Unberath, H. (2013) (eds), Regulating Dispute Resolution. Oxford: Hart Publishing Stern, J. (2012) ‘The Relationship Between Regulation and Contracts in Infrastructure Industries: Regulation as Ordered Renegotiation’, 6 Reg. and Gov. 474–98 Sunstein, C.R. (2013) ‘Deciding by Default’, 162 U Pa. L Rev. 1–57 Svetiev, Y. (2013) ‘How Consumer Law Travels’, 36 J Consumer Pol’y 209–30 Tamanaha, B. (2006) Law as a Means to an End. Cambridge: Cambridge University Press Tasic, S. (2011) ‘Are Regulators Rational?’, 17(1) J Economistes et Etudes Humaines 1–19 Tewksbury, D.G. et al. (2011) ‘New Chapters in the Mobile-Sierra Story: Application of the Doctrine After NRG Power Marketing, LLC v. Maine Public Utility Commission’, 32 Energy LJ 433–58 Torres, D.J.A. and Ribeiro, M.C.P. (2014) ‘La convencion de Viena sobre compraventa internacional de mercaderías y la función social del contrato en el derecho brasilero’, 26 Revista de Derecho Privado, Universidad Externado de Colombia 267–93 Trubek, D.M. and Trubek, L.G. (2006) ‘New Governance and Legal Regulation: Complementarity, Rivalry or Transformation’, 13 Col. J Eur. L 539–64 Trubek, D.M. et al. (eds) (2013) Law and the New Developmental State. Cambridge: Cambridge University Press Twigg-Flesner, C. (2016) ‘Does the Codification of Consumer Law Improve the Ability of Consumers to Enforce their Rights? A UK-Perspective’ in B. Heiderhoff and R. Schulze (eds), Consumer Law and Consumer Behavior, Nomos Verlag Vaheesan, S. (2013) ‘Market Power in Power Markets: The Filed-Rate Doctrine and Competition in Electricity’, 46 U Mich. JL. Ref. 921–73 Vandenbergh, M.P. (2013) ‘Private Environmental Governance’, 99 Cornell L Rev. 129–200 Waddams, S. (2011) Principle and Policy in Contract Law. Cambridge: Cambridge University Press White, J.M. (2012) ‘The Federal Power’s Act Double Standard: Unwinding the MobileSierra Doctrine After Morgan Stanley Capital Group, Inc. v. Public Utility District No. 1’, 61 Am. UL Rev. 677–714 Wiener, J.B. and Richman, B.D. (2010) ‘Mechanism Choice’ in D.A. Farber and A.J. O’Connell (eds), Research Handbook on Public Choice and Public Law. Cheltenham: Edward Elgar Publishing Wils, W.P.J. (2013) ‘Ten Years of Regulation 1/2003: A Retrospective’, 4 J Eur. Comp. L and Practice 293–301 Yang, C. et al. (2012) ‘China’s Coal Price Disturbances: Observations, Explanations and Implications for Global Energy Economies’, 51 Energy Pol’y 720–27 Young, O.R. (2008) ‘Building Regimes for Socioecological Systems: Institutional Diagnostics’ in O.R. Young et al. (eds), Institutions and Environmental Change. Cambridge, MA: MIT Press Zamir, E. (2014) ‘Contract Law and Theory: Three Views of the Cathedral’, 81 U. Chi. L Rev. 2077–123 Zhao, X. et al. (2012) ‘Why Do Electricity Utilities Cooperate with Coal Suppliers? A Theoretical and Empirical Analysis from China’, 46 Energy Pol’y 520–29 Zimmerman, A.S. (2011) ‘Distributing Justice’, 86 NY UL Rev. 500–72

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PART II MARKET VALUES AND THEIR CRITIQUES: PRIVATE GOVERNANCE AND NORMATIVE REGULATIONS

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7. Enforcing bilateral promises: a comparative law and economics perspective Francesco Parisi, Marta Cenini and Barbara Luppi

I.

INTRODUCTION

Legal systems use different and often conflicting terminology to refer to a situation where the parties to a contract exchange promises, creating mutual obligations to be fulfilled at a later time. Common law systems refer to these situations as bilateral contracts.1 The original Restatement on Contracts, section 12, defined a bilateral contract as one in which there are mutual promises between two parties to the contract and where each party is both a promisor and a promisee; in other words, an agreement where the parties exchange promises of performance (rather than actual performances) with one another.2 In bilateral contracts, the offer of one party calls for a promise by the other party. Acceptance usually takes the form of a communication by the offeree of his counter-promise; the exchange is said to be executory and not already executed (executory consideration). Each party is obliged to some act or forbearance, which, at the time of entering into the contract, will take place in the future. On the contrary, ‘unilateral contract’ means a contract where the offer calls for an act and not for a counter-promise and the promisee does not undertake any obligation until that moment. The original Restatement defined a unilateral contract as one in which a promisor receives an 1

See Corbin (1982) para. 1.23 (distinguishing unilateral contracts from bilateral contracts); see also Treitel (2003) 37 ff. 2 Restatement (Second) of Contracts, on the contrary, chooses not to carry forward the definition of unilateral and bilateral contracts because of doubts as to the utility of the distinction between the two types. See Restatement (Second) of Contracts §1 cmt. f (1981). We believe that the conceptual category of bilateral contracts remains relevant, inasmuch as it encompasses contractual situations that share a common distinctive feature.

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actual performance, put differently, a promise of future performance is made in exchange for an actual present performance. The promise of performance by one party is conditioned upon the performance of the act by the other party and the acceptance consists in the fulfillment of the act, which represents the executed consideration. The promise of future performance remains an (unaccepted) offer until the other party performs his side of the obligation (theory of unilateral contract).3 Common law lawyers usually see the contract as a promise, or as a sum of multiple promises, that causes the promisee to rely upon the promise, leading to a characterization of breach in terms of reliance.4 On the contrary, civil lawyers traditionally view the contract as an agreement that requires the meeting of two or more declarations so that the contract could be viewed as the sum of as many declarations as there are parties.5 The notion of contract thus pivots the rule of the necessary bilaterality of its formation. Although still present in the conventional understanding of what constitutes a contract, this doctrine has been criticized by Rodolfo Sacco,6 who showed that, when a contract creates obligations only upon one party, it can be validly concluded with only the declaration of the burdened party, so it is not true that contracts must be bilateral.7 Article 1108 of the Napoleonic Code also states that for the validity of the contract (convention) it is only necessary for there to be ‘le consentement de la partie qui s’oblige’ (the consent of the party who assumes the obligation) and at articles 1102 and 1103 it states that: Le contrat est synallagmatique ou bilatéral lorsque les contractants s’obligent réciproquement les uns envers les autres. Il est unilatéral lorsqu’une ou plusieurs personnes sont obligées envers une ou plusieurs autres, sans que de la part de ces dernières il y ait d’engagement.

3 See Guest (1984); Schlesinger (1968); Gorla (1955) 327 ff.; Gorla (1968) 431 ff. 4 See Klass (2010) 28; see also Carlo Marchetti, ‘Un’Introduzione al Contract del Draft Common Frame of Reference: la (Necessaria?) Bilateralità Della Formazione del Vincolo’ (2012). 5 See Somma (2000). 6 Sacco and De Nova (2004) 243 ff. 7 The Italian Civil Code of 1865 (art. 1099) also used the term bilateral contracts to refer to situations in which the contract creates mutual obligations of future performance. The article was not retained in the 1942 Italian Civil Code and the term bilateral contract has acquired different significance under the current code. For a historical narrative of the evolved usage of this term, see Messineo (1961).

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Enforcing bilateral promises 147

As Sacco points out, at the time of its enactment, the French Civil Code thought of contracts as means to constitute future obligations and viewed the party’s promise as a commitment under which the promisor undertakes the obligation.8 The common law conception of bilateral contracts more closely matches the civil law notion of synallagma and prestazione corrispettiva, which suggest the interdependence of the two obligations so that each promise is the consideration for the other. These notions call to mind a link with the notion of causa, cause, consideration as the element that justifies the burden borne by each party.9 It is significant to note, however, that in the civil law tradition, the notion of contract comprehends both exchanges of future performances and transfers of property or other rights. Thus, it may be that the exchange of performances is instantaneous, as in a contract of sale. On the contrary, as we have already noted, the notion of bilateral contracts in the common law requires that each party is obliged to some act or forbearance which, at the time of entering into the contract, will always take place in the future. As a rule, unless otherwise agreed upon by the parties, the exchange of performances should be simultaneous (hand in hand, mano contro mano, Zug um Zug, donnant donnant). This is because, as we will see later in more detail, both common and civil law countries provide for rules such as the defense of non-performance: each party can refuse to perform if the other party does not perform. More recently, the European Draft Common Frame of Reference, at article II.-I:101, has provided a definition of ‘contract’ as an ‘agreement which is intended to give rise to a binding legal relationship or to some other legal effect’ and that is ‘a bilateral or multilateral juridical act’. The Draft thus confirms the traditional civil law notion of contract as an agreement that needs for its formation two or more declarations. In articles II-1:101 and 103, the Draft introduces the notion of juridical act (which comprehends that of contract) as any statement or agreement which is intended to have legal effect as such; the juridical act may be unilateral, bilateral or multilateral and in case of a unilateral undertaking the promise is binding even without the acceptance of the promisee. The Draft has, therefore, kept a distinction between contracts and unilateral juridical acts, even though an in-depth analysis has shown that this 8

The French Civil Code, therefore, states that in order to create an obligation it is sufficient that one party has made a promise, whereas it is not necessary that the other party has accepted. This idea has been opposed by scholars who are anchored to the idea that contract formation requires the meeting of two declarations: offer and acceptance. 9 Sacco and De Nova (2004) 779 ff., 792.

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148 Comparative contract law

distinction is immaterial for most practical purposes, given the fact that ‘unilateral undertakings’ ultimately have the same discipline and the same effects as contracts.10 Evolving terminology aside, the problem of how best to enforce the exchange of promises of future performance remains relevant. Breach remedies applied to these contracts in the event of unilateral and bilateral breach determine incentives and equilibria.11 In this chapter, we develop a comparative law and economic analysis of the breach remedies provided for these types of situations, which, for the lack of a better and broadly accepted term, we shall interchangeably refer to as bilateral promises or bilateral contracts. We give special attention to the defense of non-performance and the preclusion rules that many legal systems apply in situations of unilateral and bilateral breach. These remedies play an important role in the enforcement of bilateral promises and have thus far escaped the attention of comparative law and economics scholars. In this chapter, we wish to fill this gap in the literature, considering the effect of bilateral legal remedies applied to situations in which the contract involves reciprocal promises of performance. The chapter is structured as follows. Section II identifies the problem and discusses it in a historical and comparative context, paying special attention to the alternative ways in which legal systems address the different cases of unilateral and bilateral breach. Section III introduces an analytical set-up in the context of the existing law and economics literature. We use this framework to study the effects of existing legal remedies on the parties’ performance and reliance incentives when contracts involve reciprocal promises that create bilateral investment problems. In section IV, we illustrate the results with the aid of a numerical example. Section V concludes by revisiting the question of optimal remedies for bilateral contracts in a comparative law and economics perspective.

II.

LEGAL REMEDIES FOR BILATERAL PROMISES

Contracts involving bilateral promises are formally governed by the same legal principles governing contracts involving unilateral promises.12 Generally speaking, it is considered a breach of a contract when one party does not fulfill his performance in due course or does not perform at all. 10 11 12

See Marchetti (2012); see also Acquis Group (2009) 125 ff. James (1916) para. 1102. Corbin (1982) para. 1.23.

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However, several issues may acquire particular significance in contracts that involve an exchange of promises, as these contracts create future bilateral obligations between parties.13 In most legal systems, when no time sequence is specified for fulfilling these obligations, the performance of both obligations must be simultaneous and either party can usually demand performance from the other by offering his own performance.14 In the case of bilateral promises, the non-breaching party may bring action only if the counterpart’s breach is substantial, to wit it compromises the contract in its entirety: US courts will require that any breach be substantial, and not a mere formality.15 Civil law systems provide for similar rules, requiring the so-called ‘importance of the breach’.16 When the obligations are divisible, a breach of one of them does not count as a substantial breach of the contract: in the United States, if the steps can be exchanged in corresponding pairs, then the whole contract is not necessarily breached by the failure to perform one step. This can limit the amount of damages recoverable by the nonbreaching party. So what remedy, if any, should be given to a party who is unable to perform and yet has undertaken investments in reliance on the other 13

Restatement (Second) of Contracts § 231 (1981). In most cases, when the timing of the parties’ performances is unspecified or when performances are due simultaneously, either party can demand performance from the other by offering or tendering his own performance. See, e.g., Restatement (Second) of Contracts § 238 (1981); see also UCC § 2-507 (1977). It is only when different periods are affixed within which each party is to perform that the counter-performance is construed as conditional and dependent on the performance of the other party. In all other situations where the same time is fixed for performance, or where time is fixed for one party, and no time is fixed for the other; or where no time is fixed for the performance of either party; or where the same period is fixed in which parties may perform, performances are presumed to be due simultaneously. In all such cases, either party can trigger performance by the other (after the specified period has elapsed, when a time was specified), by offering his own counter-performance. Restatement (Second) of Contracts § 234 (1981). 15 Farnsworth (1981) 267 (giving examples from English and early US law of cases in which a non-breaching party attempted to back out of a contract by pointing to insubstantial breaches by the defendant). Farnsworth states that this issue arises most often today in building contracts, in which breaches must be directed at structural features of the building in order to be considered substantial breaches. Failure to place a correct doorknob, for example, would not be considered substantial breach and would not relieve the buyer of paying for the building. 16 See, e.g., Italian Civil Code, art. 1455. 14

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party’s counter-performance? Should we allow an action in contract by a breaching party against his non-breaching counterpart? Should a breaching party be able to collect damages if his counterpart was also in breach? For bilateral contracts in which both parties promise performance capable of creating a surplus for the other party, the answer to these questions has important practical relevance for both private and social incentives. In the following, we consider the impact of existing legal remedies when applied to contracts that create mutual performance obligations. A.

Initial Unilateral Breach and the Defense of Non-Performance

Under most legal systems, in the event of a material breach or lack of substantial performance, the non-breaching party may suspend his own obligations under the contract.17 This means that if one party is in breach, the other party may also breach the contract without being deemed responsible for it. In this case, the initial non-breaching party may then sue the breaching party and ask for the termination of the contract and damages. This idea has very ancient roots. In the year 294 CE, the Roman emperors Diocletian and Maximian established that an agreement to exchange one thing for another was not binding on either party until there had been performance on one side which was accepted by the other.18 This principle, also known as the defense of non-performance, later found broad application in many legal systems and traditions, such as French, German, Spanish, Swiss and Italian civil law and public international law.19 The same rule is applied in the countries influenced 17 If breach is non-material (i.e., there has been substantial performance), then the other party has a claim for damages but is not excused from fulfilling his contractual obligation. 18 DIG. 19.4.I.2. 19 The French Code Civil adopts the exception of non-performance through many specific provisions relating to sales (arts 1612 and 1652), barter (art. 1704), and deposit (art. 1948), but the exception of non-performance is generally regarded as a principle applicable to all contracts creating bilateral obligations. Malecki (1999) 37–53. Likewise, German law (BGB, s. 320) formulates the exception as a general principle, under the title of plea of unperformed contract. A similar approach is followed by Spanish-based legal systems (e.g., Spanish Código Civil, art. 1426 ) and by the Swiss law of obligations (Swiss Code des Obligations, art. 82). Italian law adopts the exceptio inadimpleti contractus both as a general principle (Italian Codice Civile, art. 1460) and as a rule applicable to specific bilateral contracts (e.g., under arts 1565 and 1901). The defense of

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by the German legal tradition, such as Austria (ABGB, sections 918–921), Japan (CIV.C. 533) and China (UCL, article 68). As a general rule, in the case of bilateral breaches the judge must establish which breach prevails against the other, in order to ascertain which one justified the other. The trial court must compare the overall behavior of the parties in order to determine which party is responsible for the most relevant violations, thereby provoking the behavior of the counterparty and the consequent alteration of the contractual synallagma.20 Once it is determined which party breached the contract first, the common rules on damages and restitution will apply. If it is impossible to determine who was responsible for the most relevant violations and, therefore, the breaches are equivalent, in countries like the Philippines (Civil Code of the Philippines, article 1192) the contract will be ‘extinguished’ and each party will bear her respective costs. In Italy,21 the judge cannot declare the termination of the contract but must declare the rejection of both claims due to the absence of facts supporting them: in other words, it is impossible to declare the judicial termination of the contract without placing the responsibility of the breach on one of the parties.22 This means that civil law systems do not non-performance has been adopted by the United Nations. United Nations Convention on Contracts for the International Sale of Goods, Art. 71, 11 April 1980, 1489 UNTS 3. Article 71 of the Convention provides the so-called defense of non-performance, stating that a party may suspend the performance of his obligation if, after the conclusion of the contract, it becomes apparent that the other party will not perform a substantial part of his obligations. Article 72 provides that the right to withhold performance applies also in the case of anticipatory breach of contract and provides a remedy that is available even before the obligation becomes due, offering protection against a future breach of contract. Cenini and Parisi (2009) 151–70. 20 See Cass., 24 September 2009, no. 20614, Giust. Civ. Mass. 2009, 9 (‘In order to ascertain which breach justified the other, the Court must take into account the interests of both parties and the objective importance of the breach and consider not only the chronological element, but also and above all the contribution in terms of causality, the proportionality between the unfulfilled performances and the impact of these unfulfilled performances on the overall economic and social function of the contract. This judgment may lead to ascertain which of the two parties shall be considered the breaching party while the default of the other party is justified on the ground of the defense of non-performance’). See generally Sacco and De Nova (2004) 640 ff. 21 See ibid. 22 Cass., 9 June 2010, no. 13840, Giust. Civ. Mass. 2010, 6, 879. Sacco and De Nova (2004) (arguing that the parties will thus terminate the contract for mutual agreement).

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explicitly consider the case of bilateral breach, but solve it with reference to the unilateral breach problem. The amount of the damages may be reduced according to the other party’s level of culpability and contribution to the loss. There are several important differences between the treatment of the defense of non-performance, and of bilateral contracts in general, between the civil and common law systems.23 The defense of nonperformance first arose in English law in the sixteenth century.24 Prior to this time, a non-breaching party would have to give his own performance before he was allowed to sue the breaching party.25 The idea that this should not be required was finalized and set right in the famous English case, Kingston v. Preston.26 In the United States, whether the defense of non-performance is applicable depends on which performance is due first. The Restatement (Second) of Contracts provides further guidance to resolve any remaining ambiguity on when performance is due. According to section 234, unless otherwise agreed, when performances are capable of being simultaneous, each duty of performance is constructively conditioned on tender of the other.27 This implies that, even if the parties did not expressly condition their promise on performance by the other, the law sees each party’s duty to perform as conditional on the other party’s offer to perform.28 A party that is unable or unwilling to offer his performance cannot bring an action against the other. Performance or tender of performance by one party is a condition precedent for the liability of the other.29 The Uniform Commercial Code also reflects this

23 See generally Treitel (1988) (discussing the differences in the ways civil and common law systems approach the defense of non-performance and bilateral contracts). 24 See Farnsworth (1981) 254. 25 Ibid. 26 2 Doug. 689, 99, Eng. Rep. 437 (K.B. 1773). 27 Restatement (Second) of Contracts § 234(1) (1981): ‘Where all or part of the performances to be exchanged under an exchange of promises can be rendered simultaneously, they are to that extent due simultaneously, unless the language or the circumstances indicate the contrary’; see also ibid. § 238; UCC § 2-507 (1977). The second type (conditional and dependent) makes the performance of one promise a constructive condition of performance of another. Therefore, no counter-performance is due unless the first obligation is duly performed. See also Corbin (1982) para. 35.6; Perillo (2003) 424–29. 28 In practice, courts often depart from this principle. One party’s breach of a promise may be deemed material and thus give a right to suspend the duty to perform even if the promise was not technically found to be a condition as well. 29 See, e.g., Kingston v. Preston, Lofft 194, 2 Doug. 684 (K.B. 1773).

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preference in its rule that payment and delivery of goods must be simultaneous.30 The rule for the sale of land is the same.31 The scope of the defense of non-performance under US law is quite broad. The defense is available in all but a few cases, such as when different periods are affixed within which each party is to perform.32 At common law, a defense of non-performance gives the non-breaching party the option of withholding performance in the event of a substantial breach.33 A non-breaching party has two options: (1) he can refuse his performance, invoking the defense of non-performance against the other party’s action; and (2) he may ask for a rescission of the contract.34 One factor that may induce a non-breaching party to exercise the defense of non-performance is the fact that collecting damages from the other party can be a costly and difficult enterprise. A second factor is linked to the opportunity for the non-breaching party to redeploy the performance towards alternative uses.

30

UCC § 2-507(1) (1977). See, e.g., Rushton v. Campbell, 94 Neb. 141, 145 (1913) (holding that the payment of price and the delivery of the deed are simultaneous except by prior agreement). 32 Various contract rules reveal a heavy inclination towards simultaneous performance of promises. The Uniform Commercial Code reveals a similar tendency for the case of sales in which the counter-performance amounts to the payment of a price. See, e.g., UCC § 2-507 (1977) (‘tender of delivery is a condition to the buyer’s duty to accept the goods and, unless otherwise agreed, to his duty to pay for them’). Along similar lines, UCC § 2-511 states that ‘Unless otherwise agreed tender of payment is a condition to the seller’s duty to tender and complete any delivery.’ 33 Legal systems adopt different wording to characterize the seriousness of the breach necessary before a party can exercise the defense of non-performance. The wording ranges from ‘material breach’ (Daugherty v. Bruce Realty & Dev, Inc., 892 S.W. 2d 332 (Mo. App. 1995)), to ‘fundamental non-performance’ (UNIDROIT Principles of International Commercial Contracts), to ‘total breach’ Restatement (Second) of Contracts § 237 (1981). 34 Treitel (1988) 310–11 (‘Termination [through an action for rescission] brings to an end each party’s duty to perform, though the circumstances making the remedy available may give the injured party a right to damages; it also gives the injured party a right to the return of his own performance on restoring what he has received under the contract. The exception [of non-performance] does not produce these effects … but merely entitles the injured party for the time being to refuse to perform his part.’). 31

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B.

Bilateral Breach and ‘Plaintiff in Default’ Preclusions

Most legal systems provide that in contracts creating bilateral obligations between parties, when no time sequence is specified for fulfilling these obligations, the performance of both obligations must be simultaneous and either party can usually demand performance from the other by offering his own performance. As a general rule, a party cannot complain of the other party’s breach if he himself is also in breach: in this case the party cannot bring suit against the other. The system of the so-called ‘plaintiff in default’ preclusions applies to cases of bilateral breach. A party under the US and UK systems typically cannot bring suit unless he can show he was ready to perform his end of the bargain: this is the so-called ‘plaintiff in default’ rule.35 Even if the non-breaching party is able and willing to offer performance, other issues may prevent him from bringing suit. If a suit is brought, the allegedly breaching party cannot argue that he did, in fact, perform unless his performance is considered substantial.36 Finally, we have already seen that a court can hold that the performances in the contract are divisible (i.e., one incremental step toward performance by one party may require another incremental performance by another party). If the steps can be exchanged in corresponding pairs, then the whole contract is not necessarily breached by the failure to perform one step. This can limit the amount of damages recoverable by the non-breaching party. Assuming any case can go forward, the amount of payoff may vary considerably. In the case of bilateral breach, for instance, neither expectation nor restitution damages are due by either party: a party who was himself in breach might not be able to recover restitution for any steps he performed.37 Just in case the plaintiff has actually performed part of the obligation or conferred some benefit on the other party, then he might

35

Restatement (Second) of Contracts § 234 (1981). Farnsworth (1981) 270. For example, if the breaching party’s performance could be returned to him, it would not be considered substantial. Farnsworth again uses building contracts as an example. Piling up some building materials at the buyer’s site would not be considered substantial because the builder could take the materials back and use them elsewhere. Laying a foundation of a building, on the other hand, would probably be considered a substantial step toward performance. Varying degrees of performance will lead to varying degrees of forfeiture by the breaching party. ‘Willful’ breach would also make the performance nonsubstantial. 37 See, e.g., Stark v. Parker, 19 Mass. (2 Pick.) 267, 275 (1824); Lawrence v. Miller, 86 N.Y. 131, 140 (1881); Britton v. Turner, 6 N.H. 481 (1834). 36

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have restitution38 in application of the rules governing the remedies in quasi-contracts.39 Civil law systems provide for similar preclusion rules, which usually take the form of procedural preclusion. In particular, the countries influenced by the Code Napoleon, like France (article 1139), Italy (article 1454), Switzerland (article 82) and Quebec (articles 1591 and 1596), provide for the so-called ‘putting in default rule’, which states that before bringing the action the non-breaching party must offer the breaching party an opportunity to perform. This offer may take the form of a written letter addressed to the breaching party, or a more official form, which may require the intervention of a public officer. For this act to be valid, it is necessary that the claimant be ready to perform his obligation and to offer his counter-performance. The German Civil Code (section 297) states that the obligee is not in default if the obligor at the time of the offer is not in a position to effect performance. The Austrian ABGB, on the contrary, provides for a substantive preclusion rule (sections 918–921). In the case of bilateral breaches, in some countries,40 each party cannot require specific performance or expectation damages but may sue the other party for restitution in kind. We have already seen that in the Philippines,41 where the court is not able to determine which party was in breach first, the contract will be ‘extinguished’ and each party will bear its respective costs. To the contrary, the Chinese legal system provides that in the case of bilateral breach, both parties must pay damages (UCL, article 120) or each party must demonstrate to the court to what extent they have suffered, and the court will determine which party is entitled to any surplus (the so-called ‘off-setting’ rule).42 We can conclude that, in actuality, only China considers the case of a bilateral breach, while the other systems tend to solve it by reference to the unilateral breach 38 See Perillo (2003) 446. In the case of termination of the contract, which may be a further consequence of the defense of non-performance, the initial nonbreaching party may be allowed to claim damages. Treitel (1988) 310–11. 39 When remedies in quasi-contracts are available, the damages payable in the event of bilateral breach would not be equal to zero. For the purpose of analyzing the parties’ incentives, all that matters is the size of the remedy, rather than its doctrinal label. Although the remedy generally available in restitution may be less (and in some cases greater) than the remedy available in contracts, its availability is nevertheless capable of minimizing the distortions otherwise created by the preclusion rule. 40 Civil Code of Lithuania, art. 6.62. 41 Civil Code of the Philippines, art. 1192. 42 See Hsu (2007) 115; see also Gregory (2000).

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problem or applying rules on quasi-contracts. The expected private payoff of each party is discussed in section III.

III.

ENFORCING BILATERAL PROMISES: A COMPARATIVE LAW AND ECONOMICS VIEWPOINT

In the following, we develop a comparative law and economic analysis of the breach remedies discussed in section II, with special attention to the defense of non-performance and the preclusion rules that many legal systems apply in situations of unilateral and bilateral breach. As we will demonstrate, these remedies play an important role in shaping the incentives of the contracting parties. Here, we will introduce an analytical set-up, in the context of the existing law and economics literature, to study the effects of existing legal remedies on the parties’ performance and reliance incentives when contracts involve reciprocal promises that create bilateral investment problems. A.

Conventional Framing of the Contract Problem

The question of which remedy would best incentivize the optimal performance of contracts has been widely researched by law and economics scholars.43 The choice of damage remedies affects the promisor’s commitment towards performance and the promisee’s reliance on the promised performance.44 Much of the early literature in this field builds on the contributions of Barton and Shavell.45 Barton asks how a single, value-maximizing firm would design damage measures in order to induce two of its divisions to make optimal breach and reliance investments. Shavell identifies a ‘Pareto efficient complete contingent contract’ at the point of contracting in order to derive optimal contract remedies. According to these authors, the optimal legal remedies should be designed to mimic the entitlements that would be chosen under each of these hypothetical frameworks. The issue of optimal remedies for breach

43

This idea is a fundamental part of any law and economics textbook. See, e.g., Miceli, (2009). 44 In economic terms, reliance is a sunk investment that increases the value of performance if performance takes place, but also increases the promisee’s loss in the event of a breach. 45 Barton (1972); Shavell (1980).

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of contract has also been investigated within the framework of incomplete contracts.46 These contributions showed that optimal remedies could mitigate the well-known under-investment phenomenon in relationshipspecific assets.47 There is a general agreement in the law and economics literature that expectation damages are best suited for promoting optimal performance and reliance investments by the promisor and promisee to a contract.48 Expectation damages force a breaching promisor to compensate the promisee for the forgone benefit from the contract, bringing the promisee to the same level of utility he would have received in the event of successful performance.49 Expectation damages create incentives for efficient performance, since awarding expectation damages restores the promisee to the position that he would have achieved if the promisor had completed performance.50 Expectation damages also effectively link liability to the benefit forgone by the promisee, in the absence of other externalities caused by the breach.51 Under a regime of expectation damages, however, the promisee will undertake excessive reliance. This is because expectation damages, by compensating the promisee for the forgone benefit in the event of breach, operate as a form of implicit insurance, inducing the promisee to invest in reliance as if performance would likely materialize with certainty.52 The law and economics literature derives the above results using a model involving two parties: a promisor (debtor of the performance) and a promisee (creditor of the performance). Each party plays a specific role: the promisor invests in performance efforts and the promisee invests in reliance.53 In this model, at least three assumptions are made:54 (1) the promisee pays a monetary price to the promisor, commonly known as

46

Williamson (1985); see also Hart and Moore (1990). Edlin and Reichelstein (1996). 48 Eisenberg and McDonnell (2003) 1335. 49 Ibid. 50 Ibid. at 1336. 51 See Posner (1972); Shavell (1980). The standard taxonomy of contract damages is generally based on the distinctions among expectation, reliance and restitution interests: Fuller and Perdue (1936). Commonly adopted measures of damages in contract law are linked to one of these three ‘interests’ of the promisee. See also Mahoney (2000) 117–39. 52 Shavell (1980); Parisi, Luppi and Fon (2011). 53 Parisi, Luppi and Fon (2011). 54 The following assumptions are standard in the law and economics literature. See, e.g., Cooter and Ulen (2003). 47

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‘consideration’, as payment for the promisor’s performance; (2) the promisee invests in reliance on the promised performance; (3) the promisor does not invest in reliance on the promisee’s payment. These assumptions allow scholars to focus their intention on the promisor’s performance incentives and the promisee’s reliance incentives. Although complex contractual relationships can in theory be disentangled into separate agreements with unilateral performance obligations, in many real-life situations we observe contracts with mutual obligations: parties exchange promises rather than actual performances and each party is at the same time a promisor of his obligation and a promisee of the other party’s obligation. In these situations, both the rights and obligations of the parties have a bilateral nature.55 As Parisi, Luppi and Fon observe, parties choose to enter into contracts with mutual performance obligations for a variety of reasons,56 and contracts involving the exchange of goods or services between two parties can generate a surplus to the receiving party when the obligation is fulfilled.57 Each party relies on the other party’s performance. In the following analysis, we consider the effect of existing legal remedies in inducing parties to perform and rely optimally when entering into contracts with reciprocal performance obligations. The analysis develops a numerical illustration, which builds on the economic model of Parisi, Luppi and Fon. The exercise is intended to show that a bilateral obligation problem cannot be reduced to the sum of two independent unilateral problems. B.

Extending the Conventional Approach to Bilateral Promises

Bilateral relationships are more common than unilateral relationships in everyday contractual practice. Thus, it is important to provide answers to questions that may arise in cases of breach of bilateral contracts. One such question might pertain to appropriate remedies when one party is unable to perform but has undertaken investments in reliance on the other party’s counter-performance. Courts also might ask whether there should be legal remedies, other than resolution for non-performance, in cases of

55

Restatement (Second) of Contracts § 231 (1981). Parisi, Luppi and Fon (2011). For example, parties may find it practical to enter into a contract involving the exchange of goods or services, to reduce transaction costs, to avoid outlays of money, or to reduce tax burdens. In other situations, practical necessities may require the formation of contracts with mutual performance obligations and it would be difficult and often undesirable to disentangle the parties’ obligations, creating separate unilateral obligations. 57 Ibid. 56

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bilateral breach. To answer these questions, we analyze the incentives created by hypothetical rules that would allow a breaching party to collect damages when his counterpart was also in breach. Likewise, we analyze the result if a breaching party is allowed to force the performance of his non-breaching counterpart. This theoretical analysis will hopefully serve as a building block for the understanding of the economic incentives created by the defense of non-performance and preclusion rules in real-life contractual situations. We examine bilateral contracts in a simplified framework, according to the standard law and economics assumptions that parties are risk-neutral and that they choose the level of effort and reliance that maximizes their wealth. In cases of contracts involving bilateral promises, one or both parties could default on their contract obligations. In the case of a breach, the payoff or loss for non-performance is set equal to zero; in other words, the promisee receives no benefit in the event of breach, except for the possible loss of reliance investment. A bilateral contract situation therefore has four possible performance outcomes: both parties fulfill their contractual obligations, one party performs while the other party breaches, and both parties breach. We consider all such cases, allowing for the possibility of different measures of damages in the event of unilateral or bilateral breach. Given the set of possible outcomes, the social problem can be described as the sum of the payoffs of parties in each of all four possibilities, and the net of the total cost of effort and reliance investment for both parties. If each party fulfills its contractual obligation, each receives his sought-after gain. If one party fulfills his contractual obligation and the other party breaches, only the latter party realizes a gain. The symmetric analysis of payoff applies in the case of unilateral breach by the first party. There is no payoff in cases of bilateral breach, because revenues for non-performance are assumed to be zero.58

58 Note that this analytical set-up is different from the standard contract scenario often discussed in the literature, according to which the second party is not required to undertake any performance effort. By omitting the counterperformance problem, these models implicitly assume that the probability of success of performance by the second party is certain since he cannot possibly fail to fulfill the contract. Further, no reliance investment is undertaken by the first party and no gain can be realized from the nonexistent reliance investment. This scenario may alternatively be interpreted as the case in which performance by the second party has already taken place (unilateral contract) or where

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In order to achieve a social optimum, each party should choose a level of performance effort such that the marginal benefit of performance efforts for the two parties, inspired by the increased probability of successful performance, equals the marginal cost of performance effort.59 Likewise, the socially optimal reliance investments by each party are such that the expected marginal gain from each party’s reliance investment equals the marginal cost of reliance investment. When looking at the optimum from the private parties’ points of view, private costs and benefits of effort and reliance are instead taken into account: each party acts in a way that maximizes his own private welfare of the contract.60 The recent law and economics literature has shown that, in order to align private and social incentives and achieve optimal levels of performance effort, two relationships must hold. The first requirement is that damages in the unilateral case be the traditional expectations damages, which give the non-breaching party the ‘benefit of the bargain’.61 The second requirement imposes equal differences between unilateral and bilateral damages across parties.62 This requirement is necessarily fulfilled when damages for unilateral and bilateral breach for each party are set equal to each other, suggesting that in order to align private and social incentives, courts may want to impose expectation damages, not only in standard unilateral breach cases in which the victim of the contractual breach was ready to perform, but also in cases of bilateral breach, granting damages to someone who himself breached the contract. With respect to private optimal reliance investment, the traditional result63 holds, according to which setting marginal damages to zero avoids excessive reliance.64 C.

Remedies for Bilateral Contracts: A Numerical Example

With a defense of non-performance, the victim of a unilateral breach can withhold performance and redeploy it elsewhere. In addition to the performance by the second party can be carried out at will, without effort investments. 59 For a standard analysis of this optimality condition, see Cooter and Ulen (2003). 60 Korobkin (2004). 61 Schweizer (2006) 134–45. 62 See Parisi, Luppi and Fon (2011) 252 (providing an analytical proof of the results discussed here). 63 For a discussion of this concept and for an example from a game theory point of view, see Cooter and Ulen (2003) 193–222. 64 See Parisi, Luppi and Fon (2011) 258.

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various advantages offered by the defense of non-performance, as discussed in section II.A, this gives the victim a benefit equal to the redeployment value minus a damages reduction set by the court, weighted by the probability of exercising the defense of nonperformance. Likewise, in the event of a party’s own breach, he would be liable to the other party for expectation damages.65 He would obtain the expected reduction in damages when the non-breaching party exercises the defense of non-performance or the expected value of counterperformance if the non-breaching party chooses not to exercise the defense of non-performance.66 As will be shown in the numerical example, the defense of nonperformance distorts the parties’ incentives, leading to an increase in performance efforts but a decrease in reliance investments.67 In the case of performance effort, the defense of non-performance induces both parties to exert an excessive level of effort, above the social optimum. This can be explained by the fact that by performing, the non-breaching party not only avoids the threat of liability, but also eliminates the other party’s defense of non-performance, increasing the probability of obtaining the sought-after contractual benefit. Performance incentives, therefore, are higher than those created when the breaching party only faces liability in the measure of expectation damages. On the other hand, the defense of non-performance dilutes the incentives for optimal reliance since it creates a new opportunity for the dissipation of the parties’ reliance investments. With some probability greater than zero, a party who would otherwise be ready to perform may choose to exercise the defense of non-performance. Reliance investments can therefore become sunk not only as a result of the other party’s breach, but also as a result of the party’s own breach, when the defense of non-performance is exercised by the other party. Therefore, even if marginal damages are zero, reliance investments become suboptimal because the sunk investment in reliance leads parties to be wary of investing too much in reliance in the future. This sunk investment occurs whenever one party is unable to perform and the other exercises the defense of nonperformance. The magnitude of this distortion of performance effort and reliance investment depends on the parties’ expectations regarding their counterpart’s use of the defense of non-performance. Factors affecting

65 66 67

Cooter and Ulen (2003) 207. See Parisi, Luppi and Fon (2011) 258. See ibid. (analyzing how these incentives are distorted).

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these expectations might include: the presence of contract-specific investments; uncertainty in contract litigation; opportunities to redeploy performances; and damage adjustments that are withheld through the defense of non-performance. With the help of a numerical example, we will illustrate the characteristics of specific remedies for bilateral contracts discussed above. In order to address these issues more clearly, we consider a bilateral contract, assuming that the contract’s parties are symmetrical. In other words, we consider the simplest case, in which parties realize the same sought-after gain from the contract when the other party performs and the probability that they will perform is the same.68 Each party faces two decisions: (1) how much effort to exert in delivering their performance to the other party, thereby increasing the probability of the performance occurring; and (2) how much to invest in reliance, thereby increasing the value of the contract. The problem arises when the private optimal levels of effort and reliance, i.e., the levels that maximize the individual welfare of the parties, differ from the social optimum, represented by those levels maximizing the joint welfare of the parties. Legal remedies may or may not reconcile the private and social optima. It is important to investigate the distortions induced by specific remedies and whether these distortions can be reduced, in order to arrive at an accurate overall evaluation of the efficiency of remedies that apply specifically to bilateral contracts. According to the numerical simulation presented here, the socially optimal level of effort for both parties is equal to 4/9 units, with an associated probability of delivering the performance to the other party equal to 2/3. The socially optimal level of reliance investment is equal to 1/9. Both parties will experience a gain from the contract equal to 4/3 if performance occurs, and zero otherwise. In an ideal world of costless litigation and no administrative costs, optimal remedies should involve bilateral expectation damages without any additional remedy specific to bilateral contracts. In contracts involving bilateral promises, a breaching party should not be barred from bringing an action against his contracting party demanding performance and/or expectation damages. In order to reconcile private and social effort incentives, the courts should grant expectation damages to the nonbreaching party. This would require the faulty party to pay the lost value 68 This numerical simulation is based on the following functions (exhibiting the properties required in the general theoretical model): the probability of party 1 to perform is equal to e1/(e1+e2) and the value of the performance is equal to log(r1).

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of performance, both in cases of unilateral and in cases of bilateral breach. In other words, the parties will exert the social optimal effort level of 4/9 units, if the courts require the breaching party to pay expectation damages, equal to 4/3 in cases of both unilateral and bilateral breach. This condition satisfies the additional requirement needed to align private and social incentives to invest in reliance, which imposes zero marginal damages to avoid excessive reliance, a standard result in the literature. In the real world, however, the legal system provides a number of specific remedies for bilateral contracts, including the defense of non-performance and the preclusion rule. First, we analyze the effect of the defense of non-performance. The defense of non-performance allows the non-breaching party to withhold his counter-performance in the case of unilateral breach by the other party. If counter-performance is withheld, the non-breaching party may redeploy the performance at a redeployment value, of, for instance, 1. Note that the redeployment value will usually be less than the value of the contract to the breaching party, since the contract will be efficient if it is signed between parties on the market who most value that performance. However, if the defense of non-performance is exercised, the court will reduce the damages awarded to the non-breaching party, say 1/2. This scenario occurs with an estimated probability of 1/2. The application of a defense of non-performance creates a bilateral threat that leads both parties to undertake an excessive level of effort. In the numerical example presented here, both parties find it optimal to exert one unit of effort, above the socially efficient level of 2/3. This is because this rule allows the non-breaching party to threaten the breaching party with a loss of contractual surplus. The non-breaching party threatens this because, upon breach, the non-breaching party has the option of withholding counterperformance. The possibility that this performance will be withheld increases the cost of unilateral breach to the breaching party. Reliance incentives are also distorted by the defense of non-performance, though the effect is less severe than that on performance incentives. Both parties invest in reliance 1/4 units, above the social optimum. As will be discussed later, if the parties have the ability to structure their contract as a bilateral contract subject to the defense of nonperformance, this can help to mitigate the inefficiencies induced by insolvency and court errors. In other words, the defense of nonperformance corrects the distortion of effort for the party with limited liability or the dilution of effort induced by court errors for both parties. This is because the defense of non-performance creates a higher incentive to perform, which counterbalances the dilution effect associated with insolvency or court errors.

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The same analysis carried out in the previous section can be used to show the effects of ‘plaintiff in default’ preclusion rules. When a preclusion is applied, payoffs are similar to those described above, with the additional fact that in the event of bilateral breach neither party may be entitled to receive damages. The analysis would show that the adoption of a ‘plaintiff in default’ preclusion rule creates socially optimal incentives for both parties only in the special case in which the parties obtain equal benefit from the contract. Absent such symmetry, both contracting parties face distorted incentives in the opposite direction: the preclusion rule leads the party seeking the larger contractual surplus to exert excessive effort, while the party seeking the lower contractual surplus will be induced to exert suboptimal effort. This leads to a paradox, since the party that produces something of lesser value than that produced by the other party is induced to exert greater effort. This is because the ‘plaintiff in default’ rule, by precluding the right to recovery in the event of bilateral breach, causes the contracting parties to consider not only the potential liability that they may face in the event of breach, but also the value of their respective contractual expectations. In other words, incentives are distorted because the parties pay attention to the surplus that they might lose due to the preclusion rule, rather than to the benefit that their performance creates for the other party. D.

Summary of Results: Remedies for Unilateral and Bilateral Breach

Several legal systems combine remedies for unilateral and bilateral breach: a defense of non-performance similar to that discussed in section II.A is used in cases of unilateral breach,69 and, in cases of bilateral breach, such a defense is used in combination with preclusion rules similar to those discussed in section II.B. In section III.C above, we argued that in the case of a bilateral contract, the application of a defense of non-performance may lead both parties to undertake excessive levels of effort. This is because the defense of non-performance creates a double threat: the breaching party faces full liability and risks losing the benefit of his counter-performance. Reliance incentives are also distorted, though less severely than performance incentives. A preclusion rule for bilateral breach leads instead to a different type of distortion of incentives. Unlike the defense of non-performance, the preclusion rule leads

69

See Corbin (1982) para. 1.23.

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some parties to undertake excessive performance efforts, while leading others to undertake suboptimal levels of efforts. We can now examine the incentive problem facing a party that is subject to a legal regime in which a defense of non-performance for unilateral breach and a preclusion rule for bilateral breach are applied concurrently. As shown above, the defense of non-performance leads both parties to provide excess effort. Additionally, when parties suffer asymmetric losses from the mutual breach, a preclusion rule will create distortions, leading one party to exert excessive performance effort and leading the other party to invest too little towards performance. Therefore, in order to paint a complete picture, we need to consider the opposing effects of the preclusions rule on the parties’ performance incentives in conjunction with the effects of the defense of nonperformance. Adopting a preclusion rule mitigates the problem created by the defense of non-performance for the party with lower surplus from the contract, but exacerbates the already excessive incentives for the party with higher surplus. Additionally, introducing a preclusion rule for bilateral breach in a regime that already adopts a defense of nonperformance has a second-order effect on the parties’ reliance incentives. We can summarize the effects of the ‘plaintiff in default’ preclusion on incentives, considering the effects when the rule is used alone or in conjunction with the defense of non-performance. The preclusion rule induces opposite distortion on effort and reliance incentives of the parties in cases of asymmetric sought-after gains (i.e., when one party gains more than the other from performance). In the special case of symmetry, and only in this case, the preclusion rule induces no distortion in effort and reliance investment. Hence, both parties will choose a private optimal level of effort and reliance equal to the social optimum. In the case of symmetric parties, the combined use of the defense of non-performance and the preclusion rule induces excessive effort and reliance, since the inefficiency induced by the defense of non-performance dominates. The optimal choices of effort and reliance will coincide with the optimal choices when only the defense of non-performance is available. Table 7.1 below summarizes the efficiency results on optimal effort when parties receive full compensation in the event of a breach. We indicate how the privately optimal level of effort chosen under the given remedies (indicated in the three columns of Table 7.1) compares with the socially efficient level of effort. The analysis conducted here suggests that the solution utilized by many legal systems, combining defense of non-performance for unilateral breach with preclusion rules for bilateral breach, has opposite effects on the two parties’ performance incentives (mitigating the problem of

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Table 7.1 Effect of bilateral remedies on incentives Defense of nonperformance

Preclusion rule

Defense of non-performance and preclusion rule

Asymmetric-value contracts excessive performance effort for both parties

excessive performance effort for both parties

excessive performance effort suboptimal performance for party with higher surplus effort for party with indeterminate effect on higher surplus performance effort of party excessive performance with lower surplus effort for party with lower surplus Symmetric-value contracts optimal performance effort for both parties

excessive performance effort for both parties

excessive effort for one party and exacerbating the problem for the other) and has no effect on the parties’ reliance incentives. Similar reasoning applies in the case of partial compensation due to limited wealth or court errors.

IV.

IMPERFECT ENFORCEMENT AND THE ROLE OF BILATERAL REMEDIES

In the previous sections we discussed the efficiency of incentives provided by specific remedies applied in the enforcement of bilateral contracts. With the help of a numerical example, we will illustrate the characteristics of specific remedies for bilateral contracts in the presence of contract imperfections. It will be shown that the inefficiencies induced by insolvency and court errors can be mitigated, under some circumstances, by the ability of the parties to structure their contract as a bilateral contract subject to the preclusion rule. Many factors may affect the parties’ probability of receiving full compensatory damages in the event of breach. Partial compensation influences the optimal choice of effort and reliance for the contracting parties, by diluting the parties’ optimal effort incentive (under the conditions stated above). One factor than can lead to partial compensation is the limited liability of at least one contracting party. A party is said to be insolvent if in the case of its own breach, the party cannot fully compensate the other party and cannot pay the damages set by the court.

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In other words, a contracting party is potentially insolvent if his wealth level cannot cover an award of at least expectation damages set by the court. The presence of insolvency dilutes the effort incentives of the insolvent party. In other words, limited liability will induce the insolvent party to undertake an inefficiently low level of effort. Court errors represent another factor that may induce partial compensation. According to the existing literature, courts are prone to incur systematic errors or biases in the quantification of damages.70 Likewise, courts can choose to liquidate damages according to a measure that falls short of expectation damages due to difficulties in proving subjective value. Alternatively, they can impose limitations on damages based on the foreseeability of harm.71 As with limited liability, court errors will cause a dilution of the effort incentives in the case of undercompensation.72 Parisi, Luppi and Fon have suggested that the inefficiencies induced by insolvency and court errors can be mitigated, under some circumstances, by the ability of the parties to structure their contract as a bilateral contract. The choice of bilateral contracts in real-life contractual practice may therefore be driven by the presence of imperfect compensation. Imperfect compensation may be present due to a number of different reasons, including limited liability, legal costs and court errors. In a bilateral contract, the contracting parties are given an opportunity to tie two contractual obligations together, with incentives that are superior to those achievable with two independent unilateral contracts. The superiority of a bilateral contract derives from specific legal remedies that apply in cases of unilateral and bilateral breach in bilateral contracts, in the presence of imperfect compensation of the contractual parties.73 In cases of limited liability, the preclusion rule has mixed effects on the parties’ incentives depending on the relative wealth of the parties. More specifically, the preclusion rule corrects the distortion of effort incentives for the party with higher wealth. The preclusion rule, however, worsens the distortion of effort incentives for the party with lower wealth. When the parties are equally limited in their wealth, the preclusion rule does not have any effect on optimal effort. In a similar way, 70 71 72

Dore and Veitch (1994); Muris (1983). Ayres and Gertner (1989); Goetz and Scott (1980). On the other hand, overcompensation induces an inefficiently high level of

effort. 73

See Parisi, Luppi and Fon (2011) (suggesting that another example of superiority of bilateral contract is the presence of interdependent values for the contract among the parties).

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in the case of court errors, application of the preclusion rule alone would have mixed effects on the parties’ incentives. The effects depend on the relative size of distortion of the court assessment of compensation between the parties. The following numerical example is designed to illustrate that specific remedies for bilateral contracts may correct the distortion induced by imperfect compensation on the private optimal choice of effort and reliance. Without loss of generality, our example focuses on one specific reason for imperfect compensation: limited liability. In the event of limited liability, parties have a wealth level inferior to the damages set by the court in the event of breach. In this case, parties may not receive full compensation in case of breach. Imperfect compensation dilutes the incentives to perform and invest in reliance. Even a small level of insolvency induces the parties to have a private optimal level of effort and reliance investment lower than the social optimum. Suppose that the parties’ wealth is equal to 1/2. The limited liability arises when the wealth level of the breaching party is inferior to the expectation damages, equal to 4/3 in the numerical example (i.e., the value of the contract if the parties act in a socially efficient way). The presence of even a small level of insolvency dilutes the incentive to exert effort (effort then falls to 1/16 units), with a consequent reduction of the probability of performance (probability falls from 2/3 to 1/4). The private optimal level of reliance investment falls to 1/64, inducing a consistent reduction of the soughtafter gain from the contract (the gain falls from 4/3 to 9/8). The defense of non-performance distorts incentives in the opposite direction from the distortion created by limited liability. This defense induces the parties to exert more effort and reliance than is socially optimal. In the presence of limited liability, therefore, the defense of non-performance can be seen as a way to compensate the party in the presence of the phenomenon of imperfect compensation. Under the same numerical assumption discussed above, the defense of non-performance raises private optimal effort, from 1/16 to 1/4 units, even though it still remains below the socially optimal level (4/9 units). This induces an increase in the probability of performance, from 1/4 to 1/2, although the level remains below the socially optimal level of 2/3. The private optimal level of reliance investment increases from 1/64 to 1/16, inducing an increase of the sought-after gain from the contract (from 9/8 to 5/4), even if full efficiency is not regained (4/3 being the socially optimal gain from

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the contract). If the preclusion rule is available, in addition to the defense of non-performance, the equilibrium will not change.74 In Table 7.2, we summarize the efficiency results on optimal effort in three cases of contract imperfections (limited liability, court errors and legal costs) and compare the privately optimal level of effort with the socially efficient one. Table 7.2 Correcting contract imperfections with bilateral remedies Defense of nonperformance

Preclusion rule

Defense of non- performance and preclusion rule

Limited liability optimal performance effort for both parties

optimal performance efforts for wealthier party suboptimal performance effort for poorer party

optimal performance efforts for wealthier party suboptimal performance effort for poorer party Court errors

optimal performance effort for both parties

optimal performance efforts

optimal performance effort for both parties

Legal costs optimal performance effort for both parties

optimal performance effort for both parties

optimal performance effort for both parties

The results in Table 7.2 may explain the conditions under which parties may decide to entire a contract with the exchange of promises of future performance, instead of disentangling the relationship and entering into two independent unilateral contracts. Our conclusions are consistent with the fact that, although parties sometimes enter into contracts with mutual performance obligations as a matter of convenience, most real-life examples of bilateral contracts involve relationships with imperfect enforcement.

74 Under the symmetric case, when only the preclusion rule is available, the equilibrium will coincide with the case when no specific remedy is available.

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V.

CONCLUSION

In this chapter, we study some problems that parties face when entering into contracts with bilateral promises of future performance. After identifying existing legal solutions in contemporary and historical legal systems, we have observed that two rules often found in legal systems acquire particular relevance. The first group of rules originates from the exceptio inadimpleti contractus and is known at common law as the defense of non-performance. This rule relieves the non-breaching party from his duty to perform his counter-performance. This rule, by threatening the breaching party with a loss of contractual surplus, increases the cost of unilateral breach. Our numerical example shows that this may lead both parties to undertake an excessive level of effort. Our numerical example shows that reliance incentives are also distorted by the defense of non-performance, though less severely than performance incentives. The magnitude of these distortions depends on the parties’ expectations regarding their counterpart’s use of the defense of non-performance. Factors such as the presence of contract-specific investments, uncertainty in contract litigation, and opportunities to redeploy withheld performances, likely affect the magnitude of the distortion created by the defense of non-performance. The second group of rules creates procedural or substantive preclusions (in the event of a bilateral breach), for a plaintiff who is also in default. A ‘plaintiff in default’ preclusion implies that no damages are due by either party in the event of a bilateral breach. Our analysis shows that a preclusion rule for bilateral breach leads to a different type of distortion of incentives: some parties undertake excessive performance efforts, while others undertake suboptimal levels of effort. Taken in isolation, neither remedy seems optimal for the enforcement of bilateral promises. In an ideal world of costless litigation and no administrative costs, optimal remedies should not include a defense of non-performance nor a preclusion rule. Although this may appear counter-intuitive, recent law and economics literature has shown that granting breaching parties the right to obtain the counter-performance or equivalent expectation damages is necessary to maintain optimal incentives in most bilateral contract cases.75 Building on the recent work of two of the current authors, our analysis suggests that the solution utilized by many legal systems, combining remedies for unilateral and bilateral breach, mitigates the problem of excessive effort for one party, although 75

Schweizer (2006) 134–45.

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possibly exacerbating the problem for the other.76 Before drawing any firm conclusion, we should note that parties faced with a performance problem do not generally know ex ante whether the contract will result in default, or whether the breach will be unilateral or bilateral. The remedies that we have considered are likely to ‘fail’ when parties do not face ex ante uncertainty and strategically rely on the other party’s forthcoming breach, choosing lower performance efforts. This strategic reliance amplifies the inefficiency of one party’s breach, contaminating the other party’s incentives. The current process of search for transnational principles of contract law should consider the adequacy, or lack thereof, of these legal remedies, and maybe encourage a tailored application of bilateral contract remedies in precisely those cases in which the standard remedy of bilateral expectation damages would be most inadequate.

REFERENCES Acquis Group (2009) Principles, Definitions and Model Rules of European Private Law: Draft Common Frame of Reference (DCFR). C. von Bar and E. Clive (eds) http:// ec.europa.eu/justice/contract/files/european-private-law_en.pdf Ayres, I. and Gertner, R. (1989) ‘Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules’, 99 Yale LJ 87 Barton, J.H. (1972) ‘The Economic Basis of Damages for Breach of Contract’, 1 J Legal Stud. 277 Cenini, M. and Parisi, F. (2009) ‘An Economic Analysis of the CISG’, CISG Methodology 151–70 Cooter, R.D. and Ulen, T. (2003) Law and Economics, 4th edition, Addison Wesley Corbin, A.L. (1982) Corbin on Contracts, West Publishing Dore, K.J. and Edward Veitch, E. (1994) ‘Guarding Against Over-Compensation When Measuring Damages by the Cost of Repair, Replacement or Performance: The Role of Undertakings’, 23 Canadian Bus. LJ 432 Edlin, A. and Reichelstein, S. (1996) ‘Holdups, Standard Breach Remedies and Optimal Investment’, 86(3) Am. Econ. Rev. 478–501 Eisenberg, M.A. and McDonnell, B.H. (2003) ‘Expectation Damages and the Theory of Overreliance’, 35 Hastings LJ 1335 Farnsworth, E.A. (1981) ‘The Problems of Nonperformance in Contract’, 17 New Eng. L Rev. 249 Fuller, L.L. and Perdue, W.R., Jr. (1936) ‘The Reliance Interest in Contract Damages’, 46 Yale LJ 52 Goetz, C.J. and Scott, R.E. (1980) ‘Enforcing Promises: An Examination of the Basis of Contract’, 89 Yale LJ 1261 Gorla, G. (1955) Il Contratto, Milan Gorla, G. (1968) ‘Promesse “Condizionate” ad Una Prestazione’, Revista Del Diritto Commerciale

76

Parisi, Luppi and Fon (2011).

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172 Comparative contract law Gregory, J. (2000) ‘Note, Uniform Contract Law of the People’s Republic of China: First Comparative Look’, 12 Fla. J Int’l L 467 Guest, A.G. (ed.) (1984) Anson’s Law of Contract, Oxford University Press Hart, O. and Moore, J. (1990) ‘Property Rights and the Nature of the Firm’, 98 J Pol. Econ. 1119 Hsu, C.S. (2007) ‘Contract Law of the People’s Republic of China’, 16 Minn. J Int’l L 115 James, F. (1916) The Law of Option Contracts, Bender-Moss Company Klass, G. (2010) Contract Law in the USA, Kluwer Law International Korobkin, R. (2004) The Problems with Heuristics for Law, UCLA School of Law, Law and Economics Research Paper Series 5 Mahoney, P.G. (2000) ‘Contract Remedies: General’ in G. DeGeest and B. Bouckaert (eds), Encyclopedia of Law and Economics, Edward Elgar Publishing, 117–39 Malecki, C. (1999) L’exception d’inexécution, Parution Marchetti, C. (2012) ‘Un’Introduzione al Contract del Draft Common Frame of Reference: la (Necessaria?) Bilateralità Della Formazione del Vincolo’ in C. Marchetti (ed.), Il DCFR: lessici, concetti, e categorie nella prospettiva del giurista italiano, Giappichelli Messineo, F. (1961) ‘Contratto (Diritto Privato)’, 9 Enciclopedia del Diritto, Giuffrè 784–979 Miceli, T.J. (2009) The Economic Approach to Law, Stanford University Press Muris, T.J. (1983) ‘Cost of Completion or Diminution in Market Value: The Relevance of Subjective Value’, 12 J Legal Stud. 379 Parisi, F., Luppi, B. and Fon, V. (2011) ‘Optimal Remedies for Bilateral Contracts’, 40(1) J Legal Stud. 245 Perillo, J.M. (2003) Calamari and Perillo on Contracts, West Publishing Posner, R.A. (1972) Economic Analysis of Law, Little, Brown and Company Sacco, R. and De Nova, G. (2004) Il Contratto, 3rd edition, Turin Schlesinger, R.B. (ed.) (1968) Formation of Contracts, Oceana Publications Schweizer, U. (2006) ‘Cooperative Investments Induced by Contract Law’, 37(1) Rand J Econ. 134–45 Shavell, S. (1980) ‘Damage Measures for Breach of Contract’, 11 Bell J Econ. 466 Somma, A. (2000) Autonomia Privata e Struttura del Consenso Contrattuale, Milan Treitel, G.H. (1988) Remedies for Breach of Contract, Oxford University Press Treitel, G.H. (2003) The Law of Contract, Sweet & Maxwell Williamson, O.E. (1985) The Economic Institutions of Capitalism, The Free Press

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8. Spontaneous order and freedom of contract Carlo Ludovico Cordasco

I.

INTRODUCTION

As Gerald Gaus argues,1 Hayek’s theory of spontaneous order has been attacked on two opposite grounds: on the one hand, some theorists contend that it leaves no space for reforming or evaluating existing rules and institutional arrangements;2 on the other hand, other theorists claim that despite Hayek’s insistence on our ignorance in designing institutions, he still offers prescriptive claims on how we should order our societies.3 Furthermore, some other theorists argue that Hayek’s formulation of spontaneous order consists merely in the protection of freedom of contract or Locke’s triad of rights (life, liberty and property). In this chapter, I shall analyse three formulations of the theory of the spontaneous order emerging from Hayek’s account and try to show why the positions mentioned above are ultimately mistaken. Particularly, I will show that although Hayek’s theory provides us with reasons for limiting our pretence of modifying existing institutions arising out of negatively free human interactions, his theory of the spontaneous order does not justify, per se, all institutional arrangements generated by such interactions. Moreover, I argue that Hayek provides us with epistemic tools in order to interfere with the overall order of actions by limiting freedom of contract with the aim of correcting the ‘undesirable’ evolutive patterns that spontaneous orders may face. It is important to notice that I do not aim to argue that Hayek himself would allow for such interferences, but that they could be grounded in his formulation of the spontaneous order. The chapter is organised as follows: in the first part I shall introduce what I find to be Hayek’s three main requirements for social cooperation to be possible and will analyse the concept of complexity that is crucial 1 2 3

Gaus (2006). See Paul (1988). See Hodgson (1993).

173

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in order to comprehend Hayek’s account of the spontaneous order; within the second part I shall develop and analyse three different formulations of the spontaneous order, emerging from Hayek’s work, in order to show that his theory is (a) not bound to justify any existing institutional arrangements, (b) not contradictory when it prescribes how institutions should be arranged, (c) not merely consisting in the protection of Locke’s triad of rights.

II. THREE REQUIREMENTS FOR SOCIAL COOPERATION In the popular television programme, ‘The Walking Dead’, after a zombie apocalypse, a group of survivors desperately try to get rid of zombies and to establish a peaceful social order. The main obstacles that the group faces are essentially four: (1)

(2)

(3)

(4)

Contamination between zombies and survivors happens quite often and they need to figure out what causes it in order to avoid it, and how to kill zombies. People reacted differently to the zombie apocalypse: many became thieves and it is hard to know what to expect when groups of survivors meet. There are different and often incompatible goals, both intra-group (among members of a single group) and inter-groups (among different groups). For instance, in a certain group some members may prefer to assume relevant risks to rescue their relatives, some others might prefer to risk their lives in order to find a safer environment, some others might think there is no such thing as a safer environment, and that the search is ultimately worthless. Behaviours are not regulated by stable and efficient social norms.

These four obstacles might be summarised in three main points, which also constitute what I find to be Hayek’s three minimum requirements for social order to be possible: certainty, compatibility of goals, efficiency. If I could not attribute any probabilities on your reactions to my actions, it would be incredibly hard to coordinate and pursue our goals. To live in an ordered world means, in the first place, to be able to form expectations that have a good probability to be correct. For instance, in a post-apocalyptic scenario such as in ‘The Walking Dead’ it is unclear what kinds of conduct lead to contagion (whether the physical contact

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with zombies is enough to be contaminated), what kinds of behaviour should we expect from other survivors, etc. This uncertainty can be overcome mainly through the observation of regularities. For instance, I can form expectations on how contagion happens if I can observe regularities when analysing it. Clearly, my expectations can be mistaken but I have, at least, some reasons to attribute probabilities on future events. Similarly, if group X of survivors happen to be robbed every time they meet an unknown group, group X may reasonably come to suspect that theft is quite common among groups of survivors and, thus, take some precautions. There is a clear positive correlation between our ability to form expectations on future events and the possibility of satisfying our goals: for instance, I need to know what kinds of formal and informal conducts may help in pursuing an academic career in the United States if I wish to become a professor; similarly, if I do not have the ability to form meaningful expectations on shops’ opening and closing times, it would be hard to organise my day. In fact, it is difficult to imagine how we could possibly design either long or short-term plans aimed at pursuing our own goals without a certain degree of certainty within our social order. The importance of certainty in Hayek’s definition of order can be easily traced by looking at one of the most famous passages of Law, Legislation and Liberty: [Order is a] state of affairs in which a multiplicity of elements of various kinds are so related to each other that we may learn from our acquaintance with some spatial or temporal part of the whole to form correct expectations concerning the rest, or at least expectations which have a good chance of proving correct.4

The second aspect I wish to consider is compatibility of goals. Goal compatibility, here, should not be interpreted at a micro-level. There are, in fact, many intuitive cases in which our goals are non-compatible with one another in that they cannot be fulfilled together: for instance, we can compete for a PhD scholarship, to win the Wimbledon Championships, to become the President of the United States. However, the fact that our goals are often non-compatible does not make playing the social game worthless. Here, on the other hand, I refer to goal compatibility as a general compatibility of individuals’ ends: for instance, it would be meaningless to live in a society based upon theft, not just because we 4

Hayek (1982) vol. I, 36.

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may consider theft as immoral, but because there is an overall incompatibility of goals both among thieves and between thieves and non-thieves. In a society based upon theft I can even form correct expectations on other people’s reactions to my actions, but it would be worthless to play the social game as it would hardly be a sum-positive game for the parties involved. Compatibility of goals clarifies why any meaningful definitions of order relying merely on certainty are bound to be incomplete: we may live in a society where individuals can form the correct expectation to be robbed every time they meet someone they do not know, they can even know the strategies through which thieves operate, but we would hardly define such society as ordered. In a society based upon theft we can experience different degrees of certainty, but there is no room for goal compatibility.5 The third basic requirement I wish to focus on is efficiency. Suppose two sisters, Penny and Julia, find a chocolate cake and they need to find a way to divide it. Unless they spontaneously converge on a solution, such that Julia only wants a quarter of the cake and Penny is happy with the remaining 75 per cent, they need a norm to solve the dispute. In the case in which the spontaneous solution is not at hand, the fact that Penny and Julia can form correct expectations with regard to the portions of the cake that each other desires does not necessarily mean they will be able to reach an agreement. Norms, thus, are needed in order to find a uniquely salient solution to a coordination problem, reducing the risk of coordination failure. Without such solutions to coordination problems we would hardly define our society as ordered as there is no predictable way to settle disputes and to avoid the risk of systematic coordination failure. The efficiency requirement, though, does not merely say we need norms to solve such disputes; it says we need efficient norms. Suppose, again, Penny and Julia want respectively 80 per cent and 30 per cent of the cake: although any norm would be better than the impossibility to peacefully coordinate, a norm dividing the cake into 70 per cent for Penny and 30 per cent for Julia would intuitively make more sense than another one assigning 10 per cent to Penny and 90 per cent to Julia. As we shall see, though, what Hayek is looking for is not a single norm able to maximise payoffs at any given situation, but rather a set of norms that 5 Although in the quoted passage Hayek seems to define order as a mere function of certainty, many other passages clarify the importance of compatibility of goals as a basic requirement for social order under his account. See Hayek (1982) vol. I, 202–4, 207, 211.

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is able to create the conditions for cooperation and coordination allowing for the satisfaction of compatible goals over time. Although Hayek seems to take compatibility of goals as an exogenous requirement (in that he takes goals as given), certainty and efficiency are, in Hayek’s mind, the two features on which the spontaneous order acts with the aim of creating the conditions for social cooperation in order to maximise the satisfaction of the largest number of compatible goals, as we shall see in the rest of the chapter. It is important to notice that each of these basic requirements is continuous: in fact, we can imagine different degrees of certainty, compatibility of goals and efficiency. The more is the adherence to those requirements, the more it would be meaningful to play the social game since it would result in an overall sum-positive game in which we all have better chances to pursue our own goals.

III.

COMPLEXITY AND THE SPONTANEOUS ORDER

Before I go through the analysis of Hayek’s formulations of spontaneous order I need to say a few words on the concept of complexity that is crucial to comprehend the nature of the theory of spontaneous order. Complexity plays an important role in Hayek’s system of ideas insofar as social orders are inherently complex ones. They in fact possess two main features: non-ergodicity and high number of variables. Economists such as Douglass North speak of non-ergodicity to define the continually changing structure of our social orders: If I say the world is ergodic, I mean that it has a stable underlying structure, such that we can develop a theory that can be applied time after time, consistently. It is very important to understand that the world with which we are concerned is continually changing, is continually novel. That does not mean that there are not ergodic aspects of the world. But we cannot develop theory that can be used over and over again and over time. For an enormous number of issues that are important to us, the world is one of novelty and change; it does not repeat itself. There may be lessons in history, but we have to be careful about them.6

Let us think about the invention of the washing machine, to the ways in which it changed our lives, giving us much more free time compared to the past, when doing the laundry used to take an entire day of the week. This spare time could be used to go shopping at the city centre, meet new 6

North (1999) 2.

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friends, cultivate new hobbies, be connected with new ideas concerning lifestyle, politics, fashions, morality, etc. Cultural diversity is an important source of non-ergodicity, since it determines relevant changes to the basic structure of our societies. There are even more intuitive examples of innovations that, by cutting transaction costs, allowed us to be connected to new people and to be acquainted with new ideas. These sorts of innovation change, more or less directly, the basic structure of our world with no possibility of going back to previous equilibria. Essentially, what distinguishes a non-ergodic from an ergodic system is the way in which their structures react to the introduction of novelty: an ergodic system returns back to its initial state, while a non-ergodic one changes its structure permanently. Non-ergodicity also implies two other features of complex systems: tight coupling and error sensitivity. Computer scientists refer to tight coupling to describe a system in which hardware and software are not just linked but inextricably dependent on one another. A small change in the structure of the former will determine significant changes within the latter. Similarly, error sensitivity says that if we try to reproduce a complex system, even a small error in reproducing a single element, its structure, its positions or interactions, will determine enormous differences in the evolution of the new system.7 Here, the elements of our complex system are individuals; the objects of our investigation are the interactions among them, the interactions between elements and the environment, and the equilibria arising out of these interactions. The other important feature concerns the high number of elements. There is not a precise number of elements needed in order to define a system as complex, and the individuation of complexity rests on an intuitive level.8 For the purpose of the present chapter, though, the individuation of the complexity of our object is intuitively clear: the world we inhabit is characterised by a large number of elements

7 On this issue I found particularly useful the reading of Alippi, Piuri and Sami (1994). 8 On this issue I found particularly interesting Cotsaftis (2009). Anyway, the literature concerning complexity is incredibly vast. For a general introduction to the concept of complexity see Mitchell (2009). Here is a list of selected works I found extremely useful: Kauffman (1993); Simon (1962); Gell-Mann (1988); Gell-Mann (1984); Papentin (1980); Koppl (2006).

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(individuals), that are inextricably related to one another, generating continuous moral and technological innovation.9

IV.

UTILITARIANISM AND THE SPONTANEOUS ORDER

Hayek is often regarded as a critic of the utilitarian tradition but the theory of spontaneous order seems to belong to the utilitarian framework.10 This appears to be evident from Hayek’s account of the general good in a free society as ‘the facilitation of the pursuit of unknown individual purposes’. Such definition, in fact, opens the second volume of Law, Legislation and Liberty and starts Hayek’s critical discussion of the utilitarian tradition. While Hayek seems to regard the satisfaction of the largest number of compatible goals as the ultimate aim of the theory of spontaneous order, his attitude toward the utilitarian tradition remains sceptical. The main reason for such scepticism can be found by looking at Hayek’s knowledge problem: The fact, however, is that in a Great Society in which the individuals are to be free to use their own knowledge for their own purposes, the general welfare at which a government ought to aim cannot consist of the sum of particular satisfactions of the several individuals for the simple reason that neither those nor all the circumstances determining them can be known to government or anybody else. Even in the modern welfare societies the great majority and the most important of the daily needs of the great masses are met as a result of processes whose particulars government does not and cannot know.11

Here, Hayek is clearly rejecting the maximisation of particular satisfactions of several individuals as the ultimate end of the Great Society on two main grounds: first, in a complex world there is no such thing as a planner able to know the goals of particular individuals; second, goals are not given but emerge after a process of discovery that is dynamic and, thus, subject to change. Such criticisms, though, do not undermine the utilitarian soul of his moral/political theorising, but merely aim to criticise utilitarianism on practical grounds, that is to say on how utility is 9 Despite the requirement of the large number of elements, in this chapter many examples will only involve a few individuals. This oversimplification should not be an obstacle for my purposes. 10 On Hayek and Utilitarianism see also Gray (1984). 11 Hayek (1982) vol. 2, 2.

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to be maximised. Essentially, the utilitarian tradition, in Hayek’s mind, fails to take seriously the ignorance of legislators and planners. The knowledge problem, indeed, seems to undermine the feasibility of naive utilitarian approaches by ruling out the possibility of knowing individuals’ goals: [That] the prime public concern must be directed not toward particular known needs but toward the conditions for the preservation of a spontaneous order which enables the individuals to provide for their needs in manners not known to authority was well understood through most of history. For those ancient authors whose ideas chiefly provide the foundations of the modern ideal of freedom, the Stoics and Cicero, public utility and justice were the same. And on the frequent occasions when utilitas publica was invoked during the Middle Ages, what was generally meant was simply the preservation of peace and justice.12

If particular goals are either impossible to be gathered to the planner or dynamic, then, direct maximisation is problematic in two main senses. Suppose that Alf and Betty have two different sets of goals x and y and that Bob, the planner, is supposed to choose the set of rules that maximises the satisfaction of the largest number of Alf and Betty’s compatible goals. If Bob is not able to know Alf and Betty’s particular goals, then, direct maximisation is strictly impossible. On the other hand, if Bob is aware of Alf and Betty’s sets of goals at t1, but the goals are dynamic, then, the set of rules that allows for the maximisation of goals at t1 may be different from the set of rules that would be required at t2. This latter scenario poses four different kinds of knowledge problem: (a) Bob is aware of x and y at t1 but cannot predict the evolution of x and y, then, we face a classic knowledge problem starting at t2 instead of at t1; (b) Bob is aware of x and y both at t1 and t2, but the set of rules cannot be changed without costs for Alf and Betty; (c) Bob is aware of x and y both at t1 and t2 but is unable to find the set that contains the largest number of compatible goals between x and y; (d) Bob is aware of x and y both at t1 and t2 but is unable to find the set of rules that would lead to the satisfaction of the largest number of compatible goals over time. How are we supposed to maximise the satisfaction of the largest number of compatible goals if goals are continuously changing and cannot be known by planners or legislators? Since particular goals cannot be the direct object of planner’s maximisation, the choice among sets of rules is, ultimately, worthless. Such choice, indeed, would need to be based on a calculation that the planner is unable to perform. 12

Hayek (1982) vol. 2, 2.

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Hayek’s solution to the knowledge problem seems to consist in a sort of indirect maximisation. Specifically, rules should aim at maximising the satisfaction of the largest number of compatible goals by securing the conditions for cooperation and coordination. Sets of rules able to create a cooperative environment are tools that might be able to allow individuals to satisfy the largest amount of compatible goals within a certain social order. In Hayek’s words: The rules of conduct which prevail in a Great Society are thus not designed to produce particular foreseen benefits for particular people, but are multipurpose instruments developed as adaptations to certain kinds of environment because they help to deal with certain kinds of situations. And this adaptation to a kind of environment takes place through a process very different from that in which we might decide on a procedure designed to achieve particular foreseen results. It is based not on anticipation of particular needs, but on the past experience that certain kinds of situations are likely to occur with various degrees of probability. And the result of such past experience gained through trial and error is preserved not as a recollection of particular events, or as explicit knowledge of the kind of situation likely to occur, but as a sense of the importance of observing certain rules.13

We may summarise Hayek’s claims as follows: (i)

The main aim of a Great Society is to maximise the satisfaction of the largest number of compatible goals. (ii) Sets of rules should be evaluated according to their ability in bringing such maximisation. (iii) Particular goals cannot be known and, even if they were, rules cannot aim to satisfy such goals as long as we cannot predict the detailed effects that particular norms will have on the realisation of particular goals. Hence, sets of rules chosen with the aim of satisfying particular goals do not really bring the maximisation we are looking for. Rule-utilitarians who endorse such calculation are mistaken. They ignore the fact that ‘we need rules insofar as we are ignorant’. (iv) Sets of rules should merely promote cooperation and coordination and should be selected according to past experience.

13

Hayek (1982) vol. 2, 4.

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V.

A FIRST DEFINITION OF SPONTANEOUS ORDER

Why should we rely on past experience in selecting sets of rules that promote the conditions for cooperation and coordination? The main reason is that rules, in Hayek’s mind, are the result of a complex selection process that embeds individual expectations and preferences. If Bob were able to collect Alf and Betty’s specific goals and to select a set of norms that maximises their payoffs, there would no need for the complex selection process. We may just collect information and deliberate about which set of rules would be best in order to maximise payoffs. On the contrary, when Bob is ignorant with regard to Alf and Betty’s goals or unable to perform the calculation, Hayek’s solution to the maximisation problem consists in the reliance on past experience in order to select the best set of rules. The main questions to Hayek’s solution are: what is the relationship between past experience and the satisfaction of goals? Which mechanism is able to select rules embedding the past experience that is needed in order to create the conditions for cooperation and coordination? When payoffs are not available or it is meaningfully impossible to choose between different sets of rules, reliance on past experience in selecting sets of rules is motivated by the idea that the evolution of norms tend to follow a non-random pattern that would naturally improve rules, facilitating cooperation and coordination among individuals. Particularly, according to Gaus, Hayek identifies three main ways in which norms evolve: group survival, group growth and an endogenous mechanism.14 The first two mechanisms capture the idea of an intergroup selection of rules: Although the existence and preservation of the order of actions of a group can be accounted for only from the rules of conduct which individuals obey, these rules of conduct have developed because the individuals have been living in groups whose structures have gradually changed. In other words, the properties of the individuals which are significant for the existence and preservation of the group, and through this also for the existence and preservation of the individuals themselves, have been shaped by the selection of those individuals from the individuals living in groups which at each stage of evolution of the group tended to act according to such rules as made the group more efficient.15

14 15

See also Shearmur (1996). Hayek (1982).

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According to those two requirements, the evolution of norms regulating the group of Alf and Betty is shaped by a process of imitation of more successful groups. If, for instance, Penny and Julia, complying with set of norms k, were able to achieve better outcomes than Alf and Betty did, under set z, Alf and Betty would naturally converge toward set k. Such shift may not be the result of Alf and Betty’s rational and intended deliberation, but rather the unintended result of complex interactions. At the inter-group level, the process of imitation normally concerns the whole set of norms instead of particular rules. This is because Alf and Betty can hardly isolate the effects of particular norms on the general outcomes. This means that, if a particular rule R, belonging to set k seems more efficient compared to another norm, belonging to set z, it may very well be the case that if Alf and Betty decide to incorporate R within z, the interaction between R and z may even worsen z’s ability to bring the desired outcomes. The endogenous mechanism, on the other hand, works at the intragroup level and is shaped by the ‘competition between individuals’. As Gaus says: ‘This stress on individual competition and the evolution of rules suggests that, instead of a competition between social orders, Hayek has in mind a competition between individuals within a social order that leads to the selection and evolution of rules’.16 Specifically, intra-group selection is shaped by non-random deviations from the current set of rules. Particularly, rules that do not satisfy entirely Alf or Betty are more likely to be violated and, thus, replaced with more efficient rules. If Betty rightly expects that following norm b would produce better outcomes than by complying with norm a, and such deviation also satisfies Alf, then, b will replace a. If any orders in which inter and intra-group selection processes of norms take place could be defined as spontaneous, then, almost any order would be considered as spontaneous. In fact, any institutional arrangements already embed the competition processes that shape the evolution of norms. This is to say that both the intra and inter-group selection processes happen almost in any kinds of social order. If we are to define norms as good or justified merely by virtue of being selected by those mechanisms, then any norm or institutional arrangements would be either good or justified and there would be little to say about possible improvements. However, this is not what Hayek has in mind when he thinks about the theory of spontaneous order. He seems to think that improvements can be possible at the general level, or at the basic 16

Gaus (2006).

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structure level. In order to show that, I need to introduce a crucial distinction between fine-grained explanations and explanations of the principle.

VI. EXPLANATION OF THE PRINCIPLE AND A SECOND DEFINITION OF SPONTANEOUS ORDER Although Hayek’s account of the evolution of norms provides several and decisive reasons for relying on existing sets of rules, it does not exclude the possibility of prescriptive judgements on how to improve the overall order of actions even in the absence of a detailed knowledge. Such evaluation is made possible by Hayek’s distinction between explanations of the principle and detailed or fine-grained explanations. Specifically, fine-grained explanations of complex systems, such as political orders, require ‘that we have at our disposal distinct elements whose action in different circumstances is known irrespective of the particular model in which we use them’.17 Hence, all explanations concerning complex systems must possess some degree of generality since ‘[t]he model might reproduce only the few common features of a great variety of phenomena, or it may reproduce a much larger number of features common to a smaller number of instances’.18 The degree of generality, though, is not simply the result of an agent’s choice but is also dictated by an epistemological constraint, which impedes us from giving meaningful detailed explanations of complex systems. Such constraint constitutes one of Hayek’s most relevant contributions to epistemology and consists in the logical necessity, for any apparatus of classification, to ‘possess a structure of a higher degree of complexity than is possessed by the objects which it classifies; and that, therefore, the capacity of any explaining agent must be limited to objects with a structure possessing a degree of complexity lower than its own’.19 To fully understand the epistemological constraint Hayek is outlining it is useful to propose one of his examples: The usual kind of explanation which we give, e.g., of the functioning of a clockwork, will in our sense be merely an explanation of the principle. It will merely show how the kind of phenomena which we call clockworks are 17

Hayek (1952) 182. Ibid. 182. 19 On the relationship between Hayek’s epistemological studies and the theory of spontaneous order, see also Horwitz (2000), and Cubeddu (1993). 18

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Spontaneous order and freedom of contract 185 produced: the manner in which a pair of hands can be made to revolve at constant speeds, etc. In the same ‘general’ way most of us are familiar with the principles on which a steam engine, an atomic bomb, or certain kind of simple organisms function, without therefore necessarily being able to give a sufficiently detailed explanation of any one of these objects so that we should be able to construct it or precisely to predict its behaviour.20

Explanations of complex events, thus, always require some degree of generality: Even where we are able to construct one of these objects, say a clockwork, the knowledge of the principle involved will not be sufficient to predict more than certain general aspects of its operation. We should never be able, for instance, before we have built it, to predict precisely how fast it will move or precisely where its hands will be at a particular moment of time.21

The impossibility to provide detailed explanations and, thus, fine-grained predictions of how a complex system works or evolves, that is, in Alf and Betty’s story, the impossibility to foresee the detailed consequences of replacing one rule with another, does not prevent us from giving prescriptive judgements on the general structure of the overall order of actions. The ability to provide general explanations and predictions of how a complex system works allows us to distinguish between good and bad evolutive patterns of the overall order of actions. Essentially, it provides us with the ability to determine which set of general rules or principles is better in order to create the conditions for cooperation and coordination. Although we might not be able to produce general improvements in a complex system by replacing single elements or changing certain kinds of interactions among its elements, we can act at its basic structure level in order to obtain the desired changes. This means that we are not bound to be stuck with the existing set of rules if we know that there is a better set of basic rules at our disposal that would produce better patterns. For instance, going back to Hayek’s example of the clockwork, we should not rely on the time indicated by a clockwork that has not been properly constructed. We might not possess the detailed and fine-grained knowledge that would allow us to correct the functioning of the broken clockwork by applying small weights on its lancets, but we might be able to reproduce it with a functioning basic structure. 20 21

Hayek (1952) 183. Ibid. 183.

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Our ability to provide explanations of the principle is, thus, needed in order to theorise around the general framework of rules that would be able to secure the conditions for cooperation and coordination even though we are not able to predict which particular rules will arise out of those basic and procedural rules and how particular goals are going to be satisfied. It is, thus, the ability to provide explanations of the principle that allows Hayek to claim that the protection of Locke’s triad is the best available solution in order to maximise the satisfaction of the largest number of compatible goals: Property, in the wide sense in which it is used to include not only material things, but (as John Locke defined it) the ‘life, liberty and estates’ of every individual, is the only solution men have yet discovered to the problem of reconciling individual freedom with the absence of conflict. Law, liberty, and property are an inseparable trinity. There can be no law in the sense of universal rules of conduct which does not determine boundaries of the domains of freedom by laying down rules that enable each to ascertain where he is free to act.22

According to such account, an order is spontaneous when it is the result of free human interactions and not of human design. Specifically, we have strong reasons to rely on existing rules that arise out of a system that is based on the protection of freedom of contract. Such definition of the spontaneous order is, thus, ultimately negative freedom based. According to it, any institutional arrangements arising out of a system of rules that protects our freedom of contract should be the best ones in securing the conditions for cooperation and coordinations and, thus, in facilitating the satisfaction of the largest number of compatible goals. While the first formulation defined as spontaneous any order whose rules were the result of inter and intra-group selection processes, this formulation defines as spontaneous any order whose particular or specific rules arise out of individuals’ interactions, in a context characterised by the protection of freedom of contract. I refer to this formulation as ‘spontaneity in origin’.

22

Hayek (1982) vol. 1, 107.

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VII.

A THIRD DEFINITION OF SPONTANEOUS ORDER

The controversial aspect of spontaneity in origin concerns Hayek’s reliance on the protection of freedom of contract as a necessary and sufficient pre-condition in order to satisfy the largest number of compatible goals. But, what motivates it? Hayek sees rules arising out of free human interactions as prices emerging in a free market economy: Fundamentally, in a system where the knowledge of the relevant facts is dispersed among many people, prices can act to co-ordinate the separate actions of different people in the same way as subjective values help the individual to co-ordinate the parts of his plan.23

For Bob to be able to satisfy the needs of Alf and Betty, he needs to collect all the relevant information concerning their sets of goals and their evolutions. For instance, Bob needs to be aware of the kinds and quantities of goods that Alf and Betty would need. Such knowledge is not at the planner’s disposal and the problem of coordinating economic decisions, within free-market systems, is solved through the price system. Through the price system, decisions concerning what and how to produce are made at a decentralised level and prices work as signalling devices that embed the knowledge dispersed among individuals. This may not be evident in the oversimplified example concerning Alf and Betty, but it is clear when we deal with complex orders in which many individuals play the economic game. Similarly, Hayek thinks of rules arising from free human interactions as coordination devices that embed relevant knowledge. Those rules, in fact, are supposed to embed Alf and Betty’s sets of goals and should be able to capture the evolutions of those sets. The dynamic element is crucial in considering the importance of prices and rules arising out of free human interactions. We might, in fact, suppose that if Alf and Betty’s sets of goals were static, the relevant information needed in order to satisfy the set of compatible goals might be somehow available to the planner. Changes in Alf and Betty’s sets are, thus, crucial in order to argue in favour of the price system and of rules arising from human interactions, in order to coordinate Alf and Betty’s actions:

23

Hayek (1945) 526.

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188 Comparative contract law If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resource immediately available to them. We cannot expect that this problem will be solved by first communicating all this knowledge to a central board which, after integrating all knowledge, issues its order.24

According to such account, the most important task that any order has to satisfy in order to create the conditions for cooperation and coordination is to be able to adapt to changing circumstances. If orders fail in adapting to changing goals and preferences they also fail in creating the conditions for cooperation and coordination insofar as playing the social game may not be a sum-positive game for the parties involved when preferences and goals change. Hence, in order to create those conditions, we need to take into account such dynamism. As for the price system with economic decision making, here, Hayek seems to think about rules as devices that are ultimately embedding the information needed to create the conditions for cooperation and coordination. I shall refer to such definition as ‘actual spontaneity’.25

VIII.

THREE DEFINITIONS OF SPONTANEOUS ORDER

To summarise, we have now three different formulations of the spontaneous order: (i)

An order is spontaneous when its rules are subject to inter- and intra-group selection mechanisms. (ii) An order is spontaneous when its rules are the result of a general institutional arrangement that protects Locke’s triad (spontaneity in origin). (iii) An order is spontaneous when it is able to adapt to new circumstances (actual spontaneity). Rather than an account of the spontaneous order, (i) constitutes a descriptive account of how the evolution of norms is shaped. When 24 25

Ibid. 524. On the idea of Actual Spontaneity see also Cordasco and Bavetta (2015).

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Hayek describes the two selection mechanisms, he does not aim to claim that any set of rules, by virtue of being the result of those selection processes, is either good or justified. His intent is merely to show what drives the evolution of norms at large. (ii) and (iii), on the other hand, are, in Hayek’s opinion, necessarily linked. Particularly, Hayek seems committed to a view that purports (iii) as the consequence of (ii). Essentially, by protecting Alf and Betty’s rights to life, liberty and property, we create the conditions for cooperation and coordination and allow for adaptation to changing circumstances (such as changes in Alf and Betty’s preferences and goals, or changes in technological constraints, etc.). However, it is not clear why the protection of those rights would automatically lead to the ability of an institutional arrangement to adapt to changing circumstances. It is, in fact, easy to imagine a scenario in which spontaneity in origin may evolve in an order that does not possess actual spontaneity; and, similarly, we can imagine orders able to adapt to changing circumstances that are not the result of institutional arrangements that merely protect rights to life, liberty and property. We may, indeed, imagine scenarios in which the mere protection of freedom of contract does not lead to actually spontaneous orders. Take the case of a group of people, negatively free and unconstrained in the pursuit of their goals, that in order to enforce non self-enforcing contracts decide to assign the right to rule to a particular individual or to a group of individuals, according to certain criteria. The simple fact that such a decision is the result of people consenting to such an institutional arrangement does not tell us anything substantive about what kind of order will be generated. It may very well be the case that rulers will not be willing or able to adapt the institutional structure to changes in individuals’ preferences and goals. If preferences and goals change, the institutional structure that has been chosen at t1 may not be the best one in securing the conditions for cooperation and coordination at t2. A particular order can be stuck with certain institutional arrangements that satisfy the requirements of spontaneity in origin but do not satisfy those of actual spontaneity. Orders that are spontaneous in origin, thus, may easily generate institutional arrangements that are unable to adapt to new circumstances. On the other hand, we might imagine the possibility of implementing a set of general rules that would be able to create the conditions for cooperation and coordination over time, granting the possibility of adaptation to changing circumstances, even when the order cannot be defined as spontaneous in origin insofar as the implementation is not the result of people consenting to it.

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IX.

CONCLUSIONS

The main aim of this chapter was to clarify that when we rule out (i) from the set of the plausible formulations of the spontaneous order, we are still left with the improbable claim according to which (iii) is implied by (ii). If we accept that spontaneity in origin can lead to orders that do not possess actual spontaneity, and that actual spontaneity can be brought about by orders that do not possess spontaneity in origin, we have to prioritise one of the two formulations. If adaptation to changing circumstances seems what most captures Hayek’s idea of the spontaneous order, insofar as, without such feature, we would hardly maximise the satisfaction of the largest numbers of compatible goals, then (iii) is the formulation that we should prioritise. Gaus argues that Hayek’s main claims are: (a) that we cannot devise a reasonable plan to reform our rules in order to develop a better order of actions and, (b) because we cannot fully understand our system of rules, we will be largely in the dark about the overall effects of any change, so we often act in ignorance of the most important consequences.26

This seems only partially true: we can devise reasonable plans to improve an order, but such plans cannot be aimed at changing particular rules, but only basic ones. For instance, we can grasp the superiority of a certain order in collecting information and adapting to new circumstances, and we can, thus, prescribe changes to basic institutional aspects in order to improve the overall order of actions. What we cannot do is to aim to reform particular rules that arise out of the overall order of actions. Similarly, we can grasp how a spontaneous order, according to spontaneity in origin, may evolve in a non-spontaneous one, according to the concept of actual spontaneity, and we can imagine general rules that may be able prevent such evolution and, thus, protect the spontaneous order from non-spontaneous evolutions. Such a claim seems particularly relevant and has not been ignored by Hayek: The fact that all law arising out of the endeavour to articulate rules of conduct will of necessity possess some desirable properties not necessarily possessed by the commands of a legislator does not mean that in other respects such law may not develop in very undesirable directions, and that when this happens correction by deliberate legislation may not be the only practicable way out. For a variety of reasons the spontaneous process of growth may lead into an 26

Gaus (2006) 253.

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Spontaneous order and freedom of contract 191 impasse from which it cannot extricate itself by its own forces or which it will at least not correct quickly enough.27

Here, ‘undesirable directions’ seems to refer to the inability of the system to adapt to new circumstances and Hayek seems to attribute such bad patterns to differences in bargaining power: The necessity of such radical changes of particular rules may be due to various causes. It may be due simply to the recognition that some past development was based on error or that it produced consequences later recognised as unjust. But the most frequent cause is probably that the development of the law has lain in the hands of members of a particular class whose traditional views made them regard as just what could not meet the more general requirements of justice.28

Hence, explanations of the principle provide us with the ability to reform general or basic rules in order to improve the overall order of actions. Hayek’s theory of spontaneous order, then, cannot merely consist in the protection of Locke’s triad, insofar as it is not clear whether freedom of contract would always lead us toward orders that possess the ability to adapt to changing circumstances. We may have to pose limits to our freedom of contract in order to protect actual spontaneity.

BIBLIOGRAPHY Alippi, C., Piuri, V. and Sami, M. (1994) ‘The Issue of Error Sensitivity in Neural Networks’, Proceedings of the First International Conference on Massively Parallel Computing Systems, 2–6 May 1994 Butos, W.N. and Koppl, R.G. (2006) ‘Does the Sensory Order Have a Useful Economic Future’ in E. Krecke and K. Krecke (eds), Advances in Austrian Economics. Oxford: JAI Press, vol. 8 Butos, W.N. and McQuade, T. (2002) ‘Mind, Market and Institutions: The Knowledge Problem in Hayek’s Thought’ in J. Birner, P. Garrouste and T. Aimar (eds), F.A. Hayek as a Political Economist: Economic Analysis and Values. London: Routledge Butos, W.N. and McQuade, T. (2005) ‘The Sensory Order and Other Adaptive Classifying Systems’, 7 Journal of Bioeconomics 335–58 Caldwell, B. (2004) Hayek’s Challenge. Chicago, IL: University of Chicago Press Cordasco, C. and Bavetta, S. (2015) ‘Spontaneous Order: Origin, Actual Spontaneity, Diversity’, Independent Review, June 2015 Cotsaftis, M. (2009) ‘What Makes a System Complex? An Approach to Self Organization and Emergence’ in M.A. Aziz-Alaoui and C. Bertelle (eds), Understanding Complex Systems. Berlin and Heidelberg: Springer Cubeddu, R. (1993) The Philosophy of the Austrian School. London: Routledge 27 28

Hayek (1982) vol. I, 88. Ibid. 89.

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192 Comparative contract law Gaus, G. (2006) ‘The Evolution of Society and Mind: Hayek’s System of Ideas’ in E. Feser (ed.), The Cambridge Companion to Hayek. Cambridge: Cambridge University Press, 232–58 Gell-Mann, M. (1984) The Evolution of Complexity. Princeton, NJ: Princeton University Press Gell-Mann, M. (1988) ‘What is Complexity’, 1 Complexity 16–19 Gray, J. (1984) Hayek on Liberty. Oxford: Basil Blackwell Hayek, F.A. (1945) ‘The Use of Knowledge in Society’, 35(4) American Economic Review 519–30 Hayek, F.A. (1952) The Sensory Order. Chicago, IL: University of Chicago Press Hayek, F.A. (1955) The Counter-Revolution of Science. New York: Free Press Hayek, F.A. (1967a) ‘Degrees of Explanation’ in F.A. Hayek, Studies in Philosophy, Politics, and Economics. Chicago, IL: University of Chicago Press, 3–21 Hayek, F.A. (1967b) ‘The Theory of Complex Phenomena’ in F.A. Hayek, Studies in Philosophy, Politics, and Economics. Chicago, IL: University of Chicago Press, 22–42 Hayek, F.A. (1982) Law, Legislation, and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy. London: Routledge, vol. 1–3 Hayek, F.A. and Bartley, W.W. (1988) The Fatal Conceit. Chicago, IL: University of Chicago Press Hodgson, G.M. (1993) Economics and Evolution: Bringing Life Back into Economics. Ann Arbor, MI: University of Michigan Press Horwitz, S. (2000) ‘From the Sensory Order to the Liberal Order: Hayek’s Non-Rationalist Liberalism’, 13 Review of Austrian Economics 23–40 Kauffman, S. (1993) Origins of Order: Self-Organization and Selection in Evolution. Oxford: Oxford University Press Knight, F. (1921) Risk, Uncertainty, and Profit. New York: Houghton Mifflin Co. Koppl, R. (2006) ‘Austrian Economics at the Cutting Edge’, 19 Review of Austrian Economics 231–41 Mitchell, M. (2009) Complexity: A Guided Tour. Oxford: Oxford University Press North, D. (1999) ‘Dealing with a Non-Ergodic World: Institutional Economics, Property Rights and the Global Environment’, Duke Environmental Law and Policy Forum 1–12 Papentin, F. (1980) ‘On Order and Complexity’, 87 Journal Theoretical Biology 1–456 Paul, E.F. (1988) ‘Liberalism, Unintended Orders and Evolutionism’, 36 Political Studies 251–72 Shearmur, J. (1996) Hayek and After: Hayekian Liberalism as a Research Programme. London: Routledge Simon, H.A. (1962) ‘The Architecture of Complexity’, 106(6) Proceedings of the American Philosophical Society 467–82

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9. ‘Party autonomy’ Horatia Muir Watt

I.

OVERVIEW: THE POLITICAL ECONOMY OF PRIVATE ORDERING

Now enshrined in Article 3 of the Rome I Regulation (593/2008/EC), the principle that has come to be known as ‘party autonomy’, according to which parties to an international business contract are free to choose the governing law, emerged as a key methodological concept in the course of the twentieth century. It served the progressive liberalization of crossborder markets, which broke the frameworks of protectionist regulatory schemes, emancipating international flows of capital, goods and services from the claims of territoriality. Through a series of technical moves which will be described below, the law has accredited freedom of choice as the foundation of a whole parallel world of private transnational ordering, complete with its own institutions and governing principles. Indeed, from the resulting representation of the relationship between free choice of law and sovereign authority stems the fiction of an autonomous private transnational legal order, widely accepted as the source of regulation, conceded by the various states, of cross-border relationships between economic actors. In this perspective, party autonomy is to a large extent the expression, within the confines of private international contract law, of a wider political economy which serves the global expansion of the neo-liberal market. As such, it fulfils a significant function in creating an enabling environment for private sector activity in the context of a globally integrated economy.

II.

THEORETICAL REPRESENTATIONS OF PARTY AUTONOMY

Under the classical liberal paradigm, party autonomy was designed to be exercised within a political framework which ensured the ultimate primacy of public market regulation. This scheme owes as much to domestic contract theory as to the Westphalian model of the public international legal order, composed (exclusively) of equal and sovereign 193

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states. Together, state sovereignty and freedom of contract combined to produce a view of the relationship between law and market in the transnational economic sphere according to which the empowerment of private actors was subject to limits imposed in the name of the general interest. Whether framed in terms of public policy or overriding mandatory rules, such restrictions imposed upon the conduct of private transnational trade are set by a presumptively like-minded community of sovereign states similarly desirous of promoting the reciprocal benefits of international trade. Within such a scheme, the reasons for which any sovereign state would allow parties to contract out of its own rules and substitute those of a neighbouring community, were to be found both in the purported special needs of cross-border transactions and the dilution of the claim of any one state to regulate them exclusively. This implied in turn that sovereign states were deemed to be unconcerned, or their polities less affected, by transactions which did not directly involve their domestic economy; in a world where market was coextensive with territory, this idea translated methodologically into a presumption of territoriality of national regulation. And indeed, this separation of the two worlds of domestic and international transactions had a functional justification: social and economic policies were non-negotiable in homogeneous cases which fell clearly within their regulatory ambit; on the other hand such policies were not endangered by contracting-out when the relationship, bearing foreign elements, was not perceived to ‘belong’ to the local economy. However, while contractual choice of law might be encouraged in the interests of cross-border commerce, its corollary was the assumption that the community of states – specifically, those which were sufficiently closely connected to the parties to justify the jurisdiction of their courts – would moderate private autonomy to accommodate the requirements of the common good. No unbridled ‘contrat sans loi’, then, but a regulated freedom to be subject to the sovereign legal order of one’s choice. Like international commercial arbitration, whose growth followed on the generalization of party autonomy as a foundational principle of choice of law, the empowerment of private actors is supposed to cater to the special needs of international economic intercourse. The notion that party autonomy in the international arena, like freedom of contract in the domestic context, is a measured concession by the liberal state to private ordering, rests on theoretical premises which are also to be found, outside the field of contract, at the heart of multilateral conflicts methodology. Thus, the very representation of the conflict between laws within the continental Savignian tradition presupposes a certain commonality of normative preferences among like-minded (and

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pre-regulatory) sovereigns. Indeed, private law, of which the province is that of horizontal relationships between non-state actors, is perceived to be largely facilitative of private transactions, so that a conflict of laws may be seen essentially as the virtual availability of as many interchangeable sets of rules as there are connections between a given set of facts and different legal systems. Conversely, any given legal system is assumed to provide a set of rules of contract law that can suitably (that is, rationally) be applied in any geographical context. This double, liberal, representation of the relationship between state and market, law and territorial polity, had however to adjust to the rapid growth (in Europe, largely in the second half of the twentieth century) of public economic regulation affecting the market (such as competition, securities, consumership) or society (health, environmental, social protection), as well as the rise of fundamental rights in fields of private law previously considered to be immune from constitutionalization. Public policy concerns, social rights, or lois de police (‘overriding provisions’) in the legislation of closely connected states, frequently endowed with ‘extraterritorial’ scope, narrowed the expanse of private empowerment. Importantly, such concerns were relevant both to judicial proceedings within the forum state, or in respect of foreign judgments and awards at the enforcement stage. Thus, in a European setting, first in the Rome Convention (Article 7) and now in the Rome I Regulation (Article 9), room was made for ‘provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract’. Such rules may override the otherwise applicable law when a court thinks this makes sense in terms of the policies they express. Beyond this adjustment, however, private international law did not proceed to revisit the conceptualization of party autonomy in the light of the intensive growth of market and social regulation in the domestic sphere, with its transformation of the nature and function of private law; nor did its methods appear to evolve in response to the decline of the Westphalian model in international relations and the tectonic upheavals induced by globalization within both the theory of law and sovereignty and the reality of cross-border trade and investment. Yet within the changed normative, political and economic environment, party autonomy can no longer be represented as a carefully monitored concession of the liberal sovereign state. Philosophically, the shift from obligation to empowerment can be described in Foucauldian terms as a move to a

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neo-liberal model of private governance. Technically, it involves what might be called ‘methodological slippage’.

III.

‘PRIVATE LEGISLATION’ AND TECHNICAL DESIGN

Unquestioning acceptance of the principle of party freedom points to its status as a foundational myth of private international economic law. Indeed, its success has been unimpeded by the fact that significant issues as to its real ambit remain unsettled, as will be shown below. Nor does it seem to matter that despite its Kantian pedigree, its dominant justification is essentially utilitarian, linked to the needs of international trade. Although methodological, political and economic objections do appear from time to time, albeit outside mainstream doctrine, they remain largely unheeded; thus, neither the functionalist arguments drawn from governmental interests analysis, nor the potential democratic deficit resulting from the permission to contract out of local rules, nor indeed the uncertain economic rationality underlying the apparent indifference of states to free-riding by foreign parties on proven or novel regulatory models, detract from its remarkable success. The latter is, most recently, illustrated by the Draft Hague Principles on the Choice of Law in International Contracts (2012), which ‘set forth general principles concerning choice of law in international commercial contracts. They affirm the principle of party autonomy with limited exceptions.’ The power thus conceded to private actors to harness available state legislation to the needs of their cross-border transaction was, and still is, perceived as doubly conditional to the requirements of the rule of law. The first perceived expression of the latter is a condition of internationality, which is supposed to prevent domestic contracts from circumventing local public policy; the second is the requirement of the public (meaning state) origin of the chosen law, so as to prevent parties from cherry-picking or resorting to wholly private rules. Neither, in the contemporary legal context, fulfils the function of safeguarding the public interest for which it was initially designed. On the contrary, as currently framed, they create a hiatus between the rules and practice of international contracting; hence, a sense of methodological misfit. Furthermore, both serve to perpetuate a vision of the world, including the relationship between regulation and party autonomy, on the foundations of which the myth of autonomous private ordering was constructed. The first condition (which, in a European setting, was already enshrined in the Rome Convention), restricts the exercise of free choice

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of law to international contracts – or rather, due to the extraordinary difficulty of defining this cardinal requirement, to contracts of which all the elements relevant to the situation at the time of the choice were not located within one state. The Rome I Regulation introduces, in addition, the idea that, for the purposes of European legislation, a domestic contract is one which is connected solely to Member States’ territories as a whole (Article 3(4)). However, whether the perspective adopted is national or, now, European, it presupposes a bright line separating the closely regulated world of the domestic (or intra-European) economy, from the area of freedom where, beyond national (or European) frontiers, state policies relax their grip. The rise of the regulatory state, entailing the multiplication of overriding mandatory rules or ‘lois de police’ with extraterritorial thrust (as seen above), has made it difficult to maintain the bright line between domestic and international spheres in terms of the respective intensity of state interests. In other words, the idea that sovereign regulatory concerns stop at national borders could not survive either the appearance of new forms of market regulation or the growing interconnectedness of local economies. Across the Atlantic, attempts were made to adjust methodology to the increasingly regulatory function of private law. Although these attempts were not always successful in the long run, the important lesson of the American realist revolution was that multilateralism was unworkable in a world where private law is neither purely facilitative nor indeed interchangeable. In a functionalist perspective, conflicts of laws arise from the existence of contradictory regulatory interests, identified by sounding out the policies of the states involved. However, they are considered as strictly derogatory, in the sense that they do not represent the ‘normal’ way of reasoning in the conflict of laws. Therefore, they do not affect the initial requirement that the contract be international, or non-domestic, for the principle of party choice to come into play as a choice of law rule, accrediting in turn the distinctiveness of the world of international transactions. Maintaining this multilateralist fiction contributes to perpetuate the underlying world-view of a community of states conceding an area of party freedom beyond their frontiers, but over which they retain the ultimate control. This representation of an orderly world in which benign liberal states determine the outer limits of private economic activity is also linked to the second limitation to free choice. Today, within the Rome I Regulation, like half a century ago in national case law, although parties may choose any law in the world, with no requirement as to geographical linkage to the state whose law is thus chosen and no condition as to the completeness, modernity or democratic legitimacy of its legal system,

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their freedom nevertheless stops short of non-state norms such as the lex mercatoria or the UNIDROIT rules for international contracts. These, according to recital 13 to the Rome Regulation, may merely be ‘incorporated by reference’ into the contract, where they are necessarily subject to the contrary provisions of the governing law. Underlying this second restriction is the idea that the contract law of liberal states is presumptively interchangeable, because it is deemed to be based on a shared conception of societal needs (albeit largely facilitative and exclusive of specific regulatory interference), whereas norms of purely private origin cannot be supposed to implement similar conceptions. In other words, according to this vision, it was important that the parties should not escape the network of state regulation. The fear inspired by the concept of ‘private legislation’, or, even more forbidding, ‘le contrat sans loi’, may or may not be justified: it could well be, as frequently argued, that the content of the new law merchant has now developed sufficiently so as to present a coherent, reasonably complete and generally acceptable set of operative principles; it is also arguable that carefully thought out principles of substantive contract law drafted at an international level may be more valuable and adjusted to the needs of cross-border trade than many state laws which might be less progressive, less clear, more parochial, etc. In economic terms, the burden of over-regulation could be an evil greater than excessive freedom in the international sphere. But the point here is that if the mandatory social and economic policies of connected states are implemented whenever it makes sense to do so in functional terms, then the quality of whatever non-state contract norms the parties may have chosen (in the unlikely event they have committed themselves to incomplete, incoherent or non-progressive principles) hardly matters. In the absence of a specific regulatory interest, which would trump any other chosen rule anyway, the choice of non-state law does not endanger the public policies of potentially concerned states, of which, on the other hand, the protection is inadequately ensured by the sole requirement that the parties choose a state law. Excessive focus on the latter has signified, paradoxically, that party autonomy has ceased to imply subordination of private actors to state authority.

IV.

CHANGES OF STATE: REVERSAL OF THE RELATIONSHIP BETWEEN LAW AND MARKET

Private actors are empowered to attain ‘regulatory lift-off’ because the liberal state has renounced – or has been constrained by competitive

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economic forces to give up – the means to ensure the primacy of its own, or another’s, public policy regulation over ‘private legislation’. Indeed, the changing global context in which party autonomy is exercised, and to which it has largely contributed both as a foundational myth and a methodological tool, has induced two significant functions for which it was not initially designed. These ‘changes of state’ are directly linked to those which affect the relationship between law and market. By allowing parties to cross jurisdictional barriers unhindered, the principle of free choice reverses the relationship between public regulation and private choice and generates a competitive market for legal products and judicial services. The first symptom of a reversal of the status of regulation in respect of party choice law, jurisdictional barrier-crossing, results from the combined effect of choice of forum, choice of law and free movement of decisions or awards. The general acceptance of free choice of forum in cross-border litigation, in the name of party autonomy, along with the spectacular rise of arbitration, is traditionally justified in terms of the promotion of international commerce through the benefit of predictability, procedural economy and litigation risk-management. Such concerns hold true even when internationally mandatory provisions are at stake: there is no particular reason why courts should not be trusted mutually to uphold the interests of the members of a benign community of states and indeed, the Rome Convention (Article 7(1)) and Regulation (Article 9(3)) have gone a long way down this path. Reputedly more flexible, international commercial arbitration presents all these advantages, with the added attraction of confidentiality; furthermore, when political stakes are high, such as in state investment contracts, it offers an appearance of neutrality, its legitimacy being enhanced by increasing institutionalization. Increasingly commonplace in practice, such agreements have thrived as initial doubts as to the desirability of allowing private actors to appropriate access to the courts have dwindled. Free choice of forum obviously impacts upon the applicability, and thereby the imperativity, of the mandatory rules of any state other than the chosen forum (which in the case of arbitration means practically none at all). This is why the liberal scheme on which party autonomy rests presupposes that any extension of the scope of party choice of court, or the enlargement of arbitrability, is compensated by the right to a ‘second look’ by the supervising or enforcing state over the judgments or awards issuing from the chosen forum. This scheme is apparent in the US Supreme Court’s famous dictum in the Mitsubishi case, whereby ‘in the event that choice-of-law forum and the choice-of-law clauses operated in tandem to as prospective waiver of a party’s right to pursue statutory

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remedies … for antitrust violations, we would have little hesitation in condemning the agreement as against public policy’. But it rapidly became apparent that the ‘second look’ was, in many instances, either unrealistic (when no enforcement was required, the parties having settled, for instance), or problematic (when the supervising court is not better equipped than the arbitrator to make an assessment on the merits in economic terms), or indeed practically excluded through deference to the chosen forum (as in cases as notorious as the Lloyd’s litigation). A powerful economic incentive for states to renounce their ‘second look’ has been to provide a free zone for the arbitration industry. Indeed, and secondly, the generalization of choice of court agreements, along with the parallel growth of international arbitration, is now understood as giving rise to a worldwide market in adjudication or dispute resolution. Enhancing global jurisdictional competition would supposedly reap benefits in terms of the improvement of the quality of courts worldwide. However, the real problem lies in the fact that when court access is thus privatized, there is a correlative absence of judicial (or arbitral) regulation of interests beyond those of the parties to the dispute. In this respect, it is instructive to turn to the conclusion, which can hardly be suspected of anti-libertarian bias, reached by Landes and Posner using economic analysis of justice in respect of the domestic judicial system: privately designated judges lack both the legitimacy (conferred by public investiture) and the (private financial) incentive to take account of societal interests in their decision-making process. This conclusion certainly plays out, for instance, in respect of the impact of human rights in investment arbitration, where contractual mandate and choice of law pre-empt any consideration of wider public or third party interests. Although, of course, the public financing of the court system establishes both the legitimacy and the incentive which arbitration lacks in protecting societal interests beyond those of the parties to the litigation, the tendency of courts designated by choice of forum agreements to act ‘as if they were arbitrators’ obviously detracts from this particular regulatory function.

V.

DISTRIBUTIONAL EFFECTS OF PARTY AUTONOMY: HORIZONS

The centrality of private choice of law in the European tradition is so taken for granted, or at least, appears to be so solidly rooted in the history of Western private international law, that astonishingly little attention has been paid to the function it fulfils within the changing

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economic and political environment induced by globalization. The cloak of tradition is reinforced by more recent law and economics doctrines, which tend to promote party autonomy as efficiency, in the form of predictability, reduced transaction costs or facilitated risk-management. No doubt these virtues exist, at least for the party whose skills in contract negotiation and drafting are strongest. It is highly probable, however, that the interests purportedly served by unbridled freedom of choice, whether cast as those of the market or of a purported community of merchants, do not allow for adequate governance of the cross-border activities of private actors. In this respect, the (in)famous Lloyd’s litigation serves as a cautionary illustration of the cumulative effect of contract doctrine and private international law theory. Thus, under a wider perspective than that offered by various dimensions of private law doctrine, it becomes clear that party autonomy no longer serves to free private enterprise from entrenched parochial constraints under the benign supervision of a community of liberal states, but works to transform national public regulation into a disposable private good in a deregulated economy. This holds true even after the various recent financial crises and the disastrous role played by self-regulation in subordinating wider public concerns to speculative interests. In this respect, the implications of party autonomy for what has been aptly described as ‘regulatory liftoff’ must be seen in the context of the various legal tools which provide the private legal infrastructure of global markets and foreign investment. Among these, within the European context, free movement of goods and services entertains a symbiotic relationship with party choice, the latter being the metaphorical expression of cross-border mobility and regulatory arbitrage. While consumer protection has found its place here, neither social rights nor the production chains which supply the European consumer market benefit from similar solicitude. Indeed, more globally, party autonomy also structures transnational production and supply chains (generating what has been described as a ‘plug-in effect’ in respect of sub-contractors and suppliers), and can moreover be linked in this context to direct investment, of which it supports the international (contractual) regime. The private legal regime thus created is reinforced, on the one hand, by private international law rules in tort, when they work to keep any obligation to pay attention to third party interests under the sway of local law, itself often constrained to lower the level of reparation by reason of competition to attract foreign investment. On the other hand and furthermore, the private international law regime governing the structure of multinational enterprise reinforces the autonomy of corporate entities when it

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comes to the duty to care or repair in respect of industrial accidents, environmental damage or human rights abuse. At the same time, however, various countervailing tendencies have appeared. Technically, in the current state of the law, the only obvious way of ensuring that law retains its authority when parties have the licence to cross barriers is to make the ‘second look’ effective at the enforcement stage. This has been made possible within the European Union, where Member States have the obligation to refuse recognition to arbitral awards given in violation of European competition and consumer law, and presumably of those fundamental rights which are part of the Union legal order. Another notable development in the same context is the progressive mainstreaming of consumer protection, which, through the leverage provided by principles imported from outside contract theory, such as non-discrimination, has been evolving from the status of exception to the rule in respect of cross-border provision of goods and services. Party autonomy is therefore severely curtailed in an increasing number of circumstances, albeit within the safe confines of the European consumer market. However, it may well be that there is need for a more radical reformulation of the issues at stake. In the rapidly changing context of global economy, the real difficulties are not (merely) market practices shaped by stronger parties through free choice of law and forum, but the implications of the growth of (hitherto) unaccountable private authority. The role played by party autonomy in this evolution needs to be acknowledged before appropriate models of social justice can be imagined in the uncharted legal environment beyond the state.

BIBLIOGRAPHY Adams, J., Beyleveld, D. and Brownsword, R. (1997) ‘Privity of Contract: The Benefits and the Burdens of Law Reform’, 60 MLR 238–64 Batiffol, H. (1960) ‘Subjectivisme et objectivisme en droit international privé des contrats’ in Faculté de droit et des sciences économiques de Toulouse (ed.), Mélanges offerts à Jacques Maury. Paris: Dalloz, vol. I, 39 Briggs, A. (2008) Agreements on Jurisdiction and Choice of Law. Oxford: Oxford University Press Cafaggi, F. and Muir Watt, H. (eds.) (2009) The Regulatory Function of European Private Law. Cheltenham: Edward Elgar Publishing Cuniberti, G. (2009) ‘Beyond Contract: The Case for Default Arbitration in International Commercial Disputes’, 32 Fordham International Law Journal 417 Damman, J. and Hansmann, H. (2008) ‘Globalizing Commercial Litigation’, 94 Cornell Law Review 1 Fischer-Lescano, A. and and Teubner, G. (2004) ‘Regime-Collision: The Vain Search for Legal Unity in the Fragmentation of Global Law’, 25 Michigan Journal of International Law 999

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‘Party autonomy’ 203 Foucault, M. (1979) ‘Naissance de la biopolitique’ in Annuaire du Collège de France, 79e année, Histoire des systèmes de pensée, année 1978–1979; Dit et écrits. Cours du Collège de France, Paris: Gallimard, vol. III Francescakis, Ph. (1966) ‘Quelques précisions sur les lois d’application immédiate et leurs rapports avec les règles de conflit de lois’, Rev. Crit. DIP 1 Gaillard, E. (2007) ‘Aspects philosophiques du droit de l’arbitrage international’, RCADI 329 Grundmann, S. (2005) ‘European Contract Law(s) of What Colour’, ERCL 17 Jansen, N. and Michaels, R. (2006) ‘Private Law Beyond the State? Europeanization, Globalization, Privatization’, 54 American Journal of Comparative Law 843 Kegel, G. (1964) ‘The Crisis of the Conflict of Laws’, 112 RCADI 91 Kerber, W. (2000) ‘Interjurisdictional Competition Within the European Union’, 23 Fordham International Law Journal 217 Landes, W. and Posner, R. (1979) ‘Adjudication as a Private Good’, 8 Journal of Legal Studies 235 Lehmann, M. (2008) ‘Liberating the Individual from Battles Between States: Justifying Party Autonomy in Conflict of Laws’, 41 Vanderbilt Journal of Transnational Law 381–434 Marzal Yetano, T. (2010) ‘The Constitutionalisation of Party Autonomy in European Family Law’, Journal PIL 155 Micklitz, H. (2005) ‘The Concept of Competitive Competition Law’, 2 Penn State International Law Review 393 Micklitz, H. (2009) ‘The Visible Hand of European Regulatory Private Law: The Transformation of European Private Law from Autonomy to Functionalism in Competition and Regulation’, 28 Yearbook of European Law 3 Mills, A. (2006) ‘The Private History of International Law’, 55 ICQL 1 Muir Watt, H. (2005) ‘Aspects économiques de droit international privé (Réflexions sur l’impact de la globalisation économique sur les fondements des conflits de lois et de juridictions)’, 307 RCADI 25–384 Muir Watt, H. and Radicati di Brozolo, L. (2004) ‘Party Autonomy and Mandatory Rules in a Global World’, 4 Global Jurist art. 2 Niboyet, J.P. (1927) ‘La théorie de l’autonomie de la volonté’, 16 RCADI 1 Nygh, P. (1999) Autonomy in International Contracts. Oxford: Clarendon Press Ogus, A. (1999) ‘Competition Between National Legal Systems: A Contribution of Economic Analysis to Comparative Law’, 48 ICQL 405 Radicati di Brozolo, L. (2003) ‘Mondialisation, juridiction, arbitrage: vers des règles d’application semi-nécessaires?’, Rev. Crit. DIP 1 Radicati di Brozolo, L. (2004) ‘Antitrust: A Paradigm of the Relations Between Mandatory Rules and Arbitration: A Fresh Look at the Second Look’, International Arbitration Law Review 23 Ribstein, L. (2003) ‘From Efficiency to Politics in Contractual Choice of Law’, 37 Ga. Law Rev. 363 Rittich, K. (2002) Recharacterizing, Restructuring: Law, Market and Gender in Structural Reform. The Hague: Kluwer Rodi, F. (2008) ‘Private Law Beyond the Democratic Order? On the Legitimatory Problem of Private Law Beyond the State’, 56 American Journal of Comparative Law 743 Romano, G.P. (2009) ‘Règles internationalement supplétives et règles internationalement disponibles’ in J. Mestre, A. Bonomi and A. Albarian (eds), Regards comparatistes sur le phénomène contractuel. Paris: PUAM, 243 Samuel, G. (2010) The Law of Obligations. Cheltenham: Edward Elgar Publishing Von Overbeck, A. (1993) ‘L’irrésistible extension de l’autonomie de la volonté en droit international privé’ in F. Rigaux (ed.), Nouveaux itinéraires en droit: Hommage à François Rigaux. Brussels: Bruylant, 619

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204 Comparative contract law Wai, R. (2002) ‘Transnational Liftoff and Juridical Touchdown: The Regulatory Function of Private International Law in a Global Age’, 40 Columbia Journal of Transnational Law 209

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10. Who is the contracting party? A trip around the transformation of the legal subject Maria Rosaria Marella

The subject of law is one of the most powerful creations of Classical Legal Thought (hereinafter CLT), that stage of legal science that developed in the second part of the nineteenth century.1 In its theoretical foundation the notion of legal subject has lasted almost unchanged through the second globalization, which characterizes the first part of the twentieth century till the early seventies and is marked by the dominance of social thought. In this chapter I maintain that the idea of the legal subject has now come to an end or, at least, it is undergoing dramatic changes that will deeply transform its significance. This chapter is an attempt to highlight, first, the epiphanies of this crisis in new constitutions, bills of rights or other legal texts, and secondly the different projects that issue from it and/or represent directions to the way out. My aspiration is to contribute to the general discussion by investigating the extent to which these normative projects embody the characteristic traits of CLT or of the social (or a combination of them) according to the picture of the third globalization drawn by Duncan Kennedy, or whether, on the contrary, they depart from them, tracing new patterns. In CLT the subject of law is a pure legal abstraction. Its disembodiment shapes it as universalistic and transversal to all legal fields with the exception of family law, where subjects are neither disembodied nor equal.2 Feminist critique has unveiled the universalistic nature of the subject of law by disclosing its primal model: the white wealthy married male owner.3 CLT shapes the subject of law in reference to the market

1

See Kennedy (2006). See Kennedy (2010); Marella (2011). 3 See ex multis Olsen (1991); Frug (1992a); Frug (1992b); Olsen (1983); Marella (2008a); Marella and Catanossi (2014). On the inescapable link between gender identity and the legal subject see Thomas (1998) 90. 2

205

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realm. Its constituents are the right of property, on the one hand, and civil liberties, mainly to be protected against the intrusion of the state, on the other.4 This construction is still operating in the social. The subject of law is still a pure legal abstraction5 with the same exception of family law as in CLT, but its anthropological double has changed: no longer the private owner as the liberal subject, but the social class, particularly the working class. This is very clear in the Weimar Constitution (Germany, 1919), in the Preamble to the French Constitution of 1946 and in the Italian Constitution of 1948 (the only one still in force) where the subjective bedrock is undoubtedly the working class.6 The complex set of rights recognized to the worker are functional not only to his/her personal fulfillment but specifically to his/her operation in the public sphere. In the Italian Constitution of 1948 the anthropological change marked by the sunset of the bourgeois owner figure, which is now replaced by the wage earner, is emphasized by a set of guarantees that not only enhance the worker’s material life conditions (from the ‘right to work’ – Arts. 4 and 35 – to the access to property – Art. 42, 2 – and the guarantee of a free and dignifying life by means of appropriate wage rates – Art. 36) but also foster and encourage his/her active participation in the political process, meant as the core of citizens’ equal social dignity (Art. 3, 1 and 2). In fact the subject of law in the ‘Social’ has a direct correlation in the political context, which the Italian Constitution carries out by ensuring the legal recognition of labor unions (Art. 39), the right to strike (Art. 40), and more generally, by prescribing the removal of any economic and social hurdle to the fulfillment of substantive equality (Art. 3, 2). This is no longer the langue of the Grundgesetz, the Basic Law also known as the Bonn Constitution (1949), which demarcates the transition to the next stage, as its new watchwords – human dignity7 and the protection of the liberal-democratic order – show. In the third globalization the subject of law is no longer universalistic and transversal. It is rather fragmented in multiple identities that not only refer to gender, sexuality, ethnicity, religion, etc. but also to age (minors, elderly) or contingent situations (consumers, ill persons). The EU Charter of Fundamental Rights (hereinafter CFR) and the German Civil Code 4

See Mengoni (1985) 123–45. Kelsen (1967). 6 See Mengoni (1985) 127; he points out that after the Italian Constitution of 1947, the producer man, both entrepreneur and worker, assumed a central role in the Italian system, replacing the bourgeois owner. 7 See below, note 11. 5

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(BGB), as reformed in 2002, are unambiguous examples of this transformation.8 Is there anything left of the former characters of universalism and transversality? No patrimonial entitlements, no social rights are constitutive of all legal subjects in this new scenario. Perhaps a minimum common substratum may be seen in the respect of human dignity.9 Namely, the true objective landmark of this multifaceted legal subject is human dignity in the very minimalist meaning of the ultimate human substance that should not be altered (see the prohibition of genetic manipulation, eugenics, cloning and the like, Art. 3 EU Charter of Fundamental Rights).10

I.

TENSION BETWEEN UNIVERSALISM AND FRAGMENTATION: EU CHARTER OF FUNDAMENTAL RIGHTS AND ECHR

Compared to the ECHR (Rome, 1950), which is more or less a classical bill of rights with a specific emphasis on human rights, perhaps another example of the transitional stage toward contemporary models of subjectivity, the Charter of Fundamental Rights of the European Union shows important innovations. The CFR, which applies to the acts of EU bodies and institutions (in particular, legislative work of the European Parliament, the Council and the Commission) and of Member States bodies only when they are implementing EU law, puts the values of dignity, freedom(s), equality and solidarity in the foreground. Now, while the title on freedoms recalls the classical liberal model, the first title, on dignity, and the title on equality are of striking novelty. Individual dignity is placed at the heart of the system and is in fact the true universal core of the Charter.11 Torture, degrading treatment, slavery and forced labor are 8

See Rodotà (2007). Rodotà (2010). 10 See Marella (2008b). 11 In the constitutional traditions of EU Member States we find two different notions of dignity: social dignity and human dignity. The notion of social dignity refers to the right to a dignified life in terms of material and economic conditions. It has a positivist essence, implies a commitment to distributive policies and aims to achieve social justice and equality. The notion of human dignity is today overwhelming. It has a natural law essence, pre-exists the state and its law, and has several possible meanings, merging with individual freedom, autonomy and self-determination on the one hand, with the protection of the community’s basic values, on the other. In Germany, the human dignity clause is enclosed in art. 1 of the Basic Law as the utmost fundamental right. As such the 9

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prohibited in the name of human dignity, but it is especially the human body which epitomizes the value of dignity in the economy of the CFR: eugenic practices, the commodification of the human body and reproductive cloning of human beings are banned, as far as they threaten the common substratum of mankind that the Charter intends to protect. If this anthropological core represents the recipient (and the minimum common factor) of the fundamental rights in the CFR, the title on equality exemplifies its inner fragmentation. Under this title women and men (Article 23), children (Article 24), the elderly (Article 25) and persons with disabilities are identified as the individualities in need of equal treatment. There is no longer a unique social actor as the anthropological background for the subject of law and the entire political right to dignity cannot be waived by the person whose dignity is concerned and cannot be balanced with other fundamental rights. In fact, the human dignity principle shows a strong communitarian inspiration which justifies the sacrifice of the individual’s wishes. Particularly when its natural law version prevails, dignity has a very controversial, unclear relation to liberty. For this reason what characterizes today the enforcement of the dignity clause is mainly its operation as a (new) limit to private initiatives and to freedom of contract, notwithstanding the emphasis that several theorists put on a supposed role of dignity as enhancing individual self-determination. It has been enforced so far in disparate cases, including abortion, different aspects of free speech and housing. Following the same multifaceted pattern, French case law has recently (from 1994 on) implemented the dignity clause as a basic principle implicitly endorsed by the Constitution. From bioethics issues to housing, free speech and abortion, dignity is invoked at the same time as the basis and as a limit to individual selfdetermination. The CFR includes the dignity clause in the same terms as the German wording. In the Charter, dignity is a pervasive principle which names an entire title of the Charter itself. The human body and body parts, human life, etc. are ruled as issues of human dignity. In accordance with the notion of common constitutional traditions as the fundamental basis of Court of Justice of the European Union (ECJ) decisions, it is to be expected that the ECJ will implement the Charter by making its own case law on dignity conform to German constitutional case law. This could have significant implications for the harmonization of contract law in Europe (provided that this project is still in the EU agenda), specifically on the regulation of contracts’ illegality/immorality. Therefore, one can fairly expect that, on the background of the CFR implementation, a re-assessment of the limits of freedom of contract will take place in European law and the general clauses of public policy, ordre public, bonus mores, Sittenwidrigkeit will be reinterpreted in the light of human dignity, according to the model just described. For a critique of the abuse of the dignity clause in reference to the human body and the notion of legal subject in the French legal and philosophical debate see Thomas (1998).

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design underlying the EU Charter remains veiled and unexpressed. The rights of workers are no longer a question of equality, they are a matter of solidarity under the EU Charter. On the contrary, life conditions of the elderly, children and people with disabilities are a matter of (formal?) equality as long as the EU is not directly committed to enacting social policies to their advantage, rather it respects their social rights as established in national laws.

II.

TENSION BETWEEN UNIVERSALISM AND FRAGMENTATION: CODE NAPOLEON AND BGB

In this process of atomization, even the sanctuaries of the universal subject of law, i.e., the Code Napoleon and the BGB, are involved. Title 1 of BGB Part 1, as reformed in 2002, lists along with natural persons, consumers and entrepreneurs. Two possible conflicting projects are behind this inclusion, at least with reference to the consumer. The first one, dating back to the 1970s, takes the consumer into account as the epitome of an ideal of social justice that has to be affirmed in the law of the market;12 it is basically a project that could be ascribed to the Social, presenting itself as the way to update the notion of social class (namely the working class) in the consumerism era. The second project represents a typical neo-liberal move: in terms of policy, it pursues the goal of replacing citizens (with their socio-political bonds) with the players in the market arena – consumers and entrepreneurs; within the economy of the BGB it aims at reconstructing a coherent and inclusive legal system by establishing a link between classic contract law and EU consumer law. For the purpose of this chapter two opposite aspects are worth considering. On the one hand, the characteristic I ascribe to the third globalization, i.e., the fragmentation of the subject of law, emerges here to the extent that the consumer is presented as a general category, worth mentioning at the beginning of the Civil Code (in the General Part), but in fact he/she does not embody the universalistic, general legal subject of the past eras, being the recipient of a narrow legal regulation (das Verbraucherrecht, the consumer protection). On the other hand, the BGB reform of the legal subject might be understood as an attempt to establish a new general anthropology, which replaces the bourgeois, the private owner, according to the langue of CLT, and universalizes in the consumer 12

Reich (2006).

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the weaker party in market transactions, in the same way that the worker, as the weaker party in labor relations, was a universal category in the Social. Also the French Civil Code has been recently reformed in its first part concerning natural persons (Statutes of 1994, 2004 and 2008, in the architecture of the Code: Book I, Of Persons; Title I, Of Civil Rights; Chapter II, Of the Respect of the Human Body). Apparently the French approach to the subject of law is opposite to the one undertaken by the German reformers. The inclusion in the system of the Civil Code of basic legal principles governing the human body in bioethics seems to be, at first glance, the symptom of a new universalistic approach: a humanistic vision of the subject of law, no longer disembodied, rather grasped in its biopolitical substance, a substance which all individuals share. However, the biopolitical setting taken into account in the French Code is restricted to the biomedical scenario. There is no consideration of the biopolitical dimension in other economic or social relations. So the tendency to fragmentation and partiality (the individual as patient or as human body object of medical research) seems to be confirmed in the French legal context. To sum up: the atomization of legal subjectivity occurs by fragmenting individuals in many distinct identities (as in the CFR and in the BGB) and by scattering the concreteness of human beings in many partial contexts (as in the French Civil Code). In my opinion this process is to be understood within a broader framework in which law stops making sense of individuals as actors/ agents. In this direction move both the new idea of solidarity that can be found in several recent Constitutions and the new anthropology which it is possible to draw from legal texts such as the reformed BGB. The subject is no longer depicted as the promoter of a social design (no matter if he/she was really the actor or rather a factor within the projects of CLT or the Social); he/she is rather a walker-on in the picture. There are two different perspectives: (1) ‘Let’s get rid of the welfare state’, individuals need to take care of themselves: This is, bluntly speaking, the new idea of solidarity, or, as the Swiss Constitution (1999) and the new Hungarian Constitution (2011) put it, of individual responsibility toward the national community. In the wording of these new provisions, individual contributions to state and society greatly overwhelm what society and state owe to individuals: ‘All persons are responsible for themselves and shall make use of their abilities to contribute to achieving the goals of state and society’

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(Article 6 of the Swiss Constitution, significantly entitled Individual and Social Responsibility); ‘Every person is responsible for himself or herself and shall be obliged to contribute to the performance of state and community tasks to the best of his or her ability and potential’ (Hungarian Constitution, Article O) – whereas right to work and duty to work are more or less symmetric in the constitutions of the Social (Spanish Constitution of 1978, Section 35, Italian Constitution of 1948, Art. 4). (2) The individualization of any existential condition such as life, work, disability or social distress is the code to decrypt the weight and meaning of social rights in recent constitutional texts such as the CFR and the Swiss Constitution: in the latter, in particular, tens of provisions concern social security measures which aim at supporting individuals detached from any social context or social class identity. The other side of this coin is the legal centrality recognized to the consumer, as another provision of the Hungarian Constitution stresses (Art. M: ‘(1) The economy of Hungary shall be based on work that creates value and on freedom of enterprise. (2) Hungary shall ensure the conditions of fair economic competition. Hungary shall act against any abuse of a dominant position, and protect the rights of consumers’) the individual needs to be sustained and, at the same time, needs to make the machinery function by consuming and being productive. Last but not least, the creation of new identities proves to be functional to the expansion of consumption and the more capillary diffusion of the market. It sounds fastidiously rhetorical but it is exactly what the recent legal texts are telling us.

III.

THREE POSSIBLE RE/DE-CONSTRUCTIVE PROJECTS

To conclude I want to go back to a critical reading of the legal subject, analyzing three possible re- or de-constructive projects: the basic income claim (drawing on distributive justice); the commons as a legal notion which is disruptive of the subject/object dichotomy and the non-subject as a counter-apparatus.13

13

Agamben (2009).

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A.

Basic Income Guarantee

The basic income project entails a claim for a new system of social security, which should not operate on the basis of individuals’ social conditions and therefore should not differentiate among social classes and groups, but recognizes everyone is entitled to a basic income. This idea has many versions, slightly or relevantly different from one another, and a complex genealogy (Marx among other advocates14). To my knowledge the most coherent stand for basic income within the international debate draws on Toni Negri and Michael Hardt’s understanding of social wealth – particularly once immaterial labor, and specifically affective labor, has achieved dominance in the current mode of production – as the product of social cooperation, that is quintessentially a collective product, for which everyone should be rewarded. Accordingly basic income is not understood as a subsidy, but on the contrary as something owed to everyone.15 The basic income project is nested within the pattern that Duncan Kennedy describes as constitutive of CLT/Social coexistence in the third globalization.16 On the one hand, it typically represents a strategy of distributive justice that recalls the characteristic policies of the Social, but unlike the Social it has a broad universal vocation and does not draw on specific social classes and differences in social conditions between them. It can be defined as a reconstructive project as far as, through the social transversality of the basic income recipient, it gives new life to the idea of the universal subject of law. B.

Law of the Commons

As long as it does not simply designate a matter of possession (who possesses what, whether the private individual or the community) but rather a way of conceptualizing the relationship between communities and resources, communities and production/reproduction, the economy and the law of the commons are likely to subvert the age-old dichotomy of subject/object, in so doing locating themselves outside liberalism and outside the capitalist stage of world history, although the challenge would be to enlarge the realm of the commons right now, in this time, with the legal tools provided by liberalism.17 14 15 16 17

Marx (1973). Hardt and Negri (2000, 2004, 2009). Kennedy (2006). Marella (2016).

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To stand up for collective possessions means to overcome the being/ having and the subject/object dichotomies because the focus in this framework is rather on the circular relationship between the resource and the community that owns (or uses) it, within which the two entities are mutually constitutive of one another. The discourse is more complex if one thinks of immaterial resources such as knowledge, which are barely intelligible as community based. Here, Negri and Hardt’s analysis of commonwealth within knowledge capitalism is most influential.18 A different version of this discourse is one that pursues a holistic approach aiming at subverting the current (e.g., capitalist) relationship between humanity and nature.19 C.

Non-Subject Project

The idea of the annihilation of the self is to be understood as a reaction to (and a deconstruction of) the models of subjectivity I ascribe to the third globalization and, at the same time, as a possible alternative (reconstructive?) project. It has developed within the milieu of the so-called French Theory, namely on the basis of the post-structuralist philosophy of Foucault, Deleuze20, and more recently Tiqqun (or Tarnac 9 or Comité Invisible)21 but it is also strongly influenced by the work of the Italian philosopher Giorgio Agamben.22 It draws firstly on the Foucauldian idea of biopower as productive of subjectivity/identities as governmental apparatuses.23 The politics of the ‘non-subject’ is therefore a politics that aims to counteract the operation of biopower at this stage of capitalism. The Agambenian notion of whatever singularity is crucial to the extent that it depicts an entity that is neither identity based nor universal (the Latin etymology of quodlibet, whatever, is being such that it always matters), who belongs to ‘an inessential commonality, a solidarity that in no way concerns an essence’.24 An interesting antecedent in this genealogy of subtraction to the constraints of the legal subject is envisaged by Agamben himself in the theological dispute between Franciscans and the Pope in the early fourteenth century. Reclaiming the abdicatio juris, i.e. the subtraction of themselves and their form-of-life to 18 19 20 21 22 23 24

Hardt and Negri (2009). Capra and Mattei (2015). Cooper (2009). Tiqqun (2009); Comité Invisible (2007, 2014). Agamben (1993, 2011). See in particular Foucault (1977, 1982); Genel (2006). Agamben (1993) 18–19.

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the law, the Friars Minor rejected any legal qualification of their relations to any asset or good they made use of (usus pauper as usus facti).25 In the same sense Saint Francis of Assisi in the Admonitiones depicts a form of life deprived of will, claiming his own legal incapacity, thus rejecting the very core of what will be later theorized as the legal self.26 A paradox underlies this idea: the freedom from law is grounded on and located within the law itself. In its paradoxical relation to the law, the non-subject locates itself beyond the legal structures of liberalism in his CLT period, the social stage and the contemporary time for being neither universal nor identity based. It can be understood as a reconstructive project beyond and outside this period of world history. Perhaps the parole of a fourth globalization.

REFERENCES Agamben, G. (1993) The Coming Community (Theory Out of Bounds), vol. 1. Minneapolis, MN: University of Minnesota Press Agamben, G. (2009) ‘What is an Apparatus?’ in What Is an Apparatus and Other Essays. Palo Alto, CA: Stanford University Press Agamben, G. (2011) The Highest Poverty: Monastic Rules and Form-of-Life. Palo Alto, CA: Stanford University Press Capra, F. and Mattei, U. (2015) The Ecology of Law. Toward a Legal System in Tune with Nature and Community. Oakland, CA: Berrett-Koehler Publishers Comité Invisible (2007), L’insurrection qui vient (The Coming Insurrection). Paris: La Fabrique Comité Invisible (2014) À nos amis. Paris: La Fabrique Cooper M. (2009) The Silent Scream – Agamben, Deleuze and the Politics of the Unborn in Braidotti, Colebrook and Hanafin (eds), Deleuze and Law. Forensic Futures. New York: Palgrave Macmillan, 142–62 Foucault, M. (1977) Préface, reprinted in Dites et ècrites. 1954–1988, tome IV, Gallimard, Paris 2001, 135–36 Foucault, M. (1982) Les techniques de soi, reprinted in Dites et ècrites. 1954–1988, tome IV, Gallimard, Paris 2001, 1604 Frug, M.J. (1992a) A Postmodern Feminist Legal Manifesto (An Unfinished Draft), 105 Harv. L. Rev. 1045 Frug, M.J. (1992b) ‘Rescuing Impossibility Doctrine: A Postmodern Feminist Analysis of Contract Law’, 140 University of Pennsylvania Law Review 1029–46 Genel K. (2006) ‘The Question of Biopower: Foucault and Agamben’, 18 Rethinking Marxism 1 Hardt, M. and Negri, A. (2000) Empire. Cambridge, MA: Harvard University Press Hardt, M. and Negri, A. (2004) Multitude. War and Democracy in the Age of Empire. New York: Penguin 25 26

Agamben (2011). Napoli (2014).

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Who is the contracting party? 215 Hardt, M. and Negri, A. (2009) Commonwealth. Cambridge, MA: Harvard University Press Kelsen, K. (1967) Pure Theory of Law. Berkeley, CA: University of California Press Kennedy, D. (2006) ‘Three Globalizations of Law and Legal Thought: 1850–2000’ in D.M. Trubek and A. Santos (eds), The New Law and Economic Development: A Critical Appraisal. Cambridge: Cambridge University Press Kennedy, D. (2010) ‘Savigny’s Family/Patrimony Distinction and its Place in the Global Genealogy of Classical Legal Thought’, 4 American Journal of Comparative Law 811–41 Marella, M.R. (2008a) ‘Radicalism, Resistance, and the Structures of Family Law’, 4 Unbound 70 Marella, M.R. (2008b) ‘A New Perspective on Human Dignity: European Contract Law, Social Dignity and the Retreat of the Welfare State’ in S. Grundmann (ed.), Constitutional Values and European Contract Law. The Hague: Kluwer Law International, 123–47 Marella, M.R. (2011) ‘Critical Family Law’, 19(2) American University Journal of Gender Social Policy and Law 721–54 Marella, M.R. and Catanossi, S. (2014) ‘Il contratto e il mercato sono maschili? Teorie de-generi intorno al consenso contrattuale’ in G. Rojas Elgueta and N. Vardi (eds), Oltre il soggetto razionale. Rome: RomaTrE-Press Marella M.R. (2016) ‘The Commons as a Legal Concept’, Law & Critique 1–26 Marx, K. (1973) Grundrisse, The Fragment on Machines. http://thenewobjectivity.com/pdf/ marx.pdf Mengoni, L. (1985) ‘La tutela giuridica della vita materiale nelle varie età dell’uomo’ in L. Mengoni (ed.), Diritto e valori. Bologna: Il Mulino Napoli P. (2014) ‘Conversation: Perspectives on Law and Theology’ in Comparative Legal History, 114, 117 Olsen, F. (1983) ‘The Family and the Market: A Study of Ideology and Legal Reform’, 96 Harvard Law Review 1497 Olsen, F. (1991) ‘The Sex of Law’ in D. Kairysed (ed.), The Politics of Law: A Progressive Critique. New York: Pantheon Books Reich, N. (2006) ‘A European Contract Law: Ghost or Host for Integration?’, 24(2) Wisconsin International Law Journal 425–70 Rodotà, S. (2007) Dal soggetto alla persona. Naples: Editoriale Scientifica Rodotà, S. (2010) ‘Antropologia dell’ “homo dignus”’, 4 Rivista critica del diritto privato 547–64 Thomas, Y. (1998) ‘Le sujet de droit, la personne et la nature. Sur la critique contemporaine du sujet de droit’, 3 Le Debat 85–107 Tiqqun (2009) Une métaphysique critique pourrait naître comme science des dispositifs in Tiqqun, Contributions à la guerre en cours. Paris: La Fabrique

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11. Freedom of contract and constitutional values: some exceptional cases from the Colombian Constitutional Court Pablo Moreno Cruz*

Érase una vez/ un lobito bueno/ al que maltrataban/ todos los corderos. Y había también/ un príncipe malo/ una bruja hermosa/ y un pirata honrado. Todas estas cosas/ había una vez/ cuando yo soñaba/ el mundo al revés** (José Agustín Goytosolo Érase una vez.)

I.

INTRODUCTION: JURISPRUDENCE HEGEMONY AND THE ACCIÓN DE TUTELA

In some legal systems and (as far as it may be relevant to this chapter) particularly in the Colombian legal system, traditionally ascribed to civil law,1 the continuous (re)configuration of the global panorama of Law is shown (not solely) in the modification on the degree of relevance of traditional sources. Some of them, in specific contexts, from the empirical point of view, externalize and/or, from the normative point of view, ought to externalize * I would like to thank Giovanni B. Ratti, Javier Rodríguez Olmos and Vanessa Villanueva. ** Once upon a time / there was a good wolf / who was bullied / by all the lambs. And there was also / a bad prince / a pretty witch / and an honest pirate. All these things / once were found / when I dreamed / a world upside down. 1 Or, at least – and extending this assertion in Latin America – it is presented in this way, is built in this way, is (re)invented in this way, is remembered in this way, and is recalled itself in this way. See, e.g., Esquirol (1997) 425 et seq.; López Medina (2011) 195 et seq. In any case, if the adscription is read in genealogic terms, there is an irrefutable fact: the presentation of the ‘final’ exteriorization of the law in an exhaustive text characterized both continental European law (although not so much the case in reality in Germany) and Latin American post-independent regulations. For the relevance of the distinction between ‘embodied law’ and ‘disembodied law’ in the context of the distinction between common law and civil law, see Costantini (2007) 2015 et seq. Also see, and with particular reference to the relevance of memory, regardless of historiographical truth, Monateri (2013a) 37 et seq.

216

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a progressive liberation from the chains which they pretend, but do not achieve, to banish (which ends up being) a sort of vocation of producers of Law (e.g., in jurisprudence2). Meanwhile others, from the empirical point of view, end up captured and/or, from the normative point of view, ought to end up captured in the same prison that at some time made them hegemonic (e.g., in legislation). The re-configuration of the panorama of Law is also shown in the identification (and consolidation) of new (and old) legal actors, also international ones, and therefore, ‘new’ ways of externalization of Law.3 The externalization of Law, even if tied to the memory of its own past, tries to re-invent itself to the beat of a rhythm marked by new global trends, which advocate for a uniform government of normative production – outside and inside sovereign territories, outside and inside the parliamentary scenario. This overview, crowns or, at least, is crowning jurisprudence (local, foreign, international), in different ways,4 as producer of Law with clear hegemonic trend, in some cases dethroning the traditional political scenario, and therefore, the legislator.5 Furthermore, this is a phenomenon that, as previously advised, is not exclusively a Colombian heritage but rather seems, with wide shades, the reiteration of a constant6 that governs the current legal reality in several latitudes;7 this is, if the analysis of the style (of manifestation and production) of the jurisprudential norm is omitted (see section VII below). 2

López Medina (2006) 29 et seq. On all levels: contractual (e.g., soft law), in legislative amendments ‘suggested’ from the top (e.g., International Monetary Fund and World Bank), judicial (e.g., international courts), and quasi-judicial (e.g., international arbitrators); in addition to non-institutional actors such as NGOs, mass media and corporations. 4 In broad terms, about coincidences and differences in the manifestation of a possible hegemony of the jurisprudence, see, e.g. (also with respect to a non-Eurocentric nor US-centric perspective), Kapiszewski, Silverstein and Kagan (2013), especially the conclusions of the editors, ‘Conclusion of Judicial Ships and Winds of Chance’. 5 On this point, see, e.g., regarding Colombia, Landau (2010) 319 et seq. However, with a Latin-American perspective, see Esquirol (2011) 1031 et seq. 6 ‘We could say that the global world has become a sort of immense judge-made world of law. Where law consists not so much of statutes and other forms of written laws, but rather of judicial or quasi-judicial decisions’: Ferrarese (2009) 120. Also see Ferrarese (2010) ch. 5. 7 Of course, not in all scenarios and only where permitted by arbitral jurisdictions. But above all, as long as permitted by the pure government, a non-political government, a government that tends to be globally consolidated; 3

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In the specific case of the Colombian Constitutional Court, this phenomenon can certainly be corroborated. The Colombian Constitutional Court, considered by some as one of the world’s most active courts, and with a correspondingly broad constitutional review,8 is configured, under this general framework, as a particularly relevant subject of study. This is especially true if we take into consideration the decisions of review of the judgments released by judges in the context of the acción de tutela or amparo, i.e., a constitutional procedural action that confers (not less than) a power, functional to the guarantee of enforcing the correlative duties to fundamental subjective rights, including several social rights.9 Decisions in which justification (often with constant reference to foreign normative instruments, even non-binding ones10) is built, in certain situations, through the use of normative sentences (jurisprudence, international treaties, non-binding normative instruments) whose source is alien to the traditional hierarchic normative structure and, moreover, outside the local democratic authority. Decisions which claim to use a foreign legal system (not always binding)11 precisely, but not solely, based on the ‘necessity’ to specify the content of fundamental rights and, at the same time, frequently, on the ‘necessity’ to ensure its justiciability, even imposing the enforcement of correlative duties through the configuration of ad hoc public policies.12 government of the office, of efficiency, in the framework of a trend towards the privatization of the sources of law. On this point see Monateri (2013a) 100 et seq. 8 Landau (2010) 321. However, see Wilson (2011). 9 I assume herein that social rights are fundamental rights. Then, in this chapter, it should be understood that each time I use the terms ‘fundamental rights’ I am also referring to social rights. For a conceptual analysis on social rights as fundamental subjective rights, see Arango (2005). 10 Here the concept of ‘persuasive authority’ gains in importance within the context of the (poorly equal) ‘dialogue’ between the courts globally. See (along with the literature that triggered the view), Slaughter (2003) 199 et seq. Also see, for a historical analysis of persuasive authority in the configuration of legal traditions and their current relevance, Glenn (1987) 261–98. 11 On this point, in general terms see Ferrarese (2006) ch. 4. 12 The relation between public policies and the justiciability of fundamental rights, and even more with regard to social rights, is quite peaceful (Pérez Murcia et al. (2007). In contrast, the direct imposition of norms by the judge is not peaceful. The debate focuses, for example, on the non-democratic origin of judges and the impossibility to effectively enforce remedies provided in the corresponding ruling. On this point see, e.g., Tushnet (2008). Also see Landau (2012) 202 et seq.

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Decisions which, in sum, seem to be the result of the progressive consolidation of a sort of judge’s supra-competence in a context characterized (i) by a flexibilization, not always manifested in a sole hierarchy, of the order of reference by a progressive dissolution of the distinction between the different acts of authority on the production of law sources; and (ii) by an extension (not always crystal-clear) of the norms of competence that result in the exercise of further powers (traditionally conferred to the legislative and the government13) by the judge.14

II.

EXCEPTIONAL DUTY OF TOLERANCE (AT LEAST TEMPORARILY) OF BREACH OF CONTRACT

Consequences at the local level of this judicial power also radiate effects in scenarios somehow unpublished, at least in their scope. Specifically, the normative universe of the agreement (also) faces the burst of language concerning rights, and consequently, under some circumstances, procedural mechanisms that allow confronting the agreement outside traditional jurisdictions (including outside arbitration jurisdictions), and even against decisions already adopted by ordinary judges. Thus, we need to focus specifically on the boundaries to freedom of contract (manifested, in one of its versions, in the variation of the content of the agreement by the judge) giving rise to a range of new possible 13 For a (prescriptive) reflection on this phenomenon from the point of view of the crisis of traditional models of the State of Law (Estado de derecho), see Ferrajoli (2013) 437 et seq. 14 It should be noted that in several systems (think especially in Latin America), one of the triggers for the loss of centrality of parliaments lies in a specific interpretative approach of the judge when facing dense constitutions with strongly indeterminate normative terminology. This linguistic indeterminacy, rather than being rewritten by the progressive (re)formulation of less undetermined related norms that could lead to a progressive stabilization of fundamental rights (also by the legislator), led to the consolidation of an (ex post) continuous and unpredictable balancing exercise of each particular case in the hands of the Constitutional judge; a judge who acts, then, as the subject who introduces herself (and is introduced) as the one who each time and directly ought to specify the constitutional assessment. This phenomenon, critically characterized by the term ‘neo-constitutionalism’ (but in fact praised by many), certainly cannot be underestimated, at least in response to some of the phenomena (not necessarily the most important ones) that led to the weakening of the legislature and the strengthening of the judiciary. For the first formulation of the term ‘neoconstitutionalism’ through a critical look at the phenomenon, see Pozzolo (2001); (2012) chs. I–II. See n. 26 below.

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tutela decisions, which show specific trends in the relationship between the review of the agreement and the (un)justiciability of fundamental rights. Some examples may be useful. Case 1 X breached the obligation to pay included in a mortgage loan agreement with Y (a bank).15 As a result of the breach, Y filed a foreclosure action against X, which resulted in the award of the property to Y. X filed an acción de tutela arguing that Y infringed her fundamental rights, since Y, although aware of the health situation of X and her husband – namely that they had AIDS – continued with the lawsuit. In review, the Constitutional Court granted protection of X’s fundamental rights to equality and human dignity, and consequently, ordered that, within 60 days, Y refinanced the mortgage credit granted to X, taking into account the manifest weakness of the latter. In addition, a duty was imposed to inform the Court about the new agreement to prove whether Y had taken into account the situation of weakness of X in the new financial arrangement. Case 2 In a similar case, X breached the obligation to pay in a mortgage loan agreement with Y (a bank), who filed a foreclosure action in order to obtain the payment of the debt.16 X filed an acción de tutela arguing the violation of some fundamental rights by Y, since Y, knowing that X had been kidnapped during the term of default of the credit obligations, continued with the lawsuit refusing to find a way of settlement that would allow X to pay the debt. In review, the Constitutional Court decided to protect X’s rights to equality and free development of personality, and consequently ordered the parties, within the next 30 days, to novate the agreements following specific rules. Among these rules: (i) the calculation of remunerative interests, from the time of the kidnapping until one month after the serving of the lawsuit, should be calculated taking into account the circumstances of weaknesses of the plaintiff (tutelante); if no agreement was reached, current bank interest would be charged, according to

15 16

Colombian Constitutional Court, T-170/05. Colombian Constitutional Court, T-520/03.

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certificates issued by the Colombian Banking Superintendence Office (Superintendencia Bancaria); (ii) default interest could not be agreed with respect to breaches during the kidnapping period and until the expiry of the 30 day term; (iii) new security interests and guarantees must be filed; (iv) accelerating clauses agreed would not be applicable. Case 3 X breached the obligation to pay a loan agreement with Y (a bank), who filed a foreclosure action that would lead to the sale of the collateral owned by X for the payment of the debt for Y’s benefit.17 X filed an acción de tutela arguing the violation of some fundamental rights by Y, since Y, being aware that X was an individual displaced by violence as a result of the internal armed conflict in Colombia, continued with the lawsuit without applying the judicial precedents of the Constitutional Court, which order a special treatment for the victims of displacement. In review, the Constitutional Court decided to protect the fundamental rights of X, and declared the voidance of the process that ordered the closing sale of the collateral to pay the debt with Y. In this case, however, during the interregnum, the collateral had been excluded from the market by a government agency, subjugating it to the system for the protection of property and lands of displaced people (sistema de protección de patrimonios y tierras de la población desplazada). As a consequence, the Court considered that it was not accurate to impose the novation of the agreement since any (new) negotiations on the asset were already forbidden. The Court, to overcome this impasse, obligated the parties, once the voidance of the process was served, to activate a renegotiation toward agreement of payment, in order to continue with the contractual relationship. The Court ruled that negotiations should take into account the following rules, among others (akin to those already indicated in Case 2): (i) Y should refrain from charging default interest from the date of displacement until the date of serving of the decision; (ii) accelerating clauses agreed are not applicable; (iii) in the absence of warranties, the obligation would be guaranteed by the National Fund of Guaranties (Fondo Nacional de Garantías). 17

Colombian Constitutional Court, T-697/2011.

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In these three cases, in addition to the consequent ‘protection’ of the agreement, a justification of the breach of contractual obligations agreed occurs (see sections IV–VI below). An approach with the same perspective is also presented in the context of a non-final breach of contract. Case 4 X, legal user of the utility service of drinking water, breached her obligation to pay. Y (the private utility company) suspended the service until X complied with the obligation.18 X filed an acción de tutela against Y for the violation of some fundamental rights, as a result of the suspension of the utility service of drinking water at her home – where, in fact, six minors and two disabled people lived. The Court decided to protect the fundamental right to drinking water of X and, then, imposed the rendering of the utility service despite the breach of the bilateral obligation by the plaintiff, since there were minors and disabled individuals living at the place of suspension of utility service. This decision followed the precedent of the Court19 whereby the water utility service could only be reduced to a minimum of 50 liters of drinking water per day, upon default by the user, when ‘subjects worthy of special constitutional protection’ (see section VI below) live at the debtor’s dwelling, and when the arrears of payments occur as a consequence of involuntary, irresistible and insuperable reasons (presuming the latter requisite in cases of individuals classified as ‘in extreme poverty’). Case 5 X, mother of Z (a minor studying at a private school) did not pay the monthly school tuition fee. Y (the school) removed her from the school for the next year, and withheld the certificates (required to access other schools).20 X filed an acción de tutela on behalf of Z arguing that Y infringed her fundamental right when the school withheld the certificates. In review, the Constitutional Court decided to protect the fundamental right to education of Z and, in spite of the breach of the bilateral 18 19 20

Colombian Constitutional Court, T-925/12. Colombian Constitutional Court: T-717/10; T-740/11. Colombian Constitutional Court, T-616/11.

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obligation charged on X, imposed on Y the obligation to release the school certificates to Z, under previous agreement of payment that Y should subscribe with X. In the latter decision, the Court considered that: (i) the right of education of the minor was a priority over (weightier than) the economic right (claim) in benefit of the school; and (ii) it was proven that the default was due to supervening impossibility (e.g., unexpected job loss, serious illness, etc.). However, the Court, following its own precedents,21 held that in order to avoid a ‘non-payment culture’ it was necessary that default debtors (i) prove the supervening impossibility to perform; and (ii) state conclusive behaviours indicating their willingness to pay. Once again, in these two last cases, the Court justified the breach of contractual obligations agreed (see sections IV–VI below) limiting, along the way, the exceptio non adimpleti contractus, even when it would seem feasible.22 In general, as will be clarified throughout this chapter, the five cases illustrated so far follow a specific trend: faced with the infringement of fundamental rights, it is possible for the Constitutional judge to decide: (i) to intervene in contractual agreements to modify them; and (ii) that the breach of contract by the debtor does not necessarily justify the duty to perform her obligation. In other words, a duty of tolerance (at least temporarily) of the breach of contract operates.23 This is provided that the debtor is a ‘subject worthy of special constitutional protection’ (displaced, kidnapped, minors, disabled, etc.) (see section VI below). In addition, and above all, from a perspective (without regard to what judges say they do but) with regard to what judges really do, it is possible for the Constitutional judge (iii) to intervene in the agreement by an acción de tutela transforming this procedural action in a mechanism through which the judge tries to replace the shortage of implementation of public policies; specifically, by the creditor’s attribution of additional correlative duties to certain fundamental rights.

21

Colombian Constitutional Court: S.U. 624/99; T-459/09. For an analysis of this phenomenon, see Moreno Cruz (2014) 215 et seq. 23 For the reasoning by which the judge creates this norm, see section IV below. 22

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III.

BEYOND UNFAIR TERMS, BEYOND THE AGREEMENT

In these decisions, the Constitutional judge does not seem to unravel the limits of contractual freedom upon justifications constructed based on, stricto sensu, the contractual normativity, at least not as ratio decidendi. The judge builds these limits, justifies them, beyond the agreement, beyond the specific provisions of the agreement, beyond, then (but not only) the Civil Code24 whose (old) territorial and sovereign vocation25 almost disappears in the presence of a supra-competence, which final justification, itself, transcends legislation and territory. In fact, in rulings of this type of tutelas, a kind of (meta)norm that obligates to guarantee fundamental rights26 (and which source, ultimately, identifies itself beyond the territorial sovereignty and the local normative) imposes itself precisely over contractual norms (terms) that are the result of the election of the parties. In this way, the performance of the correlative duties to certain fundamental rights is considered, by the judge, as non-negotiable27 and its adscription at the expense of one of the parties (i.e., the creditor) is considered as justified. 24

Grossi (2007) 15–39, 85–124. Monateri (2013a) 102 et seq., describes the consolidation of this claim as a hyperbolic act of the sovereign, as an act of exaggeration (in the sense of enlargement) that pretends to consolidate a kind of political perfection by capturing (through the writing) the law and its excess (the residue) in one sole body: the Code. 26 This is a (meta)norm justified by the Court precisely because of the adoption of a specific ideology of active defense of the Constitutional and Democratic State of Law (Estado constitucional y democrático de derecho) or, in other terms, the adoption of proper premises (as critically described by Comanducci) of ‘ideological neo-constitutionalism’: Comanducci (2010) ch. 16. This type of neo-constitutionalism portrays itself (precisely just as in turn it is portrayed methodologically by the acceptance of a necessary relationship between law and morality) by the statement according to which law ought to be obeyed for moral reasons. Which values?: fundamental rights; under what concept of law?: ‘any set of norms according to fundamental rights’. 27 This is, in this case, a reasoning built based on an axiological hierarchy between different norms (principles included) that leads to opting for the applicability of a norm (or set of norms) rather than other(s), without that leading (at least not necessarily) to the invalidity of the latter, but, more precisely, to its inapplicability. See on axiological hierarchies and their relationship with inapplicability, Pino (2008) 288 et seq. 25

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As we will see below, it deals with judicial decisions that, in short, produce the inapplicability, but not the invalidity,28 of some of the contractual terms as an effect of a decision that seeks to guarantee the justiciability of some fundamental rights.29 In fact, the judge, within a context of exceptionality, settles the relationship between contracting parties, under a perspective that, even if varying contractual terms, does not criticize the content of the contract in relation to all circumstances. She rather criticizes the contract based on specific effects under exceptional circumstances under which, according to the judge’s decision, an (unjustified) breach of the correlative duties to fundamental rights by one of the parties is produced. In other words, the norms (terms) of the agreement, in relation, for instance, to the performance in the event of temporary breaches of contract, or in the event of an already final breach by one of the contracting parties, cannot be applied, not because they are ex ante and abstractly void, but because there are (or are identified, or are built ex post) implicit exceptions to the applicability of the consequences provided in other(s) superior(s) norms, such as (but not solely) from legislative derivation. In this way, by means of an interpretative act (not ‘simple’, but) ‘complex’,30 the judge justifies a sort of ‘(re)creation’ of the agreement in the light of the circumstances that certainly, in no exceptional conditions, were not, and could not be, foreseen by the parties (at least at the moment of entering into the agreement) within the framework of possible meanings that could be attributed to the respective normative sentences and, much less, to contractual terms.

28 As will be described (see IV below) the argumentative exercise by the judge only leads to the inapplicability of contractual terms. 29 For a general vision on the justiciability of social fundamental rights in Colombia, see Sepúlveda (2009) 144 et seq. 30 The distinction between interpretation in a strict sense (individualization of explicit norms: meaning of a text provided in a source) and integration or creation of law (e.g., individualization, building of unexpressed norms from explicit norms and/or from other unexpressed norms) may be useful in making this assertion, provided that it is clear that both activities are interpretative. On this point, see Guastini (2011) 396, 434.

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IV.

‘MOMENT’ OF EXCEPTIONALITY: FROM THE JUDGE OF THE AGREEMENT TO THE ‘JUDGE’S AGREEMENT’

We are surely faced with phenomena that may be read under the general theoretical perspective of the ‘defeasibility of norms’.31 I refer (mainly) to the ex post identification by the interpreter of exceptions to the applicability of the consequences provided by the norms.32 This is an everyday phenomenon in the practice of law: this only excludes those norms where the identification of any exception by the interpreter is not possible (indefeasibility.) Restricting the study to the cases listed herein, a norm is defeasible when the consequences provided therein are subject (in addition, obviously, to positive conditions) to negative (defeating) conditions of applicability (implicit conditions not entirely predictable ex ante). This is, in other words, the formulation of exceptions by the interpreter in the conditional sentence excluding the imputation of the normative consequences, notwithstanding the positive conditions provided in the conditional sentence are (also) given. The particularity of this phenomenon in the events herein analyzed lies, in part, in the judge’s reasoning; reasoning obviously conditioned in practice by the interpreter’s ideology of the sources of law, by her personal justice conceptions, and so on. Although the particularity lies, as well, in the consequences of the identification of the exceptions: (i) inapplicability of contractual terms without mediating (at least in these cases) a judgment on their validity;33 and (ii) identification (building) of normative gaps that ‘legitimate’ the (re)writing of the agreement as imposition of additional duties to the creditor and concomitant restrictions of her subjective rights. 31

Recently, see Ferrer and Ratti (2012). We speak about an applicable norm when the judge (or, in general, the interpreter) identifies good reasons that justify the use of the norm and, then, applies it to the case. A norm (at least when faced with another norm considered applicable) whose use is considered not justified will be regarded as inapplicable, this is, that there are no good reasons to use it in the specific resolution of a legal issue, for example, to solve a controversy before the judge. To achieve this goal the judge uses (in)applicability criteria, that do not (necessarily) lead to the invalidity of the norm. Pino (2008) 280. 33 On the distinction between validity and inapplicability, and also on the possibility that inapplicability occurs without resulting in invalidity, see Pino (2008) 298. 32

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In the cases of interest above, the reasoning seems to operate in four steps (distinguishable in the analytical perspective, but tending to be mixed up in the decisions).34 (i) At first, the Constitutional judge, not only through the interpretation of normative sentences on fundamental rights,35 considers that some norms governing agreements (mainly from legislative sources)36 prescribe the applicable scope of their consequences to a too ample and undifferentiated class of cases.37 Specifically, the judge considers that the norm ‘the parties are obliged to perform bilateral obligations agreed in a valid agreement’ – with this sentence I pretend to gather together all those norms that in one way or another impose the performance of obligations in bilateral agreements – should exclude some cases from its scope of applicability. Furthermore, the judge considers (because she considers it ‘fair’), not only that the norm ‘the parties are obliged to perform bilateral obligations agreed in a valid agreement’ will not apply to a specific class of debtors, but also, and in benefit of the same class of debtors, that there should be a norm that would prescribe (so to speak) a duty of tolerance (at least temporarily) of the breach of contract.38

34 I am (partly) using the reasoning mentioned by Chiassoni (2012) 177–78, in its analysis on the distinction, but also on the relation between axiological gap and defeasibility. 35 Proposing in turn and by an axiological hierarchy a choice when solving probable conflicts between various fundamental rights. Consider, for example, the conflict between freedom of contract and the right to health or to drinkable water. Conflicts are solved by the judge by the balancing technique as understood by some versions of neo-constitutionalism (see nn. 14, 26 above). 36 Obviously, it is also about constitutional principles and rights. Specifically, those constitutional norms that for the Court prescribe the right to freedom of contract. However, it being clear that in this reasoning the constitutional right to freedom of contract is defeated by means of the judge’s reasoning, who decides to give more weight to other(s) fundamental right(s), in this chapter, I am interested in emphasizing the consequences of reasoning at the level of legislation, in order to highlight, precisely, the limitation (the restriction) of the space granted, in principle, to contracting parties by means of legislative norms. 37 In brief, identifies (creates) a (so-called) ‘axiological gap’. Regarding axiological gaps see Guastini (2011) 134–37; Chiassoni (2007) 208–28. 38 I use this term to denote (in my own words) one of the judge-made norms in the cases shown above. Indeed, in different latitudes, these kind of norms are not alien to scholars, jurisprudence or even legislation. It is enough to consider, for instance, the so-called principle of ‘social force majeure’ regarding remedies (in the way of ‘mitigation of sanctions’) in favour of debtors; remedies that

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In order to obtain such unexpressed norm,39 first of all, the judge assumes the defeasibility of the norm ‘the parties are obliged to perform bilateral obligations agreed in a valid agreement’. In other words, she restrictively (re)interprets (with an appeal to the language of rights) the normative sentences so that they express a norm that provides exceptions to the applicability of the consequences. In this way, the judge formulates the following norm: ‘the parties are obligated, but not the debtor if she is a subject worthy of special constitutional protection [see VI below], to perform bilateral obligations agreed in a valid agreement’. In other words, the consequences of this norm (perform obligations agreed in a valid agreement) do not apply when the defaulting debtor has AIDS (Case 1); has been kidnapped (Case 2); is displaced by violence (Case 3); has not been able to perform the obligations due to involuntary, irresistible and insuperable reasons; a minor is affected by the decision, and the parents are willing to perform in the future (Case 4); is an individual classified as ‘in extreme poverty’ and/or, minors and disabled people live at that home (Case 5), etc. (ii) As a consequence of the formulation of this new norm, the Constitutional judge creates a normative gap since, at that point, it is not possible (even if at first it was) to identify one (several) norm(s) that regulate the cases excluded by the new norm, when there is, for example, a breach of contract. But above all, the Constitutional judge consequently creates an avalanche of gaps within the agreement which is the object of controversy. Basically, terms whose applicability (so to say) descends from the defeated norm can no longer be applicable to the case, as a result of the inapplicability of the consequences of the norm which is the object of the implicit exception. This is because the facts of the case are subsumed in the exceptional conditions that exclude the applicability of the consequences of the norm.40 (iii) The Constitutional judge, in her ‘efforts’ to fill normative gaps created as a result of the (re)interpretation of the norm deemed too ample regarding its scope of applicability, identifies (or better, builds or creates would be configured to afford a ‘social obstacle to performance’, such as illness, unemployment, etc. On this principle, see Wilhemsson (1992) 180 et seq. 39 About unexpressed norms see Guastini (2014) 427–38. 40 We could talk about external defeasibility of the terms of the agreement (not only of its consequences) as a consequence of the internal defeasibility of the consequences of contractual law (e.g., legislative) that provide the application of the terms. About the concept of external defeasibility, see Ferrer and Ratti (2012) 35–38.

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in the cases discussed herein), precisely the unexpressed norm sought by her: a duty of tolerance (at least temporarily) of the breach of contract when X (debtor) is a subject worthy of special constitutional protection. (iv) Finally, regarding the agreement, the judge fills the gaps created by different interpretative guidelines using (among others and) specifically the unexpressed norm prescribing a duty of tolerance (at least temporarily) of breach of contract when X (debtor) is a subject worthy of special constitutional protection. With this reasoning the judge, as we could see, legitimates a creative intervention in the agreement without needing to formulate judgments on the validity of the same: for example, due to the unfair nature of some of the terms. The judge ‘simply’ considers (and formulates a justification, not necessarily ‘good’ or ‘convincing’) that contractual terms are not applicable because norms (for example, from legislative derivation) which provided their applicability are, in turn, not applicable to the specific case; since there is applicable an unexpressed norm: duty of tolerance (at least temporarily) of the breach of contract. The consequences of this reasoning are clear: the judge partly vacates the content of the agreement to partly re-write a new one. And does it by a progressive search of unexpressed norms that stricto sensu (in the cases herein analyzed) are a judicial creation. This is the ‘moment’ of exceptionality where the judge ceases to be a surveyor of the agreement (also of its realization) to become a judge who, to a large extent, appropriates the contract. This is, in short, the ‘moment’ of exceptionality that (self-)legitimates the passage from the judge of the agreement to the ‘judge’s agreement’. This is an agreement whose normative content is no longer (at least partly) the result of an agreement between the parties (contractual norm), becoming the result of a judicial decision (judge-made norm) which in addition, and inevitably, at several levels or degrees of efficacy, has the vocation of interfering in the future, conditioning the contractual content of subsequent agreements. This even more strikingly, if it is taken into consideration that the Colombian legal system (specifically the jurisprudence itself of the Constitutional Court), on the one hand, (i) foresees a binding effect (at least vertically) of rationes decidendi of decisions regarding the content of fundamental rights41 and, on the other hand, (ii) foresees mechanisms (not employed in these cases) that allowed 41

For an illustration of the process of consolidation of the relevance of the rationes decidendi regarding the acción de tutela in Colombia, see Bernal Pulido (2007) 389 et seq.

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extension of the effects of rulings on acciones de tutela (normally inter partes) to subjects not involved in the process, e.g., declaration of inter communis effects; declaration of ‘unconstitutional state of affairs’.42

V.

INAPPLICABILITY OF DEFAULT NORMS (NORMAS DISPOSITIVAS): THE PERMISSION THAT NEVER WAS

In connection to the activities mentioned that the judge carries out in the building of her decision, some points deserve attention, particularly with regard to the activity by means of which the Constitutional judge fills the explosion of gaps created as a result of the inapplicability of the consequences provided in the norms (for example, but not only, legislative ones) that in general terms prescribe the freedom of contract and its realization. Let’s think about, for example, the relation among default norms and the Constitutional judge-made terms. A default norm (ought to be; unless the parties agree otherwise, within some limits) could be understood as a norm compounded, at the same time, by (at least) two norms.43 Specifically,44 on the one hand, a first norm (that expresses an obligation, or a prohibition or even a permission) expressly (explicitly) defeasible, that is to say, a norm subject (at least) to a negative and express condition of applicability of its consequences (‘… unless the parties agree otherwise’). On the other hand, a permissive norm45 that, precisely, when its positive applicability conditions (i.e., ‘the parties agree otherwise’) are verified, generate the inapplicability of the consequences provided on the former norm. A permissive norm from which, besides, and in turn, descends the applicability of a third norm, i.e., the 42

See section VI below. It even might be possible to refer to a third norm: specifically, a norm that (in Hohfeldian terms) confers a power on the parties to create a norm (in particular, a contractual term). However, here I will refer only to (i) the expressly defeasible norm (which could express an obligation, a prohibition and even a permission); and (ii) the permissive norm. Regarding the relationship between power and permission see Poggi (2004) 209–24. 44 The scheme adopted herein should not be understood in an ideological sense. It is, simply, a possible description of the norm structure. 45 About permissive norms, see Poggi (2004). 43

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contractual term regarding the class of cases regulated, until that moment, and abstractly, for the former norm. However, within the phenomenon herein analyzed, nothing excludes the Constitutional judge, when filling some of the gaps identified (generated) in the agreement, to draft a new term that, precisely, regulates the class of cases that in non-exceptional circumstances could have been regulated by the parties by the use of the permission granted by a default norm, i.e., specifically, by the permissive norm that configures the default norm along with the expressly defeasible norm. In fact, for example, the Constitutional judge (Case 2) ordered the novation of obligations and, in turn, provided that default interest due to breach of contract could not be accrued during the period of the kidnapping and until 30 days after the serving of the ruling; while she stated that remunerative interest should be calculated in response to the weak position of the ex-kidnapped individual. In this way, surely, the judge is regulating a subject matter that a default norm allows to be regulated by the parties. In effect, a norm of the Colombian Civil Code (article 1699) expressly provides that, as a consequence of novation, first debt interest is extinguished, unless the parties agree otherwise. The Constitutional judge withdrew the parties from the use of the permission granted by the Civil Code, not because the agreement which is the object of intervention had not ruled on the topic of default and remuneratory interest (an event in which, then, the first norm should be applied), and not because such regulation was unfair and so the object of a judgment of invalidity.46 She limited the permission because at the time she ordered the novation, she considered that, in this case, the regulation of interest by the judge should be in line with the unexpressed norm that prescribes the duty of tolerance (at least temporarily) of the breach of contract. The Constitutional judge considered, in other words, that within the normative framework on novation of obligations, the whole default norm provided in the Civil Code (and then, both the expressly defeasible norm and the permissive norm) was implicitly defeasible, namely, was subject to an implicit exception to the applicability of its consequences. If the debtor has been kidnapped (and, therefore, if the debtor is a ‘subject worthy of special constitutional protection’) and the judge compels novation of the obligations (a decision by itself exceptional within the 46

For an analysis on the (in)validity of the terms of the agreement resulting from the exercise of the permission attached to the default norm, see Grondona (2011) 326 et seq.

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normative framework of freedom of contract), the subject matter of interest (i.e., default and/or remunerative) may be regulated, not by the legislator nor in the way provided by the parties, but in the ‘judge’s agreement’. Note that, then, the defeasibility of the expressly defeasible norm is not generated as a result of the verification of the exception expressed by the legislator (‘unless the parties agree otherwise’), but rather because (in the same manner that occurred with regard to the permissive norm) the norm is defeated as a result of the creation, by the judge, of an implicit exception to the application of the whole default norm.47 Actually, the judge does this (in fact, with the same reasoning already analyzed above) to generate a new unexpressed norm: ought to be unless the judge decides otherwise.48

VI.

EXCEPTIONS TO THE APPLICABILITY OF CONTRACTUAL SUBJECTIVE RIGHTS AND THE DUTY OF SOLIDARITY

The phenomenon analyzed above clearly establishes a limitation to the exercise of one of the parties’ subjective right. Thus, precisely, and in more general terms, the second aspect that deserves attention from the decisions of the Court, is that concerning the inapplicability of norms (whether or not they are contractual terms) attributing subjective rights in favour of each of the contracting parties. It is evident that since it is an agreement, the inapplicability of contractual terms (as a result of the inapplicability of the norms that prescribe in different levels of specification the freedom of contract) means, necessarily, the inapplicability of contractual terms attributing subjective rights in their different manifestations (liberty and/or claim and/or power and/or immunity) to the benefit of the parties or (which is the same) the inapplicability of norms ascribing duties in their different

47 In effect, nothing excludes that the expressly defeasible norm (i.e., a norm formulated in a way that includes the express exception and identifiable ex ante) and, in general, the whole default norm results, in turn (as a consequence of the interpretative activity) subject to implicit exceptions. On this point see Chiassoni (2012) 175–76. 48 Norm considered by the judge as one more of the concretions of the duty of tolerance (at least temporarily) of the breach of contract.

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manifestations (no right and/or duty and/or liability and/or disability) charged on the parties.49 In addition, in the act of filling the avalanche of contractual gaps identified (created) by the Constitutional judge, the latter attributes new active normative positions (subjective rights) in favour of one of the parties or (which is the same) duties charged on the other. Effectively, without a judgment on their validity – because, for example, they are considered unfair – some contractual terms are not applied and, as regards the default debtor features, some new ones are created by the judge reformulating a balance of rights and duties clearly to the latter’s benefit. Let us consider that the Constitutional judge, using (though not only) the norm that prescribes the duty of tolerance (at least temporarily) of the breach of contract, for instance (i) limited the subjective right of action (in effect, in Cases 1, 2 and 3, the enforcement of judicial foreclosures was halted or declared void); and (ii) limited the subjective right (immunity) to the exceptio non adimpleti contractus (in Cases 4 and 5, the creditor was compelled to continue with the performance of the contractual obligation by the judge, notwithstanding that the debtor had not performed her obligation).50 From the point of view of the several duties that the Court ascribes to the creditor, one particularly deserves attention because through its use the ascription of other duties was justified, specifically correlative duties in respect of the debtor’s fundamental rights (including social rights, whose core is a claim). I refer to the duty of solidarity that the Constitutional Court, upon an expansive interpretation,51 ascribes to everyone (when the infringement of a fundamental right may derive from the breach of the duty of solidarity).52 Precisely, the norm that prescribes the constitutional duty of solidarity is used by the Constitutional judge as part of the justification (in the building) of the unexpressed norm prescribing the duty of tolerance (at 49

Hohfeld (1923). As regards Hohfeld, see, e.g., Kramer (1998) 7–111. For the qualification of the exceptio inadimpleti contractus as a subjective right, see Moreno Cruz (2014) 215–17. 51 The judge considers that the target class of the consequences of the norm which prescribes the duty of solidarity should be broader and, therefore, (re)interpret the norm to produce a second one that ascribes the duty of solidarity to everyone, expanding the relevant class in this way in contrast to the class that would be obtained, for example, by the literal interpretation of the corresponding normative sentence. 52 See, e.g., C-237/97, T-389/99, C-459/04, T-110/05, T-972/09. 50

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least temporarily) of the breach of contract and, before that, in the building of the justification of the restrictive (re)interpretation of the norm ‘the parties are obliged to perform bilateral obligations agreed in a valid agreement’.53 Concerning this restrictive interpretation, it is important to remember (see section IV above) that the Court excluded one (sub)class as recipient of the consequences of the norm. In other words (and actually from a different point of analysis), the Court seeks to produce a diversification, specification,54 of the person having rights (sujeto único de derecho) resulting (at that moment) from the abstractions of the modern process of codification, prescribed in its most influential version in the Civil Code, whose impact in the Colombian and, in different degrees, in LatinAmerican legal cultures is known to everyone.55 The diversification of the sujeto único de derecho does not only operate with respect to the relationship of the subject with the market and its function in the stabilization of its order, i.e., not only in the diversification of the sujeto único de derecho in the subclasses of consumer and employee.56 It is rather a specification that operates on the basis of (social and/or natural) features of the subject and its evident exposure to the infringement of fundamental rights, and so worthy of exceptional treatment. To this purpose, the Court refers to a ‘subject worthy of special constitutional protection’, e.g., subjects who have been

53

Please note, as discussed below, that the norm that prescribes the duty of solidarity is the result of an extensive (re)interpretation which, in turn, is used to justify the restrictive (re)interpretation of the norm the parties are obliged to perform bilateral obligations agreed in a valid agreement (which leads to a second norm: the parties are obliged, unless a party is a subject worthy of special constitutional protection, to perform bilateral obligations agreed in a valid agreement). But, in addition, it is used (along with other norms) to justify the formulation of the norm that prescribes the duty of tolerance (at least temporarily) of breach of contract by means of which the gap is filled (see above section IV). In this way, several interpretative exercises join together: (i) extensive interpretation to broaden the scope of application of the consequences of a norm (duty of solidarity); (ii) restrictive interpretation which evidences the defeasibility of another norm and generates a gap (duty to perform …); (iii) filling the gap by means of the identification (creation) of an unexpressed norm (duty of tolerance (at least temporarily) of breach of contract). 54 Bobbio (1991) 68 et seq. 55 In general see Brito Guzmán (2000). 56 For a critical view on this restrictive version of diversification see Somma (2009) 131–58.

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kidnapped (secuestrado), displaced, affected by AIDS, children, individuals classified as ‘in extreme poverty’ (i.e., debtors referred to in the mentioned cases), homosexuals, women, the elderly, etc. Using the term ‘subject worthy of special constitutional protection’, the Court justified several decisions in which the judges have expressly imposed specific duties on the executive branch, and even on the legislative branch, aimed to guarantee fundamental rights to subjects in positions of weakness. Perhaps the most emblematic situation is the one concerning the protection of displaced people, in which the Court, through several tutelas decisions (in particular Case T-025/04), has issued highly elaborated judicial remedies that impose on the state the activation of public policies.57 However, let us note that, on the contrary, with respect to the cases discussed above on the limitation of freedom of contract, the Court has not imposed duties charged on governmental institutions for the benefit of subjects worthy of special constitutional protection, within the framework of the implementation of public policies, but rather duties charged on unsatisfied creditors within the framework of a contractual relationship.58 57 On this point, particularly concerning an analysis on the scope of the effects of the tutela T-025 of 2004 of the Colombian Constitutional Court, which declared an ‘unconstitutional state of affairs’ in relation to the infringements of rights of displaced population, see Rodríguez Garavito (2011) 1669 et seq.; and, previously, Rodríguez Garavito and Rodríguez Franco (2010). 58 In other terms, the agreement or better the (re)writing of the agreement on the part of the judge is shown as an instrument considered apt to activate the justiciability of fundamental rights (also social ones) due to the absence or at least deficiency in the implementation of public policies. Therefore, the distinction that Monateri (2003) stated in terms of ‘rugiadoso’ agreement and ‘rude’ agreement, still shows its descriptive vocation. In fact, it is difficult not to note, in the interpretation of the agreement by the Colombian Constitutional Court, a (re)presentation of the agreement as a malleable ‘object’, made of clay, ductile, able to regulate individual interests and, at the same time, able to correct, ex post, the absence or deficiency of public policies (and then, also, the functions of other public authorities). In short, a vision of a sort of super-agreement opposed to an idea of agreement understood as the result calculated during a momentary lull in the framework of an ongoing conflict where the rigor of the ‘choice of word’ governs the interpretation. It is a distinction (rugiadoso-rude) which, in fact, opens the door to an analogical distinction between two visions of fundamental rights. In effect, the balancing technique as understood by some neoconstitutionalists, supposes a rugiadosa vision of fundamental rights, rights of clay, malleable, ductile; a vision that may lead to a precarious (in the sense of not stable) justiciability of the fundamental rights by the decisions of a judge who determines ‘on the road’ the entitlement of correlative duties. This vision faces a

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VII.

CONCLUSIONS: BEYOND THE ‘SIMILARITIES’

The framework analyzed so far is only a manifestation (moreover local and, without reservations, exceptional) of the tense relationship between freedom of contract and judicial intervention in the agreement. In fact, this brief analysis yields a specific result: the intervention of the Constitutional judge in the agreement through tools of procedure such as the acción de amparo, is characterized (in part) by acts not aimed at the necessary identification of unfair terms, which are then subject to a judgment of invalidity. Rather, through the ‘identification’ of a norm (duty of tolerance (at least temporarily) of breach of contract) that is (also) based on an extensive interpretation of the duty of solidarity, the judge creates, specifically, the inapplicability of terms and, thus, consequent contractual gaps – gaps that the judge fills by (re)writing part of the contract, conditioned by the content relevant to the specific fundamental rights of ‘subjects worthy of special constitutional protection’. This inapplicability of the norms of the agreement (the terms) is the result, in turn, of a process of identification (creation) by the judge of exceptions to the applicability of the consequences of norms (also default norms) arising (though not solely) from the legislative discipline of private contract law. The judge makes the norms’ inapplicability effective by means of an exercise of some kind of supra-competence whose source (at least from the empirical point of view) does not seem to be found (or not exclusively) in norms of local law but rather in norms sought beyond state sovereignty, beyond verbalized law and, evidently, beyond codification and its failed attempt to establish a sovereign order characterized (to put it in Monateri’s terms) by a hyperbolic claim.59 It is a hard version of intervention in agreements but soft regarding the hierarchy of the sources: instead of identifying the duty to declare the invalidity of some norms, the Constitutional judge chooses to blur the applicability of their consequences, which is conducive, as a result, to the inapplicability of one or several contractual norms (terms). rude vision of fundamental rights; a vision that before the certainty of the existence of a perennial danger of infringement in a perennial conflict scenario proposes an interpretation of the same that progressively leads to its concretion (even better if legislative) in the form of norms that suffer less from the linguistic indeterminacy of constitutional sentences, and that, in this way, allows its predictable application and then fundamental rights justiciability. For some reflections on this sense, see Pozzolo (2001). 59 See n. 25 above.

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This way the decision of the judge ends up generating, within the legal system, an unpredictable and ‘intermittent’ applicability of the norms (for instance, legislative ones) which govern agreements (e.g., subjective rights), opening the door to the ex post ascription of additional duties upon the contracting-creditor. The particularity of this phenomenon cannot be underestimated, at least regarding legal scenarios where a specific idea, an ideology, benefits (or, better, has benefited and there is still a general belief that it benefits) from some kind of hegemony; I refer to the idea under which norms are (only or mainly) the result of the direct interpretation of normative sentences produced by Parliament. For sure, some may affirm (and from a normative analysis perspective, it would be true) that the whole act of progressive inapplicability of the legislative norms, which, in turn, is conducive to their intermittent applicability, has several similarities with the act of distinguishing in the way shown in the systems of relevance of judicial precedent found in common law. In effect, some authors (rightly) define one of the kinds of manifestation of the act of distinguishing, within the framework of the systems of relevance of judicial precedent, as the identification of negative conditions of applicability of the consequences provided in the judge-made norm (the precedent).60 In fact, as dealt with in this chapter, it may be read as one of the possible continental versions of the act of distinguishing; but accepting that, in these cases, instead of determining the non-application of a judge-made norm, the Constitutional judge is determining the inapplicability of a norm issued by Parliament, and as a result of it the inapplicability of contractual terms. However, this simile disregards (among other things) a fundamental distinction. In relation to the way the Constitutional Court has, through its case law, created the limits to the freedom of contract: (i)

(ii)

60

the phenomenon introduces itself (and, perhaps, could be read) as an act of suspension of, an exception to the law given and written by legislative authority; many judges, scholars and law-makers still consider the given law (because, for instance, they remember it so) as complete, as an exhaustive verbalization; See, e.g., Chiassoni (2012) 231, n. 5.

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(iii) this memory leaves a sediment in the legal culture, a kind of presumption according to which written law is (and ought to be) undefeatable;61 (iv) therefore, although normative defeasibility is an undeniable phenomenon, overcoming this presumption (which is, without doubt, and in turn, defeasible) in hard cases (i.e., agreement versus fundamental rights) imposes on the interpreter, the judge, a more ‘(un)articulated’ interpretative exercise with more ‘complex’ argumentative resources (not necessarily convincing ones); even more so when it involves a radical destabilization of the agreement by the use (not only of the extra-sovereign law but also) of unexpressed norms built through the use of interpretative techniques that could easily produce unpredictable results. In other words, the phenomenon discussed above cannot be seen, then, as an act of distinguishing within a ‘quiet’ exercise of the jurisdictional function carried out in legal scenarios where the judicial decision has been represented ironically,62 i.e., as a decision and, at the same time, as a perennial, but always failed, attempt to capture non-verbalized law. Law, specifically the common law (above all the English one), may see (or would like to see or is used to seeing) the act of distinguishing as a kind of ongoing process of refining of the identification of unexpressed law, never totally verbalized. Rather, the phenomenon discussed above is an act which, when perceived and presented as a break, transforms the portrait of the clash between the law given ex ante with exhaustive and abstract vocation in circumstances of ‘normality’, and a law that focuses on the cases in order to consolidate exceptions to the former by means of the unfolding of folds of a law still not captured. Therefore (notwithstanding that it is about the same techniques with similar results), it does not seem to be adequate to reduce, simplify, all these acts (justified by judges precisely as exceptional) of building of normative gaps, of identification (creation) of unexpressed norms and of 61

With regard to this presumption, see Barberis (2005) 130. As opposed to sovereign hyperbole (see n. 25 above) according to Monateri (2013a) 85 et seq., ironic in the sense of a decision that at the same time is an imperfect declaration of a pre-existent, non-verbalized law. Ironic, then, in the sense of a creation, by means of the representation, of two levels where one ‘thing’ is ‘the set of two different things and, depending on the context, it may change from one to the other always saving the situation’ (89). 62

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(re)writing of the agreement, to a homogenized phenomenon of judicial activism necessarily fungible in any legal scenario. In effect, the differences between the patterns of judicial activism, also in the case of intervention over the agreement, go beyond, without doubt, the techniques used by legal actors (that probably coincide) and are located in a broad context – a context conditioned by the way the legal actors remember and represent the own legal system and, in turn, by means of argumentative resources that the actors effectively use (and/or ought to use) when they want to escape from – or otherwise want to preserve – that memory.63

REFERENCES Arango, R. (2005) El concepto de derechos sociales fundamentals. Bogotá: Legis Barberis, M. (2005) Filosofia del diritto. Un’introduzione teorica. Turin: Giappichelli Bernal Pulido, C. (2007) ‘La fuerza vinculante de la jurisprudencia constitucional en el orden jurídico colombiano’ in M. Cepeda Espinosa, E. Montealegre Lynett and A. Julio Estrada (eds), Teoría constitucional y políticas públicas. Bases críticas para una discusión. Bogotá: Universidad Externado de Colombia Bobbio, N. (1991) L’età dei diritti. Turin: Einaudi Brito Guzmán, A. (2000) La codificación civil en Iberoamérica. Siglos XIX y XX. Santiago: Editorial Jurídica de Chile Chiassoni, P. (2007) Tecnica dell’interpretazione giuridica. Bologna, Il Mulino Chiassoni, P. (2012) Los precedentes civiles son vinculantes? Consideraciones sobre el artículo 360-bis CPC’ in P. Chiassoni and P. Moreno Cruz (eds), Desencantos para abogados realistas. Bogotá: Universidad Externado de Colombia, 231 Comanducci, P. (2010) Hacia una teoría analítica del derecho. Ensayos escogidos. Madrid: Centro de estudios políticos y constitucionales 63 In this way, concepts (and distinctions) such as (i) embodied law and disembodied law (n. 1 above); and (ii) (then) hyperbolic act (n. 25 above) and ironic act (n. 62 above); as well as (iii) the style, understood as the form of present (actual) representation of the legal memory (‘the style of a legal system is, then, the form in which the Law in that system generates itself’, Monateri (2013a) 47), acquire, all of them, fundamental relevance in the identification of the differences between (not solely) judicial activism patterns, also with regard to the hard case agreement versus fundamental rights. Indeed, it concerns concepts that (despite appearances) from a descriptive point of view, configure themselves like a kind of ‘resistance’ in the face of the homogenized discourses. In short, if the goal is to identify distinctions and similarities, the science of comparative law ought to necessarily recur to the formant analysis, as (re)formulated by Monateri (2013a) 49: formant (formante) as ‘which conditions and determinations that a certain form or style is assumed, beyond the mere facts and the mere textual data and, thus, beyond the norms written in texts. In fact [formant] constitutes the repository of the original sense that is derived from the concrete historical manifestation of a given nomos as the basis of the historical order.’

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240 Comparative contract law Costantini, C. (2007) La legge e il tempio. Storia comparata della giustizia inglese. Rome: Carocci Esquirol, J.L. (1997) ‘The Fictions of Latin American Law (Part I)’, Utah Law Review 425 Esquirol, J.L. (2011) ‘The Turn to Legal Interpretation in Latino America’, 26(4) American University International Law Review 1031 Ferrajoli, L. (2013) ‘Passato e futuro dello stato di diritto’ in G. Pino, A. Sciavello and V. Villa (eds), Filosofia del diritto. Introduzione critica al pensiero giuridico e al diritto positivo. Turin: Giappichelli, 437 Ferrarese, M.R. (2006) Diritto sconfinato. Inventiva giuridica e spazi nel mondo globale. Rome and Bari: Laterza Ferrarese, M.R. (2009) ‘Transjudicial Dialogue and Constitutionalism: A Risk or an Opportunity for Democracy’, 2 Sociologia del diritto 120 Ferrarese, M.R. (2010) La governace tra política e diritto. Bologna: Il Mulino Ferrer, J. and Ratti, G.B. (eds) (2012) The Logic of Legal Requirements: Essays on Defeasibility. Oxford: Oxford University Press Glenn, P. (1987) ‘Persuasive Authority’, 32 McGill Law Journal 261 Grondona, M. (2011) Diritto dispositivo contrattuale. Funzioni, usi, problema. Turin: Giappichelli Grossi, P. (2007) Mitologie giuridiche della modernità. Milan: Giuffrè Guastini, R. (2011) Interpretare e argomentarei. Milan: Giuffrè Guastini, R. (2014) La sintassi del diritto. Turin: Giappichelli Hohfeld, W. (1923) Fundamental Legal Conceptions as Applied in Judicial Reasoning. New Haven, CT: Yale University Press Kapiszewski, D., Silverstein, G. and Kagan, R. (eds) (2013) Consequential Courts: Judicial Roles in Global Perspective. Cambridge: Cambridge University Press Kramer, M.H. (1998) ‘Rights Without Trimmings’ in M.H. Kramer, N.E. Simmonds and H. Steiner (eds), A Debate over Rights. Oxford: Clarendon Press, 7–111 Landau, D. (2010) ‘Political Institutions and Judicial Role in Comparative Constitutional Law’, Harvard International Law Journal 319 Landau, D. (2012) ‘The Reality of Social Rights Enforcement’, 53 Harvard International Law Journal 202 López Medina, D. (2006) El derecho de los jueces. Bogotá: Universidad de los AndesLegis, 2nd edn López Medina, D. (2011) ‘La teoria impura del diritto: la trasformazione della cultura giuridica latino americana’, Rivista critica del diritto privato 195 Monateri, P.G. (2003) ‘Ripensare il contratto: verso una visione antagonistica del contratto’, I Rivista di diritto Civile 409 Monateri, P.G. (2013a) Geopolitica del diritto. Genesi, governo e dissoluzione dei corpi politici. Rome and Bari: Laterza Monateri, P.G. (2013b) Legge, linguaggio e costume. Naples: Editoriale scientifica Moreno Cruz, P. (2014) ‘La “buona”, la “brutta” e la “cattiva” eccezione di inadempimento. A proposito dei limiti dell’exceptio inadimpleti contractus’, La nuova giurisprudenza civile commentata, Parte seconda 215 Pérez Murcia, L., Uprimy Yepes, R. and Rodríguez Garavito, C. (2007) Los derechos sociales en serio: hacia un diálogo entre derechos y políticas públicas. Bogotá: DeJusticia-IDEP Pino, G. (2008) ‘Norme e gerarchie normative’, Analisi e diritto 288 Poggi, F. (2004) Norme Permissive. Turin: Giappichelli Pozzolo, S. (2001) Neocostituzionalismo e positivismo giuridico. Turin: Giappichelli Pozzolo, S. (2012) Costituzioni, interpretazioni, disaccordi. Rome: Aracne Rodríguez Garavito, C. (2011) ‘Beyond the Courtroom: The Impact of Judicial Activism in Socioeconomic Rights in Latin America’, 89 Texas Law Review 1669

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Freedom of contract and constitutional values 241 Rodríguez Garavito, C. and Rodríguez Franco, D. (2010) Cortes y cambio social. Cómo la Corte Constitucional transformó el desplazamiento forzado en Colombia. Bogotá: DeJusticia Sepúlveda, M. (2009) ‘Colombia. The Constitutional Court’s Role in Addressing Social Justice’ in M. Langford (ed.), Social Rights Jurisprudence: Emerging Trends in International and Comparative Law. Cambridge: Cambridge University Press, 144 Slaughter, A.M. (2003) ‘A Global Community of Courts’, 44 Harvard International Law Review 199 Somma, A. (2009) ‘Dal Lavoratore al consumatore. Cittadinanza e paradigma giuslavoristico nell’economia sociale di mercato’ in G. Balandi G. Cazzetta (eds), Diritto e lavoro nell’Italia republican. Milan: Giuffrè, 131–58 Tushnet, M. (2008) Weak Courts, Strong Rights: Judicial Review and Social Welfare Rights in Comparative Law. Princeton, NJ: Princeton University Press Wilhemsson, T. (1992) Critical Studies in Private Law. Dordrecht: Kluwer Academic Publishers Wilson, B.M. (2011) ‘Strategic Deference in the Colombian Constitutional Court, 1992– 2006’ in G. Helmke and J. Ríos-Figueroa (eds), Courts in Latin America. Cambridge: Cambridge University Press

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PART III REPRESENTATIONS AND NARRATIVES

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12. The unburiable contract: Grant Gilmore’s discontinuous parabola and the literary construction of American legal style Cristina Costantini

I. UNDEAD GILMORE: INTERTEXTUAL AUTHORSHIP AND SITUATED READERS Redeem the time. Redeem the unread vision in the higher dream (T.S. Eliot, Ash-Wednesday, section IV) A land of old upheaven from the abyss By fire, to sink the abyss again; Where fragments of forgotten peoples dwelt (Tennyson, Idylls of the King, ‘The Passing of Arthur’, II. 82–84)

More than 40 years have passed since the sardonic Grant Gilmore oracularly pronounced his vigorous and Nietzschean-sounded epitaph to honour the decease of Contract.1 Time elapsed, and even the agnostic

1

The Death of Contract, first published in 1974, collects the lectures delivered by Grant Gilmore at Ohio State University Law School in 1970, with footnotes added to provide further explanation. The celebrated incipit of the book recites: ‘We are told that Contract, like God, is dead. And so it is.’ Apart from its clearly recognizable intellectual ascendancy, this overstatement, which piqued the academic community, presents three peculiarities in its proper stylistic form. First of all, Gilmore is referring to a personified Contract, as is evidenced by the capitalized initial letter C, preserved and reproduced in the body of the present text for a sense of fidelity to the original. In this way, Contract is equated with God even in an ontological perspective (not only because of the common final destiny), as a definite entity. According to Ronald Collins, the capitalization makes patent that the focus of Gilmore’s investigation is not contract as a practice, but Contract as a grand Concept, and specifically the absolute Concept of pure and classical Contract. ‘What was thus claimed dead, or dying, was some Grand Concept. It was a Concept of absolute order, not a practice of unruly bargained for exchange; it was a Concept of abstract consistency, not a practice

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prophet of the legal uncertainty died in his sleep in the Eighties of the last century, but the intellectual debate on the late relics of a wellstructured body of law has never faded. With a wavering intensity, Gilmore’s secular talk continues to rule us from its grave,2 summoning up its religious intimations. It is absorbed in the general flow of thoughts and doctrines; it is drawn into the endless, alternating rhythm of tidy order and sprawling agony that marks the common destiny of Humanities; it is blended into a creative mixture of old and new, in order to compose an aesthetic structure out of multiple and changeable styles. The same poetic form of the elegy, clearly evoked by Gilmore’s intonation, comes to suture the unavoidability of death with a resurgent memory:3 it articulates the metaphysic dance that stages the movements of living and dying as the intense counterpoints of a simultaneous appearing and disappearing now of the spiritual, now of the carnal body. The literary of varying obligation; it was a Concept of “objective” scientific discovery, not a practice of subjective good faith dealing; and it was a Concept of general application, not a practice of particular resolution’; Collins (1995) 19. The second element which attracts our attention is the recourse to the plural personal pronoun ‘we’, intentionally used to certify the real existence of a new, collective consciousness about the present fate of contract. In the explicative footnote, Gilmore even speaks about the existence of a ‘Contract is Dead Movement’, whose Lord High Executioner was identified with Stewart Macaulay. This assertion gave birth to a myth, or, realistically, to a Gilmorean myth, if we consider the strong reaction of the invoked Macaulay, who promptly declined the honour of this prestigious nomination, specifying his position: ‘academic contract was dead, while the real institution was alive and well’. The reply was definitive when Macaulay, giving a keynote paper at the Sixth Annual International Conference on Contracts held at the Stetson University School, declared ‘There is no Contract is Dead Movement’. The last significant element in Gilmore’s expression is the use of the past tense form of the verb ‘tell’: ‘we are told’. Gilmore, therefore, requires us to accept this assertion as a matter of belief. 2 This is a clear transposition, echoing William Maitland’s renowned remark on the ghostly fortune of the forms of action: ‘The forms of action we have buried, but they still rule us from their graves’; Maitland (1909[1936]) 1. 3 The intimate characteristics of elegy, as a literary genre, are particularly fit for representing an age of transition, an unsettled cultural climate, caught between a vanishing past and an uncertain future, when the tendency towards novelty does not supersede an embodied nostalgia for the past. In this perspective, it is possible to adapt to the present circumstances the brilliant expression originally coined by John Rosenberg to depict the spirit of the Victorian age ‘Waking daily to newness in all its forms, the Victorians felt, in Matthew Arnold’s phrase, like wanderers “Between two worlds, one dead / The other powerless to be born”’; Rosenberg (2005) 1.2. (Matthew Arnold’s quotation is from Stanzas from the Grande Chartreuse, II. 85–86.)

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celebration of the Dead emplots a process of re-interpretation and re-signification at the lyrical intersection of mourning and praise: folding into and out of conventional meanings, it emerges in the midst of an articulated fragmentation of traditions and visions, accepted discourses and prospective imaginations. In this perspective, having disrupted the storied past of American jurisprudence, Gilmore preached the advent of a new era, where crisis and doubts dull the assumed purity of the pristine mind. At the same time, his inquisitorial reflection dialectically opens to a further act of remembrance,4 figuring the possible transubstantiation of the buried corpse of classical theory into a reinvigorated body of rules and principles. With a contemporary and retrospective glance, it could be said that, if the fact of the death of contract has been recorded, nevertheless legal scholars have not completely turned their attention elsewhere. Conversely, it could be noted that, if law students have not been integrally or permanently dispensed from the accomplishment of antiquarian exercises about the theory of consideration, they are from time to time stirred up by provocative professors to comb unexplored paths. The pages of The Death of Contract are nowadays read and commented in various lecture halls, all over the world, certainly far beyond the proud claim of belonging to the original jurisdiction. Definitively, all the mundane deaths (of Contract, of Gilmore, and, possibly, of Gilmore’s work) are won and the secluded Self of American legal tradition is de-territorialized. Gilmore’s reliance on succeeding esteem and broad circulation has proved to be not detrimental. And so it is.

4

The word ‘remembrance’ could be here reinterpreted in the light of its symbolic potential, kept in Shakespearean poetics. Moving from the etymological roots of the verb re-member (formed by the union of the iterative particle ‘re’ with the noun ‘member’), as the act of composing again an entity in its carnal consistency, we can deeply appreciate the longing and aching admonition addressed by the father’s ghost to Hamlet ‘Adieu, adieu! Hamlet, Remember me.’ Moreover, we can remind and apply to Gilmorean discourse the unique properties of the revenant, the spectral ghost – that which comes back – as they have been brilliantly detected by Jacques Derrida. The first property is a kind of ‘paradoxical incorporation’, insofar as the spectre is positioned between life and death, between body and no body; it is ‘a certain phenomenal and carnal form of the spirit’. The second property is related to time, as it can be actually disrupted and disjoined by the spectre, and it is owing to the ‘nothing visible of the spectre’. The spectre, ‘is a Thing that is invisible between its apparitions, when it reappears. This Thing meanwhile looks at us and sees us not see it even when it is there’; Derrida (1994) 5 ff.

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It could be an attractive wager to detect the due consideration tendered to the past respectively by Grant Gilmore and Thomas Stearns Eliot. The first perceived the untimeliness of the present, abruptly turned into the past. ‘The present all too soon becomes the past. What is past is past – the future alone has meaning’, Gilmore denounced in his first dissertation.5 The second codified the historical sense not only as the pastness of the past, but also as its presence. The issues at stake involve the polemical relationship between the hegemony of the past and the counter hegemony of the future; the acknowledgment or the denial of the permanent heritage of the Dead; the artful fractures which are provoked by cognitive injuries in order to juxtapose orthodox views to heterodox ideas; ultimately, the essence of memory and the theory of tradition. Is time past redeemable?6 Or does it assume the appearance of a haunting ghost, which inexorably torments and afflicts posterity? Halting at the frontier of metaphysics, the Newcomer has to chose which direction to take: the route towards the awareness of a growing indebtedness, or the way of a repetitional (mis)appropriation of sedimented words, images and symbols. With these questions in mind, the following pages are concerned with an original and trans-disciplinary close reading of Gilmore’s work. The intellectual device proposed for a new, critical reassessment consists in a specific conception of legal traditions as a network of textual relations. Deciphering their inner meanings means, therefore, to discover the plot of intertextuality and its hidden strategies, to trace mutable connections, to start a process of moving among texts.7 The research leads to capture the interstitial sense and purpose, something that exists in the liminal threshold between a text and all the other texts to which it directly or indirectly refers. Legal texts, which compound, give expression and stylize different legal traditions, are 5

Gilmore (1936). This question is a kind of resounding echo from T.S. Eliot’s Burnt Norton ‘Time present and time past / Are both perhaps present in time future / And time future contained in time past. / If all time is eternally present / All time is unredeemable’. For an illuminating and philosphical comment, see Moore (1965) 25, where the Author draws two interpretative lines: one, which can be taken as a treatment of Bergsonian durée, explaining how ‘past gnaws away into present, devouring time future in advance’; another, according to which Eliot’s absolute time is the child of Roycean and Bradleyan metaphysical idealism, ‘in which the divine view point is a timeless moment – the moment outside of time and before and after time’. 7 For an exhaustive investigation of the various theories about intertextuality, see Allen (2000). 6

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conceived and analysed as intertexts. The single text doesn’t stand alone, in its absolute independence: it cannot exist as a hermetic or selfsufficient whole and it cannot function as a closed and impermeable system. On the contrary, it is a relational event, insofar as it keeps only a part of a meaning, it’s a synecdoche for a larger whole. As has been argued, the concept of intertextuality has even more radical implications and it directly refers to ontological issues. Recalling John Frow’s cunning view, intertextuality ‘has transformed the unity and self-presence of the text into a structure marked by the otherness and repetition; it has suggested that the exterior of the text is not a monolithic real, but a system (or an infinity) of other such textual structures’.8 Consequently, the dissection of legal traditions involves both the act of mapping transtemporal influences, in order to detect the underlying genealogy, and the troubled quest for the possibility of a monologic structure of juridical canon. Having clarified the intellectual framework here embraced, three main issues will be discussed. First of all, there will be offered a synthetic sketch on the critical afterlife of Grant Gilmore. In this perspective, the later legal scholars are conceived as the interpretative heirs of this fine intellect, who have moulded the course of American legal thought. It will be discussed on the basis of which arguments and criteria they have appreciated or censured Gilmore’s theoretical positions; how they created circles of agreement or disagreement; in what measure they transformed Gilmore’s monograph from a generational product into a timeless book. Secondly, it will be scrutinized how Gilmore transposed literary stylemes, figures of speech, novel schemes of construction and elegant syntactic patterns into the pages of a legal text, with the aim of narratively 8

Frow (1990) 46. The theses developed by John Frow at the beginning of the mentioned essay are of particular interest for the present discussion. In particular, the Author points out that ‘1. The concept of intertextuality requires that we understand the concept of text not as a self-contained structure but as differential and historical. Texts are shaped not by an immanent time but by the play of divergent temporalities. 2. Texts are therefore not structures of presence but traces and tracings of otherness. They are shaped by the repetition and the transformation of other textual structures. 3. These absent textual structures at once constrain the text and are represented by and within it; they are at once preconditions and moments of the text … 6. The process of intertextual reference is governed by the rules of the discursive formation within which it occurs. In the case of literary texts (and of readings of literary texts) the relation to the general discursive field is mediated by the structure of the literary system and by the authority of the literary canon.’

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retelling the story of American common law. In so doing, Gilmore himself operates in an intertextual scenery, in a multidimensional space in which a variety of voices and utterances blend and clash. As a third point of discussion, Gilmore’s writings will be read according to Harold Bloom’s conflictual vision of intertextual process. In this way, it will be possible not only to justify the substantial turn impressed by Gilmore to the theory of contract from a strictly legal point of view, but also to appreciate the profound motivations and reasons that lay at the basis of his graveyard motifs and mocking accent. All the previous arguments will concur to explain the ‘Gothic paradigm’ textually used by celebrated scholars (such as Maitland, Holmes, Gilmore) to fashion the identity and the essence of the common law tradition. This model is construed on the basis of a conscious and ponderate distinction both between the concept of evolution and elaboration, and between the idea of a vampiric past that preys on the present and the projection of an amorphous past altered and directed by a governing present.

II.

REVIEWING REVIEWERS: POLYPHONY EMBODIED Ashes to Ashes, dust to dust.9 These speculations in life and death – these silent battles for reversionary spoil – make brothers very loving towards each other. (William Makepeace Thackeray, Vanity Fair, ch. XI)

As is so often the case among the mortals, the announcement of the death of a living creature evokes competing feelings and reactions: curiosity, dismay, appalled silence or copious words, sense of hope or unconditional surrender. Similarly, the notice of the decease of an entire field of law, formally declared, stimulated numerous and assorted responses from 9 At the end of his homage to Grant Gilmore, Waters has offered a poetic and intense completion of the well-known verse of the Anglican Book of Common Prayer : Ashes to ashes, dust to dust / Restate, codify, freeze them if you must / But laws divorced from ebb and flow / and then arranged in grand tableaux / Are apt to foster the illusion / That rules writ right end all confusion / And yet schemes like these do not last long / For all too soon, life proves them wrong / Ashes to ashes, dust to dust / In law the future wins / Indeed, it must Waters (1983) 874.

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the legal community. Comments and reviews abounded. Not only the content of the statement was stunning and sensational, but also the tone of the prose, an uncommon mix of grave assertions and satirical witticism, impressed the readers and caught their imagination. Gilmore’s scientific hypothesis was intriguing and transformative, his style of writing sounded fascinating and hardly imitable: these attributes, so peculiar and distinctive, were certainly adapted to excite academic envy, much beyond the courtly declaration of respect and the grateful tribute for the intellectual benefit received. In fact, many colleagues have tried to erode or, even worse, to dismantle the Gilmorean universe: some of them have paraded their serious competence against what has been presented as a kind of trivial sensationalism; others became the fierce defenders of the historical reason, outraged by such a condensed account; someone else hunted to find gaps and discrepancies, distortions and misquotations. The anxious attempt to disentangle from a possible, but undesirable, identification with a great master finally acted as a boomerang and the words used to (dis)comment on the controversial book positively increased. Therefore, once again in spite of the sense first evoked, The Death of Contract bred a vigorous aesthetic afterlife. Detractors and devotees, opponents and followers are still facing the Socratic sting that comes out of the pages. The destiny of this book reversed the fate reserved for the major publications authored by the two sage villains celebrated in Gilmore’s story (Oliver Wendell Holmes and Benjamin Nathan Cardozo). As it has been brilliantly pointed out, ‘The Death of Contract quickly became one of those books that everybody reads and nobody praises’,10 while Oliver Wendell Holmes’s The Common Law and Benjamin Nathan Cardozo’s The Nature of the Judicial Process ‘had nothing in common beyond the facts that nobody reads them and everybody praises them’.11 Gilmore’s faint smile is lasting with its superior eloquence. The corrosive Author was utterly astonished to witness such a mounting interest and, at the same time, to cope with the vehemence of the critical response;12 correctly it has been noted that he was amused by all the critics, who take him so seriously.13 If we plunge into the mass of published reviews, we can appreciate a significant variation of tones and arguments. The attributes used to qualify the work, both in its parts and wholly considered, could be 10 11 12 13

Waters (1983) 870. Gilmore (2014) 76. See Waters (1983) 869. See Speidel (1974–75) 1167.

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collected in an ever-growing bulk and are nuanced with contradictory moods, that range from pertinacious hostility to emotional appraisal. The romance has not yet ended! Some commentators seemed to be proud of denouncing the flaws of Gilmore’s writing, and properly its inaccuracy, unoriginality, exaggeration, incompleteness, oversimplification. In addition, Gilmore was accused of describing his own project when he was textually referring to other celebrated giants of American law: an inconsistent perspective, apt to generate confusion and embarrass, sinisterly meanders across the lines. With an apparently different spirit, it was said that Gilmore spun a delightful myth about classical contract law, but this alluring and reassuring premise lead to an analogous, revengeful conclusion, insofar as it has been noted that such a style is pernicious for the careless reader who, rapt with wonder, ignores Gilmore’s disclaimers and caveats with the result of misunderstanding and misconstruing the entire thought. In a more sympathetic way, an attempt was made to dissociate the bright intellect of a distinguished Professor from the particular qualities of The Death of Contract, depicted as an unsuccessful publication, or as a kind of contribution, which frustrated the legitimate expectations of the legal world. Reporting only a few of the multiple reviews, that concur to corroborate the above statements, we begin to meet with the genuine and outspoken assertion of Robert Braucher, Harvard Law Professor, Reporter for the Restatement (Second) of Contract and State Court Justice, according to which ‘The idea that Contract is Dead is a perverse dictum.’14 If not aberrant, Gilmore’s thesis was considered exorbitant or extravagant, a fruit of exaggeration,15 in a way that the revolutionary significance of his legal discovery was patently converted into a merely amusing view.16 Then we encounter the evocative metaphor invented by Richard Danzig, who once remarked that ‘at any decently set intellectual table, this book would be a plum – a garnish worthy of delight … Too many scholars have been at too much pain to record in which ways Professor

14

Braucher (1976) 122. Atiyah (1986) 68, n. 8: ‘Since Gilmore’s thesis was so exaggerated, it was presumably not intended to be taken too seriously’; Dawson (1980) 3: ‘Gilmore’s accounts that both bargain consideration and Contract are dead seem exaggerated.’ 16 Murray (1990) 203–4, para. 54, according to whom Gilmore’s suggestion that ‘the bargain theory of consideration can be traced only as far back as 1881, i.e., to the alleged creator of this revolutionary concept, O.W. Holmes, is an amusing view’. 15

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Gilmore has been imprecise, injudicious, or just plain mistaken.’17 Moving from the data collected (‘by my last count these 100 pages of lectures had given rise to reviews occupying 150 pages in our leading law journals’),18 Danzig believes that a deeper and more honest reflection on the reasons that could justify the incongruous attention reserved to a small book, the dramatic success paid to lessons translated in an elegant, even if not, in the end, nourishing prose, says a lot about the present, intellectual state of legal Academia. The thesis is interesting and stimulating. It is based on subtle considerations regarding both the literary genres of legal literature and the attitudes and inclinations of the legal profession. How can we explain the fact that the casebook, written by Gilmore with Professor Kessler, in large part anticipating the doctrine of the death of contract, was considered absolutely not worthy of attention, so much so that no one reviewed it?19 Or how can we interpret the silence that fell on Professor Ian Macneil’s sweeping article published in the Southern California Law Review, widely read, but likewise not recalled or reviewed? According to Danzig, it is not by accident that discourse within a profession is shaped by circumstances of form as well as by qualities of substance. The specific and surprising, if not distressing, datum pertaining to the legal profession is that ‘the advantages of immediate attention, guaranteed criticism and publicity are bestowed largely on books and withheld from the vast preponderance of legal academic work that appears in the form of casebooks, articles and treatises’.20 Therefore, the rarity of the use of the book format is one of the possible causes, which can explain the hunger for a product like Gilmore’s work. These notes lay bare the malaise of legal academia and bring to the light the intellectual conflict between a writing delivered to descriptive books and a writing perpetuated by the means of a casebook tradition. From times ago, the approach to book-writing in the law greatly favoured casebooks: few law teachers write discursive books; many do not write at all; those who do write ‘typically content themselves with detailed analysis of problems attacked piecemeal (in the form of articles) or they devote their energy to processing preexisting knowledge so as to render it teachable (as in casebooks) or authoritatively accessible (as in treatises)’.21 Danzig’s words strongly resound with

17 18 19 20 21

Danzig (1976–77) 1133, 1134. Ibid. 1125. Kessler and Gilmore (1970). Danzig (1976–77) 1127. Ibid. 1127.

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methodological and epistemological implications: ‘the scarcity of discursive books is a tangible surrogate for an intangible shortfall: the shortage of intellectually ambitious work in the law; the scarcity of overviews, of imaginative writing, of speculation and creativity cleanly presented’. All these motives, clearly interconnected, inflate the critical echo stirred up from Gilmore’s book, even if he proceeded in a ‘very off-the-cuff way’: notwithstanding its intrinsic and self-evident limits, it offered ‘imagination, generalization, speculation, and creativity cleanly presented’.22 Metaphorically speaking, the table was very bare; therefore, the legal profession, starved as it was, made a feast of a plum and behaved as though it was given a main course. In a world without meat, or at an early age, when one finds meat hard to cut, feeling at ease with soft foods, the tastes are still immature and certainly not sophisticated. In a similar scenery, it becomes understandable that a plum was appreciated and devoured, even if lacking the protein of a substantial study. The description of Gilmore’s text as a ‘book’ does not prevent other reviewers, and first of all Robert Gordon, from observing that the formal unity is only a kind of superimposed glue, used to put together the body of different lessons.23 The noble intent of the enterprise is actually frustrated: not only the tone of the expression is of urbane chattiness, but mainly the entire design seems to be loose and the execution is disqualified by its casualness. The conclusive judgment is severe and harsh, Gilmore’s perspective being presented as fundamentally distorted, not so much erroneous as myopic. In Gary Milhollin’s view, even the curious title, The Death of Contract, would lose its apparent efficacy, in fact the study, ‘because of its brevity, could not show whether contract is “dead”, or alive and well, or even flying headlong into places where nineteenth century scholars never dreamed it could go’.24 It remains an undeveloped, brief survey of changes in doctrine, based on only a few cases, the most familiar ones in the law of consideration. Synthetically, Jay Feinman has remarked that ‘The Death of Contract is good literature, bad history and questionable theory. As numerous scholars have pointed out, Gilmore’s picture of the development and decline of classical law is in many respects overdrawn or just wrong.’25 Brian Simpson has represented Gilmore’s version of the rise and fall of the general theory of contract law as a parody, specifying ‘I always 22 23 24 25

Ibid. 1133. Gordon (1974). Milhollin (1974) 30. Feinman (1990) 1291.

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suspected that he never meant it to be taken as a serious historical account.’26 He is echoed by Joseph Perillo, who has affirmed that ‘contract scholars know him [Gilmore] best by his Death of Contract, a book which apparently was intended to be taken largely tongue-in-cheek, a spoof, that took its title from the “death of God” of theologians who were fashionable at the moment … According to its parody of history, the concept of contract was invented by Christopher Columbus Langdell, perfected by Oliver Wendell Holmes, and propagated by a scrivener named Samuel Williston.’27 On the basis of these words, it could be supposed that the spirit of parody is contagious and diffusive! Historians censured the work as bad history; many colleagues had recourse to multiple stratagems in order to furnish evidence of poor scholarship. On more than one occasion, the critical inquiry on Gilmore’s eclectic views paved the way for wide-ranging reflections. As we have seen above, the exorbitant number of reviews dedicated to a short and apparently inconsistent book stimulated a larger debate on the status of academic production. With the same purposes, Gilmore’s way of writing inflated an inspired polemics on the normative merits of rhetorical power and especially on the functions and meanings of metaphor. The discussion was, therefore, transposed onto an interdisciplinary level, contributing to the refinement of the topics examined by the so-called ‘metaphor scholarship’ and, more generally, by cognitive sciences.28 The observations are conclusively of the main interest, insofar as they look closer to the versatile structure of legal writing, to the changeful ways in which substance becomes intimately related to style in order to compose a legal text. Beyond the ontological and epistemological issues, it is well known that language conditions and moulds the real perception and the proper understanding of information. On this ground, the lively passages of The Death of Contract were dissected and scrutinized, condemned or absolved. The shadow of suspicion was projected principally by objectivist epistemology. Metaphors would be falsehoods, and would have to be undone into the facts for which they stand; in any case they distract and confound, generating a sense of weird alienation and dazzled embarrassment. In particular, legal realists were mistrustful of metaphor, because 26

Simpson (1989). Perillo (1993) 761, n. 22. 28 For the discussion on metaphor theory as applied to law, see Winter (2001); Gibbs (2008). For a very intriguing and exhaustive contribution about metaphors in law, and in particular on the metaphors implied in contract law, see Lipshaw (2012). 27

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they conceived it as one of the pernicious creations of the misleading conceptualism bred by legal formalism.29 An influential confirmation of this sceptical stance comes from Justice Cardozo’s famous maxim ‘metaphors in law are to be narrowly watched, for though starting as devices to liberate thought, they end often by enslaving it’.30 Grasping his spirit and irony, and recalling his notes on the mysterious (almost mystical) figure of Benjamin Nathan Cardozo, we can suppose that maybe Gilmore would have agreed with Patricia Loughlan’s caustic comment, when she points out that precisely the statement, destined to drop metaphor as verbal construction, uses at least two metaphors, those of ‘liberation’ and ‘slavery’.31 This objection demonstrates, much beyond the internal contradiction of the sentence, the ‘unity, the potency, the “embeddedness” of metaphor, even in the words of speakers who do not (at least apparently) wish to speak metaphorically and who do not perceive themselves to be speaking metaphorically’. Following the opinion of those who fight against the use of metaphor in legal discourse, Gilmore’s prose would be culpable of distorting and confusing the readers with the massive recourse to such an insidious figure of speech, apt to camouflage the need for precision and intellectual lucidity. In an opposite perspective, it has been affirmed that vivid metaphors can increase clarity by emphasizing particular models of reality, or, with a much stronger afflatus, that creative use of language can liberate the author from overly rigid explication. It has also been argued that ‘metaphor is both a basic dimension of human reason and an indispensable tool of legal thought … It is only by metaphor that we are able to express significant aspects of our social reality – aspects that are

29

See Cohen (1935) 812, where the Author comments: Valuable as is the language of transcendental nonsense for many practical legal purposes, it is entirely useless when we come to study, describe, predict, and criticize legal phenomena. And although judges and lawyers need not be legal scientists, it is of some practical importance that they should recognize that the traditional language of argument and opinion neither explains nor justifies court decisions. When the vivid fictions and metaphors of traditional jurisprudence are thought of as reasons for decisions, rather than poetical or mnemonic devices for formulating decisions reached on other grounds, then the author, as well as the reader, of the opinion or argument, is apt to forget the social forces which mold the law and the social ideals by which the law is to be judged. Moreover, in the same direction, Cohen (1935) 711–12, n. 4. 30 Berkey v. 3d Avenue Railway Co., 244 NY 84 (1926), at 94. 31 Loughlan (2006) 215–16.

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otherwise devaluated, distorted, or eliminated by more conventional, reductive approaches to human reasoning.’32 Moreover, it has brought to the light that metaphor functions as a powerful device of translatio, that is of connection between abstract ideas and tangible things and, therefore, it has been underlined that, in the legal domain, it is essential to exercise the equitable art of modifying or moderating general rules.33 Metaphor appears not only useful, but even practically necessary, to describe the relationship between law and ‘justice beyond the law’, to clutch a complex set of interactions among different worlds, which can only be seen in the imagination.34 Concurring with this constructive view,35 Gilmore’s words contain a powerful set of insights and the ‘value of his ideas enhances the reader’s appreciation of the rhetoric’.36 The specific accent posed on the metaphors and tropes, which embroider Gilmore’s pages, seems to have contaminated or embellished (according to the discordant positions above synthesized) other reviewing texts. This is the case of Ralph Mooney’s essay.37 Its initial lines are devoted to introduce the strong image evoked by a zoological simile (as it was first carved by Lawrence Friedman) with the aim to indict the tendencies of contemporary legal study, while the last paragraph cheers dodos and unicorns in the title with the purpose to figuratively explain the implications of the death of the contract in Gilmore’s prospect. The

32

Winter (2008) 364. Watt (2009) 148. 34 Ibid. 152–53. 35 For a clear understanding of the distinction between constructivist and non-constructivist approaches to metaphor, see Ortony (1993) 3, where the Author points out that: the constructivist approach seems to entail an important role for metaphor in both language and thought, but it also tends to undermine the distinction between metaphorical and literal. Because, for the constructivist, meaning has to be constructed rather than directly perceived, the meaning of non literal uses of language does not constitute a special problem. The use of language is an essentially creative activity, as is its comprehension. By contrast, the nonconstructivist position treats metaphors as rather unimportant, deviant, and parasitic on ‘normal usage’. If metaphors need explaining at all, their explanation will be in terms of violations of linguistic rules. Metaphors characterize rhetoric, not scientific discourse. They are vague, inessential frills, appropriate for the purposes of politicians and poets, but not for those of scientists because the goal of science is to furnish an accurate, (i.e., literal) description of physical reality. 36 Hillman (1996) 48. 37 Mooney (1976). 33

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first passage of the essay is populated by images and sounds: exotic the former, mournful the latter. Mooney begins by reporting Lawrence Friedman’s comparative sketch of legal studies and zoology courses, ‘which confine their study to dodos and unicorns, to beasts rare or long dead and beasts that never lived’.38 Therefore, he continues by saying that ‘in The Death of the Contract Grant Gilmore offers added support for that critique by tolling the bell for one of the most closely studied legal beasts of all’.39 The conclusive comment is (all things considered) not favourable: the extinction of a dominant legal creature would have been treated with more accuracy and diffuseness, as well as with a more peaceful devotion. The critical refrain is modulated on recurrent notes. On the one side, ‘Grant Gilmore is unquestionably a giant among us. The quality and the range of his scholarship, the clarity and grace of his writing are legendary among lawyers.’40 On the other side: The Death of Contract is not quite the first-rate contribution to historical scholarship the legal world has come to expect from Grant Gilmore … Despite its author’s eminence and despite its undeniable merits, the book will fail to satisfy many readers. Perhaps we simply expect too much from Grant Gilmore. Or perhaps he intended that The Death of Contract be read like an historical novel, for its broad themes rather than its specific details … Whatever the reason or the reasons, however, the book is strangely unconvincing or uncommunicative on many important points.41

One has to resist the enchanting power of Gilmore’s composition: as Robert Gordon annotates, ‘when the magic of the speaker’s voice has faded, one begins to realize that this has been a very curious performance’.42 As it has been demonstrated, from time to time we have witnessed the emergence of censorious voices and even of pesky tones, but Gilmore’s pages, superior in strength, remain untouched. They perpetually live and are not in need of resurrection after death. Law professors, if sensible and honest, will continue to share Gilmore’s provocative and catching feelings; legal students, if enthusiastic and open-minded, will let themselves be persuaded to deepen their reading and will be moved by such an intellectual gift, to them dedicated. The book introduces important ideas about the process of legal change and is an aesthetic delight, as Robert Hillmann patently declares: it 38 39 40 41 42

Friedman (1965) 25. Mooney (1976) 155. Ibid. 163. Ibid. 156, 163. Gordon (1974) 1218.

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‘includes more significant and accurate insights than its critics were willing to admit. Perhaps more important, the book is memorable for its rhetorical power.’43 In this positive perspective, the framework of Gilmore’s literary construct is worthy of admiration: a big picture is surrounded with additional details, all interesting and instructive. The picture allows us to appreciate the evolution of contract law on the whole, alternatively moving from a broader to a narrow conception in response to social, economic, and even legal forces. For these reasons, the most appropriate form of writing seems to be that chosen by Gilmore’s illuminated mind. A brilliant fresco is apt to catch the attention of the observers in a more cogent and immediate way than an excessively accurate representation, where the relish for the details risks compromising an overall view. According to Hillmann, the central message communicated by this impressive painting is the impossibility to halt or to restrain and moderate the process of legal change and development; the motion of dissolution and recombination; the enduring metamorphosis of legal paths and materials. Adding my personal and further remark, I’d like to make use, in this regard, of a Shakespearean image, pointing out that ‘the taming of the Law’ could be eventually versified, but not realized. Another merit attributed to Gilmore by Hillmann is the clear comprehension of the internal rhythm, which governs the transformations of Law: it does not follow a chaotic sequence, but respects a substantial logic and proportionally reacts to external solicitations. Moreover, in Hillmann’s account, Gilmore offers a seducing way of understanding the relationship among different movements of thought; in particular the law and economic trend could be interpreted as a counterweight to the experimentation and improvization of legal schools such as Critical Legal Studies. In fact, the view proposed through the economic lens presented contract law as ‘largely objective, determinate and divorced from political concerns. Such a view appealed to a legal community primed to stem the tide of the “romantic” revolution’.44 Among the positive voices, we can surely place Richard Epstein, who strongly appreciated the intrinsic merits of Gilmore’s creation, affirming that ‘The Death of Contract is sure to become – as it deserves to be – one of the staples of the literature of common law … It is one of those few books that deserve our most careful thought and attention.’45

43 44 45

Hillman (1996) 41. Ibid. 2. Epstein (1976) 72.

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In recent literature, according to Akbar Rasulov’s shrewd analysis, Gilmore has brought to the light the basic doctrinal symptomatology of the demise of objectivism, that is, the end of contractualism as a distinct mode of legal consciousness.46 In this view, Gilmore’s merit is to build a ‘three-ages-of-contractualism narrative’, emphasizing the role played by the mounting epistemic crisis in the production of salient paradigmatic transitions. In the forty-odd years that have passed since its first publication, The Death of Contract has been hailed as a ‘clarion call’. Undoubtedly, both beyond and despite the sensationalistic tones of an eclectic criticism, the book remains a token of a much broader pattern of intellectual transformation in the American Legal Tradition and the narrative it concurs to construe forms an essential part of the American legal canon.

III.

THE POETICS OF LAW: GILMORE AS LEGAL HUMANIST The present is the funeral of the Past and man the living sepulchre of life. (John Clare, The Present is the Funeral of the Past, 1845) No anchorage is. Sleep is not, death is not; Who seem to die live. (Ralph Waldo Emerson, Illusion)

Grant Gilmore is over celebrated and over discussed. Apart from personal and individual inclinations, it is a matter of fact that his mind was eclectic, his experience impressive, his style unparalleled. Gilmore perfectly embodied, in his life and his thought, the productive and fascinating encounter of different knowledge and methodologies, and especially he became a historical witness of the synergetic intersection between law and literature. One must remember, in fact, that, before devoting himself to legal studies, Gilmore earned a Ph.D in French Studies in 1936, discussing a thesis on Stéphan Mallarmé, and afterward he taught French at Yale University from 1937 to 1941. From the great symbolist poet, the later law professor borrowed a conscious and pertinacious sense of unorthodoxy, which pervaded not only the form of 46

Rasulov (2013) 295. In order to construct a genealogy of thought about contractualism, Gilmore’s account can be connected with M. Horwitz’s and D. Kennedy’s views; see Horwitz (1992) 9–63; Kennedy (2000).

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the intellectual discourse, the proper arrangements of the words on the page, their dislocation and syntactical construction, but also, more incisively, the perception of Law in its mutable composition, the metamorphic displacement of rules and precepts beyond the conventional, concocted geometries. From the literary verses, the legal prose inherited and jealously kept the awareness of the short distance between vision and reality, vacancy and fulfilment. Synthetically, Gilmore was a legal humanist: he ‘restated’ not the possibility, but the substantial unavoidability of the reciprocal belonging of law and literature in order to grasp human experience. If, according to Holdsworth, Charles Dickens could be considered a fully fledged legal historian,47 in a similar way Grant Gilmore could be viewed as an ingenious literary scholar: in their complexities, one figure mirrors the other. Both of them composed lively stories, superseding the formal stereotypification and the unemotional impersonality of Reports and Books of Authorities. They offered an animated picture of the men who made and represented the Law; they reconstructed the atmosphere of the period, which they were dealing with; they recreated the impression of the contemporary background and the actual scene. Moreover, Gilmore has been an audacious shaper of historical imagination. He captured the spirit of the past ages in a lyrical or poetic manner and, at the same time, he built a bridge towards new epochs and mentalities with a proactive concreteness. Tracing the internal transformations of the American Legal Tradition, he forged a personal style, which allowed him to acquire a distinctive position in the universe of legal discourse. In this regard, style is here defined as a particular combination of modes of emplotment, modes of argument and ideological implications; it is a replication of patterning, that results from a series of choices.48 The reasons that generated a wavering stance of critique, from entranced fascination to trenchant ostracism, seem to arise from the very fine art of Gilmorean emplotment. This word, in its derivative meaning, stands for ‘putting the events of a story in a form of a plot’, and, therefore, comes to denote the literary device which grasps together a variety of novel objects (events, features, actions, places, times) in order to design a unitarian vision. It involves a dynamic process of selection and arrangement, an integrating plan and purpose. Building a plot means

47

Holdsworth (1995). This definition of style derives from the encounter of Hayden White’s and Lang’s theories and approaches. In particular see White (1973) 5 and Lang (1987) 21. 48

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to sculpture the ‘outline or the armature of the story’,49 which assures a secured and individuated form with internal coherence, or, in other words, to trace ‘the organizing line demarcating and diagramming that which was previously undifferentiated’.50 Emplotment configures a kind of literary nomos. In this perspective, Grant Gilmore was a master of literary creativity and originality; he dissected the legal past, mulling over cases, doctrines, thoughts; he reordered and recomposed, with personal taste and distaste; he dived into the crowd of American legal celebrities and then he retreated into the secluded space of his own lay Empyrean. Gilmore’s plot enlivened and renewed a tradition of discourse. If we try to typify and name this regulating framework, invented by Grant Gilmore, we can speak (as I suggest) of a ‘Gothic Satire’. First of all, the dominant theme is introduced by the sorrowful notes of the title: the public of readers is conveyed to the funeral of a personified Contract, on whose gravestone the epitaph ‘Contract, like God is dead’ is carved with the indication of the date of birth and death. A negative aesthetics informs the text from its beginning, announcing a story of mystery and decadence. The pages are crossed by a glimpse of dark and shaken by erratic movements across time and space, thrilled by tensions between ‘perception and misperception, understanding and misreading; fancy and realism’.51 Ambiguity and dislocation, juxtapositions and unsettlements tactically disrupt narrative conventions, prolonging the interplay of anticipation and apprehension. A Gothic nuance affects not only the writing style and the word choice, but also the very conception of legal change, boundaries and transformations: Gothicism is spreading from the techniques of emplotment upon the very substance of the discourse. Reasoning about Contract’s life and death, Gilmore inaugurates a precise ontology of limit in legal domain. The dynamic inter-relation and the constant transgression, that jointly build the structural ambivalence of Gothic texts, inspire the Gilmorean vision on the reiterated breaking of codes of law. As for ghosts and vampires, death is not a final line, even for Law, boundaries are not fixed, or impenetrable: supposedly unchanging norms, conventions and especially modes of thought are opened up and reveal their being sustained by the connected and opposing forces of limit and trespass. Law is ‘frankensteinized’: life and death become sites of scientific transformation. This ontological infringement of certainty and

49 50 51

Brooks (1984) pos. 299. Ibid. pos. 315. Botting (2014) 5.

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stagnant immobility projects a sense of ghostliness, assuring the reappearance of past presences, the resurgence of already heard voices and already bred ideas. A spectral revenant performs a ritual repetition and enacts an historical mutilation, desynchronizing the tie which bonds the past with the present. A form of mnemonic reserve produces the uncanny feel of melancholy and nostalgia, displacing transmission and adaptation. Contract, personified as Gilmore wants, irrupts in the midst of this postmodern time out of joint and becomes the protagonist of an uninterrupted process of dismemberment and rememberment. The other characterization of Gilmorean emplotment brings to light its satirical nature. It is distinctly perceivable, from the first pages, that Gilmore’s construction presupposes the inadequacy of the pristine visions, disentangles the received tradition of American legal thought and aims to scrub and exfoliate the dominant modes of legal conceptualization. It prepares a new consciousness, built on the repudiation of the sophisticated theories nurtured in an Age of Faith. Gilmore’s prose contains the two main traits considered by Northrop Frye as the essential elements of satire: wit, or humour, and attack.52 Mobilizing even a sense of the grotesque or absurd, the legal poet offers a hermeneutic alternative to the classical reading of contract law evolution and configuration, ridiculing the valorization of its supposed originality and historical ineluctability. On the basis of the previous remarks, and adapting Hayden White’s illumining words, it is possible to argue that ‘in the poetic act which precedes the formal analysis of the field, Gilmore creates his object of analysis and predetermines the modality of conceptual strategies he will use to explain it’.53 Before being a powerful instrument of theoretical desecration, Gilmore’s writing is an act of verbal figuration. Approaching the theme and style of The Death of Contract, the careful critic chances upon another curious datum. It is an irony of fate that three of the most memorable sentences in the Common Law Tradition stage the Law in terms of life and death. The glorious paternity of these maxims has to be ascribed respectively to Oliver Wendell Holmes, Frederic William Maitland and, of course, Grant Gilmore. Even within this celebrated triad of iconic figures, Gilmore’s voice naturally assumes a distinctive intonation and inflection. The enigmatic character of Oliver Wendell Holmes, magnified into legend, cast serious doubts on the acclaimed continuity of the Common Law and tried to bring to the

52 53

Frye (2006). White (1973) 31.

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surface the karstic flux of legal change concealed beneath the supposed solid face of this majestic system of law. One of his most well-known aphorisms (among the many others he had consigned to history) placed as the inaugural motif at the beginning of his book The Common Law, ‘The life of the law has not been logic: it has been experience’,54 celebrates the inner vitality of the law. The impetuous battle between continuity and evolution is settled by Holmes in favour of the second one, as is patently made clear by the following passages: The law embodies the story of a nation’s development through many centuries, and it cannot be dealt with as if it contained only the axioms and corollaries of a book of mathematics. In order to know what it is, we must know what it has been, and what it tends to become … Many things which we take for granted have had to be laboriously fought out or thought out in past times … The Common Law has changed a good deal since the beginning of our series of reports, and the search after a theory which may now be said to prevail is very much a study of tendencies.55

The same idea of transformation and development, emphasized by the means of an evocative and metaphorical title, informs the absorbing essay ‘The Path of Law’, where we can find the equally famous dictum ‘[t]he object of our study, then, is prediction, the prediction of the incidence of the public force through the instrumentality of the courts’. Therefore, Holmes’ sympathy and attention are focused on detecting the progressive evolutionary trends of rules and doctrines, in order to assure an adequate certainty of predictable results. These are the better premises for subsequent theorizing on the distinction between elaboration and evolution: the first conceived as the mere adaptation of pre-existing principles to the specificity of later cases, while their core substance is preserved and transmitted; the second defined as the abrogation, the substitution or the essential transformation of norms and precepts under the influence of new purposes and aims, different from those which inspired their original content. Even if in different manners, in both codified and case law systems Law lives and dies: the old norms pass away and new ones are born. For its part, Frederic William Maitland historically reported the irresistible fascination of the dead forms: they are able to dictate the permanent structure of the legal system and permanently occupy legal

54 55

Holmes (1881) 1. Ibid. 1, 2.

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imagination.56 In some respects, Maitland ‘draculized’ the morphology of English legal tradition and this aesthetic vision acquires more significance, if we remember that Maitland and Bram Stoker were precise contemporaries. Gothic tones are associated (as it has been suggested above) with satiric inclinations. Gilmore’s style is unquestionably unique and overpoweringly attractive. Let us plunge into the main features of his prose. In my personal view, three main traits are compelling and typifying: the strong characterization of the protagonists of the Gilmorean story; the literary re-vision of American Legal Tradition, now conceived as a ‘chain of transmission of languages’, continuously re-imported, but always re-interpreted; the rhetorical extra-valorization of contrapositions and contradictions, which categorically divide the world of law into antithetical positions and conflicting, or, even worse, schizophrenic views. A.

Living Legal Biographies: From ‘Paper Jurists’ to Actors on the Stage

First of all, Gilmore gives us a big picture of different epochs and men, wittily compounded with colourful expressions and astonishing quips. His merit consists in metamorphosing a potentially tedious book about the nature and the development of contract law into a literary story, animated by devouring passions and false beliefs, tormented by intrigue and conspiracy, acted by heroes and villains and consigned to an alternating rhythm of revolution and stasis. A syncretistic model of genres and motifs is chosen to represent a vivid universe populated by humans, ideas, hopes, expectations, tactics, faults, disillusions, mysteries and ambiguities. Within this scenic space, Gilmore’s characters are brought to life: Story, Langdell, Holmes, Williston, Corbin, Cardozo, Llewellyn cease to be intellectual constructions, abstract entities, or ‘historified’ fossils and become the real actors who perform their drama on the stage. Their bodily concreteness and intense physicality are evoked and reproduced by the means of literary forms and devices, such as charming metaphors, humorous constructions, provocative statements and poetic aphorisms, reported confessions and fictitious dialogues, hyperbolic imagery and suspense narration. 56 Maitland (1909). The great legal historian added ‘that process by which old principles and old phrases are charged with a new content, is from the lawyer’s point of view an evolution of the true intent and meaning of the old law; from the historian’s point of view it is almost of necessity a process of perversion and misunderstanding’; Maitland (1911) 491.

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The book opens with an ironic and desecrating portrait of Christopher Columbus Langdell, who inaugurated a new course of American jurisprudence, finding in the ocean of legal norms and remedies a new, unconquered land. To introduce his tribute to the discoverer of the classical theory of contract law, Gilmore makes use of an enjoyable comparison between Christopher Columbus Langdell and Christopher Columbus, so to connect two significant figures with a common destiny, in addition to a common personal name. Therefore, the discovery of Contract on the American soil comes to mimic and to re-enact the discovery of America itself. ‘It was just a hundred years ago that Christopher Columbus Langdell, like his namesake four centuries earlier, set sail over uncharted seas and inadvertently discovered a New World.’57 If we pay attention to the words implied, we are immediately acquainted with Gilmore’s joke, with his amused act of picking on the honourable Langdell’s name. Langdell did not properly invent or build a theory, but he merely discovered something already in existence, without a particular intention or a participative inclination, accidentally; it could be said: he ‘stumbled across it’.58 The rhetorical effect is further emphasized if we link together this description with the colourful account of The Ages of American Law, as necessarily coordinated parts of a unitary discourse, or of a higher-level metatext. In The Ages, in fact, Gilmore insists on the fortuitous nature of Langdell’s legal finding, recurring to metaphorical verbs and expressions: it was substantially a fortuitous recovery to defend from other impudent robbers. Directly quoting Gilmore’s line ‘He [Langdell, A/N] seems to have been an essentially stupid man who, early in his life, hit on one great idea to which, thereafter, he clung with all the tenacity of genius.’59 Sarcasm abundantly drips from these pages. Whilst in other respects Langdell was a mediocre intellect, he revealed the stuff of a genius when, stubbornly and stolidly, with an obstinate mind, he seized on what he had mysteriously found. Despite his personal inclinations and qualities, Langdell was a dramatically lucky man. Specifically, he was a great man for the records of history only because of the considerable length of his life. He nurtured the odd faith that law was a science, like any other science, and even this aprioristic confidence finally proved to be a fortunate attitude, insofar as it commended Langdell to the President of Harvard, Charles William

57 58 59

Gilmore (1995) 5. Ibid. 6. Gilmore and Bobbitt (2014) 40, emphasis added.

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Eliot, who was a chemist and, therefore, entertained a good relationship with the hard sciences. A sympathetic vision, which possibly distorted and perverted the real nature of Law, was transformed into an instrument of success and led to Langdell’s appointment as the first Dean of the Harvard Law School. But what remained beyond a long life and a lucky fate? Not very much, according to Gilmore. To judge by his main works (the Casebook on Contracts and the Summary of the Law of Contracts, the same works recalled to the mind as the pioneering studies, which restyled the external look of contract), ‘Langdell was an industrious researcher of no distinction whatever either of mind, or of style’,60 or, rather, apart from these over-mentioned books, he seems to have written little or nothing. Moreover, if we could apply the present-day criteria for ranking professors and courses, Langdell surely could not be proclaimed as the winner of a global academic competition: ‘such students’ comments as have survived suggest that he was a less than inspiring teacher’,61 nor could it be perceived as a kind of satisfactory excuse the fact that ‘the student reaction was colored by hostility to his novel method of teaching from the cases instead of lecturing’.62 The reference, here, is to the so-called case method, abruptly inaugurated by Langdell and based on his undeserved certitude, sustained by dogmatic rather than reasoned arguments, articulated through the means of statements declared for divine revelation, synthetically a new methodology, demagogic by name, but highly perverse in its effects: ‘it had nothing whatever to do with getting students to think for themselves; it was on the contrary a method of indoctrination through brainwashing’.63 After all, nowadays could we speculate about a ‘classical theory of contract’, if Langdell had remained alone, deprived of a further intellectual aid from abler scholars? ‘The theory itself was pieced together by his successors – notably Holmes, in broad philosophical outline, and Williston, in meticulous, although not always accurate, scholarly detail.’64 The other main character of the story is the well-known and notable Justice, Oliver Wendell Holmes. In The Death of Contract, Gilmore explains and comments on the theories of this famed jurist, but the ironic 60

Gilmore (1995) 14. Ibid. 118, n. 20. 62 Ibid. 118–19, n. 20. 63 Ibid. 14, 15. Again, with an increasing emphasis, Gilmore states in the pages of The Ages of American Law ‘after your three years in Cambridge or wherever, you would never be the same again; you were stamped, branded, brainwashed for life’; Gilmore and Bobbitt (2014) 55. 64 Gilmore (1995) 15. 61

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mood is not spread across all the lines; it appears to be controlled and restrained, out of a sense of respect and deference, one could say. The only amusing motto is postponed to the footnotes, where Gilmore annotates Mark De Wolfe Howe’s remark on Holmes’ production, according to which ‘one must recognize that he was urging a revolutionary change in legal thought’. Reporting the opinions of the authorized biographer of Holmes, Gilmore notes that ‘like any revolutionary, Holmes merely sought to sugar over his more startling heresies with a frosting of antique learning’.65 At this point the line of distinction between the two intellects, which took an active part in the birth of the classical theory of contract, is traced: on the one side, we encounter the grey and confident mind of Christopher Columbus Langdell, who rearranged old materials on the basis of an arbitrary choice; on the other, our imagination is captured by the revolutionary disposition of Oliver Wendell Holmes, who tried to make a breach in the wall of American orthodoxy. We can immediately understand how the pendulum of Gilmorean preferences is oscillating. However, a deeper glance is required. In fact, the very portrait of Holmes’ temper and disposition is drawn in the other ‘twin book’ (The Ages of American Law), where we chance upon different tones and modulations. Here Holmes’ figure emerges from the abyss of his unresolved ambiguity as strange and enigmatic, dismantling the myth concocted by partisan historians. If the conventional account narrates the life of a tolerant aristocrat, a great liberal and eloquent defender of American liberties, and pompously celebrates this sort of Yankee descended from Olympus, the crude description outlined by Gilmore’s pen tears the veil of fiction and shows the real face of Justice Holmes: he was ‘savage, harsh, cruel, a bitter and lifelong pessimist, who saw in the course of human life nothing but a continuing struggle in which the rich and powerful impose their will on the poor and weak’.66 Actually, regarding certain revolutionary tendencies, Holmes was even short of that gentle optimism which led Karl Marx to believe that, after one more revolution, the world would be a better place.67 In his radical and despairing pessimism, Holmes was coping with a Dickensian world, a muddy space encrusted with oxidized biases and superstitions, a foggy atmosphere of denied expectations and imposed abuses. It is not by the way that Gilmore precisely recurs to an over-quoted adjective, first introduced by Charles Dickens, in order to render the empty inhospitality

65 66 67

Ibid. 123, n. 36. Gilmore and Bobbitt (2014) 46. Ibid.

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of Holmes’ universe: the term used is ‘bleak’, and it patently echoes the material and spiritual desolation of Dickens’ Bleak House. Within a similar context, the function reserved to the law was simply ‘to channel private aggression in an orderly, perhaps in a dignified fashion’.68 One of the historical merits credited to Holmes was his membership in the so-called Metaphysical Club, a group of intellectuals (mainly Charles Peirce, John Dewey and William James, in addition to Oliver W. Holmes), who moved American thought into the modern world. These thinkers had in common an ‘idea about ideas’, that we can imagine Gilmore would have appreciated: ideas are to be considered as tools, provisional responses to specific and irreproducible circumstances, destined to survive because of their adaptability.69 The underlined scepticism and the penchant for the mutable form of the ideas, which should never become fixed ideologies, blend well with Gilmore’s faith in the inexorable flux of legal change. There is another interesting datum coming out from Gilmore’s books, linked together. It pertains to the comparative appraisal of Langdell and Holmes, as it is construed and motivated by the means of the comparative analysis of their principal works. We have previously seen that Langdell’s Casebook and Summary could not be recommended for a distinctive style or for profound thought. Holmes’ lectures, collected in the volume entitled The Common Law, are presented as difficult to understand, if not unreadable. As a matter of fact, this apparently negative quality implies a subtle strategy planned by the brilliant Author: under the semblance of a common historical survey, Holmes intended to compose a highly original and essentially philosophical work about the nature of law: For reasons which he never explained, he chose to dress his statement in the misleading disguise of pseudo-history. Perhaps the disguise was a way of sugarcoating the pill – of making the new and unfamiliar appear to be old and familiar. Perhaps it was an elaborate joke which it amused Holmes, who was of a sardonic turn of mind, to play on his audience.70

68

Ibid. 44. For an interesting study on the ‘Metaphysical Club’, see Menand (2001). 70 Gilmore and Bobbitt (2014) 47. In this regard, Gilmore adds: ‘The historical underpinning was patently absurd, even when it had not been deliberately distorted. I do not mean to suggest that Holmes was a poor historian or that he did not know what he was doing. He was an excellent historian and knew more about what he was doing than most of us.’ Mark de Wolfe Howe anticipated Gilmore’s consciousness on the merits of his predecessors, commenting ‘The Common Law is not primarily a work of legal history. It is an endeavor in philosophy – a speculative undertaking in which the author sought to find in 69

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In the related footnote, Gilmore reports, in anecdotal form, the words pronounced by Holmes in person, in order to reply to the censure of obscurity and unintelligibility. The passage is intriguing, insofar as it amplifies Holmes’ fame as a learned jurist, who knew sources surely ignored by most of his colleagues. Holmes’ direct quotation sounds in these terms: ‘If, within the bounds which I have set myself, any one should feel inclined to reproach me for a want of greater detail, I can only quote the words of Lehuërou, “Nous faisons une théorie et non un spicilège”.’71 Who other, besides Holmes, could know of the Belgian historian, Lehuërou? Certainly even those, familiar with the French language, might be baffled by such a strange word as ‘spicilège’.72 Once again, Holmes chose an almost incomprehensible and cryptic quotation, borrowed from a different cultural context, as a way of alerting the astute reader about his own aims. What a curious kind of oxymoronic form of communication, which uses an abstruse message to make patent one of the most important tenets of the Author! For these represented reasons Holmes’ saturnine and corrosive smile comes to overlap with Gilmore’s sneering expression. It seems to be in front of a wavering hologram, made of the alternating faces of these two brave and wise men. Moreover, all the arguments, discussed before, prove the coherence of Gilmore’s synthetic view, which assigns to Holmes’ cunning mind the function of dignifying Langdell’s intellectually poor construction: ‘I have taken Langdell and Holmes as twin symbols of the new age, which I have called the Age of Faith. Langdell’s thought was crude and simplistic. Holmes’ thought was subtle, sophisticated, and in the last analysis, highly ambiguous. Holmes’ accomplishment was to make Langdellianism intellectually respectable.’73 Other characters are acting on the stage of Gilmorean macrocosm. At the opposite side of the pertinacious triad embodied by Langdell, Holmes and Williston, we bump into a couple of rioters, Nathan Benjamin Cardozo and Arthur Corbin, cheered in their historical capacity of

the materials of legal history data which would support a new interpretation of the legal order’. Howe (1963) XX. 71 Holmes (1881) Preface. 72 Julien Marie Lehuërou (1807–43) wrote an important history of the Merovingian institutions. The word ‘spicilège’, from the Latin spicilegium, originally indicates the remnants that can be gleaned from a field after the principal harvest has been completed. Holmes quotation is consequently coloured by a metaphorical dart. 73 Gilmore and Bobbitt (2014) 53.

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engineers of destruction. They, in fact, provoked, first, the erosion, and subsequently the collapse of the classical theory of contract. Metaphors abound and Gilmore’s legal saga becomes more and more attractive and engaging. In his extraordinary lucidity, Gilmore creates a strong parallel, apt to bring into a mutual, descriptive relation the contending parties. As Langdell and Holmes created an abstract Contract, each of them with a proper and different contribution, Cardozo and Corbin overthrew the pillars of the past discovery with dissimilar force and intensity. Cardozo’s attack was subtle, evasive, hesitant, while Corbin’s attack was more forthright. Like Holmes, Cardozo was a strange mix of revolutionary and nonconformist: he gave cryptic hints for our delectation and bewilderment, but it is certain that the outlines of the law of contract that emerged from the opinions of the New York Court of Appeals during the period of Cardozo’s dominance of that Court had little enough to do with the law of contract as it was taught at Harvard during the same period.74 Gilmore humanizes his characters: they are men of vices and virtues, of passions and desires; they cross epochs and time, coupling the transformation impressed onto American jurisprudence with a personal and interior evolution. From ‘paper masks’, they become persons made of flesh and blood; under the effect of an unusual, but powerfully successful prosopopeia, they rise from the page and talk directly with their new and always different audience. In the lines of The Ages of American Law, Cardozo lives the difficult and controversial relationship with his father, a corrupt lower court judge allied with the Tweed Ring in New York.75 From his youth, he assumes a personal mission, the redemption of his father’s sins. This mature consciousness builds the solid, but at the same time enigmatic adult and motivates his personal resolutions: ‘Ascetic in his personal tastes, he decided at an early age to renounce the pleasures and temptations of the world in favor of a life of intellectual meditation. The accounts of all those who knew him tell us of a man of compelling personal charm as well as of great sweetness of character. By the unanimous testimony of his contemporaries Cardozo was a saint.’76

74

Ibid. 67. The ‘Tweed Ring’ referred to the political movement founded by William M. Tweed in New York in the second half of the nineteenth century with the purpose to control the finances of the city. The men gathered together and dispensed jobs and contracts in return for political support and bribes; Callow (1981); Lynch (1927); Mandelbaum (1965). 76 Gilmore and Bobbitt (2014) 67. 75

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Here we can find Gilmore’s magisterial literary style: his creative genius is at work. A tightly woven web of connections and references comes into sight and produces an effect of ironic alienation. In fact, the feeling nourished by Cardozo towards his father mimics that act of filial piety performed by William Wetmore Story in favour of his father, Justice Joseph Story. As a concrete response to Story Sr.’s pervasive desire of harmonizing an incoherent bulk of principle and remedies, Story Jr. composed the first American Treatise on Sales in 1848. It was the most pleasant gift that the son could have given his father. But, after the young man had fulfilled what he perceived as a cogent filial duty, his legal vein and verve seemed to be exhausted: William Wetmore Story ‘abandoned the law and spent the rest of a long life as a sculptor in Italy’.77 With a smug smile, Gilmore annotates ‘[t]he Treatise on Sales is, by the way, very fine indeed and so, for all I know, the sculptures are too’.78 In a corresponding way – even if different for its own specificities – the first destiny of grief and pain which happened to the young Cardozo, came to mould his temperament and to direct his future life-path. The original sense of temperance and sobriety, which in the beginning sounded as an antidote to the excesses of the father, became a permanent antibody resisting against the assaults of history and it impressively marked the style of the decisions Cardozo wrote in his quality of Judge and Honourable Justice. The spur for change was concealed and disguised: it became the influential plot beneath the front pages of opinions and judgments. Once again, to describe the psychogenesis of Cardozo’s style, Gilmore resorts to powerful metaphors, frequently construed as the merging of two synecdoches. We properly read: Cardozo was a truly innovative judge of a type which had long since gone out of fashion. In his opinions, however, he was accustomed to hide his light under a bushel. The more innovative the decision to which he had persuaded his brethren on the Court, the more his opinion strained to prove that no novelty – not the slightest departure from prior law – was involved. Since Cardozo was one of the best case lawyers who ever lived, the proof was invariably marshalled with a masterly elegance. It is not until the reader gets to the occasional angry dissent that he realizes that Cardozo had been turning the law of New York upside down.79

The inner struggles, sedimented over time on the deep distress first perceived, even shaped Cardozo’s view both on the role of the judges and 77 78 79

Gilmore (1995) 12. Ibid. Gilmore and Bobbitt (2014) 67 (emphasis added).

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on their way of working. From hence it derives his hesitant confession that ‘judges were, on rare occasions, more than simple automata, that they made law instead of merely declaring it’.80 Despite Cardozo’s attempt to mitigate beliefs and impressions, these words were widely regarded as ‘a legal version of hardcore pornography’.81 Therefore, in conclusion, ‘Cardozo was, we might say, a revolutionary malgrè lui who was affectionately attached to the structure, which, imperceptibly, almost surreptitiously, he proceeded to subvert and destroy.’82 An opposite consideration is due to Corbin’s thought. Corbin was patently a revolutionary and his attack on the prevailing orthodoxy was crucial. In this regard, Gilmore’s merit lay in a critical reassessment of Corbin’s biography, in a wise act of resituating his work in a correct time. Gilmore unmasks the prejudicial misjudgment about the function of his Treatise on Contracts; it is a consequence of the fact that, despite the publication date (1950), the book was conceived at the beginning of the nineteenth century, in 1910 or thereabouts. Corbin spent the better part of 50 years writing the treatise for publication and we have forgotten this important datum. The temporal shift between the two events (the writing of the work and its final publication) causes a schizophrenic perception of the ideas developed and discussed. By 1950, the reforms which Corbin argued for, were no longer particularly novel; ‘the ideas had been the mother’s milk of beginning law students for a generation or more and most of the reforms had long since been accomplished’,83 but coming back to 1910 one could really appreciate the strong revolutionary gradient associated with the same conceptions. B.

Vision’s Re-Vision: For a Gilmorean Genealogy of American Legal Tradition at the Intersection of Past Influences and Prospective Imaginations

This final remark leads us to discuss Gilmore’s opinion on the nature of legal traditions, and, in particular, on the mutable form of the American one. Patrick Glenn has opened his masterpiece, Legal Traditions of the World, with the unavoidable question ‘is a theory of tradition possible?’.84 Trying to articulate a grounded response, Glenn notes that the 80 81 82 83 84

Ibid. 69. Ibid. Ibid. Gilmore (1995) 64. Glenn (2014) 3.

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definition of what is a theory involves two different kinds of relationships, both with time and with information. Gilmore offers his own answer, assuming a personal and critical position on each of the issues at stake. Specifically, his greatness (according to my interpretation) lies in the fact that Gilmore successfully proposed a construction of the ways in which great American scholars, judges and professionals constructed the American legal tradition and structured a particular legal mind, apt to explain how the law finds facts and establishes rules in the face of the fallibility of memory, the frailty of vision and the ambiguity of language.85 Synthetically, Gilmore literarily articulated a theory of metaconstruction. Recalling the insights introduced in the first paragraph of the present chapter, and also bearing in mind the comments previously made, I would like to conclude that Gilmore narratized past opinions, suggestive beliefs and influential assumptions. In so doing, his caustic discourse seems to be inspired by the critical arguments developed by Harold Bloom in order to revise Thomas Stearns Eliot’s thought. The questions, which these two giants of literature were confronted with, were precisely related to the concept of tradition and influence, to the dominance of or over the past, to the irenic or battled confrontation among sages. If we are going to find a leading motto to characterize Gilmore’s view, I think that one of the better choices is the transposition, within the legal domain, of the clear statement put forward in the first lines of The Anxiety of Influence: this short book offers a theory of poetry by way of a description of poetic influence, or the story of intra-poetic relationships. One aim of this theory is corrective: to deidealize our accepted accounts of how one poet helps to form another. Another aim, also corrective, is to try to provide a poetics that will foster a more adequate practical criticism.

If we operate a terminological substitution, replacing ‘poetry’ with ‘law’ or ‘legal tradition’; ‘poetic’ with ‘legal’; ‘poet’ with ‘jurist’, and ‘poetics’ with ‘legal theory’,86 we can define Gilmore’s short, even if dense book (just like Bloom’s work), as ‘a short book, which offers a theory of legal tradition by way of legal influence, or the story of intra-legal relationship. One aim of this theory is corrective: to deidealize our accepted accounts of how one jurist helps to form another. Another aim, also corrective, is 85

Park (2013). Precisely, if poetics could be defined as the theory of literary forms and literary discourse, the corresponding expression of ‘legal theory’, here used for replacement, can be really interestingly understood as the theory of legal forms and legal discourse. 86

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to try to provide a legal theory that will foster a more adequate practical criticism’. In the same way as Harold Bloom, Grant Gilmore announces a queer and unexpected ‘visions’ revision’, based on the critical genealogy of American legal thought and on the figurative mapping of legal arguments. This intellectual plan enacts a complex and labyrinthine relation between the reading of texts and decisions and the search for the origins of an imaginative vision. The whole universe of legal theories is fragmented and dissected; it is partitioned into clubs and circles; it is disembodied into conflicting visionary companies, each of them grouping a number of thinkers who gather together and reciprocally ally according to a common theme of prospective imagination. Langdellians, Holmesians, Willistonians, Cardozians, Corbinians are the contending factions which purport to express divergent creeds. Theoretically, Gilmore feeds on the same philosophical arguments that provided Bloom with a key rationale for his conception of the poetic will. If Bloom followed the Nietzschean Genealogy of Morals with a compelling Genealogy of Literature, Gilmore came to add a condensed Genealogy of American Law and Jurisprudence. At the basis of all these constructions is a shared awareness of the importance assumed by the confrontation among precursors and descendants, ultimately conceived as the central constituent of philosophical, poetic and legal meaning. Nietzsche’s ruminations on bad conscience (an increasing anxiety nowadays felt towards an increasingly incumbent past) furnish a suited framework for a specifically diachronic interpretation of a new history of poetics and law. The Nietzschean assertive, even if anguished declaration on the nature of our response to the past is strictly pertinent: the fear of the ancestor and his power and the consciousness of indebtedness increase in direct proportion as the power of the tribe itself increases, as it becomes more successful … we arrive at a situation in which the ancestors of the most powerful tribes have become so fearful to the imagination that they have receded at last into a numinous shadow: the ancestor becomes a god.87

From hence we can extract two main ideas, which also pervade Bloom’s works and, therefore, can help us to re-read Gilmore’s account in a Bloomian mood. The first is the reversal of conventional trajectories and temporal vectors in historical discourse. The movements in time are consigned to a changed perception: it is not the present to be guided by the past, but the past to be modified by the present through an 87 The passage is quoted in these terms by Harold Bloom in The Anxiety of Influence; Bloom (1997) 118.

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uninterrupted act of misrepresentation. The second idea is the pervasive battle, which de-forms the irenic continuity from the titans of the past to the ephebes of the present, the perpetual Agon, the relentless struggle fought until the parricide of the awkward progenitors is consumed. Both of these intellectual claims are vividly exposed, in Bloom’s language, through the clever use of a ‘demonic metaphor’: the demonization of chronology advances hand in hand with the demonization of the precursor. Moving from the Greek root of the term ‘demonization’ (from the verb δαι´ομαι, that is, to divide), Bloom uncovered the fractures and divisions in time and among individualities, the aggressive act of depreciation perpetuated by the descendants to the detriment of the predecessors. The first idea, or the critical reassessment of the temporal relations, is detectable even in Eliot’s essay, Tradition and the Individual Talent, especially in the famous passage: No poet, no artist of any art, has his complete meaning alone. His significance, his appreciation is the appreciation of his relation to the dead poets and artists. You cannot value him alone; you must set him, for contrast and comparison, among the dead. I mean this as a principle of æsthetic, not merely historical, criticism. The necessity that he shall conform, that he shall cohere, is not one-sided; what happens when a new work of art is created is something that happens simultaneously to all the works of art which preceded it. The existing monuments form an ideal order among themselves, which is modified by the introduction of the new (the really new) work of art among them. The existing order is complete before the new work arrives; for order to persist after the supervention of novelty, the whole existing order must be, if ever so slightly, altered; and so the relations, proportions, values of each work of art toward the whole are readjusted; and this is conformity between the old and the new. Whoever has approved this idea of order, of the form of European, of English literature, will not find it preposterous that the past should be altered by the present as much as the present is directed by the past. And the poet who is aware of this will be aware of great difficulties and responsibilities.88

Inspired by a similar intent, Bloom concludes his Map of a Misreading with these words: Canon-formation is not an arbitrary process, and is not, for more than a generation or two, socially or politically determined, even by the most intense of literary politics. Poets survive because of inherent strength; this strength is manifested through their influence upon other strong poets, and influence that

88

Eliot (1998) 28.

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The unburiable contract 277 goes through more than two generations of strong poets tends to become part of tradition, even to become tradition itself.89

Combining the sources of literary criticism, it is detectable the assonance we can trace when Gilmore personified the artificers both of legal constructions and of their breakdown: ‘Every Blackstone must have his Bentham; every Langdell must have his Llewellyn.’90 In this perspective, and following the exemplification proposed by the acute Gilmore, Bentham and Llewellyn couldn’t have a complete meaning alone, but they have to be appreciated within a relation of contrastive comparison with their ancestors: they have to be placed among the Deads. Bentham is signified through Blackstone (and it is arguable even the reciprocal) as Llewellyn is signified by Langdell (and, in the same way, it is arguable even the reciprocal). We can reasonably add that the couple CardozoCorbin, formed by the ‘engineers of the destruction’, gave its meaning from the other and previous couple Holmes-Williston, made up of the designers and executioners of the Grand Theory of Contract. Nevertheless, there is an important element of dissent between Bloom and Eliot about their theories on literary tradition. As has been mentioned before, Bloom imagines ‘tradition’ as a site of conflicts, not as a mere ‘handing-down, or a process of benign transmission’: it is ‘a conflict between past genius and present aspiration, in which the prize is literary survival or canonical inclusion’.91 Bloom introduces a conflictual vision of the intertextual process, described by the means of a combative terminology: ‘a poetic text is not a gathering of signs on a page, but is a psychic battlefield upon which authentic forces struggle for the only victory worth winning, the divinating triumph over oblivion’.92 Within this intellectual framework, the theory of tradition is inexorably linked to a theory of influence, modelled on Freudian philosophy, specifically on the son’s conflict with the father in the Oedipus complex, or, at a deepest analysis, on the Kabbalistic philosophy of belatedness.93 The latecomers, 89

Bloom (2003) 200. Gilmore and Bobbitt (2014) 61 (emphasis added). 91 Bloom (1994) 8–9. 92 Bloom (1976) 2. 93 Blooms repeats many times that the concept of influence has nothing to do with the notorious study of sources: one is influence at the level of style or vocabulary (the material ‘source studies’), the other is influence as a rhetorical spacing, the site of production of poetry. ‘By “poetic influence” I do not mean the transmission of ideas and images from earlier to later poets. This is indeed just “something that happens”, and whether such transmission causes anxiety in the later poets is merely a matter of temperament and circumstances. These are 90

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the writers who come time after time, are oppressed by the ominous presence of the predecessors, talented with a superior creative strength. To surmount this coercive outrage, successful writers enact a Kierkegaardian or Nietzschean will to power, employing devices and defence mechanisms against that which they need to keep repressed in the unconscious. ‘Hooked’ on the works of the precursors, the ephebes must guard themselves against the tormenting knowledge that they are merely involved in a process of re-writing, or, in Bloomian terms, of misreading. They really borrow stylistic features and figures from the previous literature, but at the same time they transmute, recast and reinterpret those literary constructions in new ways, nourishing the illusion that their work is not properly and definitely influenced by the central harbingers of literature. The distortion of the already given meaning is a necessary act devoted to incorporate the greatness of the predecessors, still maintaining a sense of autonomy. Thereby, Bloom identifies the agonistic genealogy of poetic (but it could be said, in broader terms, literary) creation with the endless map of misreading: ‘poetic history is indistinguishable from poetic influence’. Imagination is nothing but misinterpretation, which makes all creations antithetical to their precursors. These arguments, wholly considered, support a new form of critical inquiry, appropriately named ‘antithetical criticism’, devoted to catch and to comparatively measure the series of swerves (or of clinamen) after unique acts of creative misunderstanding.94 The nature

fair materials for source-hunters and biographers, and have little to do with my concern’; Bloom (1997) 71. ‘The profundities of poetic influence cannot be reduced to source-study, to the history of ideas, to the patterning of images. Poetic influence, or as I shall more frequently term it, poetic misprision, is necessarily the study of the life-cycle of the poet-as-poet. When such study considers the context in which that life-cycle is enacted, it will be compelled to examine simultaneously the relations between poets as cases akin to what Freud called the family romance, and as chapters in the history of modern revisionism, “modern” meaning here post-Enlightment’; Bloom (1997) 7–8. Bloom himself traces the line of discrepancy with respect to Freudian literary criticism: speaking about poem as an ‘achieved anxiety’, Bloom does not mean that the poem embodies a sort of sublimation of that anxiety, as the Freudian orthodoxy would admit. On the contrary, every poem is a process of repression and its inner strength is an evidence of the internal revisionism and repression, of a growing melancholy identity. 94 In The Anxiety of Influence Bloom appositely devotes an ‘interchapter’ to explain what he intends with the expression ‘anthithetical criticism’. The swerves implied as constituent elements of this form of criticism are: ‘to learn to read a great precursor poet as his greater descendants compelled themselves to read

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of poetry determines the nature of critics: all criticism is prose poetry. Specifying the famous Nietzschean motto, there are no interpretations but only misinterpretations. If this is the approach to be followed, even Bloom’s production has to be conceived as a revisionist response to his ancestors. Bloom is an antithetical critic, who writes against his Masters and even against himself. As it has been pointed out, his main books are best viewed as an extended polemic against the tradition immediately preceding him, the tradition that, through most of the twentieth century, had slighted all the Romantics but Coleridge. Bloom engages in a fierce battle with the ghostly presence of Irving Babbitt’s New Humanism, with the New Criticism of Tate, Ransom, Brooks, Warren, and again, and most acridly, with the ‘neo-Christian matrix of modern Anglo-Catholic letters’ represented by T.S. Eliot, W.H. Auden and C.S. Lewis.95 For my intellectual purposes, the polemical clash between Harold Bloom and the New Critics is revelatory. First of all, Bloom reacts against New Critical aesthetics, which championed modernism as a corrective to the excesses of Romanticism, and, on the contrary, magnifies the legacy of romantic visionary imagination as a dynamic, vital force, as a living tradition. Secondly, Bloom desecrates Eliot’s conception of literary tradition as an ideal order, or a process of benevolent transmission. ‘The malign influence of T.S. Eliot still lingers on’:96 he has idealized the process of literary transmission, producing an ‘idealized fiction of a simultaneous order, that releases literary time from the burden of anxiety’.97 Eliot anaesthetized the

him; to read the descendants as if we are their disciples, and so compel ourselves to learn where we must revise them if we are to be found by our own work, and claimed by the living of our own lives’. Bloom also clarifies that ‘neither of these quests is yet Anthitetical Criticism. That begins when we measure that first clinamen against the second. Finding just what the accent of deviation is, we proceed to apply it as corrective to the reading of the first but not the second poet or group of poets. To practice Antithetical Criticism on the more recent poet or poets becomes possible only when they have found disciples not ourselves. But these can be critics, and not poets’; Bloom (2013) 93. 95 Bloom (1971) 207. 96 Bloom (1982) 17. 97 Ibid. 17–18. It is not worth mentioning that, at a deeper glance, Bloom discovers a sort of internal dissociation in Eliot’s construction. ‘Eliot was deceiving us, grand rhetorician that he was. He could not have been deceiving himself.’ Against the Eliot of Tradition and Individual Talent, Bloom unmasks a secret and unofficial Eliot, whose vision is much more commendable. In Reflections on Contemporary Poetry, an essay published in the July 1919 issue of The Egoist, Eliot says that admiration of another writer ‘leads most often to

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role of the predecessors, confining them to the same destiny reserved to Prufrock’s dissected soul and etherized passions. Bloom concludes: ‘there is then something uncanny (unheimlich) about tradition, and tradition, used by Eliot, say, as a hedge against the daemonic, is itself, however orthodox or societal, deeply contaminated by the daemonic’.98 If we ponder over these statements and positions, we can identify a critical paradigm apt to represent Gilmore’s antithetical view against the logical, tidy and incontrovertible superfetations consumed by Classicism and his agonizing immersion into the stormy waters of Romantic consciousness, with all the new energy produced in an ecstasy of self-expression. Each one of the Ages of American Law (the Age of Discovery, the Age of Faith and the Age of Anxiety) lives and feeds on the polemical response fantasized by the Newcomers in search of a distinctive originality. The revision of past visions, even their misreading or their misinterpretation, at the same time produces and consumes the history of Law in a continuous conflict, in a preposterous use of doctrines and thoughts. As both a writer and a legal critic, Gilmore iterates, in the field of Law, Bloomian themes and especially the sympathetic participation in a Romantic agony, which defines his aesthetic choice in conflict with the formal systems built by classical theorists, echoing Bloom’s resistance to New Critics’ orientations. The final pages of The Death of Contract, a very unusual masterpiece of legal literature, with a perfect style and incomparable elegance, gives evidence on the proposed correspondence: I have one final thought. We have become used to the idea that, in literature and the arts, there are alternating rhythms of classicism and romanticism. During classical periods, which are, typically, of brief duration, everything is neat, tidy and logical; theorists and critics reign supreme; formal rules of structure and composition are stated to the general acclaim. During classical periods, which are, among other things, extremely dull, it seems that nothing interesting is ever going to happen again. But the classical aesthetic, once it has been formulated, regularly breaks down in a protracted romantic agony. The romantics spurn the exquisitely stated rules of the preceding period; they experiment, they improvise; they deny the existence of any rules; they churn around in an ecstasy of self-expression. At the height of a romantic period, everything is confused, sprawling, formless and chaotic – as well as,

imitation … and the awareness of our debt naturally leads us to hatred of the object imitated’. He contrasts with this ‘a feeling of profound kinship, or rather of a peculiar personal intimacy, with another, probably dead author’; Eliot (1919) 39–40. 98 Bloom (1975) 97–98.

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The unburiable contract 281 frequently, extremely interesting. Then, the romantic energy having spent itself, there is a new classical reformulation – and so the rhythms continue. Perhaps we should admit the possibility of such alternating rhythms in the process of the law. We have witnessed the dismantling of the formal system of the classical theorists. We have gone through our romantic agony – an experience peculiarly unsettling to people intellectually trained and conditioned as lawyers are. It may be that, in this centennial year, some new Langdell is already waiting in the wings to summon us back to the paths of righteousness, discipline, order, and well-articulated theory. Contract is dead – but who knows what unlikely resurrection the Easter-tide may bring?

Having clarified the intellectual framework best fitted to disclose Gilmore’s subtleties beyond his fresh and compact account, it is of great interest to find out the rhetorical apparatus (tropes and figures of speech), the expressive devices (terms, adjectives, word-construction) and the persuasive means (composition and intonation of the sentences) used to narratize the rise and fall of the so-called Classical Theory of Contract. In contrast to the dominant forms of discursive tradition, Gilmore’s experimental writing appears to be suggestive, rather than conclusively demonstrative; narrative, rather than exhaustively methodical; subjective, including personal or circumstantial details. The Bloomian, agonistic nature of Grand Theory scrutinized by Gilmore is disclosed from the beginning. First of all, this ‘curious machine’ was not a natural development of American law, but it was a construction, an invention, destined to produced a sharp break with the past, even with the recent past.99 ‘The apparent unity of doctrine was achieved through what might be called an extremely selective handling of the case material.’100 Besides, it is very interesting to note that, according to the same depiction Gilmore intended to give us, the builders of this new form of legal architecture proceeded to a substantial revisionist lecture of past cases and opinions. They pretended to dress with new clothes old materials and the sense of belatedness seemingly won through the means of a persistent act of selective misreading, which originates a chain of subsequent swerves: The inventors of the theory did not make it all up out of their own heads. Indeed they made industrious use of whatever bits and pieces of case law, old and new, could be made to fit the theory. Such cases were immediately promoted to ‘leading cases’ and made to fit – in much the same way that Procrustes made his guests fit. Cases which could not be made to fit were 99 100

Gilmore (1995) 19. Ibid. 61.

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282 Comparative contract law ignored or dismissed, with Langdellian certitude, as ‘wrong’. On the whole, however, the theory was in its origins, and continued to be during its life an ivory tower of abstraction.101

Once again, Gilmore’s exhilarant force is at work. The similitude introduced to explain the operational way followed by Langdellians is amazing. The mention of Procrustes’ myth102 transforms and colours the inter-textual relations, which connect the present to the past: the misappropriation of declared judgments and precedents sounds as a wilful attack on the purity of the original statements. It was not by the way that the pillage of restyled decisions was addressed towards that luxuriant basin of English case law: ‘however conscious American lawyers may have been of the need to make a fresh start, a system of law cannot be improvised overnight. It has to come from somewhere.’103 In this regard, we can merge Gilmore’s further notations with Harold Bloom’s stunning remark. On the one side, we read that English cases were precisely ‘managed’ and ‘we need not accuse Langdell and his successors of an unbecoming Anglophilism; for the structure they wanted to build, the English cases were the best – indeed the only possible – building materials’,104 even in comparison with the emerging American case law. On the other side, we recall to mind Bloom’s synthetic and exhaustive assertion according to which ‘literary criticism has known always this reliance of texts upon texts’, and this consciousness was strengthened after Vico ‘uncovered the genuine scandal of poetic origins in the complex defensive trope or troping defense he called “divination”’.105 In an effort to emulate and finally surpass anterior texts, doctrines and jurisprudence, strong legal scholars misread the precursors, in a defensive gesture that allows the ‘something new’ of juridical creation to occur. Langdell, Holmes and Williston, as has been anticipated, intellectually projected and factually led this fine work of stretching old solutions and ruminating on past ideas. 101

Ibid. 19. In Greek mythology, Procrustes lived in Attica, on the sacred way between Athens and Eleusis, where the mystery rites were performed. Here, in Corydalus, he abducted travellers and passengers, providing them with an abundant dinner and inviting them to spend the night in a rather strange bed; he wanted to fit guests’ bodies to perfection. Therefore, who were too short were stretched (as the name Procrustes etymologically indicates), while those who were too tall had their legs chopped off with a sharp hatchet. 103 Gilmore (2014) 17. 104 Gilmore (1995) 62. 105 Bloom (1976) 3. 102

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The ‘new’ theory of contract was forged from three main principles. First of all contractual liability should be restricted as narrowly as possible: ‘the theory seems to have been dedicated to the proposition that, ideally, no one should be liable to anyone for anything. Since the ideal was not attainable, the compromise solution was to restrict liability within the narrowest possible limits.’106 The merit of having accomplished this goal is credited to Oliver W. Holmes, who introduced the ‘revolutionary’107 and purpose-made doctrine, later familiar under the definitory label ‘bargain theory of consideration’. In so doing, and proceeding to an analogical application of the paradigms previously discussed, borrowed from literary studies, it could be argued that Holmes specifically acted according to one of the six ratios enunciated by Harold Bloom as the six typological dynamics which govern inter-textual relations. The possible reference is to the figure named ‘tessera’, which indicates completion and antithesis. As Bloom clarifies, the word is taken not from mosaic-making, but from the ancient mystery cults, where it meant a token of recognition, the fragment say of a small pot which with the other fragments would re-constitute the vessel. Therefore, when this ratio is evoked, one would emphasize that a creative artist antithetically ‘completes’ his precursor, by so reading the parent-text as to retain its terms, but to mean them in another sense, as though the precursor had failed to go far enough. In our present context, Holmes put his hand into the sacred urn of the ancient common law and drew out the puzzling term of ‘consideration’, which he converted to ‘some hitherto unsuspected uses’.108 As Gilmore highlights, Holmes’ ‘analysis of the true meaning of “consideration” comes forth almost naked of citation of authority or precedent. He starts with an off-hand reference to what is commonly “said” and commonly “thought”. However, what is clear to Holmes “has not always been sufficiently borne in mind” by others. Whereupon, we are off to the races at a dizzying clip.’109 The new day dawned with Holmes. Many swerves took place on the backstage. Lord Mansfield’s disgust for this questionable institute (explainable perhaps on the ground of his Scottish birth110) was rejected and dropped, damned as heresy. The odd idea that any benefit to the promisor or detriment to the promisee could support a promise was also abandoned. An undeclared meaning was extrapolated: ‘It is the essence of a consideration, that, by the terms 106 107 108 109 110

Gilmore (1995) 15. Ibid. 2. Ibid. 20. Ibid. 22–23. Ibid. 20.

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of the agreement, it is given and accepted as the motive or inducement for furnishing the consideration. The root of the whole matter is the relation of reciprocal conventional inducement, each for the other, between consideration and promise.’111 In the ‘after Holmes era’ there were benefits and benefits, detriments and detriments. The theory of consideration became the ‘balance-wheel’ of the great machine.112 The second principle of the Grand Theory was the objectification of contractual liability. According to Holmes, that liability, though narrowly restricted, was to be virtually absolute. Another clinamen was performed. Gilmore expressly defines the new trend in terms of a ‘switch’ from ‘subjective’ (the substantiation of the adjective used to qualify the ‘approach which the courts had – almost instinctively and without giving any thought to the matter – been following’113) to ‘objective’. Each litigated case must become, from an extended factual inquiry into what was intended, meant or believed, an investigation about the ‘externals’, or about what the parties said or did. As a consequence, Holmesian theory carefully narrowed the range within which mistake, fraud, duress, impossibility could be successfully pleaded as a defence. These theoretical premises produced an important effect at the operational level, mainly the transformation of questions of fact into questions of law and, therefore, a considerable reduction of the role of the civil jury in contract litigation. In Gilmore’s metaphorical language, if the consideration was the ‘balance-wheel of the great machine’, the objective theory of contract became the ‘great metaphysical solvent, the critical test for distinguishing between the false and the true’.114 With specific regard to this tenet of classical theory, Gilmore himself speaks in Bloomian terms, evoking the anxiety of influence perceived by the ‘descendants’, even inside the elitist club of the ‘Classicians’: the post-Holmesian ‘objectivist’, led by Williston, make no attempt to argue that their principle had any common law past … On the contrary, the emergence and triumph of the ‘objective theory’ was put forward as one of the great accomplishments of recent times – the apprehension of a fundamental truth which had long been hidden in a deep morass of error.115 111

Holmes (1963) 230. Gilmore (1995) 19–20. 113 Ibid. 39. 114 Ibid. 47. 115 Ibid. 47–48. To support his argument, Gilmore quotes various paragraphs of Williston’s treatise on contract, as legal evidence of his version of objectivism. The references are scrupulously detailed in n. 97; Gilmore (1995) 137. Moreover, reading Gilmore, the last straw would be represented by the fact that one of the 112

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The third and last principle of the classical theory was the proclaimed ineffectiveness of contract remedies. First of all, compensatory damages were liquidated, punitive damages were rejected; secondly, only certain kinds of losses were compensated; thirdly, specific performance was to be granted only rarely. In order to elucidate how the industrious couple ‘Holmes-Williston’, moving from Langdellian premises, assembled a bulk of abstractions into a supposed organic system, matter of ritual incantation, Gilmore speculates on the strategic use and abuse of law cases, on their narratological dis-emplotment and re-emplotment, through an act of ‘therapeutic laundering’. This diachronic sketch is of the utmost interest for a comparative legal scholar, insofar as it brings light on the intertextual construction of legal traditions and on the powerful use that can be made of the citation, as a form of ‘second-hand writing’, or writing at one remove.116 In this perspective, precedents are repositories of established filiations, composed under the discursive influence of other opinions and traversed by other styles and voices. Their conclusive shape – a cohesive unity of form and content – comes out as the final result of a bellicose battle fought against or in favour of already declared decisions; the references quoted in the text lead to the ultimate destination through a path of erasure and remembrance. Legal traditions disclose their texture, as entangled palimpsests of citations and misreadings. Retelling the story of consideration, Gilmore illustrates Williston’s misuses of past English cases, such as Stilk v. Myrick,117 Harris v. Watson,118 Dickinson v. Dodds.119 The first, Stilk v. Myrick, is presented as the better example of how an orthodox view could be supported by a mis-lecture, a partisan and selective (mis)appropriation of the old sources of law. A general rule on consideration and performance of contractual obligations (a promise to perform a contractual obligation already owed to the other party will not constitute good consideration) was derived from a decision pronounced in relation to the rigour of ‘seafaring life’ during the Napoleon wars. Figuring the past, Gilmore explores the

best known judicial expressions of the objective theory was by Learned Hand, who had been a student of Williston’s and acknowledged the great influence which Williston had had on his thinking. The case in question is Hotchkiss v. National City Bank of New York, 200 Fed. 287, 293 (S.D.N.Y. 1911). 116 For a brilliant theory of citation as a ‘second-hand writing’, see Compagnon (1979). 117 Stilk v. Myrick [1809] EWHC KB J58. 118 Harris v. Watson, 1791, King’s Bench; (1791) Peake 102, 170 ER 94. 119 Dickinson v. Dodds (1876) 2 Ch. D 463.

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contentious relationships both among law reporters and among legal scholars, who tried to anchor their own conclusions to one authoritative vision, selected among the others. This is the stratified narrative of Law. At the beginning, Lord Ellenborough’s opinion was recorded in two different tales, written by reporters of different standing, Espinasse, not benevolently considered,120 and Campbell, highly valued and respected. The first relates that Lord Ellenborough decided the case according to a principle of public policy, firstly applied in Harris v. Watson;121 the second identifies the ratio decidendi in a principle of contract law, namely, a want of consideration in the case.122 The ‘cases’ were 120 Even if probably provided with many fine qualities, Espinasse’s capacity as an accurate law reporter was diminished by the fact that he was virtually deaf and, according to the common account, he was not an accurate lip-reader. Consequently, the exactness of his report with reference to an oral judgment given immediately after the conclusion of legal argument and without a full written text is at least doubtful; see Megarry (1973) 118 where Pollock CB is quoted as having said: ‘Mr Espinasse was deaf. He heard one half of a case and reported the other.’ 121 Stilk v. Myrick (1809) 6 Esp. 129, 130, 170 ER 851: Lord Ellenborough ruled, that the plaintiff could not recover this part of his demand. His Lordship said, that he recognized the principle of the case of Harris v. Watson as founded on just and proper policy. When the defendant entered on board the ship, he stipulated to do all the work his situation called upon him to do. Here the voyage was to the Baltick and back, not to Cronstadt only; if the voyage had then terminated, the sailors might have made what terms they pleased. If any part of the crew had died, would not the remainder have been forced to work the ship home? If that accident would have left them liable to do the whole work without any extraordinary remuneration, why should not desertion or casualty equally demand it. 122 Stilk v. Myrick (1809) 2 Camp. 317, 318, 170 ER 1168, 1169: I think Harris v. Watson was rightly decided; but I doubt whether the ground of public policy, upon which Lord Kenyon is stated to have proceeded, be the true principle on which the decision is to be supported. Here, I say, the agreement is void for want of consideration. There was no consideration for the ulterior pay promised to the mariners who remained with the ship. Before they sailed from London they had undertaken to do all that they could under all the emergencies of the voyage. They had sold all their services till the voyage should be completed. If they had been at liberty to quit the vessel at Cronstadt, the case would have been quite different; or if the captain had capriciously discharged the two men who were wanting, the others might not have been compellable to take the whole duty upon themselves, and their agreeing to do so might have been a sufficient consideration for the promise of an advance of wages. But the desertion of a part of the crew is to be considered an emergency of the voyage as much as their death; and those who

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transmuted onto the ‘rules’ of the general theory of contract law, fixed into the bodies of treatises and Restatements, exploiting the vagaries of early nineteenth century English case-reporting and lumping unlike cases together without stating the facts of either case. These arguments allow Gilmore to put at the centre of the scene the polyphonic structure on which the monument of common law has been erected and, at the same time, to express his caustic view on the real consistency and authenticity of the classical theory of contract. A ‘devious process’ led to the birth of this Grand Theory: ‘such is the progress of jurisprudence … we need not concern ourselves with whether the process involved deliberate deception or merely unconscious distortion on the part of the theory-builder. What is clear is that some funny things happened on the way from case report to treatise.’123 This comment becomes much more pregnant, if we recall how Gilmore describes the realists’ position and especially their attack on the ‘conceptualism’ of the past. Gilmore states that, according to legal realism, ‘the predictive value of past cases for future decisions is slight or nil: the theory of precedent is simply a gimmick by which clever judges fool other people and stupid judges occasionally fool themselves. The study of doctrine – of rules of law – is sterile and absurd.’124 In the same way, the case of Dickinson v. Dodds is dusted off and brushed up in order to make clear the conceptual sliding imposed by Williston on Mellish LJ’s opinion. Where Mellish used the subjective device of the ‘meeting of the mind’ to verify the revocability or not of an offer, Williston, faithful and loyal heir of Holmesian objectivism, once again availed himself of the prodigious versatility of consideration. The remain are bound by the terms of their original contract to exert themselves to the utmost to bring the ship in safety to her destined port. Therefore, without looking to the policy of this agreement, I think it is void for want of consideration, and that the plaintiff can only recover at the rate of £5 a month. 123 Gilmore (1995) 30. 124 Gilmore (1961) 1038. In these pages Gilmore, with masterly skill, describes Realists’ critical attempt to dismantle the false ideologies built by the conceptualists of the nineteenth century: The trouble with the nineteenth century, said the realists, was that lawyers believed, and law professors taught, that law was a symmetrical structure of logical propositions, all neatly dovetailed. The truth or error, the rightness or wrongness, of a judicial decision could be determined by merely checking to see whether it fitted into the symmetrical structure; if it fitted, it was right; if it did not fit, it was wrong and could, or at least should, be disregarded. Moreover, law students could be trained by being made to read carefully selected collections of correct cases, from whose study, by induction, they could arrive at the correct general principles.

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bargain theory was extended to the entire life of the contract, so to conclude that offers stated to be irrevocable, even if relied upon, were not irrevocable unless supported by separate consideration. An analogous fate was reserved (Gilmore notes) for other cases, metamorphosed or amputated with the aim of dismantling the subjectivist approach to the theory of contract. The weird,125 even if celebrated, case Raffles v. Wichelhaus,126 known as the Peerless case, was misinterpreted by Holmes, who elaborated an astonishing explanation of the declared rule in order to legitimate his objectivist theory on the exclusive relevance of what the parties have properly said, not on what they properly meant. In Gilmore’s witty criticism ‘even for Holmes this was an extraordinary tour de force … The magician who could “objectify” Raffles v. Wichelhaus could, the need arising, objectify anything.’127 Afterwards, moving in a background of bibliographical amusement, and unveiling the curiosities of legal literature, Gilmore traces the story of transmission of the language of Paradine v. Jane128 from mid-seventeenth century England to mid-nineteenth century America. This ‘second-hand writing’, the practice of citation, made it possible to steadfastly attach the apparent meaning of a not particularly celebrated English case (of at least 200 years before) to a theory of absolute contractual liability. Thus, it turned out that in his edition of Saunders Reports (a collection of late seventeenth century cases), Serjeant Williams commented on a case here mentioned, Walton v. Waterhouse, paraphrasing the language used in the 125 In Gilmore’s view the case ‘is to the ordinary run of case law as the recently popular theatre of the absurd is to the ordinary run of theatre’; Gilmore (1995) 39. Gilmore treats the report of the case as literary text, detecting the key structural components from a narratological point of view (‘it starts with a fairly detailed résumé of the pleadings, continues with a colloquy between losing counsel and the two of the three judges who made up the court, gives the argument of the winning counsel who, after two sentences was “stopped by the Court” which, giving no reasons, abruptly announced: “There must be judgment for the defendants”’), and delineates the main characters with a vivid description, from Milward and Mellish (counsels of the parties) to Pollock and Martin (judges of the court), their trial strategies and diversionary tactics; their woolyheaded questions and narrow-minded disposition; their extenuating attempts to convince and persuade and their redemptive distractions; Gilmore (1995) 39 ff.; with a particular emphasis see 42–43, where, like in a novel, we find that ‘Milward could go on talking until he was blue in the face without shaking them [the judges of the Court A/N]. There seems to be an air of increasing desperation in Milward’s attempts to deal with the wooly-headed questions from the bench.’ 126 Raffles v. Wichelhaus [1864] EWHC Exch. J19. 127 Gilmore (1995) 45. 128 Paradine v. Jane [1647] EWHC KB J5.

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Aleyn Report of Paradine.129 In a chain of transmission, it was William’s note, which Judge Morton, sitting in the Supreme Judicial Court of Massachusetts, cited and copied out, creating the ‘general rule’ on excuse by reason of impossibility.130 This grand construction, presented by its artisans as tidy, neat, logical and carefully crafted through a pervasive handling of case material, was progressively eroded by the salt of a new sceptical movement in jurisprudence, which culminated in Legal Realism. The new corrosive prophets disrupted the certainties of the old faith and introduced an age of doubtfulness. Against the classical vision of Law, conceived as a static and monolithic entity, the realists invoked the force of change and dynamics, the permanence of precariousness and instability. Law changes as society changes: the symmetrical structure of dovetailed logical rules has never existed;131 the idea that cases can be arranged to make sense was purest moonshine and nonsense.132 Corbin’s heterodoxy lambasted Langdellian illusion and crumbled the Holmesian universe. Cardozo and Corbin deliberately enacted a personalized Counter-Sublime in reaction to the precursors’ Sublime. The first, serving on the New York Court of Appeals, pursued a line of his own in contractual matters and distanced himself from the Holmesian ‘bargain theory of consideration’. The second showed the fallacy of the Holmesian model, as it was based on a doctrine of contract, wholly formal and external, and on a theory of consideration, which were wrong both as a matter of historical fact and as a matter of social policy. The new scenario, depicted with growing emphasis by Gilmore, was marked by strong contrapositions among characters and institutes: Cardozo and Corbin coped with Holmes and Williston; promissory estoppel came to supersede the indomitable monopoly of consideration. Gilmore portraits the troubled bafflement of many judges, who, unlike Holmes, were not prepared to look with indifference on the plight of a plaintiff, who, in turn, had relied, to his detriment, on a defendant’s assurances without the protection of a formal contract.133 In order to manage this overwhelmingly awkward situation, some sage judges began to rummage in the drawer of the old remedies and mouldy terminology and they found the redeeming syntagms of ‘equitable estoppel’ and ‘promissory estoppel’. 129 130 131 132 133

2 Wms. Saunders 420, 85 Eng. Rep. 1223 [K.B. 1684]. The reference is to Adams v. Nichols, 19 Pick. 275, 276 (Mass. 1837). Gilmore (1961) 1038. Gilmore (1995) 65. Ibid. 70.

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The struggle between contending factions and visions tore the body of the First Restatement on Contract, the new product originally devised by the orthodox establishment as a means of resistance against the attack of Legal Realists. In the early 1920s, there was still hope that the unity of doctrine could be preserved and that the viability of a case-law system, which had actually outlived its time, could be safeguarded. This extraordinary operation was performed by the American Law Institute, which was composed of the most distinguished practising lawyers, judges and law professors in the country. Williston and Corbin were the prominent members of the new crew, the dominant intellectual influences in the drafting of the First Restatement of Contracts. Narrating the story of this impressive treatise, Gilmore humanizes, as only a great writer can do, the pages of an inanimate object, of a book: paragraphs and restated rules are not mere linguistic signs posed on a material page, but strong voices of rival actors disembodied into texts. ‘Williston and Corbin held antithetical points of view on almost every conceivable point of law – that accounts for the schizophrenic quality which makes the Restatement, viewed historically, the fascinating document which it is.’134 So, if the dress-appearance of the Restatement was tidily coherent, its soul was fractured and disquieted, a noble compromise between form and substance. Factions ruled: ‘in the debate on consideration Corbin and the Cardozeans lost out to Williston and the Holmesians. In Williston’s view, that should have been the end of the matter. Instead, Corbin returned to the attack.’135 The quarrel between Williston and Corbin repeated and reincarnated the strife of their principals, Holmes and Cardozo. The final result was not the reopening of the debate, but the formulation of two distinct sections, one of which undercuts the underlying principle of the other. On the one hand, we find section 75, which contains a pure Holmesian definition of consideration. With his witty and uncommon acuteness, Gilmore glosses: ‘The venerable Justice Holmes took no part in the Restatement project. It is unlikely that he ever looked at the Restatement of Contracts. If, however, § 75 was ever drawn to his attention, it is not hard to imagine him chuckling at the thought of how his revolutionary teaching of the 1880s had become the orthodoxy of a century later.’136 On the other hand, we find the ambiguous and really not 134

Ibid. 66. Ibid. 69. Here Gilmore specifies that ‘Corbin, who had been deeply influenced by Cardozo, proposed to the Restaters what might be called a Cardozean definition of consideration – broad, vague and, essentially, meaningless – a common equivalent of causa, or cause.’ 136 Ibid. 67–68. 135

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immediately comprehensible text of section 90, which paved the way for a resurgent operativeness of the estoppel idea, under the auspices of Corbin, inspired by Cardozo. The mysterious sentence of section 90 had no comment at all and was illustrated by only four hypothetical cases (none of them presumably based on a real case), which ‘led any analyst to the despairing conclusion that no one had any idea what the damn thing meant’. But it was. The centrality of section 75 was definitely crumbled and demolished. ‘The Restatement ended up uneasily poised between past and future, which is no doubt the best thing that could have been done.’ The subsequent history and the advent of the Second Restatement of Contracts are altogether fascinating. In fact, when even the continuers of the virtuous old ways couldn’t oppose resistance to the infection of the revolutionary virus, the pristine illusions and assumptions came to an end. A redraft of rules and sections became inevitable. While the rewritten text of section 75 had not been changed in substance, the comment had been ‘Corbinized’.137 An internal dissociation appeared to move the rule away from its operational explanation. The work of dissection had been over-amplified; the old comment, composed with an authentically Willistonian flourish, had been forgotten.138 However, Gilmore states, the Corbinization of section 75 is quite insignificant compared to what has happened to section 90. From the original version of the section, naked of comment and provided with four mysterious illustrations, for the total amount of less than a page written, Restaters went to a revised formulation with comments and illustrations (grown to 17) scrupulously reported over 12 pages. At this time, the agony was pacified and composed: The unwanted stepchild of Restatement (First) has become ‘a basic principle’ of Restatement (Second) … the unresolved ambiguity in the relationship between § 75 and § 90 in the Restatement (First) has now been resolved in favour of the promissory estoppel principle of § 90 which has, in effect, swallowed up the bargain principle of § 75.139

This was a process of doctrinal disintegration. A new history was beginning. 137

Ibid. 77. The Comment states: ‘The word “consideration” has often been used with meanings different from that given here. It is often used merely to express the legal conclusion that a promise is enforceable.’ 138 The Comment states: ‘No duty is generally imposed on one who makes an informal promise unless the promise is supported by sufficient consideration.’ 139 Gilmore (1995) 79.

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C.

Splitting the World: Gilmore’s Oppositional Ontology

As has been anticipated above, the third main feature of Gilmorean prose is the rhetorical extra-valorization of contrapositions and contradictions, which categorically divide the world in general, and the world of law in particular, into antithetical positions and conflicting, or, even worse, schizophrenic views. The final statement, introduced as a comment on the double souls kept, in a compromise way, by the First Restatement of Contracts, comes to seal the earth-shaking controversies, which have animated the narrative of the previous pages: ‘we have become accustomed to the idea, without in the least understanding it, that the universe includes both matter and anti-matter. Perhaps what we have here is Restatement and antiRestatement or Contract and anti-Contract.’140 The premise justifies the corollary: ‘the one thing that is clear is that these two contradictory propositions cannot live comfortably together’.141 If we synthetically re-figure the intense depiction of American legal thought, as brightly condensed in the twin books, The Death of Contract and The Ages of American Law, we can detect a dichotomic reason, which divides and counters characters, doctrines, objects, entities, opinions, traditions, schools of thoughts. Therefore, we can easily portray this sequence of oppositional couples: Cardozo v. Holmes; Corbin v. Williston; Langdell v. Llewellyn; Blackstone v. Bentham; Contract v. AntiContract; Subjectivism v. Objectivism; Formalism v. Realism; Life v. Death. There is another, actually underestimated issue, which seems of the main significance for legal scholars. The fierce competition among theories – and in the specific case between the classical theory of contract and its Realist disintegration; between the unitarian Empire of Contract and the Middle-Earth of Cont-Tort – is the intellectual and phenotypical expression of a much more profound and political struggle among legal formants and legal schools. First of all, Gilmore presents the ascendancy of the classical vision as the principal product of the law schools’ intellectual activities. As he expressly reminds: in the academic world the influence of Langdell and Holmes was direct and immediate, consciously perceived and universally acknowledged. And the American law school, in the new format which Langdell had designed, 140 141

Ibid. 68. Ibid.

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The unburiable contract 293 became a principal instrument in the process of restructuring our jurisprudential thought and reshaping our legal system … it may well be that no educational institutions in any country at any time have enjoyed the prestige and achieved the success of the dozen or so national law schools which grew up in the image of Langdell’s Harvard.142

The law schools became masters of influence. From hence the germs of anxiety took to spreading abroad. On the one hand, the law schools acted on subjects and roles, restructuring the relationship between professors and students; on the other hand, they acted on the sources of law, producing a new type of legal literature, of bloodless abstraction and conceptualization, as a response to the pressures generated by the floods and torrents of published reports. Moreover, the proactivism of legal schools froze judicial creativity; the courts became the apostles of reaction and the guardians of an oversimplified past: ‘the judicial product of the period can fairly be described as Langdellianism in action’.143 This predisposition moulded the style of opinion-writing, dictating a new fashion. The Age of Faith, of the great systematizations, was consequently the age of the ‘string citation’, as in judicial opinions, as in the learned treatises. The reassuring idea of a fixed body of law, invested with an almost supernatural authority, proved to be irresistibly attractive and Langdell historically repeated Blackstone’s fortune. ‘The juice of life had been squeezed out; the case reports became so many dry husks. Stare decisis reigned supreme.’144 Beyond these considerations, it is possible to re-dimension the polemics among theories as an epihenomenic device, which intercepts and captures the cultural clash between the Harvard and Yale Law Schools. The sardonic grin, which modulates the voice of Gilmore’s account, is the final and corrosive harshness nurtured by a Yale man against his colleagues belonging to the rival faction of ‘Harvard clubbing’. In the opening pages of The Death of Contract Gilmore doesn’t forget to state that, in its ‘pure’ form the classical theory of contract, this perfection of abstraction and wilful amputation of the pristine cases, may never have existed outside the classrooms of the Harvard Law School. At the end of the book Gilmore returns to the pivotal role played by law schools: we should not underestimate the influence on the legal profession throughout the country of the handful of great law schools which, during this period,

142 143 144

Gilmore (2014) 51–52. Ibid. 55. Ibid. 57.

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These words, pronounced by a strenuous defender of the Yale intellectual mood, during the course of the 1970s, tell more to the attentive reader. It is a matter of fact that the special combination of Eliot, Langdell and Ames produced an educational system unusually well adapted to its time and secured Harvard Law School a unique place in the modern academic landscape. We have recalled Langdell’s gospel and his proclaimed ‘credo’, as they have been filtered through Gilmore’s eyes. The new faith is composed of a limited number of incontrovertible assumptions: Law was considered as a science, consisting of certain principles and doctrines; the number of fundamental doctrines is much less than is commonly supposed; the cases which are useful and necessary for mastering the doctrines bear an exceedingly small proportion to all that have been reported (the vast majority being useless and worse than useless); the doctrines could be usefully classified and arranged; all the available materials of that science are contained in printed books. Synthetically, ‘Langdell devised a new theory of American law, a new method of instruction, and a program of credentialing that made his school a paradigm for American legal education’.146 The President of Harvard, Charles William Eliot (among other things, cousin of the great poet T.S. Eliot, recurrently remembered in these pages), and the new Dean of the Law School, fruitfully appointed, shared a common intellectual commitment to the scientism of the day. Analogizing the law library to the chemistry lab, Langdell built an everlasting, fiduciary relationship with Eliot. Positivism captured a large number of noble minds, willing to assert that knowledge is based exclusively on the methods and discoveries of the physical or ‘positivist’ and natural sciences (such as chemistry, physics, zoology, botany, and so on). Oliver Wendell Holmes, William James, Henry Adams, Brooks Adams, John Friske came to history ‘seeking science’.147 Law was divorced from politics and treated as a technocratic discipline; contracts became the queen science of the new school, because the law of contracts collided less with political issues that might blemish the actual interest of the legal scientist. Langdell so drastically revolutionized the nature and system of legal education, that its historical course could be split into two ages, after and before the advent of Christopher Columbus Langdell (aC v. bC). Case method was 145 146 147

Gilmore (1995) 106. Carrington (1995) 691. Sutherland (1967) 176.

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developed as a technique for law teaching and attracted eager students. As Sutherland vividly notes, ‘men are remembered by tag descriptions. Langdell’s case method is his popular memorial’148 and Laura Kalman ironically adds ‘often, the aspiring academic left Harvard after graduation to spread the gospel of the case method through “colonial service” at a less prestigious school in the hinterland’.149 It was a devastating earthquake, which upset the American tradition of university law teaching. From these times onwards, only slight changes were brought to legal curricula. Legal education remained static and uniform, dressing a ‘canonized’ style imposed by Harvard from 1870. This couple of clear propositions gives a precise idea of the academic immobilism: ‘Transport a first-year student out of a 1967 Contracts class back into Langdell’s, and it would have felt familiar. Transport the student of 1967 into a Contracts class at another prestigious law school, and he would have felt the same way.’150 Legal Realism came to the rescue. A new mantra was sounded against Harvard’s logics of imperialism, as well as against formalism, conceptualism, classical legal thought, classical legal science. Langdellianism progressively became the orthodoxy to be superseded. The Realist project, after the initial start at Columbia, took root at Yale University, which led the charge against Harvard and especially against Langdell, now re-presented as the ‘brilliant neurotic’, who had seduced American legal education. Even legal methods of education were shifted from the once acclaimed ‘case method’ towards clinical legal education, placing the law office at the centre of the curriculum; both Cambridge and New Haven appeared to be the headquarters of legal doctrine, but while Cambridge churned out treatises in order to collect, organize, systematize and reconcile originally conflicting cases, New Haven produced critical works, with the specific aim of unveiling the incoherence of doctrines, the personal idiosyncrasies obscured by formal and aseptic decisions, and the ideological fallacies of their competitors’ constructions. Gilmore’s polemical antagonism, his elegant satire, the ironic tone of his novelized account, the artful selection of words and adjectives should be located in the context of the political and educational competition between Harvard and Yale during the 1960s and 1970s. ‘Life at Harvard is precise and formal, in the classical tradition. Life at Yale is untidy, confused and disorganized, in, shall we say, the romantic at all events not

148 149 150

Ibid. 179. Kalman (2005) 18. Ibid. 13.

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the classical, tradition’, he observed with the aim of unveiling the truth about Harvard and Yale.151 Maybe, it was really from Yale’s sense of insecurity, from its living in Harvard’s shadow, that Gilmore derived his own feeling of romantic agony. From hence he developed his Bloomian anxiety of influence.

IV.

INFLUENCE AND TRADITION: THE RHYTHMICAL FLUCTUATION FROM KENOSIS TO THE RETURN OF THE DEAD

In the end, what could be found, scrabbling under Gilmore’s knowing smile and looking behind his humour and nimble wit? One could respond: a land of complex relationships and ambivalent feelings. His poetic polemic questioned the illusions of order and coherence and supported a view of unstable legal change, romantic improvization and tentative experimentation. Gilmore concurred to build a new aesthetics of American legal tradition. In this noble enterprise, his projections and performative imagination were the personal reactions to a growing anxiety of influence. Once again, the fault-lines between past and present, the internal fissures of legal tradition were at stake. As Guido Calabresi reminds us, Gilmore, in his mature age, insisted that ‘the Golden Age of the Yale Law School is never now. It was always in the past … and can be again in the future if only we do a few things right. Always close, always striving, never quite there yet except in memory and hope.’ Maybe, one thing right, which could be done, would be the acknowledgment and the management of awkward presences, of troublesome predecessors. Charles Yablon has argued and perfectly discussed how Gilmore’s ambidextrous depiction of Oliver Wendell Holmes is not unlike that of the strong poets whose work is analysed by Harold Bloom. Brilliant, but at the same time (as has been previously emphasized) savage, harsh and cruel, Holmes becomes the legal remake of Mary Shelley’s Dr Frankenstein, ‘a morbid and self-centred genius who, seeking to create a viable theory of contract from bits and pieces of prior case law, creates instead a monster, a powerful but not truly living formalistic system that wreaks havoc on a quasi-innocent populace for the following fifty years, until it

151

Gilmore (1963) 9.

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is hunted down and destroyed by an intrepid band of Legal Realists’.152 In this way Gilmore stages a clear dissociation between the Creator and his creature: a genius, who breeds a monster; a theoretical brilliance destined to materialize into a freak accident. Fate summoned Grant Gilmore to an intense confrontation with Oliver Wendell Holmes. In fact, from 1967, Gilmore was the custodian of the so-called ‘Holmes devise’, the collection of papers Holmes had bequeathed to the United States and he was commissioned to complete the biographic work already begun by Mark De Wolfe Howe. Instead of concluding Holmes’ official biography, Gilmore published the twin books, The Death of Contract and The Ages of American Law. Therefore, these works entered history on behalf of Holmes’ biography, which was never written. Gilmore absorbed Holmes’ inclinations and composed his The Death of Contract around a plot of historical evolution, which could be encoded as similar to that purported by Holmes’ monograph The Common Law. The ancestor (Holmes’ The Common Law) celebrates the progressive objectification of legal relationships as society moves from the tribal to the modern; the ephebe (Gilmore’s The Death of Contract) tells the story of a formalistic system of contract law superseded by more flexible concepts of obligation and reliance, in accordance with the modified needs of the modern welfare state. The latest is inspired by an adversary proceeding in respect of the former. The same characterization of Holmes, as has been evoked in these pages, is clear evidence of the fact that Gilmore’s views can really be understood and reassessed in Bloomian terms. We can detect significant omissions along with exaggerated attributes and emphasized circumstances. All these stylistic contrivances delineate a meaningful context beyond the letter of the text. In The Death of Contract Gilmore presents Holmes as the theorizer of the classical theory, the intellectual mind, which came to dignify Langdell’s rough materials and incomplete schemes of thought. Actually, Holmes comes to rectify the miraculous perfection of abstract formalism built by Langdell: the cathedral erected by the greatest living legal theologian broke into fragments under the hammering attack of the motto ‘the life of law has not been logic, it has been experience’. Gilmore is silent on those aspects that imposed, on Holmes as intellectual, at most the tag of ‘legal realist’, but surely not the label of ‘deductive logician’.

152

Yablon (1995) 237.

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In this regard, Charles Yablon’s essays are illuminating. He suggests that ‘the one-sided picture we get of Holmes in The Death of Contract, a portrait that emphasizes Holmes’s formalism to the almost total exclusion of his realism, is a “misreading” of Holmes in the sense Bloom uses it and for much the same reason that Bloom tells us that strong poets misread their predecessors’.153 In particular, Yablon applies to Gilmore’s writing all the revisionary ratios introduced by Harold Bloom (clinamen, tessera, kenosis, apophrades) in order to define the legal misprision or misreading embedded in the pages of the book. First of all, clinamen functions as a swerve, as an instance of creative revisionism that produces a final misinterpretation: the newcomer himself determines the precursor’s particular law. Gilmore misinterprets Holmes insofar as he makes the classical theory of contract a matter of artifice, not a natural restatement of the existing common law, or a part of natural legal development, but simply a constructed mistake. In the tessera, according to Bloom, ‘the later poet provides what his imagination tells him would complete the otherwise “truncated” precursor poem and poet, a “completion” that is as much a misprision as a revisionary swerve is’.154 Gilmore offers a completing antithesis in respect of Holmes’ project when he presents, under a new interpretative light, the same cases from which the basic tenets of classical contract theory were derived: they are re-told, re-exposed in their factual consistence, re-analysed in their complexities and puzzling issues. The new exegesis adds a ground of historicity to an openly invented tradition, divorcing real facts from imagined superfetations, reality from magic. The subsequent ratio, named as kenosis, recalling the theological kenosis of God, indicates ‘the revisionary act in which an “emptying” or “ebbing” takes place in relation to the precursor’. Gilmore ‘emptifies’ the classical theory of contract through a process of abstraction till it comes to predicate the unattainable nonsense that ‘no one should ever be liable to anyone, anytime’. Bloom’s final ratio is apophrades, the last phase of the revisionary relationship marked by the strong return of the Dead. Gilmore correspondently closes The Death of Contract with a prospective of resurrection of what has been apparently buried. In particular, the last chapter of the book is the proper synopsis of kenosis and apophrades, and, in the end, it traces a (new) beginning of

153 154

Ibid. 246. Bloom (1997) 66.

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The unburiable contract 299

return. The story opens with the description of what was happening after Langdell, after Holmes, Williston, Cardozo and Corbin: ‘contract’ was being reabsorbed into the mainstream of tort; it was re-united with what classical theory had improperly and arbitrarily divorced, staking out an enclave within the general domain of tort. Two emerging and ‘twin-ideas’ went to attack the stronghold erected by classical thought, that is, the consideration theory: with the idea of quasi-contract and unjust enrichment the classical theory was breached on the benefit side, while with the idea of promissory estoppel it was breached on the detriment side. ‘The two fields (Contract and Tort), which had been artificially set apart, were gradually merging and becoming one’,155 metamorphosing the original configuration into a new hybridized figure, not improperly called by Gilmore ‘Contorts’. This was a precise example of that phenomenon which, in the history of comparative religion, is called syncretism, or the reconciliation or union of conflicting beliefs. Classical theory of contract was, at that point, emptied out and located in a kenomatic threshold. But, at the end of the same chapter, Gilmore prophesies an apophrades of resurrection, a return of the pristine mind, a reappearance of dead scholars and censored rules. An Easter turn of the tide is almost upon on us. Since Gilmore pronounced this prediction, the mapping of contract law has been a controversial exercise. Contrasting views took turns at the wheel of the legal development machine and different labels have been used to distinguish and typify new groups of competing adepts. Corbinized contract scholars have been often characterized as ‘neoclassical’, with their sincere disappointment, in the light of the equivocal meaning of this denomination; they believed, in fact, that the prefix ‘neo’, positively appreciated, was darkened by the much more unmanageable legacy brought by the adjective ‘classical’. On another front, the so-called ‘relationists’, led by Ian Macneil, proposed a redefinition of the same nature of the contract, focusing their attention on its relational character, as the term used to name the new theory clearly emphasizes. Their intent was to deconstruct monistic theories of contract law, to better approximate to the true understanding of the parties: contract rights and duties should be guaranteed and imposed within the overall context of continuing relationships among the parties, repudiating the old and classical vision of discrete and static transactions. A wider horizon seems to be opened by inter- or trans-disciplinary projects and movements, such as Law and Society and Law and Economics. On the other hand, a new

155

Gilmore (1995) 96.

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wave of formalism is stirring contractual scholarship, in order to re-create a product that can be useful to courts and practitioners, much beyond the accepted ‘Llewellinesque standards’. Even if the neoformalists seek to distinguish their specific approach from the classical formalism of the oldest Langdellians, their purpose is to affirm the sovereignty of contractual text, of the express terms, considered not as mere evidence of the contract, but as its proper and exclusive constituents. As Gilmore predicted, this is the story of the ‘unburiable contract’. The moment a journey is finished, another begins.

BIBLIOGRAPHY Allen, G. (2000) Intertextuality. London: Routledge Atiyah, P.S. (1986) Essays on Contract. Oxford: Clarendon Press Bloom, H. (1971) The Ringers in the Tower: Studies in Romantic Tradition. Chicago, IL: University of Chicago Press Bloom, H. (1975) Kabbalah and Criticisim. New York: Seabury Press Bloom, H. (1976) Poetry and Repression: Revisionism from Blake to Stevens. New Haven, CT: Yale University Press Bloom, H. (1982) The Breaking of the Vessels. Chicago, IL: University of Chicago Bloom, H. (1994) The Western Canon: The Books and School of the Ages. New York: Harcourt Brace Bloom, H. (1997) The Anxiety of Influence. Oxford: Oxford University Press, 2nd edn Bloom, H. (2003) A Map of Misreading. Oxford: Oxford University Press, 2nd edn Botting, F. (2014) Gothic. New York: Routledge, 2nd edn Braucher, R. (1976) ‘Contracts’ in B. Schwartz (ed.), American Law: The Third Century. South Hackensack, NJ: Published for New York University School of Law by F.B. Rothman Brooks, P. (1984) Reading for the Plot. [Kindle version]. Retrieved from www.amazon. com Callow, A.B. (1981) The Tweed Ring. Westport, CT: Greenwood Press Carrington, P.D. (1995) ‘Hail! Langdell!’, Law and Social Inquiry 691–760 Cohen, F.S. (1935) ‘Transcendental Nonsense and the Functional Approach’, 35(6) Columbia Law Review 809–49 Collins R.K.L. (1995) ‘Gilmore’s Grant (or the Life and Afterlife of Grant Gilmore and His Death)’, 90(7) Northwestern University Law Review 7–31 Compagnon, A. (1979) La seconde main: ou, Le travail de la citation. Paris: Seuil Danzig, R. (1976–77) ‘The Death of Contract and the Life of the Profession: Observations on the Intellectual State of Legal Academia’, 29 Stan. Law Rev. 1125–34 Dawson, J.P. (1980) Gifts and Promises: Continental and American Law Compared. New Haven, CT: Yale University Press Derrida, J. (1994) Specters of Marx: The State of Debt, the Work of Mourning and the New International. New York: Routledge Eliot, T.S. (1919) ‘Reflections on Contemporary Poetry’, VI(3) The Egoist 39–40 Eliot, T.S. (1998) ‘Tradition and Individual Talent’ in T.S. Eliot, The Sacred Wood and Other Essays. New York: Dover Publications Epstein, R. (1976) ‘Book Review’, 68 American Journal Legal History 72

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The unburiable contract 301 Feinman, J.M. (1990) ‘The Significance of Contract Theory’, 58 Cincinnati Law Review 1283–318 Friedman, L. (1965) Contract Law in America. Madison, WI: University of Wisconsin Press, 25 Frow, J. (1990) ‘Intertextuality and Ontology’ in M. Worton and J. Still (eds), Intertextuality: Theories and Practices. Manchester: Manchester University Press, 45–55 Frye, N. (2006) Anatomy of Criticism: Four Essays. Toronto and Buffalo: University of Toronto Press Gibbs, R.W. (2008) ‘Metaphor and Thought: The State of the Art’ in R.W. Gibbs (ed.), The Cambridge Handbook of Metaphor and Thought. Cambridge: Cambridge University Press, 3–13 Gilmore, G. (1936) Stephane Mallarmé: A Biography and Interpretation (unpublished Ph.D dissertation, Yale University) Gilmore, G. (1961) ‘Legal Realism: Its Cause and Cure’, 70(7) Yale Law Journal 1037 Gilmore, G. (1963) ‘The Truth about Harvard and Yale’, Yale Law Rep. 8 Gilmore, G. (1995) The Death of Contract. Columbus, OH: Ohio State University Press Gilmore, G. (2014) The Ages of American Law. New Haven, CT: Yale University Press, 2nd edn Gilmore, G. and Bobbitt, P. (2014) The Ages of American Law. New Haven, CT: Yale University Press Glenn, H.P. (2014) Legal Traditions of the World: Sustainable Diversity in Law. Oxford and New York: Oxford University Press, 5th edn Gordon, R.W. (1974) ‘Book Review’, 1216(4) Wisconsin Law Review 1216–39 Hillman, R.A. (1996) ‘The Triumph of Gilmore’s The Death of Contract’, 90 Cornell Law Faculty Publications 32–48 Hohefeld, W.N. (1917) Fundamental Legal Conceptions as Applied in Judicial Reasoning, Yale Law School Legal Scholarship Repository Faculty Scholarship Series, Paper 4378 Holdsworth, W.S. (1995) Charles Dickens as a Legal Historian. Union, NJ: Lawbook Exchange Holmes, O.W. (1881) The Common Law. Boston, NJ: Little, Brown Holmes, O.W. (1963) The Common Law. Cambridge, MA: Belknap Press Horowitz, A. (2014) Moriarty. New York: Harper, 1st US edn Horwitz, M.J. (1992) The Transformation of American Law, 1870–1960: The Crisis of Legal Orthodoxy. New York: Oxford University Press Howe, M.D.W. (1963) ‘Introduction’ in O.W. Holmes and M.D.W. Howe, The Common Law. Boston, NJ: Little, Brown Kalman, L. (2005). Yale Law School and the Sixties: Revolt and Reverberations. Chapel Hill, NC: University of North Carolina Press Kennedy, D. (2000) ‘From the Will Theory to the Principle of Private Autonomy: Lon Fuller’s “Consideration and Form”’, 100 Columbia Law Review 94–175 Kessler, F. and Gilmore, G. (1970) Contract: Cases and Materials. Boston, NJ: Little, Brown Lang, B. (1987) The Concept of Style. Ithaca, NY: Cornell University Press, revised and expanded edn Lipshaw, J.M. (2012) ‘Metaphors, Models, and Meaning in Contract Law’, 116(4) Penn State Law Review 987–1042 Loughlan, P. (2006) ‘Pirates, Parasites, Reapers, Sowers, Fruits, Foxes … The Metaphors of Intellectual Property’, 28 Sydney Law Review 211–26 Lynch, D.T. (1927) ‘Boss’ Tweed: The Story of a Grim Generation. New York: Boni and Liveright Maitland, F.W. (1909[1936]) in A.H. Chaytor and W.J. Whittaker (eds), The Forms of Action at Common Law: A Course of Lectures. Cambridge: Cambridge University Press

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302 Comparative contract law Maitland, F.W. (1911) ‘Why the History of English Law is Not Written’ in H.A.L. Fisher (ed.), The Collected Papers, 1. Cambridge: Cambridge University Press Mandelbaum, S.J. (1965) Boss Tweed’s New York. New York: J. Wiley Megarry, R.E. (1973) A Second Miscellany at Law: A Further Diversion for Lawyers and Others. London: Stevens Menand, L. (2001). The Metaphysical Club. New York: Farrar, Straus and Giroux Milhollin, G.L. (1974) ‘More on the Death of Contract’, 24(1) Catholic University Law Review 29–60 Mooney, R.J. (1976) ‘The Rise and Fall of Classical Contract Law: A Response to Professor Gilmore’, 155 Oregon Law Review 155–76 Moore, R. (1965) Metaphysical Symbolism in T.S. Eliot’s Four Quartets. Stanford, CA: Stanford University Press Murray, J.E. (1990) Murray on Contracts. Charlottesville, VA: Michie Law Publishers, 3rd edn Ortony, A. (1993) Metaphor and Thought. Cambridge: Cambridge University Press, 2nd edn Park, D.W. (2013) The Legal Mind: How the Law Thinks. San Bernardino, CA: CreateSpace Independent Publishing Platform Perillo, J.M. (1993) ‘Twelve Letters from Arthur L. Corbin to Robert Braucher’, 50(2) Washington and Lee Law Review 755–99 Rasulov, A. (2013) ‘The Doctrine of Sources in the Discourse of the Permanent Court of International Justice’ in C.J. Tams and M. Fitzmaurice (eds), Legacies of the Permanent Court of International Justice. Leiden: Martinus Nijhoff Publishers Rosenberg, J.D. (2005) Elegy for an Age: The Presence of the Past in Victorian Literature. London: Anthem Press Simpson, B.A.W. (1989) ‘Contracts for Cotton to Arrive: The Case of the Two Ships Peerless’, 11 Cardozo Law Review 287–333 Speidel, R.E. (1974–75) ‘An Essay on the Reported Death and Continued Vitality of Contract’, 27 Stan. Law Rev. 1161–83 Sutherland, A. (1967) The Law at Harvard. Cambridge, MA: Harvard University Press Waters, J. (1983) ‘For Grant Gilmore’, 42(4) Maryland Law Review 864–74 Watt, G. (2009) Equity Stirring: The Story of Justice Beyond Law. Oxford: Hart Publishing White, H.V. (1973) Metahistory: The Historical Imagination in Nineteenth-Century Europe. Baltimore, MD: Johns Hopkins University Press Winter, S.L. (2001) A Clearing in the Forest: Law, Life and Mind. Chicago, IL: University of Chicago Press Winter, S.L. (2008) ‘What is the “Color” of Law?’ in R.W. Gibbs (ed.), The Cambridge Handbook: Metaphor and Thought. Cambridge: Cambridge University Press, 365–79 Yablon, C.M. (1995) ‘Grant Gilmore, Holmes, and the Anxiety of Influence’, 90 Northwestern University Law Review 236–53

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13. Queering the contractual paradigm between law and political theory Flavia Monceri

I.

INTRODUCTION

The idea that the social institution we are used to naming ‘state’ has been established by means of a (social) ‘contract’ is surely one of the most appealing in the history of modern and contemporary Western political thought. Of course, the fact that such an idea has been able to become the dominant, most widely accepted, explanation of the origins of the state does not mean that it is the only one possibility for thinking about those origins, for different explanations have been suggested, not least the one proposed by Carl Menger (and subsequently the so-called Austrian School), according to whom a great variety of social phenomena, including the state, have in fact an ‘organic/spontaneous’ root that needs no explicit ‘agreement’ or ‘contract’ (Menger [1883] 1985).1 So the question may arise concerning the reason why the ‘contractual paradigm’ has been so successful in overwhelming competing accounts about the origins of the (modern) state to the extent that it still seems that political theory cannot avoid referring to some kind of ‘original contract’, especially if contemporary democratic regimes are to pursue ‘social justice’ as their ultimate goal (see notably Rawls [1971] 1999). Although it is not my aim here to jump into this question and try to find an answer, which would be impossible also because of space constraints, I find that a preliminary, but convincing, explanation might be the one suggested by Menger in his Investigations, where he writes: The most obvious idea for arriving at understanding of social institutions, of their nature, and of their movement was to explain them as the result of human calculation aimed at their establishment and formation, to attribute them to agreement between people or to acts of positive legislation. This 1 As is well known, further competing accounts to the contractual one can be found, e.g., in classical accounts of the ‘genealogy’ of the ‘polis’, such as the ones suggested by Plato and Aristotle, as well as in non-contractualist thinkers such as Hegel and Marx, and last but not least in anarchist theorists.

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304 Comparative contract law (pragmatic) approach was not adequate to real conditions and was thoroughly unhistorical. It still offered the advantage of interpreting from a common, easily understood point of view all social institutions, both those which are presented to us actually as the result of the common will of socially organized human beings and those in which such origin is not detectable. This is an advantage which will be underestimated by no one who is familiar with scientific works and knows the history of their development. (Menger [1883] 1985: 148)

In other terms, referring to a contractual origin of the state is appealing because it is the most immediate, reductionist, and therefore simple, explanation of social phenomena in that it understands them as a direct outcome of the human ability to shape the environment according to human intentions and will. From this perspective, it could be stated that social institutions, including the state, are intentionally constructed by human beings, in accordance with their cognitive structure and in the service of their goals. This of course implies that human beings are able to univocally detect such goals as well as the means to reach them, by applying their specific and shared faculties, the main one of which is reason. I would add to Menger’s aforementioned statements that the appeal of the contractual paradigm consists in its being the most anthropocentric explanation of the origin of social phenomena, and that therefore it leaves open a number of questions from the very beginning. It is obvious that in order for the contractual paradigm to fully work a clear-cut model of the ‘human being’ is needed, capable of securing that the concrete contract will give birth to the most rational and the best possible configuration of the social institution whose establishment can be considered its object – in this case the state. The aim of this chapter is to queer (to make odd, strange, as well as to give a radical twist to) the contractual paradigm by queering the underpinning model of the human being – that is to say the ‘contractor’ – it takes for granted, never explicitly discussing it, and rather leaving it go unmarked, as it were independent of any cultural, historical and epistemic biases. It is a kind of queering of the modern individual, as it were, in order to show that far from being an abstract and universal notion which could be applied to each and every one of the concrete human individuals, it is on the contrary a very particular construction elaborated by selecting a number of features from a given environment as if they were the only ones to count. Moreover, to anticipate something I will come back to later, the very fact that the model of the ‘human being able to contract’ is only a construction also implies that it cannot help but be exclusive from the outset.

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Queering the contractual paradigm 305

The ultimate goal of my work is to show that, for all of its appeal, the contractual paradigm is not the most adequate theoretical model if we are to think about a more and more inclusive society, since the paradigm is doomed to break down as soon as we try to modify the model of the human being it presupposes, or even simply to consider different features originally excluded from that same model. This means that contemporary political theory, which is performed in a complex and multicultural global environment, should be ready to give up the contractual paradigm altogether as a privileged account of the origin of ‘civil societies’ and to shift to a different theoretical model. And at the end of the day I would also like to suggest, as a byproduct of this brief investigation, that the very notion of ‘contract’ might be radically rethought (queered?) also in the more dedicated field of contract law, moving from the acknowledgement that it is never independent of a particular understanding of the ‘contractor’.

II.

WHO IS ENTITLED TO SIGN THE (ORIGINAL) CONTRACT?

To be sure, the contractual paradigm might be, and has been, subjected to different kinds of objections, criticism and questions (e.g. Riley 1982; Pateman 1985; Hampton 2002, 2007; Richardson 2009). Since the classic accounts of the ‘(social) contract’ (see notably Hobbes [1651] 1998; Locke [1690] 1980; Rousseau [1755] 2002, [1762] 2002) are at the same time kind of founding myths of the ‘modern state’ and theoretical justifications of a newly occurred change in the way of understanding politics, it seems not surprising that they contain a number of inconsistencies. The most relevant of them, as it is well known, lies in the opposition between a ‘state of nature’ and a ‘civil society (state)’, which should be considered as rigidly separated if the (social) contract is to play the role of an epochal event, so to speak, after the occurring of which things will never be as they were ‘before’. However, the fundamental problem in drawing this clear distinction is that there is no possibility of having perfect knowledge of the ways things actually were in the state of nature since the contractualists2 were all already situated within a civil society and therefore cognitively unable to avoid the reference to that society when constructing the model of what was there ‘before’ or 2

Although I know that the terms ‘contractarianism’ and ‘contractualism’ have been considered as meaning different traditions (see, e.g., Mills (2008) 53) I use only the term ‘contractualism’ as a general one.

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‘abstracting from the here and now’ (i.e. the state of nature). This necessarily leads all of them, including modern contractualist authors such as Rawls, to contaminate, as it were, the state of nature with elements coming from the civil society still to be established. This is the reason why I do not find it very useful to focus here on the similarities and differences in such models, trying to show which one of them constitutes the most convincing account of the shift from the state of nature to a civil society/state. I prefer going directly to the root of the problem, as far as I can conceive of it, by stating that the most relevant questions to be posed to any contractual accounts past and present are those relating to the ‘who’ and the ‘how’. The latter question is apparently a trivial one, since the ‘how’ is necessarily constituted by the contract as a ‘neutral’ instrument to reach the goal of exiting the state of nature to enter the realm of civil society as something entirely new. Anyway, this question becomes much less trivial if we consider that an instrument becomes such only if there is someone who chooses it as the most adequate one to reach the envisioned goal, that is to say, if we consider that ultimately the ‘how’ depends on the ‘who’. Even if we remain inside the contractual narratives, we can legitimately presume that the individuals in the state of nature might have chosen different means to establish the state, being an evidence of that also the existence of different possible accounts of its origins. To put it bluntly, I claim that in all of these accounts behind the choice of the contract as the privileged instrument to establish the political body there is a particular model of the human being for whom the contract can and must be the preferred instrument to reach that goal. Just in this sense it can be stated that the ‘how’ depends on the ‘who’, and that this gives us also some hints as to the particular configuration of that model. But this also means that the core problem to be addressed is not the one concerning the instrument, i.e. that the problem is not primarily the contract as a particular form of interaction between human beings, but the one concerning the configuration of the human being who decides to choose just that instrument and not another one, as if it were a compulsory choice based on that human being’s very nature. Hence, I will not address here the admittedly thorny questions concerning the reasons for the (social) contract or the actual object of such contract, although I readily acknowledge their relevance.3 3 See Mills (2008) 50 ff., who stresses also the complexity of the very term ‘contract’: ‘So the concept has been used in radically different ways – the

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Queering the contractual paradigm 307

Rather, I will address the question concerning who is the subject of the contract, the contractor, especially asking: ‘What model of the human being does the contractual paradigm presuppose as the most adequate one to negotiate, elaborate, agree, write and sign it, so that all the parties can be reasonably sure that the contract will effectively work?’ In fact, the social contract is not a private contract but a public one, in the sense that its particularity lies in the fact that all individuals are theoretically entitled to sign it, although the object of the contract is not an exchange among them, but the establishment of ‘something’ which is put over them, to which they all decide to be subjugated (at least partially). It is therefore crucial that all parties can trust each other (as well as that ‘something’ they establish as the outcome of their agreement), but since in the moment of the contract there is no guarantee altogether, the most reliable idea is that they must be all perfectly ‘equal’, that is to say interchangeable. Therefore the idea of the contract needs a clear model of the human being with which all the signing parties (the single concrete human beings) must be consistent: this model becomes the ‘norm’ to which each and every individual must conform in order to be entitled to sign the contract, or to consent to it (as is the case for future generations). Things being so, it is clear that the model cannot include, from the very beginning, all the concrete individuals who might be theoretically entitled to sign, but only those who fit the model, and this also means that the question concerning the ‘who’ poses itself before the event of the contract, because the possibility to bargain for the conditions of the contract, to elaborate and write it down and to conclude it by signing depends upon the fulfilment of the conditions to be a contractor. So the event of the contract cannot by necessity be one in which all free and equal individuals take part, but only some of them. And this immediately makes clear that what makes the social contract possible is the preliminary exercise of power on the part of some individuals over the others, who are excluded in principle. Freedom and equality have nothing to do with it, if not in the sense that those human individuals who find themselves entitled to sign the contract are to be thought of as free and equal among themselves, but at the expense of all the others. By now it should at least be clear that the model of the human being is a construction entailing the exercise of power, and particularly of the contract as literal, metaphorical, historical, hypothetical, descriptive, prescriptive, prudential, moral, constitutional, civil, regulative ideal, device of representation’ (51).

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308 Comparative contract law

power to exclude.4 From this operation, which already casts a thick shadow on the ability of the contractual paradigm to represent the symbol of freedom, justice and participation for all, as contemporary advocates try to convince us to believe, the figure of the ‘normal’ human being arises, which overlaps with the modern individual. What are the features of such individual? Well, let us state it bluntly: the human being entitled to perform the activities leading to a successful social contract is male, white, Christian, heterosexual and able. In the remaining part of this section I will concentrate on the first three features (male, white, Christian) postponing the discussion of the last two features (heterosexual, able) to the next section, which will more directly refer to the current and future possibilities to queer the contractual paradigm to the extent that we deconstruct it to the ground in order to go beyond it, replacing it with a different ‘model’ of the human being, still to be elaborated, more adequate to the acknowledgement that ‘diversity matters’ for political thinking. Let’s start with the idea that the contractor has to be ‘male’, an idea which is detectable more or less patently in all contract theories,5 and that constitutes the main reason why feminist thinking has subjected the whole of the contractual paradigm to a deep and radical criticism in the last decades. In short, it could be stated that the exclusion of women from the ‘human beings entitled to contract’ is due to the taken-for-granted presupposition that the so-called sexual dimorphism is a ‘rule’ or a ‘law’ of nature. In nature, so the story goes, human bodies come to the world only in two different shapes from the anatomical point of view: some of them are equipped with a penis, whereas some others have no penis, but a vagina (which by the way is a mark of the absence of a penis).6 One relevant by-product of this opinion is that all differently equipped bodies are to be considered ‘errors of nature’, and therefore they do not matter, but the remarkable point for our goal here is that this ‘natural difference’ can constitute the basis for the distinction among two different groups of human beings (females and males, women and men) as well as for the 4 I understand here power as a ‘relation’, rather than a ‘structure’, much in the sense suggested by Michel Foucault, e.g. ([1976] 1998). 5 With the remarkable exception of Hobbes, for whom in the state of nature all individuals are free and equal, including women, although this natural condition does not immediately imply that they are to be considered free and equal as men are in the moment of the contract or in civil society (see also Pateman (1988) 44–52). 6 For a critical discussion of the erroneous idea of a ‘natural’ sexual dimorphism see Fausto-Sterling 2000.

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exercise of the power to exclude on the part of one of such groups (historically males/men), on the basis of the belief that the natural difference in the shape of the body implies a natural difference in faculties, abilities, and so on. As Carol Pateman puts it in her seminal The Sexual Contract, ‘for all the classic writers (except Hobbes), a difference in rationality follows from natural sexual difference’ and this implies that ‘only masculine beings are endowed with the attributes and capacities necessary to enter into contracts, the most important of which is ownership in the person; only men, that is to say, are “individuals”’ (Pateman 1988: 5–6). The point is that ‘contract is seen as the paradigm of free agreement. But women are not born free; women have not natural freedom’ (6), so they cannot become fully entitled contractors like the male human beings. And why is it so? Because the ‘original contract is a sexual-social pact, but the story of the sexual contract has been repressed’ (1). According to Pateman’s very influential position (on which see O’Neill, Lyndon Shanley and Young 2008), coming from the time of second wave feminism before queer theory entered the stage, the social contract could not be thinkable without the sexual contract in that ‘the story of the sexual contract is also about the genesis of political right, and explains why exercise of the right is legitimate – but this story is about political right as patriarchal right or sex-right, the power that men exercise over women’ (1). Such power entails that to exclude female human beings – women – from the number of free and equal individuals entitled to sign the original contract. As a result, it can be stated that ‘the original pact is a sexual as well as a social contract: it is sexual in the sense of patriarchal – that is, the contract establishes men’s political right over women – and also sexual in the sense of establishing orderly access by men to women’s body’ (Pateman 1988: 2). In this sense, it can surely be stated that the social contract is in fact a gendered contract, because only one of the two genders is entitled to sign it and to benefit from it, whereas the other gender (women) can benefit from it only to the extent to which men decide to transfer part of the benefits also to women as their subordinates, and/or to let women participate directly. Now, although this criticism on the part of Pateman, as well as on the part of feminist thinking as a whole, is very useful in unmasking the claims of social contract theory past and present to universality and inclusion, it is far from being flawless, for at least two reasons. The first one is that this kind of criticism implicitly accepts the foundations of the very theory it wants to denounce, namely the existence of two and only two sexes and hence of two and only two genders. In such critical accounts there is no

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space for the differently sexed and gendered subjects – there is no space for the queer subjects – because human beings are thought of as articulated into only two groups. The second reason is that even in such critical accounts males and females, men and women, are conceived of as two homogeneous groups confronting themselves: there is only one kind of sexual contract (generally to be identified with the ‘marriage contract’) whose parties cannot be other individuals than a female and a male, a woman and a man. But in my opinion the strangest thing is that this leads us to overlook an aspect that could be deployed as a very strong theoretical weapon to prove the inconsistency of the model of human being proposed by the social contract theorists. As a matter of fact, the most powerful critical argument is not that all women are excluded from the contract, but that not all men are included as fully legitimated contractors. As masculinity studies are trying to show (e.g. Flood, Kegan Gardiner, Pease and Pringle 2007; Anderson 2009; Aboim 2010; Reeser 2010; Robinson and Hockey 2011), the labels ‘male’ and ‘man’ do not include all possible concrete manifestations of ‘being male/man’, but only some of them, reproducing within the dominant group the very same logic of exclusion (also from the contract and its benefits) which is applied to ‘the Other’ (the female/woman). Therefore, it should not go unnoticed that the original contract is not signed by all men as free and equal human beings, because a great number of them do not satisfy the conditions to be granted the status of a full human being. The roots of this in-group exclusion can be various, for instance the ones I will address in the next section (heterosexuality and ableness), but one of the most patent and influential amongst them was the implicit characterization of the human being that counts as ‘white’ – a feature that can pertain both to women and men. Moving from Pateman’s book, of course with differences, Charles W. Mills (1997) added to the idea of a sexual contract that of a ‘racial contract’, assuming that ‘white supremacy is the unnamed political system that has made the modern world what it is today’ (1). The racial contract is a particular kind of contract that ‘though based on the social contract tradition that has been central to Western political theory, is not a contract between everybody (“we the people”) but between just the people who count, the people who really are people (“we the white people”). So it is a Racial Contract’ (3). The idea of the racial contract moves from ‘three simple claims: the existential claim – white supremacy, both local and global, exists and has existed for many years; the conceptual claim – white supremacy should be thought of as itself a political system; the methodological claim – as a political system, white

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supremacy can illuminatingly be theorized as based on a “contract” between whites, a Racial Contract’ (7). As is obvious, the latter kind of contract cannot be thought of as being stipulated between two free and equal parties (whites and nonwhites) but ‘rather, it is a Contract between those categorized as white over the nonwhites, who are thus the objects rather than the subjects of the agreement’ (12). We could state, then, that the very object of the contract, in this case, is to establish the exclusion of some human beings from the status of possible contractors – and this means from the status of (full) human beings. Mills’ racial contract is a clear instance of the relevance of the question concerning the identification of the correct parties of the original contract, who far from being all individuals are clearly individuated as the result of a selection between all human beings according to some ‘markers’, among them ‘sex’ and ‘race’. Now, the idea that the ‘normal’ human being must be ‘white’ allows for the exclusion not only of all nonwhite women (who are already excluded as women) but also for that of all nonwhite men. In this sense, a nonwhite male/man finds himself in the very same position as women – that of a not-fully-human being – and therefore not entitled to sign the original contract, which in its turn is not simply a contract signed by ‘males’ but a contract that only ‘white males’ are fully entitled to sign. In this sense, I would add that from the viewpoint of the social contract theory the individual labelled as ‘nonwhite male’ might be already considered as a queer human being (if he is considered a human being at all). Although these first two exclusions (women and nonwhite human beings) would surely give much opportunity for further discussion, I must limit myself to the previous very brief remarks and proceed to the last character I address in this section, namely that of being ‘Christian’. By this I do not mean, of course, that the contractor is or should be a ‘believer’, although this might be the case. I only want to stress the fact that, like any theoretical construction, the contractual paradigm arises from, and is inserted in, a cultural context by which it is heavily influenced. In other terms, by ‘Christian’ I understand the (mainstream) cosmology of reference of the contractual paradigm, despite all the differences occurring in time, also and especially in elaborating the model of human being who can sign the original contract. There is surely no need to give evidence of the fact that Christian cosmology has been very influential in shaping fundamental notions of Western political thinking, such as that of a substantially free, equal and independent ‘individual’. Beyond that, what I am suggesting here is that both the very distinction between a state of nature and a civil society, and the construction of the correct model of the ‘civil man’, the ‘modern individual’, and the

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‘citizen’ as opposed to the ‘natural man’ are deeply indebted to Christian cosmology, and especially to the Book of Genesis. All the major classic contract theorists, notably Hobbes (e.g. Thornton 2005), Locke (e.g. Waldron 2002) and Rousseau (e.g. Alberg 2007), independently of their personal beliefs and their different positions towards the historical religious institutions of their times and their theological positions, not only confronted themselves with that cosmology, but were really unable to get rid of it on the way towards the construction of a purely rational account of politics and the political order, from the exclusive viewpoint of the human being. This inability to think about politics and political order outside or beyond Christian cosmology, or at least with reference to different possible cosmologies, surely defeated but not erased by Christianity in the West, is especially clear in questions of ‘race’ and ‘sex’, since the ‘modern civil rational man’ is directly Adam’s heir. And for all the distinctions, rhetorical devices, as well as covert criticism of Christian cosmology, theology and thinking we can find in those classic texts, the fact remains that their authors surely accepted the supremacy of a ‘white man’ that those religious accounts allowed for, as well as the hierarchical descending line ‘God-man-woman-nature’, which is clearly at work also in the newborn civil society/state. Therefore, if we analyse the contractual paradigm by simply de-contextualizing it, as if the reference to Christian cosmology were redundant or very limited, we might be not able to reach the core of the difficulties it poses, consisting mainly in the fact that such paradigm cannot, has no possibility, to emend the original inequalities it implicitly accepts if not by overcoming its very foundation and justification in Christian cosmology. In my opinion, when feminists, like advocates of various ‘social justice theories’, try to rethink the contractual paradigm to include women, ‘nonwhites’, differently sexed and gendered individuals, ‘disabled’7 individuals and so on, they are going wrong, since they seem to think that the solution to a fundamental problem could consist in a practical move: inclusion by means of political decisions enforced by positive rules and laws. But they do not clearly acknowledge that since the paradigm is constructed in order to exclude, if you want to be included you have only two possibilities: either accept the order established by that paradigm and be content with the fact that ‘they’ (the 7

In this article the terms ‘disability’, ‘disabled’ and the like are always given in quotation marks to stress the author’s discomfort and disagreement with such terms.

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dominant men) listen to you and give you (at least partially) what you are asking for; or refuse that same order by refusing its presuppositions, that is to say by overcoming altogether the social contract paradigm. The ultimate outcome of queering the model of the contractor by unmasking its culturally biased character should be just this – overcoming the paradigm to construct something different.

III.

THE IMPOSSIBLE CONTRACTOR: QUEERING COMPULSORY HETEROSEXUALITY AND ABLENESS

In order to be fully entitled to sign the (original social) contract and to benefit from it under the established law a human being must be male, white and Christian, but this is not yet the whole story. It is namely not enough to fulfil these substantial requirements, so to speak, for he also needs to be able to guarantee his active participation in the political institution he is going to establish by means of the contract: in short, he must fulfil the requirement of securing in advance that he will be functional to the political community, by performing what is expected of him as a fully entitled member of the civil society/state. The two most important requirements in order for a man to become such a full member are heterosexuality and able-bodiedness or ableness, to name them in current terms (see Katz 1996; McRuer 2006). Roughly speaking, heterosexuality names the idea that the two permitted sexes are mutually, and only mutually, sexually attracted, whereas able-bodiedness/ableness names the one according to which any concrete human body should conform to the standard physical and psychological configuration considered as the ‘naturally given’, ‘normal’ and therefore ‘correct’ and ‘healthy’ one for an individual of the human species (for a discussion see Monceri 2014). Both of them also hint at a particular understanding of the human being as capable not only of living in a community, but of making it flourish by adding one’s own active contribution in all fields of everyday community life. The main function associated with heterosexuality is surely reproduction. A man must be able to have children, that is to say to give new members to the community in order for it to survive and stay in time. Of course, a corollary performance is to convey the value of heterosexuality to his children, to the extent that the heterosexual principle becomes a prescriptive norm. Hence, heterosexuality gives birth to a heteronormative regime for which heterosexuality becomes compulsory if a man

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wants to remain within the group of free and equal members (on ‘heteronormativity’ see notably Warner 1993). Beyond that, in all contractual accounts, and for all their differences, being a father seems to be something necessary for a man to have an interest in the maintainance of the civil society/state, for he has a responsibility as a father for an enduring well-being of his children within society. So, if we think together the two features of being a male and being heterosexual, the resulting picture is properly that of a father, not of a mere ‘man’, and this immediately evokes the usual picture of the (heterosexual nuclear) ‘family’ as the ‘natural’ basis of human societies. Now, what is interesting in this very sketchy account is that I did not refer to women, that is to say to the heterosexual counterpart of men. As a matter of fact, the discourse concerning ‘fathers and sons’ as representative of ‘the family’ is usual in contractual narratives, reflecting the patriarchal arrangements of modern and contemporary societies. Nonetheless, the ‘second sex’ cannot be totally erased from such accounts, remaining there at least implicitly, and this leads to a substantial difficulty. In order to say that a man is heterosexual, you need to acknowledge that there is another sex, better a differently sexed body, towards which a man should feel a compulsory sexual attraction. In this sense, the feature of heterosexuality already allows women to be included in a picture that otherwise excludes them. On the other hand, the only possible move in order to exclude women from the aforementioned picture would be to opt for homosexuality, that is to say for a sexual attraction between same-sexed bodies. However, this would exclude the possibility of reproduction aimed at maintaining the state, which is of course unthinkable. Therefore, in a sense, the need to include heterosexuality among the features of the contractor allows a rift to enter the model of the (male) human being underpinning the contractual paradigm that cannot be easily fixed. Of course, this might be, and has been, done by means of exercising the ‘power to exclude’, but the very plain fact that you need women in order to reproduce human beings, i.e. that you must be a heterosexual male, has the potential to deconstruct the model from within, as, for instance, feminist theorists have well understood. At this point, however, it becomes necessary to stop discussing the feature of compulsory heterosexuality to briefly address ableness, because the two features are strictly intertwined. In order for a man (or a woman, for that matter) to be allowed to reproduce himself, it is namely necessary that he has been recognized as able to perform such a function, and this immediately shifts the focus to the question of what does it mean for a human body to be ‘able’, and therefore ‘perfectly or at least adequately functional’. Generally speaking, it can be stated that there are

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two fundamental questions generally posed to each and every concrete human body at birth: ‘Is this body male or female?’, and ‘Is this body able or not-able?’, although this second question can be also posed in the following narrower version: ‘Is this body a healthy or an ill one?’ Answering both questions is mandatory on the part of the members of a group/community in order to grant or refuse full membership to the newborn human beings, but I would say that the question concerning ableness is the most relevant one, because it has consequences also for the one concerning the heterosexual performance, so to speak. As a matter of fact, to be declared male or female is not enough in order to be fully entitled to participate in the community as a heterosexual being, that is to say by reproducing yourself, because if you are declared not-able you will not even be entitled to exercise your sexuality altogether just because you are not-able, although you will be inserted within one of the two permitted sex categories (see also Monceri 2012). This immediately introduces a difficulty in the contractual paradigm: can a not-able heterosexual male/man become a full member of the group of free and equal individuals if he cannot become a father, since he is not allowed to exercise his sexuality because of his stated dis-ability? It goes without saying that the answer is ‘no’, and this poses, as we have seen in the case of nonwhite men, the question concerning the position and collocation of ‘disabled’ men as queer individuals within a paradigm that apparently grants exclusive dominance to the group of males/men. But more than this, it can be stated that ableness is perhaps the most important feature of all those I have mentioned as necessary to be a contractor, since being recognized as able by the part of the group is actually what entitles a (male) human being to be a contractor. In fact, the entire range of abilities and faculties to actively participate in ‘civil’ life depends on the original evaluation judgement about a concrete human body as ‘able’. Indeed, I would say that ableness is a feature that cannot fail to be there if a human being is to be recognized as a possible participant in a ‘civil society/state’, whereas the not-able or ‘disabled’ human being is doomed to remain bound to the pre-political ‘state of nature’ – or to the so-called ‘private sphere’, which is more or less the same. Ableness becomes the most original compulsory feature in order to participate in the life of a political community, because each and every human being inserted within it must assure the performance of activities that are all directly linked to the underlying definition of the ‘able human body’. And it cannot be denied, although I cannot address the issue more deeply, that there is more than this, because the ‘disabled body’ (whatever its concrete definition) literally embodies or incorporates the fears of the community to become ‘impure’, to be infected to the extent that the

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‘free and equal members’ might regress to a less-than-human condition. Hence, we can detect here a parallel process that mirrors the one leading from heterosexuality to heteronormativity. Compulsory ableness leads to ableistnormativity (Campbell 2009: 4) as well as to the establishing of ableism as ‘a network of beliefs, processes, and practices that produce a particular kind of self and body (the corporeal standard) that is projected as the perfect, as the species-typical, and, therefore, as essential and fully human’ (Campbell 2005: 127 n. 2). As a matter of fact, in order to prove that you possess all the faculties that are considered necessary to a contractor, among them notably freedom, equality, independence, rationality, property (in the person as well as of external ‘objects’, goods, etc.), you must be recognized as able-bodied on the part of your fellows. If this is not the case, you cannot be accepted as a full participating member of the political community, and will be considerd as kind of a ‘burden’ and as a second-rank human being to be put in chancery. Just in this sense ableness becomes compulsory in order for a male/man to be entitled to partipate on equal terms. Now, the strange thing is that this still, if implicitly, widespread idea is rooted in a picture of the human being as something given once and for all, that is to say as something not subject to change, and this leads to a number of unsolvable difficulties. The first of them is that human life is bounded to time, and that all human bodies are to be considered as simply temporarily able-bodied. The human life-course is such that the body (which of course includes the mind) is doomed to face decay, corruption and deep functional modifications with the passage of time, to the extent that an ‘ageing’ and ‘old’ human body cannot be defined as ‘able’ as the same body in an earlier phase of its duration time, so to speak. This means that in order to fully participate you must be relatively young, that is to say in the phase of your life in which you should possess all the necessary attributes to be considered ‘able’. This is the reason why when (not only) classical contractual theorists think about ‘contractors’, ‘citizens’, and similar figures, the image they end up by evoking is that of a young, healthy (male) human being, who by the way is just in that phase of his life in which he can bear children. But the opposite side of the coin, so to speak, is that children and old people are excluded from this picture, even when they are males/men: should we conclude that (male) children and old people can be considered as queer human beings excluded from entering the role of the contractor? Personally, I think so. Be that as it may, the difficulty remains to find a way to include the same people in different phases of their life, in that those phases imply a different understanding of ableness, and therefore a

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different degree of that legitimate participation, which is however guaranteed to them in principle because they are considered as fully entitled to the role of contractors. Anyway, even if a solution might be found for this first difficulty, there would still be a second one for which a definite solution seems impossible. Human beings, both those recognized as ‘able’ and those labelled as ‘disabled’, live in an uncertain, unforeseeable and dangerous environment, and this has an influence as to the degree to which ableness can be maintained not only through life, but even from moment to moment. In other terms, although you can be born ‘able’, you can become ‘not-able’ or ‘disabled’ later, without any possibility to foresee, control and avoid it. Among the various aspects that could be relevant from this point of view, the most important one for our present discussion of the contractual paradigm, the social contract, and the figure of the contractor is that this circumstance has a heavy impact on the very ability to consent to the contract. How can you commit yourself to be a full participant in the envisioned political community, if you cannot be sure – and therefore you cannot secure to anybody – that you will be able-bodied through all of your life? Indeed, you might become a ‘burden’ or a second-rank human being at any moment, and this would imply that the rest of the free and equal members would have to decide what to do with you. But this is only a particular problem, the more general one being that all the self-appointed contractors are not in a better position than those they exclude because of their ‘inability’, since no one of them can secure that they will be able actually to perform what is expected of them as full members of the civil society/state. The inconsistencies of the contractual paradigm, and especially the exclusion of the so-called ‘disabled’ people, have recently given birth to attempts to revise the conditions and presuppositions of the original social contract, coming from within the same paradigm in its contemporary version more concerned with ‘social justice’. One of those attempts, as is well known, is that offered by Martha Nussbaum moving from a criticism of Rawls’ version of contractual theory, although in the belief that ‘we should not reject Rawls’ theory or any other contractarian theory, but that we should keep working on alternative theories, which may possibly enhance our understanding of justice and enable us to extend those very theories’ (Nussbaum 2007: 25).8 Anyway, this suggestion 8

In this same work, Nussbaum addresses specifically the difficulties posed to the contractual paradigm, including Rawls’ version, by the exclusion of ‘disabled people’, and she tries to find a way to open up the theoretical framework in order

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cannot be received if one considers the previous discussion as consistent and convincing enough to have shown that the difficulties the contractual paradigm has to face come from its anthropological foundations. Hence, if we try to rethink the paradigm in the direction to let it include different features in the model of human being supporting the entire theoretical construction, this proves to be impossible, and we are left with the only possibility to overcome it entirely just because of its inability to take into due account the multiplicity of queer individuals (or ‘subjects’ if you prefer) it must exclude for reasons of internal logical consistency. Indeed, the paradigm is unable even to manage the inclusion of the queer males/men I have previously mentioned (the nonwhite male/man, the ‘disabled’ male/man, male children and old people) and it shows also clear difficulties in fully including women, all the attempts notwithstanding (not only) on the part of feminist theorists. To be sure, it would not be very difficult to show that the same goes for people variously labelled as queer from the viewpoint of their sexual difference, for whom there is no space in the classical accounts as well as in the contemporary ones, if not under the label of ‘disadvantaged people’, ‘minority groups’, ‘identity groups’, and so on. To take just one instance, what role should be envisioned for intersexual individuals (Kitzinger 1999; Hird 2000; Kessler 2002; Preves 2005; Chase 2006; Harper 2007; Karkazis 2008; Holmes 2009), who clearly queer the foundational sex binary ‘male/ female’ upon which the entire contractual paradigm rests? Just as in many other cases, also in this one the fundamental difficulty is that there is no possibility to legitimate the inclusion of a third, fourth, n-th, sex and gender in the model of human being accepted by the contractual paradigm, since this would imply rethinking all of its basic assumptions, first of all those relating to reproduction and family as they are conceived of in a heteronormative regime. It is namely self-evident that speaking about the heterosexuality (or homosexuality and even bisexuality) of an intersexual human body makes no sense. But something similar can be said with reference to other cases, such as those of transexual and transgender people (see for an introduction Stryker and Whittle 2006; on transexuality e.g. Shrage 2009), who not only queer both the sex and gender categories, but also radically deconstruct the very idea that a sexual and/or gender identity does exist in principle and remains the same through life, which is one of the most to let it include not only ‘disabled people’ but also ‘nonhuman animals’. For a brief discussion of this work, in relation to the case of ‘disabled’ individuals see Monceri (2012).

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basic assumptions of queer theory as a whole (e.g. Hall 2003; Sullivan 2003; Wilchins 2004; Giffney and O’Rourke 2009; on legal theory Albertson Fineman, Jackson and Romero 2009). The cases could be multiplied at will, since the real problem is that the contractual paradigm works if and only if its underpinning model of the human being is agreed upon and accepted as such. Therefore, at the end of this necessarily brief and preliminary investigation, my personal conclusion is that the contractual paradigm cannot be all that useful for contemporary political theory, if it intends to cope with the idea that individual diversity matters. There are still underexplored ways to conceive of the political community and its origins, such as, but not limited to, contemporary anarchist and post-anarchist thinking (for an introduction Jun and Wahl 2010; Rousselle and Evren 2011; Daring, Rogue, Shannon and Volcano 2012; Jun 2012; Kinna and Evren 2013). It may surely be that they can value more diversified, open, flexible, and bottom-up theoretical models, also by taking under due consideration the fact that in order to attain a really inclusive society we have to construct, to the extent to which we need one, a more adequate model of the human being than that offered by the contractual paradigm.

BIBLIOGRAPHY Aboim, S. (2010) Plural Masculinities: The Remaking of the Self in Private Life. Farnham and Burlington, VT: Ashgate Alberg, J. (2007) A Reinterpretation of Rousseau: A Religious System. Basingstoke: Palgrave Macmillan Albertson Fineman, M., Jackson, J.E. and Romero, A.P. (eds) (2009) Feminist and Queer Legal Theory: Intimate Encounters, Uncomfortable Conversations. Farnham and Burlington, VT: Ashgate Anderson, E. (2009) Inclusive Masculinity: The Changing Nature of Masculinities. New York and London: Routledge Campbell, F.K. (2005) ‘Legislating Disability: Negative Ontologies and the Government of Legal Identities’ in S. Tremain (ed.), Foucault and the Government of Disability. Ann Arbor, MI: University of Michigan Press, 108–30 Campbell, F.K. (2009) Contours of Ableism: The Production of Disability and Ableness. Basingstoke: Palgrave Macmillan Chase, C. (2006) ‘Hermaphrodites with Attitude: Mapping the Emergence of Intersex Political Activism’ in S. Stryker and S. Whittle (eds), The Transgender Studies Reader. New York and London: Routledge, 300–314 Daring, C.B., Rogue, J., Shannon, D. and Volcano, A. (eds) (2012) Queering Anarchism: Addressing and Undressing Power and Desire. Edinburgh, Oakland, VA and Baltimore, MD: AK Press Fausto-Sterling, A. (2000) Sexing the Body: Gender Politics and the Construction of Sexuality. New York: Basic Books Flood, M., Kegan Gardiner J., Pease, B. and Pringle, K. (eds) (2007) International Encyclopedia of Men and Masculinities. London and New York: Routledge

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320 Comparative contract law Foucault, M. ([1976] 1998) The Will to Knowledge: The History of Sexuality. London: Penguin, vol. I Giffney, N. and O’Rourke, M. (eds) (2009), The Ashgate Research Companion to Queer Theory. Farnham and Burlington, VT: Ashgate Hall, D.E. (2003) Queer Theories. Basingstoke: Palgrave Macmillan Hampton, J. (2002) ‘Feminist Contractarianism’ in L.M. Antony and C. Witt (eds), A Mind of One’s Own: Feminist Essays on Reason and Objectivity. Boulder, CO: Westview Press, 337–68, 2nd edn Hampton, J. (2007) The Intrinsic Worth of Persons: Contractarianism in Moral and Political Philosophy, D. Farnham (ed.). Cambridge: Cambridge University Press Harper, C. (2007) Intersex. Oxford and New York: Berg Hird, M.J. (2000) ‘Gender’s Nature: Intersexuality, Transsexualism and the “Sex”/ “Gender” Binary’, 1(3) Feminist Theory 347–64 Hirschmann, N.J. (2008) Gender, Class, and Freedom in Modern Political Theory. Princeton, NJ and Oxford: Princeton University Press Hobbes, T. ([1651] 1998) Leviathan, Introduction and Notes by J.C.A. Gaskin (ed.). Oxford and New York: Oxford University Press Holmes, M. (ed.) (2009) Critical Intersex. Farnham and Burlington, VT: Ashgate Jun, N. (2012) Anarchism and Political Modernity. New York and London: Continuum Jun, N.J. and Wahl, S. (eds) (2010) New Perspectives on Anarchism. Lanham, MD: Lexington Books Karkazis, K. (2008) Fixing Sex: Intersex, Medical Authority, and Lived Experience. Durham and London: Duke University Press Katz, J. (1996) The Invention of Heterosexuality. New York: Plume Kessler, S.J. (2002) Lessons from the Intersexed. New Brunswick, NJ and London: Rutgers University Press Kinna, R. and Evren, S. (eds) (2013) ‘Blasting the Canon’, special issue, 1 Anarchist Development in Cultural Studies Kitzinger, C. (1999) ‘Intersexuality: Deconstructing the Sex/Gender Binary’, 9(4) Feminism and Psychology 493–98 Locke, J. ([1690] 1980), Second Treatise of Government, with an Introduction by C.B. Macpherson (ed.). Indianapolis, IN and Cambridge: Hackett Publishing Company McRuer, R. (2006) Crip Theory: Cultural Signs of Queerness and Disability. New York: New York University Press Menger, C. ([1883] 1985) Investigations into the Method of the Social Sciences with Special Reference to Economics, L. Schneider (ed.). New York and London: New York University Press Mills, C.W. (1997) The Racial Contract. Ithaca, NY and London: Cornell University Press Mills, C.W. (2008) ‘The Domination Contract’ in D.I. O’Neill, M. Lyndon Shanley and I.M. Young (eds), Illusion of Consent: Engaging with Carol Pateman. University Park, PA: Pennsylvania State University Press, 49–74 Monceri, F. (2012) ‘Citizenship on Trial: “Disability” and the Borders of Gender’, 1(2) AG About Gender: International Journal of Gender Studies 51–72, available at www.aboutgender.unige.it/ojs Monceri, F. (2014) ‘The Nature of the “Ruling Body”: Embodiment, Ableism and Normalcy’, 34(1) Teoria, thematic issue on Ripensare la ‘natura’/Rethinking ‘Nature’, F. Monceri (guest ed.), 183–200 Nussbaum, M.C. (2007) Frontiers of Justice: Disability Nationality Species Membership. Cambridge, MA and London: Belknap Press O’Neill, D.I., Lyndon Shanley, M. and Young, I.M. (eds) (2008) Illusion of Consent: Engaging with Carol Pateman. University Park, PA: Pennsylvania State University Press Pateman, C. (1985) The Problem of Political Obligation: A Critique of Liberal Theory. Berkeley, CA and Los Angeles, CA: University of California Press

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Queering the contractual paradigm 321 Pateman, C. (1988) The Sexual Contract. Cambridge: Polity Press Preves, S.E. (2005) Intersex and Identity: The Contested Identity. New Brunswick, NJ and London: Rutgers University Press Rawls, J. ([1971] 1999) A Theory of Justice. Cambridge, MA: Belknap Press, rev. edn Reeser, T.W. (2010) Masculinities in Theory: An Introduction. Chichester: WileyBlackwell Richardson, J. (2009) The Classic Social Contractarians: Critical Perspectives from Contemporary Feminist Philosophy and Law: Farnham and Burlington, VT: Ashgate Riley, P. (1982) Will and Political Legitimacy: A Critical Exposition of Social Contract Theory in Hobbes, Locke, Rousseau, Kant, and Hegel. Cambridge, MA and London: Harvard University Press Robinson, V. and Hockey, J. (2011) Masculinities in Transition. Basingstoke and New York: Palgrave Macmillan Rousseau, J.J. ([1755] 2002) ‘The Second Discourse: Discourse on the Origin and Foundations of Inequality Among Mankind’ in The Social Contract and the First and Second Discourses, with an Introduction by S. Dunn (ed.). New Haven, CT and London: Yale University Press Rousseau, J.J. ([1762] 2002) The Social Contract and the First and Second Discourses, with an Introduction by S. Dunn (ed.). New Haven, CT and London: Yale University Press Rousselle, D. and Evren, S (eds) (2011) Post-Anarchism: A Reader. London and New York: Pluto Press Shrage, L.J. (ed.) (2009) ‘You’ve Changed’: Sex Reassignment and Personal Identity. Oxford and New York: Oxford University Press Stryker, S. and Whittle, S. (eds) (2006) The Transgender Studies Reader. New York and London: Routledge Sullivan, N. (2003) A Critical Introduction to Queer Theory. Edinburgh: Edinburgh University Press Thornton, H. (2005) State of Nature or Eden? Thomas Hobbes and His Contemporaries on the Natural Condition of Human Beings. Rochester, NY: University of Rochester Press Waldron, J. (2002) God, Locke, and Equality: Christian Foundations of John Locke’s Political Thought. Cambridge: Cambridge University Press Warner, M. (1993) ‘Introduction’ in M. Warner (ed.), Fear of a Queer Planet: Queer Politics and Social Theory. Minneapolis, MN and London: University of Minnesota Press, vii–xxxi Wilchins, R. (2004) Queer Theory, Gender Theory: An Instant Primer. Los Angeles, CA: Alyson Books

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14. Contracts in literature: from Doctor Faustus to vampires Daniela Carpi

According to conventional contract law, the formation of a valid agreement ordinarily involves an offer, an acceptance, and consideration. The former two elements typically take place through spoken or written language: an offeror proposes to do something in exchange for something of value to be given by an offeree. The latter may then accept the offer, reject it, or make a counteroffer.1

This definition of contract makes a distinction between a promise and an offer: a promise encompasses a stronger mode of commitment than an offer. From a legal perspective we may say that a contract is a juridical act which has a social-economic function. It implies a subjective will and is the manifestation of an individual’s private autonomy. The contract is the summa of different subjective wills that are structured according to a formula defined by the state. The contract marks the relational character of legal rights and exemplifies social relationships within the modern world. The form of the contract allows people to overcome any juridical limitation through the dialectics of single wills. Anything can fall under the category of contract apart from what would encroach upon one’s reason, freedom and dignity. As the Latin word indicates, ‘contract’ derives from ‘contractus’, a drawing together of two or more parties. Contractual obligation starts with the acceptance by word or action of an offer. Certain requirements must be satisfied for the formation of a legally binding contract. First, there must be an intention to contract. Second, the parties must have legal capacity to contract. Third, it is necessary to comply with certain legal formalities. Fourth, there must usually be ‘consideration’. Fifth, the purpose of the contract must not be illegal. Literary works have often dealt with contracts, which have been at the core of many plots. The type of contracts I will take into consideration as diachronical examples of this contractual proposition extend from the Renaissance to the end of the Victorian era: they range from an immoral 1

Schane (2012).

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contract, invalid in itself, to the interpretation of the text of a contract, to a verbal contract between two persons establishing a marriage agreement, to a contract for the selling of a mansion that will give a person legal existence. These examples do not intend to exhaust the various facets offered by literature as far as contracts are concerned; instead they attempt to demonstrate that contracts are one of the many elements that form the basis for the law-and-literature comparison.

I.

IMMORAL CONTRACT IN MARLOWE’S DOCTOR FAUSTUS

Marlowe’s Doctor Faustus brings together the fields of law and art at the most crucial point in the main character’s human and super-human dealings: his stipulation of a contract with the devil. The text moves between two worlds, the legal and the artistic, bringing them to a crisis. The one should emphasize the other. But in fact stress is placed in both cases upon careful analysis of language, upon the critical interpretation of the medieval sciences of Trivium and Quadrivium; thus the legal and religious authority with which these sciences were regarded during the Middle Ages is thwarted.2 This is indicative of a move from uncritical and fideistic acceptance (also under the influence of the general ideas of the Renaissance which would then lead to the experimentalist philosophy of Bacon) to an analytical and critical approach that eventually ended with the vanquishing of certain Truths: Settle thy studies, Faustus, and begin To sound the depth of what thou wilt profess.3

The turning point of this discourse consists exactly in the act of signing the pact, which seals the need for a move from an oral contractual form to a written form, in order to give greater validity to the negotiations. The legal and literary discourses both become performative, proclaiming the impossibility of attaining Truth. Furthermore, they both proclaim their verbal and rhetorical value, due to the attention paid to the main terms of the contract. That the authority of law will be challenged is foretold in the opening monologue delivered by Faustus. He carries out a point by point examination of the terms of medieval knowledge, which bring together 2 3

See Carpi (2009). Marlowe (1969) I, i, 1–2.

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law and literature, medicine and the art of rhetoric, science and the humanities: Sweet Analytics, ‘tis thou hast ravished me. Bene disserere est finis logices … Affords this art no greater miracle? … Where is Justinian? Si una eademque res legatur duobus, Alter rem, alter valorem rei, etc. A petty case of paltry legacies. … This study fits a mercenary drudge, Who aims at nothing but external trash, Too servile and illiberal for me. (I, i, 6–36)

These two quotations emphasize the fundamental connection between the art of rhetoric and the legal code, which both fall under Faustus’ accusation of being trivial and unsatisfactory. From the play’s very start the critical comparison between law and literature is set. Where medieval man saw moral and juridical stability, Faustus sees defeat by mortality, mercenariness and self-interest (lawyers as moneygrubbers and merchants), broadening of meaning (through the art of rhetoric), futility. He brings to light the limited nature of human power, the limits of man’s influence on his own destiny and on his own power. In short, accepted knowledge is suddenly seen as limited and unsatisfying, and this crisis is provoked by the art of rhetoric. The same ambiguity and the same dialectical conflict between certainty and uncertainty, truth and falsity, reappears as central to drawing up the written contract. In fact Faustus turns to the devil in his need to ‘resolve me of all ambiguities’ (I, i, 79): his search for absolute truth involves the deconstruction of all accepted knowledge. Writing becomes the means to solidify and reify that which cannot have solidity, and therefore becomes itself a symptom of corruption. The emblematic image of Faustus at the beginning of the play, engrossed in the books in his library, alone before the written word, already conveys the idea of damnation and claustrophobia. The written word is seen as a symptom of departing from the ‘straight and narrow path’, of a splitting, and of a search for certainty that has vanished into nothing. The written contract emphasizes this hinting to the demonic value of writing, in an attempt to seal a definitive move away from God and the Holy Scriptures (the only writings with the right to

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exist as such). Within the text, law is immediately associated with its nullification, with its power to broaden Truth rhetorically. Let us analyze the terms of the agreement: Mephistopheles asks Faustus to ‘bequeath’ his soul and then asks for a ‘deed of gift’: Faustus, stab thy arm courageously And bind thy soul, that at some certain day Great Lucifer may claim as his own … … thou must write it in manner of a deed of gift. (I, v, 48–59) Consummatum est: this bill is ended And Faustus has bequeathed his soul to Lucifer. (I, v, 73–74)

Though different from the legal point of view (bequeathing entails inheritance, while deed and gift require a pact between living persons), they both share free will: this is to say that a deed of gift is valid only if the individual who is contracting the legal deed is not forced to do so. A contract under seal is called a deed or a special contract. A document becomes a deed if it is signed, sealed (Faustus’ blood) and delivered. Delivery is largely a matter of intention and a deed may be delivered even though it remains in the possession of the maker. When a deed is signed, sealed and delivered it is executed. An escrow is a deed executed subject to a condition that it is not to become operative until a certain contingency is satisfied, for example, the occurrence of a certain event or expiration of a period of time. This last element is patently present in the play, where Faustus bequeaths his soul to Mephistopheles at the expiration date of 24 years. In the text we notice that the terms ‘bequeath’ and ‘deed of gift’ are used interchangeably: therefore the legal conditions of a testament and of a deed of gift are often interchangeable. In fact, the contract with the devil is both a sort of living will and the actual selling of an object. What is particular is that Mephistopheles asks for securities: why this request? We immediately get the impression that Mephistopheles is trying to fortify a bond which is intrinsically invalid, that what we are facing is an illegal contract, meaning that Faustus could have broken it at any time and set himself free. In fact, in English law and even more so in Roman law, which Renaissance humanists so admired (in the very opening of the play Faustus mentions the Justinian Code), immoral contracts are not binding: this is exactly the point where law and theology converge. Underscored is our conviction that Faustus is not damned by the devil: instead he is his own tempter. An educated person such as Faustus could not have been unaware of this legal principle. Moreover, the security is imposed and therefore is not legally valid.

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In a transfer of property one can sell what one owns, but an individual does not own his soul. This principle holds particularly true in the Renaissance period, when religious faith still prevailed. That is to say, if Faustus is foiled in his worldly aspirations because he does not obtain what he seeks, he is equally foiled by the parody of his legal contract. Another element which makes the pact invalid is the condition required by Faustus: he wants to be ‘a spirit in form and substance’. This demand is impossible to obtain. A contract contra bonos mores is unenforceable. Marlowe compares the ‘meaning’ of law to the eschatological perspective of all humanity, but this view does not seem to him to have an acceptable basis. The notion of the instrumentality of law emerges right from the opening monologue, as does diffidence towards jurists, seen as ‘servile’ and ‘illiberal’. Faustus sees the study of law as a ‘mercenary drudgery’. The analysis of civil law is followed by that of divine law, canonical law, moral law. The two different laws are associated with the common notion of stipendium: if law is mercenary because lawyers are money-grubbers, moral law regards stipendium in the same way (‘stipendium peccati mors est’): in both cases we are basically dealing with a commercial agreement, a contract of sale that, in this instance, involves also moral law. The two events, legal and religious, have precepts and rules in common, pacts and payments, and thus moral law takes on the connotations of a mercantile transaction. Pessimism over the human condition, doomed to die on one hand, and to sin, or spiritual death, on the other hand, causes Faustus to see the two branches in a common light, negative and mercenary, in a denigration of the Christian doctrine of free will. Faustus’ analysis starts with a quotation from Justinian law. He puts it into context (testamentary law, Justinian corpus juris) and interprets it by creating a critical parallel co-text (‘a petty case of paltry legacies’): all these elements converge in a cognitive purpose (the search for an absolute that provides universal justice and truth) that is judged a failure. Therefore, in this part of the monologue, Faustus acts as the interpreter of the law, casting doubt upon its validity. What was a written code, passed down to provide a juridical basis for certainty, is deconstructed, shedding light on its vacuity. The resulting social foundation is therefore an essentially financial one, where everything is bought and sold, both death (as a result of sin) and the action of the jurist. An aspect worthy of note is the way Faustus examines legal texts: a passage from Justinian law and a passage from Jerome’s Bible, thus putting legal code alongside religious ethics from the very start: When all is done Divinity is best. Jerome’s Bible! Faustus, view it well. (I, i, 36–37)

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The strength of law lies in its coercive value, but that effect can only be obtained when its own rationality and linearity are put into play. Thus law is based on a desire for legitimacy, and it is here that the need arises for a contract to sell Faustus’ soul: to make the negotiations official, normative and coercive, in order for their performative nature to be made certain. Yet the paradox of this contract lies not only in the fact that one cannot sell what one does not possess, but also in its uncertain, non-binding effects. Faustus’ first reaction is to waver, thus demonstrating that the pact can be violated: the only consequence would be physical torture by the demons (something deeply feared by Faustus). The pact could not, however, be spiritually binding in any way. The possibility of its automatic settlement recurs constantly throughout the text. On one hand, a contract has been stipulated that should be binding, where its written form would provide the guarantee, but on the other hand, paradoxically, that pact contemplates its own violation. The contradiction is irreducible: Literature’s ‘negative capability’ permits it to hold paradox in abeyance long enough for it to intuit the paradox’s irreducibility.4

In the play, Faustus adopts the art of self-persuasion. Through rhetorical devices and dialectical arguments he convinces himself of the worth of his ambitions. He therefore acts as his own lawyer, employing legal and philosophical disquisitions together with elements of passion. Passion should, however, be kept in check in the attempt to reach mathematical objectivity when searching for truth. The art of rhetoric is used to establish legal certainty on grounds that are not legal. Mephistopheles wants ‘securities’, and the hurry with which he asks Faustus to sign the pact underlines the fine line separating damnation from salvation. They both seem to harbor the same doubts and distress; thus we can understand the devil’s attempt to give legal certainty, at any rate, to the sale: from the request for ‘securities’ to that of the legal form of a ‘deed of gift’. Yet, for the duration of the contract, the knowledge of its worthlessness and of the incessant risk that Faustus will repent, thus nullifying the validity of the written contract, cause Mephistopheles to stay constantly on his guard, watching for any possible signs of collapse on the part of Faustus. Were the pact truly legal and binding, such precautions would be unnecessary. Faustus instead seems to assign the written pact all responsibility for his actions to come, using it as an alibi for the choices he makes. He threatens to annul the 4

Joshino (1998).

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contract only if Mephistopheles were not to stick to the contract, meaning in case he did not obey every whim of Faustus: Here Mephistopheles, receive this scroll, A deed of gift, of body and soul; But yet conditionally, that thou perform All covenants and articles between us both. (I, v, 88–91)

The drafting of the contract is quite peculiar. While the notary public did not exist as an official and public figure before the nineteenth century, the office was nonetheless in use and played a central role in jurisdiction over essential aspects of English law (such as weddings and divorce, proof and application of last wills and testaments, disputes over ecclesiastical duties). Furthermore, the notary figure worked in conjunction with the Church of England. Generally speaking, there was no way to give a private instrument the same status as a public document. The common law approach to documents is a reflection of a general attitude towards proof. Publicity was preferred to secrecy, as oral proof was preferred to documentary proof. In fact, common law trials were held before juries of laymen, and oral testimony was preferred over written documents which could have proved difficult to read. Transfers of property titles were in fact carried out through a public ceremony, the so-called ‘livery of seisin’. Acts bearing a seal were an alternative to a ‘livery of seisin’. In Doctor Faustus the so-called transfer of ownership of the soul, or the testamentary document, is negotiated through a written contract. The reason for this may have been to emphasize both the learnedness of the contracting parties as well as the need to give documental soundness to something that was fundamentally illegitimate. Its illegitimate nature is also emphasized by the fact that there is no public official present to certify the validity of the document: the affixed seal is represented by the blood of Faustus, almost as if better to symbolize that the object in contention is the vital (spiritual, in this case) lifeblood of the contractor. In case it were challenged, the document, being of an ethical/religious nature, would have been referred to an ecclesiastical court. In those days, the ecclesiastical court would in turn refer it to the notary public (who was granted the exclusive right to authenticate documents for use in ecclesiastical courts). Here the figure of the notary public is not present, thus underscoring another aspect of the dubious authenticity of the contract. In addition, there are not even any witnesses who can certify to the legality and security of the document. The publicity considered necessary in those days, in the absence of an official intermediary to the contract, is lacking. All of these elements place Faustus’ contract in a

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completely illegal, private, and secret sphere (not even his students are aware of it). Doubts are thus raised as to whether the event really happened, suggesting that the negotiation actually occurred within the soul of Faustus, who attempts to give a legal justification for a very personal betrayal of God. Let us consider the passage where, immediately after signing the pact, Faustus sees the inscription ‘Homo fuge’ appear and disappear on his arm, shedding a dubious light on the reality of the written words of the contract itself: My senses are deceived: here’s nothing writ! Oh, yes, I see it plain. Even here is writ. (I, v, 78–79)

In theory, common law dictated that anyone could draw up a legal document, and that its validity had nothing to do with the condition of the writer. Validity instead depended upon the presence of the seal, or on the presence of the contracting parties’ signatures and on the possibility of producing on request witnesses capable of testifying that the document in question had been drawn up as indicated. The notion of a public document valid in itself as a proof, which is characteristic of continental notary acts, was essentially limited to legislative statutes and court statements. All other documents had to be authenticated before a court. But of whom does the court consist in the case of Faustus? Of the devils, represented by Mephistopheles who is, among other things, a contracting party? Mephistopheles is acting on behalf of Beelzebub, but he holds no official proxy: every single element in the transaction is legally very imprecise, so why resort to such a contract, making continual reference to it in order to uphold the details of the negotiation? Common law recognized several basic methods for securing formal validity of private negotiations. The most effective method of securing a contract was to draw it up as an act, a written document that was authenticated in the presence of witnesses and which included seals and the signatures of the contracting parties. In the absence of proof of fraud or falsification, it was difficult for such a document to be judged invalid by a court. In this case, however, where the sale is of something impalpable and insubstantial, where there are no witnesses, no notary public and no publicity, the document is on the brink of questionable legality from the very start, despite its written form which provides a seemingly credible aspect. It is neither a public nor a private document. It has a formal appearance but lacks the official requisites. The document has in fact arisen from an illicit situation. It sells what cannot be sold, and furthermore lacks the official requirements to secure its authenticity.

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The depravity of the contract is made evident by the falseness of the images that arise from it: just think of the succubus in the guise of Helen of Troy, of the trick played on the horse-courser with the false image of the horse, of the semblance of the Seven Deadly Sins who arrive on scene to distract Faustus from his attempt to repent. The struggle between law and images dates back in time: Controversies about images permeate Western law. Their public and overtly political expression in the iconoclastic disputes reveals not only a deep-seated fear but also an ambiguity as to the use of art and of images more generally.5

The famous aphorism from the Renaissance Imago veritas falsa sums up the dual attitude of law towards the use of images, which paradoxically combine truth and lie, blindness and vision. A false contract generates false images, and such images are eidola materialized by the devils to lull Faustus into a dream of omnipotence. The corruption of the sacred word (‘Consummatum est’) is linked to the corruption of the images, which are demonical apparitions. The same word takes on iconic value in the text. Faustus himself, in the very first scenes of the play, is fascinated by the figural power of the signs on the page (‘Lines, circles, scenes, letters and characters; / Ay, these are those that Faustus most desires’), which take on an idolatrous symbolism. Words and images blend into a sensual possibility for contingent and transient corruption, uniting imagistic strength with logic and rhetoric. Moreover, the use of rhetoric, or shall we say the cynical analysis of text and the skillful linguistic devices Faustus employs to convince himself of the rightness of his quest for omnipotence, are signals of an Edenic fall, a separation from the whole: The law arranges, distributes and polices its own image through icons of authority and sovereignty, tradition and fidelity … law has always had a visual policy and understood the importance of the governance of images for the maintenance of the social bond.6

We are dealing with a strange combination of iconoclasm and iconophilia that has always regulated the relations between law and image: legal responses have in fact determined the set of icons and images for every era. In Doctor Faustus, the key points of the damnation are linked to the verb ‘to see’: ‘Oh yes, I see it plain. Even here it is writ Homo Fuge’ (I, 1, 79); ‘See, see where Christ’s blood streams in the firmament’ (V, 2, 156). Damnation of writing accompanies damnation of the images and of 5 6

Douzinas and Nead (1999) 7. Ibid. 9.

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the simulacra of truth they produce. According to the ethics of that time this is the result of an immoral contract: The fear of images, displaced into judicial hermeneutics, becomes the fear of plural meanings and interpretations.7

In reality, a more in depth analysis of the validity of the contract between Faustus and Mephistopheles, aside from any assessment of the actual form of the contract, leads to a series of observations. First, the contract is to be considered as an inter vivos act, though some of its provisions will go into effect after the death of one of the contracting parties. Therefore, it is a post mortem exequendum contract. Yet it is not an act of bequeathal mortis causa, because it also provides for performance of a service on the part of the devil; thus, in exchange for a service to be performed immediately, the property transfer (surrendering of the soul) is deferred post mortem. The written form was employed ad probationem, in order to facilitate its proof in a court of law, but it is certainly not ad validitatem, insofar as it was not imposed by the law. Thus, the freedom of form principle applies. I repeat, though, that aside from issues of formality (such as the absence of the notary and witnesses, and the substitution of a seal with blood, etc.), the real reason why the contract is not valid lies not in the alterity of the good in question (how can I sell something that does not belong to me?), but rather in its violation of morals. In theory, a sales contract for a good belonging to another is possible (clearly not with effects involving transfer of the property) provided both parties are aware of the conditions (otherwise it would qualify as fraud). All judicial systems, however, forbid any and all acts of sale of one’s own body (would it be legal to sell a kidney or a leg to pay off a debt?). This restriction, though sometimes sanctioned by positive legal systems (for example, article 5 of the Italian Civil Code), is actually an immanent principle in all civilized societies. It is thus contra legem, regardless of whether the law directly forbids it or not, because it is, in any case, contra bonos mores. In other words, we are faced with an inherent principle, a fundamental value that cannot be disregarded by any judicial system. If it is forbidden to sell your physical body, a fortiori it is forbidden to sell your soul. Ex turpi causa non oritur actio, therefore the contract could not be enforced by Mephistopheles. We are within the case of a void or voidable contract: a voidable contract is one which exists but can be brought to an end by one party if he so chooses. 7

Ibid. 8.

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The highly learned Faustus-Marlowe was well aware of all this, thus the securities requested by Mephistopheles are just a smokescreen. If the principal contractual obligation is invalid, then the subordinate security obligation is invalid as well (Italian Civil Code, article 1939). Thus, Faustus’ evil contract will find a place suited to it only in an internal court, or, rather, at an ethical level within the relationship between salvation and damnation, above and beyond all legal apparatus. So what was Marlowe, who probably had extensive knowledge of the law, trying to tell us? In my opinion, the stipulation of this contract places emphasis on the self-damnation of the character, who attempts to project his blame externally on documental devices. This play delves into a re-reading of the religious myth of the fall from Eden, that is, through the rejection of God by eating from the tree of knowledge. We are thus led to reconsider the scene where the contract is stipulated, and see it in the light of a devilish modern temptation, even more subtle because it is only paraphrased beneath the shroud of legal certification.

II.

PROBLEM OF INTERPRETATION OF THE CONTRACT IN SHAKESPEARE’S THE MERCHANT OF VENICE

Shakespeare’s The Merchant of Venice rests on a persistent desire for the accomplishing of an interpretation founded in reality: the suitors have to face the necessity of correctly interpreting the signifying value of the caskets in order to conquer their beloved; Portia indulges in a continuous critical analysis of the personalities of the different suitors; Shylock appeals to an application (that he believes univocal) of the law and he clashes with unsuspected interpretative expansions; Bassanio argues about the duplicity of social life, which requires a constantly alert reading to perceive the separation between appearance and reality, ‘shadow’ and ‘substance’.8 Within these different articulations of the theme of interpretation, the key point here is the interpretive perspective on the legal bond and how to apply it in the confrontation between Shylock and Portia as the judge in the court scene. On the one hand, there is trust in the law as the monolithic point of reference, as monument and written code supporting the state, exemplified by Shylock’s invocations to the application of the law: ‘I’ll have my bond’ (3, 3, 5); ‘I stand for judgment’ (4, 1, 103); 8

See Carpi (1994).

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‘I stand here for law’ (4, 1, 142); ‘I crave the law; / The penalty and forfeit of my bond’ (4, 1, 203–4); ‘I stand here on my bond’ (4, 1, 239).9 On the other hand, there are the interpretations of the law itself, its re-constructions, and the ‘traces’ that survive individual applications. The re-enactment of the linguistic differentiation between récit and discours, the surfacing of the legal code as narration, as text to be deconstructed, lies between the law and its re-construction, between an ontological and universal concept and the concept of ‘traces’, of ‘narrative representation’. Interpretation is a fundamental element that links literature to law, as Posner, Boyer, and other critics have maintained: The interpretation of a contract is the process of determining the thoughts that the use of the words therein intended to convey to each other.10

Interpretation is always relative and governed by intention. For instance, whether the purpose of interpreting contracts is to recreate the objectives of the parties or to encourage contracting parties to embody their agreement in a clearly written, comprehensive document, governs the interpretive outcome:11 The interpretive common ground between law and literature is best viewed when law engages society in a concrete example: the written contract.12 [H]owever much the law wishes to have a formal existence, it cannot succeed in doing so, because at any level from the most highly abstract to the most particular and detailed, any specification of what the law is will already be infected by interpretation and will therefore be challengeable.13

The law appealed to by Shylock exists as a ‘deep structure’,14 one which the entire structure of culture tends towards and the solidity of the state rests on: ‘If you deny me, fie upon your law! / there is no force in the decrees of Venice!’ (4, 1, 101–2); ‘Antonio: The Duke cannot deny the course of law: / For the commodity that strangers have / With us in Venice, if it be denied, / Will much impeach the justice of the state …’ (3, 3, 26–29). The law constitutes the supporting element for the safety of the state: to subvert it would mean destabilizing the whole social cosmos. 9 10 11 12 13 14

Shakespeare and Wilson (1969). Boyer (2003) 169, n. 31. Posner (1998) 212, quoted in Boyer (2003) 169. Boyer (2003) 171. Fish (1994) 142–44. Felperin (1990) 152.

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The risks that non-compliance with the law would entail are, in fact, emphasized. Greenblatt’s terms of ‘circulation’ and ‘negotiation’ might be applied to this concept, since the ‘legal code’ seems to be the result of the circulation of de-codifying energy, the effect of an endless negotiation between its deep meaning and its re-readings. Portia initiates a new way of observation and verification, which is in accordance with the scientific method established by Bacon. Law is transformed into a rhetorical place, a script for the law to follow. The new authority of the interpreter is, in fact, rhetoric: the dilation of the law is made possible by a tropological reading of the canon, which brings to the surface the secretum of the text; in this way, the ‘style’ sets itself against the ‘idea’, inscribing the initial discourse within temporality. This new hermeneutical experience posits itself also as aesthetics, that is to say that a new paradigm, based upon a system of metaphors, is created, just as happens in a literary creation. The reading of/compliance with the law becomes an aesthetic experience for Portia. Portia demonstrates a new way of ‘living’ in the law, which entails an interpretative belonging and a possibility of critical articulation. I am applying the term ‘living’ in the sense meant by Vattimo (who, in turn, derives it from Heidegger) from whom I borrow the image of ‘living in a library’: while the knowledge of truth, as real possession of an object through a suitable representation, is represented with the idea of truth as conformity, the truth of living is, rather, the competence of the librarian, who does not completely possess, in a precise act of transparent comprehension, the totality of the content of the books among which he lives15

but who knows where to look. The image of the library, then, dear to Borges and to Ortega Y Gasset, recurs again in Vattimo. In Portia’s case, the knowledge-possession of the object-law materializes in the idea of the librarian-interpreter, who makes an analytical use of the book for a precise act of understanding that is also, in this case, an act of hermeneutical violence. The struggle between Shylock and Portia is a struggle for the act of reading and for correct interpretation; the ethics of the law are indispensable to hermeneutical living and are closely tied to pragmatism. It is a matter of appropriation of content through a suitable representation. 15

Vattimo (1989).

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Interpretation occurs when it posits itself as breaking up with tradition (here represented as the written text of the law). It begins as an anti-foundational act: the truth of the law is presented in terms of project, conformation; its form and its meaning are not any longer bound to the immediate perceptive grasp, and instead they receive a new schematization through interpretive reasoning. The dynamis is realized between the new and the old structure/image; the new sense, thus derived, is central to its intelligibility. We witness the intrusion of doubt: everything is put into question, even that which seems incontrovertible (namely, the certainty of law, the apparently patent meaning of the written contract): the evidence is no longer about the character of Truth, but it is rather about the necessity of a sensation of analytical integration. In philosophical terms, it is a matter of the passage from a principle of non-contradiction to the structure of Being. ‘The truth of the opening is not an object whose cognitive possession is attested by the sensation of evidence, accomplishment and integration’,16 but rather Truth is located in continuous conformation and adjustment. When Portia appears, disguised as a judge, she holds a book in her hands: the book of the written law, the text of which apparently corresponds to the monolithic stability of the law to which Shylock constantly appeals. The book seems to point out the consistency and irreducibility of the code, the certainty of the canon, the Manichean source of any judgment. Portia, in fact, emphasizes its stabilizing power: It must not be, there is no power in Venice Can alter a decree established: ‘Twill be recorded for a precedent And many an error by the same example Will rush into the state. It cannot be. (4, 1, 216–19)

The impossibility of non-compliance with the law is emphasized by the two categorical statements placed at the beginning and at the end of Portia’s speech. All this seems to support Shylock’s request and his just appeal for the application of the ‘bond’. However, even the epistemic and semantic certainty of the text is, little by little, broken down by Portia’s clever use of that same text, undermining the validity of the contract. Indeed, the subsequent act of re-opening the book appears extremely threatening with the words: ‘Thyself shalt see the act: / for, as thou urgest justice, be assured / Thou shalt have justice more than thou desir’st’ (4, 1, 16

Ibid.

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311–14). The written text turns out to be a sharp weapon that might lead to completely unexpected consequences, and hence Shylock’s exclamation: ‘Is that the law?’ underscores the amazement of someone who cannot recognize himself in the new text that interpretation has brought to light. Portia appears as the Ideal Reader, who reads the legal code in an unorthodox way, contemplating the possibility of multiple interpretations, a reader alert to the linguistic fabric of the text, sensitive to the semantic voids left by the grammatical construction of the text itself. Reading is, consequently, the search for a secret code operating from within language; the code is posited as constituting an ideal objectivity within a train of thought that establishes the relativity of the universal message of the written word as its own characterizing element. The mediation of interpretation brings about a sense of discomfort, of dissatisfaction towards the restrictions of the code, which exists as long as it is de-constructed. In this sense, interpretation appears as the trial of writing: the code as grammé is bound to a time out of time, out of phase with the moment of its application; the phoné or the creative re-reading practice employed by Portia emphasizes the distorting materiality of the book. Thus is derived a juxtaposition between faith and critical spirit: on the one hand, there is Shylock with his faith in the power of his own property, in the incontrovertible clarity of the law (hence of the contract), in the loyalty of his daughter; on the other hand, there is the unorthodox interpreter, who renders the certainties in the code useless, highlighting its ambiguities and prompting an analytical and deductive capacity in her suitors. Portia – a direct heir of Bacon’s new experimentalism – observes humankind around her with a highly disenchanted and attentive spirit. Shylock’s defeat, once he is deprived of his supporting structure, points to the wavering of a universe suffering the blows of a new dialectical attitude that is liminally located between writing and its interpretation, between the code and its reading. This shift in the text, from an acritical acceptance of the law to a questioning of law itself, corresponds to a diachronic movement within the legal system. In the sixteenth century, the English legal system, like those in continental Europe (then somewhat similar) was based partly upon the common law, orally transmitted or consolidated in the judges’ decisions (stare decisis). In addition, it relied on the authority of Roman law, drawn from the gloss of medieval commentators, mainly from the school of Bologna, and finally, on the written laws issued by lords or by authorities enjoying such a power. In the light of the evolution of sixteenth/seventeenth-century rationalism, chiefly French, the incongruence of such a system became evident:

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it was a system which presented wide margins of uncertainty. However, a strongly hierarchical and basically stable socio-economic society could endure it. The emerging French bourgeoisie strove to overcome this system; in revolutionary times, and subsequently under the influence of the Napoleonic ideology, a movement arose for a massive codification of current law. The goal of such monumental work was to attain to the absolute ‘certainty of the law’, and to a number of corollaries derived from it, such as a judge-interpreter rather than a legislator, as well as to the completeness of the legal system, which would not have any gaps and would regulate all cases that might eventually arise. Such myths of uniformity could only exist in a socially stable society, which believed in progressive and positivistic principles. The concept itself of ‘certainty of the law’ wavers as soon as ideological certainties, especially gnoseological ones, are fractured because of the prevalence of anti-rationalistic trends; furthermore, it wavers also due to the intensification of the politico-ideological conflict deriving from the assertiveness of the subordinate classes and because of the Marxist faith that considers law not as a value in itself but rather as an ideological superstructure of production relations. This is the actual situation as seen in the development of alternative theories, but it is also the situation presented in The Merchant of Venice. Here we are confronted with the so-called teleological interpretation of the norms; such an interpretation replaces a purely neutral and literary interpretive criterion with one which tries to fulfill the aim of the norm itself, in order to appreciate its possible evolutionary interpretations, on the basis of the developments and changes of the social order. Finally, we reach the so-called alternative interpretation of the law, that is the use of law as source or lever to subvert social relations, as theorized, mainly in the last few years, by the most extremist trends of left-wing jurisprudence. Such a phase of interpretative confusion is announced by older texts, such as The Merchant of Venice, where the concept of codification itself presents some elements of crisis, given the threat of the impossibility of a reductio ad unum of jurisprudence. Shylock is defeated as the reader (of the law) by a stronger reading (that of Portia). The conflict is between ‘a symbolic model of the world (a classical-medieval-Renaissance heritage) and a syntagmatic model of the world, inaugurating the relativism of the modern age’.17 Thus, in The Merchant of Venice, the symbolic social order, with its reference co-ordinates, sets itself against a new episteme, 17

Serpieri (1985).

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conceived as disruption and loss of stable values: both the book and the contract are no longer sources of certainty, but of interpretative relativism. Within an apparently linear structure some threatening ideological contradictions are disclosed: a strong sense of hierarchical order (familial and political: daughter versus father, the law versus its application, Christian versus Jew) is perceived as undermined by disruptive and contrasting forces (the daughter tries to guide the choice of her favorite suitor; Portia invades the masculine sphere disguising herself and becoming a ‘lewd interpreter’ (3, 4, 80); the relativity of law). Everything is pervaded by a strong and foreboding sense of death (in primis, Antonio’s threatened death, then the Jew’s spiritual death). The universe still seems to be regulated by a code (the voice of the dead father who speaks through the ‘scrolls’ contained in the caskets, the written pact and the articles of jurisprudence), but in reality everything is made relative by Portia’s new awareness of her ability to impose her will upon political, legal, and familial power, thanks particularly to her interpretive ability. ‘At stake are the analogous orders – political and ontological – of the microcosm (family, father) and the macrocosm (state, sovereign, nature, reason)’, as Kavanagh states regarding A Midsummer Night’s Dream,18 but the same concept can also be upheld in relation to The Merchant of Venice. The written text of the law, invoked by Shylock as a pharmakon, emerges as the other to the self, that is as poison: Shylock will be annihilated precisely by the use of the law. Justice becomes an unstable sign which exists only as mediation, as witness to a non-ephemeral knowledge which can be falsified precisely because it is written monumentalization. As it transpires in Plato, the writing of law appears as deadly impulse to duplication: The pharmakon is that dangerous supplement that breaks into the very thing that would have liked to do without it yet lets itself at once be breached, roughed up, fulfilled and replaced.19

Interpretation, then, is the sign of a sign, the supplement of a supplement: if writing is already a sign (a reflection of an abstract concept of justice, that is, somehow, directed), interpretation is, even more so, detached from the initial Idea/Logos, an attempt to complete the trace. Law posits itself, not in the absolute form of its Being, but as the ‘determination and effect within a system that is no longer that of 18 19

Kavanagh (1985). Derrida (1972).

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presence but of différance’.20 Interpretation appears as a differential structure, as the image of deferment. The written code already exists in function of its destination, in giving itself up to a hermeneutical interpretation. It becomes dialectic, the place of the founding opposition between being and non-being: the written text is not only posed and considered in its informative elements, but it is also practiced in its dynamic destination. After all, the code has a testamentary character by itself precisely by being in-scription and also due to its intrinsic connection to the absence/disappearance of the author. Portia’s reading of the contract marks the gap between the time when it was drafted and the time when it is re-examined: even the document, then, is bound to the mortal necessity of deviation. Here we find the distinction between the objectual and the operative. Paradoxically, we are in the sphere of a conflict between an ‘ontological hermeneutics of Truth’ and the ‘incontrovertible givenness’ of Truth in the metaphysical tradition.21 In other words, a gap is opened between the notion of Truth (as used by Heidegger to mean ‘conformity’) and hermeneutics, in its rational criticism of the existent (here used as idolum fori). Following Heidegger, one could say that in the hermeneutical dilation of the written bond/code, as employed by Portia, an immediate identification of ‘Being’ with what is nameable without performative contradictions is undone. The law is realized in its reenactment-distortion-acceptance. While Shylock stands for a concept of Truth as conformity (in a scientific and positivistic sense), Portia stands for a concept of Truth as opening (in the sense of a science of the spirit). Portia’s interpretation is given as a ‘poetic’ proposal for new rules, as a hermeneutical activity that achieves new paradigmatic horizons. The renewal of the canon is entrusted to a woman, and for this very reason is doubly disruptive: it is up to her to establish an approach to the real marked by critical spirit, showing new applicative possibilities of the code. The deductive and critical emphasis, brought to light by Portia, is displayed also in her denunciation of the stereotyped linguistic code of love, thus opening a disenchanted gap between the idea and the language, even in courtship. The inanity of the vows proceeds at the same rate as the untrustworthiness of the written law, in a total questioning of any certainty. From a strictly legal perspective we may say that in the contract signed by Antonio and Shylock we find the two important terms that typify a 20 21

Derrida (1974) 25 (my translation). Vattimo (1989) (my translation).

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contract: the conditions (Shylock will give Antonio 3,000 ducats) and the warranties (Antonio guarantees a pound of his own flesh). However, the contract has some implied terms that are not immediately apparent: that is, Antonio’s death. An unexpressed term can be implied only if the court finds that the parties must have intended that term to form part of the contract. It must be a term that goes without saying, a term which, although tacit, formed part of the contract. This is why the Prince takes it for granted that Shylock wanted to take Antonio’s life. Thus, the Prince orders Shylock to break the contract. The breach of the conditions of the contract would give the ‘innocent’ party a choice: Shylock would repudiate the contract in exchange for a much larger sum of money. This is called ‘discharge by breach’. Shylock could affirm the contract and recover damages to compensate him for the breach. But Shylock wants to keep to the terms of the contract also because Antonio signed the bond with his free will: the consent of the parties is necessary for a contract to be enforceable. When the parties contract under a fundamental misapprehension as to a state of affairs or facts forming the basis of the contract, the contract is void. As mentioned earlier, Antonio was well aware of the risks implied in the text, so much so that Bassanio urged him not to sign under such severe terms. However, rectification through equity would have been possible, and this is exactly what Portia and the Duke sustain. For an agreement to be enforceable as a binding contract it must have been the intention of the parties to create a legal relationship. The consensus ad idem falls within this category. The offer made by the offeror to the offeree is the statement of a willingness to be bound on certain specified terms. Kant distinguishes between the juridical and the ethical ratio: the former is projected outwards and is a reasonable norm which serves the function of disciplining human relationships and of establishing a procedure to redress the norm once it has been violated. The latter is independent of circumstances and is addressed inward, toward the soul of the subject. While the former is part of a written code, the latter is abstract and does not refer to a particular situation or a material circumstance. Shylock’s bond would be seen by Kant as tautological: it is the judge’s duty to respect the terms of the bond because the non-respect of this contract would impair the economic-social structure of Venice. However, in Shylock’s case both ratios are called into question: on one hand, the bond does answer the juridical ratio but on the other hand, an ethical redress is required, hence Portia’s demand that Shylock plead for mercy.

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Such discourse on the act of interpretation, which has as its fulcrum the text of the law, branches out into a series of images that converge towards a sense of uncertainty and instability: for example, there is much insistence on the element of ‘disguise’, travesty and social roles. In relation to this, Bassanio’s monologue in Act III, scene II is crucial, since it is wholly centered upon the ‘ornament’, on the exterior gilding which veils society’s inner reality, almost as if social life itself were a code to be de-codified in order to make the secretum emerge. ‘So may the outward shows be least themselves – / The world is still deceived with ornament’ (3, 2, 73–75): Bassanio takes into consideration all sectors of society in order to unveil their hidden meaning, just as Portia applies her analysis to the inner core of the text of the law. Bassanio observes how a pretty exterior aspect would often hide evil, just as religious piety might conceal ‘damned error’, and how the ‘fair ornament’ masks ‘grossness’ and beauty has inside itself the ‘skull’: ‘Thus ornament is but the guiled shore / To a most dangerous sea’ (3, 2, 98–100). Such discourse on ornament proceeds at the same rate as the tropological analysis carried out by Portia in order to show the unexpected face of the law, and for this reason it is always connected to an act of interpretation. Everything is ‘role playing’, a juxtaposition between ‘shadow’ and ‘substance’, ‘truth’ and ‘counterfeit’, and, as it has been pointed out, even amorous words, which seem nothing but a mere veneer for amorous pathos. The image of woman thus appears as an ideal perfection, as a ‘quest’ through the verbal act: the word pursues such an idea of perfection, clashing with its appearance: ‘yet look, how far / The substance of my praise doth wrong this shadow / Doth limp behind the substance’ (3, 2, 128–30). The image of woman emerges as sum of the Good, which has to ratify the different ‘semblances’ as the real ‘As doubtful whether what I see be true, / Until confirmed, signed, ratified by you’ (3, 2, 148–49). We are within a dialectics of signs, whose real significance needs to be perceived beyond the world as a space of inscription, beyond the horizon itself, as a signifying game ruled by the differences between signs, and whose external sign is the trace of an overcoming. The juxtaposition expressed by Bassanio is between the identification (of the hidden) and its overcoming (the movement of the social inscription of signs). The essence-Being of things lies in difference, and upon this difference all textual fabric is organized. Interpreting such signs would mean perceiving the principle of diacriticity as a condition of significance. The ‘presence’ or the ‘entity’ eludes form and that overabundance of ornaments which Plato defines as ‘beyond entity and presence’: everything is a supplementary structure of a system of irreducible differences,

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that is to say that the individuals are not as the others describe them, and law is not as it appears linearly in a text. It is a constant movement within a signifying structure. In this pyrotechnics of ‘semblances’, not only does social behavior turn out to be ‘role playing’, but very often the characters themselves ascribe a role to others, so that in order to penetrate appearances a strong interpretative capacity is once more needed: if Antonio appears to most eyes as the incarnation of honesty and probity, Shylock sees him as having the very same lack of piety that others attribute to Shylock himself. In turn, Shylock, to whom the appellation of ‘devil’ is often attributed, in the end appears as the victim of a situation of social uncertainty which requires an exemplary punishment in an attempt to rescue society’s hierarchical stability. The excess of the punishment itself (the forfeiture of all Shylock’s properties, the loss of his daughter, the elimination of his own racial identity, and the obligation to convert) exposes the kind of danger represented by Shylock: it can be said that he embodies the deeply conservative element within a developing society. Note, for example, the way he becomes the spokesman for traditional values such as stability of the law, hierarchy within family, the solidity and sobriety of his house (‘Let not the sound of shallow foppery enter / My sober house’ (2, 5, 35–36)), all of which are opposed to the new perceptive and critical capacity that has arisen among individuals. Once again, Portia is the emblem of this new empiricism, which branches into a different knowledge of the individual. The ‘I’ builds up its own meaning through observation and reasoning: Portia’s superiority to all the other characters in the play lies precisely in her more subtle deductive capacity and in the fact that her function is also that of stimulating an analogous critical spirit in her suitors. They are given the task of semiologically de-codifying the symbolic meaning of the different caskets: the differential dynamics between Reality and its traces can be located in the re-reading of Plato’s myth of the cave. The interpretative process is also realized, as has been stated, as an aesthetic experience: ‘the reduction in evidence of the object’s givenness’22 becomes a harmonious integration within the social community. Bassanio, momentarily alienated from the social context because of his financial problems, is re-integrated into the community through a correct ethical-aesthetic interpretation, which implies a cognitive-appropriative experience. This is the acceptance of a possible demystification of what seems evident, the school of ‘suspicion’ of which Nietzsche speaks. 22

Ibid.

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The emergence of experimentalism brings about the consummation of a model of Truth based on evidence: the separation between what is immediately perceivable to the senses and the Truth that can be verified only by positioning ourselves on another horizon. The idea of Truth begins to be exalted as a critical function, as a permanent rupture, in a continuous adjustment between sensorial evidence and its verification.

III.

MARRIAGE CONTRACT: SHAKESPEARE’S ROMEO AND JULIET AND JOHN CONGREVE’S THE WAY OF THE WORLD

In the course of the seventeenth century the political debates in England encroached also on the notion of the marriage contract, which rapidly became the basis for liberal arguments about female equality and marriage. The marriage contract had established a relationship of irrevocable hierarchical authority between the parties: The marriage contract involved something more than the consent to marry and might contain stipulations about the terms of the relationship.23

Romeo and Juliet presents a good example of a marriage contract. The theme of the marriage pact can be seen from a legal point of view, that is, we can consider the contractual nature of the promise of marriage, according to which the contract had force of law. Classical Roman law attributed an almost exclusively social relevance to betrothals, following the principle of the freedom to marry. In fact, still today, the free consent to a marriage is an essential requirement for its validity.24 In the first century AD, to declare that one no longer wished to marry was sufficient to break the marriage pact. It was only from the fourth century AD onwards that the ‘sponsales’ began to acquire the contractual status that will characterize them for the following centuries, right up until the time of modern codifications. In fact, in order to confer a stronger value to Christian engagement, the Imperial constitutions began to grant several rights to the betrothed, as far as their reciprocal rights were concerned. The unilateral dissolution of the promise of marriage was punished with monetary sanctions, unless dissolution was for reasons defined as acceptable by the authorities. In that case, restitution of gifts assumed a special value. 23 24

Shanley (1979) 86. Carpi (2008).

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In the later legislation of the Empire, the Christian engagement came to be identified more and more with the arrale one (from arra, the Greek word for ‘deposit’), an Eastern tradition according to which the promise of marriage should go along with the giving of gifts on the part of the future husband (the gift was a kind of warranty for the maintenance of the pact). The tendency to equate sponsalia to marriage, both in terms of consensus and of the subsequent status, increased. Even the love pact between Romeo and Juliet is defined as a ‘contract’: ‘Although I joy in thee, / I have no joy of this contract tonight’.25 The party at the Capulets’ house certainly assumes the status of a marriage negotiation, tantamount to a promise from Capulet that he will grant his daughter’s hand under an exchange based on dowry and gifts. Thus Juliet’s refusal to marry Paris risks her exclusion from the right to succession and to hereditary goods. Sponsalia were included in the dispute about the relation between consummation of the marriage and consent to it. In fact, canonists were debating whether the marriage as a contract could be concluded solo consensu or required the concrete element of the sexual union. This is the distinction between sponsalia de praesenti and sponsalia de futuro. The main characteristic which distinguished the two kinds of sponsalia was the unitas carnis. If, on the one hand, it was argued that consensus facit nuptias, on the other hand, there was also a will to distinguish the cases in which the marriage was real from those in which it had only been planned for the future, that is, a will to distinguish between actual marriage and promise of marriage.26 For centuries the tradition of canonical right, and particularly the influence of Protestantism, have considered engagement as the most important aspect of marriage, reducing the latter to a mere completion of the former. Hence, the fiancé is for Shakespeare a ‘husband on precontract’ (Measure for Measure 4, 2, 75),27 to the extent that the sponsalia could be delegated to a third party by power of attorney, as with any other contract.28 Romeo and Juliet highlights the ambiguity of these two kinds of legality within the marriage contract, since Juliet has already been promised to Paris by her father, who organizes the engagement party. In 25 Shakespeare (1971) 2.1.116. All subsequent references will be to this text, edited by J. Dover Wilson. 26 In the twelfth century, Pope Alexander acknowledged the distinction between verba de praesenti and verba de futuro, recognizing that the latter could be transformed into a real marriage if they were followed by a sexual union. 27 This reference is to the new ‘RSC edition’. Bate and Rasmussen (2007). 28 Oberto (1996) 77. See also De Giorgio and Klapisch-Zuber (1996).

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fact, what initially appears as a carnivalistic ‘feast’ later becomes a ‘solemnity’, a formal marriage proposal. Juliet’s promise to Romeo and its subsequent consummation raise the problem of which of the two is the real marriage. From a Christian perspective, the secret marriage is indeed privileged in the text. In fact, the marriage with Paris would occasion the risk of bigamy. The dispute concerns the pre-eminence of the secular marriage over the religious one, or vice versa. Thus, on the one hand, there is the Church, willing to guarantee free choice to the individual. On the other hand, there is the ambition of families, who consider the arranged marriage to be an important element of political and financial alliance. Once again we are facing a clash between the private and the public spheres, between a private form of order and a social or public one. In the text, the marriage theme underlines precisely this conflict between the two forms of order. The contrast is further emphasized by the fact that, although in that era women actually had the right of veto, it is not respected in this case, given the numerous pressures and threats applied to Juliet.29 In fact, the social relevance and the complexity of marriage derive from its belonging to the institutional sphere as well as to that of customs or social usage. Later, there is yet another shift from the marriage based on the canons of seriousness required by Protestantism30 to the economic/secular marriage. The great pomp of the wedding exalted the symbolic role of the woman: it was her temporary apotheosis and her public triumph, which was then counteracted by future years of obedience and seclusion.31 29 See Horkheimer (1959) 360: ‘the birth of modern civilization emancipated the bourgeois family rather than the individual per se and thus carried within itself a profound antagonism from the very beginning. The family remained essentially a feudal institution based on the principle of “blood” … Man, liberated from serfdom in alien households, became the master in his own. Children, however, for whom the world had been a penitentiary throughout the Middle Ages, continued to be slaves well into the nineteenth century. When the separation of state and society, of political and private life, was completed, direct personal dependence survived in the home.’ 30 ‘This shift of emphasis towards the nuclear family was given powerful support by Reformation theology and practice. The medieval Catholic ideal of chastity … was replaced by the ideal of the conjugal affection. The married state now became the ethical norm for the virtuous Christian.’ Stone (1978) 135. 31 Let us consider The Taming of the Shrew, where one of the strategies for breaking Katharina’s resistance is precisely that of denying her the pomp of the ceremony. In Act 3, scene 2, Petruchio arrives at church without the appropriate clothing and proceeds to deny his wife the wedding breakfast, the first wedding night, and all the rest of the traditional paraphernalia.

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In Romeo and Juliet, there is also another contraposition: that between a private pact (based on civil law of a Roman model, which recognizes full juridical status to the agreements made in order to fulfill an obligation, and which will later become the Anglo-Saxon common law) and the pact endorsed by the religious authority (sacramentum). It is a contraposition between juridical norms and canonical code. Hence, Juliet is bound by both pacts to different contracts, each of which are legally valid. The crucial passage in the text, evidenced by the forms of justice administration, is also revealed by the coexistence between a ‘promise by parole’ (entirely dependent on the will of the contractor, since the law had erased the private exercise of one’s rights) and a ‘promise by deed’ (based on a contract and on a religious ceremony). Juliet is caught in the vice of fidelity to two forms of contract, torn between an agreement stricto iure and one based on bona fide (which is the one forced on her by her father): Because canon law declared marriage a sacrament dependent only upon the consent of the man and woman to be wed, secret marriages – marriages without the presence of parents or other witnesses and even without priests – were legal.32

However, it must be acknowledged that English courts of law, while recognizing the validity of clandestine marriages, also punished such unions. In seventeenth-century Anglo-American contract law, among the promises that were considered binding according to the common law, we should mention ‘a formal acknowledgement by bond under seal, often conditioned upon performance of a promise for which it was a security’, and ‘a simple promise upon consideration, that is, in exchange for an act or for another promise’.33 In the first case, we immediately recall Shylock’s contract in The Merchant of Venice, while the second case can be applied to the twofold promise of marriage in Romeo and Juliet. These theories based on a contract were followed by the seventeenthcentury lawyer Hugo Grotius’ principle of moral force, based on the ethical meaning of the promise. Hence, the validity of marriage came to be based on the free will of the contractors, an element which was definitely not present in the pact between Juliet and Paris. Once again, the text incorporates two completely different approaches: the father’s 32 33

Diefendorf (1987) 669. Pound (1954) 145.

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absolute authority, and the daughter’s free will. According to the medieval canons, the latter was an element of subversion, but in the modern authorities it is an inalienable right.34 Law, however, consists in a constant dialectic between contrasting situations, which mirror the relation between spirit and nature. According to Roscoe Pound, law must be stable but cannot remain static. As far as the legal reality is concerned, there is a need to piece together and to overcome the antinomy between the stability of law, seen as society’s rational, firm and fixed order and its dynamism, mirroring the incessant transformations of needs, such as collective and individual interests, moral requirements and political problems.35 Law, while fulfilling the social need for stability, must also come to terms with the constantly changing requirements of society. Such elements are quite evident in Romeo and Juliet: on the one hand, the medieval concept of private revenge is still present, but on the other hand, its results and historical transformations are questioned. This questioning reveals a concept of law as opus operans rather than opus operatum. The criteria of marriage pacts are placed in the context of a continuing historical development. They are presented as a process in fieri, as a transformation which is still taking place and which reflects an unceasing evolution. Congreve’s The Way of the World (1710) presents an evolution of the concept of the marital contract stemming from the seventeenth-century debates described above. The entire play is centered on problems concerning marriages, valid or invalid, on contracts that may annul existing marriages, impostures and tricks that may favor or work against would-be marriages. Everything is done for the sake of ‘Reputation’, which must in no case be blemished. The whole society is rooted in make-believe, in pretensions and false appearances. Contracts are at its core: 34 ‘[S]erious challenges were already developing to the traditional authority of husbands in the patriarchal family. Moreover, the … demand for the separation of religion from state control accelerated the process by which the divine sanctions for the social hierarchy were undermined. Once they were gone, the way was open, first for a contract theory of the state, and then, by logical analogy, for a contract theory of the family.’ Stone (1978) 340. According to Stone, the most important transformation of the family structure was the gradual freedom from paternal authority, which was made possible by the growing power of the central government. As the state and tribunals granted ever increasing protection to wives and children, a relationship of subordination towards the husband and the father became increasingly weakened. 35 Cesarini Sforza (1963).

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348 Comparative contract law Mrs Fainall: So, if my poor mother is caught in a Contract, you will discover the Imposture betimes; and release her by producing a Certificate of her Gallant’s former Marriage. Mirabell: Yes upon Condition that she consent to my Marriage with her Niece, and surrender the Moiety of her Fortune in her possession.36

Here Mrs Fainall is finding a way out of the possible consequences of a trick through which Mrs Fainall’s mother has been married to Mirabell’s servant disguised as a gentleman. Obviously, such a marriage is invalid in itself, because of the imposture: the woman is marrying somebody who is not what he pretends to be. If fraud can be demonstrated the contract is void. Moreover, one cannot enter a contract sub condicione: one draws up a contract creating a condition of invalidity for oneself so that one may be set free if necessary. This is legally invalid and annuls the contract from the start. The marriage contract becomes the solution to situations of embarrassment, for instance, a woman being impregnated by her lover, and hence her reputation being ruined. A husband answers the necessity for an excuse: he would be ‘sacrificed to the Occasion’ and would provide a good remedy. What emerges is the mercenary side of marriage that can be entered and annulled according to necessity. The fact that the characters themselves speak of ‘Contract’ stresses the business perspective on marriage. The elements of a commercial transaction are evident here: marriage only entails an exchange of favors, a do ut des. The strong sexual undertone of the play is in line with the general atmosphere of Restoration theatre.37 Marriage should not be the end of contrivance and pursuit, but a constant and endless courtship and solicitation on the man’s part, a deferral of favors, a steady play of pursuit and rejection. The enjoyment should be maintained through a pleasurable fatigue and never fall into an assured and codified situation. This credo typical of the comedy of wit or comedy of sex (it depends on the classification) reaches its climax in The Way of the World in the particularly ironic oral contract (or promise), which is at the center of Act IV, scene v. ‘I’ll never marry unless I am first made sure of my Will and Pleasure’ asserts Millamant. The woman lists all the pleasures that marriage would put an end to: faithful solitude, darling contemplation, morning thoughts, indolent slumbers. Definitely, if she agrees to marry Mirabell she wants to keep many privileges: lying in bed in the morning as long as she pleases, the rejection of nauseous 36 37

Congreve (1969) Act II, scene iii, 369. See Carpi (2005).

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terms of endearment (sweetheart, jewel, joy, love), of familiarity and kisses. She refuses to be seen with him in society, at the theatre. ‘Let us be as strange as if we had been marry’d a great while; and as well bred as if we were not marry’d at all’ (The Way of the World, Act V, scene v). But the conditions are not exhausted: Millamant: … liberty to pay and receive Visits to and from whom I please; to write and receive Letters, without Interrogatories or wry Faces on your part; to wear what I please; and chuse Conversation with regard only to my own Taste; to have no Obligation to converse with Wits that I don’t like, because they are your Acquaintance; or to be intimate with Fools, because they may be your Relations. Come to dinner when I please, dine in my Dressing-Room when I’m out of Humour, without giving a reason. To have my Closet inviolate; to be the sole Empress of my Tea-Table, which you must never presume to approach without first asking leave. And lastly wherever I am you shall always knock at the Door before you come in. These articles subscrib’d, if I continue to endure you a little longer, I may by degrees dwindle into a Wife.

This ‘Bill of Fare’ represents the female terms of the Account. But Mirabell also has his own terms to list: Mirabell: In primis, then I covenant that your Acquaintance be general; that you admit no sworn Confident or Intimate of your own Sex; no she Friend to skreen her Affairs under your Countenance and tempt you to make Trial of a mutual Secresie. No Decoy-Duck to wheedle you a fop – scrambling to the play in a Mask … Item, I Article, that you continue to like your own Face as long as I shall … I prohibit all Masks for the Night made of Oil’d-skins.

We may discern a difference in Millamant’s and Mirabell’s ‘provisos’: the former stresses her will for independence and for keeping her identity as a woman; the latter indicates his attempt at still considering his wife as a property to be kept and defended. The request that she should not force herself into squeezed laces if pregnant is a way to secure the safety and health of his progeny, in a concept of marriage as procreation. Moreover, the elements contained in the first part of Mirabell’s conditions aim at a moralization of marriage: marriage must be rooted in fidelity and seriousness. In fact, emplotted in the text of this contract are the Protestant views on marriage that it must start out on the solid grounds of solemnity and mutual acceptance. The message of these curious and even absurd items of the contract reveals an awareness of the serious requirements of a religious marriage, where the man must be ‘tractable and compliant’, and the wife must be faithful and attend to the raising of the

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ensuing children. If the conditions of the agreement are accepted, then the two lovers will proceed to the signing of the deed: Mirabell: Then we’re agreed. Shall I kiss your Hand upon the Contract? And here comes one to be a Witness to the Sealing of the Deed. (The Way of the World, Act V, scene v)

What emerges in this play and in its Bill of Fare is the contractual idea: the only legitimate basis for relationships of super- and sub-ordination is the free consent of the individual. What Millamant requires of Mirabell is a promise which entails a commitment and future obligation, a sort of conditional promise. What Mirabell answers could correspond to an offer: he is still committed to Millamant’s proposal but he becomes obligated to the future performance only upon her acceptance:38 But now precisely because the promisor’s obligation is contingent on the promisee’s willingness to undertake his or her part of the bargain, the promise needs to communicate that desire to the promisor either by performing the requested act or by promising to do so.39

The fact that Mirabell sets up his own conditions for the agreement marks his acceptance, so that the contract can take place through an exchange of promises. The offeree agrees to undertake the requested performance. The conceptual revolution that started in the seventeenth century is best exemplified in the treatment of marriage in literature: In 1640 virtually all writers still spoke of the ‘contractual’ element in marriage as being simply the consent of each party to marry the other. Both man and woman consented to take on the rights and obligations of their respective stations … To contract a marriage was to consent to a status which in its essence was hierarchical and unalterable. By 1690, however, John Locke suggested that if marriage were a ‘contractual’ relationship, the terms of the contract as well as whether or not to enter into the relationship were negotiable. Nothing inherent in the contracting of marriage dictated woman’s subordination to man.40

Notwithstanding Mirabell’s items, that in some way redirect the contract within male domination (his requests tend to show a will to protect his 38 39 40

See Schane (2012). Ibid. 107. Shanley (1979) 79.

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‘property’, that is the woman and the progeny as his private property), the deed marks the signing of the contract as an act of free will and equality on the woman’s part. The contract has become mutual, and not one-directional: also the woman can specify her requests and wants to have them respected. Shortly before the publication of The Way of the World, Pufendorf had asserted that: We presuppose at the outset that by nature all individuals have equal rights, and no one enjoys authority over another, unless it has been secured by an act of himself or the other. For although, as a general thing, the male surpasses the female in strength of body and mind, yet that superiority is of itself far from being capable of giving the former authority over the latter. Therefore, whatever right a man has over a woman, inasmuch as she is his equal, will have to be secured by her consent, or by a just war.41

The contract between Mirabell and Millamant marks exactly this epochal change: the woman can dictate her own terms, even if the man retains the final hierarchical decision. This implies that the marriage contract involves something more than the consent to marry and might contain stipulations about the terms of the relationship. This contractual nature of marriage is very close to Locke’s conclusions: if all beings are free and equal in the state of nature, then when they agree to marry they are free to set whatever terms to their relationship they wish, as long as these are consonant with the procreation and care of children:42 Only by adopting a masculine language of contract (i.e., the staging of marital negotiations in the play’s proviso scene) is Mirabell able to reconcile the seeming conflict between his own desire for authenticity and his partner’s penchant for pretense. By recoding his marriage through the terms of legal contract, Mirabell substitutes the trappings of law for the conventions of theatricality, thereby subordinating the coquettish Millamant and establishing himself as the play’s moral and emotional center.43

The moralization of marriage throughout the Reformation finds in this play a middle ground between the comic aspect of the comedy of wit and the ethical principles bringing a new, more serious attitude: the contract demonstrates a will to ground marriage on solid moral principles of respect and fidelity. 41 42 43

Pufendorf et al. (1934) Book VI, ch. 1, s. 9, 853. See Locke (1884) vol. II, 83, 365. Davis (2011) 520.

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IV.

CONTRACT FOR THE ACQUISITION OF A PROPERTY IN DRACULA: HOW TO ACQUIRE LEGAL PERSONHOOD

A large part of Bram Stoker’s novel Dracula focuses on the intricacies of property relations,44 that is on the social, legal and personal stakes of ownership. Property rights are thematized vis-à-vis human rights: ‘the relationship between property and personhood has commonly been both ignored and taken for granted in legal thought’, asserts Jane Radin.45 Together with Kant, Radin affirms that property is necessary to give full scope to the free will of individuals, who must have control over objects in order to fully constitute themselves as persons. The novel, as a genre, is closely connected to the rise of modern capitalism. In his Second Treatise of Government John Locke asserts that the individual first of all owns himself, that man has a property in his own person (what is defined as possessive individualism). The first sort of property therefore consists in one’s own body. In Dracula’s case the owning of property is his way of attempting to exist as a human being within English culture. In the novel the notion of personal property and the idea of subjectivity are intertwined. But does Dracula possess his body? While trying to exist as a legal persona by becoming the owner of a mansion, Dracula actually does not possess the fundamental element that would give him the status of a Western legal persona, that is, his own body. In fact, for half of the day (the daytime) his body is not under his control; instead he lies inside a coffin at anybody’s mercy. He must defend his undefended body by hiding the coffin and paying people to transport him while he is unconscious. This total weakness is paralleled by superhuman capacities at night-time, thus making his persona inconsequential, while at the same time he shows a longing for an inner coherence and impregnability. The issues of subjectivity and economics come to be intertwined. On the one hand, Dracula owns property and exists because of it, on the other hand, for part of the day, he does not own his own body, which is supposed to represent the basic form of property: Both Hegel and Kant maintained that property is necessary to give individuals fulfillment: man must have control over some number of objects in order to 44 45

See Carpi (2012). Radin (1993) 2.

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In order to constitute himself as a person Dracula needs a connection with objects, in this case ships and houses. At the very beginning of the novel Jonathan Harker, a solicitor in a London law firm, goes to Transylvania to discuss with Count Dracula the selling of a property in London. Together Harker and Dracula peruse the papers concerning the deed of acquisition: ‘with him I went into plans and deeds and figures of all sorts … We went thoroughly into the business of the purchase of the estate at Purfleet … I told him the facts and got his signature to the necessary papers.’47 Here we are witnessing a commercial transaction, a contract for the sale or other disposition of a material property, an act normally supported by a written memorandum (Law of Property Act 1925, section 40 will provide that contracts which are not so executed may not be enforced by court action). The economic transaction that triggers the plot marks an epochal change in the economy of the state. The Napoleonic Code breaks with feudal limitations, with the division into classes, with the concept of patrimony. Being the monument of the age of codification, the Napoleonic Code sets the contract at the center of economic relationships. Civic bourgeois society takes form through the growing contractual autonomy of each single individual: the old order, which was rooted in rigid status codes, and on the fixed roles of the patriarchal family, is superseded. Thus society becomes dynamic, and contractual obligations are at the center of that process. The access to financial resources is no longer mediated through the older rigid economic-social means; the contract becomes the instrument through which the free consensus of the parties can regulate the actual aspects of a modern economy. That is to say that Dracula can aspire to be integrated into the social fabric by buying a mansion and by having recourse to a law firm for the signature on the contract. The contract marks a trust relationship, a willing transaction between subjects based on two elements: an expectation of reciprocity and juridical rightfulness. Dracula pays for the mansion and the law firm reciprocates in the transaction with a pledge of secrecy. Kant in fact portrays modern society as an interchange of willed actions between different subjects endowed with a legal capacity for action. The contract can be enforced by judicial authority, but society cannot have 46 47

Carpi (2005) 132. Stoker (1965) 31–32.

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recourse only to coercion in order to enforce contracts, otherwise the economic system would be constantly obstructed. ‘The mythology of property expresses rootedness and the mythology of contract expresses mutability’:48 Dracula indeed strives to be rooted within Western civilization; in order to attain this goal he has recourse to a contract that transforms his previous situation of outsider into one of insider. Thus there is stability and movement at the same time. This view stems from a traditional ideology of property, the conceptual status quo with its individualist bias. Property is at the intersection between law and economy and appears to be a borderline between social institution and ideological investment. Property suggests a wish for security: it evokes a status and it implies a request for visibility; it entails a psychological perspective which permits each individual to feel secure within society. But what is property? In his Second Treatise of Government (1690) John Locke wrote ‘every Man has a Property in his own Person: thus no Body has any Right to but himself’,49 and C.B. Macpherson, commenting on Locke’s philosophy, states: Its possessive quality is found in its conception of the individual as essentially the proprietor of his own person or capacities … The individual was seen neither as a moral whole, nor as part of a larger social whole, but as an owner of himself.50

If so, Dracula cannot be considered a proprietor, yet he buys and owns and therefore he exists as a legal persona. In the course of the novel the evolution of Dracula’s identity moves from that of the wanderer, given his condition of un-dead, rooted in a place outside history and time (the castle, the snowy wilderness), to that of the new capitalistic man, established in civilized society thanks to his acquisition of a mansion. Dracula tries to become part of Western civilization by his possessions and by acquiring a settled position. It is this symbolic sense of geography and ownership that epitomizes Dracula’s attempt at existing as a legal persona. You are insofar as you possess. This entails also the inclusion of a new type of legal identity for him within the English social system. Dracula is aware of himself as a nobleman, a master and a boyar: he insists on his class position and his place in the social hierarchy. However, in a different country he would be 48 49 50

Radin (1993) 24. Locke (1988). Macpherson (1962) 3.

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a stranger, a ‘no body’. The estate he is buying will allow him to keep his privileges. Moreover, he needs to know the English way of life and the English language so as to merge culturally. Dracula poses a threat within Western society in that he tries to become an intrinsic part of London life by means of his acquisition. The mansion and his personal manipulation of the law (he guides Jonathan Harker’s legal requests, he strives to absorb the subtle details of the legal system) demonstrate that he intends to be a legal persona, in the totality of that meaning, by forcing his way into English civilization. Dracula’s ownership of his Transylvanian castle dates far back in time, it is part of the natural landscape, in the same way as class relationships seem to be: he wants to reproduce his same position as a master within English society as well. Property serves exactly this function. In the novel Dracula’s sense of belonging takes on two different aspects: the jus sanguinis (his mentioning that he has always been a master and a boyar in Transylvania, so he comes from a long established family), and the jus soli (membership according to land ownership, which he wants to obtain by acquiring a mansion in London). His jus sanguinis and jus soli were connected when living in Transylvania, whereas they must be reaffirmed in London as jus soli if he wants to acquire a new legal status: Securing membership status in a given state or region – with its specific level of wealth, degree of stability, and human rights record – is a crucial factor in the determination of life chances.51

Dracula tries to secure membership status by wealth and by a certain stability represented by his mansion. While in Transylvania his territorial membership is secured by the entitlements of his birth rights, in London possession is his only resource. He moves from a situation of inherited property and acknowledged birth rights to the construction of a new legal persona, which is necessary to become part of a different culture. Property is seen as state-enforced relations of entitlement and duties: Dracula is in fact deeply interested in how the legal system works, whether, for example, he can employ just one lawyer or more than one. He realizes that he can exploit the advantages of belonging to his new civilization through the acquisition of legal knowledge. The role of the legal profession in maintaining the authority of law is evident in the text. Dracula thoroughly investigates the workings of the legal profession: 51

Shachar Hirschl (2007) 253.

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356 Comparative contract law There was a certain method in the Count’s inquiries … First he asked me if a man in England might have two solicitors or more. I told him he might have a dozen if he wished, but that it would not be wise to have more than one solicitor engaged in one transaction, as only one could act at a time and that to change would be certain to militate against his interest. He seemed thoroughly to understand, and went on to ask if there would be any practical difficulty in having one man to attend, say, to banking, and another to look after shipping, in case local help were needed in a place far from the home of the banking solicitor.52

Dracula goes on to stress the necessity for a lawyer to serve the interests of his client with undivided attention: this is why for the acquisition of his London house he has chosen a lawyer who does not reside in London, so that ‘no local interest might be served save my own wish only’: ‘as one of London residence might, perhaps, have some purpose of himself, or friend to serve’.53 Dracula insists on his request for secrecy, and therefore on his need to divide the control of his property among different lawyers. At this point Jonathan Harker admits that ‘such is often done by men of business who do not like the whole of their affairs to be known by any one person’.54 Harker is so impressed by Dracula’s questions that he exclaims ‘he would have made a wonderful solicitor’. Dracula is aware that his understanding of the legal system will give him the power to impose himself as a legal person in society. His main purpose is that of protecting his privacy, of not giving any lawyer exclusive power over himself and complete knowledge of his affairs. Property gives him legal rights, but also legal duties. Property creates special relationships among people that can be in rem (rights that are valid against the world) or in personam (valid against a specific set of individuals, the ones with whom one has contracted). The in rem quality provides protection in a collective dimension because it is connected to a system of laws. Therefore, in buying a house Dracula tries to find some protection for himself as an individual facing a collectivity: he wishes to rely upon the recognition of that collectivity. This new identity he is trying to create is validated by property. Property relations create a web of entitlements, one of which is the right to privacy; we are reminded of Jonathan Harker’s description of the characteristics of the newly acquired mansion: seclusion, isolation and protection from trespassers. The ownership of the house therefore grants Dracula some rights and entitlements. 52 53 54

Stoker (1965) 39. Ibid. 39. Ibid. 40.

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Dracula’s interest in the English legal system and its way of functioning is a means of coming to terms with a new reality; it is his way of trying to understand how the specific English social system is constructed and organized. By inquiring into the genesis and practice of the law he wants to learn English social behavior and structure. Since law is one of the cultural elements that are part of historical reality, law contributes to the creation and diffusion of meaning, symbols and language: law is part of the ‘construction, interpretation and negotiation of systems of meaning’.55 If Dracula wants to become part of English society he must come to terms with its legal system, he must know about ‘the production, transmission and reception of the ideas and practices of lawyers in society’.56 However, the novel is rooted in a legal paradox: on one hand, Dracula wants to understand the law in order to better exist as a legal persona; on the other hand, once he exists he uses the law to hide his real essence. It is Harker himself who tells Dracula that gentlemen usually do not like ‘the whole of their affairs to be known by any one person’.57 In order to maintain the secrecy of his affairs, Dracula has chosen a solicitor who does not reside in London. He appreciates the secluded location of his new house: privacy is essential to him. Therefore, property serves the function of transforming Dracula into a legal persona, but it is the law itself that guarantees secrecy and makes his duplicity possible. The law is source both of legal existence and of legal privacy. Dracula exploits the law: the law, if well and aptly used, is a means of protection, secrecy and power. One function of the work of lawyers is to enhance property values. As Dracula makes use of the law to exist as a person and to maintain his privacy, law appears to be enmeshed in secrecy and obscure rituals. Dracula’s recourse to the law is a means of doing away with his monstrosity, because the law cannot permit the exceptional body.58 To return to the theme of the contract, if the civil code stands for the maintenance of a static piece of property, the commercial code stands for innovation and circulation of property, for commercial mediation, speculation. In the case of Dracula’s deed of acquisition we realize how property was circulated in the London of the time:

55 56 57 58

Pue and Sugarman (2003) 12–13. Ibid. 13. Stoker (1965) 40. Punter (1998) 40.

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358 Comparative contract law Traditional liberal theory placed in property ideology (ownership) the aspect of connectedness, and in contract ideology (exchange) the aspect of separability. But because traditional property ideology makes freedom of alienation through contract an essential characteristic of property, the whole ideological system tends towards commodification.59

In the text the particularly symbolic function of the contract of acquisition is marked also by the fact that there is no selling party mentioned: the law firm only acts as go-between but the real owner of the mansion being sold is not mentioned. The function of Jonathan Harker is that of facilitating the efficiency of transaction and investment required by Dracula, to respect his expectations of the function of the law firm (efficiency and secrecy). Both Dracula and the law firm pursue contractual fairness through a large measure of contractual freedom. In the contemporary world, contract law has not yet reached a complete descriptive theory, explaining what the law is, nor a complete normative theory, explaining what the law should be, even if contract theory has become one of the most significant fields in modern microand macro-organization economics. Dracula’s contract in its specified details anticipates the awareness of the need for a precise contract law. However, in the text the contract has the function of marking Dracula’s attack against Western civilization, hence his fundamental requirement for secrecy. The law firm can freely choose the contracting strategies to maximize the efficiency of the terms Dracula requires, that is his existence as a legal persona inside Western civilization. However, the mandatory rules of the contract rest on a misplaced view of the interests of one of the parties: it is not in the interest of the law firm to have such a character as Dracula accepted as an equal in society, for he represents a terrible threat to its survival.

V.

CONCLUSIONS

The types of contracts analysed in this chapter do not attempt to give a strictly juridical overview of the problem, but rather to show how literature revisits the topic of the contract by considering its moral aspects. In fact, all the above examples have focused on how contracts are a means of attaining social identity, or of demonstrating the moral damnation of the characters, or even of showing the social development in the so-called war of the sexes. The contracts in the literary texts I have 59

Radin (1993) 31.

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mentioned suggest a pervasive ethical perspective that can actually take legal terms as their starting point, but that in the end move towards a moral or social judgement of the characters involved. What interests literature is what law can illuminate and how law can be made to act within society at large.

REFERENCES Bate, J. and Rasmussen, E. (eds) (2007) William Shakespeare: Complete Works. Basingstoke: Macmillan Boyer, M.L. (2003) ‘Contract as Text: Interpretive Overlap in Law and Literature’, 12 Southern California Interdisciplinary Law Journal 167–79 Carpi, D. (1994) ‘L’atto dell’interpretazione in The Merchant of Venice’ in M. Tempera, The Merchant of Venice, dal testo alla scena. Bologna: Clueb Carpi, D. (2005) ‘Person and Property in Thomas Middleton’s A Chaste Maid in Cheapside’ in D. Carpi (ed.), Property Law in Renaissance Literature. Frankfurt am Main: Peter Lang, 131 Carpi, D. (2008) ‘Law and its Subversion in Romeo and Juliet’ in G. Watt and P. Raffield (eds), Shakespeare and the Law. Oxford: Hart Publishing, 119 Carpi, D. (2009) ‘Faustus Must “Buy My Service with His Soul”: The Immoral Contract in Dr. Faustus’ in H. Champion (ed.), Droit et Justice dans l’Europe de la Renaissance, Actes réunis par J.-P. Pittion avec la collaboration de St. Geonget. Paris: coll. ‘Le savoir de Mantice’, 81–90 Carpi, D. (2012) ‘A Biojuridical Reading of Dracula’, 6(2) Pólemos, A Journal of Law, Literature and Culture 169–82 Cesarini Sforza, W. (1963) ‘Introduzione’ in R. Pound (ed.), Introduzione alla filosofia del diritto. Florence: Sansoni, xxvii Congreve, W. (1969) The Way of the World. Oxford: Oxford University Press Davis, V. (2011) ‘Dramatizing the Sexual Contract: Congreve and Centlivre’, 51(3) SEL 519–43 De Giorgio, M. and Klapisch-Zuber, C. (1996) Storia del matrimonio. Bari: Laterza Derrida, J. (1972) ‘Plato’s Pharmacy’ in J. Derrida, Dissemination. Chicago, IL: Chicago University Press, 110 Derrida, J. (1974) ‘La differanza’ in (various authors) Scrittura e Rivoluzione. Milan: Mazzotta, 7–38 Diefendorf, B.B. (1987) ‘Family Culture, Renaissance Culture’, 40(4) Renaissance Quarterly 661–81 Douzinas, C. and Nead, L. (eds) (1999) Law and the Image: The Authority of Art and the Aesthetics of Law. Chicago, IL and London: University of Chicago Press Felperin, H. (1990) The Uses of the Canon: Elizabethan Literature and Contemporary Theory. Oxford: Clarendon Press Fish, S. (1994) There’s no Such Thing as Free Speech and It’s a Good Thing Too. New York: Oxford University Press Horkheimer, M. (1959) ‘Authoritarianism and the Family Today’ in R.N. Anshen (ed.), The Family: Its Function and Destiny. New York: Harper, 381–98 Joshino, K. (1998) ‘The Paradox of Vision in Law and Literature’, speech delivered at the Convention on ‘Law and Literature’ held in Rome, October 1998 Kavanagh, J.H. (1985) ‘Shakespeare in Ideology’ in J. Drakakis (ed.), Alternative Shakespeares. London and New York: Routledge, 144–65

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360 Comparative contract law Locke, J. (1884) Two Treatises of Government. London: George Routledge and Sons Locke, J. (1988 [1690]) The Second Treatise of Government in J. Locke and P. Laslett, Two Treatises of Government. Cambridge: Cambridge University Press, 287 Macpherson, C.B. (1962) The Political Theory of Possessive Individualism: Hobbes to Locke. Oxford: Clarendon Press Marlowe, C. (1969) Doctor Faustus in C. Marlowe, The Complete Plays. London: Penguin Oberto, G. (1996) La promessa di matrimonio fra passato e presente. Padova: Cedam Posner, R. (1998) Law and Literature. Cambridge, MA: Harvard University Press Pound, R. (1954) An Introduction to the Philosophy of Law. New Haven, CT: Yale University Press Pue, W.W. and Sugarman, D. (2003) ‘Introduction: Towards a Cultural History of Lawyers’ in W.W. Pue and D. Sugarman (eds), Lawyers and Vampires: Cultural Histories of Legal Professions. Oxford and Portland, OR: Hart, 1 Pufendorf, S., Oldfather, C.H. and Oldfather, W.A. (1934) De Jure Naturae et Gentium Libri Octo [On the Law of Nature and Nations]. Oxford: Clarendon Press Punter, D. (1998) Gothic Pathologies: The Text, the Body and the Law. London: Macmillan Radin, M.J. (1993) Reinterpreting Property. Chicago, IL and London: University of Chicago Press Schane, S. (2012) ‘Contract Formation as a Speech Act’ in P.M. Tiersma and L.M. Solan (eds), The Oxford Handbook of Language and Law. Oxford: Oxford University Press, 100 Serpieri, A. (1985) ‘Reading the Signs: Towards a Semiotics of Shakespearean Drama’ in J. Drakakis (ed.), Alternative Shakespeares. London and New York: Routledge, 119–43 Shachar, A. and Hirschl, R. (2007) ‘Citizenship as Inherited Property’, 3(3) Political Theory 253–87 Shakespeare, W. (1971) Romeo and Juliet. Cambridge: Cambridge University Press Shakespeare, W. and Wilson, J.D. (1969) The Merchant of Venice. Cambridge: Cambridge University Press Shanley, M.L. (1979) ‘Marriage Contract and Social Contract in Seventeenth Century English Political Thought’, 32(1) Western Political Quarterly 79–91 Stoker, B. (1965) Dracula. New York: Signet Stone, L. (1978) The Family, Sex and Marriage in England 1500–1800. London: Weidenfeld and Nicolson Vattimo, G. (ed.) (1989) Filosofia 88. Rome and Bari: Biblioteca di Cultura Laterza

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15. Women and contracts in Angela Carter’s postmodern revision of the fairy tale Sidia Fiorato

I.

FAIRY TALES AND THE LAW

‘[L]aw and narrative are inseparably related’:1 stories define a society’s commitment to the law, they describe, and at the same time ground, the normative world in which a community lives. This reciprocal relationship is clearly exemplified by folk and fairy tales, a genre which has successfully morphed itself to illuminate contingent historical moments by attesting to the cultural mentalities dominant in different periods and by contributing to the codification of social norms. Man, ‘the story telling animal’2 engages in the attempt to understand and portray the world through his stories, a common hermeneutic aim shared by both law and literature.3 As Costantini asserts, the law needs the medium of a corpus for its actualization, which is both a physical corpus of a person who ‘embodies’ the law and a material corpus represented by the book of law;4 however, the law also needs a corpus over which it can exert its authority and control and through which it can perpetuate itself. The people of a community ‘embody’ such corpus in their behavior toward each other and their relationships (personal and/or professional) in everyday life; moreover, the stories of their tradition stage the cultural imagination as a juridical space of action for the law. ‘A legal tradition … includes not only a corpus iuris, but also a language and a mythos – narratives in which the corpus iuris is located by those whose wills act upon it’,5 and also narratives by the addressee of the action of the law. The narratives stage a passage and an interpenetration between Ortung, ‘the constitution of a specific juridical order and its spatial location’, Ordnung ‘the 1 2 3 4 5

Cover (1983) 4. Swift (1983) 62. See Antor (2007). Costantini (2007) 215. Cover (1983) 9.

361

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juridical order trespasses the boundaries of its original locus in order to become the law of the Kingdom’,6 and Kulturordnung,7 the space of culture and cultural imagination. Folk and fairy tales do not openly use legal terms, but many and different legal issues constitute the background of the narratives in a co-presence of a cultural and legal imagination. The legal issues the protagonists have to face in their everyday life engage people’s understanding and sharing of ‘the legitimacy of the law, the extent to which [they] accept it as valid, whether it is rational, providential or simply effective’.8 Folk and fairy tales can therefore be considered among the secondary sources of the law,9 as they stage ‘a narrative understanding’ of people’s ‘political selves, narratives by which they represent their condition and interpret the common life they share’10 within the community. In particular, the tales provide and, at the same time, reflect upon ‘the cultural boundaries within which the reader measures and validates his or her own identity’11 as well as his/her own self-understanding. The tales’ imaginative grasp involves the subjective perception of the law within the depicted social order, yet they also open to the expression of people’s aspirations, needs, dreams and wishes. As reflectors of actual and possible normative behavior, the tales can be considered as socially symbolic acts which can strengthen social bonds or create more viable ones: ‘their aura illuminate[s] the possible fulfillment of utopian longings and wishes’12 mirroring the desire to overcome oppression and change society. For this reason, as Zipes asserts, they have ‘provided the critical measure of how far we are from taking history into our own hands and creating more just societies’.13

II.

ANGELA CARTER’S FAIRY TALES

The postmodern period has submitted the fairy-tale genre to a deep scrutiny, in order to expose the tales’ strong hold on our imaginative minds and reveal them as enculturing tools for a socialized conduct. In 6 7 8 9 10 11 12 13

Costantini (2007) 220 and 180. Möhlenkampf (2007) 236. Ward (1999) 1. Laeverenz (2007) 254. Ward (1999) 5. Zipes (1983) 55. Zipes (1979) 6; Zitzlsperger (2007) 157 and Bacchilega (1997) 7. Zipes (1979) 3.

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particular, Angela Carter considers fairy tales as repositories of common cultural ‘scripts – a collective mythology which naturalizes certain types of behavior’14 through culturally constructed ‘archetypes’, by means of constant repetition and embodiment. From this perspective, women’s social and physical ‘displacement from action in the world is not an unavoidable position but a potent myth’.15 She therefore rewrites the apparently immutable and timeless scripts for archetypal female figures through an active feminist subjectivity; her fairy-tale protagonists are initially presented as socially constrained and enclosed into ancestral settings, but they eventually refuse to subject themselves to social stereotypes and sexist ideologies and finally prevail over them. In this way, she transforms cultural history with ‘acts of fairy-tale archeology that release th[e] stor[ies’] many other voices’.16 Her work differentiates itself from feminist versions of fairy tales which merely operate a reversal of roles and hierarchies but do not question their existence nor the symbolic order they represent and, at the same time, create. In her process of ‘role-breaking and role-making’,17 Carter does not simply point out the shortcomings of the conventional representations of gender, but she also offers different representations and different models which defamiliarize traditional (and unquestioned) frames of reference. Carter sees in fairy tales a means of knowledge and self-knowledge. She inverts the stories’ traditional pattern from instability to a stable identity with a movement that attacks the dominant stability with a situation of apparent instability, which will be finally acknowledged as a new individual condition; in this way, the passive acceptance and embodiment of culturally determined roles is called into question.18 14

Rubinson (2005) 151. Brooke (2004) 68. 16 Bacchilega (1997) 59. Carter’s critical stance can be seen as aligned with the tradition of the French women writers of contes de fées of the end of the seventeenth century, who used the tales for social critique, with particular reference to the institution of forced marriage and the destiny of women in a predominantly male-controlled world. The fairy tales constituted their only means of expression, although masked as fantasy, in a patriarchal context. Moreover, they often included commentaries upon the genre itself. 17 Atwood (2007) 133. 18 See Crunelle-Vanrigh (1998) 116–17: ‘Fairy tales are informed by closure, a movement from change to permanence. Their plots move from an initial, pernicious metamorphosis to a stable identity. That must and will be reached or recaptured. Carter, however, stubbornly moves the other way round, from stability to instability, undermining the closed binary logic of fairy tale and 15

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Carter operates a subversion of the genre from within the genre itself, and investigates its tenets for a deep analysis of the gendered structure of society. Such investigation eventually extends to include the legal sphere and the legal persona of her female protagonists, as well as of her male characters, who in some of her tales are innovatively portrayed as active parts in the refusal of sanctioned social roles.

III.

CONTRACTS AND THEIR TRANSFORMATION IN THE BLOODY CHAMBER

Among the many legal issues that can be identified in fairy tales, contracts are very recurrent; we more often find oral exchanges of promises,19 that is, the posing and acceptance of conditions to gain something between two characters, rather than written documents, but they are nonetheless legally binding and often influence the course of the story and the life of the main protagonist. Angela Carter’s revision of fairy-tale tenets in ‘The Bloody Chamber’, ‘The Courtship of Mr Lyon’ and ‘The Tiger’s Bride’20 is parallel to a revision of the tenets of the different kinds of contract present in the stories, in particular their various aspects and implications, their connection with the definition of the legal status of the parties, and the woman’s position within them in the different phases of the narration. Under English law there is no univocal definition of ‘contract’. As scholars argue: Certain definitions stress the need for the existence of a ‘bargain’, that is to say, an exchange of promised benefits. In other definitions the emphasis is placed on the existence of a ‘promise’. According to those definitions, a contract appears to involve the superimposition of two ‘promises’, rather than any single, all-embracing transaction.21 eventually substituting différance for différence or difference. She takes her reader along the paths of indeterminacy, revelling in a state of never-ending metamorphosis.’ 19 See Blum (2007) 3: ‘“contract” describes a relationship that may not be recorded in a document. As a general rule, a contract does not have to be in writing to be a binding and enforceable legal obligation.’ 20 All the references to these stories will be taken from Carter (2006 [1979]) and indicated by the abbreviations of the titles (respectively BC, CML, TB), followed by the page number. 21 Beale et al. (2002) 3.

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However, the various definitions show varying degrees of two components: the subjective element of intention and the objective element of the role of the law. In general terms, a contract is an exchange of promises or agreement between parties that creates and defines legal obligations between them. The main elements of a contract are a meeting of the minds, i.e., mutual consent, in that the parties to the contract must have a mutual understanding of what the contract covers; offer and acceptance; mutual consideration,22 i.e., the mutual exchange of something of value; the performance or delivery of the action contemplated by the contract; good faith. Contract law is based on the Latin phrase pacta sunt servanda (pacts must be kept); Contracts [are] sources of obligations. The basic principle which the law of contract seeks to enforce is that a person who makes a promise to another ought to keep this promise. Each promise that a promisor makes to a promisee by entering into a contract with him creates an obligation to perform it owed by the promisor as obligor to the promisee as obligee.23

In the case of one party failing to perform its duties of obligations, a breach of contract takes place. The most important feature of a contract is that one party makes an offer for a bargain that another accepts; the meeting of the offer and the acceptance (‘concurrence of wills’ or ‘meeting of the minds’) constitutes the consensus ad idem required to form a contract. There must be evidence that the parties had each from an objective perspective engaged in conduct manifesting their assent; by ‘objective perspective’ is meant that somebody must give the impression of offering or accepting contractual terms in the eyes of a reasonable person. This ‘reasonable person’ in the case of postmodern fairy tales is the reader himself, called to witness the exchange of promises between the characters. In ‘The Bloody Chamber’ (BC) the young protagonist speaks in the first person and recalls the past events of her life which led her to marry the Marquis.24 The marriage contract is a patriarchal construct: ‘[t]he 22 With regard to this, see Beale et al. (2002) 16: ‘the doctrine of consideration requires that, for a promise to be binding in English law, the promise must form part of a bargain – that is to say, the promise must have been given in exchange for something else, either an act or forbearance or a return promise’. 23 Beale et al. (2002) 11. 24 Also the style in which the tales are written signals a subversion of the narrative conventions of the genre, which shape, or rather constrain expression, in accordance with their disciplinary function (see Roberts (2002) 498). In Carter’s stories, the female narrator manages and controls the narrative; her voice

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relationship of exchange which constitutes marriage is not established between a man and a woman but by two groups of men and the woman figures as one of the objects in the exchange, not as one of the [male] partners’.25 The referent for the acceptance of the marriage proposal is here the protagonist’s widowed mother, who, however, in her first described action in the narrative, which also represents the first recording of her voice, refuses the contract’s tenets and allows her to decide. She does not want to sell her daughter as a way out of poverty, so she asks her a direct question: ‘Are you sure you love him?’, pointing to a requisite for the marriage commonly ignored by the prevalent economic structure of the contract. The protagonist’s words ‘I’m sure I want to marry him’ (BC, 2) only express her will to enter the binding condition of matrimony, failing to grasp the proffered freedom to actively decide her destiny and follow a different logic from the economic one. Actually, her mother embodies such freedom with all its social consequences, which are likewise underlined, but which have allowed her a position of autonomy and independence in society.26 Her legacy is, however, lost on her daughter who, in a passage of status as well as of jurisdiction, literally ‘cease[s] to be her child in becoming his [the Marquis’] wife’ (BC, 1). The daughter seems convinced of her actions; she describes her voyage towards her husband’s house with an ‘ecstasy of excitement’: she speaks of her ‘bridal triumph’, her ‘marital coup’ (BC, 1, 4). She is aware of the terms of the contract, of what her marriage with the Marquis entails: when she talks of his castle she calls it ‘that legendary habitation in which he had been born. To which, one day, I might bear an heir. Our destination, my destiny’ (BC, 2). As soon as she arrives there she holds her first interview with the housekeeper as mistress of the house and when she is given the bunch of keys, she reflects upon the fact that they symbolize ‘the practical aspects of marriage with a great house, great actually alternates with a third-person external perspective only to prevail in what Cavallaro has defined as a ‘consciousness of stream’ (see Cavallaro (2011) 129–30). 25 Levi-Strauss (1969) 480–81. 26 The mother is described as ‘indomitable’ (BC, 1), a woman who ‘had gladly, scandalously, defiantly beggared herself for love’ (BC, 2) willingly ignoring social conventions and economic interest. When her husband died, she assumed his role in the family and social context by appropriating herself of his revolver (symbol of his social role as a warrior). She is presented as a male hero as she ‘had outfaced a junkful of Chinese pirates, nursed a village through a visitation of the plague, shot a man-eating tiger with her own hand’ (BC, 2).

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wealth, great man’ (BC, 16). She appears conscious of her new status: ‘My new rank forbade overtures of friendship to the staff’ (BC, 21) and encourages herself in facing her new life by saying to herself: ‘I shall act the fine lady to the manner born one day, if only by virtue of default’ (BC, 16). From all these elements we derive the impression of a clear-minded girl, who consciously and ambitiously entered a marriage contract with a rich man. We actually recognize the value of the offer accompanied by a fixed period for acceptance by means of the various and precious gifts during the period of the Marquis’ courtship: the engagement ring, which had belonged to his family for generations; the stylish dress he buys her to go to the opera; her trousseau (‘what would I have gone to him in, otherwise?’, BC, 6); her wedding dress and a dress for her mother, too; a choker of rubies, a family jewel that symbolically signals her inclusion into the family; the gold opal wedding ring; and, in his own castle, a turret suite completely furnished and decorated in accordance with her musical talent. By reflecting upon the solitude and the separation from her mother the marriage implies, she admits that ‘This ring, the bloody bandage of rubies, the wardrobe of clothes, … all had conspired to seduce me so utterly that I could not say I felt one single twinge of regret’ (BC, 7). During the journey, she lucidly associates the comfort and warmth which should characterize family life with something she is excluded from; from her train window she intrusively imagines the station master’s family life and ‘all the paraphernalia of the everyday world from which I, with my stunning marriage, had exiled myself’ (BC, 7), as a consequence of her acceptance of the opal ring and the weight of all it signifies and implies. Her words ‘I will always be lonely’ (BC, 7) act as a recognition that she has actually not married for companionship but for economic advantage. As a matter of fact, she underlines ‘the impeccable linen of the pillow’ on the train leading her to the ‘country of marriage’ compared to her former ‘narrow bedroom’ with her ‘tumbled garments I would not need any more’ (BC, 1) as she now wears a ‘satin nightdress’ (BC, 2). There is clearly no case of misrepresentation, i.e., false statements or promises to induce one party into the contract, nor mistake, i.e., an incorrect understanding by one or more parties to a contract; no case of duress, i.e., a threat of harm made to compel a person to do something against his or her will or judgement, nor undue influence, i.e., taking advantage of a position of power over another person to induce him/her to do something. As is explicitly stated at the end of the narrative by the Marquis to the piano tuner ‘does even a youth so besotted as you are

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think she was truly blind to her own desires when she took my ring?’ (BC, 39). The protagonist consciously enters this contract under patriarchal ideology (paradoxically from within the feminist context embodied by her mother) according to which individual success and happiness identified with marriage, and the woman was expected willingly to give up her independence to a man. In exchange, she acquires social standing and wealth. She is actually bedazzled by the monetary value of the gifts she has received. During the night at the opera, the day before her wedding, the girl openly states her acceptance of the contract in terms which underline her side of the bargain: He was as rich as Croesus … I thought I must truly love him. Yes. I did. On his arm, all eyes were upon me. The whispering crowd in the foyer parted like the Red Sea to let us through … How my circumstances had changed. (BC, 5)

As the narrative progresses, we notice how the protagonist is slowly reduced to the Marquis’ gifts, she is commodified, as she becomes part of his patrimony. Everything is filtered by her own point of view; at this stage, she underlines the advantages of the contract and willingly ignores possible and unexpected negative implications, which she however, perceives in her ominous comparison of her wedding presents to crystallized fruit (see BC, 1). By accepting the contract, she herself will become crystallized into a dependent and subordinate position, prevented from the possibility to develop an autonomous personality. An important requisite for a contract under English law is consideration, that is, the idea that both parties to a contract must bring something to the bargain. The young protagonist is always aware of her side of the contract, in particular that she represents its object. On the evening before the wedding, the Marquis watches her in the mirrors of the opera house and she feels ‘his assessing eye of the connoisseur inspecting horseflesh, or even of a housewife in the market inspecting cuts on the slab’, until she sees herself as he sees her: ‘And I saw myself, suddenly as he saw me’, that is, she becomes aware of her commodified status, significantly through a mirror, symbol of the patriarchal gaze in fairy tales, as well as of the definition of female identity through that gaze. She actually says ‘I saw how much that cruel necklace became me’ (BC, 6): the verb ‘became’ exploits the ambiguity of the meaning indicating also that she is reduced to her necklace.

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This scene is repeated in his bedchamber, when she sees herself multiplied in the mirrors surrounding the bed as he says: ‘I have acquired a whole harem for myself!’, and during the consummation of the marriage, when she feels examined ‘limb by limb … bare as a lamb chop … And so my purchaser unwrapped his bargain’ (BC, 11). She is depicted as always aware of her position and accordingly performing her side of the contract. She is a sexualized commodity he has purchased; as she cynically observes, ‘Did all the castle hold enough riches to recompense me for the company of the libertine with whom I must share it?’ (BC, 19). Moreover, when he is suddenly called away on business she feels that he abandons her on her wedding night to show his mastery over her marketed self: a ‘child I’ve bought with a handful of coloured stones and the pelts of dead beasts, [she] won’t run away’ (BC, 15). Before leaving, the Marquis calls his young bride and entrusts her with a bunch of keys. This act should sanction her status as the mistress of the castle, but this is at the same time performed and negated through the positing of a condition which actually invalidates it. The Marquis explains what each key opens and grants his bride permission to go everywhere, but for one specific place: ‘All is yours, everywhere is open to you – except the lock that this single key fits … you must promise me … to leave it well alone’ (BC, 18). In this case, however, only the request of the Marquis is openly stated in the text; we have no binding promise on the woman’s part. And in fact she transgresses the prohibition. This is a traditional pattern of fairy tales in which an injunction is followed by its transgression in order to stage the educating punishment.27 In Carter’s version, however, the latter part of the scheme is revised. When the protagonist realizes the danger of her new situation, her thoughts focus on the ring, the symbol of her marriage/selling contract and on how to escape from the patriarchal power and absolute authority it represents: ‘My first thought, when I saw the ring for which I had sold myself to this fate, was how to escape it’ (BC, 28). She does not passively accept punishment for her transgressive behavior, a male-determined and male-judged transgression, as she lucidly and acutely observes; she does not show any sign of repentance for her actions, but rather denounces her husband’s scheme. I had behaved exactly according to his desires; had he not bought me so that I should do so? … I had played a game in which every move was governed by 27

See Propp (1968).

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370 Comparative contract law a destiny as oppressive and omnipotent as himself, since that destiny was himself; and I had lost … Lost, as the victim loses to the executioner. (BC, 34)28

The transgression and the entrance into the forbidden room recall a similar situation in Kafka’s parable Before the Law. In this parable, the man from the country obeys the prohibition to enter the room of the law, ignoring his own desire to know it; by doing so, he recognizes the power of the law over himself. Before the Law narrates ‘the foundation of the subject in the recognition of the law, in the man’s self-prohibition and censorship, in his self-denial and abnegation’.29 In Carter’s story, the protagonist enters the room and gains a knowledge of patriarchal law and of its effects on herself. She realizes that the Marquis controls the law, in that he causes the crimes to happen in order to deliver the punishment as a law-giver puppet master. As she says, ‘The evidence of that bloody chamber had showed me I could expect no mercy’ (BC, 35). She rebels to her passive position, to her husband’s assumed entitlement to legislate and control her, to reduce her to her mere fleshly dimension (a ‘corpus’ iuris) in order ‘to inscribe upon her his continuing [patriarchal] tale of punishment for wives’ disobedience’.30 She discovers and at the same time denounces the locus of patriarchal law and its rituals, based on a system of memories and traditions grounded on communis opinio and the authority of the ancestral times of its origin, on images and symbols embodied by the Marquis and his castle, which escape the dimensions of time and space and reconnect with the dimension of myth.31 The protagonist retains the necessary presence of mind and resolutely and actively fights not to succumb by exploiting the status granted her by the contract in order to escape the contract itself and reverse it through the assertion of her own individuality. In particular, she makes recourse to all the things/qualities she brought into the bargain and which the Marquis had appreciated, for example her talent in music: ‘If my music had first ensnared him, then might it not also give me the power to free myself from him?’ (BC, 30); and, even more, her sexuality: ‘Mimicking the new bride newly awakened I flung my arms around him, for on my seeming acquiescence depended my salvation’ (BC, 33). She demonstrates a resourcefulness and readiness to use her sexuality as an 28 Actually, he has given her all the instructions to guide her to his secret room in his absence. 29 Douzinas (2003) 43. 30 Manley (2001) 85. 31 See Costantini (2007) 229, and Goodrich (1990) 117.

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instrument to save her life and even kill her husband: ‘I forced myself to be seductive. I saw myself, pale, pliant as a plant that begs to be trampled underfoot, a dozen vulnerable, appealing girls reflected in as many mirrors, and I saw how he almost failed to resist me, if he had come to me in bed, I would have strangled him, then’ (BC, 34–35). If soon after her discovery she refuses to take refuge in her bedroom as the mirrors ‘retained the memory of his presence’ (BC, 28) and his inquisitorial gaze, now she purposely wishes to exploit the effect of the mirrors on herself, trying to deceive him through her own reflected commodification in order to strangle him. She reverses the image of the bargain in order to ensnare him into her trap, a new bargain from which she will be the only one to profit, passing from feigned object to deceitful and winning party. Curiously, the killing method recalls the choker, the symbol of all the women of his family, and further underlines her intention to reverse the Marquis’ methods against himself. Although her stratagems fail, she demonstrates that she possesses the force to try and determine her own fate, to conquer independence and power. She engages in a fight with her husband on equal terms, in order to gain control and therefore power over him. She feigns playing the (male-made) role of the victim in order to reverse it, and she will finally manage to do it with the help of her mother, who will come to her rescue as an image of a ‘furious justice’ (BC, 40). It is the gaze of the mother which disempowers the man, revealing his role of puppet master: ‘[t]he puppet master, open-mouthed, impotent at last, saw his dolls break free of their strings, abandon the rituals he had ordained for them since time began and start to live for themselves’ (BC, 39). She represents a new conception of the law, as the guarantee of a different symbolic order to which her daughter now returns and which she had embodied in her unconventional life. The lack of conformity to the status quo of community expectations instead of being punished is revealed as an alternative world order, which the daughter will take further; as her mother refused to marry for money, that is, she refused the economic foundation of the marriage contract, she seems to refuse the contract in toto, as at the end of the story she voluntarily remains ambiguous on her possible marriage with the piano tuner and seems rather to suggest a socially uncodified (and therefore unsanctioned) companionship. However, she is left with a red mark on her brow, as a memento that she has let herself be fascinated by the Marquis’ power and wealth, and has consciously subjected herself to enter the materiality of a transaction through which, having marketed herself, she has accepted that her worth resided only in her purchaser. As Sage asserts, the protagonist becomes a

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sort of ancient mariner, who expiates her ‘guilt’, that is, the past acceptance of her cultural identity, ‘the power of the “mind-forged manacles”’32 by narrating her story. The two subsequent stories, ‘The Courtship of Mr Lyon’ and ‘The Tiger’s Bride’, are inspired by the tale of Beauty and the Beast. At their opening, the women protagonists are denied any choice; they merely find themselves as objects in trading contracts (actually mock-marriage contracts), which see on the one hand the father figure, and on the other a party who escapes a precise social codification, a no-better-specified ‘beast’, who is however allowed to enter the contract in virtue of his possession of social and economic accomplishments. The female protagonists both undergo a process of development of self-awareness which leads them to exit the contract and re-enter it under different terms which subvert sanctioned social roles (both male and female ones). In ‘The Courtship of Mr Lyon’ (CML), the female protagonist, nameless and therefore deprived of an autonomous identity, is referred to as her father’s ‘beauty, his girl-child, his pet’ (CML, 43), as the external narrative voice points out. We first see her when she is at home waiting for him, and then we subsequently meet her as she is already in the palace of the Beast. She appears to be completely powerless, deprived of any chance for self-determination, as well as of the status of a subject; she is a mere object of exchange caught in an impersonal patriarchal law of contract between her father and the Beast, the object sold and bought by a rose. Once in the palace she is directly addressed by the Beast who proposes to her a further contractual relationship: ‘he would aid her father’s appeal against the judgment’ which had declared his economic ruin, if ‘she should stay here, with him, in comfort’ (CML, 48). According to the bargain theory, contracts are voluntary exchange relationships involving reciprocal promises or performances; ‘it means nothing if a party suffers legal detriment, unless the parties agree that it is the price for the promise’.33 This is the case of Beauty, whose essence is based on her spirit of sacrifice and self-effacement; she complies with her subordinate status and accepts to remain with the Beast out of filial devotion and economic dependence: she stayed, and smiled, because her father wanted her to do so … her visit to the Beast must be, on some magically reciprocal scale, the price of her father’s good fortune. Do not think she had no will of her own; only she was possessed by a sense of obligation to an unusual degree. (CML, 48) 32 33

Sage (2007) 30. Blum (2007) 7.

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Beauty’s reflections show, on the one hand, that she is conscious of her status as a commodity (actually at the opening of the tale she is described as ‘a young girl who looked as if she had been carved out of a single pearl’ (CML, 49)), as a good to be exchanged in order to grant her father wealth, and she accepts such patriarchally imposed role and the legal detriment it implies. However, on the other hand, she feels a sense of obligation in that, she actively enters the contract as one of the parties, no longer merely as its object: as long as she accepts to remain in the Beast’s palace, her father will be wealthy. The tale first portrays the Beast in absentia, that is through his estate and properties which he puts at Beauty’s father’s disposal following the social rules of hospitality and reciprocal help. As the father transgresses such rules and steals from the Beast’s property, the latter abandons his social role and regresses to his feral nature: ‘Call me Beast’ (CML, 47). He seems to partake of two natures as ‘he reared on his hind legs like an angry lion, yet wore a smoking jacket … and was the owner of that lovely house and the low hills that cupped it’ (CML, 47), but lets the more savage one prevail, thus asserting his alterity. On the contrary, in his attitude towards Beauty he proves willing to abide by social conventions and deny his real nature in order to perform the socially recognized role of the gentleman. Beauty, in her accepted gendered role, narcissistically inhabits the Beast’s palace34 as if she were already in the position of the mistress of the house; she spends her time in reading, embroidering and conversing with the Beast, while performing female domestic duties such as pouring tea (see CML, 49). She acknowledges that she feels happy in this condition, although she is not able to reconcile her feelings to a sense of strangeness and otherness which prevents her from attaining closeness with the Beast. When he tries to kiss her hands and fails as his nature prevents the reproduction of this codified act, while making her experience ‘the stiff bristles of his muzzle grazing her skin [and] the rough lapping of his tongue’ (CML, 50), first she feels compassion, but then ‘retreat[s] nervously into her skin, flinching at his touch’ (CML, 51). She interprets through her point of view the Beast’s expression of sadness and ascribes it to his self-imposed solitude: ‘a constant human presence would remind him too bitterly of his otherness’ (CML, 48). Beauty is described as possessing the quality of piercing appearances and seeing a person’s soul with her gaze, but here the process is reversed as she is offered a vision of herself reflected in the Beast’s ‘green, inscrutable eyes’ (CML, 50); such image is not socially sanctioned like the previous 34

See Brooke (2004) 74.

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one in the picture or the following ones in the mirror. She has to interpret and understand her own reflection from a new perspective which will lead her to acknowledge her own self. The story only seemingly stages a subversion of roles, through Beauty’s apparent transforming of the Beast into the socially accepted Mr Lyon (in line with De Beaumont’s traditional tale); actually, Carter’s Beauty undergoes a transformation as well, as an effect of their shared closeness. When her father, who recovered from bankruptcy and now enjoys a wealthy condition thanks to her exchange, asks her to go back to him, she accepts and enters into another contract with the Beast, this time in the role of obligor: she promises to go back to the palace before the end of winter. However, while staying with her father, she recedes into a position of dependence on a male figure, she is commodified and put at the same level as the objects and treats he buys for her, an ornament on his arm: ‘a whole new wardrobe for his darling, so she could step out on his arm to parties’ (CML, 51). He introduces her into society, maybe to profit once again from her and conclude another marriage/economic contract. In this new environment, the image of the Beast and of her time at his palace slowly fades, leaving only the feeling of a lost possibility of change and an ensuing desolating emptiness filled (and stifled) by more and more commodities. She finds confirmation of her role in mirrors, but little by little she does not recognize herself any longer in her self-imposed role compliant with patriarchal tenets, and notices the difference of her reflection on the glass surface from the one she has seen in the Beast’s agate eyes. The narrative voice underlines how she is losing her beauty, a natural quality, for prettiness, an artificial ornamented condition. The arrival of the Beast’s spaniel makes her realize the breach of contract on her part, and, at the same time, wakes her from her hypnotic trance-like embodiment of her social subordinate role as daughter. She no longer recognizes herself as a sacrificial victim, the role she covered in the first contract, and goes back to the Beast in order to cover the role entailed in the second one. In a subversion of social tenets she proposes an unconditioned relationship of companionship to the Beast: ‘If you’ll have me, I’ll never leave you’ (CML, 54). In this new contract, based on her active and autonomous choice of remaining with him, she becomes at the same time the proffering party, and the object at its centre. Through her contractual promise, Beauty saves the Beast from death and transforms him into Mr Lyon; as a matter of fact, it is only at this point that the Beast acquires a name through the external narrative voice, which seems to impose a social role on him and definitely solve the initial struggle between his two natures. In the same scene, the Beast calls Beauty for

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the first time by name, thus signaling his acknowledgment of her identity after she has acknowledged it herself, and setting a contrast with the narrative voice of the closing sentence which refers to her as Mrs Lyon. There seems to be a contrast here between the Beast’s (now turned man) acceptance of Beauty’s proffered companionship (in an implicit denial and refusal of the marriage contract) and the narrative voice which seems willing to perpetuate the status quo by imposing social conventions and forcibly enclosing both characters within them. Actually, the narrative can be seen as ending on ambiguous tones and fluid identities. The name itself of the couple as Mr and Mrs Lyon seems to point to an ambiguous nature, half animal and half human. As Crunelle-Vanrigh points out, after his final transformation, the beast maintains a resemblance to a lion, ‘the handsomest of all the beasts’ (CML, 55) which disrupts Beauty’s former assertion that ‘a lion is a lion and a man is a man and, though lions are more beautiful by far than we are, yet they belong to a different order of beauty’ (CML, 47). Beauty, on her part, is referred to in animal imagery in her transformation, as she is called ‘Miss Lamb’, a ‘pampered cat’, and finally ‘Mrs Lyon’, in an unfixing and mingling of identities.35 If during the narrative Beauty had been fascinated by the Beast’s beauty (‘Fascinated, almost awed, she watched the firelight play on the gold fringes of his mane’ (CML, 49)) but could not prevail upon herself to establish a physical contact with him of her own free will (‘still his strangeness made her shiver … he was so different from herself’ (CML, 51)), in the final scene the deferred contact (‘she flung herself upon him … her tears fell on his face like snow’ (CML, 54)) determines a mutual contamination of their natures. She therefore manages to reach and accept a relationship of ‘strange companionship’ with the Beast (see CML, 50) whom she tells ‘I have come home’ (CML, 54). She does not respond to his pleadings against his nature (‘I could not go hunting’ (CML, 54)), nor does she judge him, but asks for his acceptance of herself, realizing that ‘She had only looked at her own face reflected’ in his eyes36 and failed to perceive his own essence and suffering in his feigned identity. The scene ends with Mr Lyon inviting Beauty to ‘eat’ and they are finally portrayed as walking in the garden, a possible prelude to hunting.37 Therefore, the 35

See Crunelle-Vanrigh (1998) 121. His attempts at abiding by social laws have only brought him to disillusion, exhaustion and despair. 37 This perspective is echoed in Emma Donoghue’s version of the story which ends in the following way ‘And as the years flowed by, some villagers told travelers of a beast and a beauty who lived in the castle and could be seen 36

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traditional interpretation of the tale which sees the final marriage as a reward for Beauty’s sacrifice actually possesses a melancholic tone, due to the opacity of the restored socially accepted dimension. In re-entering society and complying with its rules the Beast would renounce a fuller and purer dimension, the one he possessed at the beginning of the story and which is explored in The Tiger’s Bride. ‘The Tiger’s Bride’ (TB) posits the woman protagonist as the object of an unspecified contract between card players. The one-line opening of the tale ‘My father lost me to the beast at cards’ (TB, 56) stages her powerful feminine narrative voice and point of view, which exposes the monetary value assigned by the father to his daughter, and foregrounds her critical attitude. As the protagonist later underlines: ‘You must not think my father valued me less than a king’s ransom; but, at no more than a king’s ransom’ (TB, 59, emphasis in the original). She silently watches as ‘he rids himself of the last scraps of my inheritance’ (TB, 56). Her words reveal her economic awareness, that she feels entitled to her inheritance, to a patrimony, aware of its necessity in a patriarchal society in order to gain a social position. However, her subordinate status as woman and daughter prevents her from intervening, even when he ‘staked his daughter on a hand of cards’ and lost her: ‘I have lost my pearl, my pearl beyond price’ (TB, 59 and 60) he laments, at the same time actualizing her commodification. The girl becomes quickly aware of her new condition as an object of exchange, once again in a mock-marriage contract: ‘I had been bought and sold, passed from hand to hand’ (TB, 70), but actively reacts, confronting and renegotiating the terms of the contract. She appears conscious of the role she must subject herself to play (a flesh-object in a commodity system), but she is determined not to remain a victim and tries to exploit her situation to her own advantage: ‘For now my skin was my only capital in the world and today I’d make my first investment’ (TB, 62). She goes to the palace of the Beast wrapped in her imposed role in an official and public ceremony of passage of property. The protagonist is influenced by the patriarchal objectification of women and, even if she does not appear to have interiorized them at the point of assuming the role of sacrificial victim like her predecessor in the previous tale, she continues to see herself in the terms of an object of trade and believes the Beast sees her in the same way. When she is asked to show herself naked, something for which ‘the Beast had clearly paid walking on the battlements, and others told of two beauties, and others of two beasts’ (Donoghue (1997) 37). With regard to this, see also Cutolo (2014) 39.

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cash on the nail … and paid up promptly’ (TB, 73), she reacts by transforming the terms of the contract in a grotesque way in order to disrupt his profit. She declares she will impersonate the role of a prostitute (she would wait for the Beast with her skirt upon her head and then expect to be paid for it) or of a ballet girl (that is, a woman who did not enjoy a respectable social status). The Beast’s request of ‘The sight of a young lady’s skin that no man has ever seen before’ (TB, 68), refers to the persona not yet conditioned by social tenets, as will become apparent at the end of the narration. However, entangled in patriarchal frames, the protagonist understands the Beast’s request as a degradation, a bargain which entails the loss of her traded virginity, and which will leave her bereft of her only remaining patrimony, although she is repeatedly defined by the valet as ‘a woman of honour’ (TB, 66 and 68). In front of her persistent denial to perform the contractual terms, the Beast unexpectedly reverses them, and exchanges their positions: as the valet tells her, ‘“If you will not let him see you without your clothes … you must then prepare yourself for the sight of my master naked”. I nodded’ (TB, 71). Her nodding represents her willing entrance into the new contract. By setting Beauty in the place of the obligor of the contract, as a ‘woman of honour’, the Beast subverts gender relationship, thus showing he is also positioned outside the patriarchal order (and this will lead to a reciprocal rather than exploitative relationship). The Beast entitles Beauty to dispose a contract, enabling her at the same time to assert her own identity autonomously. He finally fulfills the contractual obligation he himself had arranged with her father and which involved her as part of his profit therein; in taking her place, however, he reveals the true nature of his proposed contract. Actually, by subjecting himself to its conditions, he does not reify himself, but rather, in showing himself naked, i.e., in his true animal nature, he reveals that his essence rests outside any culturally imposed social role, symbolized by the human mask he constantly wears. Under the ‘annihilating vehemence of his eyes’ (TB, 71) Beauty starts to overcome patriarchal ideology by realizing that ‘The Tiger will never lie down with the Lamb; he acknowledges no pact that is not reciprocal. The lamb must learn to run with the tigers’ (TB, 71). There is no space here for Miss Lamb, the self-imposed role of sacrificial victim; she feels called to action and reciprocates the stripping. After having acknowledged the beast and discovered ‘the exact nature of his beastliness’ (TB, 61), she asks to be acknowledged by him on the same terms. Therefore, the female protagonist actively looks at the male instead of being passively looked at, she reciprocates his gaze, thus altering her signification and determining her own meaning and subjectivity. By showing herself naked she feels at liberty for the first time in her life, because she

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has managed to free herself from her culturally imposed role and to open herself to a new and autonomous one. When she returns to her room, she looks in the mirror held by her mechanical maid and sees her father enjoying the newly found wealth due to his daughter’s trading value. The protagonist’s compliance with the terms of the contract has restored her father’s lost fortune and will restore herself to him as well, undamaged, together with expensive gifts. The image in the mirror shows that the Tiger has respected his side of the bargain and is preparing everything for her departure. Beauty realizes that the mechanical doll she had been given to attend upon her symbolizes her culturally defined self, and the mirror she holds reflects a simulacrum of a woman: ‘all I saw was a pale, hollow-eyed girl whom I scarcely recognized’ (TB, 73). She finds the strength to refuse the role of victim, deprived of rationality (‘I was a young girl, a virgin, and therefore men denied me rationality just as they denied it to all those who were not exactly like themselves, in all their unreason’ (TB, 70)), and sends back to her father the mechanical maid dressed with her own clothes ‘to perform the part of her father’s daughter’ (TB, 73). She then annuls the first contract by enforcing the second one she has actively entered. She strips herself of all clothing, she ‘peel[s] down to the cold, white meat of contract’ (BC, 73) in order to belie it; she will not sell but give herself; not the ‘cold, white meat’ of the body of the contract, detached from the self, but her ‘existence’ as an autonomous subject. She is finally in control of the terms of her transformation from object of exchange into ‘a subject making her own contracts and laying down her own laws’,38 as well as constructing her own identity. She thus acquires the quality of individual autonomy, which is an integral part of personal liberty and which grounds the power to enter contracts and to formulate the terms of contractual relationships.39 While in ‘The Courtship of Mr Lyon’, the protagonist’s contact with the beast’s nature, when the latter licks her hands, makes her retreat into her skin, which symbolizes the safety of her codified identity, in this second tale, a reverse process takes place and the protagonist allows her skin to be removed from her real self, through the licking action of the Beast: ‘I felt the harsh velvet of his head against my hand, then a tongue, abrasive as sandpaper … And each stroke of his tongue ripped off skin after successive skin, all the skins of a life in the world and left behind a nascent patina of shining hairs’ (TB, 75). 38 39

Aristodemou (1999) 206. See Blum (2007) 8.

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The protagonist’s development parallels the one of the Beast, previously described as pacing in his room, apparently waiting for her, divested of all the paraphernalia of his self-imposed social role: ‘The purple dressing gown, the mask, the wig, were laid out on his chair’ but he has abandoned ‘the empty house of his appearance’ (TB, 74). Actually, in order to act in society, the beast had to perform the sanctioned human role of a wealthy man, and deny his feline characteristics by wearing clothes, a wig and hiding his paws; moreover, he wore a human mask, uncanny in its perfection, almost self-denouncing the artificiality of his pose. He does not manage to speak, but emits a growl and a roar which his valet interprets for him. The mask is therefore not sufficient to render him a persona (in the etymological sense of the word) as, although he subjects himself to social conditions, it does not allow his voice to resonate and communicate in social life. Actually, the narrative often conveys his strain to abide by a codified social role; he is described as possessing a ‘crude clumsiness about his outlines’ and ‘an odd air of self-imposed restraint, as if fighting a battle with himself to remain upright when he would rather drop on all fours’ (TB, 58). As the protagonist observes, ‘The beast bought solitude, not luxury with his money’ (TB, 63) and the failure of his social contract is symbolized by his dismantled palace, which differently from the Beast’s one in ‘The Courtship of Mr Lyon’, appears as uninhabited, a refuge from the strain of society rather than an assertion of his social self. The protagonist achieves a form of equality with the beast ‘once their shared alienation in the human world has been acknowledged and overcome’.40 Her relationship with the Beast is based on equal terms; the Tiger requires her engagement as a subject in a conception of the law that builds relationships between people as socii in a society, and grants their action.41 In this ethics of alterity, the other must be respected in his difference and the encounter does not lead to the loss of identity on one side but to creativity and mutual recognition for an equal relationship. They thus reach a just attitude towards the other, acknowledging their reciprocal dimension: ‘Alterity should be intended in the most universal sense of the term (i.e. the other as indeed other), empowered by all its ontological implications.’42 Rules exist not to satisfy the normative will of the giver (or his personal interests) but to guarantee that the relationship between subjects is really relational, associative, that is, juridical; 40 41 42

Dutheil de la Rochére (2013) 261. D’Agostino (2000) 13. Ibid. 20 (my translation).

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acting juridically implies the reciprocal recognition of interests between subjects.43 The walls of the Beast’s ancestral house, symbol of patriarchal law (like Mr Lyon’s and the Marquis’ mansion), are shaken by his purring, the expression of his real voice, and ‘will all fall, everything will disintegrate’ (TB, 75) opening the way for a newfound dimension in difference and through difference. In her portrayal of a gendered being willing to embrace difference,44 Carter transcends the patriarchal myth of the passive and willingly submitted woman through her imaginative counterdiscursive position, which eventually includes male characters as well; actually, by avoiding idealistic representations of either femininity or masculinity, she transcends both patriarchal and feminist grand narratives alike. Her stories celebrate identity as ‘a fluid and shifting endowment’45 which is not posited as a requirement for entering a contract, but is achieved through the contract itself, which allows the creation of a new ‘corpus’ iuris.

REFERENCES Antor, H. (2007) ‘The Ethics of Story-Telling and of Reading: Literature, the Law and the Principle of Equity’ in D. Carpi (ed.), The Concept of Equity: An Interdisciplinary Assessment. Heidelberg: Winter, 151–68 Aristodemou, M. (1999) ‘Fantasies of Women as Lawmakers: Empowerment or Entrapment in Angela Carter’s Bloody Chamber’ in M. Freeman (ed.), Law and Literature. Oxford: Oxford University Press, 191–218 Atwood, M. (2007) ‘Running with the Tigers’ in L. Sage (ed.), Essays on the Art of Angela Carter: Flesh and the Mirror. London: Virago, 133–50 Bacchilega, C. (1997) Postmodern Fairy Tales: Gender and Narrative Strategies. Philadelphia, PN: University of Pennsylvania Press Beale, H., Hartkamp, A., Kötz, H. and Tallon, D. (2002) Cases, Materials and Text on Contract Law. Oxford and Portland, OR: Hart Publishing Blum, B.A. (2007) Contracts: Examples and Explanations. New York: Kluwer Brooke, P. (2004) ‘Lyons and Tigers and Wolves – Oh My! Revisionary Fairy Tales in the Work of Angela Carter’, 16(1) Critical Survey 67–88 Carter, A. (2006 [1979]) The Bloody Chamber. London: Vintage Cavallaro, D. (2011) The World of Angela Carter: A Critical Investigation. Jefferson, NC: McFarland & Co., Inc., 129–30 Costantini, C. (2007) La Legge e il Tempio. Rome: Carocci Cover, R. (1983) ‘Nomos and Narrative’, 97 Harvard Law Review 1–44 Crunelle-Vanrigh, A. (1998) ‘The Logic of the Same and Différance: The Courtship of Mr Lyon’, 12(1) Marvels and Tales 116–32 43 44 45

See ibid. 14. See Cavallaro (2011) 130. Dutheil de la Rochére (2013) 262.

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Women and contracts 381 Cutolo, R. (2014) Into the Woods of Wicked Wonderland. Heidelberg: Winter D’Agostino, F. (2000) Filosofia del Diritto. Turin: Giappichelli Donoghue, E. (1997) Kissing the Witch. New York: Harper Collins Douzinas, C. (2003) ‘The Literature of Law’ in D. Carpi (ed.), Shakespeare and the Law. Ravenna: Longo, 17–46 Dutheil de la Rochére, M.H. (2013) Reading, Translating, Rewriting: Angela Carter’s Translational Poetics. Detroit, MI: Wayne State University Press, 261 Goodrich, P. (1990) Languages of Law: From Logics of Memory to Nomadic Masks. London: Weidenfeld & Nicholson Laeverenz, J. (2007) ‘Märchen als rechtsgeschichtliche Quellen?’ in H. Lox, S. Lutkat and D. Kluge (eds), Recht und Gerechtigkeit in Märchen. Königs Furt: Krummwisch, 254–95 Levi-Strauss, C. (1969) The Elementary Structures of Kinship. Boston, NJ: Beacon Press Manley, K. (2001) ‘The Woman in Process in Angela Carter’s The Bloody Chamber’ in D.M. Roemer and C. Bacchilega (eds), Angela Carter and the Fairy Tale. Detroit, MI: Wayne State University Press, 83–93 Möhlenkampf, A. (2007) ‘Rechtsinstitute und Vertragstypen in Grimms Märchen’ in H. Lox, S. Lutkat and D. Kluge (eds), Recht und Gerechtigkeit in Märchen. Königs Furt: Krummwisch, 234–53 Propp, P. (1968) Morphology of the Folk Tale. Austin, TX: University of Texas Press Roberts, K.J. (2002) ‘Once upon the Bench. Rule Under the Fairy Tale’, 13(2) Yale Journal of Law and the Humanities 497–529 Rubinson, G.J. (2005) The Fiction of Rushdie, Barnes, Winterson and Carter: Breaking Cultural and Literary Boundaries in the Work of Four Postmodernists. Jefferson, NC and London: McFarland & Co., Inc. Publishers Sage, L. (2007) Angela Carter. Northcote: Horndon Swift, G. (1983) Waterland. New York: Vintage Ward, I. (1999) Shakespeare and the Legal Imagination. London: Butterworths Zipes, J. (1979) Breaking the Magic Spell: Radical Theories of Folk and Fairy Tales. London: Heinemann Zipes, J. (1983) Fairy Tale and the Art of Subversion. London: Heinemann Zitzlsperger, H. (2007) ‘Über das Gerechtigkeitsempfinden von Kindern und Jugendlichen beim Hören vom Märchen’ in H. Lox, S. Lutkat and D. Kluge (eds), Recht und Gerechtigkeit in Märchen. Königs Furt: Krummwisch, 141–67

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PART IV GLOBAL CONTEXT AND LOCAL FRAMES

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16. The wrecking ball: good faith, preemption and US exceptionalism Peter Goodrich

If two of us make a Bargain, why should either of us stand by it? What need you care what you say, or what need I care what I say? Certainly because there is something about me that tells me Fides est servanda.1

In the recent US Supreme Court decision Northwest Inc. v. Rabbi Binyomin Ginsberg, Justice Alito, writing for the majority, determined that the contractual duty of good faith is not an element of volitional contracting but a State legislated imposition.2 Just as the rest of the common law world, including even England, which has had a ‘traditional hostility’3 to the doctrine, moves towards the recovery and harmonization of contracting as necessarily subject to implicit and interpretative criteria of good faith, the US common law exposes not only a disturbing degree of exceptionalism but also a logic that is ever increasingly adrift from the history of doctrine and the reason of precedent. At the very moment that good faith, the conscience and equity implied in all promising, and fundamental to the interpretation of all contractual language, is revitalized in other common law jurisdictions, and becomes settled and harmonized in European private law, Brexit notwithstanding, the US Supreme Court strikes out alone.4 It does so, I will argue, with very limited justifications based primarily in policy and not in any reasoned, let alone scholarly or consistent apprehension of the history and development of the law of contracting. To the extent that it is possible to say that there are emergent topics in contracts, the doctrine of good faith or more properly the preclusion of

1

Selden (1868) 66. Northwest, Inc. v. Rabbi S. Binyom Ginsberg, 134 S.Ct. 1422 (2014). 3 McKendrick (2014) 219, noting that ‘there are signs that the traditional English hostility towards a requirement of good faith might be abating’. Discussed in Yam Seng Pte Ltd v. International Trade Corp. [2013] EWHC 111 (QB). 4 The prime example, of course, to which the United States is a signatory, is the UN Convention on Contracts for the International Sale of Goods, Art. 7(1) which stipulates that ‘in interpretation of this Convention, regard is to be had to … the observance of good faith in international trade’. 2

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bad faith performance is enjoying some degree of limelight. The reason, of course, is as much the growing threat of corporate imposition of gargantuan standard form contracts, and the corresponding demise of any sense of volition or of real freedom of bargain in the face of online consent icons linked to ever increasingly complex and prolix online terms and conditions of exchange. The imposition of mandatory arbitration in standard form agreements and the enforcement of class action waivers as conscionable, despite being presented on a take it or leave it, non-negotiable basis, increasingly signal the displacement of contract as bargained for exchange with the leviathan of imposed arbitration by virtue of its unilateral inscription by the drafting party.5 The motives for such doctrinal elaborations and transformations will here be deemed a secondary concern, as compared with the primary doctrinal import of such developments, which impinge first and most directly upon the intellectual history of common law and, secondly and consequentially, reflect the triumph of corporate interest, of adhesion over volition in the realm of agreements. It is first a matter of scholarship, of the failing role of the academy and the declining significance of legal education in the United States, a sorry intellectual trajectory, and latterly the enigma of dissimulation, the inability to accurately present the reason for decision, the motive that renders judgment, in the ratio decidendi or deliberation reported.

I.

PREEMPTION AND GOOD FAITH

The context of Rabbi Ginsberg’s complaint is specific to US law in that it involves the relation between Federal and State law and the doctrine of preemption. The Airline Deregulation Act (ADA) of 1978 was passed by Congress ‘to encourage, develop, and attain an air transportation system which relies on competitive market forces’.6 In order to prevent States from ‘undoing federal deregulation with regulation of their own’, a 5

For the recognition that virtually all consumer contracts are adhesion contracts see AT & T v. Concepcion, 131 S. Ct. 1740 (2011). For the most recent Supreme Court decision on class action waivers, see DirectTV v. Imburgia, 136 S. Ct 463 (2015). For general discussion, see Resnik (2015). For an example of the classic view of equality, see the argument in Laidlaw v. Organ, 15 U.S. 178 (1817), relying principally on Cicero and Pothier, and referencing contracts of sale of goods: ‘the reason is that equity and justice, in these contracts, consists of equality’. 6 49 USC s. 41713(b)(1). The ADA was amended and incorporated into the Federal Aviation Administration Authorization Act 1994 where s. 41713(b)(1) was codified at 49 USC. app. s. 1305(a)(1).

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preemption clause was included in the ADA which stipulated that States could not impose any ‘law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier’.7 As formulated by the various courts, the viability of the plaintiff’s claim came down to whether breach of the duty of good faith in the performance of a contract was preempted under the statute because it was a State regulation relating to ‘airline prices and services’. Rabbi Ginsberg, a resident of Minnesota, was a Platinum Elite member of Northwest’s frequent flier WorldPerks Program between 1999 and 2008. In June 2008 he was told that his membership of the program was being revoked and in July he received a letter from Northwest stating that his termination was due to his frequent complaints about the service. Specifically, the letter stated that in the past six months the Rabbi had contacted the WorldPerks office 24 times in relation to travel problems, including nine incidents of late arrival of his bag at the luggage carousel. The letter continued to state that the Rabbi had ‘continually asked for compensation over and above our guidelines. We have awarded you $1,925.00 in travel credit vouchers, 78,500 WorldPerks bonus miles, a voucher extension to your son, and $491.00 in cash reimbursements’.8 Such generosity apparently justified revocation of the Rabbi’s membership and later attempts to obtain a clearer explanation of the grounds of termination resulted in an email referring him to Rule 7 of the terms and conditions of WorldPerks, stating in relevant part that: [a]buse of the WorldPerks program (including failure to follow program policies and procedures … any misrepresentation of fact … or other improper conduct as determined by Northwest in its sole judgment …) may result in cancellation of the member’s account and future disqualification from program participation.

In response, Rabbi Ginsberg filed a class action lawsuit, one aspect of which was a contract claim for breach of the duty of good faith and fair dealing. The cancellation of his membership of the program was, he claimed, in bad faith. The real reason for termination, it was argued, was cost-cutting occasioned by Northwest’s merger with Delta. Such an ulterior motive, while not necessarily retaliatory or malicious, is potentially in infraction of the implied covenant of good faith and fair dealing 7 Ibid. The legislative history is discussed in Ginsberg v. Northwest, Inc. 2009 U.S. Dist. LEXIS 133138, at first instance before Janis L. Sammartino J, and on appeal in Ginsberg v. Northwest, Inc., 653 F.3d 1033 (2011), before Robert R. Beezer J. 8 Ginsberg (2009), n. 7 above, at 2.

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to be found in all contracts according to both Restatement (Second) of Contracts, section 205, and Uniform Commercial Code, section 1:304, though the latter was not applicable in the present instance as it was services and not goods that formed the subject of exchange.9 Case law, with the partial exception of the ‘at will’ employment doctrine, which in a limited number of jurisdictions prevents the formation of a contract and so also precludes any implied terms, has increasingly followed the Restatement synopsis of the extant and historic law on good faith. In Fortune v. National Cash Register Company, for instance, termination of employment by the defendant company so as to avoid paying a bonus slightly in excess of US$92,000, due shortly after the date of firing, for work done, was within the ambit of bad faith breach of contract.10 The classic statement of the modern US doctrine comes in a case involving termination of a female employee because she had refused to date her foreman: in every contract there is an implied covenant that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract, which means that in every contract there exists an implied covenant of good faith and fair dealing.11

Ginberg’s suit was dismissed, inter alia, on the ground that the implied covenant was a duty that ‘does not appear ex nihilo, and is not imposed by the contract itself (unless it so stipulates). Rather, it is implied by state law … That parties must act in good faith and deal fairly with one another is a requirement of state policy, external to the contract itself, and that is given the force and effect of law.’12 The implied covenant was thus to be interpreted as State law that imposed regulation relating to the price, route or service provided by the airline. The good faith provision, in sum, was not a part of the voluntary undertaking of the agreement between the parties but was rather predicated upon a State law external to the volitional bargain. It was this logic that Justice Alito reiterates and

9 For classic discussions of the modern US doctrine of good faith, see Summers (1968); Burton (1980). 10 Fortune v. National Cash Register Co., 364 N.E.2d 1251 (1977); and similarly see Nolan v. Control Data Corp., 579 A.2d 1252 (1990) where an employer’s right to alter the quotas that formed the basis of a bonus scheme was held to be subject to the requirement of good faith. 11 Monge v. Beebe Rubber Co., 114 N.H. 130, 133 (1974) (emphasis added), itself citing Kirke La Shelle Co. v. Armstrong Co., 263 N.Y. 79, 87 (1933). 12 Ginsberg (2009), n. 7 above, at 12.

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marginally expands upon in the final dismissal of the action and to which attention will now be turned. Justice Alito shares the English common law’s traditional hostility to the doctrine of good faith and begins his analysis with a citation to an apparently dismissive statement of the doctrine: ‘The concept of good faith in the performance of contracts is a phrase without general meaning (or meanings) of its own’.13 It bears note that Alito J does not bother to include the end of the sentence quoted, which continues, without pause or punctuation, ‘and serves to exclude a wide range of heterogeneous forms of bad faith’.14 Nor does Alito J bother with the determination in Tymshare, which stated that ‘what the intention of the parties was in making the contract must control’ the exercise of the power to alter the quotas upon which bonuses were based. The question to be determined upon remand was precisely whether or not Tymshare was ‘acting for any of the purposes implicitly envisioned by the contract’.15 It is a point that is intriguingly and perhaps counter-intuitively affirmed by Judge Posner in Market Street v. Frey where he opines at length upon the vagueness and vagaries of the doctrine and, in full conformity with Justice Alito’s hostility to contractual bona fides, cites Learned Hand’s warning to the effect that ‘such words as “fraud”, “good faith”, “whim”, “caprice”, “arbitrary action” and “legal fraud” … obscure the issue’. Posner expatiates the doctrinal, which is to say ideological point, by stating that the ‘particular confusion to which the vaguely moralistic overtones of “good faith” give rise is the belief that every contract establishes a fiduciary relationship’.16 That said, the reductio ad absurdum aired, the normative desideratum nailed to the masthead, Posner then seeks to limit the doctrine to the most narrow of complexions, but does so while nonetheless stating a method that conforms to traditional doctrinal analysis: ‘The concept of good faith … is a stab at approximating the terms that the parties would have negotiated had they foreseen the circumstances that have given rise to their dispute’.17 Thus, again, and

13

Tymshare, Inc. v. Covell, 727 F.2d 1145, 1152 (1984). Ibid. 1152, citing Summers (1968) 201. 15 Tymshare, n. 13 above, at 1154. 16 Market Street Associates Ltd v. Frey, 941 F.2d 588, 593 (1991). 17 Ibid. 595. The notion of taking a stab at what the contract means is one that is dear to Posner who elsewhere elaborates a theory, if such is not too strong a term, of contract interpretation as according with the judge’s ‘best guess’ as to what the parties intended, predicated upon the judicially available ‘extrinsic non-evidence’ of their meaning, by which latter expression his Honor intends to refer to judicial acumen and worldly wisdom. See Posner (2005). 14

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even in its most limited form, it is expressly the good faith intention of the parties, the proper construction of the meaning of the agreement, the morally apposite interpretation of the words, and thus the immanent and volitional predicates to the contract that good faith recuperates and expresses. Despite a brief acknowledgement of the method of implication and reference to the actual though imputed intentions of the contracting parties, Alito moves to stage an alternative position in which the doctrine is deemed to be imposed externally by law and specifically by the State so as to legislate that ‘a party does not violate community standards of decency, fairness, or reasonableness’.18 This, he claims, is necessarily a ‘state-imposed obligation’ and this even though the exact formulation that he has used refers to ‘community standards of decency, fairness, or reasonableness’, to what other judges term ‘reasonable expectations’, which is to say custom and common law, the tradition of precedent as the priority of the anterior, and as such, a law of the land, a body of immanent norms, patterns of practice that traditionally have precedence over statute or State regulation according to the sages of the common law, however much their teachings are now disregarded.19 Granted that custom, practice and use are hardly consonant with State regulation, let alone imposition, Alito’s logic wavers tenuously between different meanings of law and State. His citation of authority for the ‘necessity’ of viewing good faith as a State-imposed obligation, references a Missouri case which upholds the implied covenant of good faith in all contracts and so precluded a party from escaping all liability by declaring a lease to mine a quarry ‘illusory’ where no express promise had been made to actually mine and sell limestone from the quarry.20 Alito ignores the general thread of the argument in Magruder and simply extracts, out of context, the rather non-probative proposition that ‘[w]hen terms are present that directly nullify the implied covenants of good faith and

18

Ginsberg (2014), n. 2 above, at 11. The various formulations of the leges terrae as the precedence of the prior, as the pattern of practice and so the expression of what parties actually do, goes back at least to Fortescue’s, De Laudibus legum Angliae, circa 1468–70, and nowhere better expounded than in Waterhouse (1663). 20 Magruder Quarry & Co. v. Briscoe, 83 S.W.3d 647 (2002); and for the classic source of such an implication, see Wood v. Lucy Lady Duff Gordon, 222 N.Y. 88 (1917), where Cardozo stated that: ‘A promise may be lacking, and yet the whole writing may be an instinct with an obligation, imperfectly expressed. If that is so, there is a contract.’ Such a contract expressly gives effect to the good faith meaning of the agreement, the words used. 19

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reasonable efforts … the contract is void for lack of mutuality’. This, of course, simply means that the parties never reached an agreement, their minds did not meet, because at least on one side no commitment was actually undertaken and so no promise was made. The point is reiterated powerfully in Harris v. Blockbuster, where the defendant’s reservation of a unilateral power to change terms in the contract without notice and with potentially retroactive effects upon disputes already in process was deemed no promise at all.21 Again, however, it should be reiterated that this is because of what the parties have done, said or written, and so is necessarily here a matter of interpretation of the express intentions of the parties to the putative agreement and is not by virtue of any imposition by State or legislation. Alito extracts a different moral. Turning, somewhat disingenuously, to the authority of Corbin, he cites a truncated quotation to the apparent effect that ‘unwillingness to allow people to disclaim the obligation of good faith … shows that the obligation cannot be implied, but is law imposed’.22 This transpires not to be a quotation from Corbin at all, but rather the invention of his subsequent Editors and an extract from their Supplement. The reference of the quoted passage is to the imposition of an obligation of good faith in sale of goods contracts as regulated by the Uniform Commercial Code (UCC). UCC, section 1:304, imposes an obligation of good faith and being statutory is an imposition that the parties cannot disclaim. The Editors legitimate though limited point is that private agreement should not wholly oust the will of Congress in relation to sale of goods. Ginsberg, of course, does not involve sale of goods and is not subject to the statute. Even if it were, the point that Alito J seeks to extract from the Editors of the Supplement is neither supported by the subsequent discussion nor is it in consonance with Corbin’s text. The Code says nothing of the common law of implied covenants of good faith though the inclusion of such a covenant does suggest that the legislature supported the common law doctrine and insofar as the Code is arguably a synthesis of extant common law with respect to the sale of goods, it suggests an affirmation of the classical doctrine and precedents. More specifically, the Supplement is an updating of the case law that Corbin had used in his discussion of the difference between constructive and implied conditions. Here Corbin states clearly that the implication of 21 Elaine Harris v. Blockbuster Inc., 622 F.Supp. 2d 396 (2009), holding that the contract was unenforceable ‘principally for two reasons: (1) it is illusory; and (2) it is unconscionable’. 22 Corbin (1960) 100.

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a condition is ‘for the reason that the parties have so agreed, but the intention to make it so has not been expressed in sufficiently definite language’.23 Far from viewing good faith as law imposed by the State, Corbin regards the term either as implied from the intention of the parties, and so a subjective part of the contract, or as implicit in the founding juridical virtues of justice and equality, and so objectively a part of the agreement and implicit in the volitional commitment the parties have undertaken. To cite Corbin again, a constructive condition is ‘an event that is operative as such on grounds of fairness and justice’. As later commentators have expressed it, the constructive condition is based upon ‘the intrinsic morality of the objective conception of intention’ and is just as much a part of the presumed intention of the parties as what was actually expressed.24 It is in the old language bonae fidei iudicia, as will be elaborated upon in due course. For the present the relevant point is that if the decision hinges on this interpolation, or at best this out of context recitation of part of an argument made by the later Editors of Corbin with respect to an unrelated point of statutory interpretation, then the motive for the judgment is probably rather far removed from the ostensive ground of dismissal. In sum, when Alito J goes on to conclude that the implied covenant of good faith and fair dealing enlarges the contract and entails application of State imposed regulations relating to airline services and so is preempted under the ADA preemption provision, his reasoning is unimpeded by any sound understanding of the private law doctrine that generates the concept of good faith.

II.

BONA FIDE PROMISING

The purpose of preemption doctrine is to give effect to legislative intent and so with respect to the ADA the spirit of the Act, the intent of Congress, fictive though that necessarily must be, is that the market rather than the State regulates airline commerce. This of course means

23

Ibid. 132. Campbell (2014) 484. In the words of Legatt J, in Yam Seng: ‘A paradigm example of a general norm which underlies almost all contractual relationships is an expectation of honesty.’ If it is not expressly included in the contract it is nonetheless objectively a part of the intentional agreement because the parties cannot provide for every event that may happen and so the language of the contract ‘must be given a reasonable construction which promotes the values and purposes expressed or implicit in the contract’. (n. 3 above, at 139). 24

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that contract should determine rights and duties, that private ordering effectuates the most efficient regime, and that State imposed interferences in the equilibrium achieved by the invisible hand of social interaction and agreement be kept to a minimum. The early form of the ADA, the 1958 Federal Aviation Act, which the 1978 ADA statute amends and renumbers, and which Alito symptomatically fails to mention, indeed contained a ‘savings clause’ which expressly stipulates, by way of clarification, that ‘nothing … in this chapter shall in any way abridge or alter the remedies now existing at common law’.25 The private ordering of an airline’s obligations means precisely that the terms and conditions offered are contractual and volitional, that they are the result of bargained for exchange as interpreted, implemented and where appropriate remedied by the courts. If the interpretations of the courts are deemed preempted because courts as institutions, and judges as State employees, are in some sense external to the parties’ volitional concord, then ‘a plaintiff could have no recourse to the State courts because they would have no jurisdiction to adjudicate the claim’.26 It seems at least unlikely and at most absurd that the legislature intended such ouster of the jurisdiction of the courts. If it follows, even presumably for Alito, that some enforcement of contractual rights is permitted under the statute then the question of the distinctiveness of the doctrine of good faith comes clearly to the fore. Common law favors particulars rather than principles, the concrete case, and by extension custom and use, over code and unitary norm. The early modern common lawyers even favored at times the maxim communis error facit ius, meaning in the main that examples, particular instances, practice rather than theory or principle should govern judgment.27 Part of the hostility to the doctrine of good faith, seen as amorphous and moralizing by Judge Posner, and as an imposition derogating from volitional market forces by Alito, is thus certainly its seemingly abstract character and its generality of application. In Market

25 49 USC s. 1506 (1964), amended and renumbered as 49 USC s. 40120(c) (1994). 26 Ginsberg (2011), n. 7 above, at 1039 (Court of Appeals). 27 St German (1975 [1528]) 162: ‘quod communis error facit ius. That is to say a comen errour makyth a ryght / of whiche wordis as it semyth some trust may be had / that though it were fully admyttyd that the sayde recoueryes were fyst had vpon an vnlawful grounde and agaynste the good ordre of consyence that yet nevertheless for as moche as they have ben vsed of longe tyme / so that they haue ben taken … as for lawe’. On the broad theme of exemplars and judgment, see Baker (2001).

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Street, for example, Posner concludes, in a somewhat divagatory manner, that if we cannot define good faith as altruism, then we are forced to limit the doctrine to preclusion of fraud, either express or constructive. Thus if the plaintiff had not actively concealed a material fact from the other party, if there was no trick or suppression of pertinent information, then there was no bad faith. The reason for this, in Posner’s account, is that the parties, at the time of contracting, cannot have intended such opportunism in the face of unforeseen circumstances. Good faith, in Posner’s account, and as a mode of limiting the ambit and influence of the doctrine, gives effect then to the presumed intentions of consenting parties and these, as defined, are slim to nil, save that they likely preclude fraud in the event of circumstances unforeseen. Alito is similarly concerned to limit and constrain the scope of this equalizing doctrine and is equally likely to be motivated by the desire to limit class actions of this sort, already reproved in AT & T v. Concepcion, and again most recently in Direct TV v. Imburgia, but it is doubtful that such constitutes an adequate reason for the historical and conceptual errors in the circumscription of good faith.28 First and most obviously, the limitation of good faith to fraud, actual or constructive, signals that far from being a unitary concept or extension of common law remedies, the doctrine is plural, transaction based and pragmatic. Good faith and fair dealing do not constitute a general duty but rather, as the example of fraud suggests, comprise a series of situationally specific remedies predicated upon the equitable effort to give effect to the parties’ bona fide intentions as expressed and memorialized in the contract. Good faith mitigates against fraud, it also precludes malice and retaliation in employment terminations, it implies best efforts into output and requirements contracts, it prevents or more technically estops a party who has promised one thing from changing their position and going back on their promise to the detriment of another. Similarly, the case law indicates that a commercial percentage lease cannot be undermined by the lessee evading the common interest in maximizing output or income, as the case may be, and more broadly the principle of implying a promise not to impede or prevent the other party from performing their part of the contract is well recognized. The doctrine of unconscionability implements good faith at the time of bargain, as also do the defenses of mistake and misrepresentation. It takes little further analysis to recognize that moral obligation and material

28 AT & T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011); DirectTV v. Imburgia, 136 St. Ct 436 (2015).

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benefit are also attempts in diverse contexts to bring an element or ‘iota’ of equity and good faith into situations where the promise is for other reasons unenforceable. It may be that on occasion the justificatory rhetoric of judgment expands or rechristens the doctrine into a unity, as for example, in the judicial statement that ‘I believe that in all relationships between civilized persons, there is an obligation not to act in bad faith’, but the appearance of universality is belied by the recourse to the negative and a statement which in effect reiterates the pragmatic ground of equity usually expressed in the maxim ubi ius ibi remedium.29 The second and related point to make is that, in the words of one early twentieth century judge, following in a lengthy tradition: [f]raud is kaleidoscopic, infinite. Fraud being infinite and taking protean form at will, were courts to cramp themselves by defining it with a hard and fast definition, their jurisdiction would be cunningly circumvented at once by new schemes beyond definition. Messieurs, the fraud-feasors, would like nothing half so … well.30

This expansiveness of bad faith practice founds Professor Summers’ excluder thesis and allows at most for a listing of verified types of misbehavior in contracting.31 Older English case law makes the same point. In Allcard v. Skinner, an implausibly named Reverend D. Nihill was spiritual adviser to a plaintiff who transferred all of her wealth to the perhaps more aptly named Skinner who was Mother Superior of a religious order in the circumstances inaptly called ‘The Sisters of the Poor’. Lindley LJ famously observed in the course of deciding that the plaintiff had exercised free will and that in any event laches, meaning passage of time, that: Courts of Equity have always protected people from being forced, tricked, or misled, in any way, by others into parting with their property … [such] is one of the most legitimate objects of all laws; and the equitable doctrine of undue influence has grown out of and been developed by the necessity of grappling with insidious forms of spiritual tyranny and with the infinite varieties of fraud.32

29

Pederson J, dissenting, in Hillesland v. Federal Land Bank Ass’n, 407 N.W.2d 206, 216 (1987). 30 Lamm J in Stonemets v. Head, 248 Mo. 243, 263 (1913), citing Lord Chancellor Hardwicke, in Lawley v. Hooper 3 Atk. 278. 31 Summers (2000). 32 Allcard v. Skinner (1897) 36 Ch. D 145, Cotton LJ dissenting.

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Equity is equality and here, by dint of lapse of time, there was no inequality according to the majority opinion. Be that as it may, and distant though the norm may seem from the practice, the general equitable power to intervene is highly specific and attaches to the wrongdoing and not so directly to the positive principle or moral agenda that the US exceptionalist tendencies so fear. If fraud and its companion bad faith cannot be defined, corralled or delimited in advance, it is necessary to look further for the juristic root of a doctrine of good faith, and indeed of contracts that in civil law were enforced for good faith, termed bonae fidei iudicia, actions on and in assertion of good faith that long pre-date any supposed State imposition in either common law or continental codes. The legal principle at issue is properly depicted as that of keeping one’s word, abiding by one’s promises and so doing what one has committed to doing in joint venture with the other. It is a simple, inaugural and profound principle that returns ultimately to the Twelve Tables and the dictate, dear to Cicero and to Vico, that stipulates simply and succinctly that as it has been said, so shall it be done, and specifically, si quis nexum faciet mancipiumque, uti lingua nuncupassit ita ius esto.33 The root of this general principle is fides, faith in the word as deed, and in Gaius’ Institutes, it takes the form of the sacramentum, the basis of all leges actiones or acts in law. What is important, for an understanding of the much later elaborations of a legal concept of good faith, however, is the simple point that fides, being faithful to one’s word, lies at the ethical root of the juridical system, or as Cicero puts it, fundamentum iustitiae.34 Such fidelity to one’s word precedes and founds the very concept of justice from which law springs, and again resorting to Cicero, has its roots initially in natural law, the ius gentium shared by all, and thus is expressly and most interestingly defined as iudicia sine lege, meaning that it is an action outside law, because prior to law, as part of divine decree, nature and use, and so needing no statement in the lesser form of temporal rules. Good faith is predicated upon equity and nature, justice as such or, in the language of common lawyers, ius quaesitum alteri, the other face of law. Contractual good faith is a species of the genus fides and returns, as the more scholarly jurisprudence is fond of remarking, to the scholastic 33

Twelve Tables (Lex duodecim tabularum) 6.1; Cicero, De officiis 3, 65. Cicero, De officiis 1.23: fundamentum autem est iustitiae fides, id est dictorum conventorumque constantia et veritas. Elsewhere Cicero elaborates not only on constancy and veracity as the root of justice, but also on faith as the doing of what is said. For a general overview, see the excellent Schermaier (2000). 34

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tradition of philosophical thought that founds the reason of law. Whatever the precise genealogy of the civilian assertion of good faith as truth telling, and the sources are diverse and confused, the grounding norm is one of fidelity to one’s word and to promises, even where nothing is to be gained by such keeping of faith. Aquinas follows Aristotle’s Ethics and adds that someone who does not do what he promises, acts unfaithfully, even if they do not lie.35 For the civil law tradition, the various earlier sources gain fragmentary but permanent expression in the Corpus Iuris Civilis and the various statements of fidelity to the word and by extension faith in instruments are well known. It is sufficient to cite Ulpian who begins his discussion de pactis by observing that it is natural equity that founds the principle of human faith – fidei humanae – and dictates that what we agree to do must be done.36 Agreements are to be kept, or as Ulpian depicts slightly later, covenants will be enforced – pacta conventa … servabo – because such is the requirement of good faith. The later discussion then moves to bad faith (iniquum) and the preclusion of malice and deceit, as well as the enforcement of veracity and so of keeping one’s promise where change of circumstances has led the promisor to want to change their mind.37 Moving to the English reception of Roman law, the mos britannicus and its indigenous translations, the didactic principle of an inherited law both divine and human, natural and positive, equitable and secular gains prominent expression in the pedagogic literature of preparatives. Thus, for Fulbeck, ‘religion, justice and law do stand together … And justice must be regarded of the law as the load-star is minded of the seaman, for without it can be no government.’38 The learned Judge Sir John Doderidge is more succinct and cites Justinian’s Institutes, the exemplar of didactic juristic texts, to the effect that ‘law is truly stiled, Rerum divinarum humanarumque Scientia’, immediately after praising Chancellor Fortescue for being ‘excellently learned in Divinity, Philosophy, Law both Ecclesiasticall, and the Lawes of this Realme’.39 Granted the mixed nature of the tradition, theological and philosophical, canon and common law mixed with Latin, law French, civilian maxims and rules, the plural roots of good faith, of keeping one’s word, of being constant and true to promises, at common law should evidently be plural and transdisciplinary. 35

For discussion and citation, see Gordley (1991) ch. 2; and reprised in Gordley (2000). 36 D. 2.14.1 (Ulpian). 37 D. 2.14.7 and D. 2.14.10. 38 Fulbeck (1829 [1599]) 2–4. 39 Doderidge (1631) 34.

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Fulbeck can act as our initial guide in that he provides a suitably pedagogic and splendidly short definition of bona fides, namely ‘sincere conscience’.40 And conscience he defines as cordis scientia, knowledge of the heart, faith in the truth, to which he adds: ‘Surely the light of the truth in an honest mind dimmeth and obscureth all cavils and quillets.’41 Clearly for Fulbeck, the concept of good faith, like justice, is a faculty, an interior sensibility and inner apprehension that is most directly correlated to the conscience and an etymology that can also be given as cum scientia, knowing with (the divinity). The common law root of this derivation is St German who begins his discussion of the law of reason and nature by defining the two as synonyms and then proceeds to stipulate that the true law of nature (lex vero nature) is that of reason: And this is the law which among the learned in English law (inter peritos legis Angliae) is called the law of reason, which natural reason has established among all men so that there is a natural instinct present in all men to observe it.42

It is written in the hearts of men, ‘their conscience bearing witness’, and thus ‘against this lawe prescripcyon statute nor custome may not prevayle’.43 St German references Aristotle’s Ethics and elaborates conscience as equity, and equity as equality. In the subsequent elaboration, conscience mitigates the rigor of law, it resolves ambiguities, fills gaps, supports ‘estopellys’, ordains restitution, and generally: it is understand that the lawe is to be lefte for conscience / where the law judges according to allegations and proofs, that is to say, where a thynge is tried and founde by verdyt against the trouth … where the cause of the lawe dothe cease / the lawe also doth cease in conscience.44

The early jurisprudence was more than sufficient to dictate that in equity conscience required that promises be kept because he that promises ‘is bounden in conscience to performe’.45 To borrow from a slightly later treatise on conscience, where there is any doubt as to the scope, meaning or duty occasioned by a contract, veniunt in bonae fidei judiciis, namely

40 41 42 43 44 45

Fulbeck (1829 [1599]) 198. Ibid. 86–87. St German (1975 [1528]) 14–15. Ibid. 15. Ibid. 119. Ibid. 229.

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good faith will be the ground of interpretation and judgment as established by prescription and common use.46 The bonae fidei contracts, distinguished in classical law from contracts stricti iuris, were a compact construed according to the intentions of the parties, with ambiguities, gaps and scope of terms being determined by reference to the context of agreement, usage and norms of interpretation that presumed good faith on the part of the promisor.47 The interpretation of the contract ex bona fide determined that equality was considered in addressing the promise and its performance and that the spirit as well as the letter was taken into account. It is this sense of good faith promising that later law incorporates into the concept of conscience and the enforcement of contracts ‘as gude faith and conscens requyer’.48 Even a positivist such as Hobbes has no difficulty in expounding the concept as unproblematic, Chapter 14 of Leviathan roundly stating the principle of executory contract as being where ‘both parts may contract now, to performe hereafter: in which cases, he that is to performe in time to come, being trusted, his performance is called Keeping of Promise, or Faith; and the fayling of performance (if it be voluntary) Violation of Faith’.49 In sum, when later law variously picks up the doctrine of good faith as the ground of construction, interpretation and enforcement of agreements it is the equity of keeping one’s promise, the conscience that dictates fidelity to the word and to the instrument in its expanded and contextual sense that appertains. Lord Mansfield, who famously abrogated the concept of consideration, did so not on whim or invention but through acknowledging that the principle that underlaid the requirement of consideration was that of good faith and the need to show an intention to promise, causa or conscientious commitment.50 For Mansfield, consideration was simply evidence of good faith commitment, of an obligation ex bona fide, and provided that there was an equity underlying the promise, even an iota, then ‘it has long been established that where a person is bound morally and conscientiously to pay a debt, though not legally bound, a subsequent promise will give a right of action’.51 In other areas

46

Taylor (1660) Bk 3 ch. 6 rule 12.2 (404). See Buckland (1975) 678–82. 48 For the early common law history and distinctions, the principal text is still Simpson (1987) 396–400. 49 Hobbes (1950 [1652]) Part 1 cap. xiv (110). 50 Pillans and Rose v. Van Mierop and Hopkins (1765) 3 Burr. 1663. The view returns in the common law tradition to Thomas Hobbes. See Atiyah (1979) 167–69; Ibbetson (1999) 215–17; and more recently Hogg (2011) 142–47. 51 Lee v. Muggeridge (1813) 5 Taunt. 36. 47

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of contracting, the same principle of equitable commitment, of doing what one promises, directly supports enforcement, for example, of promises to hold auctions ‘without reserve’, ‘material benefits’, waivers, notice requirements, interpretation contra proferentem, estoppels in their diverse manifestations, and the equity of quasi-contractual restitution more generally.52 The strongest example is perhaps the one that Mansfield elaborates in Bexwell, namely that of bona fide bidding. In that the bidder is simply offering and has no contractual relationship with the auctioneer who solicits their offer, the bidder is bound in good faith, collaterally, ex contractu, which is here to say in an enforceable manner, to the truth of their promise.53 In historical terms, from classical Roman to contemporary common law, good faith promising is the unspoken assumption behind the other doctrines which, stricti iuris, police the parameters and enforceability of the agreement. The point is that it is not necessary to adopt a theory of contract as promise to recognize that underpinning and supporting the boundaries of contracting and the ethic of promise and performance lies the tacit substrate of all volitional obligation which dictates that faith be kept in words, that pacta sunt servanda, and that, to paraphrase St Paul, the fulfillment of the law is equity. Not only does the volitional obligation arise ex bona fide, whether or not this is in any specific application of the doctrine recognized, but so too where strict law runs out, where interpretation, emendation or application in unforeseen circumstances has to be determined, good faith again will come to the fore and play the part of the basic and unwritten law. In the mos americanus, US common law, the same sources and the same principles are applicable, and a brief example can make the point much better than any theory. In Laidlaw v. Organ, the question was whether there was any duty on the part of the buyer of tobacco to inform the seller that a recent change of circumstances, the signing of a peace treaty, was about to radically change the price of the good.54 Tobacco prices had been depressed for some time due to a blockade of American ports by the British. The buyer had knowledge of the signing of the Peace Treaty of Ghent, prior to its public announcement the next day, but when asked by the seller if ‘there was any news which was calculated to enhance the price or value of the article’, the buyer did not respond. What is important about the case is not the decision on the facts, which is 52 Bexwell v. Christie (1776) 1 Cowp. 395; and for contemporary law, Restatement (Second) of Contract, s. 28; Uniform Commercial Code, s. 2:328. 53 See, e.g., Barry v. Heathcote Ball & Co. [2001] 1 All ER 944. 54 Laidlaw v. Organ (1817) 2 Wheat. 178.

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relatively uncontroversial, stating that if there had been concealment, then there had been an exercise of bad faith misrepresentation, but rather the logic of the decision and the sources that are cited in argument. Ingersoll, counsel for the plaintiffs, in error, starts from the French treatise of Pothier and the principle, dear to Selden amongst others, that the concept of keeping to one’s bargain, pacta sunt servanda, is based upon the principle ‘fides est servanda. The parties treated on an unequal footing’.55 There follows a lengthy attempt to reconstruct the history of the doctrine of good faith, and its centrality, indeed its place as the synonym of contract (bona fide) itself. This leads to citation of a fragment from Florentinus in the Digest of Justinian, where the jurisconsult states that good faith requires that ‘a vendor must not use obscure speech, and also must avoid insidious concealment’.56 Then follows a lengthy rehearsal of Cicero’s arguments in De Officiis, in which he starts out from the law of the Twelve Tables and the maxim that what is said must be done, and then poses several hypothetical cases, including that of a corn merchant who arrives in Rhodes during a time of great scarcity, knowing that there are several other fully loaded ships arriving soon. Can he sell his corn at the higher price occasioned by the corn famine? Rehearsing the views of the stoic philosopher Diogenes and his pupil Antipater, Cicero concludes that good faith requires that the fact of other ships arriving soon at Rhodes cannot be concealed from the buyers, stating that ‘concealment consists in trying for your own profit to keep others from finding out something that you know, when it is in their interest to know it’.57 It is this Ciceronian logic that Chief Justice Marshall adopts in his per curiam decision. The range of sources and the depth of analysis of moral and legal principle in the case is one thing, the simple rule that one is entitled at law to rely upon the good faith of the interlocutor’s words and behavior is another. The maxim fides est servanda is so primary and basic to contract that it scarcely merits reiteration, in the same sense that one does not need to expound the rules of grammar when proffering discursive deliberations. What was true, however, of the US Supreme Court at the turn of the nineteenth century transpires to be less evident today. Surprising though it is for Justices to forget both principle and the law, this is what appears to have happened.

55 56 57

Ibid. 182. The reference to Pothier is to the French text of De vente. Digest 18.1.43. Cicero, De Officiis, Book III ch. iii (id est celare …).

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III.

CONCLUSION: THE IMPLICATION OF GOOD FAITH

The significance of the promise, and of the judgment, ex bona fide, for the purposes of analyzing the decision in Binyomin Ginsberg lies in a doctrinal history which for centuries of the private law of obligations, both civilian and common, has founded enforcement, implicitly and often explicitly, upon the good faith intentions of the parties. It is not State regulation, administrative imposition, or any other apparently insidious and improper form of political will that dictates that bad faith be excluded from the formation and performance of the contract. It is rather and in fact much more simply the legal meaning of the words used by way of promise and agreement. The judgment of good faith, going back ultimately to the action bonae fidei iudicia, recognizes that for all the importance of formalities, and whatever the virtues of the restraining doctrines of literalism and its attendant restriction of obligation to the ‘four corners’ of the instrument, it is still necessary to have faith in such instruments (de fide instrumentorum in the old language of the Digest) and so to attend to the implicit dimensions of the agreement, both to what is written and what is meant.58 It is in the latter dimension that the question of intent, the scope of volition, and the application of agreement to future and unforeseen circumstances becomes central to the project of contract doctrine. European common law has increasingly returned to the concept of good faith as the mechanism of interpretation of the contract as the vehicle of express and implied meanings. This is hardly new law in that the implication of what is necessary to making the contract effective has always been an intrinsic aspect of construction – ut res magis valeat, as the older courts were wont to say. Sometimes, such construction has expressly taken the form of giving effect to a promise by circumscribing and defining it by reference to good faith, but it has equally been essential that the logical presuppositions of exchange are on occasion excavated and enforced. Thus in Shadwell v. Shadwell, an apparently social arrangement between an uncle and his nephew, in which the former promised the latter an annuity upon marriage to his fiancée, was made actus legitimi, a legally enforceable promise by implying that the nephew promised in his turn to bring forward the date of marriage and so

58 Digest 22:4 (de fide instrumentorum), a rubric lengthily annotated in Pierre Legendre’s work. For discussion see Goodrich (1997).

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changed his economic position in faith that the promise be kept.59 In Attilio de Cicco v. Joseph Schweizer, Cardozo J went even further and in a comparable case where the date of the wedding had already been set implied a promise that the affianced not cancel the nuptials.60 In myriad other instances where good faith is nowhere expressly present, the implied sense of the bargain gives legal meaning or business efficacy to the promises. This is done on the basis of what the promise implies and if we borrow from the modern law of contract, the test for such implication is the presumed intentions of the parties, rather than the letter of the agreement: The law has outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal. It takes a broader view to-day. A promise may be lacking, and yet the whole writing may be ‘instinct with an obligation’, imperfectly expressed. If that is so, there is a contract.61

To the same effect, in the English decision relied upon by Cardozo, The Moorcock, the court finds a promise between the lines: An implied warranty, or, as it is called, covenant in law, as distinguished from an express contract or express warranty, really is in all cases founded upon the presumed intention of the parties, and upon reason.62

The implied term is thus internal to the promise and intrinsic to the volitional agreement, the voluntary undertaking of the promisor. More recent case law makes the point even more forcefully in elaborating the meaning of the agreement by way of reference to the ‘reasonable expectations’ of the parties, with Lord Hoffman famously pronouncing that in ascertaining the meaning that the memorandum would have for a reasonable person in the position of the contracting parties, account be taken of: ‘absolutely anything which would have affected the way in which the language of the document would have been understood by a

59 Shadwell v. Shadwell (1860) 9 CBNS 159. I am here borrowing the example, though it is a very familiar one and cited constitutively in Hamer v. Sidway, 124 N.Y. 538 (1891), from Collins (2003) 31: ‘At an implicit level, however, we can discern the operation of a convention that wealthy relatives might seek to encourage young men to marry and settle down by making it financially possible or even advantageous for them to do so.’ 60 Attilio De Cicco v. Joseph Schweizer, 221 N.Y. 431 (1917). 61 Wood v. Lady Duff Gordon, n. 20 above, at 91. 62 The Moorcock (1889) 14 PD 64.

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reasonable man’.63 Lexicon and syntax provide no more than a start to the process of construction of the contract as a whole in its proper factual matrix and commercial context. These provide the basis for construing the agreement as including what reasonable people would incorporate into the writing by way of giving it sense and application. Here, in the words of Justice Legatt, ‘[i]mportantly, for the present purposes, the relevant background against which contracts are made includes not only matters of fact known to the parties but also shared values and norms of behavior’. Such assumed general norms will include an expectation of honesty and equally critically, trust, ‘[y]et it is seldom, if ever, made the subject of an express contractual obligation’.64 In elaborating the meaning of agreement and the content of promises as dependent upon and expressive of the reasonable expectations of the parties, the doctrine of good faith effectively disinters the legal sense of agreement, of the ‘meeting minds’, the congregatio mentem, that law seeks to effectuate. This is an objective rather subjective construal of intent and, to return to Justice Legatt: This follows from the fact that the content of the duty of good faith is established by a process of construction which in English law is based on an objective principle. The court is concerned not with the subjective intentions of the parties but with their presumed intention, which is ascertained by attributing to them the purposes and values which reasonable people in their situation would have had.65

The statement may be that of an English court but the same doctrinal principle is evident in US contracts and gets reiterated as a matter of course in the quotidian interpretation of agreements.66 In White City, to take a reasonably current example, the question was whether a commercial lease which precluded the landlord from entering any new leases with businesses that primarily sold sandwiches, should be interpreted as disallowing a new lease to a Mexican-style restaurant chain selling

63 Investors Compensation Scheme v. West Bromwich Building Society [1998] 1 WLR 896, 912; and reprised in Attorney General for Belize v. Belize Telecom Ltd [2009] 1 WLR 1988. 64 Yam Seng, n. 3 above, paras 133–34. 65 Ibid. para. 145. 66 The textbook cases are Lucy v. Zehmer, 84 S.E.2d 516 (1954); and Embry v. McKittrick, 105 S.W. 777 (1907). For a more recent example with a strong element of good faith implied into the finding that a contract existed, see Wrench v. Taco Bell, 256 F.3d 446 (2001).

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burritos, quesadillas and tacos.67 In determining that tacos were not sandwiches, because they are made from a single tortilla rather than two slices of bread, it was the express purpose of the court ‘to construe the contract as a whole in a reasonable and practical way, consistent with its language, background and purpose’.68 It is evident, in conclusion, that if the implication of terms, and the implied covenant of good faith in particular, is understood as objectively constituting part of the agreement because it is intrinsic to the proper construction of the contract, then the notion in Ginsberg that preemption precludes good faith as State imposed law takes on a different and less justifiable hue. Corbin in the extract cited did not mean that the State imposed the good faith requirement but rather that the law implies a duty internal to the promise that the party made. It is imposed only because the party in question has gone back on what they promised or has failed to keep faith with their words. The objective construction of the meaning of the agreement constitutes a subjective imposition in that it constrains the breaching party from changing their mind or going against the promise that was made. At a doctrinal level, the decision in Ginsberg is expressive of a growing tendency towards US exceptionalism in which policy overturns principle and the immediacy of pragmatics dispenses with doctrine. In conclusion, I will argue that there are two principal objections to such a usurpation of jurisdiction. The first is perhaps somewhat arcane and is certainly formal. The exceptionalist disavowal of doctrine undermines what remnants of legitimacy contemporary law still harbors. It does so by removing itself from the scholarly discourse, the intellective and intellectual institutions that to a limited degree anchor law in a deliberative forensic process that is at least rhetorically distinct from the other liberal sciences and to some extent socially isolated from the journalism of policy and the reactive unreason, the attention grabbing low impact catharsis of intrinsically evanescent new media. The theatre of law loses its impact and effect, it separates from justice as equality, if the three unities of legal drama, time, place and ceremony, are eviscerated by the demands of policy. In Ginsberg the policy claim, insofar as it can be divined, is that of acceding to the Congressional will to promote a free market in airline services. To effectuate this policy the Court interprets the ADA preemption clause in such a way as to effectively eliminate the freedom of the market in favor

67

White City Shopping Center v. PR Restaurants, LLC, 21 Mass. L Rep. 565 (2006). 68 Ibid. 572.

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of adhesion, the corporate imposition of unilaterally drafted and implemented boilerplate contracts that have never been read let alone volitionally agreed to by any sentient contracting subject.69 The invocation of the freedom of the market in fact masks an Orwellian unilateralization of practice, and a pattern of constraint and potential overreaching. The second objection is more substantive. The decision is wrong. US exceptionalism here means doctrinal imprecision or ‘imperite’ judgment. As I have endeavored to show at some length, the implied covenant of good faith is a term that is doctrinally at the heart of all agreements and for significant periods of time, for principal figures in the development of the common law tradition, it was a synonym for contract as such. Good faith was what the courts enforced and bona fides were the cause of action in law. An implied term is one which gives effect to the moral sense of the vir bonus that the legal subject is in law taken to be. Such a subject embraces their promises and sticks to the ethical meaning of their words as stated. They act ex bona fide, out of good faith, and are judged bonae fidei, because the rendering of justice must give effect to the virtue and ethic of the good judge, which is to say the moral arbiter of a law that even in jurisdictions defined by case law, ius non scriptum, is contained in the books or is not law at all. To imply is to extricate, construe and elicit the best meaning available, and in Ginsberg the Court failed to do this. It failed to recollect not only the proper meaning of the implied covenant of good faith, but also in the process failed to apply the proper sense of implication which, in its etymological and so strict meaning, itself has a primary connotation of ‘to infold, entangle, entwine, envelop, enwrap, embrace and clasp’. To imply is by extension to hold in one’s arms, to engage and not to distance and yet the Court sought here only to create distance and to disengage from the reasons and routines of established doctrine, proven methods and settled law. In misunderstanding the history and the doctrine, the court itself slipped dangerously close to a species of decisional bad faith all of its own.

REFERENCES Atiyah, P. (1979) The Rise and Fall of the Freedom of Contract. Oxford: Oxford University Press Baker, J.H. (2001) The Law’s Two Bodies. Oxford: Oxford University Press Buckland, W.W. (1975) A Text-Book of Roman Law. Cambridge: Cambridge University Press 69 On class actions, see Gilles and Friedman (2012); on adhesion, Radin (2012); Kim (2013).

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The wrecking ball 407 Burton, S. (1980) ‘Breach of Contract and the Common Law Duty to Perform in Good Faith’, 94 Harv. LR 369 Campbell, D. (2014) ‘Good Faith and the Ubiquity of the “Relational” Contract’, 77 MLR 460 Collins, H. (2003) ‘Discovering the Implicit Dimensions of Contract’ in D. Campbell, H. Collins and J. Wightman (eds), Implicit Dimensions of Contract. Oxford: Hart Publishing Corbin, A. (1960) Contracts, 1999 Supplement vol. 3A ss. 622–771. Lawrence Cunningham and Arthur Jacobson (eds), St Paul: West Publishing Doderidge, Sir J. (1631) The English Lawyer. London: More Fulbeck, W. (1829 [1599]) Direction or Preparative to the Study of Law. London: Clarke Gilles, M. and Friedman, G. (2012) ‘After Class: Aggregate Litigation in the Wake of AT & T Mobility v Concepcion’, 79 Chicago L Rev. 623 Goodrich, P (1997) ‘Introduction: Psychoanalysis and Law’, in Law and the Unconscious: A Legendre Reader. London: Macmillan Gordley, J. (1991) The Philosophical Origins of Modern Contract Doctrine. Oxford: Oxford University Press Gordley, J. (2000) ‘Good Faith in Contract Law in the Medieval ius commune’ in S. Whitaker and R. Zimmermann (eds), Good Faith in European Contract Law. Cambridge: Cambridge University Press, 93 Hobbes, T. (1950 [1652]) Leviathan. Oxford: Oxford University Press Hogg, M. (2011) Promises and Contract Law. Cambridge: Cambridge University Press Ibbetson, D. (1999) A Historical Introduction to the Law of Obligations. Oxford: Oxford University Press Kim, N. (2013) Wrap Contracts. Oxford: Oxford University Press McKendrick, E. (2014) Contract Law. London: Macmillan Posner, R. (2005) ‘The Law and Economics of Contract Interpretation’, 83 Tex. L Rev. 1581 Radin, M. (2013) Boilerplate: The Fine Print, Vanishing Rights, and the Rule of Law. Princeton, NJ: Princeton University Press Resnik, J. (2015) ‘Diffusing Disputes: The Public in the Private of Arbitration, the Private in Courts, and the Erasure of Rights’, 124 Yale LJ 2804 Schermaier, M.J. (2000) ‘Bona Fides in Roman Contract Law’ in S. Whitaker and R. Zimmermann (eds), Good Faith in European Contract Law. Cambridge: Cambridge University Press, 63 Selden, J. (1868 [1689]) Table Talk. London: Murray Simpson, A.W.B. (1987) A History of the Common Law of Contract. Oxford: Oxford University Press St German (1975 [1528]) Doctor and Student. London: Selden Society Summers, R. (1968) ‘Good Faith in General Contract Law and the Sales Provisions of the Uniform Commercial Code’, 54 Va. L Rev. 1145 Summers, R. (2000) ‘The Conceptualisation of Good Faith in American Contract Law: A General Account’ in S. Whitaker and R. Zimmermann (eds), Good Faith in European Contract Law. Cambridge: Cambridge University Press, 118 Taylor, Dr J. (1660) Ductor Dubitantium or The Rule of Conscience. London: Roiston Waterhouse, E. (1663) Fortescutus illustratus, or, A commentary on that nervous treatise De laudibus legum Angliae, written by Sir John Fortescue Knight. London: Roycroft

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17. Technological contracts Massimiliano Granieri

I.

INTRODUCTION

Virtually any aspect of law is influenced by technological progress. This has been true over time; after all, the very history of mankind witnesses the interaction between technology and legal institutions. But it holds true as well in space, because the transnational vocation of technology sooner or later turns into a challenge for all legal systems and their ability to govern social relationships that happen within areas subject to state sovereignty. Contract law is no exception to such impact.1 The massive emergence of technology in the realm of contracts and contract law has been interpreted mainly in terms of transaction costs reduction, since technology is instrumental to form agreements in a more expeditious way, regardless of the distance between contractors.2 In this respect, the advent of technology in contract law has too often and too simplistically been considered the same as e-commerce.3 1

The impact that technology has on some forms of property (rather than on contracts) is probably more straightforward, such as intellectual property, which is truly the creation of technology and would not exist in nature. The inner link between contracts and property should immediately prompt the suggestion that the two aspects are inevitably related, as will become clear in discussing UCITA (see below). 2 Addressing all aspects of contract law that might be impacted by technology is beyond the reach of this chapter. For more general contributions see, inter alia, Kalemi and Ndreka (2012); Wang (2010). 3 An area profoundly affected by technology and related to contract performance of monetary obligations is that of payments. Many legal systems have started dealing with the ensuing problems, eventually with the aim of easing the resort to alternative forms of payment, while granting an adequate level of reliability for payments made by electronic means. The European Union adopted Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC [2007] OJ L319/1. The last frontier at the intersection of technology and the law of payments is the challenge posed to governments by ‘bitcoins’.

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All those may prove very partial views of the phenomenon, but they have been the major driving forces within legal systems to adjust traditional contract law in order to support the use of technology in connection with perfecting and executing transactions. Nevertheless, the implications of technology’s pervasiveness are as profound on contract law as they are on contracts as social institutions and go well beyond modifying the way offer and acceptance meet to form an agreement. If it is true that over time new advancements in technology have represented a source of betterment for people, it is no less true that the relationship between technology and contract and its implications for contract law are not a recent acquisition. Contracting has always been impacted at several levels by the use of novel techniques and contracts evolved with the development of modern forms of communication.4 An immediate consequence of such observation is that the interaction between technology and contract cannot be described in absolute terms; it is rather historically contingent. In every age of human development available technologies have been instrumental to some aspects of transacting. We face now an era of extraordinarily rapid technological change and the emergence of pervasive digital technologies is influencing the meaning of contract more than in the past. It remains to be seen whether the interaction between technology and contract today is different in nature from what happened in the past or whether it is just a matter of magnitude.5 Needless to say, one view or the other has consequences in terms of regulatory approaches. 4 Looking back to ancient law, technology was trivial but still instrumental to contracting, as is shown in Monateri (2000) 530, when the author recalls that under Roman law the stipulatio required formalities to take effect and those formalities where carried out by technologies: a pair of scales and a piece of copper, a formula had to be pronounced and certain gestures executed. Symbols, procedures and technical objects mimic or replace consent; so it was, so it is now. 5 At a more general level, the issue has been whether new technologies and the Internet require a radically new regulatory approach that begins to remove old rules or if existing rules can be conveniently adjusted, since technological advancements did not introduce anything radical or meaningfully different (a position that has been referred to as ‘cyberfallacy’). See Reed (2000) 2 (‘The Cyberspace fallacy states that Internet is a new jurisdiction, in which none of the existing rules and regulations apply’). Famously, Easterbrook (1996) asserted that passing special legislation for electronic contracting would have been tantamount to suggesting an unlikely ‘law of the horse’. Lessig (1999b) argued that such law could possibly be justified. Concord, Matwyshyn (2013) (pointing

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The most advanced legal systems showed some activism in regulating ‘electronic contracts’, as a synonym of a new model of commerce, when digital technologies brought about further challenges to traditional contract law. Regulation was pursued with different intensity and for different reasons, from the attempt to support national industries, to the need to adapt to international standards, to the demand for consumers’ protection. In all instances, regulatory responses have been to some extent not completely aware of the real impact modern technologies have on consent as the core component of contracts and on contracts as the pillar of individual autonomy.6 A further, sometimes neglected, consequence of this proposition is also that the interaction between technology and contract and its implications for contract law must be seen necessarily as influenced by approaches that are taken by judges, legislators and governments of different legal systems. Technology and contracts is a binomial that calls for a compelling comparative analysis, that provides the observer with a comprehensive view of local responses to common universal problems and developments posed by the use of technology in contracts. In contract law, common law and civil law legal families are probably still the most active contributors in terms of doctrines, principles and cases;7 comparative law studies have to move along the lines drawn by those systems also as far as technological contracts are concerned. The rest of this chapter is organized as follows. Primarily, the interactions among technology, contracts and contract law are briefly clarified; they will remain problematic nonetheless, but it is necessary to agree on some basic assumptions before moving to the legal discourse. out that an inconsistent approach by courts to electronic contracting caused an undesirable ‘law of the zebra’). The analysis of Moringiello and Reynolds (2013) 455, confirms their conclusions that ‘courts recognized that the legal problems posed by new technology were no different than those that had been presented in the preceding century and, therefore, judges rejected efforts to change the basic law of contracts’ (footnote omitted). On the resiliency of contract law see also, Kidd and Daugthrey (2000); Sommer (2000), and, for Europe, Kryczka (2005) 155. A partially different view, following an economic perspective, has been taken by Katz (2004) (arguing that changes at the level of application of law would be justified by the different way in which transaction costs come out in electronic settings as opposed to the brick-and-mortar world). 6 As Prof. Farnsworth pointed out, ‘the eminent position of contracts is also due to their central role for the ordering of market relations, especially in the heyday of liberalism, and to the symbolic importance of private agreements for the ideology of individual autonomy’; Farnsworth (2006) 901. 7 Ibid. 900.

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Secondarily, a comparative overview of sources of law will be provided, discussing the different approaches that states and international institutions have followed in regulating electronic contracting with a view to promoting cross-border transactions. Needless to say, electronic contracting and commerce are primarily subject to the laws created by the same players of the market; state regulations follow. A specific paragraph will deal with the impact that technology has had on formation of contracts and on the mechanism of offer and acceptance in the main legal systems, from traditional approaches of contract law about exchange of consent to modern techniques where a contract is formed even though the element of consent has lost its centrality and is replaced by formalities or simply presumed. A further paragraph will address what is probably the most innovative aspect of modern digital economies, where technology is no longer a mere tool to perfect transactions, but it becomes the subject matter of the agreement. Such evolution in the landscape of contract law proves problematic, since technology as property can avoid state regulation and can impose one party’s will over the other. This is probably one aspect that makes scholars doubt the ability of traditional contract law to adapt to the changing technological scenario and justifies the call for specific regulations. The last paragraph concludes by envisioning a possible evolution in the relationship between technology and contract law and provides some critical remarks regarding overly invasive regulatory approaches which some legal systems seem eager to take with respect to electronic contracting.

II.

FRAMING THE ISSUE OF RELATIONSHIPS AMONG TECHNOLOGY, LAW AND CONTRACT LAW

Dealing with technology and contract law is by no means an easy task. Any discourse is premised on the logical interaction between three different entities of the real world, such as technology, contracts and contract law. Before moving forward, in a truly comparative perspective, in the observation of what legal systems have done in regulating contracts, it would not hurt to improve our understanding of the interplay of technology, contracts and contract law. Contracts are primarily social institutions. As such, with obvious exceptions, they are not a product of authority at central level, but the result of the free exercise of individual autonomy at the most decentralized level. Individual consent is typically the mechanism that justifies the

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binding commitment of the parties and contract law has developed mostly by hinging on this very element of consent, whether as promise for consideration or as minds that meet at some point in time and space, depending on the preferred narrative of contract theory. Contracts as facts of the real world do have their own spatial and temporal existence and the exercise of individual autonomy in principle can go a long way towards abstracting the agreement from any specific legal system and making it self-enforcing.8 At the broadest level, technology is any means that allows mankind to reach a given goal.9 In this respect, technology is in principle the outcome of decentralized individual choices to solve problems, a feature that makes technology very close to contracts. To the extent that technology remains available to individuals, and not exposed to some sort of centralization or unilateral or oligopolistic control, it can be seen as a form of free expression.10 Also, technology as a fact does not have intrinsic limitations in terms of space and time, even though states sometimes aim at ‘controlling’ the use of technology by trying to reinstate space limitations (a point that will be discussed further in paragraph 5). As an expression of human knowledge, technology can be as boundless as the public domain typically is. Essentially, contracts can be considered a social technology whose aim is to solve the problem of allocation of resources among humans. Both contracts and technology are exposed to a risk, which will be dealt with in more detail later in this chapter; from the expression of a decentralized private ordering, they can either end up serving the ends of a narrower set of individuals and institutions (thus subject to more intense centralized control) or become unilateral (that is, more concentrated in the hands of one party over the other11). Both contracts and technology can be subject 8 This is particularly true for business-to-business transactions in transnational context, when the aim of the parties is, above all, to neutralize the risks associated with national regulation and judicial power over their relationship. 9 This is one of the broadest definitions proposed by Arthur (2009) 27. 10 It is not a coincidence that open source software communities tend to see source code as freedom and oppose any sort of control or centralization of the technology that, according to their views, can be achieved through traditional property rights. For an understanding of what ‘property’ means in open source see Raymond (2001) 65. The most authoritative view has been expressed by Lessig (1999a) passim. 11 Examples would be unilateral predisposition of terms and conditions in standardized form contracts and systems for the management of digital rights. This topic will be dealt with later in more detail; here are instances in which

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to regulation by states, with the purpose of limiting power or, on the other side, encouraging or supporting decentralized individual choices. If we intend contract law as part of state law, then the differences with contract and technology as facts are straightforward. Law (both as statutes or as the product of courts) is a centralized and authoritative manifestation of public power, subject to the same limits of state sovereignty. There might be other important differences, but this is sufficient to highlight the sheer contrast between contract law, on the one side, and contracts and technology, on the other. The ambition of states to regulate contracts has always clashed with the extra-territorial vocation of commerce. Technology has been instrumental to facilitate communication and now electronic contracting is one of the most serious challenges to the authority of nation-states, because Internet technologies make the exchange ubiquitous and can be used to delocalize contracting activities with respect to applicable law and jurisdiction.12 Quite paradoxically, national legislations can be detrimental to electronic contracting, since fragmentation can increase transaction costs and offset the advantages technology offers to commerce. Exploring those interactions is a premise to understanding the regulatory efforts of states and, first and foremost, the initiatives of model laws that the United Nations Commission on International Trade Law has undertaken in the last 20 years, when digital technologies became the technology and contracts, in principle available to both parties, are in fact used by one of them to limit the freedom of the other. 12 In Europe, Regulation (EC) 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (‘Rome I’) [2008] OJ L177/1 provides default rules on applicable law to consumer contracts and in this respect art. 6.1 specifies that it applies to contracts used by a professional that ‘by any means’ (thus, including electronic means) directs her commercial or professional activities to several countries. Jurisdictional matters are dealt with under Council Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters [2001] OJ L12/1, which is being replaced by Regulation (EU) 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters [2012] OJ L351/1; Regulation 1215/2012, art. 17(1)(a) (corresponding to Regulation 44/2001, art. 15(1)(c)) also refers to ‘any means’. Of course, delocalizing contracts through Internet technologies is also a way to escape prohibitions and trade in unlawful objects; it is the case of counterfeited goods, as well as the case of the black market that uses the backbone of the Web (actually the so-called ‘deep Web’) to enable trafficking. One example of such unlawful online marketplace is Silk Road, also known as the ‘Amazon.com of illegal drugs’).

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dominant technological paradigm and unfolded a number of problems and opportunities. Furthermore, the differences in nature between technology and contract law will help us understand the challenges that technology is bringing to the world of contract.

III.

NATIONAL SOURCES AND GLOBAL CHALLENGES: A NEW LEX MERCATORIA FOR ELECTRONIC CONTRACTING?

Regulation of electronic contracting has followed a parallel pattern at international as well as at domestic level. The common trait to all forms of legislative intervention has been the idea that there were legal obstacles at national law level that would prevent the full exploitation of the opportunities offered by electronic contracting, particularly in transactions involving foreign parties. Laws and model laws have been adopted to facilitate electronic contracting. The need to occasionally fix some aspects and to ease the resort to technology for contracting explains why in most cases legal systems have followed piecemeal solutions, rather than holistic approaches; old rules have been amended or new rules introduced (particularly in the field of offer and acceptance) only to the extent it was necessary to facilitate electronically mediated exchange.13 At the same time, the realm of electronics and the Internet has been regarded initially by market players as an area suitable for strong self-regulation and freedom from state intervention, one remarkable example being that of standard setting for electronic communications and for the creation of the information infrastructure that makes the Internet possible.14 The efforts of firms, developers and technology gurus in building a stateless domain subject to self-regulation have been a common trait of the market in the last decades and has followed an even earlier pattern aimed at the spontaneous creation of what is now called the ‘new’ lex mercatoria.15 13

Referring to Canadian legislation, Savirimuthu (2005) 116, notes the enactment of such regulations ‘reflects the growing domestic and international consensus among policymakers and industry that traditional ideas like agreement, autonomy and consent cannot remain unaffected by the increasing interaction between technology, law and society’ (footnote omitted). 14 Among others see Reidenberg (1998) 553; Uy (2003). 15 There can be different views about the intensity of deregulation in cyberspace and one of those could be anarchy, as advocated by one of the radical

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Although there has been a growing interest and excitement by national legal systems worldwide to regulate and facilitate electronic contracts, the main actors remain common law and civil law countries, epitomized (with a great deal of approximation) by the United States and Europe, that have followed an intuitively different approach in the regulation of contracts, although solutions to specific problems (e.g., formation of contracts or validity of digital signatures) may occasionally converge. All systems have been influenced to a certain extent by the actions of international agencies. One of the first signs of regulatory activism came from the United Nation Commission on International Trade Law (UNCITRAL), adopting in 1996 the Model Law on Electronic Commerce as soft law.16 The 1996 Model Law (and its amendment in 1998) is the first instance in which a legislative text adopts the principles of non-discrimination, technological neutrality and functional equivalence, that later became the source of inspiration for a number of countries.17 A further Model Law followed in 2001, on electronic signatures, to enable and facilitate the use of electronic signatures by introducing the principles of technical equivalence between electronic and handwritten signatures.18 Importantly, through the impulsion of the United States given to UNCITRAL, the 1996 Model Law and its principles came to be the basis of the Convention on the Use of Electronic Communications in International Contracts, adopted by the General Assembly of the United

gurus of the Internet; see Barlow (1996). As far as open source communities are concerned, see Marrella and Yoo (2007) 813 (discussing this new form of private ordering and its interdependencies with state laws). Quite interestingly, an area that is left apparently uncovered by state legislation is that of consumer-toconsumer contracts, arranged by online platforms. A first contribution to the understanding of problems and solutions arising in that context can be found in Guadamuz González (2003). 16 For an account of international sources of electronic contracting see Frignani and Torsello (2010) 247 ff. More specifically, on the work of UNCITRAL, Herrmann (1999) 45. 17 For a complete list of countries that implemented the Model Law and the subsequent UNCITRAL Convention see UNCITRAL (2009) 38, n. 88; for the Philippines, see Uy (2003) 224. Most remarkably, the work of UNCITRAL formed the basis for US legislation; see Poggi (2000) 238; Winn and Haubold (2002) 578 and below. 18 The UNCITRAL Model Law on Electronic Signatures was adopted on 5 July 2001.

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Nations on 23 November 2005.19 The purpose of the Convention is clear in the Preamble: uniform rules would remove obstacles to the use of electronic communications in international contracts and would enhance legal certainty and commercial predictability. The Convention was deemed necessary to overcome a gap in the Convention on the International Sale of Goods, that would otherwise be applicable also to electronic transactions; its article 13 referred to ‘writing’ as including telegram and telex, but not other, more sophisticated and technological means.20 Importantly, those first legal sources remain at international level and represent a guidance for states to adjust their legislation and achieve some level of uniformity as far as cross-border transactions are concerned. The fortunate strategy of the drafters of the UNCITRAL legislation was to follow a policy of technological neutrality, just providing legislative criteria to establish a generic functional equivalence between traditional handwritten signatures and the new electronic ones.21 In this way, a change in technological paradigm does not make the legislation obsolete. A.

European Normative Framework

The European Union and the United States each followed original, and only partly converging, approaches, which have also been influenced by the institutional peculiarities of each legal system.22 A final equilibrium 19 See Boss and Kilian (2008); Martin (2008) 471; Fiorelli (2006). The Convention was opened for signatures by all states from 16 January 2006 to 16 January 2008. Formally it has been signed and accessed by 20 states (not the United States nor current European Member States), among which are China, the Republic of Korea, the Russian Federation and Singapore. It was supposed to enter into force six months after the date of deposit of the third instrument of ratification, which happened on 1 March 2013 (art. 23(1)). For an illustration of the situation in the Far East, see Seng (2008). For a recent overview of the situation in South Africa, see Srivastava and Koekemoer (2013). 20 For a detailed explanation of the reasons that led to the 2005 Convention in light of the Convention on International Sale of Goods, see Hill (2003); Smith (2007). 21 For a comprehensive comment on the UNCITRAL legislation on electronic signatures, see UNCITRAL (2009) 44. 22 For the purposes of this chapter, the European Union will be dealt with as a legal system per se, even though national legal systems of Member States retain a good deal of importance in contract law and in electronic contracting. So far, indeed, harmonization efforts have not produced bodies of law that replace

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has not been reached yet; in particular, Europe is still experimenting with different sources.23 The most remarkable difference in the regulatory approaches of Europe and the United States is in the purposes of legislation. European efforts to provide electronic contracting with new rules are led by a heterodox goal, one that has been a leitmotiv of much of the European policies, that is to say, the creation of an internal market.24 Because spontaneous forces of demand and supply per se have not been able to cause market integration on the European territories, institutions believed that transactional opportunities offered by the use of technology in cross-border exchanges would be instrumental to that goal but that, at the same time, private autonomy itself needed support.25 As has been pointed out, ‘[p]opular sentiment in the US by contrast, appears more skeptical both about the frequency of market failures and whether the likely benefits outweigh the costs when the costs of unintended negative consequences of regulatory intervention are taken into account’.26 However, harmonization to promote market integration was not the exclusive policy of European legislation, since the internal market is a space where consumers must receive a high level of protection in commercial transactions.27 Thus, legislation on electronic contracting is partly soaked with, although not exhausted by, mandatory consumer protection rules. As a consequence, European contract law is now biased national contract laws. The process of European integration requires keeping an eye on the national dimension, but it is clear that significant changes happen because of the input of European institutions. 23 In general, it seems that European institutions are relentless in trying to correct market failures, sometimes exaggerating this dimension of European integration and indulging too much in overregulation. 24 Poggi (2000) 248. 25 As Winn and Haubold (2002) 567, have noted, ‘electronic commerce traverses national boundaries even more easily than traditional forms of crossborder trade’. 26 Winn and Bix (2006) 184; Kierkegaard (2007) 2. Winn and Haubold (2002) 568–69, have suggested that ‘the laissez fair or self-regulatory approach favored in the US and the more conventionally regulatory approach taken in the European Union may also reflect in some measure US enthusiasm for new technology and the much more ambivalent popular attitude toward innovation in the European Union’ (footnote omitted). 27 See Treaty on the Functioning of the European Union, Art. 114(3). This provision was considered also the legal basis for the adoption of the Common European Sales Law (see n. 52 below and accompanying text), although a number of Member States raised concerns as to its appropriateness.

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in many respects and has caused national laws to lose their comprehensive dimension (and clarity) centered around a monolithic figure of contract. Consumer transactions are separated from those between businesses, while in both instances there must be consistency with the goal of market integration, and with other values, such as privacy and fundamental rights. Under such an institutional setting, drafting comprehensive and consistent legislation would be an extremely complex task in Europe.28 The regulatory approach remains fragmented and the many rationales for statutory intervention do not facilitate the goal of creating a general framework.29 Undeniably, to the extent that the use of technology by one party alters the normal dynamics of negotiation to the detriment of the other (in hypothesis, the consumer), technology becomes less decentralized and more unilateral, thus contradicting its alleged neutrality. Departure from this basic dimension can justify legislative or judicial intervention. Again, in this respect European institutions found a reason in the digital environment to enhance the regulatory framework and protect consumers, where US courts mostly rely on traditional doctrines of common law, such as unconscionability.30 In other words, it appears that European institutions have been skeptical about the ability of traditional contract law doctrines alone to accommodate the needs of consumer protection in the digital world. To the contrary, in the United States it has been assumed that, with few exceptions, common law has the required flexibility to deal with problems arising out of modern technologies, including those caused by consumers’ inexperience and vulnerability.31 Actually, as will become clear in addressing the issue of contract formation (see below), whenever the US institutions sought a massive reform of contract law to adjust it to the digital world, the results were poor. European legislation concerning electronic contracting is made up of two specific Directives and a body of originally diverse rules contained in other Directives.32 The first is the so-called Directive on electronic 28

Winn and Bix (2006) 181. See also Martin (2008) 500. A critical discussion of the rationale inspiring much of the European contract law regulation can be found in Pardolesi (2014). 30 For the discussion about use of (procedural) unconscionability doctrine to electronic contracting in the United States see below. 31 See Moringiello and Reynolds (2013) 456 (‘We believe that, from a legal standpoint, electronic contracting is no different from face-to-face contracting’). 32 Winn and Bix (2006) 181. 29

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commerce.33 The second one is the Directive on electronic signature.34 The remainder of the framework included pieces of legislation that pre-existed and that apply equally to electronic contracting;35 they include at least the Directive on contracts negotiated away from business premises,36 the unfair contract terms Directive37 and the distance selling Directive.38 In an effort to improve the regulatory framework to unleash 33 Directive 2001/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market [2000] OJ L178/1. The Directive has been implemented in all Member States, including the United Kingdom with the Electronic Commerce (EC Directive) Regulations 2002, SI 2002/2013. 34 Directive 1999/93/EC of the European Parliament and of the Council of 13 December 1999 on a Community framework for electronic signatures [2000] OJ L13/12. The main purpose of the Directive is to allow parties to use electronic signatures when forming contracts. It introduces a distinction (unknown to US legislation) between electronic signature and advanced electronic signature (Kierkegaard (2007) 45–46). See Winn and Haubold (2002) 587. For a comparative reading of the Directive and a focus on EU, German and Italian law, see Troiano (2005). Apart from that, the Directive does not cover aspects related to the conclusion and validity of contracts or other legal obligations where there are requirements, as regards form, prescribed by national or European Union law, nor does it affect rules and limits, contained in national or European Union law, governing the use of documents (art. 1(2)). In this respect, its impact on electronic contracting is limited. 35 ‘Electronic commerce in Europe is not taking place in a lawless space or “legal vacuum” that would have to be filled by broad legislation’, as made clear by Winn and Haubold (2002) 573. 36 Directive 85/577/EEC of 20 December 1985 to protect consumers in respect of contracts negotiated away from business premises [1985] OJ L372/31. 37 Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts [1993] OJ, L95/29. The Directive has been a cornerstone in the harmonization of consumer contract law in European countries against unfair terms and it has been applied nationally to online contracts. See, e.g., UFC-Que Choisir v. AOL France, Tribunal de Grande Instance de Nanterre, judgment of 6 February 2004, affirmed by the Cour d’appeal Versailles, 15 September 2005, in JCP IV, 150905 (AOL online standard terms violated French law implementing the Directive). Several legal systems have statutes concerning consumer contracts that would apply to online contracting; for an account see Winn and Bix (2006) 184. A detailed reconstruction of the legal background and of the historical passages that led to the adoption of Directive 93/13/EEC is offered by Maxeiner (2003) 131. 38 Directive 97/7/EC of the European Parliament and of the Council of 20 May 2007 on the protection of consumers in respect of distance contracts [1999] OJ L144/19. This Directive was originally introduced to favor electronic commerce, which takes place when consumers enter a distance selling contract by

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the potential of electronic contracting, the EU institutions have passed the so-called consumer rights Directive.39 This new body of law in fact is just a consolidation of the acquis mentioned above, inspired by the purpose of achieving a high level of consumer protection and the full functioning of the internal market. The electronic commerce Directive has a scope broader than merely regulating contracts in the digital market. It is aimed at removing obstacles and creating the internal market for information society services, a formula that includes, but does not exhaust, electronic contracting.40 The Directive reaffirms its facilitative nature and the role of technology when it states that ‘the development of information society services within the area without internal frontiers is vital to eliminating the barriers which divide the European peoples’.41 In this respect, the Directive denotes a positive bias for technology, since facilitative contract law rules imply leaning in favor of electronic contracting. The definition of information society services includes a number of economic activities that take place online, in particular selling goods.42 Such a broad definition, provided by the same Directive, has significant implications for general contract law. Sale of goods online becomes a service by the very words of the legislator. Contractual types in the digital economy lose their identities with unpredictable consequences, means of technology for communication at a distance (technology here has a broad meaning, including phone calls or email). 39 Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights [2011] OJ L304/64. 40 See, specifically, art. 1 of the Directive, that approximates national provisions on information society services, establishment of service providers, commercial communications, electronic contracts, liability of intermediaries, codes of conduct, out-of-court dispute settlements, court actions and cooperation between Member States. 41 Recital (1). 42 In Google France SARL, Google Inc. v. Louis Vuitton Malletier SA and others (2010), the Court of Cassation, judgment of 20 May 2008, asked the Court of Justice of the European Union (CJEU) whether Google Search fell within the definition of an ‘information society service’. In Recital 17, the Directive makes clear that the definition of information society services is one already existing in the European Union acquis and covers ‘any service normally provided for remuneration, at a distance, by means of electronic equipment for the processing (including digital compression) and storage of data, and at the individual request of a recipient of a service’. Joined Cases C-236/08 to C-238/08 Google v. Louis Vuitton, CJEU, judgment of 23 March 2010, held that the rules of Directive 2001/31/EC (see n. 33 above) also apply to an Internet referencing service provider.

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since national contract law and contract doctrines at least in civil law countries are still based on types as selectors of substantive disciplines.43 Regulation has its unintended consequences and this may well be one of those cases in which the piecemeal approach followed at European level flies in the face of national legislation.44 Importantly, the limited goal of the Directive does not justify full harmonization of contract law in Europe.45 It remains a sectorial discipline that relies, implicitly or expressly, on national legislations for all aspects of contracts and, in this respect, as will become clear later in this paragraph, there is a resemblance to the US approach of UETA and E-Sign. The core provisions of the Directive lie in three articles (9–11) grouped under section 2 (‘Contracts concluded by electronic means’) of Chapter II. As the title of the section makes clear, these provisions relate to the conclusion of the contract, which seems to be the moment most affected by the advent of technology. The general requirement is that Member States have to ensure that their legal systems allow contracts to be concluded by electronic means.46 It appears that the main technique to protect consumers (article 10(1) provides that when parties are not consumers such provisions can be omitted by contract) is to require the service provider to give a minimum set of information,47 in a way that is clear, comprehensive and 43

As to unpredictable consequences due to blurring boundaries between contractual types see C-128/11 UsedSoft v. Oracle International, CJEU, Grand Chambre, judgment of 3 July 2012 (also published in Foro italiano, 2012, IV, 377), where the Court held that the exhaustion effect is also produced when the user has paid to download a copy of a software product and her rights have unlimited duration. The same problem has been raised by some courts in the United States, whether a contract that a vendor calls a ‘license’ should rather be a sale, which would clearly demand the application of art. 2 of the Uniform Commercial Code; see Softman Products Co. v. Adobe Sys., Inc., 171 F. Supp. 2d 1075 (C.D. Cal 2001). See also Winn and Bix (2006) 180 (n. 25 and accompanying text). 44 Criticism of the piecemeal approach followed by the Directive has been expressed by Riefa (2009) 6. 45 As Winn and Haubold (2002) 7 have pointed out, ‘this directive is not aimed to be the comprehensive and final regulatory framework for electronic contracts in Europe’. 46 Some scholars have referred to such provisions as ‘contract law neutral’, meaning that they do not interfere directly with existing national systems of ‘general’ contract law (Winn and Haubold (2002) 574). 47 C-298/07 Bundesverband der Verbraucherzentralen und Verbraucherverbände – Verbraucherzentrale Bundesverband eV v. deutsche internet versicherung

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unambiguous.48 Importantly, the information must be provided prior to the order being placed by the recipient,49 a requirement that affects particular kinds of electronic contracts (see below).50 The duty to provide information does not apply when contracts are concluded exclusively by exchange of electronic emails or by equivalent individual communications.51 The last frontier of European regulation efforts was represented by a highly controversial regulation that went under the name of the Common AG, CJEU, judgment of 16 October 2008, confirmed that in order to be able to respond to consumers promptly, a company may need to provide other methods of communication beyond its postal and email address. A ‘contact us’ form without also providing an email address is not sufficient. For a comment on the decisions, see Lorenz (2009); Melison (2009). For discussion and criticism regarding the interpretation given by the CJEU to the information requirement set forth by the Directive see Riefa (2009) 35. 48 See art. 10(1). The service provider must inform the consumers also of the existence of codes of conduct (art. 10(2)), a tool that has been given centrality in the Directive as an expression of partial self-regulation in the industry. As Kierkegaard (2007) 18, points out, these are prior information requirements. 49 One important thing to note is that the European legislator resorts to the term ‘order’, which is not technical contract law terminology. Its possible meaning is both offer or invitation to treat and the final choice has been left to national legislations. On the possible confusion caused by the use of terminology (justified by the need to reconcile civil law and common law traditions, absent a sort of common vocabulary) see Riefa (2009) 30. 50 Since the Directive does not stipulate a specific sanction for violation of informational duties under art. 10, Ramberg (2001) 439, suggests that it is left to the contract law of the Member States to decide whether an agreement has been formed on the basis of the information actually made available by the service provider. The kind of disclosure requirements of the Directive are more specific than simple mandatory website disclosures (duty to keep the contractual text accessible at all times on a website, reachable through a hyperlink). Hillman (2006) 854, has argued that one possible side effect of mandatory disclosure is not the increased cost for vendors (that is marginal and would be eventually passed on to consumers), but the enforcement of terms that would have been otherwise held unconscionable under the doctrine of procedural unconscionability, merely because they are made accessible to consumers ex ante and cannot be held to be surprising. For the opposite view (supported by empirical observation), that ‘retailers design Web sites balancing between the benefits of extracting purposeful assent and the burdens of complicating the purchase process’, see Mann and Siebeneicher (2007). 51 This exemption is made explicit in art. 10(4) and it is repeated in art. 11(3) about the placement of the order. In case of email, ‘[t]he rationale is that necessary information can be asked easily in case of an individual consumer’ (Kierkegaard (2007) 20).

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European Sales Law (CESL).52 To some extent, the pattern of adoption that the CESL used to follow resembles very much that of the Uniform Computer Information Transaction Act (UCITA) in the United States; at least, it moved from seemingly similar policy premises.53 The CESL was not directly aimed at electronic contracting; it was rather an ambitious attempt to introduce a truly European contract law for sales.54 The Commission took the opportunity of the proposed regulation to harmonize sales law for Europe, including contracts concluded online or for the purchase of digital content. After a very intense debate and widespread criticism and political opposition, the proposal for a CESL was dropped.55 Certainly, the choice of the Commission to make the CESL an optional instrument, that would have not replaced national legislations but would add to the existing options that contracting parties have to regulate their contracts, was one of the reasons for criticism.56 The back-up plan of the European after the 52

Pongelli (2013); Aubert de Vincelles (2011); Lando (2011). In the flagship initiative document Europe 2020: A Strategy for Smart, Sustainable and Inclusive Growth, COM(2010)2020 final, at 21, the European Commission manifested the need to adapt ‘EU and national legislation to the digital era so as to promote the circulation of content with high level of trust for consumers and companies’. The Commission seized the opportunity of the CESL to force the introduction of a discipline of certain contracts relating to digital content in a body of rules aimed at governing sales of goods. 54 For a review of the initiatives of the European Union in the field of contract law, see Kryczka (2005) 157; Hondius (2011). 55 The European Parliament has approved the draft on 26 February 2014, with changes to the original proposal of the Commission, that had been introduced for the first time in 2011. The proposal has to be approved by the European Council to be passed into a Regulation, but there has been resistance by a number of national Parliaments, including the Belgian, the German, the Austrian and the British, on the ground that the initiative is not consistent with the principle of subsidiarity or lacks legal basis. Also, associations of consumers and industries have expressed strong criticism of the proposed Regulation, at least in its proposed form. Scholars have also voiced their dissent, on both sides of the Atlantic. US contributions have emphasized the over-regulatory attitude of the European institutions. Much criticism has been expressed in this respect; see Ancel et al. (2011). For a review of the neo-classical critique of the CESL proposal coming from US scholars see Caruso (2013) 486. 56 This legal solution was proposed by the Commission to reach the highest level of harmonization without relying on the implementation by Member States, on the one side, and without replacing authoritatively national legislations on contracts, on the other. Member States would have been allowed to make the future regulation applicable also to entirely domestic transactions. The legal position of European regulations as sources of law also solves the typical 53

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proposed regulation was withdrawn consisted of two draft directives that were adopted in December 2015.57 One addresses certain aspects concerning contracts for the supply of digital content and the other is aimed at certain aspects concerning contracts for the online and other distance sales of goods. Both drafts borrow heavily from the text of the CESL, but the European Commission has given up the general approach and the optional mechanism. B. United States: Federal Regulation and Model Laws The minimalist approach of the United States in regulating electronic contracts produced one model of uniform law and one federal statute. When a more structured and comprehensive approach was proposed, a new model law (the Uniform Computer Information Transaction Act, UCITA) came out, but its history (one that is too famous and notorious to be recalled here in detail58) informs us that the advent of digital technology was disruptive indeed, but not as much as to justify the adoption of a radically new regulatory framework. Looking at that piece of legislation in hindsight can reveal a lot more about how the common law (particularly in the United States) is showing resilience to technological change. The Uniform Electronic Transaction Act (UETA) was adopted in 1999 as a Model Law for the States of the Union, to remove any doubt that contracts concluded by electronic means could satisfy the Statute of Frauds.59 It was shortly followed by the Electronic Signatures in Global problem of international private law; for a thorough discussion on all these issues, see Rühl (2012). On the ‘opt-in’ mechanism, see also Hesselink (2012). 57 See Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the online and other distance sales of goods, COM/2015/0635 final, and Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content, COM/2015/0634 final, both introduced on December 9, 2015, by the European Commission. 58 On UCITA in general and on its tortuous adoption (starting from revised UCC, art. 2B): Maxeiner (2003) 123. More specific works include Chow and Kinstlick (2001); Nimmer (2000). UCITA has received much attention also from comparative law scholars for its innovative content in terms of creation of access contracts as a possible new type of agreement for digital environments; see, among others, Pardolesi and Palmieri (2002). 59 Uniform Electronic Transactions Act, ss. 1–21, 7A ULA 211 (1999). Nimmer (1996) 227, reports that the uncertainty came from the fact that the UCC, s. 1-201(46) includes, in the definition of ‘writing’, ‘printing, typewriting

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and National Commerce Act (E-Sign),60 a federal statute that adopted the most significant provisions of UETA.61 None of them has general contract law ambitions; they remain sectorial and leave questions of formation to the common law of contracts.62 Under UETA (but the same principles apply to E-Sign), a record or signature may not be denied legal effect or enforceability solely because it is in electronic form. Furthermore, a contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation. If a law requires a record to be in writing, an electronic record satisfies the law. Also, if a law requires a signature, an electronic signature satisfies that law. Those basic provisions found favor with many states, as they were modestly aimed at facilitating the use of technology in transactions, without altering the fundamental structure of contract law at national level.63 As has been vividly pointed out, ‘[a]lthough courts would have or any other intentional reduction to tangible form’. According to Winn and Haubold (2002) 581, states tried to repeal the Statute of Frauds by enacting UETA with uneven success, which explains the formation of the occasional majority which led to the approval of E-Sign (see n. 63 below). A vigorous opposition to the abolition of the Statute of Frauds came from the software and information industry, allegedly for the difficulties that they would have encountered in enforcing verbal contracts, such as software licenses for multiple copies (Nimmer (1996) 229). 60 Electronic Signatures in Global and National Commerce Act , 15 USC ss. 7001–7031 (2006). In signing the law, US President Bill Clinton was the first to use the electronic signature to pass a Bill into law. General comments on the two statutes can be found in Wittie and Winn (2000); a detailed description of E-Sign’s context is provided by Hays (2001). See also Balloon (2001) (suggesting that regulation of electronic contracting should be at federal level rather than at state level). Both laws are based on the 1996 Model Law of UNCITRAL: Martin (2008) 472. 61 E-Sign is more protective towards consumers, as pointed out by Kierkegaard (2007) 15. Scholars agree that E-Sign is a bad copy of UETA; it was enacted by an occasionally formed coalition of political forces that wanted to exploit the momentum at all costs and rushed to pass the law. The purpose was to address the issues posed at federal level by the UNCITRAL Model Law on Electronic Commerce. See Winn and Haubold (2002) 578. 62 Moringiello and Reynolds (2013) 460. Kierkegaard (2007) 13. 63 This also explains why, unlike the e-commerce Directive, the UETA does not contemplate a checklist of information that must be provided ex ante to the consumer (Kierkegaard (2007) 21). The institutional constraint to respect contract law at state level explains the peculiar (and troubling) mechanism of preemption that regulates the relationship between E-Sign and inconsistent UETA provisions: ‘if states had laws that were inconsistent with E-SIGN,

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probably gotten there on their own, the statutes were helpful in moving the process along. The important point is that the two laws [i.e. UETA and E-Sign] were quick fixes to a readily understood problem.’64 UCITA was an attempt to provide a comprehensive discipline to contracts of the information age and to validate certain standard terms in computer information licenses (such as click-wrap contracts, which will be discussed below).65 The basic assumption was that some features of the digital economy are so radical as to require a substantial rewriting of contract law in the United States, starting from article 2 of the Uniform Commercial Code, which deals with sales of goods in a changed world where the market is more inclined towards providing services and access.66 The project of UCITA (that started as an expansion of the Uniform Commercial Code with the addition of article 2B67) was carried forward by NCCUSL and finalized in 1999, but the American Law Institute left the project before its approval and later proposed the Principles of the Law of Software Contracts.68 Not surprisingly, only two states adopted it.69 Quite surprisingly, at least four states ‘adopted anti-UCITA “bomb shelter” laws to prevent vendors transacting business in those states from “opting into” UCITA based on the states where it is in force’.70 Criticism

E-SIGN would preempt those laws, establishing national uniformity on the basis of federal law, but if states instead passed the original uniform version of UETA, then E-SIGN would not preempt state law, but instead be “superseded” by the state’s enactment of UETA’; Winn and Haubold (2002) 579 (footnote omitted); see also 1 Willinston on Contracts s. 4:5 (4th edn, 2014), and Buckley et al. (2013) 8:2. 64 Moringiello and Reynolds (2013) 490 (footnotes omitted). This also explains the good success of UETA, which was adopted by 48 states. See also Winn and Haubold (2002) 569. 65 Maxeiner (2003) 111. 66 See Nimmer (1996) 232–33. 67 For a description of the process of revision of art. 2 see Speidel (2001). 68 Software Contracts: as Adopted and Promulgated by the American Law Institute at Washington, DC, 19 May 2009, St Paul, MN, 2010. For a comment on an otherwise little considered project see Hillman and O’Rourke (2010). 69 Maryland and Virginia. In 2003 NCCUSL suspended its efforts to obtain adoption of UCITA by the states. 70 Winn and Bix (2006) 180, n. 28. The four states are Iowa, North Carolina, West Virginia, Vermont; see 1 Williston on Contracts s. 6:41 (4th edn, 2014).

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has been widespread and there were also questions whether the final text reflected established industry practices.71 As scholars pointed out, when a change of the common law touched upon formalities, statutes passed swiftly and their adoption was successful; they were actually solving the problem created by state enactment of numerous signature statutes based on a variety of encryption standards and specific technologies that would fall short of facilitating interstate transactions. Common law resisted when changes concerned formation.72

IV.

TECHNOLOGY AS A TOOL AND AS CONTENT

One of the areas of contract law in which technology has always had an impact is that of contract formation, where technology is a tool to transport parties’ intent along distances when contracting does not take place in a usual face-to-face situation.73 And since distance creates temporal lags, contract law defines, among other things, not only how, but also when and where an agreement is reached for a number of consequences, such as contractual liability, applicable law and jurisdiction. The law of contract formation has two souls. One is technical and is more apparent. As mentioned, it provides answers (and in this respect, answers can differ among legal systems) to a problem of the real world, where distance and time matter. The other soul is ideological and more intimate. In principle, contracts are forms of exercise of individual choice in democratic, decentralized societies. When parties’ wills meet, individuals have committed their freedom to the transactional goal, thus voluntarily limiting their courses of action in exchange for something. Contract law is premised on such ‘normative values that now define the legitimacy of the private ordering regime’.74 71 An account of the several critiques is provided by Moringiello and Reynolds (2013) 464. One of the most authoritative voices against UCITA and its attempt to redefine contract law was Lemley (1999) (discussing the enforcement of click-wrap agreement as substantial departure from the common law of offer and acceptance). 72 Moringiello and Reynolds (2013) 457. According to Winn and Haubold (2002) 570, absence of broad consensus on how US contract law should be modified and adapted to electronic contracting also explains the lack of consistency in case law. 73 See Moringiello and Reynolds (2013) 461 (‘Contract law developed in a world of face-to-face exchanges among persons who knew one another, at least by reputation’; footnote omitted). 74 Savirimuthu (2005) 110.

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Technology has been universally considered a solution to the problem of forming contracts and to facilitating the exchange of promises, shortening the temporal lag, limiting risks of communication, automating responses and reducing transaction costs. In its turn, contract law has provided incremental answers to problems posed by new technologies.75 What is less straightforward is that the more technology has made the formation of a contract easier and quicker, the more consent, as the building block of private ordering, has lost its original meaning and has been replaced by formalities; there can be a trade-off between use of technology and consent, but the bottom line is that their very presence is inversely correlated, as is shown historically by the fact that consensual contracts supplanted over time agreements with formalities.76 It has been said (although in a different context) that ‘formalities in contracts have two basic functions. They mark the end of negotiations, and they provide evidence for the contract and its terms.’77 The importance of formalities can be exaggerated but it cannot be seriously affirmed conceptually that within formalities there is consent and will. They only convey a meaning of offer or acceptance that is conventionally defined and accepted. Some gestures, and the language itself, are meant to represent will. They symbolize it. But they are not will themselves. The challenge to all legal systems, then, is to understand to what extent the enforcement of mechanisms of contract formation and formalities that forgo (even only presumed) parties’ will is consistent with the basic principles of contract law about individual freedom and choice, a challenge that became more difficult with the advent of digital technologies.78

75 Reed (2000) 175. At a more general level, Winn and Bix (2006) 176 (‘The regulation of electronic contracting is primarily a matter of using existing Contract Law rule—directly, or with some extension’; footnote omitted). According to Moringiello and Reynolds (2013) 453, so far US contract law has handled the changes imposed by technology very well. 76 As Nimmer (1996) 214, points out, ‘as human involvement increases, the time, cost and speed advantages of the electronic system are lost and the system can become merely an advanced technology variation of a telephone call’. 77 Monateri (2000) 525 (discussing the role of formalities in the Roman stipulatio). 78 Savirimuthu (2005) 125, is clear in this respect: ‘the phrase “meeting of the minds” is a distraction. The real question that the use of the online communications systems pose[s] is this: what constitutes assent in the cultural and economic environment of software?’ (the argument is used by the author to support his view that code is a replacement for consent and it embeds values).

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A.

From Post to Instant Messaging

Legal systems have responded to the problem of contract formation between distant parties in different ways, and the two main solutions – the mail box (or dispatch, or postal acceptance) rule and the receipt rule – have been a bonanza for generations of comparative law scholars, entailing a never exhausted debate.79 Legal systems have been affected by home bias and have characterized their own choice as ‘the rule’ and that of others as ‘the exception’. A number of technical solutions has appeared in the history of contracts for the formation of agreements when parties are not in the same place at the same time. Some of those solutions have been completely replaced over time, some others just added to the previously existing toolbox. Mailing was followed by the telegraph and then by telephone;80 subsequently telex and telefax appeared.81 Eventually, email, Web interactions and instant messaging came on the scene with the advent of the digital infrastructure represented by the Internet. Each time a new technology appeared, the issue was to decide whether pre-existing contract law rules could accommodate the needs of commerce and ensure an acceptable level of certainty in commercial practice.82 79 All comparative law scholars know that the experiment of studying comparatively legal institutions and rules using a factual approach to unveil the common core of legal systems was started by Rudolf Schlesinger at Cornell Law School investigating (not by chance) the area of contract formation. The fruits of that seminal intellectual effort are now in Schlesinger and Bonassies (1968). After all, the first volume of Gorla (1955) also was mostly concerned with formation of contracts. From one of the authors that were involved in the Cornell seminars, see Macneil (1964). 80 The mail box rule was extended consistently to contracts made by telegraph, ‘including those situations in which the offeror’s burden under the rule is at its zenith – that is, including situations in which the acceptance message is ultimately lost in transit and the offeror, unaware that a contract exists, is nevertheless legally bound to perform’; Rawls (2009) 205 (footnote omitted). 81 Most English courts applied the receipt rule to transactions carried out by telephone/telex: Entores Ltd v. Miles Far E. Corp. [1955] 2 Q.B. 327 (AC) (stating that in such cases ‘parties are at all intents and purposes in each other’s presence’). 82 An example of shortcomings of rapid technological change is that of non-oral modification clauses (NOM) which in contracts typically require that any change of a written agreement must be in writing to be valid. Scholars agree that statutes and case law in the United States support modification of agreements via email: Holmes (2010). In Shattuck v. Klotzbach, 2001 WL 1839720 (Sup. Ct Mass. 2001), a US court held that exchange of email was sufficient to

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The mail box rule was the original solution for common law systems.83 Civil law countries favored the rule of receipt,84 which assumes a contract is formed when the offeror receives the acceptance of the offeree, following a rationale close to that of contextual, face-to-face contracting. International trade law showed a preference for the receipt rule.85 Over time, the mail box rule lost its appeal, with digital technologies significantly contributing to its final demise.86 Comparative studies have long dealt with gauging the suitability of one solution over another and the ability of each solution to accommodate the modified context of electronic contracting. The use of technology has transformed negotiations and formation of contracts, basically nullifying distance and, as a consequence, time lags; exchange of promises, although not contextual, has become instantaneous.87 In some cases (like satisfy the writing requirement of the Statute of Frauds, relying on prior case law that considered a telegram as writing. 83 The rule was established in Adams v. Lindsell (1818) 106 ER 250, and then was accepted in the United States: Mactier’s Adm’rs v. Frith, 6 Wend. 103 (N.Y. 1830). It is still controlling in most states in the United States; see Nimmer (1996) 222. The rule is also discussed by Rawls (2009) 205. For a comparative analysis, see Farnsworth (2006) 916; Maniruzzaman (2001) 487. The diffusion of the rule in the world is described by Carlini (2005) 524. 84 Italian law, see Civil Code, art. 1326. The situation in France has been problematic since the Code Napoléon, as the code does not propose a solution; see Carlini (2005) 527. 85 On the complex interaction between the solutions accepted by the Convention on Contracts for the International Sale of Goods and the Convention on the Use of Electronic Communications in International Contracts see Martin (2008) 484, 487–88. 86 As reported by Rawls (2009) 207, a number of US courts had discontinued the application of the mail box rule even before the Internet era: Slobojan v. United States, 136 Ct. Cl. 620 (1956); Rhode Island Tool Co. v. United States, 128 F. Supp. 417 (Ct. Cl. 1955). Also telephone dealings were treated as face-to-face interaction and the mail box rule was not applied: Exter Mfg. Co. v. Glass-Craft Boats, Inc., 173 A.2d 791 (N.H. 1961); United States v. Bushwick Mills, Inc., 165 F.2d 198 (2d Cir. 1947). Morrison v. Thoelke, 155 So.2d 889 (Fla. Dist. Ct. App. 1963) went on excluding the application of the mail box rule to modern methods of communication. UCITA denies application of the mail box rule for electronic messages: Kierkegaard (2007) 37. Watnick (2004) 197, expresses the view that, since a clear default rule for the timing of acceptance sent electronically does not exist, the mail box rule should be retained for electronic acceptances of contracts not covered by UCITA. The application of the mail box rule declined also in Australia: Mik (2009) 8. 87 Moringiello (2005) has been accurate in showing how consumers perceive paper-based transactions as different from electronic transactions.

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emails or instant messaging), between dispatch and delivery there is such a small space that offer and acceptance are separate for a negligible fraction of time and revocation is almost impossible.88 Even the US Restatement of Contracts subjects ‘substantially instantaneous’ two-way communications to the same principle applicable to acceptances where the parties are in the presence of each other.89 The mail box and receipt rule are just different solutions to allocate the risk of communication between the parties. In common law, it has been pointed out that a rule based on actual receipt of acceptance by the offeror would have put her at risk that a revocation of the acceptance could arrive before the acceptance was received;90 comparing risks, the offeror91 is already exposed to the chance that her offer is never received by the counterpart.92 To adjust this situation, the common law of contracts has evolved in a way that makes all contract communications

88

This explains the rationale of the European Union law that makes applicable to electronic contracting the jus poenitendi of the distance selling Directive. If there is no time to weigh a deal, there is some time to change one’s mind and dissolve the agreement. 89 Restatement (Second) of Contracts s. 64 (1981). On the virtues of the formula used by the Restatement (‘substantially instantaneous’) as able to capture all future technological developments, see Rawls (2009) 210. Substantially instantaneous communication means include phone, telex, facsimile, EDI, email and instant messaging; not post and telegraph. But Fasciano (1997) argues that the mail box rule is still suited for usage of email in contract formation. For a technical discussion on email as a way to exchange consensus, see Mik (2009) 16, 20 (suggesting that the mail box rule should apply to email). 90 As pointed out by Macneil (1964) 953, with regard to the time between offer and acceptance, ‘it is not surprising that the Anglo-American courts have kept that period of nakedness as short as possible by adoption of a dispatch rule. Indeed, it may be said that one of the prime functions of the dispatch rule is to shorten the duration of the offeror’s right to revoke. Moreover, not only does the dispatch rule shorten the period of revocability, it removes an element of uncertainty from the contract relationship’ (footnote omitted). 91 Rawls (2009) 216 (‘the likelihood that sending an offer will eventually result in an enforceable contract is, ceteris paribus, inherently less than the likelihood that sending an acceptance will result in an enforceable contract’; footnote omitted). 92 According to Rawls, ibid. 212, ‘it makes sense for the recipient to bear the risk of failure, for she is incentivized to choose a reliable operator ex ante and may furthermore have a legal remedy sounding in contract law against the operator of the faulty service’ (footnote omitted).

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(offers, revocations, rejections) effective not upon receipt, but acceptance.93 Incidentally, a mail box rule is also instrumental in favoring a quicker conclusion of the contract, raising the paradox that a contract is nevertheless concluded if the offeror has not yet received the acceptance and even if, for some reason, she will never receive it.94 The implications of technology use on contract formation impact on time, of course, although there is also some impact on distance. Parties can be far away from each other, no matter how far; technology makes exchange of contractual promises instantaneous as if they were contextual and as if parties were in the presence of each other.95 This change requires an update (not necessarily a revolution) of contract law norms, since now revocation of the acceptance is virtually impossible and there is no point in keeping a difference in treatment among different ways of contract formation.96 Such functional reasons (and not an otherwise conceptually untenable theoretical superiority) have made the receipt rule prevalent in many legal systems, particularly as technological change became pervasive.97 Article 11 of the e-commerce Directive requires that the service provider acknowledges receipt of the recipient’s order without undue delay and by electronic means.98 Moreover, the order and the 93

Fasciano (1997) 975; Nimmer (1996) 222. In the landmark case Adams v. Lindsell, n. 83 above, the King’s Bench reasoned that the dispatch rule was imposed by necessity, since the receipt rule would have required notification that the acceptance had arrived and the receipt of such notification would have required a further notification, and so on to the infinite. See Mik (2009) 9. Macneil (1964) 954, points out that case law has upheld the mail box rule even in cases where there was no reliance by the offeree. 95 ‘Receipt’ of an acceptance does not necessarily correspond to actual knowledge of the recipient. In electronic contracting it has been argued that receipt of an acceptance ‘occurs when an acceptance has entered the information processing system designated for such messages by the offeror’ (Rawls (2009) 211). 96 Rawls (2009) 214. 97 Ibid. 204 (arguing that the mail box rule discourages the use of the most efficient means of communication). Cases where courts have suggested the receipt rule as the best default rule for contract formation include Romala Corp. v. United States, 20 Ct. Cl. 435 (1990), aff’d, 927 F.2d 1219 (Fed. Cir. 1991); Trinity Homes, L.L.C. v. Fang, 63 Va. Cir. 409 (Va. Cir. Ct. 2003). 98 Service provider, within the text of the Directive, has the meaning as clarified above. The rationale for requiring confirmation is to give consumers protection against accidental contracts that could be easily entered into without an intermediate step; for a comment see Kierkegaard (2007) 28. Ramberg (2001) 94

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acknowledgement of receipt are deemed to be received when the parties, to whom they are addressed, are able to access them, a rule that (like the rest of article 11) applies also to exchange of electronic mail or equivalent individual communications. Essentially, the Directive relies on some sort of reinforced receipt rule for a harmonized solution in Europe.99 As a further protection for consumers, the same Directive introduces an element of differentiation with US solutions, requiring the service provider to make available to the recipient appropriate, effective and accessible means (e.g., a splash screen or a pop-up window or an intermediate-review screenshot) allowing her to identify and correct input errors, prior to the placing of the order. This step is only procedural and does not change the fundamental contract law solutions adopted by national systems for contract formation. Besides formal solutions adopted individually by legal systems, and once the prevalent model has been identified, a comparative view reveals that the question over one rule or the other to ease electronic contracting is ill-conceived and, after all, unimportant. The most challenging issue becomes understanding to what extent, facing an upsurge of technological advancements, the law of contracts in legal systems is trading off consent in the original meaning for mechanisms of contract formation where the relevance of the human factor shrinks to the point that the simplest formality replaces the complexity of will altogether and the ‘humanistic model’ of contractual behavior fades away.100 The inner soul 440, points out that the rationale is unclear; if it were to avoid uncertainty, that would be true also for all kind of contracts, not only electronic. 99 The default rule adopted by the Directive is the same that, in common law, the offeror could have written by altering the mail box rule and explicitly making receipt of the acceptance necessary for the formation of the contract, as rightly suggested by Watnick (2004) 179. Winn & Haubold (2002) 575, see a possible interference with national provisions; they specifically mention s. 130.1 of the German BGB on the moment a contractual declaration is deemed to be received. Neither UETA, nor E-Sign, takes a stand on the applicability of dispatch or receipt rules to contract formation; see Rawls (2009) 209. The same author advocates the adoption of the receipt rule for all contracts in the United States, however formed, to ensure consistency both with domestic cases in which the mail box rule is not operative, and with foreign countries (ibid. at 224). 100 The expression is borrowed by Nimmer (1996) 212: ‘The most basic principle of contract common law entails the assumption that a contract is undertaken (or not) based on the decisions or actions of an individual, either on his own behalf or as representative for another. From this humanistic model stems a wide range of assumptions, restrictions and approaches to the idea of

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of the law of contract formation reemerges here and casts ideological views in the debate. The question revolves not just around procedures but on the very nature of contracts in society when technology redefines the contours of human interactions. Before moving ahead, a warning is in order. The role and the presence of consent in contract formation should not be overemphasized, at least in its subjective meaning.101 In its pure, conscious and unconstrained form consent does not exist any longer, if ever, and it lost centrality even before the radical technological transformation caused by the digital revolution took place.102 This is not to say that consent is a myth of a classical era nor is it a provocative assertion that the meeting of minds belongs to a lost paradise of contracts. It is rather a disenchanted view of what contracts came to be in the real world of mass-market transactions and complex business-to-business dealings (assuming, for a moment, that all contracts between professionals are still subject uniformly to the same rationale). The final question is whether the change brought about by digital technologies in contract law is different in magnitude or in nature with respect to the evolution of the past, and to what extent a claim of exceptionalism is justified.103 B.

Impact of Digital Technology on the Meeting of Minds

There are two fields where the issue can be tested. The first is that of contracting by using electronic agents, epitomized by electronic data contracting’. Radin (2000) referred to the ‘Contract as Consent’ as opposed to the ‘Contract-as-Product’ model. 101 For a discussion of the nineteenth century reconstruction of individual will in contract theory and the adoption of a subjective theory of consent as linked to liberalism, see Weitzenboek (2001) 218. 102 In the seed industry, it is common to see terms and conditions printed on sealed seed bags; unwrapping the packaging (on which are written the terms) implies acceptance of the conditions defined by the breeder. The seed-wrap licensing practice has been approved by a number of lower courts and then affirmed by the US Supreme Court in J.E.M. v. Pioneer, 534 U.S. 124, 145 (2001). In mass-market transactions, the practice of standard terms has provoked discussions about consent which are now also being raised by the so-called ‘rolling contracts’ (usually found in the practice of insurance contracts). See Gillette (2004) (suggesting that rolling contracts should be studied under the paradigm of principal/agent problems). 103 Keeping in mind that ‘enough of a quantitative difference is a qualitative difference’ (Radin (2000) 1127).

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interchange (EDI), an area where contracting is completely automated. The other is the field of click-wrap/browse-wrap contracts. From a comparative perspective, it has to be noted that European Directives, mostly concerned with consumers’ transactions, do not deal directly with EDI,104 whereas UETA and E-Sign also provide for formation of contracts through the interaction of a computer program or other automated means.105 International sources, such as the UNCITRAL Convention on the Use of Electronic Communications in International Contracts, ‘appear to represent a belated acceptance by non-U.S. legal systems of the legitimacy and utility of such methods’.106 EDI takes place almost exclusively in a business-to-business context.107 Its contemporary version corresponds to the machine-to-machine interactions in the Internet of things.108 Transactions are carried out by and within the information systems of two or more firms. Exchanges are instantaneous and internal to the interconnected systems. Tracing parties’ consent in the transaction is virtually impossible, both because the transaction is automated and because formally there are no human parties.109 They only had a role in defining a priori the general contractual framework (so-called ‘trading partner agreements’) under which EDI transactions are carried out.110 104

Poggi (2000) 265, interprets the European Directive as possibly leaving Member States the opportunity and the duty to regulate EDI contracting. See also Weitzenboek (2001) 228, and Riefa (2009) 12. Kryczka (2005) 167, points out that the use of automated systems for concluding contracts could be governed in Europe by other sources, such as the Principles of European Contract Law (see above). 105 Martin (2008) 491–92; Kierkegaard (2007) 41. According to Sommer (2000) 1177, regulation of EDI is the only actual new issue of UETA. 106 Martin (2008) 492 (footnote omitted). 107 Nimmer (1996) 213. See also Lerouge (1999). 108 See Sundmaeker et al. (2010). 109 However, there can be problems typical of traditional contracting, such as the battle of the forms when the two systems are programmed to issue and accept orders according to their own standard terms; see Nimmer (1996) 232 (discussing the applicability of U.C.C. s. 2-207 to EDI) and Mootz (2008) (arguing that the battle of the forms is becoming obsolete in the world of electronic contracting). As pointed out by at Weitzenboek (2001) 209, ‘computers are not merely a means of communication that enable and facilitate electronic commerce, but are capable of initiating the communication’. 110 At least one author has argued that business model design by the parties is also instrumental in shaping the new scenario of electronic contracting while providing incentives to prevent opportunism; Kobayashi (2005).

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Consent is only an antecedent of the exchange in EDI,111 although the agreement that enables electronic contracting by electronic agents is fundamental to solving legal issues such as liabilities for malfunctioning and problems caused by a defect in transmission. This is an area of technical regulation that is still basically untouched by legislators and presumably it will be left entirely to private autonomy and to the new lex mercatoria, unless legislators dare to embark on writing technical rules that can grow old quickly.112 Eventually, technology in the field of EDI has not completely removed the role of consent and the human factor associated with structuring the contractual framework and programming the machines to carry out instructions. The transaction itself might not be consensual, but its origins certainly are. The main implication is that traditional contract law rules are still working as default rules, to the extent a problem appears and its causes can be traced back to the upstream consensual mechanisms that created the EDI system.113 In analogy to shrink-wrap licensing,114 click-wrap and browse-wrap identify kinds of agreements whose conclusion is reached by clicking on 111 Savirimuthu (2005) 131, refers to this model of contracting as ‘mediated consent’. See Weitzenboek (2001) 215, for a discussion of electronic agents under the law of agency and a possible application of an objective theory of consent to EDI. Radin (2000) 1130, opposes the view of importing agency into EDI to justify this kind of transaction (‘The term “agent” means something else when we are considering human “agency”. Human “agency” refers to the freedom of autonomous beings’). 112 On the role of technical rules in EDI see also Winn and Haubold (2002) 582. It is worth recalling that UNCITRAL proposed a Draft Model Law on Legal Aspects of Electronic Data Interchange and Related Means of Communication in 1995. In the United States, the American Bar Association worked on a model agreement many years ago: Electronic Messaging Task Force (1990). This area is close to that of electronic clearing of credits and debits. For a commentary and a further examination of other private initiatives in the field of EDI, see Sabett (1996) 530–31. 113 Moringiello and Reynolds (2013) 485. 114 The majority of courts in the United States were inclined to enforce shrink-wrap licenses: ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996) (Easterbrook, J); for a comment, see Winn and Haubold (2002) 6 (manuscript). The decision was followed in Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir. 1997) (Easterbrook, J), but the court in Klocek v. Gateway, Inc., 104 F. Supp. 2d 1332 (D. Kan. 2000), refused to follow those precedents and stated that there was not a sufficient showing of consent for an arbitration clause that was part of the agreement. Kim (2007) 837, recalls that the first cases in the United States were negative in terms of the validity of shrink-wrap agreements under the U.C.C.:

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a screen box with lengthy contractual terms or by simply continuing navigation on a website that disclaims a formula of implied acceptance.115 Sometimes, contracts are enforced even if the user has not had the chance to access the terms of use prior to purchase, as long as she is given the contractual opportunity to return the good (a CD in shrink-wrap agreements) after reviewing the terms of the license.116 Click-wrap contracts have been considered to be like the online version of standard-form contracts.117 Sometimes they are referred to as ‘pay now, terms later’,118 since one party has to express her consent to the agreement by clicking on a button before knowing, or without reading, which terms will govern the relationship and possibly how much she will have to pay under the contract.119 Browse-wrap agreements are formed simply because the user of a website continues navigation usually after being warned that usage of the website or simply navigation is in itself acceptance of the terms (either the original

see, e.g., Step-Saver Data Sys., Inc. v. Wyse Tech., 939 F.2d 91 (3rd Cir. 1991); Vault Corp. v. Quaid Software, Ltd., 847 F.2d. 255 (5th Cir. 1988). For a scholarly discussion, see Lemley (1995). 115 Winn and Bix (2006) 178 (further action, such as continuing use of a site or downloading software, is construed as acceptance). This Web-based communication, ‘due to the inherent immediacy of response, raise[s] few problems with regards to effectiveness’ (Mik (2009) 27). 116 Kim (2007) 823. 117 Lemley (2006); Winn and Bix (2006) 177. Kierkegaard (2007) 22, has expressed doubts about the compatibility of click-wrap agreements with the European rules of the e-commerce Directive which require that the consumer can also store and retain the contract terms. 118 Moringiello and Reynolds (2013) 463. 119 I. LAN Sys., Inc. v. Netscout Serv. Level Corp., 183 F. Supp. 2d 328 (D. Mass. 2002), has considered one such agreement valid. See also Feldman v. Google, Inc., 513 F. Supp. 2d 229 (E.D. Pa. 2007) (confirming the validity of a term on jurisdiction in a click-wrap agreement). In Canada, Rudder v. Microsoft Corp., 47 C.C.L.T. (2) 168 (Ont. Sup. Ct. 1999), has held the forum-selection clause in a click-wrap agreement enforceable. Moringiello and Reynolds (2013) 465, draw a distinction between click-wrap and shrink-wrap: ‘[a] transaction in which an offeree is asked to click her agreement either at the end of the terms or next to a hyperlink leading to the terms is not a “pay first, terms later” transaction because the buyer has the opportunity to review the terms before payment’.

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or a modified version);120 in such a case there is no request to expressly manifest assent to use.121 Article 11 of the European Directive on electronic commerce would basically outlaw any kind of agreement if the consumer is not given information ex ante and if she does not receive a confirmation by the service provider that the order was received.122 Any other indication about validity of click-wrap/browse-wrap agreements must be found in national legislations. In the United States, UCITA contains a very broad statement about contract formation: a contract may be formed in any manner sufficient to show an agreement, including offer and acceptance or conduct of both parties or operations of electronic agents which recognize the existence of a contract. It is exactly this formula that may be way too indulgent to a theory of consent-replacing formalities in electronic contracting and that caused the low level of acceptance of UCITA by states. From a comparative perspective, what is important to note is that, once again, common law judges (not legislators) made important contributions to click-wrap and browse-wrap agreements; the general trend is to

120 Moringiello and Reynolds (2013) 466. Pollstar v. Gigmania, Ltd., 170 F. Supp. 2d 974 (E.D. Cal. 2000) (browse-wrap agreement valid and enforceable). See also Register.com, Inc., v. Verio, Inc., 356 F.3d 393 (2d Cir. 2004). Contra, Specht v. Netscape Communications Corp., 150 F. Supp. 2d 585 (S.D.N.Y. 2011) (agreement not valid for lack of consent between the parties). Since navigation is a continued activity to access a service and can be done on the same website on different occasions, browse-wrap agreements can also be rolling contracts (see n. 102 above) and in Swift v. Zinga Game Network, Inc., 805 F. Supp. 2d 904 (N.D. Cal. 2011), the court held that the modified version of the agreement was applicable to the user. The case has been criticized by Moringiello and Reynolds (2013) 473, since the modification issue was not dealt with by the court and this ‘modified click-wrap’ was simply enforced. The same holding that a rolling contract is enforceable can be found in the Canadian case of Kanitz v. Rogers Cable Inc., 58 O.R. (3d) 299 (Ont. Sup. Ct. 2002). The case of contracts modified unilaterally and accepted by browsing is recurrent in social networks; for an analysis of the main clauses used by networks in light of European regulations see Granieri (2011). 121 In this case assent has been characterized by Kim (2007) 817, as ‘acquiescence rather than agreement’ (emphasis in the original). See also Kunz (2003). 122 The Directive clearly refers to a situation in which the user is supposed to pay for something. In fact, many situations occur in which the service is free and the user only accepts the terms according to a click-wrap scheme.

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enforce them on the ground of contract formation123 and, when necessary, to use traditional doctrines such as unconscionability to prevent unjust results.124 Scholars seem to confirm this orientation and apparently do not indulge in exceptionalism,125 even though there is also a strong dissent on the specific issue of enforcing agreements when consent is actually missing.126 Some authors underscore how courts’ decisions can be aimed at facilitating transactions while lacking a sound rationale in contract law and ‘contort existing contract doctrine to enforce agreements that in other contexts would be unenforceable for lack of assent’.127 On a more general ground, there is one issue that should not be underestimated. New forms of technology-enabled contracting are being held enforceable by the majority of courts, which deny any discontinuity 123

See Hines v. Overstock.com, Inc., 668 F. Supp. 2d 362, 366 (E.D.N.Y. 2009) (‘The making of contracts over the internet has not fundamentally changed the principles of contracts’ (citations omitted)). A full and up-to-date overview of cases is offered by Moringiello and Reynolds (2010). 124 UCITA also applies the doctrine of unconscionability to transactions in computer information; see Kierkegaard (2007) 26. See Bragg v. Linden Research, Inc., 487 F. Supp. 2d 593 (E.D. Pa. 2007) (some terms of a click-wrap agreement held unconscionable); In re RealNetworks, Inc., Privacy Litigation, 2000 WL 631341 (E.D. Tex. 2000); and Brower v. Gateway 2000, Inc., 676 N.Y.S. 2d 569 (N.Y. App. Div. 1998) (unconscionability of arbitration clause in a click-wrap agreement); Groff v. America Online, Inc., 1998 WL 307001 (R.I. Super. Ct. 1998) (online forum selection clause enforceable); contra, America Online, Inc. v. Superior Court, 108 Cal. Rptr. 2d 699 (Cal. Ct. App. 2001). 125 Moringiello and Reynolds (2013) 468–69. For the position that standardform online contracting does not require a different treatment in the electronic age and unconscionability and related consent doctrines are still a valid framework to analyze electronic contracting, see Hillman and Rachlinski (2002). According to Gillette (2005) 983, the real issue is that judges will not be able to distinguish a term that is exploitative from a term that is inspired by efficient risk allocation; since standard-form practices require some legal redress in electronic contracting and such remedies cannot come from case law, the suggestion is that the appropriate forum for intervention is administrative, not judicial. 126 See, among others, Macaulay (2004); Braucher (2000); Bern (2004). Against those critiques (centered mostly on the destruction of consent-based contract law and on potential damage for consumers), Marotta-Wurgler (2009) has provided empirical evidence that in the field of software, at least on the US market, the terms of end-user license agreements (EULAs) as rolling contracts are not systematically more pro-seller than terms included in contracts available to users before purchase. Regardless of the absolute quality of those terms, evidence supports the view that ‘pay now, terms later’ agreements are not necessarily bad for users (whether professionals or consumers). 127 Kim (2007) 816 (footnote omitted).

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in technical evolution and confirm the resilience of contract law to deal with new problems caused by technology, even when such problems relate to contract formation and to the very role of consent.128 To recall the trade-off mentioned above, the courts’ attitude trades off actual consent against speed in commercial electronic environments and is oriented towards facilitating online transactions.129 However, particularly the experience of click-wrap and browse-wrap contracts shows that there are instances where a contract is formed by altering the normal sequence of negotiating steps, when both parties form their consent based on previous actual knowledge of the good and services they are dealing with and of the contract terms.130 The process of contract formation is typically not completely detached by the content of the agreement, since when parties accept a voluntary limitation to their freedom or a decrease in their estates they do not do it in the abstract, but with respect to an actual arrangement of reciprocal interests. The implication is that when technology affects the process of formation, there are hardly any consequences for the kind of private order the parties are trying to establish for themselves.131 If the usual sequence is altered and knowledge follows consent, is there still ground to support the view that modern technologies do not alter the substance and nature of contracting? C.

Technology as Content

The most peculiar contribution to the realm of contract (and to contract law) given by technological progress comes from digital technologies. They have brought about the case where not only conclusion, but also execution of the agreement can be carried out entirely in the online world.132 This is particularly true when the agreement allows the user to access online resources (storage capacity, software, databases) or to download digital content. Legal systems have responded by trying to 128

As pointed out by Radin (2004) 3, ‘these “wrap” procedures are not “agreements” in accord with the traditional rhetoric of “consent” and “meeting of the minds”, but neither are most contracts in the contemporary offline world’. See also Radin (2000) 1133. 129 Kim (2007) 800. 130 There is an implicit reference here to the ‘contract-as-thing’ metaphor that was originally suggested by Leff (1970) 138, even though the same image goes back to an intuition of Llewellyn. 131 This point is particularly clear and well taken in Savirimuthu (2005) 121. 132 The online conclusion/online execution binomial is not completely brand new; payments fall into the execution of the agreement and electronic payments

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adjust the traditional contract law to the new digital environment and are still in the process of framing new rules, sometimes in the same context in which they try to solve old problems.133 The advent of cloud computing has been a further novelty, as it basically changed the offered model of digital content (and software, above all), making the provision of goods shaped after service supply and license agreements rather than based on sale contracts.134 Whether just space for storage, or application software, or content, or platforms or infrastructure, everything now is service,135 and the value chain, up to the end user, is based on back-to-back agreements that regulate the level of the service and the regime of liabilities. When the subject matter of a contract – the quid pro quo a price is paid – becomes digital or digitalized, technology is no longer a means to reach an agreement.136 It is, in a sense, its content, a construct that immediately calls into question the intellectual property protection of the service/ content provider (typically copyright). The unfortunate consequence is that now technology can be used to enforce the proprietary regime on the resources shared by the owner and the combination contract plus technology proves stronger than property rights alone; it is even apt to reshape owners’ rights and prerogatives according to a scheme that is no longer defined statutorily by legislators, but technologically by private actors of the market. The advent of digital rights management (DRM) systems has caused technology to have a new, additional, more dangerous role. The role of technology is upgraded by DRM: not just facilitative, but regulatory.137 have been around since long before digital technologies appeared and transformed contract law and were available also for off-line transactions; see n. 3 above. 133 After all, when the European Union believes that fragmentation in contract law is an obstacle to diffusion of cloud computing, it is blaming a well-known pre-existing situation that is not influenced by new technologies (for more specific arguments on cloud computing see n. 146 below). For the statutory initiative of UCITA, see also Radin (2000) 1140. 134 On the dissolution of the distinction between license and sale see n. 43 above and the UsedSoft decision of the CJEU. 135 Hence the acronyms based on the ‘-as-a-Service’ suffix (Software-, Content-, Platform-, Infrastructure-as-a-Service). 136 The fact that everything can be digital or digitalized was a reason for concern about the potential reach of UCITA (Radin (2000) 1141) and a further element that explains the failure of this statutory initiative. 137 From this unexpected role comes a challenge for spaces of freedom for users that legislations usually provide, such as the fair use doctrine in the United

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Keeping in mind the original interaction between technology, contracts and contract law, the final outcome is that technology is redesigning the original equilibrium, reducing the role of consent in contract formation and eroding, if not eliminating, the regulatory role of contract law.138 There are strong legal implications arising out of this process. First of all, individual consent results in a completely different and weakened form.139 In spite of the liberal tradition, consent is no longer the basis of voluntary exchanges and circulation of resources.140 Technology-driven formalities might replace it altogether. Secondly, although even technology requires state rules to reinforce the regime of fruition for digital goods imposed by digital rights management systems,141 state law can lose significant ground and have increasing difficulties in regulating aspects of electronic commerce. Importantly, technology can contend with national and supranational law in the role of creating an environment conducive to electronic commerce, since

States and the permitted uses in Europe. For early discussion of this topic see Burk and Cohen (2001). 138 For consideration on the relationship between technology, contract and property see also Radin (2004) 10 (‘The advent of Digital Rights Management Systems (DRMSs) has the potential to read out the regulatory contouring of contract just as the advent of ubiquitous superseding entitlement regimes has the potential to read out the regulatory contouring of property’). For a critical reconstruction of DRM systems in comparative perspective, see Caso (2014). 139 Radin (2000) 1135, reminds us that the real world is populated by contract-as-products, more than contracts-as-consent, and this argument should make us more prepared to consider not completely unusual situations where consent is only presumed. 140 Savirimuthu (2005) 115 (‘Contract rules and norms are viewed as mirroring the liberal ideals of a democratic society and the discipline imposed by the market’). 141 As Sommer (2000) 1221, points out: ‘[a] technological fix is not enough to give copyright industries complete control of their information. Therefore, they seek to buttress the technological fix by legal means. License restrictions may control some users. Criminal or tort law may control mass-market abusers, completely unauthorized users, or those who abet these criminals or tort-feasors by providing them with technological aids’ (footnote omitted). From a comparative perspective, it has to be recalled that violation of DRM is unlawful also in Europe, pursuant to a Directive that was purposefully introduced to harmonize aspects of copyright in Europe in the digital era. See Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonization of certain aspects of copyright and related rights in the information society [2001] OJ L167/10, arts 6 and 7.

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standardization processes can be quicker and more effective than harmonization achieved through statutory intervention.142 Thirdly, while consent is individual by definition, technology is not necessarily available to everyone, which means that technology ordering, as opposed to private, consent-based ordering, is much less decentralized and less democratic.143 And it has the diabolic virtue of being pervasive (having widespread application) but elusive at the same time (able to escape state regulation). Advocates of cyber-anarchy should be aware that technology may eventually turn out to be less democratic, less controllable and less decentralized than it appears in principle.

V.

CONCLUSION: WHAT COMPARATIVE LAW STUDIES CAN SAY ABOUT CONTRACT LAW BEFORE TECHNOLOGICAL DEVELOPMENTS

The implications of technological development for contract law are far more intense than this chapter can possibly say. The comparative survey of regulatory approaches in the main legal systems should help to draw some inevitably partial considerations about the relationship between technology, contracts and contract law. One first lesson comes from the experience of UCITA. It has been constantly repeated that Europe, vis-à-vis the United States, has followed 142

See Radin (2000) 1152. According to Radin (2004) 12, digital rights management systems bypass contract; ‘[t]hey bypass the state’s structuring of the legal infrastructure of exchange. The DRMS is like an infallible “injunction” controlled completely by one party’. Sommer (2000) 1222, underscores a further aspect of technology: ‘digital rights management is far more precise than traditional intellectual property’ and it facilitates price discrimination in commercial transactions (something that is harder with physical resources). Recent case law in Europe witnesses how digital management systems can be used unilaterally to remove freedom from users well beyond the proprietary and statutory regime. See C-355/12 Nintendo v. PC Box, CJEU, judgment of 13 January 2014, Foro italiano, 2014, IV, 207, stating that where technological measures prevent or restrict not only acts which require the rightholder’s authorization pursuant to that Directive, but also acts which do not require such authorization, a national court must verify whether the application of the measures complies with the principle of proportionality and, in particular, must consider whether, in the current state of technology, the former effect could be achieved without producing the latter effect or while producing it to a lesser extent. 143

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a route of more proactive regulation, showing a skepticism towards the virtues of market forces to create the internal market and to adequately amend contracts of unfair terms. Consistently with this view, legislation has been less intense with respect to business-to-business transactions where parties tend to be sophisticated. The quality of the ensuing rules and the real need for regulation are still open to discussion.144 In the United States, the regulatory approach has been lighter (although not insignificant), both because the nature of digital technologies is not perceived as extraordinary, and through a more adherent faith in the laissez-faire credo. As a result, the most significant contributions came from courts and from adaptation of traditional contract law doctrines. Legislators only appeared where necessary, for quick fixes. Where the regulatory anxiety dared the most, such as in the case of UCITA, the reaction was negative.145 As the European Union is now investing significant resources in the creation of a uniform body of rules also on electronic contracts (and, significantly, aimed also at small and medium enterprises) and the regulatory anxiety never comes to an end,146 the US lesson, if not

144

Stark criticism has been expressed by Ramberg (2001) 450 (‘From the perspective of contract law, the E-Commerce Directive is of no value and may even have contra-productive effects’). 145 ‘Not only has contract law rejected hard-and-fast rules, but when legislators have attempted to codify some of those rules, the courts have softened them. Contract law has survived because it is firm enough to give guidance to those who use it to order their daily lives, and flexible enough to permit change when needed’ (Moringiello and Reynolds (2013) 499–50). A note of concern comes from Radin (2000) 1147, who rightly observes that if UCITA becomes generally accepted and implemented in the United States it could be seen as a circulating model for the rest of the world. 146 With the same purpose of incentivizing the use of cloud computing in Europe, the Commission is now suggesting initiatives also in this field, although the Common European Sales Law would have been applicable also to cloud computing contracts and was expected to solve the problem of fragmentation of rules within the European Union. See European Commission, Unleashing the Potential of Cloud Computing in Europe, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, COM (2012)529 final. The underlying rationale for adjusting aspects of the legal framework is not wrong. After all, there is little discussion about the relationship between legal norms and competitiveness of legal systems. The real question is about the source of legal norms and the ability of legislation alone to be effectively conducive to a reliable business environment. In the case of cloud computing contracts, it seems that the

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followed, should at least be kept in mind at all material times.147 Top-down initiatives in very market-driven environments can be an expensive failure. If there is no need to legislate, then the do-nothing option would be advisable, even if bureaucratic forces are left temporarily unemployed. The US courts certainly played a timely role in creating a favorable environment for electronic contracting and, in doing so, they sometimes tipped in favor of technology even when the use of technology would bring a significant wound to consent-based theories of contract law.148 In the classical regulatory competition paradigm, the role of the US courts can be seen as an element of competitive advantage.149 In this respect, if Europe follows the traditional pattern of forced harmonization it will mark an even stronger distance with respect to the United States.150 Once again, comparative legal studies are critically important even in the perspective of legal reform, simply because they are able to bring empirical evidence of homogeneous experiences, not otherwise available.151 One might say that the US and the European situations are not comparable, as the European Union is not yet a wide-open market and Commission will leverage on model contracts, with standard terms and commissions, that will have the new generation of directives as applicable law (see n. 57 above). 147 As Moringiello and Reynolds (2013) 491, sharply conclude: ‘[i]n short, UCITA was a solution in search of a problem’ (footnote omitted). 148 Kim (2007) 801 (‘The judicial transmutation of constructive assent into actual assent undermines one of the fundamental principles underlying contract law – that of individual autonomy’ (footnote omitted)). 149 See Winn and Bix (2006) 179; Winn and Haubold (2002) 568 (stating that the ‘European Union approach seems more likely to produce a sound outcome in some areas, such as consumers’ transactions and the oversight of technical standards’). 150 Some authors have suggested the European Union should increase the level of regulation. Riefa (2009) 42, concludes that the minimal harmonization approach followed by the e-commerce Directive (described above) was not positive for the internal market because it led to diverse national implementation; for this reason, a change in strategy towards maximum harmonization would improve the regulatory framework in a more business-friendly way, but would not systematically increase consumer protection. Discontent about the level of harmonization achieved by the Directive has been expressed also by Ramberg (2001) 449. 151 This view has been proposed by Pardolesi and Granieri (2013) 23. Quite paradoxically, with respect to the UCITA saga, Maxeiner (2003) 129, has observed that ‘[c]omparative law inquiries could have helped overcome our limited abilities either to conceive of or to experiment with alternatives’.

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legislation is indeed instrumental in removing barriers. The point is whether too many rules may not be barriers themselves. There is no ex ante answer to this question. Only actual comparative enquiry and experimentation can have the final word.

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448 Comparative contract law Lemley, M.A. (1999) ‘Beyond Preemption: The Law and Policy of Intellectual Property Licensing’, 87 Calif. L Rev. 111 Lemley, M.A. (2006) ‘Terms of Use’, 91 Minn. L Rev. 459 Lerouge, J.F. (1999) ‘The Use of Electronic Agents Questioned under Contractual Law: Suggested Solutions on a European and American Level’, 18 Marshall J Computer and Info. L 403 Lessig, L. (1999a) Code and Other Laws of the Cyberspace. New York: Basic Books Lessig, L. (1999b) ‘The Law of the Horse: What Cyberlaw Might Teach’, 113 Harv. L Rev. 501 Lorenz, B. (2009) ‘Die Telefonnummer in der Anbieterkennzeichnung’, Verbraucher und Recht 295 Macaulay, S. (2004) ‘Freedom of Contracts: Solutions in Search of a Problem?’, Wis. L Rev. 776 Macneil, I.R. (1964) ‘Time of Acceptance: Too Many Problems for a Single Rule’, 112 U Pa. L Rev. 947 Maniruzzaman, A.F. (2001) ‘Formation of International Sales Contracts: A Comparative Perspective’, 29 Int’l Bus. Law 483 Mann, R.J. and Siebeneicher, T. (2007) Just One Click: The Reality of Internet Retail Contracting, University of Texas School of Law, Law and Economics Research Paper No. 104 Marotta-Wurgler, F. (2009) ‘Are “Pay Now, Terms Later” Contracts Worse for Buyers? Evidence from Software License Agreements’, 38 Journal of Legal Studies 309 Marrella, F. and Yoo, C.S. (2007) ‘Is Open Source Software the New Lex Mercatoria?’, 47 Va. J Int. L 807 Martin, C.H. (2008) ‘The Electronic Contracts Convention, the CISG, and New Sources of E-Commerce Law’, 16 Tulane J Int’l and Comp. L 467 Matwyshyn, A.M. (2013) ‘The Law of the Zebra’, 28(1) Berkeley Tech. LJ 155 Maxeiner, J.R. (2003) ‘Standard-Terms Contracting in the Global Electronic Age: European Alternative’, 28 Yale J Int’l L 109 Melison, D. (2009) ‘Arrêt Bundesverband c. DIV: l’identification du numéro de téléphone par les prestataires de service de la société de l’information’, Revue européenne de droit de la consommation 582 Mik, E. (2009) ‘The Effectiveness of Acceptances Communicated by Electronic Means, or – Does the Postal Acceptance Rule Apply to Email?’, 26 Journal of Contract Law 1 Monateri, P.G. (2000) ‘Black Gaius: A Quest for the Multicultural Origins of the “Western Legal Tradition”’, 51 Hastings Int’l and Comp. L Rev. 479 Mootz, F.J. (2008) ‘After the Battle of the Forms: Commercial Contracting in the Electronic Age’, 4 I/S: A Journal of Law and Policy for the Information Society 271 Moringiello, J.M. (2005) ‘Signals, Assent and Internet Contracting’, Rutgers L Rev. 57 Moringiello, J.M. and Reynolds, W.L. (2010) ‘Electronic Contracting Cases 2009–2010’, 66 Bus. Law. 175 Moringiello, J.M. and Reynolds, W.L. (2013) ‘From Lord Coke to Internet Privacy: The Past, Present and Future of the Law of Electronic Contracting’, 72 Maryland L Rev. 452 Nimmer, R.T. (1996) ‘Electronic Contracting: Legal Issues’, 14 Marshall J. Computer and Info. L 211 Nimmer, R.T. (2000) The UCITA Revolution: The New E-Commerce Model for Software and Database Licensing. New York: PLI Pardolesi, R. (2014) ‘Clausole abusive nei contratti dei consumatori. E oltre?’, V Foro Italiano 11 Pardolesi, R. and Granieri, M. (2013) ‘The Future of Law Professors and Comparative Law, 21 Nat’l Italian American Bar Ass’n J 1 Pardolesi, R. and Palmieri, A. (2002) ‘Gli access contracts: una nuova categoria per il diritto dell’era digitale’, Rivista di diritto privato 265

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Technological contracts 449 Poggi, C.T. (2000) ‘Electronic Commerce Legislation: An Analysis of European and American Approaches to Contract Formation’, 41 Va. J Int’l L 224 Pongelli, G. (2013) ‘The Proposal for a Regulation on a Common European Sales Law (CESL) and Its Gradual Evolution’, 4 Comp. L Rev. 1 Radin, M.J. (2000) ‘Humans, Computers, and Binding Commitments’, 75 Ind. LJ 1125 Radin, M.J. (2004) ‘Regulation by Contract, Regulation by Machine’, Journal of Institutional and Theoretical Economics 160 Ramberg, C.H. (2001) ‘The E-Commerce Directive and Formation of Contract in a Comparative Perspective’, 26 EL Rev. 429 Rawls, A. (2009) ‘Contract Formation in an Internet Age’, 10 Colum. Sci. and Tech. L Rev. 200 Raymond, E.S. (2001) The Cathedral and the Bazaar: Musing on Linux and Open Source. Sebastopol: O’Reilly Reed, C. (2000) Internet Law: Texts and Materials. London: Butterworth Reidenberg, J.R. (1998) ‘Lex Informatica: The Formation of Information Policy Rules Through Technology’, 76 Tex. L Rev. 553 Riefa, C. (2009) ‘The Reform of Electronic Consumer Contracts in Europe: Towards an Effective Legal Framework?’, 14 Lex Electronica 1 Rühl, G. (2012) The Common European Sales Law: 28th Regime, 2nd Regime, or 1st Regime?, Maastricht European Private Law Institute Working Paper No. 2012/5 Sabett, R.V. (1996) ‘International Harmonization in Electronic Commerce and Electronic Data Interchange: A Proposed First Step Toward Signing on the Digital Dotted Line’, 46 Am. U L Rev. 511 Savirimuthu, J. (2005) ‘Online Contract Formation: Taking Technological Infrastructure Seriously’, 2 U Ottawa L and Tech. J 105 Schlesinger, R.B. and Bonassies, P.G. (1968) Formation of Contracts: A Study of the Common Core of Legal Systems. New York: Dobbs Ferry Seng, D. (2008) ‘The Singapore Electronic Transactions Act and the Hong Kong Electronic Transactions Ordinance’, 5 Digital Evidence and Electronic Signature Law Review 7 Smith, S.E. (2007) ‘The United Nations Convention on the Use of Electronic Communication in International Contracts (CUECIC): Why It Should be Adopted and How It will Affect International E-Contracting’, 11 SMU Sci. and Tech. L Rev. 133 Sommer, J.H. (2000) ‘Against Cyberlaw’, Berkeley Tech. LJ 1145 Speidel, R.E. (2001) ‘Revising UCC Article 2: A View from the Trenches’, 52 Hastings LJ 607 Srivastava, A. and Koekemoer, M. (2013) ‘The Legal Recognition of Electronic Signatures in South Africa: A Critical Overview’, 21 African Journal of International and Comparative Law 427 Sundmaeker, H., Guillemin, P., Friess, P. and Woelfflé, S. (2010) Vision and Challenges for Realising the Internet of Things. Luxembourg: EUR-OP Troiano, O. (2005)‚ Die elektronische Signatur: Angleichung und Diversifizierung der Vorschriften auf EG-Ebene, im italienischen und im deutschen Recht’, Zeitschrift für Europäisches Privatrecht 43 UNCITRAL (2009) Promoting Confidence in Electronic Commerce: Legal Issues on International Use of Electronic Authentication and Signature Methods. Vienna Uy, I.J.E. (2003) Issues and Doctrines on Electronic Contracting, available at www.aseanlawassociation.org/docs/w5_phil.pdf Wang, F.F. (2010) Law of Electronic Commercial Transactions: Contemporary Issues in the EU, US, and China. London: Routledge Watnick, V. (2004) ‘The Electronic Formation of Contracts and the Common Law “Mailbox Rule”’, 56 Baylor L Rev. 175

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450 Comparative contract law Weitzenboek, E.M. (2001) ‘Electronic Agents and the Formation of Contracts’, 9 Int’l J Law and Technology 204 Winn, J.K. and Bix, B.H. (2006) ‘Diverging Perspectives on Electronic Contracting in the U.S. and EU’, 54 Clev. St L Rev. 175 Winn, J.K. and Haubold, J. (2002) ‘Electronic Promises: Contract Law Reform and E-Commerce in a Comparative Perspective’, 27 European Law Review 567 Wittie, R.A. and Winn, J.K. (2000) ‘Electronic Signatures Under the Federal E-SIGN Legislation and the UETA’, 56 Bus. Law 293

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18. Contractual interpretation: the South African blend of common, civil and indigenous law in comparative perspective Andrew Hutchison

I.

INTRODUCTION

Interpretation of legal documents remains as relevant today as it was in Roman times. While theories of interpretation vary between the major legal families of European law, the essential characteristics of a particular approach to interpretation tend (invariably) to simply be nuanced aspects of subjective or objective methods.1 To use the language of the historic sources, there is a reconciliation that needs to take place between the verba (or objective language) used by the drafter(s) of a legal instrument and the voluntas (or subjective intention) which it was intended to convey.2 In the case of a contract, if the objective meaning of the language used and the subjective intentions of the parties to that contract coincide, then the task of an interpreter is easy. If, however, the evidence suggests that there has been an error in the drafting of the contract; or that it does not make commercial sense as written; or that there is an ambiguity in the language used; then the task of the interpreter is more difficult. This chapter will consider the potential theoretical paradigms through which a contract may be read, so as to resolve the difficulties of interpretation. The primary focus will be on the law of contractual interpretation in South Africa, although there will also be an historical and comparative look at the other major European schools of legal thought, particularly the English common law approach, as well as certain supra-national model laws. The aim of this contribution is to track the development which the South African law of contractual interpretation is undergoing at present, with reference to leading comparative regimes. 1

Compare the comparative survey in Von Bar and Clive (eds) (2009) vol. 1, 556–9. 2 Zimmermann (1990) 620–50. See also Lewis (1996) 195.

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II.

WHY SOUTH AFRICA?

The geographical region of present day South Africa was a Dutch colony from 1652 until 1795, and thereafter fell under the administration of the British government (except for another brief period of Dutch rule between 1803 and 1806) until the unification of its four composite territories into what was from then known as South Africa in 1910.3 The British colonizers chose to preserve the existing system of Roman Dutch law which they found in place in South Africa’s colonies, with the result that uncodified Roman Dutch law remains a binding source of South African law today.4 In the process of modernization and commercial development which took place during the British administration, large tracts of English law and legal procedure were grafted onto this structure, however, so that today South Africa is one of a handful of ‘mixed’ legal systems, displaying the characteristics of both the Romanistic civil law, as well as the English common law.5 Since the advent of democracy in South Africa in 1994, there has also been a supreme Constitution encompassing a vertically and (under many circumstances) horizontally enforceable Bill of Rights.6 This Constitution recognizes, in addition to the existing sources of law, the special role of African customary law, still widely practised by the indigenous peoples of the country.7 This customary law has been invoked by the South African Constitutional Court in a number of contexts, including (as we shall see) contract law.8 Thus South African law can be seen as a compromise between vastly divergent sources, all co-existing in one legal regime and, of necessity, blended together by our courts on a daily basis. From this blend of cultures and approaches comes a compromise position, which is unique to South Africa and yet still in many ways bears the hallmarks of its

3 For a general history see Fagan (1996). South Africa only became a fully fledged sovereign country following the (British) Statute of Westminster in 1931. 4 Ibid. at 51. 5 Ibid. See further Zimmermann (2004) 4–8. 6 Constitution of the Republic of South Africa, 1996. Originally enacted as Act 108 of 1996 and preceded by an ‘interim’ Constitution, Act 200 of 1993. The 1996 Constitution came into force in February 1997. 7 Constitution of the Republic of South Africa, s. 211. 8 See generally on customary law: Bennett (2004); Himonga and Nhlapo (2014).

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European (in the broad sense) heritage. The resultant synthesis is a study in how divergent legal philosophies can be unified, in much the same way that model laws such as the UNIDROIT Principles of International Commercial Contracts (PICC), or the Draft Common Frame of Reference (DCFR) present an attempt at compromise. The argument of this chapter is that the South African law of contractual interpretation is moving away from its Roman Dutch roots to something more like the current state of the English law of interpretation. It will further be argued, however, that the new English approach is not too far removed from the German approach. In sum, there is a shift in South Africa away from a search for the subjective intention of the contract’s drafters, towards a more objective and reliance based approach. This chapter will look first at the traditional view which South African courts take of contractual interpretation, including the civil and common law sources for this. It will then also consider the latest case law and the shift in emphasis evident therein. From there, the recent developments of English law will be examined, with brief reference also to German and French law, as well as the UNIDROIT PICC and the DCFR. Finally, the potential future impact of the Constitution and African customary law on the South African law of contractual interpretation will be considered.

III.

DEVELOPING SOUTH AFRICAN APPROACH

Writers in the later European ius commune attempted to distil certain maxims of contractual interpretation from Justinian’s Digest. Thus Pothier listed 12 rules in his Treatise on the Law of Obligations,9 which were further cut down to nine by Van der Linden.10 The writing of both these influential authors is considered authoritative by South African courts, particularly that of Van der Linden, who wrote on Roman Dutch law. Thus the primary (or golden) rule of interpretation, listed first by both authors, is that: ‘In agreements we should consider what was the general intention of the contracting parties rather than follow the literal

9

Pothier (1853), trs David Evans, Part 1, ch. 1, art. 7, 148–57, paras 91–102. 10 Linden (1806) 1, 14, 4, translated in Juta (1906) 105–6.

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meaning of words.’11 This golden rule was accepted by the South African Appellate Division12 in one of its first cases, Joubert v. Enslin.13 Thus the inquiry in contractual interpretation was into the subjective intentions of the parties to a contract, with these taking precedence over the objective wording of that contract. This should not be understood as an entirely subjective approach, however, since the Appellate Division soon after adopted the parol evidence rule from English law.14 This rule, taken from the English law of evidence,15 was described in the leading South African case as follows: Now this Court has accepted the rule that when a contract has been reduced to writing, the writing is, in general, regarded as the exclusive memorial of the transaction and in a suit between the parties no evidence to prove its terms may be given save the document or secondary evidence of its contents, nor may the contents of such document be contradicted, altered, added to or varied by parol evidence.16

The search was therefore intended to be for the common intention of the contracting parties, but the law of evidence prevented a court from examining what could potentially be a highly relevant source of evidence of common intention, namely the negotiations between the parties preceding the adoption of the contract in its final form.17 This does not 11

Linden (1806) 1, 14, 4. Compare Pothier Obligations 1, 1, 7, 91. This passage has its origins in the Digest 50, 16, 219: ‘In conventionibus contrahentium voluntatem potius quam verba spectari placuit.’ 12 The Appellate Division, set up in 1910 upon the unification of South Africa, was the highest South African court in all matters. Appeal was available to the Privy Council in Britain until the South African declaration of independence in 1961. Thereafter, the Appellate Division was the court of final appeal in South Africa until the Constitutional Court was established in 1995, following the advent of democratic governance. The Constitutional Court then became the final court in constitutional cases only. Since August 2013 the Constitutional Court has been the apex court of South Africa in all matters, following an amendment to the Constitution. See generally Corder (2010). 13 1910 AD 6, 37–8, per Innes, JA. 14 Lowrey v. Steedman 1914 AD 532, 543. 15 The South African law of evidence is a transplant of the English law of evidence, subject to certain minor statutory modifications in its new home. See Schwikkard and van der Merwe (2010) 24–31; Christie and Bradfield (2011) 200. 16 Union Government v. Vianini Ferro-Concrete Pipes (Pty) Ltd 1941 AD 43, 47. 17 Debates continue today, both in English and South African law, about the continuing validity of the parol evidence rule, but it seems to enjoy the

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mean that evidence of the context surrounding the conclusion of contract could not be led, where relevant. In what was for a long time the locus classicus on the role of context in the South African law of contractual interpretation, Delmas Milling Co. Ltd v. Du Plessis,18 Schreiner, JA distinguished three different situations: first where linguistic treatment of the words of the contract could resolve a difficulty in interpretation;19 second, where a latent ambiguity could not be cured by linguistic treatment, recourse could be had to ‘matters present to the minds of the parties when they contracted (but not actual negotiations and similar statements)’20 (cases in this second category could be conveniently referred to as ‘cases of uncertainty’);21 only in the case of a patent ambiguity, not merely one of ‘uncertainty’, but an ambiguity truly unresolvable on the existing evidence, recourse could be had to ‘what passed between the parties on the subject of the contract’.22 These distinctions were explained in a later case as being between: (1) (2) (3)

the context of the contract as a whole; ‘background’ circumstances, which explained the ‘genesis and purpose of the contract’, evidence of which is admissable; and ‘surrounding circumstances’ of ‘previous negotiations and correspondence between the parties’, evidence of which is admissible only in an instance of ambiguity.23

What is immediately apparent is that this is a difficult process to explain and defend, and secondly that it resulted in a qualified contextual approach, allowing only limited recourse to the context of the contract. This distinction was dropped by the Supreme Court of Appeal, the post-constitutional successor to the Appellate Division, in the recent case of KPMG Chartered Accountants (SA) v. Securefin Ltd.24 The terms continuing support of the judiciary in both countries. For English law, see Chartbrook Ltd v. Persimmon Homes Ltd [2009] UKHL 38, paras 28–47. For South African law, see KPMG Chartered Accountants (SA) v. Securefin Ltd 2009 (4) SA 399 (SCA), para. 39. For debate about the continuing validity of the rule, see, e.g., Nicholls (2005). 18 1955 (3) SA 447 (A). 19 Ibid. at 454F–G. 20 Ibid. at 454G–455A. 21 Ibid. 22 Ibid. at 455A–B. 23 Coopers & Lybrand and others v. Bryant 1995 (3) SA 761 (A), 768A–E. Compare Maxwell (2012) 260. 24 2009 (4) SA 399 (SCA).

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‘context’ or ‘factual matrix’ were there thought more appropriate.25 In a string of decisions following KPMG Chartered Accountants, the Supreme Court of Appeal has affirmed this decision: Interpretation is the process of attributing meaning to the words used in a document, be it legislation, some other statutory instrument, or contract, having regard to the context provided by reading the particular provision or provisions in the light of the document as a whole and the circumstances attendant upon its coming into existence. Whatever the nature of the document, consideration must be given to the language used in the light of the ordinary rules of grammar and syntax; the context in which the provision appears; the apparent purpose to which it is directed and the material known to those responsible for its production. Where more than one meaning is possible each possibility must be weighed in the light of all these factors. The process is objective, not subjective. A sensible meaning is to be preferred to one that leads to insensible or unbusinesslike results or undermines the apparent purpose of the document.26

The Supreme Court of Appeal has also drawn attention to the fictional nature of the search for the common intention of the parties to a contract, given the typical contexts of modern contracting, whether through the medium of legal advisors or the ‘take it or leave it’ standard form contract.27 Indeed, one of the Justices of the Supreme Court of Appeal, Wallis, JA, has argued in his personal capacity for an approach to contractual interpretation which prefers the objective meaning which an ordinary, reasonable reader would impose on a contract if he read it, to a search for the subjective intention of the parties.28 This argument was with reference to the latest developments in the English law of contractual interpretation, under the guidance of Lord Hoffmann in particular. This shift in emphasis by the House of Lords will be discussed separately below. The recent dicta from the Supreme Court of Appeal reflect that the South African law of contractual interpretation is in a state of flux. The 25

Ibid. at para. 39. Natal Joint Municipal Pension Fund v. Endumeni Municipality 2012 (4) SA 593 (SCA), para. 18. See also Bothma-Batho Transport (Edms) Bpk v. S Bothma & Seun Transport (Edms) Bpk 2014 (2) SA 494 (SCA), paras 10–12; Ekurhuleni Metropolitan Muncipality v. Germiston Municipal Retirement Fund 2010 (2) SA 498 (SCA), para. 13; North East Finance (Pty) Ltd v. Standard Bank of SA Ltd 2013 (5) SA 1 (SCA), paras 24–5. 27 Natal Joint Municipal Pension Fund, n. 26 above, para. 20. 28 Wallis (2010). Wallis, JA penned the unanimous judgment in Natal Joint Municipal Pension Fund, n. 26 above. 26

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change has come largely in the stage at which the context of a contract may be considered. Whereas in the past, the context could only be looked at in cases of ambiguity, or lack of certainty, now the context may be considered from the outset. At the same time, however, the search is no longer for the common intention of the parties – the former ‘golden rule’ of interpretation. Now the process is objective, the ascription of meaning by a court to the contract as written, in the light of its context (although still preserving the parol evidence rule). A similar process has taken place in the South African law of interpretation of statutes, although driven this time by the Constitutional Court, carrying out the mandate of the Constitution to interpret legislation purposively to give effect to the values in the Bill of Rights.29 This movement away from subjective intention (whether of the contracting parties or the Legislature) to written words and the reliance thereon by the opposing party (or the populace) is in line with the evolution of English law, which will be examined next.

IV.

PARALLEL RE-EMPHASIS IN ENGLISH LAW

The move from literalism to contextualism in the interpretation of contracts can be seen in English law. The similarity between the drafting of legal texts in England and South Africa was remarked upon by Zimmermann in his magnum opus The Law of Obligations.30 The source of this influence of English law on South African is not hard to find, and is partly explained by the colonial administration of South Africa as set out above. Zimmermann described this similarity as being due to the existence of ‘strict and relatively formal canons of construction’.31 This strong adherence to the objective wording of the contract, reinforced by the parol evidence rule, can be seen in the dicta of the court in Lovell and Christmas Ltd v. Wall: If there is one principle more clearly established than another in English law it is surely this: It is for the court to construe a written document. It is 29 Constitution of the Republic of South Africa, s. 39(2). The leading Constitutional Court decision on the proper approach to the interpretation of statutes is Investigating Directorate: Serious Economic Offences v. Hyundai Motor Distributors (Pty) Ltd, In re: Hyundai Motor Distributors (Pty) Ltd v. Smit NO 2001 (1) SA 545 (CC), paras 21–6. Whether the Constitution has any role to play in the interpretation of contracts in South Africa will be considered at the end of this chapter. 30 Zimmermann (1990) 623. 31 Ibid.

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458 Comparative contract law irrelevant and improper to ask what the parties, prior to the execution of the instrument, intended or understood. What is the meaning of the language that they have used therein? That is the problem, and the only problem.32

This blinkered examination of the text was developed in later decisions of the House of Lords: In order for the agreement … to be understood, it must be placed in its context. The time has long passed when agreements, even those under seal, were isolated from the matrix of facts in which they were set and interpreted purely on internal linguistic considerations.33

The current position of English law was authoritatively stated by Lord Hoffmann in five propositions in Investors Compensation Scheme Ltd v. West Bromwich Building Society.34 Only the first and most important of these will be reproduced here: Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.35

Proposition three preserves the exclusion from the context of a contract ‘the previous negotiations of the parties and their declarations of subjective intent’ would not constitute admissible evidence when construing a contract.36 The only exception to this principle would be when a claim was made for rectification of a contract.37 Lewison explains that Lord Hoffmann’s account of the English approach to contractual interpretation is not a departure from precedent, 32

(1911) 104 LT 85 (CA), 88. Prenn v. Simmonds [1971] 1 WLR 1381 (HL), 1383–4, per Wilberforce, LJ. See also Reardon Smith Line Ltd v. Yngvar Hansen-Tangen [1976] 1 WLR 989 (HL), 995–7. 34 [1998] 1 WLR 896 (HL). 35 Ibid. at 912H. This rule of contextual interpretation is retained in Arnold v Britton [2015] UKSC 36 at para 15, although scope for purposive construction according to ‘commercial common sense’ (see Rainy Sky SA v Kookmin Bank Ltd [2011] UKSC 50 in particular) was cut back in paras 17–23 of Arnold, with emphasis being placed on objective interpretation of the actual language used by the parties. 36 Ibid. at 913A–B. For a lengthy defence of the parol evidence rule see Chartbrook Ltd v. Persimmon Homes Ltd [2009] UKHL 38, paras 28–47, per Hoffmann, LJ. 37 Ibid. 33

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but rather ‘a restatement with a different emphasis’.38 Lord Hoffmann himself pronounced in a later case that he had not thereby ‘greatly increased’ the amount of background material which could be considered in construing a contract – his five points could all be backed up with earlier case authority.39 This argument is borne out by an analysis of decisions such as those of Lord Wilberforce in Prenn v. Simmonds40 (quoted above) and Reardon Smith Line Ltd v. Yngvar Hansen-Tangen.41 Thus while it might not be true to state that English law is in a stage of development in this area, there is definitely a progressive shift from literalism to contextualism at play. Similarly, the process of construction could not be described as anything other than objective, since the search is not for the intention of the parties, but for the meaning of the words they had used. The change in emphasis is in the approach to the hypothetical exercise which a court has to go through in examining the evidence before it in order to give meaning to a contract. The parol evidence rule and the rule excluding evidence of prior negotiations remain a firm fixture in English law and represent defining characteristics of its law of contractual interpretation, distinguishing this in particular from French law and legal regimes based thereon. German law, however, remains remarkably similar to English law in its operation, particularly following the re-emphasis of the sources by Lord Hoffmann. The following section will cast the examination of comparative sources a bit wider, drawing in other leading European jurisdictions and supra-national regimes.

V.

CONTINENTAL EUROPEAN AND SUPRA-NATIONAL COMPARISONS

The German Civil Code (BGB) lays down two rules for the interpretation of contracts: (1)

section 133: ‘When a declaration of intent is interpreted, it is necessary to ascertain the true intention rather than adhering to the literal meaning of the declaration’;42

38

Lewison (2011) 3. Chartbrook, n. 36 above, para. 37. See also Bingham (2008). 40 See n. 33 above. 41 See n. 33 above. 42 Official translation provided by the Federal Ministry of Justice, www.gesetze-im-internet.de/englisch_bgb/englisch_bgb.html. 39

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(2)

section 157: ‘Contracts are to be interpreted as required by good faith, taking customary practice into consideration.’43

These two provisions seem to conflict on their face, the one calling for a search for subjective intention, the other for a normative search for a reasonable interpretation.44 Vogenauer explains that due to the manner in which German courts analyse transactions to determine whether a contract has been formed, the interpreter has to adopt the ‘objective perspective of the recipient of the declaration’.45 Thus the search is for the understanding of a reasonable person in the position of the parties.46 Viewed in this light, the German perspective is not far removed from that of Lord Hoffmann in Investors Compensation Scheme,47 or of the South African Supreme Court of Appeal in its latest line of cases starting with KPMG Chartered Accountants.48 The law of contractual interpretation in France is governed by a sub-chapter in their Civil Code. The first of the articles calls for subjective interpretation: article 1156: One must in agreements seek what the common intention of the contracting parties was, rather than pay attention to the literal meaning of the terms.49

This is the first rule of contractual interpretation mentioned by Pothier. The following articles 1157 to 1164 refer to certain objective factors which may also be used in interpretation; these are all also taken from Pothier’s account of the law of interpretation. Thus, the official starting point of interpretation in France is with the ‘golden rule’, as was historically the position in South Africa, with subsidiary rules allowing for a mix of subjective and objective factors.50 Of course, the French 43

Ibid. Compare the analysis of Muthorst (2011) 49. 45 Vogenauer (2007) 127–8. In this type of analysis, the equivalent of the English offer and acceptance, the declaration of intention forming the offer has to be understood as the recipient would understand it ‘in accordance with good faith, having regard to commercial practice’ (ibid.). 46 Ibid. at 128. 47 [1998] 1 WLR 896 (HL). 48 2009 (4) SA 399 (SCA). Compare the arguments of Vogenauer (2007) 128–9 and of Kötz and Flessner (1997) 109–13. 49 Translation by Georges Rouhette, available at www.legifrance.gouv.fr/ Traductions/en-English/Legifrance-translations. 50 Compare Vogenauer (2007) 126–7; Kötz and Flessner (1997) 110–12. 44

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Code Civil is a document of considerable antiquity and it is understandable that their approach to interpretation will have been developed since then.51 In this regard, the Cour de Cassation had already intimated in the nineteenth century that the articles of the French Code Civil on contractual interpretation were guidance, rather than mandatory rules.52 It should be noted, however, that in French law, the correct interpretation of a contract is a question of fact, not law, and therefore lies to the lower courts judging the merits of the case to determine and is outside the control of the Cour de Cassation.53 Hence, it is hard to determine a unified approach of the French courts to the issue.54 On the question of admissibility of extrinsic evidence, there is no general equivalent of the parol evidence rule in French or German law, although exceptions exist.55 Vogenauer argues that, to the civil law observer, such a rule presents a ‘quaint confusion of the law of evidence and the substantive law on contractual interpretation’.56 Rather he posits that there should be a presumption against admitting extrinsic evidence, unless the circumstances of the case require it to resolve a difficulty in interpretation.57 This he argues is the German position.58 This chapter has so far concluded that the South African and English approaches to interpretation are objective, and require a contextual reading of the contract itself. German law is also objective in effect, but the BGB combines subjective and objective approaches and extrinsic evidence of the parties’ prior negotiations is permissible as a source of context to explain the background to their transaction. French law likewise presents a mix of subjective and objective factors, but the 51 Nicholas (1992) 47, states that this ‘rule’ of interpretation is of little assistance, since the difficulties arise where the intention of the parties is not clear, or a particular situation has not been dealt with by them. 52 Cass req. 24 February 1868, DP 1868.1.308. 53 Nicholas (1992) 47; Vogenauer (2007) 129–30. See also Von Bar and Clive (2009) vol. 1, 557. 54 Nicholas (1992) 47. 55 See, e.g., French Civil Code, art. 1341(1): ‘An instrument before notaires or under private signature must be executed in all matters exceeding a sum or value fixed by decree [€1500], even for voluntary deposits, and no proof by witness is allowed against or beyond the contents of instruments, or as to what is alleged to have been said before, at the time of, or after the instruments, although it is a question of a lesser sum or value’. Translation taken from Legifrance website, n. 49 above. 56 Vogenauer (2007) 135. 57 Ibid. at 137–9. 58 Ibid., citing BGH 5 July 2002, NJW 2002, 3164.

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starting point (at least in terms of the Code Civil) is subjective, in line with the writings of Pothier and drawing on an approach taken from the Digest. Due to space constraints, this limited survey will omit any further national jurisdictions and turn now to certain of the supra-national model rules. These systems of rules are by nature a form of compromise and an attempt to capture best practice. Again the inquiry will be limited to the subjective/objective interpretation question. The UNIDROIT Principles of International Commercial Contracts (PICC), like the German BGB, contain both an objective and a subjective directive for interpretation. The 2010 version provides as follows: article 4.1: (1) A contract shall be interpreted according to the common intention of the parties. (2) If such an intention cannot be established, the contract shall be interpreted according to the meaning that reasonable persons of the same kind as the parties would give to it in the same circumstances.

The comments to this article make it clear that preference is to be given to the common subjective intention if this can be established. As only a secondary consideration, recourse may be had to what reasonable parties with the same knowledge and in the same circumstances would construe the contract to mean. This, as comment two makes clear, is not a general requirement of reasonableness, but one which places the interpreter in the shoes of those particular parties. A similar rule is captured in the Draft Common Frame of Reference (DCFR): Article II – 8:101: (1) A contract is to be interpreted according to the common intention of the parties even if this differs from the literal meaning of the words. (2) If one party intended the contract, or a term or expression used in it, to have a particular meaning, and at the time of the conclusion of the contract the other party was aware, or could reasonably be expected to have been aware, of the first party’s intention, the contract is to be interpreted in the way intended by the first party. (3) The contract is, however, to be interpreted according to the meaning which a reasonable person would give to it: (a) if an intention cannot be established under the preceding paragraphs; or (b) if the question arises with a person, not being a party to the contract or a person who by law has no better rights than such a party, who has reasonably and in good faith relied on the contract’s apparent meaning.59

The comments to this section note that it combines elements of the subjective and objective approaches, as do most Member States of the European Union. The primary inquiry is again stated to be into the 59

Von Bar and Clive (2009) 553.

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common intention of the parties in the light of the context of the transaction.60 Objective questions of what it would be reasonable to expect the contracting party to whom an offer was made to understand by such offer are the next point of call. Finally, as a last resort, the interpreter may consider what would be a completely objective interpretation of the contract (subject to the requirement that such an interpretation must be reasonable). This brief excursus of two models of supra-national law thus confirms that Pothier’s golden rule of interpretation is still alive and well. Indeed, Lord Hoffmann noted not long ago that the UNIDROIT PICC were based on French legal philosophy and as such the perspective which this model provides, generally, and on admitting extrinsic evidence in particular, was at variance with the English common law.61 The two approaches set out above do try to reconcile with objective interpretation, however, by providing this as a deadlock-breaker for resolving hard cases of interpretation, not resolvable from examining the parties’ common intention. What is noticeable about the continental, particularly German, law as well as the model laws, is the high premium placed upon good faith. Since this chapter set out to compare South African law with the major European legal systems in particular, the role of good faith in South African contract law will be considered next.

VI.

GOOD FAITH, THE CONSTITUTION AND AFRICAN CUSTOMARY LAW IN SOUTH AFRICAN CONTRACTUAL INTERPRETATION

As we have seen, in the early days of the law of a unified South Africa, the search was for the common intention of the parties as expressed in the wording of their contract. The possibility of allowing good faith to guide the interpretation of the contract was only acknowledged in the instance of an ambiguity: in the event of two competing constructions, the Appellate Division was prepared to favour a construction of the contract which avoided a ‘manifestly inequitable result’.62 Good faith 60 Article II-8:102 encourages the interpreter to have regard to the context in which the contract was concluded and gives various examples of what constitutes such context. One of these, it should, be noted, is the catch all provision of ‘good faith and fair dealing’. 61 Chartbrook Ltd v. Persimmon Homes Ltd [2009] UKHL 38, para. 39. 62 Trustee, Estate Cresswell and Durbach v. Coetzee 1916 AD 14, 19. Zimmermann (1996) 242–3.

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was hence treated as a deadlock-breaking consideration, in much the same way as the other secondary rules of construction drawn from historic sources such as Pothier and Van der Linden. South African contract law does not recognize an independently enforceable duty of good faith, the view of the Supreme Court of Appeal is that it is rather a ‘foundational principle, which underlies contract law in general, and which finds its expression in the particular rules and doctrines thereof’.63 This conservative view was undermined by the Constitutional Court, however, when it infused the common law test for legality of a contract with values such as fairness, justice and reasonableness.64 Thus when invited to consider whether a time bar clause in a short-term insurance contract was an infringement of the constitutionally protected right of access to a court,65 the Constitutional Court held that the proper test was to weigh this clause against public policy.66 The precise formula for the public policy test used by the Court is worth repeating: Notions of fairness, justice and equity, and reasonableness cannot be separated from public policy. Public policy takes into account the necessity to do simple justice between individuals. Public policy is informed by the concept of ubuntu. It would be contrary to public policy to enforce a time-limitation clause that does not afford the person bound by it an adequate and fair opportunity to seek judicial redress.67

Although this case dealt with the enforcement of contractual terms, this approach could well be extended to the interpretation phase of a contract as well, so that competing constructions could be weighed against public policy in choosing an outcome. Indeed, the Supreme Court of Appeal stated in South African Forestry Co. Ltd v. York Timbers Ltd that ‘notions of fairness and good faith that underlie the law of contract’ have a role to play in contractual interpretation.68 The concept of ‘ubuntu’, referred to 63

Brisley v. Drotsky 2002 (4) SA 1 (SCA), para. 22 (author’s translation). Barkhuizen v. Napier 2007 (5) SA 323 (CC), para. 51. This was done via the public policy rule, which is explained below. See para. 82 of this case, however, for a reaffirmation of the Brisley v. Drotsky approach to the question of good faith as a doctrine independent of public policy or the Constitution. 65 Constitution of the Republic of South Africa, s. 34. 66 Barkhuizen, n. 57 above, paras 28–30. 67 Ibid. para. 51. Compare Everfresh Market Virginia (Pty) Ltd v. Shoprite Checkers (Pty) Ltd 2012 (1) SA 256 (CC), para. 72, per Moseneke, J (the context here was good faith in the negotiation of contracts); Botha v. Rich NO 2014 (4) SA 124 (CC), paras 45–6 (a unanimous court limited a seller’s power to cancel a sale of immovable property for breach by the purchaser). 68 2005 (3) SA 323 (SCA), para. 32. 64

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in the extract above, is taken from African customary law and has been defined as follows by the Constitutional Court: Metaphorically, [ubuntu] expresses itself in umuntu ngumuntu ngabantu, describing the significance of group solidarity on survival issues so central to the survival of communities. While it envelops the key values of group solidarity, compassion, respect, human dignity, conformity to basic norms and collective unity, in its fundamental sense it denotes humanity and morality.69

It does not seem to be a stretch to say that notions of fairness and objective reasonableness, reinforced by notions of African philosophy and the values of equity and dignity underlying the South African Bill of Rights, may soon be required of all contracts under South African law, whether through the public policy rule or a duty of good faith implied by law.70 This could usefully be coupled with the more objective approach to interpretation which the Supreme Court of Appeal has adopted in cases such as Natal Joint Municipal Pension Fund recently.71 This would also be in line with the prevailing approach to the interpretation of statutes in this country,72 and has long been advocated by proponents of good faith.73 Such a move would ensure that an interpretation of a contract would not only have to be that which a reasonable reader in the position of the parties would give to it, but also objectively reasonable and not in conflict with constitutional values. In many ways, this echoes the approach of continental European jurisdictions listed above, such as Germany, as well as the supra-national model rules, such as the UNIDROIT PICC or the DCFR, which require a duty of good faith in contracting.74 69 S v. Makwanyane 1995 (3) SA 391 (CC), para. 308, per Mokgoro, J. See further Bennett (2011) 3; Cornell and Muvangua (2012). 70 See the strong statements in this regard in Everfresh Market Virginia, n. 67 above, para. 72. In the consumer context, Consumer Protection Act 68 of 2008 requires (s. 48) that consumer contracts may not contain ‘unfair, unreasonable or unjust’ terms. Under s. 52 of that Act, a court is given extensive powers to undo a contract interpreted to contain such terms. 71 2012 (4) SA 593 (SCA), para. 18. 72 See above and the statement in Natal Joint Municipal Pension Fund, n. 26 above, para. 19, that the new objective, contextual approach to interpretation is in line with the South African approach to the interpretation of statutes, which operates particularly within the context of the Constitution. 73 Compare, e.g. Lubbe and Murray (1988) 469. 74 The duty of good faith is captured in UNIDROIT PICC, art. 1.7 and DCFR, art. III-1:103.

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VII.

CONCLUSION

We have seen that the South African approach to contractual interpretation used to be a synthesis of civil and common law, with the golden rule of interpretation, taken from the later ius commune writers and still to be found in the French Civil Code, being applied against a backdrop of the English law preventing extrinsic evidence of contractual negotiations. This ‘parol evidence’ rule still forms part of South African law, as well as English law, and the courts of both jurisdictions have defended and reinforced it recently. This rule is at variance with German and French law. The South African movement toward preferring an interpretation based on a reasonable reading by a person in the shoes of the recipient of an offer, is essentially a reflection of the shift in English law which has been happening since the 1970s. This technique of reading is very close to that practised by German courts for many years, demonstrating the widespread acceptance of this approach. Indeed, it could be said that South Africa in particular, with its own movement towards an enforceable duty of good faith in contract law, is moving as much in the German direction as in the English. This also shows that the South African synthesis of the law of interpretation positions it closer perhaps to English and German law than to French law. Perhaps this is to draw a false dichotomy, however, since elements of the same trends in interpretation can be found in most of the legal systems surveyed in this chapter. The major stumbling blocks are the rules against certain forms of extrinsic evidence, although we have seen that even some in the English jurisdiction are calling for the abolition of this. The main argument against abolition of these rules seems to be prevention of the leading of unnecessary and voluminous evidence of contractual negotiations by the parties to a dispute,75 but the French and German experience has proved that this ‘floodgates’ type of argument is perhaps overly stressed.76 Questions of drastic reform aside, the shift in emphasis toward the construction of the reasonable recipient in South African and English law is a positive one. The inference of the understanding of a contract of an ordinary contracting party in the shoes of the recipient, rather than that of legally trained judges, is a step in the direction of making law more intelligible and open to those who are governed by it, and protects the reliance of the party who accepted the offer. 75 76

See, e.g., Lubbe and Murray (1988) 463. Compare the argument of Vogenauer (2007) 137–9 (discussed above).

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REFERENCES Bennett, T.W. (2004) Customary Law in South Africa. Lansdowne: Juta Bennett, T.W. (2011) ‘Ubuntu: An African Equity’ in F. Diedrich (ed.), Ubuntu, Good Faith and Equity: Flexible Legal Principles in Developing a Contemporary Jurisprudence. Claremont, South Africa: Juta, 3 Bingham, T. (2008) ‘A New Thing Under the Sun: The Interpretation of Contract and the ICS Decision’, 12 Edinburgh L R 374 Christie, R.H. and Bradfield, G.B. (2011) The Law of Contract in South Africa. Durban: Butterworths, 6th edn Corder, H. (2010) ‘A Century Worth Celebrating’, 127 South African L J 571 Cornell, D. and Muvangua, N. (2012) Ubuntu and the Law: African Ideals and PostApartheid Jurisprudence. New York: Fordham University Press Fagan, E. (1996) ‘Roman-Dutch Law in its South African Historical Context’ in R. Zimmermann and D. Visser (eds), Southern Cross: Civil Law and Common Law in South Africa. Oxford: Clarendon Press, 33 Himonga, C. and Nhlapo, T. (eds) (2014) African Customary Law in South Africa: Post-Apartheid and Living Law Perspectives. Cape Town: Oxford University Press Southern Africa Juta, H. (1906) Institutes of Holland. Cape Town: J.C. Juta Kötz, H. and Flessner, A. (1997) European Contract Law. Oxford: Clarendon Press, Tony Weir (trans.) Lewis, C. (1996) ‘Interpretation of Contracts’ in R. Zimmermann and D. Visser (eds), Southern Cross: Civil Law and Common Law in South Africa. Oxford: Clarendon Press, 195 Lewison, K. (2011) The Interpretation of Contracts. London: Sweet & Maxwell, 5th edn Linden, J. (1806) Rechtsgeleerd, Practicaal, en Koopmans Handboek. Amsterdam: Allart Lubbe, G. and Murray, C. (1988) Farlam and Hathaway on Contract: Cases, Materials, Commentary. Claremont, South Africa: Juta, 3rd edn Maxwell, C. (2012) ‘Interpretation of Contracts’ in D. Hutchison and C.J. Pretorius (eds), The Law of Contract in South Africa. Cape Town: Oxford University Press Southern Africa, 2nd edn, 255 Muthorst, O. (2011) ‘Contract Interpretation Under the German BGB and Under the DCFR’ in B. Heiderhoff and G. Zmij (eds), Interpretation in Polish, German and European Private Law. Munich: Sellier European Law Publishers, 47 Nicholas, B. (1992) The French Law of Contract. Oxford: Clarendon Press, 2nd edn Nicholls, D. (2005) ‘My Kingdom for a Horse: The Meaning of Words’, 121 LQR 577 Pothier, R. (1853) A Treatise on the Law of Obligations or Contracts (Traité des Obligations). Philadelphia, PN: R.H. Small, David Evans, W. (trans.) Schwikkard, P.J. and Van der Merwe, S.E. (2010) Principles of Evidence. Kenwyn, South Africa: Juta & Co., 3rd edn Vogenauer, S. (2007) ‘Interpretation of Contracts: Concluding Comparative Observations’ in A. Burrows and E. Peel (eds), Contract Terms. Oxford: Oxford University Press Von Bar, C. and Clive, E. (eds) (2009) Principles, Definitions and Model Rules of European Private Law: Draft Common Frame of Reference, vol. 1. Munich: Sellier, European Law Publishers Wallis, M. (2010) ‘What’s in a Word? Interpretation Through the Eyes of Ordinary Readers’, 127 South African L J 673 Zimmermann, R. (1990) The Law of Obligations: Roman Foundations of the Civilian Tradition. Cape Town: Juta

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468 Comparative contract law Zimmermann, R. (1996) ‘Good Faith and Equity’ in R. Zimmermann and D. Visser (eds), Southern Cross: Civil Law and Common Law in South Africa. Oxford: Clarendon Press, 217 Zimmermann, R. (2004) ‘“Double Cross”: Comparing Scots and South African Law’ in R. Zimmermann, D. Visser and K. Reid (eds), Mixed Legal Systems in Comparative Perspective: Property and Obligations in Scotland and South Africa. New York: Oxford University Press, 1

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19. Promissory estoppel Paolo Pardolesi

I.

WHAT IS PROMISSORY ESTOPPEL?

Promissory estoppel took shape in the nineteenth century to smooth out the rigidity of the doctrine of consideration:1 it is possible to suggest that promissory estoppel provides a valuable investment protection mechanism in so far as it bars the promisor from opportunistic withdrawal of his undertaking when it can be expected that the promisor’s behaviour has induced the justified reliance of the promisee (so that ignoring such reliance would be contrary to justice). Nevertheless, it simultaneously poses the problem of the adequacy of such a protection, especially where there is a margin for trading ex post which would render the imposition of liability unnecessary. Therefore, we will see that the focus shifts from the reasonableness of the conduct during the negotiations and moves in the direction of the obligation to act in good faith. This being the original inspiration, the theory has seen further developments in North America, which created an exception and became, to a greater extent, an alternative principle to the traditional theory of consideration based on the bargaining principle (which requires that there be some type of exchange bringing value, monetary or otherwise, to both parties). 1 The roots of the institution of promissory estoppel go back to the procedural remedy of estoppel which was an equitable defence exception to prevent the enforcement of the customary rules in cases where their application would have produced unjust results. In more detail, there are three figures which have become progressively more and more important: (1) the estoppel by record or rem judicatam (which is equivalent to the prohibition of double jeopardy); (2) the estoppel by deed (which applies in proceedings of a formal nature: in short, it prevents the other party of the same agreement from denying as stated therein); and (3) the estoppel in pais (which is based on the idea that he or she who has stated something then should not have the right to contest it). However, there are many attempts to reconstruct the estoppel as a unitarian body: the latest one is the fascinating work of Cooke (2001) 1 ff. For a recent historic reconstruction of the origins of promissory estoppel see Amato (2012) 49 ff.

469

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Therefore, although the traditional version of promissory estoppel relaxes the rigor of this approach emphasizing the element of induced reliance (therefore, reinterpreting the lack of commitment of the counterparty, the commonly received version creates a systematic exception that is able to co-exist with the principle: the promise of non-reciprocity would fall on deaf ears if the pressing need to avoid injustice, triggered by the change of the legal-patrimonial position to which the promisee was innocently led, did not bar the promisor’s option to withdraw) – the new course, as we shall see, marks a sharp break from the traditional approach. In a broader view, the idea is that the unilateral promise is intended precisely to reassure the beneficiary about the seriousness of the undertaking and, consequently, to induce him to act on another’s commitment. Thus, the focus shifts from the reliance of the recipient to the willingness of the promisor to assume the commitment. As a result, promissory estoppel ceases to appear as an exception and becomes, to a greater extent, an alternative principle to the traditional theory.2 From the comparative scholar’s perspective this picture is particularly intriguing and filled with fascinating suggestions. The counter-intuitive possibility of identifying the unilateral promise as a bargaining configuration (which revolves around the idea that the promisor wants to stress the seriousness of the commitment) or as an essential requirement of pre-contractual obligation (where it is closely linked to the desire to protect the expectation created in the promisee) requires some crucial theoretical articulations to be reconsidered. The following notes are the first steps on the path towards uncovering and examining this complex conceptual chain.

II. ENGLISH DISCIPLINE OF PROMISSORY ESTOPPEL: AN INTRIGUING JOURNEY AS A LEGAL TRANSPLANT Even though the development of the English discipline of promissory estoppel mirrors the different matrices of common law and equity (which have produced, in addition to an intrinsic inconsistency, a terminological vagueness),3 it is necessary to emphasize that the impulse toward unification took place not only through the direct influence of American 2

On these profiles see Posner (1977). Spencer Bower (1966) 332. In this perspective it will be important to start from the ‘impact’ of the Judicature Acts (1873–75). Prior to these, the English system followed a dualistic approach, whereby rights and remedies could only be 3

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jurisprudence (where this result had already been largely achieved), but in a ‘mediated manner’, through the stimulus coming from the decisions made by some Commonwealth courts (mainly Australian), which, in turn, had adopted the North American legal solutions.4 In this perspective, the most important case is Waltons Stores (Interstate) Ltd v. Maher, which not only established the transplantation of the US model of promissory estoppel into the Australian legal tradition, but also captured the attention of the English courts, becoming the main way of unifying estoppel in a single discipline with offensive capabilities.5 Before turning to the analysis of this important legal solution, it seems appropriate to briefly survey some crucial evolutionary features concerning the enforcement of promissory estoppel in England by means of the scrutiny of two leading cases: (1) Jorden v. Money6 and (2) Central London Property Trust Ltd v. High Trees House Ltd.7

applied either by common law courts or by the Chancery court. This approach was overwhelmed by a ‘procedural fusion’; the Acts affirmed the irrelevance of jurisdiction and the abandonment of the terms ‘legal’ or ‘equitable’, which carry a complex array of implications. However, this procedural simplification marked the start of a web of conflicting results, due to the fact that, in many cases, common law and equity dealt with the same elements, each adopting different terminology and practical solutions. One example for all: although the term contract (rooted in common law) was used in equity cases where specific performance was sought for an agreement binding at common law, the opposite route did not work. An agreement relevant in equity, but not recognized at common law, could never have been classified as contract; rather, in the face of a hypothesis of this kind, it was alleged that the defendant, retracing his steps (that is, when he had resolved to break the agreement), had committed ‘an equitable fraud’, with the consequence of being subject to an estoppel for violation of a fiduciary duty (see Jaffey (2000) 421–2). 4 Waltons Stores (Interstate) Ltd v. Maher (1988) 164 CLR 387; Foran v. Wright (1989) 168 CLR 385; Commonwealth of Australia v. Verwayen (1990) 170 CLR 394. 5 This case has been recalled by many decisions: see, for example, Petromec Inc. v. Petroleo Brasileiro S.A. Petrobras [2004] EWHC (Comm) 127; Brennan v. Bolt Burdon [2003] EWHC (QB) 2493; Actionstrength Ltd v. Int’l Glass Engineering [2003] UKHL 17, [2003] 2 WLR 1060; In re Goldcorp Exch. Ltd [1994] 3 WLR 199. 6 Jorden v. Money (1854) 5 HL Cas. 185. For a reconnaissance of the events in this case see Ngugi (2007). 7 Central London Property Trust Ltd v. High Trees House Ltd [1956] All ER 256.

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A. Difficulty in Recognizing the Requirement of Intention to Create Legal Relations In 1854, the House of Lords, ruling on the case of Jorden v. Money, held that the ‘doctrine of estoppel does not apply to a case where the representation is not a representation of a fact, but a statement of something which the party intends or does not intend to do’.8 More specifically, the court recognized estoppel based on simple reliance (namely, in the presence of a simple declaration of intent aimed to influence the conduct of a recipient who has acted in reliance): a move to which the same court had given its plain denial just nine years before in the decision in Hammersley v. De Biel.9 Only 100 years later, the will of the courts to reduce estoppel to a mere ‘rule of evidence’10 underwent an important transformation by virtue of the statement of Lord Denning in Central London Property Trust Ltd v. High Trees House Ltd, which involved a dispute regarding the request of the plaintiff/landlord to recover arrears of a lease (with a rental agreement lacking consideration) after having shown the defendant/tenant his willingness to accept a partial payment in view of the special conditions existing in London as a result of the Second World War.11 In particular, in spite of the will of the plaintiff/landlord to obtain not only the return of the full price (i.e. that established originally in the lease), but, given the lack of consideration, the recovery of the money saved by the defendant because of his promise, Lord Denning adopted a solution which in some ways was surprising. He held that, even though the promise was rooted in an assurance as to the future, estoppel should be granted since the promisor/lessor intended to bind himself, inducing the lessee to rely on the willingness of the landlord to accept a reduced amount compared to that provided by the contract. Consequently, although the landlord could ask to return to the initial contract terms, he was precluded from claiming the repayment of the sum which he had promised to relinquish. 8

Jorden v. Money, n. 6 above, at 185. Hammersley v. De Biel (1845) 8 ER 1312 (HL). 10 During that century this practice was mitigated only by the rise of proprietary estoppel, which allowed the plaintiff to establish a cause of action based on the expectation created by a declaration of future intent by the defendant ‘where the underlying subject-matter respecting the representations was land’ (Ngugi (2007) 475). 11 Central London Property Trust Ltd v. High Trees House Ltd, n. 7 above, at 256. 9

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The court patently exceeded the limits laid down in Jorden v. Money;12 but it took advantage of important changes set forth in Hughes v. Metropolitan Rail Co.13 and Birminghan & District Land Co. v. London and North-Western Rail Co.14 (which enshrine the principle under which reliance can only be implemented between actors bound together by a pre-existing contractual relationship or ‘at least defined and distinct legal relations’).15 The latter two cases lay sufficient foundation and legal basis on which one can assert the principle that a promisor is not permitted to drop the promise when certain conditions are met. More specifically, in cases where the intention to create ‘legal relations’ is demonstrated (that is, promises were ‘intended to be binding, intended to be acted on and in fact acted on’), courts must consider the party bound despite the fact that ‘under the old common law it might be difficult to find any consideration for it’.16 The rationale for the shift was based on the idea that one should not be permitted to act inconsistently since, if the holder of a contractual right, by his conduct, induces the counter-party to believe that this right will not be implemented or will be temporarily held in abeyance, then he should not be given the opportunity to withdraw and take advantage of the same right after the passage of the period of insured ‘quarantine’. Only in the presence of these distinct features may the promises give rise to the instrument of quasi-estoppel, which is more commonly known as promissory estoppel.17 B. Uncertain Interpretation of the High Trees Decision Although the High Trees decision has played a vital role in the evolution of this legal instrument in England, its interpretation was doubtful regarding whether its application was limited solely to those subjects already bound by pre-existing contractual relations. Notwithstanding that the jurisprudence was largely in favour of the need for the existence of a contractual relationship between the parties, 12 See Jorden v. Money, n. 6 above, at 9. See also, Koffman and Macdonald (2007) 84: ‘the law had moved on since Jorden v. Money to cover a broader principle than that traditionally represented by the doctrine of estoppel by representation’. 13 Hughes v. Metropolitan Railway Co. [1877] 2 App. Cas. 439. 14 Birmingham and District Land Co. v. London & North-Western Rail Co. (1888) 40 Ch. D 286. 15 Ngugi (2007) 475–6. 16 Spencer Bower (1966) 333–4. 17 The other one is the election. On this kind of instrument see ibid. at 285.

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the position of Lord Denning (in determining that the promise, ‘intended to be binding, intended to be acted on, and in fact acted on, is binding so far as its terms properly apply’) would seem to open the gates to the possibility that estoppel be imbued with an ‘offensive soul’, which, as will be seen, can be traced to US jurisprudence.18 Furthermore, in a case of divorce marked by the promise and later refusal by a husband to provide an annual maintenance allowance for his wife,19 Judge Byrne embraced the woman’s arguments and held that the promise of the spouse, though not based on any previous contractual relationship and lacking consideration, had to be implemented on the basis of the principle enshrined in the High Trees case.20 Nonetheless, the appeal gave the author of the decision the opportunity to clarify the point and vigorously underline that the principle set forth in the High Trees case was not aimed at following in the footsteps of section 90 of the Restatement (First) of Contracts (which states: ‘[t]hat principle does not create new causes of action where none existed before[; i]t only prevents a party from insisting upon his strict legal rights, when it would be unjust to allow him to enforce them, having regard to the dealings which have taken place between the parties’).21 In addition, this position was further reiterated by the same judge in an essay where he expressed his belief that there was no need for equity to alter the English discipline of consideration since it ensured a much wider scope than that envisaged in the United States. This, according to Lord Denning, could be explained as follows: the saliency of this more flexible approach lies in the fact that, despite lacking an explicit request, an equivalent could be traced in the will to induce the counter-party to perform a positive act, or abstain from acting by virtue of reliance created by promises.22 After all, some years before, in 18

See Thompson (1983) 266. What is important to emphasize is that the spouse, relying on the binding nature of the promise, had failed to undertake the legal proceedings necessary to obtain the required court order. 20 Combe v. Combe [1951] 2 KB 215 (CA). 21 For a thorough analysis of the reasoning of Lord Denning in Combe v. Combe see Ngugi (2007) 477–82. 22 Denning (1952) 1: [T]he law for centuries has been that an act done at the request of another, express or implied, is sufficient consideration to support a promise … The only essentials are the promise by the one and the forbearance by the other on the faith of it. Even though there was no request in fact for the forbearance, nevertheless if the promise was given with the intention of inducing the creditor to forbear on the faith of it, the law will imply a request … In these circumstances it may be well that, instead of using the old language of 19

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Bob Guinness Ltd v. Salomonsen, Denning himself had stressed that consideration is sometimes the actual purchase price of a promise, and sometimes a mere fiction recognized to ensure that the promise is enforceable.23 The result of Denning’s dicta is the implication that ‘[i]f the law is willing to “imply” a request, it follows that, under this definition, a majority of the cases covered by the American doctrine of promissory estoppel would immediately be transformed into consideration’.24 However, the debate about the limit laid down in the cases of Hughes and Birmingham25 – that estoppel may only be applicable between parties bound by a pre-existent contractual relationship – has not lost its vigour. After all, some courts (often referring to Combe for support) have

‘request’ and ‘consideration’ we can express the self-same principle by saying that a promise is binding in law if it was intended to create legal relations, intended to be acted upon and was in fact acted upon by the person to whom it was given. 23 Bob Guiness Ltd v. Salomonsen [1948] 2 KB 42. 24 Ngugi (2007) 481–2 (‘this would, in turn, make the doctrine of promissory estoppel superfluous if offered to enforce relied-on promises, simply because the law would imply a request by the promisor to the promisee to do the actions or forbearance which would be the basis of the estoppel action hence transforming such actions or forbearance into consideration’). This solution has found confirmation in a variety of subsequent judicial decisions, which has led to the identification of five essential elements that characterize the rule of English promissory estoppel: (1) the presence of a promise or a statement put forth in a clear and unambiguous manner, by the party against which the estoppel is sought (Motor Oil Hellas (Corinth) Refineries S.A. v. Shipping Corp. of India [1990] 1 Lloyd’s Rep. 391, 399 (HL 1989); Allied Marine Transp. Ltd v. Vale Do Rio Doce Navegaçao S.A. [1985] 2 Lloyd’s Rep. 18, 25, 28 (CA)); (2) the promisee must act to his detriment on the basis of the promise (Goldsworthy v. Brickell [1987] Ch. 378, 411 (CA)); (3) in a manner inconsistent with the promise/ declaration made to the promise such that it would be unconscionable not to give legal recognition to the promise (Jennings v. Rice [2002] EWCA (Civ) 159; D & C Builders v. Rees [1966] 2 QB 617, 625 (CA)); (4) the effect of estoppel must be to suspend (rather than terminate) the right challenged so that the person who has formulated the declaration/promise will not be ‘locked’ forever, but will regain the faculties paralyzed by providing reasonable notice where appropriate (National Westminster Bank Plc v. Somer, Int’l (UK) Ltd [2001] EWCA (Civ) 970); (5) finally, such a legal instrument has to prevent the execution of the rights covered by the promise/grant by the promisor, but may not allow for the creation of new rights (Combe v. Combe, n. 20 above at 220). 25 See Hughes v. Metropolitan Railway Co., n. 13 above, at 439; Birmingham and District Land Co. v. London & North-Western Rail Co., n. 14 above, at 286.

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held that the pre-existence of legal relations is a necessary element for the expansion of its scope. Nevertheless, this result was achieved not by overruling the decision, ‘but by arguing for recognition of a “unified” estoppel which does not distinguish between proprietary or promissory estoppel. The result of such unification would be to make all justifiably relied on representations enforceable.’26 C. ‘Mediated Manner’ of Transplantation of the US Model of Promissory Estoppel into the English Legal Tradition As we stressed beforehand, the impulse toward unification of the English discipline of promissory estoppel took place not only through the direct influence of American jurisprudence but through the incentive coming from the decisions made by some Australian courts that captured the attention of the English courts. In particular, the most significant case, Waltons Stores (Interstate) Ltd v. Maher, gave Chief Justice Mason (and Wilson) the occasion to assert that statements not supported by consideration might find a cause of action in estoppel with the equitable goal of preventing ‘unconscionable conduct’.27 This analysis, which stays true to the traditional roots, reveals an obvious link with the US doctrine: after all, as evidenced by both judges, in section 90, paragraph 1, of the Restatement (Second) of Contracts, the connection between estoppel and the contract discipline appears to be close to the Australian version ‘with its origins in the equitable concept of unconscionable conduct’. This is because the US version has progressively acquired the role of equivalent or substitute to consideration in the formation of the contract. Therefore, the proposition in section 90, which, on the one hand, ensures the implementation of a promise conditioned on a reasonable expectation ‘on the part of the promisor that his promise will induce action or forbearance by the promisee’ and, on the other, the impossibility of allowing injustice to occur, makes clear that the promise is enforced in circumstances other than simply where it is ‘unconscionable’28 In light of these considerations, it is reasonable to conclude that the English discipline of promissory estoppel ‘will complete an intriguing 26

Ngugi (2007) 484. See ibid. at 490. 28 Waltons Stores (Interstate) Ltd. v. Maher, n. 4 above, at 387: ‘the emphasis is on the promisor’s reasonable expectation that his promise will induce action or forbearance, not on the fact that he created or encouraged an expectation in the promisee of performance of the promise’. 27

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journey as a legal transplant: from England to the United States; to England and back through the Commonwealth. In any event, that would be a remarkable success rate for a legal transplant.’29

III. EVOLUTION OF THE NORTH AMERICAN DISCIPLINE OF PROMISSORY ESTOPPEL BETWEEN THE FIRST AND SECOND RESTATEMENT OF CONTRACTS Contrary to what some commentators would induce us to believe, the development of promissory estoppel in North America was not in response to a draft of the enlightened Restaters, rather it was rooted in a feeling, inspired by the more elastic US system, which is inescapably different from the English approach.30 This openness to novelty created a situation of substantial uncertainty within the framework of contract law:31 following the establishment of 29

See Ngugi (2007) 484. Many decades before the advent of the First Restatement of Contracts (1932), the US courts, responding to the need to amend the proliferation of cases stained by the harm caused by reliance (triggered by the rigidity of traditional rules for the establishment, modification and termination of a contract), sought alternative routes, referencing possible solutions used in common law jurisdictions and in courts of equity (on this see Posner (2003) 851), who highlights the ways in which the promissory estoppel ‘evolved through the common law process as a device that helped avoid results that were perceived to be unjust in particular kinds of cases’. See also, Prentice (2007) 81, who points out how ‘the values advanced by the equitable doctrine of promissory estoppel are certainly consonant with principles well recognized by behavioural decision theory’. More specifically, the institution of assumpsit, which remedies the harm suffered from reliance on a promise, and the invocation of equitable fraud, for cases in which the promisor claimed the strict application of the ‘contract doctrine after having induced promisee’s justifiable reliance’ had assumed great importance (Teeven (2004) 502). Indeed, these legal instruments were capable of ensuring both a greater flexibility in contractual arrangements and the implementation of ‘crafted novel promises to deal with uncertain economic conditions’: ibid. at 500 (‘contrary to that accepted account, the following legal history of the justifiable reliance doctrine documents that courts regularly granted commercial promisees relief from reliance hardship for many decades prior to the first Restatement’). 31 For a recent overview of the origins of the North American discipline of promissory estoppel see Jimenez (2010). More specifically: the author examines the significance of the promissory estoppel cause of action, the normative basis upon which promissory estoppel rests, the traditional remedies that have been 30

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the American Law Institute (ALI), whose primary purpose was to provide clarification and simplification of the law and its better adaptation to the needs of everyday life, Samuel Williston emphasized the difficulties of achieving a uniform definition of consideration. Moreover, Williston stressed that, in principle, the same could have been detected in the three ‘distinct and conflicting ideas of justifiable reliance, bargain, and a slender reed of moral obligation’.32 Nonetheless, the perception that the courts considered justified reliance a valid basis (no less than a bargain) for establishing a binding contract did not stop Williston from isolating the exchange as the unitary paradigm of the Restatement to find sufficient consideration.33 Comment (c) of section 75 of the First Restatement of Contracts, extrapolating the views of Langdell and Holmes (the expression, as assessed by a careful observer, of a ‘formalist reaction against the natural law flexibility that had crept into the sphere of promissory liability during the preceding decades’,34 excluded that reliance on a promise could constitute consideration.35 awarded to successful promissory estoppel litigants, and the manner in which promissory estoppel remedies have been traditionally classified according to the conceptual expectation and reliance interests. 32 See Williston (1921). 33 Teeven (2004) 511–12. 34 Ibid. at 514. On this profile see Langdell (1880) s. 79; Holmes (1881). See comment (c) to s. 75 of the Restatement (Second) of Contracts: furthermore, although a price has been agreed upon and paid for a promise, the promise is not binding unless the law deems the price sufficient. The following Sections state when an agreed price or consideration for a promise is sufficient to make the promise binding and when such a price or consideration is insufficient. The fact that the promisee relies on the promise to his injury, or the promisor gains some advantage therefrom, does not establish consideration without the element of bargain or agreed exchange; but some informal promises are enforceable without the element of bargain. These fall and are placed in the category of contracts which are binding without assent or consideration (see §§ 85–94). Section 75 establishes that: ‘(1) consideration for a promise is: (a) an act other than a promise, or (b) a forbearance, or (c) the creation, modification or destruction of a legal relation, or (d) a return promise, bargained for and given in exchange for the promise. (2) Consideration may be given to the promisor or to some other person. It may be given by the promisee or by some other person.’ 35 Although, from this perspective, it would seem to be heresy to state that Holmes takes a formalist approach, it is necessary to remark on the complexity of his role. Holmes undertook a crusade against the possibility of justifiable reliance being understood as a basis for consideration (Gilmore (1974) 75). In this vein, a reference can be drawn to the English case of Coggs v. Bernard (case of damage

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Nevertheless, such radical conclusions struggled with the prevailing theoretical view which (conforming to the developments of nineteenth century jurisprudence)36 looked favourably upon the need for justifiable reliance to be a worthy exception to consideration.37 In spite of such marked fluctuations,38 the first version of what would become the First Restatement of Contracts adopted a highly restrictive

caused by the violation of the depositor’s reliance on the free promise of providing for the transport of his goods by the depositary), in which the court had deduced the existence of a consideration that could bind the negligent depositary (Coggs v. Bernard (1703) 72 Eng. Rep. 107 (KB). The anomaly consisted in the fact that this decision converted what normally fell within the scope of a tort action for negligent bailment into a contract action because the court applied the concept of consideration. Specifically referring to this holding, Holmes described Coggs as the paradigmatic example of the inadequacy that follows when the general rule of contracts allows justifiable reliance to become a basis for consideration (Holmes (1881) 196). On this, see Teeven (2004) 516 (‘Holmes presented Coggs as a case representative of contracts generally and then readily pointed out that it was doctrinally flawed since Coggs was an easy target to undercut. Holmes used Coggs to side-step, while still trying to compromise, the raft of nineteenth century American reliance hardship decisions that involved transactions traditionally governed by the doctrine of consideration’). 36 In this perspective the leading case is Rice v. Almy, 32 Conn. 297 (1864). On this point, see Teeven (2004) 522, who remarks how this case: provided perhaps an extreme example of how far some nineteenth century courts at law went to rationalize hardship relief for justifiable reliance. The Connecticut court traced consideration back to ‘its foundations’ as a trespassory deceit action. That much was correct, but the court’s claim that reliance relief for deceit remained available in contract law was a departure from judicial treatment because by the sixteenth century, the deceit element had been subsumed within a modern doctrine of consideration grounded upon reciprocal agreement. The opinion in Rice stated that consideration contained substantial elements of an estoppel in that a promise induces another to change his situation; if he is allowed to deny the validity of the promise he is enabled to perpetrate a fraud by his false promise. 37 For the doctrine favourable to the protection of reasonable reliance see Pollock (1950); Pound (1919) 452; Parsons (1886) 359; Bigelow (1876) 441. 38 More specifically, we saw how Williston had identified consideration as something different from the bargain (corresponding to cases where the promisor, by virtue of his promise, is able to create in the promisee expectations that lead him to adopt a particular conduct) and had emphasized the impatience of US courts in relation to the restrictive bargaining theory in reliance hardship cases (see Wilson v. Spry, 223 S.W. 564, 568 (Ark. 1920); Spitzle v. Guth, 183 N. Y. S. 734, 747 (N.Y. Special Term, 1920)), urging him to adopt the label of promissory estoppel for this field (Williston (1921) 139). Instead, Corbin

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concept of consideration, which effectively excluded from its sphere justifiable reliance;39 section 75 portrayed a setting strikingly close to Holmes.40 However, this exclusion did not gather the necessary consensus to ensure consolidation. In fact, the drafters themselves knew that they had left a vacuum in relation to cases where harm is caused to the promisee due to his justifiable reliance. In the subsequent draft of 1925 the drafters tried to increase the value of ‘judicial rulings in favour of promisees on the grounds of justifiable reliance in Restatement sections 85 through 94’. A year later, the drafters of the Restatement elaborated in section 88 (which would later become section 90 in its 1932 publication) on a specific promissory relief for harm resulting from justifiable reliance (which soon became an object of heated debate within the legal community).41 One of the areas of contrast concerned the realization that, while section 90 adopted an ‘open language’ approach that foresaw the applicability of promissory estoppel in relation to promises made in a commercial setting, the doctrinal view took an approach which was diametrically opposed as it excluded the possibility of relief based on justifiable reliance in a commercial setting.42 Such authoritative indications seemed to prelude the general endorsement of the restrictive approach under which the remedy relating to justifiable reliance could reflected on the case law characterized by the sacrifice of reliance, highlighting how ‘consideration may consist of acts of reliance upon a promise even though they were not specified as the agreed equivalent and inducement’ (Anson (1880)). 39 ‘Although Corbin, and in part Williston, treated justifiable reliance as a basis for finding consideration in their writings prior to 1926, Williston’s conservative inclinations won out in section 90 placing promissory estoppel outside the exclusive bargain test for consideration enunciated in section 75’: Teeven (2004) 527. 40 See Gilmore (1974) 56. 41 On the events connected to the drafting of the First Restatement of Contracts see Gilmore (1974) 56. 42 The point is that, as discussed above, Williston and Corbin, while aware of practices adopted by the courts to grant relief reliance in relation to violations of business promises, opted for a substantially different position. Even though the closing position taken by Corbin might seem counter-intuitive (especially if we consider its relationship with the doctrine of the realists), it is necessary to stay away from superficial conclusions about his scientific (in)coherence. To this end, returning to the insightful comments made by Gilmore, it is useful to recall that the First Restatement of Contracts was the result of the compromise that Williston and Corbin were able to achieve notwithstanding the fact that they started from opposite points of view on almost all issues of law. In this

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have been applied only in relation to cases involving free promises and traditional relationships not covered by consideration.43 Nevertheless, the solution proposed did not ensure satisfactory results. On the contrary, the muddled effects that it produced convinced the authors of the Restatement to backtrack in order to review its excessive ‘timidity’ (which created many unacceptable restrictions regarding the objectives and the scope of the applicability of promissory estoppel).44 The results of a change of this kind were not long in coming. In Robert Gordon, Inc. v. Ingersoll-Rand Co., although the final outcome denied the application of promissory estoppel because the plaintiff had not been able to prove an irreparable detriment, the court emphasized that ‘the mere fact that the transaction is commercial in nature should not preclude the use of promissory estoppel’.45 Three years later, in the Engineering

perspective, however, Corbin’s position was far from simple: he was a ‘revolutionary’ who, belonging to an intermediate generation (or those between Williston and Llewellyn), had felt able to do more working within the establishment than staying outside with those to whom he was most certainly linked in ideological choices (realists). This pushed him to support hard solutions (in this way it is possible to collocate the vicissitudes that accompanied the development of the concept of consideration under s. 75) which explain this uncertain trend of the positions of Corbin and clarify the ‘schizophrenic’ nature which makes the Restatement, noted from a historical point of view, ‘the fascinating document that it actually is’. More specifically, Williston pointed out how s. 90 constitutes a ‘formalist retreat’ from the previous expansion of promissory liability, affirmed under the principles of natural law, and ‘states a general rule broader than has often been laid down’ (ALI Draft and Comments 1928, 245). On his account, Corbin, although prone in the years preceding the drafting of the Restatement to show persuasively that justifiable reliance could be understood in commercial promises, in doing so referred to the case of ‘gratuitous promise of land’ (for a more in-depth discussion of this, see Teeven (2004) 533–4). 43 For the doctrine see Billig (1927); Shattuck (1937) 913 ff.; Page (1947); Boyer (1950), as well as Boyer (1952). For the jurisprudence see Bard v. Kent, 122 P.2d 8 (Cal. 1942); E.I. Dupont de Nemorous & Co. v. Claiborne-Reno Co., 64 F. 2d 224 (8th Cir. 1933); James Baird Co. v. Gimbel Bros., 64 F. 2d 344 (2d Cir. 1933); Heggen v. Clover Leaf Coal & Mining Co., 253 N.W. 140 (Iowa 1934); James Barclay & Co. v. Bailey, 34 F. Supp. 665 (E.D. Tenn. 1940). 44 After all, both Williston (criticizing the reasoning of certain judicial decisions) and Corbin (noting that the definition of consideration was so reductive that ‘the Institute was immediately compelled to construct a number of additional rules in sections 85 through 94, to deal with justifiable reliance and moral obligation’) led to more opening, thus encouraging an application free from counter-intuitive limitations (Teeven (2004) 540–41). 45 Robert Gordon Inc. v. Ingersoll-Rand Co., 117 F. 2d 654 (7th Cir. 1941).

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Co. v. Ellerman decision, there was a decisive step towards the recognition of the full efficiency of promissory estoppel in trade. In fact, the Supreme Court of South Dakota, moving away from the nearly dominant case law, held that justifiable reliance would not suffer an impediment in establishing a contractual relationship due to the inescapable prerequisite of consideration, affirming that ‘ordinary estoppel abolishes some legal requirement in its application’.46 This approach was readily confirmed in subsequent case law. One case which had a large impact (and demands attention as a milestone case in marking such a change) is the decision in Drennan v. Star Paving Co.47 In particular, Judge Traynor, overlooking the approach that had brought him some years before to decide the opposite way in Bard v. Kent (on the basis that the subcontractor has the ability to predict the reliance that its proposal could generate in the contractor), held that a clear and definite offer cannot be revoked when there is reasonable expectation that the offer will induce detrimental reliance of the counter-party and when the offer does, in fact, induce detrimental reliance. In other words, promissory estoppel forcefully asserted its essential role in relation to commercial promises. From this perspective, we can appreciate the purpose behind the reference (by the same judge) to the historical case of Fontane v. Baxley, where the court ruled in favour of the promisee allowing the promise to be protected from harm caused by justifiable reliance. Such a finding embodied the tendency towards sensitivity, typical of the nineteenth century, to natural law (a tendency that Holmes had contrasted vigorously through the theory of consideration), encouraging North American courts to apply promissory estoppel in cases involving commercial promises.48 46

Engineering Co. v. Ellerman, 10 N.W. 2d 879 (S.D. 1943). Drennan v. Star Paving Co., 333 P. 2d 757 (Cal. 1958). 48 Fontane v. Baxley, 17 S.E. 1015 (Ga. 1892). On this case see Teeven (2004) 567–8 (‘in that case, a railroad tie manufacturer in Georgia offered to supply ties at a set price for one year if the buyer’s bids to sell ties were accepted by New York railway companies. Georgia’s Chief Justice Bleckley said the tie manufacturer could have repudiated for lack of mutuality before [the buyer] … had incurred trouble and expense in complying with it on his part.’ The buyer had relied on the manufacturer’s offer to sell railway ties by travelling from Georgia to New York, setting up office in New York, submitting bids to New York railway companies based on the manufacturer’s price, landing contracts with two railways and securing assurances that he had submitted the low bids on three upcoming contracts. The court concluded that it would be a ‘fraud’ to permit revocation after substantial reliance. The court held that the manufacturer’s promise to supply the ties needed to fulfil contracts at a stated price was 47

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Thus, the middle of the century marked the return to the state of the law before the publication of the Restatement of the Law of Contracts, where the commercial promises were deemed (with a remarkable degree of frequency) binding on the grounds of justifiable reliance. To be more concise, this indication would find convincing confirmation in the Restatement (Second) of Contracts. The proof is the fact that, amidst the many adjustments made to section 90,49 the main changes concerned the principle of reliance. To cite Gilmore, section 90 went from featuring the ‘unwanted stepchild of the Restatement (First)’ to being the mother’s first son or the ‘basic principle of Restatement (Second)’ which, as suggested by the comment, prevails, in case of necessity, over the theory of exchange referred to in section.50 The affirmation of the principle of the reliance in section 90 of the Restatement (Second) of Contracts is immediately confirmed in the holding of the famous case of Hoffman v. Red Owl Store (an action for damages due to the interruption of negotiations for the granting of a grocery store franchise).51 In a few words, during the negotiations the executives of the defendant company (Red Owl Store) had assured the irrevocable once the buyer had reasonably relied on the supplier’s promises of quantity and price in making his bids to railway companies, at least as to the two contracts actually formed with the railway companies). 49 See Gilmore (1974) 64–5; Knapp (1981) 55 ff.; Eisenberg (1982) 657; Farnsworth (1987a) 1454; Murray (1990) 278 ff.; Yorio and Thel (1991) 123 ff. Section 90 of the Restatement (Second) of Contracts states that: ‘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 or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.’ 50 Gilmore (1974) 64. From this point of view, the switch is patent: the structure of the new s. 90 clearly affirmed how the reliance principle, freeing itself from one of the major limitations provided in its original form, was applicable in both contexts (commercial or otherwise). In other words, the irreconcilable ambiguity between ss. 75 and 90 of the First Restatement was resolved quite clearly in favour of the principle of promissory estoppel in s. 90, which has absorbed the principle of exchange referred to in s. 75. The only situation that seems to implicate the use of s. 75 would be a case in which an exchange has not been fully performed by either party when both of them have no intention to carry out the action. Even there, as the cryptic comment suggests, the eventual reliance may be reason enough to provide a legal sanction without a preliminary investigation into whether or not there was consideration (see Gilmore (1974) 65). 51 Hoffman v. Red Owl Stores, 133 N.W. 2d 267 (Wis. 1965).

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claimant (Hoffman) that he would obtain the franchise if he made a financial contribution equal to the sum of US$18,000. To this end, the plaintiff had been encouraged by the same managers to perform a series of actions in order to obtain the money to secure the franchise. In short, (1) the claimant sold his bakery; (2) he bought a small grocery store to establish the experience necessary; (3) subsequently he was urged to sell it, with the assurance that he would find a larger store in another town; and finally, (4) he rented a house in the city where he was supposed to open the franchise. Notwithstanding all these efforts, Red Owl unexpectedly increased the amount of capital required to obtain the franchise by almost double (about US$34,000). Consequently, the exasperated claimant decided to stop the negotiations and sued the defendant company to obtain the rest of the losses sustained due to the reliance placed on the declarations and on the promises made by them. The Wisconsin Supreme Court awarded the compensation to the claimant, stating, inter alia, that the promise necessary to support a ‘cause of action for promissory estoppel’ should not embrace all the essential details of an outlined transaction between promisor and promisee so as to be equivalent to the enforcement of a binding contract in the case of an acceptance of the promise.52 Rather, the existence of justifiable reliance was enough: the court opted for the enforcement of the promises made during negotiations to protect the expectation that they have created in the promisee, whether or not the promisor has acted in good faith or with intent to manipulate the behaviour of the other.53 A. Alternative Reading of Promissory Estoppel However, as evidenced by a perceptive scholar, this is not the only key reading of promissory estoppel:54 moving from the idea that the reliance of the promisee would seem to be aimed at influencing the decision of the promisor to sell the franchise on favourable terms, this new approach looks at both the strength of the promise and the power relationship thus 52

Ibid. at 297–8. On this case see Di Matteo et al. (2007) 142–58; Kühne (1990) 290 (‘the court viewed promissory estoppel as being extra-contractual in nature’). Nevertheless, this decision by the Wisconsin Supreme Court has been heavily criticized: see Schwartz and Scott (2007); Scott (2007; Johnston (1999), who stresses that: ‘while efficiency of the classic Hoffman v. Red Owl is much more debatable than previously assumed, as actually applied by courts today, promissory estoppel in this context may be surprisingly efficient’. 54 Di Matteo et al. (2007) 8. 53

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created (instead of justifiable reliance).55 In other words: ‘Hoffman exercised his bargaining power to attempt to control the outcome of the parties’ interaction.’56 To better understand the implications linked to the reconstruction indicated above, we turn our attention to the helpful suggestions worked out by Farber and Matheson in a famous essay containing a tremendous amount of critical substance. The authors, through a careful survey (covering the period between 1980 and 1985) of the case law concerning the application of promissory estoppel, not only excluded that reliance constitutes the only key interpretation, but came to envisage a new rule: ‘any promise made in furtherance of an economic activity is enforceable’.57 In a few words, they noted, on the one hand, that the traditional doctrine of consideration tends to protect the trust generated by promises that involve social benefits (e.g., sales, rents, insurances and loans), and, on the other, that irrevocable offers,58 guarantees59 and options60 are no-consideration promises, yet are enforced for the pragmatic reason that, otherwise, several important business transactions would not be feasible. This approach puts emphasis on the fact that ‘promissory estoppel fills a similar function by enforcing promises in other settings not amenable to traditional bargaining transactions, in which reliance is beneficial both to the promisor and to society as a whole’.61

55

See Yorio and Thel (1991) 162–3 (‘the critical and difficult question about Section 90 in the courts is not whether to protect reliance, but whether to enforce the promise at issue. It is neither sufficient nor necessary that the promise induce the promisee to rely to her detriment. Every promise may influence the promisee’s behavior, and yet not every relied-upon promise is enforceable. What distinguishes enforceable from unenforceable promises is the quality of the commitment made by the promisor’). 56 Di Matteo et al. (2007) 144 (‘Hoffman exercised his bargaining power to attempt to control the outcome of the parties’ interaction’). 57 ‘[A] new rule of promissory liability is emerging from the courts’ encounters with an economy in which Okun’s “invisible handshake” is increasingly important’: Farber and Matheson (1985) 905. 58 See UCC s. 2-205 (1978) (firm offer rule). 59 See Restatement (Second) of Contracts s. 88 (guaranty). 60 See ibid. s. 87 (option contract). 61 On this profile see Farber and Matheson (1985) 905. According to these authors, this new rule will make it possible to unify the ‘promissory estoppel and other exceptions to the consideration requirement with consideration doctrine itself’.

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In this perspective, it is no surprise that the need to protect the certainty and stability of economic exchanges (together with the opportunity to motivate people to have trust in promises where ‘that trust is socially beneficial’) has pushed the courts in the direction of an expansive application of promissory estoppel, able to ensure, through a ‘new rule’ of promissory obligation, a strengthening of trust (understood in its double meaning of good moral and economic value) between traders, essential for the ‘formation of valuable economic institutions’.62 From this point of view, the expectation referred to in section 90 of the Restatement (Second) of Contracts would be only the highest point of a trend supported by a set of exceptions (to the necessary existence of consideration) designed to encourage useful commercial agreements.63 The alternative reading of promissory estoppel opens a scenario much different from that proposed by Gilmore.64 The expansive application, rather than constituting evidence of the absorption process of the contract in tort, would witness the institution of a ‘new theory characterized by a distinctly contractual obligation’.65 Finally, one element is unquestionable: without the ambition to assert itself as an absolute truth,66 the new 62 Farber and Matheson (1985) 945–6 (‘a rule that gives force to this expectation simply reinforces the traditional free will basis of promissory liability, albeit in an expanded context of relational and institutional interdependence’). 63 This new approach, while placing itself outside the traditional doctrine of contract law, at least as it concerns the lack of proof of both consideration and detriment associated with promissory estoppel, ends up sharing its main objectives. Therefore, as pointed out by the best literature, it is possible to say that ‘the rule sounds within contract law, and operates within its traditional area of concern: economic exchange promissory’ (see Farber and Matheson (1985) 929). 64 See Gilmore (1974) 79. 65 Farber and Matheson (1985) 906. On this profile see Yorio and Thel (1991) 166 (‘far from evidencing the death of contract, the application of Section 90 by the courts demonstrates that promise is more vital than ever’). For a different reading key see Powers (2007) 842, which points out how ‘the issue is not whether promissory estoppel is a contract or a tort theory, but whether cases decided under the doctrine are contract or tort cases, or whether they are something else’. 66 Farber and Matheson (1985) 946–7. More specifically, the authors remarked how this new rule ‘does not account for every case, but it does provide much surer guidance in understanding the case law. As a normative statement, the promissory estoppel doctrine expressed in section 90 has raised more questions than it has answered. In every case, it has required that courts return to first principles to ask whether injustice can be avoided only by enforcement of the promise. Busy judges, we think, deserve better guidance.’

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theory risks facing the problems linked to the implementation of promises executed in types of relationships which are acquiring increasing relevance in the modern economic reality.67

IV. SCOTS LAW OF PROMISE: FROM STAIR TO THE REQUIREMENT OF WRITING (SCOTLAND) ACT 1995 After considering the evolution of the promissory estoppel discipline in England and in North America, and as a sort of natural connection with the Italian legal system, it may be useful to consider the mixed jurisdictions of Scotland and Louisiana, which give a remarkable synthesis between the legal traditions of common law and civil law.68 Let us start with the examination of the discipline of the promise in Scotland. For this purpose, special attention should be devoted to the ‘impact’ of ‘institutional writing’69 (concerning private and criminal law) and, more precisely, of Stair’s Institutions of the Law of Scotland, which is the most important contribution on the subject of the contract and promise.70 In particular, abiding by the belief that canon law had removed the

67

On this point see Yorio and Thel (1991) 166 (‘the importance to courts of promise explains why the remedy for breach of a Section 90 promise is invariably expectancy relief (if measurable); why the absence of inducement and detriment is irrelevant; why some promises are not enforced despite detrimental reliance; and why the outcome (in terms of both liability and remedy) generally turns on some aspect of promise’). For an opposite point of view see Feinman (1992) 316: ‘the prescription, it seems to me, is to stop addressing old questions – by debating whether the core of Section 90 is promise or reliance, for example, and address the more fundamental issue of what kind of framework we should have, for that will determine the questions we should ask’. 68 For an in-depth examination of the binding power of the promise in Scotland and in Louisiana see Snyder (2008). On the concept of mixed jurisdictions see Smith (1962) 46; Örücü et al. (1996); Zimmerman and Reid (2000); Tetley (2000); Palmer (2001); Smits (2001); Smits (2002); Zimmerman and Reid (2006). 69 On the sources of Scots law see, indicatively, Walker (1983); Rodger (1996); Black (1936) 59. 70 The Institutions of the Law of Scotland deduced from its Originals, and collated with the Civil, Canon and Feudal Laws and with the Customs of Neighbouring Nations was published in 1681 and represent the most important work of James Dalrymple, 1st Viscount Stair.

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exception de nudo pacto non oritur actio,71 Stair rejected Grotius’ requirement of acceptance, emphasizing the binding power of the promise simple and pure.72 However, this rule suffered a considerable reshaping because of the evidence system used in Scotland: ‘promises cannot be proved by witnesses, even for small amounts, unlike contracts’.73 Therefore, until the publication of the Requirement of Writing (Scotland) Act 1995, in the Scottish legal system the use of writing as a vestimentum of the agreement represented a fundamental requisite.74 In more detail: the Acts of Union (passed by the English and Scottish Parliaments in 1707), apart from leading to the creation of the United Kingdom of Great Britain on 1 May of that year, caused a progressive colonization by the principles of English common law, with the result of separating the Scottish rules from their Roman law origin.75 Significant opposition to the English influence took place after the Second World War, with the contribution of Thomas Broun Smith, who brought ‘the Scots law of unilateral promise, if not into the forefront, at least out of obscurity’:76 ‘I’m convinced that the civilian tradition in Scots – that element which is the most rational, equitable, universal and potentially creative – is in jeopardy … There are pressures from outside our system and weaknesses within’.77 In other words: what Smith did was to illustrate the elegance of the Scottish … solution and place it into a comparative context that gave it both pedigree and gravitas. His work takes into account the great civil law families of French and German law and particularly addresses Roman-Dutch law and South African law. He explains where Stair’s – and Scotland’s – solution fits among those respectable traditions, and he demonstrates the superior doctrinal simplicity of a Scottish analysis of the problems posed by the cases.78 71 ‘[E]cclesiastical courts maintained an important role in Scotland even after the Reformation, and the Court of Session was itself largely ecclesiastical in its conception, character, and outlook’: Snyder (2008) 28. 72 On this point see ibid. at 28–9: ‘Stair states that a promise is that which is simple and pure, and hath not implied as a condition, the acceptance of another, and he thus distinguishes an obligation based on promise from an obligation based on a contract, which is the deed of two, the offerer and the accepter.’ 73 Snyder (2008) 29. 74 For an in-depth examination of these aspects see, once again, Vagni (2008) 169. 75 On these profiles see McDiarmid (1999). 76 Snyder (2008) 30. On the works of T.B. Smith, see Reid and Carey Miller (2005). 77 Smith (1962) 73. 78 Snyder (2008) 31–2.

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These orientations were confirmed with the work on the law of contracts which the Scottish Law Commission undertook in 1973 (under the leadership of Smith).79 The final goal was to purify the discipline of the obligations from all theories which brought it far from Stair’s contribution: ‘[t]he obligation to which such a promise gives rise … is unilateral, in that it is the creation of the will of the promisor alone; this is so even though the promised performance is stipulated to be conditional upon some act or abstention by the promisee’.80 Nevertheless, the Scottish Law Commission did not realize the goal to clarify the chaotic relationship between promise and contract in Scots law:81 ‘[i]t is less clear whether the offeror is similarly entitled to deny the existence of a contract when the offeree claims that he relied upon the term in the offer to the effect that his silence would be construed as an acceptance, and that he intended his silence to be so regarded’.82 Actually, turning to the doctrinal debate, there is still great uncertainty, increased by the inactivity of the Scottish Parliament (which missed the opportunity to conclude the path to recovery of Stair’s contribution initiated by the Law Commission).83 Instead, with the Requirement of Writing (Scotland) Act 1995, the Scottish Parliament merely introduced a few exceptions to the rule according to which the binding power of the simple promise could be admitted only with the requisite of the vestimentum. In other words, ‘where one party has materially relied, the other party may not withdraw if doing so would result in material harm. The lack of formality is forgiven.’ Nevertheless, the die is cast: ‘[a]lthough the statutory language is lengthy and convoluted, this Scottish statute essentially states the principle of promissory estoppel as applied to the problems posed by the statute of frauds’.84 In this perspective, it is important to observe that the Requirement of Writing (Scotland) Act exhibits some different shades when compared to the discipline of the promissory estoppel in England and in North 79

On the contribution of T.B. Smith see MacQueen (2005) 138. See Scottish Law Commission (1977) 4: ‘[a]t least since the time of Stair the law of Scotland, diverging in this respect from the laws of most other civil law systems of Western Europe, has not required, before an obligation is recognized as coming into being, that the promisee accepts the benefit of the promise made in his favour; it has consequently seen no need, as other systems have, to resort to the device of a presumed acceptance by the beneficiary in order to hold the promisor to his undertaking’. 81 Vagni (2008) 216. 82 Scottish Law Commission (1977) 47. 83 On this point see Vagni (2008) 267. 84 Snyder (2008) 23. 80

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America: the most significant one is the explicit request that the reliance of the promisee be supported by the ‘knowledge and acquiescience’ of the promisor.85 What, then, is the real meaning of the requirement introduced by the Scottish Parliament? In particular, would it be satisfied when the reliance is foreseeable (as we can see in section 90 of the Restatement (Second) of Contracts) or in the hypothesis in which it is ‘expected and desired, but the promisor has not been informed that it has actually taken place’?86 However, instead of tracing a hasty evaluation, it is important to remark that the inauspicious drafting of the rule,87 on one hand, and the rarity of Scottish jurisprudence on this point,88 on the other, have reduced considerably its range of incidence. As a consequence, it is reasonable to conclude that the Scottish Parliament, endorsing the promise devoid of the requisite of the vestimentum in the presence of the surrogate of the reliance of the promisee, sides with the North American concept of promissory estoppel, but remains far from the implementation of Stair’s principle of the binding power of the promise simple and pure.89

85

See Requirement of Writing (Scotland) Act 1995, s. 1(3): Where a contract, obligation or trust mentioned in subsection (2)(a) above is not constituted in a written document complying with section 2 of this Act, but one of the parties to the contract, a creditor in the obligation or a beneficiary under the trust (‘the first person’) has acted or refrained from acting in reliance on the contract, obligation or trust with the knowledge and acquiescence of the other party to the contract, the debtor in the obligation or the truster (‘the second person’) – (a) the second person shall not be entitled to withdraw from the contract, obligation or trust; and (b) the contract, obligation or trust shall not be regarded as invalid, on the ground that it is not so constituted, if the condition set out in subsection (4) is satisfied. 86 Snyder (2008) 23–4: ‘there may be some work for the courts here, and it will be informative to observe the judicial reactions and whether the old stance on knowledge under rei interventus doctrine is continued. Certainly the promisor’s knowledge and acquiescence would always be relevant to promissory estoppel, if for no other reason than the relevance of injustice.’ 87 ‘The clarity that might be expected of a modern statutory codification of bar with respect to formalities, however, is arguably illusory in the case of the 1995 Act. Certainly the drafting is infelicitous … and its circumlocution raises a number of technical questions of statutory interpretation that could make a real difference in the results of cases’: Snyder (2008) 24. 88 On this profile see Vagni (2008) 229. 89 For an in-depth examination of these aspects see, once again, Vagni (2008) 230.

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A. Louisiana Law of Promise: The Codification of Promissory Estoppel It is a long way from Scotland to Louisiana; yet, the suggestions of a mixed jurisdiction marked by the ‘tangible’ and ‘singular’ codification of promissory estoppel, do persist.90 One of the most relevant problems which has characterized the origin of the Civil Code of Louisiana is that it contained the problematic word ‘consideration’, both in the central definition of cause (Civil Code of 1870, article 1896 provides that by cause of contract ‘is meant the consideration or motive for making it’) and in other troublesome places (for example, the options’ discipline).91 Although this approach fomented a fair amount of civilian angst in Louisiana, efforts were made to reconcile ‘these mentions of consideration with the indisputably civilian notion of cause’, assuming that the word ‘consideration’ (as used in the Civil Code) ‘could be read to be at times synonymous with “cause”, and other times with “onerous cause”’ and arguing that ‘the requirement that there be “any consideration” for an option would be satisfied in virtually every option, given that the parties are interested in buying or selling, particularly since the flexible “any consideration” formulation (therein stipulated) replaced the earlier, stricter requirement that the option be purchased for value’.92 However, these efforts did not achieve resounding success. In fact, Louisiana courts adopted a more severe approach requiring that an option be supported by consideration, much as at common law.93 This scenario became more complicated when ‘Louisiana did recognize certain kinds of conventional obligations without any consideration at all, as long as formal requirements were met’. In other words, Louisiana preserved ‘the possibility of a valid gratuitous contract, that is, 90

For art. 1967 of the Louisiana Civil Code see n. 97 below. Snyder (2008) 10–11, observes that the source of art. 1896 of the Civil Code of 1970 has to be found in art. 1887 of the French version of 1825: ‘On entend par la cause du contract … la consideration ou le motif qui a engagé à contracter’. Moreover, ‘the French version is considered more authoritative than the English versions of either 1825 or 1870’. 92 Snyder (2008) 12. For an in-depth examination of these aspects see Litvinoff (1975) 107. 93 In this sense see Goodyear Tire & Rubber Co. v. Ruiz, 367 S.O. 2d 79 (La. Ct App. 4th Cir. 1979); McCarthy v. Magliola, 331 S.O. 2d 89 (La. Ct App. 1st Cir. 1976); Davis v. Bray, 191 S.O. 2d 774 (La. Ct App. 2d Cir. 1966); Moresi v. Burleigh, 127 S.O. 624 (La. 1930); Gloven v. Abney, 106 S.O. 735 (La. 1925). 91

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promise of donation’, as long as there was the presence of two fundamental requisites: ‘[f]irst, the intent had to be expressed in a so-called authentic public act, that is, a writing “passed before a notary public and two witnesses”. Second, the promise had to be accepted.’94 A relevant step forward in the direction of assuring greater systematic cohesion was registered in 1985 with the revision of the Civil Code. References to consideration were removed. Instead, the revision reactivated the requisite of cause, with an important clarification: ‘Under this Article, the cause is not consideration.’95 Coherently, with respect to options, the revision requires no consideration and ‘the revision commentary states, with a certain amount of gumption, that the revision does not change the law’. Finally, ‘the reference to consideration in the article on gratuitous contracts was also removed, without mention, with the usual comment that the revised article does not change the law’.96 In light of these premises, it comes as no surprise that in article 1967 of the Civil Code97 the Louisiana State Law Institute showed its will to remove consideration from Louisiana obligations law. More surprising was its willingness to add promissory estoppel (with a meaning evidently inspired by the model expected in section 90 of the Restatement (Second) of Contracts): this desire was made explicit when the Institute instructed the reporter to draft an article that would make it quite clear that ‘cause’ is not ‘consideration’ in the common law sense and, further, to introduce a concept analogous to detrimental reliance or promissory estoppel.98 94 ‘This situation obtained at the same time as various mentions of consideration in other contexts muddied the Louisiana waters on whether the courts would follow the doctrine of cause exclusively or would revert to ideas of consideration. The legal situation in Louisiana was decidedly mixed’: Snyder (2008) 12. 95 See La. Civ. Code, art. 1966 (requiring cause), art. 1967 (defining cause) and comment (c). 96 Snyder (2008) 13. 97 See art. 1967: Cause is the reason why a party obligates himself. A party may be obliged by a promise when he knew or should have known that promise would induce the other party to rely on it to his detriment and the other party was reasonable in so relying. Recovery may be limited to the expenses incurred or the damages suffered as a result of the promisee’s reliance on the promise. Reliance on a gratuitous promise made without required formalities is not reasonable. 98 See Snyder (2008) 33. For an in-depth examination of these profiles see Louisiana State Law Institute, Revision of the Louisiana Civil Code of 1870, Book III, Obligations Revision – Cause, 3 (20 April 1979).

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In this perspective, it is worth observing that, ‘in the Common Law states, promissory estoppel got its start in late XIX nineteenth-century case law in which the equities of the case seemed to require enforcement of a promise that did not amount to the usual kind of contract’: often courts, because of a lack of ad hoc solutions, enforced promises on grounds that could be rationalized under the terms of promissory estoppel.99 In particular, one of the most important cases was Ducote v. Oden, decided by the Louisiana Supreme Court.100 The importance of this decision is connected to the observation that, although representing the emblem of the ‘rejection of common law doctrine’,101 it was subjected to the change of orientation sponsored by the Louisiana State Law Institute. Beyond the in-depth analysis of the main profiles concerning this litigation,102 the Louisiana Supreme Court remarked that ‘[s]uch a theory is unknown to our law and could not be found in the all-important provisions of the Civil Code’.103 The Louisiana State Law Institute decided, on one hand, to remove consideration from Louisiana obligations law and, on the other hand, to transplant the model of North American promissory estoppel into the Civil Code. Therefore, ‘the irony is double-faced: not only are common law notions defining cause, positively and negatively, but promissory estoppel is being imported at the same time that the chief doctrine that made it necessary is being deported’. All that implied a wide effort of interpretation: the cause, rather than revealing ‘the motive for making a promise’, should represent the essential ‘reason’ or, even better, ‘the reason that makes an obligation enforceable’.104 Despite this change of horizon, the 1985 revision did not obtain the hoped for results: [i]n the proposed formulation, if the promise is supported by cause, it is for that very reason enforceable, by definition. Cause has been not only turned around, then, but made to serve the same function as consideration. To be clear, it did not employ the same test as consideration – no bargain was to be 99 ‘So in the early Louisiana law, promissory estoppel percolated quietly through the cases, as elsewhere in the country’: Snyder (2008) 13. 100 Ducote v. Oden, 59 S.O. 2d 130 (La. 1952). 101 Snyder (2008) 14. 102 See ibid. at 13 ff., who observes how ‘[t]he court emphasized the weakness of the plaintiff’s allegation that the promise took place in a casual … conversation in the stages of discussion, and even courts which accept the doctrine would likely find that the elemental promise had not been shown’. 103 Ducote v. Oden, n. 100 above, at 132. 104 Snyder (2008) 34.

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494 Comparative contract law required – but the function of the doctrine was to be the same. At Common Law, if there is consideration the promise is enforceable, and otherwise not. Under the proposed formulation, if there is cause, the promise is enforceable, and otherwise not. This proposition is a far cry from the original scheme, and while Civilian in its adherence to a cause not identical to bargain, it is being driven by concerns emanating from the Common Law.105

This solution was confirmed by the arguments through which the Louisiana State Law Institute justified the introduction of the discipline of promissory estoppel in the Civil Code: (1) first of all, this discipline ‘is consonant with the principles in the existing Code, including its Napoleonic general article on delictual obligation’; (2) moreover, the implementation of promissory estoppel has been recognized and supported in the case law (‘[t]his proposition was a bit difficult in light of the Supreme Court of Louisiana decision in Ducote v. Oden, as mentioned above, but the reporter identified the stream of cases that applied the principle sub rosa both before and after Ducote’); and finally (3), ‘the most remarkable argument’ is that promissory estoppel, by virtue of its strong connection with both ‘delictual and quasi-delictual obligations’ and culpa in contrahendo, ‘is in essence a civil law doctrine anyway’.106 The transplant of promissory estoppel into the Louisiana Civil Code (recognizing an ancient heritage of civil law)107 may appear an artifice, yet the Institute ‘worked in many of the same sorts of jobs associated 105

See ibid. at 34–5. On this point see, in more detail, ibid. at 35–6, who observes how promissory estoppel is linked to the binding force of a unilateral declaration of will, the very same idea observed in Scotland, and most clearly in Stair. The crowning glory, though, goes to the assertion that estoppel is descendent from the Roman law doctrine of venire contra factum proprium. The assertion that promissory estoppel is not a common law invention after all, and is instead Roman and thus quintessentially of the civil law, is no less remarkable for its dubiety. Venire contra factum proprium is more generally viewed as being based on facts rather than executory promises, and is therefore closer to equitable estoppel … rather than promissory estoppel. Moreover, venire contra factum proprium is probably better attributed to the ius commune, and perhaps Bartolus originally, rather than Rome, as earlier research has shown. But these are scholastic points. The impetus came from the American Common Law and Restatement. The revision draft reproduces section 90, not a text from the Digest or from Bartolus, neither of which is very clearly about promissory estoppel anyway. 107 ‘This view was certainly not shared by all participants in the legislative process. The extent to which promissory estoppel, with its delictual flavour, 106

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with promissory estoppel in the rest of the United States’. Therefore, differently from the Scottish law (in which the discipline of promissory estoppel has not obtained a wide success), promissory estoppel in Louisiana, conquering a role of fundamental importance in the law of promise, has been applied in many cases concerning different problems such as ‘option contracts’, ‘irrevocable offers’ and, more generally, ‘pre-contractual liability’.108

V. ITALIAN LAW OF PROMISE: UNILATERAL PROMISE AND CULPA IN CONTRAHENDO In the light of the survey conducted regarding the discipline of promissory estoppel in English and North American law, on one hand, and the mixed jurisdictions of Scots and Louisiana law, on the other hand, let us now approach the analysis of the Italian experience (about the binding nature of promises) utilizing two different points of view: pre-contractual and contractual.109 More specifically, the ability to identify, in the voluntary assumption of a commitment, both a contractual configuration (which revolves around the idea that the declaration of intention is to confirm the seriousness of the promise by the promisor) and a precontractual obligation (which, by contrast, is closely linked to the desire to protect the reliance created in the promisee) comports with the

could be compatible with any civilian conception of cause seems to have been especially troublesome’: Du Plessis (2003) 228. 108 See Lafayette City-Parish Consol Govt, 907 S.O. 2d 37 (La. 2005); Baker v. LSU Health Scis Ctr, Inst of Professional Education, 889 SO 2d 1178 (La. Ct. App. 2004); Hibernia Nat’l Bank v. Antonini, 862 S.O. 2d 331 (La. Ct. App. 2003); Holt v. Bethany Land Co., 843 S.O. 2d 606 (La. Ct. App. 2003); Dan Rhodes Enters v. City of Lake Charles, 857 S.O. 2d 1256 (La. Ct. App. 2003); Jesco Constr Corp. v. Nationsbank Corp., 830 S.O. 2d 989 (La. Ct. App. 2002); Magic Moments Pizza, Inc. v. Louisiana Restaurant Assn, 819 S.O. 2d 1146 (La. Ct. App. 2002); Haring v. Stinson, 756 S.O. 2d 1201 (La. 2000). On this, see De Long (1997); Hillman (1998); Barnett (1996); Farber and Matheson (1985) 903; Yorio and Thel (1991) 111. 109 On this, see the recent work of Amato (2012) 87–218, who, examining the ‘preferential relationships’ (in which arise the duty to protect the reliance), identifies and analyses three hypotheses: (1) culpa in contrahendo; (2) misinformation (which runs across contracts and torts); and, finally, (3) the ‘damages as reflex’ caused to third party through the implementation of contractual obligation.

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discipline of unilateral promises and culpa in contrahendo (with particular reference to the issues underlying the unjustified withdrawal from negotiation). Let us to start with the scrutiny of the former. In the Italian legal system, the problem with the binding nature of a unilateral promise is traditionally linked to the controversial co-existence of Civil Code, articles 1987 and 1333.110 In more detail: while in article 1333 the unilateral declaration to bind oneself would seem to be ascribed to the contractual sphere (making ‘it part of the prerogatives of the private autonomy reserved by the art. 1322 to the contract’),111 article 1987 precludes any binding effect beyond the cases expressly allowed by law.112 In a few words, the same formula for the creation of a promise (characterized by the declaration of assumption of commitment and of its object) could be classified either as a ‘proposal’ (per article 1333) or as a ‘promise’ (per article 1987). Nonetheless, the consciousness of the impossible co-existence of different disciplines for the same phenomenon has prompted both literature and jurisprudence to handle the issue of the compulsory nature of a unilateral promise by moving in two opposite directions:113 on one hand, the more orthodox trajectory under which the foundation of the binding nature of all unilateral promises should be identified in the general discipline of contracts and, in particular, in the dual requirement of causal justification and of the nuances provided by the legislature; on the other, a more recent strand has focused on the reliance of the promisee as an independent criterion for recognition of obligations and responsibility of the promisor.114 However, given the limits of this chapter and the obvious impossibility of scrutinizing both alternative routes here,115 our attention will be centred upon the more recent one. Accordingly, we will focus on the approach that presents more affinity with the North American tradition 110 Since the entry into force of the Italian Civil Code in 1942, the assumption of the unilateral formation of a bond (per Civil Code, art. 1333) has raised many compatibility problems with the precept of art. 1987. On this, see: Tamburrino (1954) 29–30; Segni (1972) 347; Ravazzoni (1973); Sacco (1975) 37; Castiglia (1983). For a thorough historical reconstruction of the evolution of the issue of the binding nature of the promise in the Italian legal system see D’Angelo (1996). 111 D’Angelo (1996) 61–2. 112 See Barassi (1946) 299, according to whom art. 1333 constitutes a perferct antithesis of art. 1987. 113 D’Angelo (1996) 64. 114 In this sense see Marini (1995) 245. 115 For a detailed survey see Pardolesi (2009) 144–59.

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and identifies justifiable reliance of the promisee as the premise for the binding nature of the promise.116 Moving away from damages awarded to those who have carried out activities, incurred costs or assumed risks based on reliance triggered by the statements of a promisor about the implementation of a future behaviour (not due to relationships of exchange), this solution shapes a clarification after the wider review of criteria for recognizing a promise’s binding nature, as well as after the reconstruction of a basis of liability other than the binding force of promise as a contract or legal transaction. Consequently, giving great importance to the reasons for the bond rather than the obligatory nature of the promise, the reliance of the promisee becomes not only a specific criterion for the recognition of obligations and responsibility of the promisor but the focus of ‘a comprehensive interpretation of rules and principles heterogeneous and distinctly related to the procedure for the formation of the bond and to the foundation of the latter’.117 Considerable headway in the debate around the recognition of the binding nature of unilateral promises can be detected in an Italian Supreme Court decision relating to letters of patronage, in which the scheme proposal/failure to refuse pursuant to Civil Code, article 1333 is looked on as a viaticum to escape from the necessary verification of a bilateral declaration and to trigger the recognition of the binding character linked to unilateral statements which come through the ‘bottleneck’ of article 1987.118 The ‘split’ takes place close to the heated debate concerning the identification of the legal nature of the letters of patronage and the responsibility to reconnect to them.119 Starting from the observation that the specific function linked to such unilateral declarations ‘is meant to strengthen the future creditor, to whom the declaration is addressed, and corroborates the belief that the sponsor will meet its commitments’, there is no doubt that the legal implications coming from the letters of 116

On this, see Di Majo (1989) 48 ff.; Alpa (1991) 311 ff. D’Angelo (1996) 152. 118 Cass. 27 September 1995 no. 10235, in Banca, borsa ecc., 1994, II, at 40. This decision has been commented on by: Chinè (1996b); Stignone (1996); Caliceti (1996); Figone (1996); Cavanna (1996). 119 On the theme of letters of patronage see, briefly, Chiomenti (1974); De Sanctis Ricciardone (1983); Di Giovanni (1984); Ruffolo (1984); Atti (1985) 878; Mazzoni (1986); Segni (1990); Severini (1991); Barbuto (1994); Stignone (1996) 301; Chinè (1996a); Caliceti (1996) 3007; Galgano (1996); Papale (2000); Musy (2001); Gallo (2001); Caleo (2002); Turco (2004); Corea (2007). 117

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patronage are a testing ground that is of absolute importance to any development on this issue.120 For that reason, the Supreme Court went over the black letter text of article 1987, looking at the scheme contemplated by the provision, well within the contractual discipline, relating to the proposal which would imply obligations only for its author (i.e., article 1333). With that said, the procedure envisaged in article 1333 responds to the sequence of a proposal without a refusal (from which can 120 See Cass. 10235/1995, n. 118 above, at 40–41. In particular, this decision, following a linear trajectory, states that generalizations, particularly in the field of letters of patronage, should be avoided, and it has identified a concept of extra-contractual liability in unilateral statements for the injury caused by reliance that is a consequence of ‘the release of false or inaccurate statements, or to the sequence of behaviors in conflict with their content’ (Marini (1995) 505). For the doctrine favourable to the extra-contractual thesis see Chiomenti (1974) 348; Checchini (1977) 178 ff.; Galgano (1988) 214. Nevertheless, the statement of facts in the different legal disputes involving such unilateral declarations has pushed the interpreters to go towards the tort profile. It is indisputable that such declarations have the common element of reliance created by the person who makes the declaration with respect to the behaviours and to the initiatives relating to the subsidiary. However, in order to identify the actual legal range of the individual letters of patronage it is necessary to distinguish between ‘weak’ and ‘strong’ statements. The former deals with declarations solely concerning information about the economic and financial situation of the company that is seeking financial support. The composition of the shareholders and, sometimes, of the modus operandi of administrative bodies seems to possibly identify a responsibility charged on the supporting person on the basis of the precepts formulated in Civil Code, arts 1337 and 1338 (Cass. 10235/1995, n. 118 above, at 40). In the second instance (i.e., in the case of ‘strong’ statements), since the holding company assumes some specific commitments (such as safeguarding the solvency of the subsidiary, to give prior notice of its intention to divest its holding or of future maintenance of the same), it is necessary to check whether its liability can be established based on the negotiation plan (in this sense see Marini (1995) 507). This last question (despite the presence of a significant doctrinal orientation aimed at recognizing the contractual nature of a breach of such unilateral declarations) persuaded the Italian Supreme Court to balance, on one hand, the principle of typicality (in art. 1987) and, on the other, the complexity of the relationship between the latter and art. 1333, to reach the ‘surprising’ conclusion by which the nature of the declaration of strong patronage must find its foundation in the scheme outlined in art. 1333 (on this point see Mazzoni (1986) 99–100). After all, this solution ‘[is] perfectly suited to the letters of patronage, which have binding character, and consequently there is no reason to doubt their binding force, since those statements, albeit with different tools than those proper to typical guarantees, are still aimed to reinforce the protection of the rights of creditors and, therefore, to achieve interests certainly deserving of protection under the law’ (Cass. 10235/1995, n. 118 above, at 43).

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be inferred the sole will of the proposer with absolute exclusion of the recipient), and omits any declaration with bilateral character. Therefore, the conclusions that can be drawn from it are that for every free promise (i.e., a promise in which the obligation lies only on the promisor) the relationship can be constituted without acceptance but rather by the effect of a unilateral act. Through the scheme of article 1333, the letter of patronage is imputed to the area of contracts. Yet, the decision was a huge leap as it recognized the binding nature of such unilateral declarations.121 Consequently, in spite of the radical rejection of the equivalence between acceptance and a recipient’s failure to refuse an offer, and the requisite of will by the obliged party, the Italian Civil Code’s conception of contractual consensus is extended, by virtue of an unprejudiced reading of article 1333, to embrace the ‘non-legal’ process, consisting of the mere proposal of the person who is obliged (with the corollary fiction of the layperson’s failure to refuse). In the light of these premises, it is now necessary to take into account cases in which the binding effect is based on the justifiable reliance created in the counter-party. In this perspective we need to move our attention onto the discipline of culpa in contrahendo with particular interest in the issues connected with unjustified withdrawal from negotiations. Although the Italian debate on the issue of culpa in contrahendo has ancient roots,122 it acquired consistency at the beginning of the twentieth century, both through the implementation of judgments penalizing unjustified withdrawals in negotiations,123 and the achievement of an orientation that had completely metabolized the German reflection of good faith in contrahendo.124 A natural consequence of this assimilation 121

Chiné, G. (1996b) 741. Caruso (1993) 157, who observes that before Jhering’s teachings were adopted by the Italian legal system (the origin of this concept is conventionally connected with the publication of the article of Von Jhering (1861)) both Italian doctrine and jurisprudence showed their indifference toward pre-contractual liability. 123 See App. Napoli 27 March 1911, in Foro It., Rep. 1911, voce Contratto, no. 19; Cass. 6 February 1925, in Riv. Dir. Comm., 1925, II, 248. 124 After all, before the Civil Code of 1942 introduced an ad hoc rule, some parts of the literature (see Faggella (1918) 269) had just provided for the introduction of the concept of unjustified withdrawal from the negotiations in pre-contractual liability. This theme has been (and is still today) the object of strong doctrinal debate: on this debate see, e.g., Verga (1941); Mengoni (1956); Benatti (1963); Visintini (1972); Bessone (1972); Ravazzoni (1974); Morello (1974); Speciale (1990); Turco (1990); Patti and Patti (1993); Mantovani (1995); 122

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resulted in the elaboration of Civil Code, article 1337, and the debate has gradually developed into the systematic classification and the nature of the pre-contractual liability.125 In a few words: together with the three traditional interpretive approaches that have marked the doctrinal and jurisprudential confrontation,126 the general framework has been enriched by a new contribution characterized by the division between ‘liability for failure of negotiations based on the evidence of malice or guilt’ and a more objective withdrawal liability (i.e., ‘independent of fault’).127

Bastianon (1996); D’Amico (1996); Monateri (1998); Musy (1998); De Lorenzi (1999); Palmieri (1999); Rovelli (2000) 199; Matera (2000); Maninetti (2000); Meruzzi (2002); Gallo (2004); Pardolesi (2005); D’Amico (2006) 977; Afferni (2008). 125 Caruso (1993) 161. In this respect it is necessary to remark how this discipline follows different rules in other legal systems: see Cartwright and Hesselink (2008) 461. 126 In essence these are: (1) that liability for withdrawing from a negotiation would fall within the area of torts (about the theory of Aquilian nature see Greco (1952); Sacco (1975) 676; Carresi (1987); Bianca (2000); Roppo (2001) 184; Gallo (2004) 299; Patti and Patti (1993) 45. For the jurispudence see, e.g., Cass. 19 April 1983 no. 2705, in Foro It., Rep. 1983, voce Contratto in genere, no. 143; 18 June 1987 no. 5371, ibid., 1988, I, 181; 6 February 1992 no. 2704, in Giur. It., 1993, I, 1, 1560; 13 December 1994 no. 10649, in Foro It., Rep. 1994, voce Contratto in genere, no. 284; 1 February 1995 no. 1163, ibid., Rep. 1995, voce Contratto in genere, no. 284; 30 August 1995 no. 9157, ibid., Rep. 1996, voce Contratto in genere, no. 259; 29 April 1999 no. 4299, ibid., Rep. 1999, voce Contratto in genere, no. 356; 16 July 2001 no. 9645, ibid., 2002, I, 806; 10 October 2003 no. 15172, ibid., voce Contratto in genere, no. 317; 7 May 2004 no. 8723, ibid., Rep. 2004, voce Contratto in genere, no. 359; 5 August 2004 no. 15040, ibid., Rep. 2005, voce Contratto in genere, no. 426.); (2) that (remaining faithful to the German matrix) culpa in contrahendo should be specifically confined to non-fulfilment liability (on this see Mengoni (1956) 362; Giorgianni (1965); Tucci (1970) 134; Portale (1982); Benatti (1987); Turco (1990) 755 ff.; Rovelli (2000) 126 ff.; Meruzzi (2002) 53 ff.; Di Majo (2004) 537; Galgano (2004) 635; D’Amico (2006) 1107 ff.; Castronovo (2006) 502; Afferni (2008) 10–11); and finally, (3) that this type of responsibility should be linked to a tertium genus, working halfway between contractual and extra-contractual (the origin of this thesis belongs to Sacco (1961); on this, see Rescigno (1979) 142; Cuffaro (1988)). 127 Afferni (2008) 15–18. The thesis according to which two pre-contractual liabilities would exist is strongly expressed in the German doctrine: see, e.g., Larenz (1987) 107; Canaris (2000); Grunewald (1984) 710–11.

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Beyond the scrutiny of the intricate positions articulated in the debate,128 great importance should be given to the determination of the temporal element which can be considered as ‘reasonable’ reliance on the future conclusion of the contract. The case law (almost) dominantly connects this moment to the attainment of an advanced state of negotiation.129 More specifically, it is necessary for parties to have reached an agreement on all essential elements of the contract (the only element lacking is the signing of the deal) for reliance worthy of protection to be found. However, the same jurisprudence seems to request some direction sufficient to justify the party’s belief about the future conclusion of the contract.130 As a result, it is not surprising that, in a climate of uncertainty, a substantial part of the literature (looking at possible solutions envisaged from German legal experience) has suggested the opportunity of matching the very advanced stage of negotiation with the achievement of practical certainty of the future conclusion of contract.131 128

Traditionally the prevalent orientation of jurisprudence recognizes the duty to indemnify (to the extent of the negative interest) damage resulting from the injury to the legitimate reliance of the counter-party on the conclusion of the contract: see Cass. 10 October 2003 no. 15172, in Foro It., Rep. 2003, voce Contratto in genere, no. 317; 14 February 2000 no. 1632, ibid., Rep. 2000, voce Contratto in genere, no. 347; 14 June 1999 no. 5830, in Foro It., Rep. 1999, voce Contratto in genere, no. 355; 25 November 1997 no. 11811, ibid., Rep. 1998, voce Contratto in genere, no. 322; 9157/2005, n. 126 above; 26 October 1994 no. 8778, in Foro It., Rep. 1994, voce Contratto in genere, no. 286; 12 March 1993 no. 2973, ibid., 1994, I, 956; 30 March 1990 no. 2623, ibid., Rep. 1990, voce Contratto in genere, no. 233; 11 September 1989 no. 3922, ibid., Rep. 1989, voce Contratto in genere, no. 255; 25 January 1988 no. 582, ibid., Rep. 1988, voce Contratto in genere, 266. However, the doctrine, while considering it essential that this responsibility has its basis in the culpability of the party which withdraws, outlines more diverse approaches: see Bianca (2000) 168; Patti and Patti (1993) 73. 129 See Cass. 13 March 1996 no. 2057, in Foro It., 1996, I, 2065; 25 February 1992 no. 2335, ibid., 1992, I, 1766; 22 October 1982 no. 5492, in Giur. It., 1984, I, 1, 1199; 13 July 1968 no. 2521, in Foro It., 1968, I, 2454. 130 Afferni (2009) 469–70 (‘in effect … the reliance may subsist even when all the essential elements of the coming contract have not been yet determined and, vice versa, the reliance may be lacking when these elements have already been determined’). 131 See Afferni (2008) 18. The idea come from the German jurisprudence (see BGH 29 March 1996, NJW, 1996, 1884; BGH, 22 February 1989, NJW-RR 1989, 627; BGH, 7 February 1980, BHGZ 76, 343; BGH, 12 June 1975, NJW 1975, 1774; BGH, 11 February 1969, WM 1969, 595, 597), which adopts a

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From this perspective, the ‘futuristic’ solution proposed in the Dutch legal system deserves substantial attention. The Dutch legal system has created a general duty to negotiate in good faith, but it ‘takes the view that the very nature of negotiations creates a relationship which the law should protect; and sees that relationship as one which develops during the course of the negotiations and its final stages almost merge into the same contract’.132 In other words, since the decision of the Hoge Raad in Plas v. Walburg (in which three distinct levels characterizing the process of negotiation were set forth),133 the Dutch courts ruled that at the third stage (the beginning of which coincides with the moment when ‘the claimant could reasonably expect that the contract would be concluded’) the parties can exercise their right to withdraw from the negotiations: ‘in the sense that if one party does break off he may be required not only to compensate the claimant’s out-of-pocket losses but even to compensate the expectation which he had from the contract; or even that the court will require the defendant not to break off at all, but to conclude the contract – specific enforcement’.134 Consequently, standing out from the grain of other civil law systems, Dutch law has taken steps to clarify the uneasy distinction between contract and negotiations through a gradual process whereby, after a certain threshold, the party that suffers the withdrawal can claim compensation which would place him in the same position that they would have been in if the contract had been correctly concluded: [i]t is not impossible that negotiations concerning a contract may reach such an advanced stage that the act of breaking them off must in itself be regarded, resolute position in considering that the workability of culpa in contrahendo does not depend exclusively on the fact that the counter-party has made investments relying on the future conclusion of the contract; it is necessary, instead, that the refusal of coming to agreement does not have an acceptable reason, where the business would result in a clear benefit and the other party has taken on burdens which are necessary to the conclusion of the contract (Lorenz and Vogelsang (2008) 35–6). For an overview of the German doctrine see Larenz and Wolf (2004) 601; Medicus (2005) 49. 132 Cartwright and Hesselink (2008) 468–9. 133 HR 18/6/ 1982 (Plas/Valburg), NJ 1983, 723. More specifically, the Hoge Raad established the following subdivision: (1) in the first stage of the negotiations, the parties of the negotiations are free to withdraw without any liability; (2) in the second stage, the parties, although they may withdraw without coercion, have to compensate the counter-party for the expenses supported; (3) in the third stage, ‘the party is no longer free to break off negotiation’ (Hesselink (2008) 45–6). 134 Cartwright and Hesselink (2008) 468–9.

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Promissory estoppel 503 in the prevailing circumstances, as a breach of good faith, on the basis that the parties may be assumed mutually to have relied on the expectation that some sort of contract would in any event result from the negotiations. In such a situation, it may also be legitimate to find that an obligation exists to pay compensation for lost profits.135

These remarkable solutions in pre-contractual liability, introduced by the practice of Dutch law, offer the opportunity to consider, on a more informed basis, the apparent polarity of the civil law and common law systems (namely, the English and the North American system). Moreover, though the English system is traditionally regarded as ‘the most restrictive’ in terms of pre-contractual liability, it seems appropriate to consider the possibility of detecting several points of contact, in their ways of framing the responsibilities that flow from the interruption of negotiations: [i]f English law were to take the step of accepting a development of the doctrine of promissory estoppel to cover contractual negotiations generally, rather than being limited (within the doctrine of proprietary estoppel) to promises relating to interests in land, both the rationale and the result of the liabilities might resemble the Dutch position.136

135

HR 18/6/ 1982 (Plas/Valburg), n. 133 above, at 723. Therefore, looking at how withdrawal from the negotiation is precluded if it causes a real expectation of the future conclusion of the contract, Dutch jurisprudence not only eludes the problems related to the relationship between negotiation and contract, but emphasizes that ‘[t]he wrong is therefore the breaking-off of the negotiations, and so the loss caused is the loss of contract, because if the defendant had not committed the wrong, he would have concluded the contract and thereby fulfilled, rather than disappointed, the claimant’s expectations’. On this point see Cartwright and Hesselink (2008) 469: ‘[i]n this, Dutch law goes even further than most of the other civil law systems in our study, which will impose liability for breaking off negotiations … but will normally limit the damages to wasted expenditure: the reliance interest’. 136 ‘A party who has created in the other the expectation that he would receive the benefits of a contract, where the latter has acted in reliance on the belief that the contract would be concluded, might be estopped from denying that he is bound to complete the contract. That is, it would be open to the courts, in developing the doctrine of promissory estoppel, to allow the remedy to be based not simply on the value of the claimant’s reliance on his belief that the contract would be formed, but on his expectation from the contract. The claimant’s reliance is the trigger for the estoppel, but need not to be measure of his remedy under it’: Cartwright and Hesselink (2008) 470.

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Therefore, following this approach, it is not surprising that certain parts of the doctrine have gone so far as to identify promissory estoppel as the appropriate tool to overcome the problems related to European precontractual liability: [t]he aim of a new EC reliance doctrine should be ‘merely’ to validate limited incursion into private bargaining, principally in order to restore reliance expenditure to A in situations where A has acted to his detriment on a reasonably held belief or view, inspired by or attributable to B, that a contract would materialize.137

By common recognition, the English legal system ‘appears to exhibit the strongest reluctance to impose pre-contractual liability’. Even though, following in the footsteps of the US legal system (i.e., through the impulse of the decisions of Australian courts), ‘the nearest that English law has come to recognizing the development of a new source of obligation within the pre-contractual phase is through the doctrine of estoppel’.138 However, the North American system, which can be characterized as favouring a dynamic and flexible approach, would appear to have gradually adopted a softer attitude, capable of opening a bridge to the discipline of culpa in contrahendo. In addition, notwithstanding the reasons traditionally given for denying entry to pre-contractual duties of good faith,139 in recent decades the 137

See Doris (2007) 16. Cartwright and Hesselink (2008) 461. 139 In a work that meticulously collects the plethora of previous case law relevant to the area of withdrawal from negotiations, the most reliable doctrinal voice in the United States identifies five essential reasons of inescapable relevance (Farnsworth (1987b) 242–3): (1) the so-called aleatory theory of negotiations (deeply rooted in US doctrinal and jurisprudential views, in the sign of the belief that negotiation is a pitiless arena, where everyone works at his own risk, knowing that error will not be forgiven), under which, until the final conclusion of the contract, the outcome of negotiations remains unclear, leaving the parties free from any contractual relationship; (2) the general indifference of the system with respect to the outcome of negotiation (except the cases where the conclusion of a contract responds to interests deemed worthy of protection from the order); (3) the reduction in costs of administration of justice (through clear rules and simple application); (4) the uncertainty stemming from the difficulty of identifying with absolute precision at which point in time should the parties of a negotiation be constrained by the duty of good faith; and, finally, (5) the widespread concern that such an obligation is a relevant obstacle to the ‘normal’ course of the negotiations (both discouraging parties at all times where the probability of a deal appears remote, while greatly accelerating the negotiations 138

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legal community has witnessed a remarkable opening on the part of the US legal system to ‘the imposition of an obligation of good faith and fair dealing’ in the execution of the contract.140 As such, it is possible to track the advent of section 1-201(19) of the Uniform Commercial Code (which includes a definition of subjective good faith)141 and of section 205 of the Restatement (Second) of Contracts (which verbalizes a general duty of fairness).142 Nevertheless, ‘American law was not – and arguably is not yet – ready to adopt a similar approach for bad faith in bargaining’.143 After all, although the decision of the (often cited) case of Hoffman v. Red Owl Store144 is an application of section 90 to the pre-contractual stage able to open a direct connection with culpa in contrahendo (‘with regard to the implementation of the duty of good faith, we can safely say that the principles of culpa in contrahendo, with the exception of a generalized duty of good faith arising out of the negotiations themselves, are by now implicit in the American case law after a period of much in order to reach a final conclusion, even if hasty). These, in brief, are the reasons that, at least initially, led US doctrine and jurisprudence to adopt an attitude of substantial reluctance towards a generalized pre-contractual obligation of good faith. 140 Colombo (1993) 343. 141 UCC s. 1-201(19) (in the official draft of 1952) establishes: ‘Good faith means honesty in fact in the conduct or transaction concerned.’ 142 Restatement (Second) of Contracts, s. 205 provides that: ‘Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement’. On this point see Summers (1982), who remarks how this section is ‘one of the truly major advances in American contract law during the past fifty years’. However, Colombo (1993) 344, stresses how ‘such advance was produced amidst doubts and fears of judicial activism that, at least from a European perspective, are bewildering given the nature of the common law system’. In this perspective great importance is ascribed to the transcription of the 1970 Proceeding of the American Law Institute (at 814): ‘Professor Braucher [the Reporter]: I have been asked … Is this really a restatement of the law? Is this not an attempt … to write the Sermon on the Mount into Restatement of Contracts? … I do not want to try to disguise what is being said here. This proposition is thoroughly acceptable if you define good faith very narrowly; but as you define good faith more broadly, the doubts begin to arise … reference to what happened to the law of Germany under the heading of … good faith. It became, in the days of the great inflation following World War One, a license for judicial remaking of contract way beyond anything that ever happened in the United States. Now, I suppose if we got to a place where you had 25 per cent inflation every month that you might find some judicial activism here too.’ 143 Colombo (1993) 344–5. 144 Hoffman v. Red Owl Stores, n. 51 above, at 267.

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506 Comparative contract law

experimentation with good faith notions by trial and error’),145 the absence of a theoretical elaboration of a general obligation of good faith would seem to testify against the definitive overcoming of the ancestral reluctance to impose pre-contractual liability.146 More specifically: even though a significant step forward has been made by the legal community recognizing the concept of good faith ratified in section 1-201(19) of the Uniform Commercial Code and section 205 of the Restatement (Second) of Contracts, and by virtue of the expansive implementation of section 90 of the Restatement (Second) of Contracts, ‘the real problem lies in the back-door technique of their use. The issue of good faith is not tackled head on and the problems, resolved in a roundabout and ad hoc manner, refuse to go away.’147

BIBLIOGRAPHY AAVV [various authors] (1936) An Introductory Survey of the Sources and Literature of Scots Law. Edinburgh: Printed for the Stair Society by R. Maclehose & Co. Afferni, G. (2008) Il quantum del danno nella responsabilità precontrattuale. Turin: Giappichelli Afferni, G. (2009) ‘Responsabilità precontrattuale e rottura delle trattative: danno risarcibile e nesso di causalità’, Danno e Resp. 469 Alpa, G. (1991) ‘Introduzione alla nuova giurisprudenza’ in G. Alpa (ed.), I contratti in generale, vol. I. Turin: Giappichelli Amato, C. (2012) Affidamento e responsabilità. Milan: Giuffrè Anson, W.R. (1880) ‘Principles of the Law of Contract’, 14 Am. L Rev. 233 Atti, A. (1985) ‘Le lettere di “patronage” e i gruppi di società: le fattispecie e il valore giuridico’, Contr. impr. 878 Barassi, L. (1946) La teoria generale delle obbligazioni, vol. II, Le fonti. Milan: Giuffrè Barbuto, M. (1994) ‘Il punto sulle “lettere di patronage”’, Impresa 756 Barnett, R.E. (1996) ‘The Death of Reliance’, 46 J Legal Education 518 Bastianon, S. (1996) ‘Responsabilità precontrattuale, recesso ingiustificato e risarcimento del danno’, Resp. Civ. 988 Bebchuk, L.A. and Ben-Shahar, O. (2001) ‘Pre-contractual Reliance’, 30 J Legal Stud. 423 Benatti, F. (1963) La responsabilità precontrattuale. Milan: Giuffrè Benatti, F. (1987) ‘Culpa in contrahendo’, Contratto e Impresa 303 Bessone, M. (1972) ‘Rapporto precontrattuale e doveri di correttezza’, Riv. Tri. Dir. Proc. Civ. 962 Bianca, C.M. (2000) Il contratto. Milan: Giuffrè 145

Colombo (1993) 348. Bebchuk and Ben-Shahar (2001) 424 (‘[u]nder current U.S. law, the traditional rule assesses no pre-contractual liability. Parties are free to break off negotiations at any time, in which case each party bears the sunk cost of its reliance investments’). 147 Colombo (1993) 349. 146

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Promissory estoppel 507 Bigelow, M.M. (1876) A Treatise on the Law of Estoppel. Boston, NJ: Little Brown, 2nd edn Billig, T.C. (1927) ‘The Problem of Consideration in Charitable Subscriptions’, 12 Cornell LQ 467 Black, A.C. (1936) ‘The Institutional Writers’ in AAVV [various authors], An Introductory Survey of the Sources and Literature of Scots Law. Edinburgh: Printed for the Stair Society by R. Maclehose & Co. Boyer, B.F. (1950) ‘Promissory Estoppel: Requirements and Limitations of the Doctrine’, 98 U Pa. L Rev. 459 Boyer, B.F. (1952) ‘Promissory Estoppel: Principle from Precedents’, 50 Mich. Rev. 639 Caleo, O. (2002) ‘Patronage e art. 1333 c.c.: gli sviluppi della questione nei recenti orientamenti della giurisprudenza’, 2 Temi Romana 39 Caliceti, P. (1996) ‘Brevi note in tema di patronage’, I Giust Civ. 3007 Canaris, C.W. (2000) ‘Die vertrauenshaftung im lichte der rechtsprechung des BGH’, 50 Jahre bundesgerichtshof. Festgabe aus der wissenschaft, vol. I. Munich: Beck, 180 Carresi, F. (1956) ‘In tema di responsabilità precontrattuale’, Temi 440 Carresi, F. (1987) Il contratto. Milan: Giuffrè Cartwright, J. and Hesselink, M. (2008) ‘Conclusions’ in J. Cartwright and M. Hesselink (eds), Precontractual Liability in European Private Law. Cambridge: Cambridge University Press Caruso, D. (1993) La culpa in contrahendo. L’esperienza statunitense e quella italiana. Milan: Giuffrè Castiglia, G. (1983) ‘Promesse unilaterali atipiche’, I Riv. Dir. Comm. 331 Castronovo, C. (2006) La nuova responsabilità civile. Milan: Giuffrè Cavanna, I. (1996) ‘Lettera di patronage ed estensione della responsabilità del patronnant’, I Nuova Giur. Civ. 285 Checchini, L. (1977) Rapporti non vincolanti e regole di correttezza. Padova: Cedam Chinè, G. (1996a) ‘I confini del patronage: un istituto ancora in cerca di autore’, I(2) Giur. It. 257 Chinè, G. (1996b) ‘La cassazione sul patronage: una voce fuori dal coro’, I(1) Giur. It. 737 Chiomenti, F. (1974) ‘Le “lettere di conforto”’, I Riv. Dir. Comm. 348 Colombo, S. (1993) ‘The Present Differences Between the Civil Law and Common Law Worlds with Regard to Culpa in Contrahendo’, 4 Tilburg Foreign L Rev. 341 Cooke, E. (2001) The Modern Law of Estoppel. Oxford: Oxford University Press Corea, N. (2007) ‘Le lettere di patronage: natura giuridica, effetti e responsabilità’, Obbligazioni e Contratti 642 Cuffaro, V. (1988) ‘Responsabilità precontrattuale’, XXXIX Enciclopedia del Diritto. Milan: Giuffrè 1265 D’Amico, G. (1996) Regole di validità’ e principio di correttezza nella formazione del contratto. Naples: ESI D’Amico, G. (2006) ‘La responsabilità precontrattuale’ in V. Roppo (ed.), Trattato del Contratto, vol. V, 2. Milan: Giuffrè D’Angelo, A. (1996) ‘Le promesse unilaterali’ in P. Schlesinger (ed.), Il codice civile commentario. Milan: Giuffrè Dalrymple, J. (1681) The Institutions of the Law of Scotland deduced from its Originals, and collated with the Civil, Canon and Feudal Laws and with the Customs of Neighbouring Nations De Long, S.W. (1997) ‘The New Requirement of Enforcement Reliance in Commercial Promissory Estoppel: Section 90 as Catch-22’, Wis. L Rev. 943 De Lorenzi, V. (1999) ‘Correttezza e diligenza precontrattuale: il problema economico’, I Riv. Dir. Comm. 565 De Sanctis Ricciardone, A. (1983) ‘Patronage e “raccomandazione”’, Riv. Crit. Dir. Priv. 397

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508 Comparative contract law Denning, A.T. (195”2) ‘Recent Developments in the Doctrine of Consideration’, 15 Mod. L Rev. 1 Di Giovanni, F. (1984) Le lettere di patronage. Padova: Cedam Di Majo, A. (1989) Promesse unilaterali. Milan Di Majo, A. (2004) ‘Vincoli unilaterali e bilaterali nella formazione del contratto’ in M. Bessone (ed.), Istituzioni di diritto privato. Turin: Giappichelli, 537 Di Matteo, L.A., Prentice, R.A., Morant, B.D. and Barnhizer, D.D. (2007) Vision of Contract Theory: Rationality, Bargaining and Interpretation. Durham, NC: Carolina Academic Press Doris, M.J. (2007) ‘Bargaining and Reliance in New European Contract Law’, InDret, no. 3 Du Plessis, J. (2003) ‘Common Law Influences on the Law of Contract and Unjustified Enrichment in Some Mixed Legal Systems’, 78 Tul. L Rev. 218 Eisenberg, M. (1982) ‘The Principles of Consideration’, 67 Cornell L Rev. 640 Faggella, G. (1906) ‘Dei periodi precontrattuali e della loro vera ed esatta ostruzione scientifica’ in Studi giuridici in onore di Carlo Fadda, vol. III. Napoli: L. Pierro ed. 269 Faggella, G. (1918) I periodi precontrattuali e la responsabilità precontrattuale. Stab. Tip. Rome: Soceità cartiere centrali Farber, D.A. and Matheson, J.H. (1985) ‘Beyond Promissory Estoppel: Contract Law and “Invisible Handshake”’, 52 U. Chi. L. Rev. Farnsworth, E.A. (1987a) ‘Contracts Scholarship in the Age of the Anthology’, 85 Mich. L Rev. 1406 Farnsworth, E.A. (1987b) ‘Precontractual Liability and Preliminary Agreements: Fair Dealing and Failed Negotiations’, 87 Colum. L Rev. 217 Feinman, J.M. (1992) ‘The Last Promissory Estoppel Article’, 61 Fordham L Rev. 303 Figone, A. (1996) ‘Obblighi della società patronnant’, Società 288 Galgano, F. (1988) ‘Le società per azioni’ in F. Galgano (ed.), Trattato di diritto commerciale e diritto pubblico dell’economia. Padova: Cedam Galgano, F. (1996) ‘Lettere di patronage e promesse unilaterali atipiche’, Contratto e Impr. 9 Galgano, F. (2004) Diritto civile e commerciale. Padova: Cedam Gallo, G. (2001) ‘Le lettere di patronage tra responsabilità contrattuale e aquiliana’, 6 Mondo Bancario 55 Gallo, G. (2004) ‘Responsabilità precontrattuale: la fattispecie’, Riv. Dir. Civ. 295 Gilmore, G. (1974) The Death of Contract. Columbus, OH: Ohio State University Press Giorgianni, M. (1965) ‘Appunti sulle fonti delle obbligazioni’, I Riv. Dir. Civ. 70 Greco, P. (1952) ‘Formazione di contratto nullo e responsabilità extracontrattuale’, Temi 467 Grunewald, B. (1984) ‘Das scheitern von vertragsverhandlungen ohne triftigen grund’, Juristenzeitung 710 Hesselink, M. (2008) ‘Case 1: Negotiations for Premises for a Bookshop (for Netherlands)’ in J. Cartwright and M. Hesselink (eds), Precontractual Liability in European Private Law. Cambridge: Cambridge University Press Hillman, R.A. (1998) ‘Questioning the New Consensus on Promissory Estoppel: An Empirical and Theoretical Study’, Colum. L Rev. 580 Holmes, O.W. (1881) The Common Law. Boston, NJ: Little Brown Jaffey, P. (2000) The Nature and Scope of Restitution. Oxford: Hart Publishing Jimenez, M.J. (2010) ‘The Many Faces of Promissory Estoppel: An Empirical Analysis Under the Restatement (Second) of Contracts’, 57 UCLA Law Rev. 669 Johnston, J.S. (1999) ‘Communication and Courtship: Cheap Talk Economics and the Law of Contract Formation’, 85 Va. L Rev. 385 Knapp, C.L. (1981) ‘Reliance in the Revised Restatement: The Proliferation of Promissory Estoppel, 81 Colum. L Rev. 52

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Promissory estoppel 509 Koffman, L. and Macdonald, E. (2007) The Law of Contract. Oxford: Oxford University Press Kühne, G. (1990) ‘Reliance, Promissory Estoppel and Culpa in Contrahendo: A Comparative Analysis’, 10 Tel Aviv U Stud. L 279 Langdell, C.C. (1880) A Summary of the Law of Contracts. Boston: Little Brown and Company Larenz, K. (1987) Lehrbuch des schuldrechts: allgemeiner teil. Munich: Bech Larenz, K. and Wolf, M. (2004) Allgemeiner teil des bürgerlichen rechts. Munich: Beck Litvinoff, S. (1975) Obligations, vol. II, 35 La. L. Rev. 618 Lorenz, S. and Vogelsang, W. (2008) ‘Case 1: Negotiations for Premises for a Bookshop (for Germany)’ in J. Cartwright and M. Hesselink (eds), Precontractual Liability in European Private Law. Cambridge: Cambridge University Press MacQueen, H.L. (2005) ‘Glory with Gloak or the Stake with Stair? T.B. Smith and the Scots Law of Contract’ in E. Reid and D.L. Carey Miller (eds), A Mixed Legal System in Transition: T.B. Smith and the Progress of Scots Law. Edinburgh: Edinburgh University Press Maninetti, P. (2000) ‘Responsabilità precontrattuale e risarcimento dei danni: verso una concezione sempre più estensiva’, Danno e Resp. 982 Mantovani, M. (1995) ‘Vizi incompleti’ del contratto e rimedio risarcitorio. Turin: Giappichelli Marini, G. (1995) Promessa ed affidamento nel diritto dei contratti. Naples: Jovene Matera, N. (2000) ‘La responsabilità precontrattuale tra vecchi e nuovi spunti di riflessione’, Giur. It. 1178 Mazzoni, A. (1986) Le lettere di patronage. Milan: Giuffrè McDiarmid, C. (1999) ‘Scots Law, the Turning of the Tide’, Juridical Rev. 156 Medicus, D. (2005) Schuldrecht I: allgemeiner teil. Munich: Beck Mengoni, L. (1956) ‘Sulla natura della responsabilità precontrattuale’, II Riv. Dir. Comm. 360 Meruzzi, G. (2002) La trattativa maliziosa. Padova: Cedam Monateri, P.G. (1998) La responsabilità contrattuale e precontrattuale. Turin: Utet Morello, U. (1974) ‘Culpa in contrahendo’, accordi preliminari (un classico problema rivisitato) in La casa di abitazione tra normativa vigente e prospettive, II, a cura del Consiglio Nazionale del Notariato, Milan: Giuffrè Murray, J.E. (1990) Murray on Contracts. Charlottesville, VA: Michie Co. Musy, A.M. (1998) ‘Responsabilità precontrattuale (culpa in contraendo)’, XVII Digesto Civ. 391. Turin Musy, A.M. (2001) ‘L’art. 1333 c.c. e le lettere di patronage c.d. “forti”’, Giur. It. 2254 Ngugi, J.M. (2007) ‘Promissory Estoppel: The Life History of an Ideal Legal Transplant’, 41 U Rich. L Rev. 425 Örücü, E., Attwooll, E. and Coyle, S. (1996) Studies in Legal System: Mixed and Mixing. The Hague: Kluwer International Page, W.H. (1947) ‘Consideration: Genuine and Synthetic’, Wis. L Rev. 483 Palmer, V.V. (2001) Mixed Jurisdiction Worldwide: The Third Legal Family. Cambridge: Cambridge University Press Palmieri, D. (1999) La responsabilità precontrattuale nella giurisprudenza. Milan: Giuffrè Papale, P.P. (2000) ‘Lettere di patronage: gli sviluppi in Francia e in Italia’, II Riv. Dir. Civ. 307 Pardolesi, P. (2005) ‘Recesso dalle trattative: un esercizio di Comparative Law and Economics’, Danno e Resp. 597 Pardolesi, P. (2009) Promissory Estoppel: affidamento e vincolatività della promessa. Bari: Cacucci Parsons, T. (1886) The Law of Contracts. Boston, NJ: Little Brown, 5th edn

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510 Comparative contract law Patti, G. and Patti, S. (1993) ‘Responsabilità precontrattuale e contratti standard’ in P. Schlesinger (ed.), Commentario al Codice Civile. Milan: Giuffrè Pollock, F. (1950) Principles of Contract. London: Stevens, 13th edn Portale, G.B. (1982) ‘Informazione societaria e responsabilità degli intermediari’, I Banca, Borsa e Titoli di Credito 2 Posner, E.A. (2003) ‘Economic Analysis of Contract Law After Three Decades: Success or Failure?’, 112 Yale LJ 829 Posner, R.A. (1977) ‘Gratuitous Promises in Economics and Law’, 6 J Legal Stud. 411 Pound, R. (1919) ‘Consideration in Equity’, 13 Ill. L Rev. 435 Powers, J.F. (2007) ‘Promissory Estoppel and Wagging the Dog’, 59 Ark L Rev. 841 Prentice, R.A. (2007) ‘Application: Gift Promise and Promissory Estoppel’ in L.A. Di Matteo (ed.), Vision of Contract Theory: Rationality, Bargaining and Interpretation. Durham, NC: Carolina Academic Press, 59 Ravazzoni, A. (1973) La formazione del contratto, vol. I, Le fasi del procedimento. Milan: Giuffrè Ravazzoni, A. (1974) La formazione del contratto. Milan: Giuffrè Reid, E. and Carey Miller, D.L. (eds) (2005) A Mixed Legal System in Transition: T.B. Smith and the Progress of Scots Law. Edinburgh: Edinburgh University Press Rescigno, P. (1979) ‘Obbligazioni (diritto privato)’, XXIX Enciclopedia del diritto. Milan: Giuffrè Rodger, A.F. (1996) ‘Think about Scots Law’, Edin. L Rev. 12 Roppo, V. (2001) ‘Il contratto’ in G. Iudica and P. Zatti (eds), Trattato di diritto privato. Milan: Giuffrè Rovelli, L. (2000) ‘La responsabilità precontrattuale’ in M. Bessone (ed.), Trattato di diritto privato, vol. XIII, 2, Il contratto in generale. Turin: Giappichelli Ruffolo, U. (1984) ‘Letters de patronage e responsabilità aquiliana’, Dir. Impresa 459 Sacco, R. (1961) ‘Culpa in contrahendo e culpa aquiliana’, II Riv. Dir. Comm. 186 Sacco, R. (1975) ‘Il contratto’ in F. Vassalli (ed.), Trattato di diritto civ. it. Turin: Utet Schwartz, A. and Scott, R.E. (2007) The Law and Economics of Preliminary Agreements, Yale Law and Economics Research Paper no. 336 Scott, R.E. (2007) ‘Hoffman v. Red Owl Stores and the Myth of Precontractual Reliance’, 68 Ohio St L J 71 Scottish Law Commission (1977) Memorandum no. 36, General Introduction. Edinburgh Segni, M. (1972) Autonomia privata e valutazione legale tipica. Padova: Cedam Segni, M. (1990) ‘Lettere di patronage’, XVII Enc. Giur. Severini, F. (1991) ‘Il patronage tra la promessa unilaterale atipica e la promessa del fatto del terzo’, I Giur. Comm. 884 Shattuck, W.L. (1937) ‘Gratuitous Promises: A New Writ?’, 35 Mich. L Rev. 908 Smith, T.B. (1962) ‘Scots Law and Roman-Dutch Law: A Shared Tradition’ in T.B. Smith (ed.), Studies Critical and Comparative. Edinburgh: Oceana Publications Smits, J.M. (2001) The Contribution of Mixed Legal System to European Contract Law. Antwerp: Intersentia Smits, J.M. (2002) The Making of European Private Law. Antwerp: Intersentia Snyder, D.V. (2008) Hunting Promissory Estoppel, available at http://ssrn.com/ abstract=1316358 Speciale, R. (1990) Contratti preliminari e intese precontrattuali. Milan: Giuffrè Spencer Bower, G. (1966) The Law Relating to the Estoppel by Representation. London: Butterworths Stignone, C. (1996) ‘Lettere di patronage: dichiarazioni a contenuto impegnativo e qualificazione contrattuale della fattispecie’, Corriere Giur. 301 Summers, R.S. (1982) ‘The General Duty of Good Faith: Its Recognition and Conceptualization’, 67 Cornell L R 810

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Promissory estoppel 511 Tamburrino, G. (1954) I vincoli unilaterali nella formazione progressiva del contratto. Milan: Giuffrè Teeven, K.M. (2004) ‘Origin of Promissory Estoppel: Justifiable Reliance and Commercial Uncertainty Before Williston’s Restatement’, 34 U Mem. L Rev. 499 Tetley, W. (2000) ‘Mixed Jurisdictions: Common Law vs. Civil Law (Codified and Uncodified)’, 60 La. L Rev. 677 Thompson, M.P. (1983) ‘From Representation to Expectation: Estoppel as a Cause of Action’, 42 Cambridge L J 257 Tucci, G. (1970) Il danno ingiusto. Naples: ESI Turco, A. (2004) ‘Lettere di patronage impegnative e la problematica relativa all’art. 1333 c.c.’, Rass. Dir. Civ. 248 Turco, C. (1990) Interesse negativo e responsabilità precontrattuale. Milan: Giuffrè Vagni, L. (2008) La promessa in Scozia. Per un percorso di diritto contrattuale europeo. Milan: Giuffrè Verga, A. (1941) Errore e responsabilità nei contratti. Padova: Cedam Von Jhering, R. (1861) ‘Culpa in contraendo oder Schadensersatz bei nichtigen oder nicht zur Perfektion gelangten Verträge’, Jherings Jahrbücher 4 Visintini, G. (1972) La reticenza nella formazione del contratto. Padova: Cedam Walker, M. (1983) ‘Gli scritti istituzionali del diritto scozzese’, Riv. Dir. Civ. 509 Williston, S. (1921) The Law of Contracts. New York: Baker, Voorhis & Co. Yorio, E. and Thel, S. (1991) ‘The Promissory Basis of Section 90’, 101 Yale L J 111 Zimmerman, R. and Reid, K. (2000) A History of Private Law in Scotland. Oxford: Oxford University Press Zimmerman, R. and Reid, K. (2006) European Contract Law: Scots and South African Perspective. Edinburgh: Edinburgh University Press

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20. Party autonomy in global context: an international lawyer’s take on the political economy of a self-constituting regime Horatia Muir Watt

Arguably the most significant principle of contemporary private international law,1 ‘party autonomy’, or contractual freedom of choice of the governing law, also fulfils a key function within the political economy of private ordering in today’s global context. In this respect, while the principle emerged as part and parcel of the ‘mythology of modern law’,2 it has also worked, less visibly, to destabilize modernity’s assumptions about the relationship between law and sovereignty, which are now at the heart of the theoretical turmoil within the traditional legal paradigm. The role played by party autonomy in this evolution needs to be acknowledged before new models of social justice can be imagined within the uncharted legal environment beyond the state. With such an aim in mind, this chapter is an attempt both to analyse the way in which the principle of party autonomy provides crucial support for the powerful fiction of an autonomous private transnational legal order and, by the same token, to connect the current tribulations of private international law to the wider debate on the future of law beyond the state. To this end, first, a brief overview is called for in order to set the scene for this analysis (I). The various political representations of private autonomy then need to be revisited (II) before exploring the relationship between the idea of ‘private legislation’ and issues of ‘merely technical’ design (III). The latter are at the root of the fundamental reversal of the relationship between law and market which accompanies the move from liberalism to neo-liberalism (IV). Significant distributional effects thereby attach to this specifically global function of party autonomy (V). 1

The literature on this principle, its origns, evolution, current status and limits, is too abundant to be cited exhaustively. See among many others: Batiffol (1960) vol. I, 39; Briggs (2008); Cuniberti (2009); Damman and Hansmann (2008); Lehmann (2008); Yetano (2010); Muir Watt (2005); Niboyet (1927); Nygh (1999); von Overbeck (1993) 619. 2 For the authentic version, Fitzpatrick (1992).

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The stakes are therefore sufficiently significant to warrant a detour by the stimulating insights of societal constitutionalism, in the search for ways to understand the expansionist tendencies of party autonomy conceptualized as an autonomous social sphere (VI). It may then be wondered, in conclusion, whether the wheel has turned full circle – with a twist.

I.

OVERVIEW: THE POLITICAL ECONOMY OF PRIVATE ORDERING

Now enshrined in an astonishing number of national codes worldwide,3 and indeed still expanding as a central element of transnational soft law,4 the principle that has come to be known as ‘party autonomy’, according to which parties to an international business contract are free to choose the governing law, emerged as a key methodological concept in the course of the twentieth century. It served the progressive liberalization of cross-border markets, which broke the frames of protectionist regulatory schemes, emancipating international flows of capital, goods and services from the claims of territoriality. Through a series of technical moves which will be described below, the law has accredited freedom of choice as the foundation of a whole parallel world of private transnational ordering, complete with its own institutions and governing principles. Indeed, from the resulting representation of the relationship between free choice of law and sovereign authority stems the fiction of an autonomous private transnational legal order, widely accepted as the source of regulation, conceded by the various states, of cross-border relationships between economic actors. In this perspective, party autonomy is to a large extent the expression, within the confines of private international contract law, of a wider political economy which serves the global expansion of the neo-liberal market. As such, it fulfils a significant function in creating an enabling environment for private sector activity in the context of a globally integrated economy. This role is rarely questioned, any more than the various supporting fictions which have worked to ensure the expansion of the principle within the liberal legal paradigm.

3 See for an impressive panorama, Symeonides (2014); and, for example, emblematically, Rome I Regulation on the law applicable to contractual obligations (EC) 593/2008, Art. 3. 4 Compare the Hague Principles on the Choice of Law in International Contracts (adopted on 19 March 2015).

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II.

THEORETICAL REPRESENTATIONS OF PARTY AUTONOMY

Indeed, under the classical liberal paradigm, party autonomy was designed to be exercised within a political framework which ensured the ultimate primacy of public market regulation. This scheme owes as much to domestic contract theory as to the Westphalian model of the public international legal order, composed (exclusively) of equal and sovereign states. Together, state sovereignty and freedom of contract combined to produce a view of the relationship between law and market in the transnational economic sphere according to which the empowerment of private actors was subject to limits imposed in the name of the general interest.5 Whether framed in terms of public policy or overriding mandatory rules, such restrictions imposed upon the conduct of private transnational trade are set by a presumptively like-minded community of sovereign states similarly desirous of promoting the reciprocal benefits of international trade. Within such a scheme, the reasons for which any sovereign state would allow parties to contract out of its own rules and substitute those of a neighbouring community, were to be found both in the purported special needs of cross-border transactions and the dilution of the claim of any one state to regulate them exclusively.6 This implied in turn that sovereign states were deemed to be unconcerned, or their polities less affected, by transactions which did not directly involve their domestic economy; in a world where market was coextensive with territory, this idea translated methodologically into a presumption of territoriality of national regulation.7 And indeed, this separation of the two worlds of domestic and international transactions had a functional justification: social and economic policies were non-negotiable in homogeneous cases which fell clearly within their regulatory ambit; on the other hand, such policies were not endangered by contracting-out when the relationship, bearing foreign elements, was not perceived to ‘belong’ to the local economy. However, while contractual choice of law might be encouraged in the interests of cross-border commerce, its corollary was the assumption that 5

Francescakis (1966); Romano (2009). See Ribstein (2003). 7 This notion is far from irrelevant today. See the US Supreme Court’s influential ruling on this point in the 2010 Morrison case (Morrison v. National Australia Bank, 561 U.S. 247 (2010)). 6

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the community of states – specifically, those which were sufficiently closely connected to the parties to justify the jurisdiction of their courts – would moderate private autonomy to accommodate the requirements of the common good. No unbridled ‘contrat sans loi’, then, but a regulated freedom to be subject to the sovereign legal order of one’s choice. Like international commercial arbitration, whose growth followed on the generalization of party autonomy as a foundational principle of choice of law, the empowerment of private actors is supposed to cater to the special needs of international economic intercourse. The notion that party autonomy in the international arena, like freedom of contract in the domestic context, is a measured concession by the liberal state to private ordering,8 rests on theoretical premises which are also to be found, outside the field of contract, at the heart of multilateral conflicts methodology.9 Thus, the very representation of the conflict between laws within the continental Savignian tradition presupposes a certain commonality of normative preferences among like-minded (and pre-regulatory) sovereigns. Indeed, private law, of which the province is that of horizontal relationships between non-state actors, is perceived to be largely facilitative of private transactions,10 so that a conflict of laws may be seen essentially as the virtual availability of as many interchangeable sets of rules as there are connections between a given set of facts and different legal systems. Conversely, any given legal system is assumed to provide a set of rules of contract law that can suitably (that is, rationally) be applied in any geographical context. This double, liberal, representation of the relationship between state and market, law and territorial polity, had, however, to adjust to the rapid growth (in Europe, largely in the second half of the twentieth century) of public economic regulation affecting the market (such as competition, securities, consumership) or society (health, environmental, social protection), as well as the rise of fundamental rights in fields of private law previously considered to be immune from constitutionalization. Public policy concerns, social rights, or lois de police (‘overriding mandatory provisions’) in the legislation of closely connected states, frequently endowed with ‘extraterritorial’ scope, narrowed the expanse of private empowerment. Importantly, such concerns were relevant both to judicial proceedings within the forum state, or in respect of foreign judgments and awards at the enforcement stage. Thus, in a European setting, first in 8 9 10

Jansen and Michaels (2006). See Mills (2006). Ogus (1999).

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the Rome Convention (Article 7) and now in the Rome I Regulation (593/2008) (Article 9), room was made for: provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable to the contract.

Such rules may override the otherwise applicable law when a court thinks this makes sense in terms of the policies they express. Beyond this adjustment, however, private international law did not proceed to revisit the conceptualization of party autonomy in the light of the intensive growth of market and social regulation in the domestic sphere, with its transformation of the nature and function of private law;11 nor did its methods appear to evolve in response to the decline of the Westphalian model in international relations and the tectonic upheavals induced by globalization within both the theory of law and sovereignty and the reality of cross-border trade and investment. Yet within the changed normative, political and economic environment, party autonomy can no longer be represented as a carefully monitored concession of the liberal sovereign state. Philosophically, the shift from obligation to empowerment can be described in Foucauldian terms as a move to a neo-liberal model of private governance.12 Technically, it involves what might be called ‘methodological slippage’.

III.

PRIVATE LEGISLATION AND ‘MERELY TECHNICAL’13 DESIGN

Unquestioning acceptance of the principle of party freedom points to its status as a foundational myth of private international economic law. Indeed, its success has been unimpeded by the fact that significant issues as to its real ambit remain unsettled, as will be shown below. Nor does it seem to matter that despite its Kantian pedigree, its dominant justification is essentially utilitarian, linked to the needs of international trade. Although methodological, political and economic objections do appear from time to time, albeit outside mainstream doctrine, they remain largely unheeded; thus, neither the functionalist arguments drawn from 11 12 13

Cafaggi and Muir Watt (2009); Micklitz (2009). Foucault (2004). Kennedy (2002).

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governmental interests analysis, nor the potential democratic deficit resulting from the permission to contract out of local rules, nor indeed the uncertain economic rationality underlying the apparent indifference of states to free-riding by foreign parties on proven or novel regulatory models, detract from its remarkable success. The latter is, most recently, illustrated by the Hague Principles on the Choice of Law in International Contracts (2015), which affirms the general principle of party autonomy, with limited exceptions. The power thus conceded to private actors to harness available state legislation to the needs of their cross-border transaction was, and still is, perceived as doubly conditional to the requirements of the rule of law. The first perceived expression of the latter is a condition of internationality, which is supposed to prevent domestic contracts from circumventing local public policy; the second is the requirement of the public (meaning state) origin of the chosen law, so as to prevent parties from cherry-picking or resorting to wholly private rules. Neither, in the contemporary legal context, fulfils the function of safeguarding the public interest for which it was initially designed. On the contrary, as currently framed, they create a hiatus between the rules and practice of international contracting; hence, a sense of methodological misfit. Furthermore, both serve to perpetuate a vision of the world, including the relationship between regulation and party autonomy, on the foundations of which the myth of autonomous private ordering was constructed. The first condition (which, in a European setting, was already enshrined in the Rome Convention), restricts the exercise of free choice of law to international contracts – or rather, due to the extraordinary difficulty of defining this cardinal requirement, to contracts of which all the elements relevant to the situation at the time of the choice were not located within one state. The Rome I Regulation introduces, in addition, the idea that, for the purposes of European legislation, a domestic contract is one which is connected solely to Member States’ territories as a whole (Article 3(4)). However, whether the perspective adopted is national or, now, European, it presupposes a bright line separating the closely regulated world of the domestic (or intra-European) economy, from the area of freedom where, beyond national (or European) frontiers, state policies relax their grip. The rise of the regulatory state, entailing the multiplication of overriding mandatory rules or ‘lois de police’ with extraterritorial thrust (as seen above), has made it difficult to maintain the bright line between domestic and international spheres in terms of the respective intensity of state interests. In other words, the idea that sovereign regulatory concerns stops at national borders could not survive

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either the appearance of new forms of market regulation or the growing interconnectedness of local economies. Across the Atlantic, attempts were made to adjust methodology to the increasingly regulatory function of private law.14 Although these attempts were not always successful in the long run, the important lesson of the American realist revolution was that multilateralism was unworkable in a world where private law is neither purely facilitative nor indeed interchangeable. In a functionalist perspective, conflicts of laws arise from the existence of contradictory regulatory interests, identified by sounding out the policies of the states involved. However, they are considered as strictly derogatory, in the sense that they do not represent the ‘normal’ way of reasoning in the conflict of laws. Therefore, they do not affect the initial requirement that the contract be international, or non-domestic, for the principle of party choice to come into play as a choice of law rule, accrediting in turn the distinctiveness of the world of international transactions. Maintaining this multilateralist fiction contributes to perpetuate the underlying world-view of a community of states conceding an area of party freedom beyond their frontiers, but over which they retain the ultimate control. This representation of an orderly world in which benign liberal states determine the outer limits of private economic activity is also linked to the second limitation to free choice. Today, within the Rome I Regulation, like half a century ago in national case law, although parties may choose any law in the world, with no requirement as to geographical linkage to the state whose law is thus chosen and no condition as to the completeness, modernity or democratic legitimacy of its legal system, their freedom nevertheless stops short of non-state norms such as the lex mercatoria or the UNIDROIT rules for international contracts. These, according to recital 13 of the Rome I Regulation, may merely be ‘incorporated by reference’ into the contract, where they are necessarily subject to the contrary provisions of the governing law. Underlying this second restriction is the idea that the contract law of liberal states is presumptively interchangeable, because it is deemed to be based on a shared conception of societal needs (albeit largely facilitative and exclusive of specific regulatory interference), whereas norms of purely private origin cannot be supposed to implement similar conceptions. In other 14 Such attempts met with considerable resistance in Europe, often on (legal-theoretical) grounds similar to those which have been opposed more recently to the invasion of law and economics doctrines. See, e.g., Kegel (1964) 112.

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words, according to this vision, it was important that the parties should not escape the network of state regulation. The fear inspired by the concept of ‘private legislation’ – or, even more forbidding, ‘le contrat sans loi’ – may or not be justified: it could well be, as frequently argued, that the content of the new law merchant has now developed sufficiently so as to present a coherent, reasonably complete and generally acceptable set of operative principles; it is also arguable that carefully thought out principles of substantive contract law drafted at an international level may be more valuable and adjusted to the needs of cross-border trade than many state laws which might be less progressive, less clear, more parochial, etc. In economic terms, the burden of over-regulation could be an evil greater than excessive freedom in the international sphere. But the point here is that if the mandatory social and economic policies of connected states are implemented whenever it makes sense to do so in functional terms, then the quality of whatever non-state contract norms the parties may have chosen (in the unlikely event they have committed themselves to incomplete, incoherent or non-progressive principles) hardly matters. In the absence of a specific regulatory interest, which would trump any other chosen rule anyway, the choice of non-state law does not endanger the public policies of potentially concerned states, of which, on the other hand, the protection is inadequately ensured by the sole requirement that the parties choose a state law. Excessive focus on the latter has signified, paradoxically, that party autonomy has ceased to imply subordination of private actors to state authority.

IV.

CHANGES OF STATE:15 REVERSAL OF THE RELATIONSHIP BETWEEN LAW AND MARKET

Private actors are empowered to attain ‘regulatory lift-off’16 because the liberal state has renounced – or has been constrained by competitive economic forces to give up – the means to ensure the primacy of its own (or another’s) public policy regulation over ‘private legislation’.17 Indeed, the changing global context in which party autonomy is exercised, and to which it has largely contributed both as a foundational myth and a methodological tool, has induced two significant functions for which it was not initially designed. These ‘changes of state’ are directly linked to 15 16 17

For this expression, see Brett (2011). Wai (2002). Rodi (2008).

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those which affect the relationship between law and market.18 By allowing parties to cross jurisdictional barriers unhindered, the principle of free choice reverses the relationship between public regulation and private choice and generates a competitive market for legal products and judicial services.19 The first symptom of a reversal of the status of regulation in respect of party choice law, jurisdictional barrier-crossing, results from the combined effect of choice of forum, choice of law and free movement of decisions or awards. The general acceptance of free choice of forum in cross-border litigation, in the name of party autonomy, along with the spectacular rise of arbitration, is traditionally justified in terms of the promotion of international commerce through the benefit of predictability, procedural economy and litigation risk-management. Such concerns hold true even when internationally mandatory provisions are at stake: there is no particular reason why courts should not be trusted mutually to uphold the interests of the members of a benign community of states and indeed, the Rome Convention (Article 7(1)) and Rome I Regulation (Article 9(3)) have gone a long way down this path. Reputedly more flexible, international commercial arbitration presents all these advantages, with the added attraction of confidentiality; furthermore, when political stakes are high, such as in state investment contracts, it offers an appearance of neutrality, its legitimacy being enhanced by increasing institutionalization. Increasingly commonplace in practice, such agreements have thrived as initial doubts as to the desirability of allowing private actors to appropriate access to the courts have dwindled. Free choice of forum obviously impacts upon the applicability, and thereby the imperativity, of the mandatory rules of any state other than the chosen forum (which in the case of arbitration means practically none at all). This is why the liberal scheme on which party autonomy rests presupposes that any extension of the scope of party choice of court, or the enlargement of arbitrability, is compensated by the right to a ‘second look’ by the supervising or enforcing state over the judgments or awards issuing from the chosen forum. This scheme is apparent in the United States Supreme Court’s famous dictum in the Mitsubishi case, whereby: in the event that choice-of-law forum and the choice-of-law clauses operated in tandem as prospective waiver of a party’s right to pursue statutory remedies 18

On such changes induced by a competitve market for legal products, see Kerber (2000). 19 Muir Watt and Radicati di Brozolo (2004).

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Party autonomy in global context 521 … for antitrust violations, we would have little hesitation in condemning the agreement as against public policy.20

But it rapidly became apparent that the ‘second look’ was, in many instances, either unrealistic (when no enforcement was required, the parties having settled, for instance), or problematic (when the supervising court is not better equipped than the arbitrator to make an assessment on the merits in economic terms), or indeed practically excluded through deference to the chosen forum (as in cases as notorious as the Lloyd’s litigation). A powerful economic incentive for states to renounce their ‘second look’ has been to provide a free zone for the arbitration industry.21 It is useful to note here, in view of the characterization (proposed below, under VI) of the lex mercatoria as a self-constituting constitutional regime, that the extreme liberalization of arbitration law has come complete with a philosophical doctrine designed to legitimate the regulatory lift-off thus achieved.22 Indeed, and secondly, the generalization of choice-of-court agreements, along with the parallel growth of international arbitration, is now understood as giving rise to a worldwide market in adjudication or dispute resolution. Enhancing global jurisdictional competition would supposedly reap benefits in terms of the improvement of the quality of courts worldwide. However, the real problem lies in the fact that when court access is thus privatized, there is a correlative absence of judicial (or arbitral) regulation of interests beyond those of the parties to the dispute. In this respect, it is instructive to turn to the conclusion, which can hardly be suspected of anti-libertarian bias, reached by Landes and Posner using economic analysis of justice in respect of the domestic judicial system: privately designated judges lack both the legitimacy (conferred by public investiture) and the (private financial) incentive to take account of societal interests in their decision-making process. This conclusion certainly plays out, for instance, in respect of the impact of human rights in investment arbitration, where contractual mandate and choice of law pre-empt any consideration of wider public or third-party interests.23 Although, of course, the public financing of the court system establishes both the legitimacy and the incentive which arbitration lacks in protecting societal interests beyond those of the parties to the 20 21 22 23

Mitsubishi v. Soler Chrysler-Plymouth, 473 U.S. 614 (1985). Radicati di Brozolo (2003) and Radicati di Brozolo (2004). Gaillard (2007). Landes and Posner (1979).

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litigation, the tendency of courts designated by choice of forum agreements to act ‘as if they were arbitrators’ obviously detracts from this particular regulatory function.

V. DISTRIBUTIONAL EFFECTS24 OF PARTY AUTONOMY The centrality of private choice of law in the European tradition is so taken for granted, or at least, appears to be so solidly rooted in the history of Western private international law, that astonishingly little attention has been paid to the function it fulfils within the changing economic and political environment induced by globalization. The cloak of tradition is reinforced by more recent law and economics doctrines, which tend to promote party autonomy as efficiency, in the form of predictability, reduced transaction costs, or facilitated risk-management. No doubt these virtues exist, at least for the party whose skills in contract negotiation and drafting are strongest. It is highly probable, however, that the interests purportedly served by unbridled freedom of choice, whether cast as those of the market or of a purported community of merchants, do not allow for adequate governance of the cross-border activities of private actors. In this respect, the (in)famous Lloyd’s litigation serves as a cautionary illustration of the cumulative effect of contract doctrine and private international law theory.25 Thus, under a wider perspective than that offered by various dimensions of private law doctrine, it becomes clear that party autonomy no longer serves to free private enterprise from entrenched parochial constraints under the benign supervision of a community of liberal states, but works to transform national public regulation into a disposable private good in a deregulated economy. This holds true even after the various recent financial crises and the disastrous 24 On the use of the notion of distributional effects of legal institions as a critical tool to understand their often hidden effects in neighbouring spheres, see Rittich (2002). 25 Roby v. Corporation of Lloyd’s, 996 F. 2d 1353 (2d Cir. 1993); Bonny v. Society of Lloyd’s, 3 F. 3d 156 (7th Cir. 1993); compare in France, the ‘Monster Cable’ case: Cass civ 1re, 22 October 2008, JCP (G) 2008, II, 10187, note L. d’Avout; JCP (E) 2008, 2535, note N. Mathey; Contrats, conc consom 2008, comm 270, note M. Malurie-Vignal; D 2009, 200, note F. Jault-Seseke, D. Bureau and H. Muir Watt, ‘L’impérativité désactivée? (à propos de Cass civ 1re, 22 octobre 2008)’, Rev. Crit. DIP 2009, 1.

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role played by self-regulation in subordinating wider public concerns to speculative interests. In this respect, the implications of party autonomy for what has been aptly described as ‘regulatory lift-off’26 must be seen in the context of the various legal tools which provide the private legal infrastructure of global markets and foreign investment. Among these, within the European context, free movement of goods and services entertains a symbiotic relationship with party choice, the latter being the metaphorical expression of cross-border mobility and regulatory arbitrage. While consumer protection has found its place here, neither social rights nor the production chains which supply the European consumer market benefit from similar solicitude. Indeed, more globally, party autonomy also structures transnational production and supply chains (generating what has been described as a ‘plug-in effect’ in respect of sub-contractors and suppliers27), and can moreover be linked in this context to direct investment, of which it supports the international (contractual) regime. The private legal regime thus created is reinforced, on the one hand, by private international law rules in tort, when they work to keep any obligation to pay attention to third-party interests under the sway of local law, itself often constrained to lower the level of reparation by reason of competition to attract foreign investment. On the other hand, and furthermore, the private international law regime governing the structure of multinational enterprise reinforces the autonomy of corporate entities when it comes to the duty to care or repair in respect of industrial accidents, environmental damage, or human rights abuse. At the same time, however, various countervailing tendencies have appeared. Technically, in the current state of the law, the only obvious way of ensuring that law retains its authority when parties have the licence to cross barriers is to make the ‘second look’ effective at the enforcement stage. This has been made possible within the European Union, where Member States have the obligation to refuse recognition to arbitral awards given in violation of European competition and consumer law,28 and presumably of those fundamental rights which are part of the Union legal order. Another notable development in the same context is the progressive mainstreaming of consumer protection, which, through the leverage provided by principles imported from outside contract 26

Wai (2002). See Muir Watt (2010), citing Roger Brownsword, to whom the expression is attributed. 28 See emblematically (in a competition law case), C126-97 CJCE Eco Swiss China Time Ltd v. Benetton International. 27

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theory, such as non-discrimination, has been evolving from the status of exception to the rule in respect of cross-border provision of goods and services.29 Party autonomy is therefore severely curtailed in an increasing number of circumstances, albeit within the safe confines of the European consumer market. However, it may well be that there is need for a more radical reformulation of the issues at stake. In the rapidly changing context of global economy, the real difficulties are not (merely) market practices shaped by stronger parties through free choice of law and forum, but the implications of the expansion of unaccountable private authority in the context of what social theory aptly describes as the increasing functional differentiation of autonomous regimes.30 The stakes are sufficently high, therefore to warrant a detour by the ‘intimations’ of global legal theory,31 with a view to fitting the career of private autonomy into the bigger picture of the normative landscape beyond the confines of state sovereignty.32 The next section will present the insights of societal constitutionalism, a brand of legal pluralism, which may offer a way of re-reading conflicts theory in global context, with particularly interesting implications in respect of the transnational market regime based on party autonomy.

VI.

RE-READING CONFLICTS INVOLVING PRIVATE TRANSNATIONAL REGIMES: FUNCTIONAL DIFFERENTIATION OF PLURAL AUTONOMOUS ORDERS

‘Societal constitutionalism’, the specific brand of pluralism advocated by Gunter Teubner,33 makes a direct connection between its own vision of 29

Ziegler (2007). Teubner (2011). 31 Walker (2015). 32 For a critique in turn of Walker’s own conceptions as being tainted by a state-focussed paradigm, see Buchanan (2009). 33 This theory is developed by Teubner (2011) on the basis of insights in Niklas Luhman’s theory of functional differentiation of social spheres. It is emphatically not a theory of global constitutionalism involving the search for an all-encompassing set of shared principles of world governance, but a pluralist perspective. As will be seen, it advocated only one possible common constitutional approach, that of ‘collision law’, which each node (or forum, in more traditional vocabulary) would define for itself. 30

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‘colliding function-systems’ and the conflict of laws.34 It is also deliberately attuned to the features of the global, and is not therefore merely an extension of infra-state pluralism to the transnational sphere. As such, it is certainly one of the most original and productive strands of contemporary global legal thought. What follows is a (very) abbreviated presentation of some of its key insights, which may be necessary for the information of readers who are not familiar with the vocabulary of the social sciences. However, it is suggested that this section should be read with conflicts of laws in mind, particularly those involving the lex mercatoria. In short, this sociological perspective sees as the central evolution of late modernity (that is, emerging within the modern state and accentuated by globalization), the multiplication of areas of autonomous action in society, each developing its own formal rationality, in mutual indifference to each other. It claims a post-structuralist pedigree35 to the extent that it was Foucault who first identified ‘radically de-personalizing power phenomena and identifying today’s micro-power relations in society’s capillaries in the discourses/practices of “disciplines”’. This results in ‘escalated differentiation, pluralization and reciprocal compartmentalization of separate spheres’.36 Such spheres concern culture, science, the economy, or law, but also more specialized sub-spheres such as finance, ecology, or human rights (or indeed the lex mercatoria). These processes describe and explain the crisis of politics in the modern state. It is no longer possible for any authority to represent the whole of society. The political constitution of the state can no longer channel ‘the collective energies of the whole society, founding the nation’s unity. In modernity, the collective potential is no longer available as a whole, but has been dispersed into numerous social potentials, energies, powers.’ This is due to the narrow specialization of the ‘communicative media’ of each social sphere: power, money, knowledge, law.37 34

Christian Joerges and others have also mooted a version of (threedimensional) ‘Conflicts Law as Constitutional Form’ (Kjaer et al. 2011). According to this project, meta-conflict rules would allocate competence as between the different multi-levels of governance (national, supra-national/ regional). In this respect, it seems to assume an overriding conflicts law rather than the reflexive, decentred approach advocated below. 35 See Teubner (2011) 74, observing however that an inflated perspective of power ‘does not discern the more subtle effects of other communication media’. 36 Ibid. at 39. 37 Ibid. at 63. This process is not necessarily negative. It has made possible great achievements of civilization in the arts, science, medicine, economics,

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Like the nation-state emerging in early modernity, these social subsystems are self-referential, establishing themselves through processes by which, ex nihilo, they constitute their own autonomy. The specific contribution of societal constitutionalism is to analyse this move towards autonomy as the development by each sphere of its own ‘constitution’.38 Obviously, the concept of constitution advocated here must be dissociated from the nation-state:39 Firstly, the constitution should be disconnected from statehood, so that transnational issue-specific regulatory regimes may be considered candidates for constitutionalization. Secondly, the constitution should be decoupled from institutionalized politics, thus allowing other areas of global civil society to be identified as possible constitutional subjects. Thirdly, the constitution should be decoupled from the medium of power, thus making other media of communication possible constitutional targets.40

The idea advocated by Teubner is then to borrow insights from the discipline of constitutional sociology, relating both to the conditions politics, and the law even if it has dark sides. More specialization is to come: ‘research, education, healthcare, the media, the arts – globalization offers the opportunity to strengthen their autonomy’ (82). 38 In terms of systems theory, ‘the political constitutions of nation states have the constitutive function of securing the autonomy of politics which has been acquired in the modern era in relation to “other” religious, familial, economic, and military sources of power’ (ibid. at 75). In contrast to the former, however, ‘their self-foundation does not take place through a formally organized collective, but rather as a communicative self-foundation with no formal organization of the whole system’. 39 This is a move constitutional scholars often have trouble making. It is preferred, however, to alternative terms, such as ‘meta-regulation’, ‘indispensable norms’ or ‘higher legal principles’ which are inadequate to comprehend the complexity of issues that the concept ‘constitution’ covers. 40 Ibid. at 60. There is serious disagreement here under the wide umbrella of pluralism. Noting that ‘we should abandon, then, the false premise that constitutionalization inevitably means the transformation of a group of individuals into a collective actor’, Teubner warns that ‘concepts which some find helpful, such as “epistemic community”, “eco-nomic community”, or “nomic community” should be used with extreme caution, since, once again, none of the sociological characteristics of a community are present’. In this respect, he argues, ‘Berman’s ideas are therefore problematic, since his anthropological approach always assumes the presence of culturally defined communities that function as constitutional subjects. In reality, however, the communities referred to in social constitutions are just imagined identities, just self-descriptions of their operational unity’ (ibid. at 68).

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surrounding the constitution of social systems, and the contributions made by legal norms to this process, and then to generalize these insights to non-state systems. Thus, a constitution dissociated from state requires ‘a legal imagination which can call upon the founding myth of a collective … a constitution does not necessarily require a demos, a primordial ethnic group or intermediary structures, but it does need a legal imagination of revolution and memory’.41 The requirement of a foundational myth is linked in Teubner’s account to the constitution’s first essential function, which is to supply a way of dealing with the ‘paradox of self-reference’42 or how a political system emerges out of nothing. Self-foundation or ‘mystical self-recursivity’43 is described as a feature of the political constitutions of nation-states. ‘The self-constituting social system refers to the law which in turn supports self-foundation.’ This means that the problem of self-reference is dealt with as it were by externalizing the paradox to the law. The same phenomenon can be observed in other social systems: their respective paradoxes of self-foundation are externalized to the law. ‘When a social system gives itself a legal constitution, it finds an escape from the deficiencies of self-foundation and its paradoxes.’44 A second function of constitutions – at least, of successful constitutions – is to ‘induce limits within each social system through “self-steering” mechanisms’. On the 41

In support of this point, it can indeed be observed that even private regimes have their founding myths, which are at the heart of their constitutions and legitimize their ‘jurisgenerative power’. Global law itself, in Neil Walker’s account (cited above), has to confront self-referentiality and, to do so, creates its own pedigree by appealing to the past in its own ongoing process of selfconstitution. In respect of the lex mercatoria, Teubner shows how its constitutional self-validation also appeals to the history of ancient trade customs. The ‘culture of the past’ of the common law or the natural rights pedigree of the civil law tradition are other examples in more traditional spheres. 42 Teubner (2011) 82. And ibid. at 63: ‘Systems theory understands the “pouvoir constituant” as a communicative potential, a type of social energy, literally as a “power” which, via constitutional norms, is transformed into a “pouvoir constitué”, but which remains as a permanent irritant to the constituted power. The “constitutional subject” is then not simply a semantic artefact of communication, but rather a pulsating process at the interface of consciousness and communication, resulting in the emergence of the pouvoir constituant.’ 43 Ibid. at 104 : ‘We should only speak of constitutions in the strict sense when the medial reflexivity of a social system – be it politics, the economy, or some other sector – is supported by the law or, to be more precise, by the reflexivity of the law.’ 44 Ibid. at 107.

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one hand, sub-systemic rationality can develop pathological, selfdestructive tendencies (‘turbo-autopoiesis’). This compulsive growth dynamic can be seen in the politicization, economization, juridification, medialization and medicalization of the world.45 Although societal constitutionalism developed in order to understand changes which take place within the late-modern state, these ideas apply equally well to global regimes which cross the boundaries of nationstates. ‘In transnational contexts, it is the issue-specific regimes that form new kernels around which collective identities crystallize.’ However, these regimes are distinctive because their: primary constitutional aim is to dismantle nation-state barriers: to break down the close structural couplings between the function systems and nation-state politics and law, and to enable function-specific communications to become globally interconnected … Constitutive rules thus serve to unleash the intrinsic dynamics of the function systems at the global level. Unburdened by nation-state restrictions, the systems are now placed to follow, globally, a programme of maximizing their partial rationality.

This is quite clear in the context of the global economy, where ‘the dismantling of national production regimes releases destructive dynamics in the global systems; destructive dynamics in which the one-sided rationality-maximization of one social sector collides with other social dynamics’.46 45

The analysis is applicable to law itself (ibid.): ‘In the case of law, we can clearly see that law not only resolves conflicts and returns to a position of rest. Rather, its own regulations actually generate conflicts, which then call for further regulation. Through its regulatory intervention in daily life, law itself produces the situations which then give rise to conflicts. And, at the same time, each norm generates problems of interpretation, which themselves generate further conflicts. Finally, the sheer mass of legal rules produces rule-conflicts which call for the production of yet more rules. It appears that the high autonomy of law enhances the number of conflicts.’ 46 Ibid. at 79. In respect of these constitutionalized regimes, arises ‘the disturbing question’: does functional differentiation ‘secretly imply a peculiar growth compulsion’? In other words, do these autonomous regimes have an inherent tendency to expand into the other spheres, with potentially harmful effects or negative externalities? The equally disquieting answer is that ‘the self-reproduction of function systems and formal organizations follow an inexorable growth imperative’. The explanation is to be found in the specific structure of these specialized systems, which are ‘oriented towards one and only one binary code’. As such they destroy the inherent self-limitations which worked effectively in the multifunctional institutions in traditional societies. This, then, is

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In the absence of any higher central authority or perspective from which to order these regimes in any reassuring semblance of hierarchy, how then might the expansion of autonomous regimes be contained? This is the point at which theories of legal pluralism usually fall short of providing an answer. However descriptively adequate, they are of little use once the autonomy of normative regimes and the ensuing competition for supremacy are identified. But at this point, societal constitutionalism suggests that the most appropriate analysis is in terms of networks. This means that the network nodes ‘each internally develop their own conflict of laws from which perspective they can decide conflicts of norms’.47 There is no network centre to decide norm conflicts between nodes, but rather, the nodes decide the issues for themselves in a decentralized manner. ‘Each node then has the responsibility to incorporate into its internal perspective the norms of the other nodes as well as those of the overall order.’48 But identifying the (de-centralized) standpoint does not in itself provide the methodology with which such conflicts may be solved. The idea here is that different methods are available to deal with issues of conflict according to the type of ‘social couplings’ involved for different types of societal spheres.49 Thus, in societal constitutionalism, different regimes (or nodes) each entertain particular relationships with the social. The parameter is the constitution of the nation-state, which is embedded within an encompassing legal order. In this respect, it disposes of an ‘internal balance’ constituted by mechanisms of self-limitation, notably a set of fundamental rights. By contrast, specialized transnational regimes may present a far lesser degree of social embeddedness, lacking similar internal resources. These are tailored to one functionally differentiated sector of world society and as a consequence reflect the independent rationality of the societal sector to which they are coupled. ‘Regime constitutions are partial constitutions that are not based on overall social processes, i.e. the particular problem of globalization: ‘when the function systems become global, thus freeing themselves from the dominance of nation-state politics, there is no longer an agency to set them limits, stem their centrifugal tendencies, or regulate their conflicts’. The example of the private market regime supported by commercial arbitration which is progressively expanding into the realm of public regulatory interest through investment arbitration provides an excellent illustration of this centrifrugal growth. 47 Teubner (2011) 159. 48 Ibid. at 160. 49 A similar classification and analysis can be found in Fisher (2011), discussed in more detail in Muir Watt (2011) 418.

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those directed at the broader public interest.’50 At the other extreme, ‘indigenous’ normative orders are more strongly embedded at the overall social level than nation-state law. The reason is that ‘they appear in social areas in which no functionally differentiated legal system has been formed: their norms are inseparably interwoven with religious, political, and economic aspects’.51 These differing degrees of social embeddedness, it is suggested, impact directly upon the appropriate mode of conflict resolution. In instances involving only transnational specialized regimes (such as a conflict between party autonomy and the requirements of health, culture, finance or the environment), the appropriate methodology would be the ‘substantive law approach’, which: takes up elements from the conflicting constitutional norms in each case and reflects these in the shape of a new substantive norm oriented at the same time towards the ‘ordre public transnational’. This leads to a form of hybrid law as, from the viewpoint of the deciding authority, the substantive norm internalizes alien constitutional norms into its own law, but at the same time leaves their autonomy undisturbed.52

VII.

CONCLUSION: A FULL CIRCLE … WITH A BIG TWIST?

While much of the previous section makes for difficult reading, notably because it uses the vocabulary of a non-legal discipline, it may also have a highly familiar ring for private international lawyers, at least in some respects: + The most familiar illustration, for private international lawyers, of an autonomous self-constitutionalizing system with ‘destructive growth tendencies’ can of course be found, precisely, in the transnational market regime (the global version of the lex mercatoria53). As we have seen, such a regime of unaccountable private authority, complete with its own inner logic, structuring 50

Teubner (2011) 160. Ibid. at 184. These socially embedded regimes appear as generating ‘intercultural conflicts’. An example might be claims grounded on indigenous property rights against the land-grab by private investors in the context of investment arbitration. 52 Ibid. at 156. 53 Fischer-Lescano and Teubner (2004). 51

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principles and private jurisdictions, prospers notably through extreme liberalization of arbitration; it shows furthermore a marked propensity to expand into neighbouring areas such as investment law, where it clashes with other regimes;54 it has come complete with a philosophical doctrine designed to legitimate the ‘regulatory lift-off’ it has achieved, in respect of limits contained either in the laws of nation-states or indeed, as the context of investment arbitration shows, fundamental rights.55 This is largely ‘how private corporate actors govern’.56 In Teubner’s words, ‘corporate constitutional politics have successfully dismantled nation-state production regimes whenever they impede the global expansion of corporate activities’.57 + Furthermore, insofar as it advocates network analysis, the insights of societal constitutionalism are perfectly comprehensible from the perspective of private international law. It has long been accepted in this context that (unless there is an international treaty) each legal system can only decide conflicts for itself. This is the case even when it develops elaborate devices (such as renvoi) that purport to coordinate various legal systems outside itself: it still operates as a closed system. After all, this is why, in a conflict of laws perspective, there is no such thing as a subjective right ‘out there’ (as opposed, perhaps to a fundamental right): a right can only exist from the extremely relative perspective of a particular forum. Nevertheless, the various nodes composing a network have to cooperate in order to survive. Similarly (even in the age of cynical particularism), the conflict of laws has remained attached to a vision of the relationship between legal systems in which various ideas of coordination, comity, deference, and more recently, peer review have pride of place.58 Moreover, the conflict of laws has long developed such ideas as tolerance (in the case of public policy) and mutual recognition (in the case of judgments or rights), which are clearly essential to the functioning of a reflexive network paradigm. + The third set of developments on which conflicts lawyers will have a certain impression of déjà vu concerns the differentiation within the proposed methodology according to diverse degrees of social 54 55 56 57 58

See Muir Watt (2014). Gaillard (2007). Danielson (2005). Teubner (2011) 77. Mills (2014) 245.

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embeddedness of the systems involved. Although the question is framed very differently, the latter concept might be said to echo the idea of proximity, which has long dominated horizontal conflicts of state law, and led to differentiated approaches according to the ‘nature of the legal relationship’. More specifically still, as far as conflicts involving transnational functional regimes are concerned, Von Mehren and Trautman suggested a specific substantive methodology many years ago, for the needs of interstate conflicts of laws, which involved re-interpreting the policies of each interested state in the light of the other’s aims and interests.59 More recently, Hannah Buxbaum proposed a similarly substantive-cosmopolitan approach in respect of public regulatory conflicts.60 As Teubner himself points out, this may be similar to the idea of transnational public policy that has emerged in arbitration. Above all, it recalls a conception of ordre public conceived as a positive measure of tolerance towards alterity.61 So does all this mean that the wheel comes back full circle? To answer this question in a conclusion which aspires only to open future debate, let us go back to another striking statement by Gunter Teubner: In a world society with neither apex nor centre, there is just one way remaining to handle inter-constitutional conflicts – a strictly heterarchical conflict resolution. This is not just because of the absence of centralized power, which could be countered by intensified political efforts, but is rather connected with deep structures in society which Max Weber called the ‘polytheism’ of modernity. Even committed proponents of the ‘unity of the constitution’ are forced to agree that the unity of the nation-state constitution is now moving toward a ‘clash of civil constitutions’, toward mutually conflicting rationalities to be defused by a new conflict of laws.

Teubner’s statement elevates the conflict of laws to a meta-constitutional level. Yet, to a certain extent, this is unsurprising. After all, the conflict of law’s line of business has long been making sense of interactions that cross state boundaries and fall between the gaps between domestic sovereignty and public international law. At the same time, however, complacency would be largely misplaced. The discipline’s contemporary intellectual abeyance certainly warrants a humble detour by the various 59 60 61

See von Mehren and Trautman (1965). Buxbaum (2002). Boden (2002).

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thriving strands of global legal theory.62 Indeed, it may have much to learn from other disciplinary vocabularies, either about the definition of conflicts or their modes of resolution, and this could lead in turn to a radical reformulation of its own core issues. Indeed, if encounters between heterogeneous norms or expressions of diverse types of informal authority are central to the understanding of the normative landscape beyond the confines of state sovereignty,63 the traditional schemes of intelligibility which underlie the conflicts of laws need to take on board various additional dimensions of global complexity. If it does so and succeeds in living up to this challenge, it may emerge considerably enlightened by global legal theory. Conflicts involving the lex mercatoria, as a functionally specialized cross-border regime, seem to be a good place to start!

REFERENCES Batiffol, H. (1960) ‘Subjectivisme et objectivisme en droit international privé des contrats’ in J. Maury (ed.), Mélanges offerts à Jacques Maury. Paris: Dalloz & Sirey Boden, D. (2002) L’ordre public: limite et condition de la tolérance. Recherches sur le pluralisme juridique, thesis. Paris I Brett, A. (2011) Changes of State: Nature and the Limits of the City in Early Modern Natural Law. Princeton, NJ: Princeton University Press Briggs, A. (2008) Agreements on Jurisdiction and Choice of Law. Oxford: Oxford University Press Buchanan, R. (2009) ‘Reconceptualizing Law and Politics in the Transnational Constitutional and Legal Pluralist Approaches’, 5 Socio-Legal Review 21 Buxbaum, H.L. (2002) ‘Conflict of Economic Laws: From Sovereignty to Substance’, 42(4) Virginia Journal of International Law 931 Cafaggi, F. and Muir Watt, H. (eds) (2009) The Regulatory Function of European Private Law. Cheltenham: Edward Elgar Publishing Cuniberti, G. (2009) ‘Beyond Contract: The Case for Default Arbitration in International Commercial Disputes, 32 Fordham International Law Journal 417 Damman, J. and Hansmann, H. (2008) ‘Globalizing Commercial Litigation’, 94(1) Cornell Law Review 1 Danielson, D. (2005) ‘How Corporations Govern: Taking Corporate Power Seriously in Transnational Regulation and Governance’, 46 Harvard International Law Journal 411 Fischer-Lescano, A. and Teubner, G. (2004) ‘Regime-Collision: The Vain Search for Legal Unity in the Fragmentation of Global Law’, 25 Michigan Journal of International Law 999 Fisher, T. (2011) ‘A Nuanced Approach to the Privatization Debate’, 5 Law and Ethics of Human Rights 71 62 For an overview and tenative classification of these strands, see Walker (2015). 63 For a critique, in turn, of Walker’s own conceptions as being tainted by a state-focussed paradigm, see Buchanan (2009).

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534 Comparative contract law Fitzpatrick, P. (1992) The Mythology of Modern Law. London: Routledge, Chapman & Hall Foucault, M. (2004) Naissance de la biopolitique. Cours au Collège de France (1978– 1979). Paris: Gallimard Francescakis, Ph. (1966) ‘Quelques précsions sur les lois d’application immédiate et leurs rapports avec les règles de conflit de loi’, RCDIP 1 Gaillard, E. (2007) ‘Aspects philosophiques du droit de l’arbitrage international’, RCADI 329 Jansen, N. and Michaels, R. (2006) ‘Private Law Beyond the State? Europeanization, Globalization, Privatization’, 54 American Journal of Comparative Law 843 Jault-Seseke, F., Bureau, D. and Muir Watt, H. (2009) ‘L’impérativité désactivée? (à propos de Cass civ 1re, 22 octobre 2008)’, Rev. Crit. DIP 1 Kegel, G. (1964) ‘The Crisis of the Conflict of Laws’, 1 RCADI 91 Kennedy, D. (2002) ‘The Political Stakes in “Merely Technical” Issues of Contract Law’, 10(1) European Review of Private Law 7 Kerber, W. (2000) ‘Interjurisdictional Competition Within the European Union’, 23 Fordham International Law Journal 217 Kjaer, P., Joerges, C. and Ralli, T. (2011) ‘Conflicts Law as Constitutional Form in the Post-National Constellation: Special Issue of Transnational Legal Theory’, 2(2) Transnational Legal Theory, available at http://ssrn.com/abstract=1972306 Landes, W. and Posner, R. (1979) ‘Adjudication as a Private Good’, 8 Journal of Legal Studies 235 Lehmann, M. (2008) ‘Liberating the Individual from Battles Between States: Justifying Party Autonomy in Conflict of Laws’, 41 Vanderbilt Journal of Transnational Law 381 Micklitz, H. (2009) ‘The Visible Hand of European Regulatory Private Law: The Transformation of European Private Law from Autonomy to Functionalism in Competition and Regulation’, 28 Yearbook of European Law 3 Mills, A. (2006) ‘The Private History of International Law’, 55 ICQL 1 Mills, A. (2014) ‘Variable Geometry, Peer Governance and the Public International Perspective on Private International Law’ in H. Muir Watt and F. Arroyo (eds), Private International Law and Global Governance. Oxford: Oxford University Press Muir Watt, H. (2005) ‘Aspects économiques de droit international privé (Réflexions sur l’impact de la globalisation économique sur les fondements des conflits de lois et de juridictions)’, 307 RCADI 25 Muir Watt, H. (2010) ‘“Party Autonomy” in International Contracts: From the Makings of a Myth to the Requirements of Global Governance’, 3 ERCL 1 Muir Watt, H. (2011) ‘Private International Law Beyond the Schism’, 2(3) Transnational Legal Theory 347 Muir Watt, H. (2014) ‘The Contested Legitimacy of Investment Arbitration and the Human Rights Ordeal: The Missing Link’ in W. Mattli and T. Dietz (eds), International Arbitration and Global Governance: Contending Theories and Evidence. Oxford: Oxford University Press Muir Watt, H. and Radicati di Brozolo, L. (2004) ‘Party Autonomy and Mandatory Rules in a Global World’, 4(1) Global Jurist art. 2 Niboyet, J.P. (1927) ‘La théorie de l’autonomie de la volonté’, 16 RCADI 1 Nygh, P. (1999) Autonomy in International Contracts. Oxford: Clarendon Press Ogus, A. (1999) ‘Competition Between National Legal Systems: A Contribution of Economic Analysis to Comparative Law’, 48 ICQL 405 Radicati di Brozolo, L. (2003) ‘Mondialisation, juridiction, arbitrage: vers des règles d’application semi-nécessaires?’, RCDP 1 Radicati di Brozolo, L. (2004) ‘Antitrust: A Paradigm of the Relations Between Mandatory Rules and Arbitration: A Fresh Look at the Second Look’, International Arbitration Law Review 23

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Party autonomy in global context 535 Ribstein, L. (2003) ‘From Efficiency to Politics in Contractual Choice of Law’, 37 Ga. L Rev. 363 Rittich, K. (2002) Recharacterizing, Restructuring: Law, Market and Gender in Structural Reform. The Hague: Kluwer Rodi, F. (2008) ‘Private Law Beyond the Democratic Order? On the Legitimatory Problem of “Private Law Beyond the State”’, 56 American Journal of Comparative Law 743 Romano, G.P. (2009) ‘Règles internationalement supplétives et règles internationalement disponibles’ in J. Mestre, A. Bonomi, A. Albarian, Centre de droit économique (Aix-en-Provence, Bouches-du-Rhône), Centre de droit comparé, de droit européen et de législations étrangères (Lausanne) and Institut suisse de droit comparé (Lausanne), Regards comparatistes sur le phénomène contractuel. Aix-en Provence: Presses Universitaires d’Aix-Marseille – PUAM Symeonides, S. (2014) Codifying Choice of Law Around the World: An International Comparative Analysis. Oxford: Oxford University Press Teubner, G. (2011) Constitutional Fragments: Societal Constitutionalism in Globalization. Oxford: Oxford University Press Von Mehren, A. and Trautman, D. (1965) The Law of Multistate Problems. Boston, NJ: Little, Brown Von Overbeck, A. (1993) ‘L’irrésistible extension de l’autonomie de la volonté en droit international privé’ in Nouveaux itinéraires en droit: hommage à François Rigaux. Brussels: Bruylant Wai, R. (2002) ‘Transnational Liftoff and Juridical Touchdown: The Regulatory Function of Private International Law in a Global Age’, 40 Columbia Journal of Transnational Law 209 Walker, N. (2015) Intimations of Global Law. Oxford: Oxford University Press Yetano, M.T. (2010) ‘The Constitutionalisation of Party Autonomy in European Family Law’, Journal PIL 155 Ziegler, K. (2007) Private Law and Human Rights. Oxford: Hart

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Index

ableism 316 ableness 3, 310, 313–17 accelerating clauses 221 acceptance, offer and 88, 90, 365, 409, 411, 414, 431, 438 acción de tutela 216–23 Accursius 33 acquisition 352–58 activism, judicial 239 actors, non-state 129, 195, 515 actual performance 145–46, 158 ADA (Airline Deregulation Act) 386–87, 392–93 ADR (alternative dispute resolution) 125 African customary law 452–53, 463–65 Agamben, G. 213 Age of Faith 263, 270, 280, 293 agents, electronic 434, 436, 438 agony, romantic 280–81, 296 Airline Deregulation Act, see ADA alphabet 68, 70, 72–73, 92 alterity 331, 373, 379, 532 ambiguities 97–98, 103, 262, 265, 398–99, 451, 455, 457 ancestors 275, 277, 279, 297 Antonio 32, 333, 338–40, 342 anxiety 274, 278–80, 284, 293 apophrades 298–99 applicability 199, 225–26, 228–31, 236–37, 520 applicable law 195, 413, 427, 445, 516 Aquinas, Thomas 19, 40, 397 arbitrage 132 arbitration 199–200, 386, 520–21, 531–32 international 200, 521 Aristotle 19–20, 40 art of rhetoric, see rhetoric asymmetric-value contracts 166

atypical contracts 56–57 Australia, courts 476, 504 Austria 28–29, 151 authenticity 287, 328–29, 351 authoritarian theory of contract 47–64 authoritarian theory of contract law juridical Fascism and juridical National Socialism compared 49–53 keywords and formalisms of debate on juridical Fascism 48–49 authority 336, 351, 390–91, 411, 413, 523, 525, 530 autonomy individual 378, 410–12 party, see party autonomy private 2, 58, 96, 117, 123, 133, 322, 417 theories 1, 11–12 background rules 97, 108 bad faith 387–89, 394–97, 402, 406, 505 balance 55, 58–59, 63, 99, 117, 122–24, 130–31, 233 banks 74, 90, 220–21 Barbeyrac, J. 21–22 bargain theory of consideration 283, 289 bargaining power 128, 191, 485 bargains 30–31, 107–8, 364–65, 368–71, 377–78, 385–86, 478, 493–94 barter 21, 23–25 Barton, J.H. 156 basic income project 212 Bassanio 32, 332, 340–42 Beauty and the Beast 372 behaviour 107, 151, 361, 363, 401, 404, 498

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538 Comparative contract law and invasion 83–85 Belgium 28–29 Bentham, J. 277, 292 bilateral breach 148, 152, 154–56, 159, 163–65, 167, 170 event of 164 preclusion rule for 164–65, 170 bilateral contracts 145, 147–48, 150, 152, 158–59, 162, 164, 166–67 remedies for 160–64, 166, 168 bilateral juridical transactions 53–54 bilateral obligations 149, 154, 222, 227–28, 234 bilateral promises 148–49, 163, 165, 169–70 comparative law and economics viewpoint 156–66 enforcement 145–71 extension of conventional approach to 158–60 legal remedies for 148–56 bilateral remedies 166–69 binding force 23, 95, 497–98 Bloody Chamber 364–65, 370, 427 Bloom, H. 250, 274–80, 282–84, 296–98 bona fide promising 392–401 bonds 54–55, 57–58, 325, 332–33, 335, 340, 346, 497 borrowers 27, 30, 74 Brazil 112, 130–32, 135 Civil Code 130–31 breaching parties 150, 152, 154–55, 159, 161–63, 168, 170, 405 burden of proof 76, 78 buyers 33–34, 40, 400–401, 483 Cardozo, B.N. 251, 256, 265, 271–73, 289–92, 299, 403 Carter, A. 361–80 case method 294–95 castle 354, 366–67, 369–70 causa 57, 61, 107, 147, 399 Charter of Fundamental Rights of the European Union 206–7 children 208–9, 235, 313–14, 316, 350–51

China 112, 130–32, 135, 151, 155 choice 24, 99, 126–27, 134, 194, 199–200, 428–29, 515 accredited freedom of 193, 513 free 196–97, 345, 517–18 party 15, 197, 199, 201, 518, 520, 523 unbridled freedom of 201, 522 choice of forum, agreements 200, 522 choice of law 196, 199, 520; see also forum free 193, 202, 513, 524 Christian cosmology 311–12 Cicero 180, 396, 401 circumstances, new 188–91 civil law 50, 67, 216, 326, 346, 487, 494, 503 countries 28, 120, 147, 415, 421, 430 systems 12, 28, 149, 151, 155, 502 civil society/state 305–6, 311–15, 317 class actions 127 classic to contemporary comparative law 100–102 classical theory 247, 266, 284–85, 297, 299 classical theory of contract 3, 267–68, 271, 287, 292–93, 298–99 classification 67, 70, 87, 89–90, 184, 348 levels of 74–78 click-wrap contracts 437 clockworks 184–85 clustering 67–68, 87–90, 92 Code Napoleon 52, 155, 209–11 codification 50, 55, 234, 236, 337, 353, 361 Coggs v. Bernard 31, 479 coherence 73, 85, 99, 270, 296 Collins, H. 116–17, 246 Colombia 216–39 Constitutional Court 216, 218 commercial promises 481–83 commercial transactions 348, 353, 417 commodatum 26–27, 30–31 commodities 333, 373–74 common intention 62, 454, 456–57, 460, 462–63

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Index 539 common law 8–9, 29–30, 263–64, 390–91, 393, 396–97, 424–25, 470–71 courts 120, 471 English 117, 389, 452, 463, 488 systems 12, 145, 152, 430, 503 commons 211–13, 422 communications, electronic 118, 128, 414–16, 435 commutative justice 40 comparatists 67–92 compatible goals, largest number of 2, 177, 179–81, 186–87, 190 compensation 26, 40, 127, 165, 168, 387, 484, 503 imperfect 167–68 partial 166–67 competition 104, 109, 183, 195, 292, 515, 529 law 124, 126, 128 damages 125–26 completeness 103, 197, 337, 518 complex systems 2, 68, 99, 178, 184–85 complexity 2, 87, 90–92, 102, 124, 173, 184, 261 and spontaneous order 177–79 compromises 118, 149, 452–53, 462, 479 conceptualism 101, 256, 287, 295 concession contracts 114 conditions for cooperation and coordination 177, 181–82, 185–86, 188–89 conflict of laws 195, 197, 515, 518, 525, 529, 531–33 conflicts 82–83, 91, 103, 126, 277, 337, 339, 529–33 Congreve, John 343, 347–51 connected states 195, 198, 515, 519 conscience 385, 398–99 consensual contracts 20, 23, 32–35, 428 consensus 73, 91, 344, 365 consent 19–24, 26–27, 32–33, 343–44, 350–51, 428, 433–37, 439–40 element of 411–12 consequential damages 38 consideration 29–31, 107–9, 283–90, 322, 399, 472–76, 478–82, 491–94

bargain theory of 283, 289 requirement 399 theory/doctrine 86, 247, 284, 289, 299, 469, 482 Constitutional courts/judges 216, 218, 220–24, 227–31, 233, 236–37, 457, 464–65 constitutional norms 530 constitutional values 216, 465 constitutional values and freedom of contract 216–39 constitutionalism, societal 524, 526, 528–29 constitutionalization 195, 515, 526 consumer protection 96, 201, 209, 418, 420, 523 consumers 38–39, 77–78, 126, 209, 211, 417–18, 421–22, 433 consumption 20, 23, 26, 30, 35, 211 contagion 174–75 contextual factors 127, 134, 136 contextualism 457, 459 contract clustering 67–68, 87–90, 92 contract doctrine 289, 402, 421, 522 contract formation 418, 427, 429, 432–34, 438–40, 442 mechanisms 428, 433 contract law basic task 14–15 common 80, 425, 431 and Fascism 55–57 harmonization 108, 208, 421 and National Socialism 53–55 regulatory, see regulatory contract law Roman, see Roman contract law systems 8, 10, 12, 15–17 and technological contracts 411–14 theories 7–17, 202, 250, 283, 288, 296, 308, 358 authoritarian theory, see authoritarian theory of contract autonomy theories 1, 11–12 current 11–14 doubts about 14–17

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540 Comparative contract law general theories with application to contract law 13–14, 16, 254, 287 mixed 14 property theories 12 reliance theories 2, 12–13 variation 15–16 contract price 40–42 contract remedies, and regulatory remedies 124–29 contract theories, see contract law, theories ‘contracticles’ 2, 67, 90, 92 contracting parties 11–12, 58–59, 164, 166–67, 205–15, 225, 328–29, 453–54 weaker 57–58 contractors 304–5, 307–9, 311, 313–17, 328, 346, 408, 482 contracts atypical 56–57 bilateral 145, 147–48, 150, 152, 158–59, 162, 164, 166–67 binding 322, 340, 478, 484 click-wrap 437 concession 114 consensual 20, 23, 32–35, 428 electronic 410, 415, 422, 444 immoral 322–33, 325, 331 innominate 21–24 insurance 26, 35 international 196–98, 415–16, 435, 517–18 made under seal 30, 325, 346, 458 marriage 310, 343–51, 365, 367, 371, 375 racial 310–11 real 20, 23, 26, 29 of sale 33, 75, 147, 326, 441 sexual 309–10 standard form 37, 386, 456 stricti iuris 35–39, 399 technological, see technological contracts unilateral 145–46 written 36, 38, 43, 86, 324, 327–28, 333, 335 contractual equity 55, 58

contractual interpretation 451–66 contractual justice, as legal discourse 106–8 contractual norms 88, 224, 229, 236 contractual obligations 75, 84, 159, 167, 222–23, 233, 285, 322 contractual paradigm 3, 123, 303–5, 307–9, 311–15, 317–19 contractual surplus 163–64, 170 contractual terms 3, 15, 122, 225–26, 229, 231–33, 237, 365 contractualism 260 contrat sans loi 194, 198, 515, 519 control 76, 128, 135, 352, 356, 361, 370, 378 cooperation, social, see social cooperation cooperation and coordination, conditions for 177, 181–82, 185–86, 188–89 Corbin, A. 265, 273, 289–92, 299, 391–92, 405, 481 correlative duties 218, 223–25, 233 corruption 316, 324, 330 cosmology 311–12 Costantini, C. 361–62 costs 26, 124, 130, 163, 170, 180, 417 legal 167, 169 transaction 178, 410, 413 counter-parties 470, 473–74, 482, 499, 502 counter-performance 155, 161, 163–64, 170 courts 42–43, 76–80, 160–63, 166–68, 220–23, 234–35, 402–6, 472–73 Australia 476, 504 common law 120, 471 constitutional 216, 218, 220–24, 227–31, 233, 236–37, 457, 464–65 errors 163, 166–69 France 34, 106, 461 Germany 34–35, 60–62, 460, 466 Italian 47 Supreme Courts 125, 455–56, 464–65, 482, 494, 498 United States 4, 31, 149, 418, 445

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Index 541 Courtship of Mr Lyon 364, 372–75, 378–79 creativity 96, 105, 254, 379 creditors 54, 56, 79, 157, 224, 226, 233, 497–98 critical comparative contract law 95–109 cross-border transactions/trade 194–96, 198, 411, 416, 514, 516–17, 519 Crunelle-Vanrigh, A. 375 cryptotypes 104 culpa in contrahendo 494–96, 499, 502, 504–5 cultural imagination 361–62 cultures 72, 99–100, 102, 105, 355, 362, 525, 530 cumulative effect 201, 522 Dagan, H. 9, 120–21 damages 12–13, 16, 68–69, 74–77, 150–53, 159–61, 163–64, 167 competition law 125–26 consequential 38 expectation 155, 157, 160–63, 167–68 marginal 160–61 money 12–13 recovery 41–42 Roman contract law 39–44 damnation 324, 327, 330, 332 damnum emergens 39 daughters 336, 338, 342, 347, 366, 371, 374, 376 DCFR (Draft Common Frame of Reference) 38, 147, 453, 462, 465 de fide instrumentorum 402 death 246, 250, 257–58, 260, 262–63, 326, 331, 338 Death of Contract 293, 297 debt 68–69, 75–76, 78, 90, 92, 220–21, 280, 331 debtors 27, 54, 56, 223, 227–29, 231, 233, 235 decency 26–27, 390 declamations 105, 107–8 declarations 146–47, 230, 251, 458–60, 484, 496–99

unilateral 496–99 default norms 230–32, 236 default rules 15, 154, 164, 436 defeasibility 228, 231–32 defenses non-performance 148, 150, 152–53, 156, 160–66, 168–70 preclusion rule 166, 169 deference 131, 200, 268, 521, 531 delivery 21, 26–31, 34, 43, 153, 325, 365, 431 democratic legitimacy 116, 197, 518 deposit 20, 23, 26, 31, 344 depositum 26–27, 30–31 descendants 275–76, 279, 284 detriment 276, 283–84, 289, 394, 418, 504 detrimental reliance 13, 16, 482, 492 dialectics 86–87, 322, 339, 341 Dickinson v. Dodds 285, 287 digital content 423, 440–41 digital rights management systems (DRMSs) 442 digital technologies 410, 413, 424, 428, 430, 434, 440–41, 444 and meeting of minds 434–40 dignity 82, 206–8, 220, 322, 465 disability 208–9, 211, 233 disabled people 222, 228, 317–18 diseases 69, 73, 89, 91–92 disorder 91–92 displacement 125–26, 221, 363, 386 disproportionality 42, 44 disputes 48–49, 126, 176, 344–45, 389, 391, 466, 472 distance 59, 89, 100, 406, 408, 419–20, 427, 432 distinctiveness 99, 197, 393, 518 distortions 161–63, 165, 168, 170, 251, 278 distributive justice 117, 135, 211–12 Doctor Faustus 322–32 documents, written 328–29, 364, 457 Dracula 352–58 Draft Common Frame of Reference 38, 147, 453, 462, see DCFR DRMSs (digital rights management systems) 442

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542 Comparative contract law Ducote v. Oden 493–94 Dumoulin, Charles 41–42 Dutch law 502–3 duties 50–52, 79–80, 82, 85, 233, 235–37, 398, 400; see also obligations correlative 218, 223–25, 233 of solidarity 232–33, 236 of tolerance 219, 223, 227, 229, 231, 233, 236, 531–32 ECHR, see European Convention on Human Rights economic analysis 13, 107–8, 148, 156, 200, 521 economic interests 28, 53, 59 economic terms 198, 200, 519, 521 economics 13–14, 107–8, 114, 299, 352 EDI (electronic data interchange) 435–36 education 82, 222–23, 295, 526 legal 16, 91, 294–95, 386 efficiency 13–14, 107–8, 162, 166, 168, 174, 176–77, 358 effort excessive 161, 163–66, 170 incentives 167 optimal choices of 165–66 electronic agents 434, 436, 438 electronic commerce 415, 419, 438, 442 electronic communications 118, 128, 414–16, 435 electronic contracting 410–11, 413–27, 430, 433, 436, 438, 445 electronic contracts 410, 415, 422, 444 electronic data interchange, see EDI electronic signatures 415, 419, 424–25 email 387, 420, 429 embeddedness, social 529–30 empowerment of private actors 194, 514–15 enforcement 116, 119, 124–25, 128, 393, 397, 399–400, 484 bilateral promises 145–71 conventional framing of contract problem 156–58

mechanisms 112–13, 115, 124, 128–29, 132, 134 powers 125, 127–28 private 124–27 of promises 8, 28, 148, 170 stage 195, 202, 515, 523 English law 325, 328, 364, 368, 398, 452–55, 466, 503–4 and South Africa 457–59 equality 207–9, 220, 307, 316, 392, 396, 398–99, 405 equity 81, 90, 385, 395–96, 398–400, 464–65, 470–71, 474 contractual 55, 58 equivalence 56–57, 62, 127, 499 ergodic systems 178 error(s) 62, 178, 181, 191, 284, 335, 401, 451 court 163, 166–69 E-Sign 421, 425–26, 435 estates 186, 353–54, 373, 440 estoppel 400, 471–72, 474–76, 493, 504 promissory, see promissory estoppel ethics 331, 334, 379, 400, 406 European Convention on Human Rights (ECHR) 207–9 European integration 96, 417 European Union 28, 112, 202, 416, 444–45, 462, 523 Charter of Fundamental Rights 206–9 internal market 417, 419–20, 444 evidence 278, 280, 306, 335, 342–43, 451, 454–55, 459 extrinsic 461, 463, 466 parol evidence rule 454, 457, 459, 461, 466 exceptio inadimpleti contractus 170 exceptio non adimpleti contractus 223, 233 exceptionalism 385–406 exceptionality 225–30 exceptions, implicit 225, 228, 231–32 excessive effort 161, 163–66, 170 excessive performance effort 165–66, 170 exchange of goods 53–55, 63, 158 exchange of promises 148–49, 169, 350, 365, 428, 430

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Index 543 exclusion 78, 98, 135, 308, 310–11, 317, 344, 458 expectation damages 155, 157, 160–63, 167–68 expectations 161–62, 170, 175–76, 265, 268, 484, 486, 502–3 correct 175–76 reasonable 390, 403–4, 476, 482 experimentation 130, 259, 296, 446, 506 expressly defeasible norm 231–32 extrinsic evidence 461, 463, 466 face-to-face contracting 430 fair reason 28–29 fairness 14, 38, 120, 390, 392, 464–65, 505 fairy tales 3, 361–64, 368–69 faith, bad 387–89, 394–97, 402, 406, 505 family law 54, 205–6 Fascism 47–52, 59–60, 62 and contract law 55–57 juridical, see juridical Fascism fathers 271–72, 277, 314–15, 338, 344, 346, 372–74, 376–78 fault 1, 43, 68, 72, 74–78, 95, 265, 296 Faustus, Doctor 322–32 Federal Energy Regulator (FERC) 122–23 FERC (Federal Energy Regulator) 122–23 fidelity 330, 346, 349, 351, 396–97, 399 fides est servanda 385, 401 Fon, V. 158, 167 forbearance 145, 147, 476 foreign investment 201, 523 foreseeability 12, 42–43, 167 formalism 48, 101, 292, 295, 300, 403 formalities 20, 80, 149, 402, 411, 427–28, 433, 442 formation of contracts 81, 84, 146–47, 322, 411, 415, 425, 427–30 forum 199–200, 202, 520–21, 524 forum state 195, 515 Foucault, M. 213, 525 fragmentation and universalism 207–11

France 28–29, 42, 80, 155, 460 Civil Code 34, 41, 210, 466 courts 34, 106, 461 law 41, 80, 453, 459, 461, 466 fraud 284, 329, 331, 348, 389, 394–96, 424–25, 430 free choice 196–97, 345, 517–18 of forum 199, 520 free promises 479, 499 free will 26, 325, 340, 346, 351–52, 375 freedom 53–54, 186–87, 189, 191, 207–8, 232, 235–37, 514–15 freedom of contract 54, 95, 191, 194, 208, 232, 235–37, 514–15 and constitutional values 216–39 protection 173, 186–87, 189 and spontaneous order 173–91 Fried, Charles 7–8, 11 Friedman, Lawrence 257–58 frustration 76–77, 90 Fulbeck, W. 397–98 function 82, 84, 100–101, 199–200, 269–70, 339–40, 357–58, 493–94 function systems 528–29 functional approach 86–87, 96 functional differentiation of plural autonomous orders 524–30 functionalism 86–87, 100–102 fundamental rights 206–8, 220–25, 227, 233, 235–36, 238, 529, 531 justiciability 220, 236 Gaius 20, 32, 73 gaps 84, 120, 132, 228–31, 236, 337, 339, 398–99 normative 226, 228, 238 Gaus, G. 182–83, 190 gender 206, 309, 318, 363 general clauses 60, 95–96, 208 general rules 39–40, 151, 154, 185, 189–90, 285, 479, 481 general theories, with application to contract law 13–14, 16, 254, 287 generality 2, 78, 90, 115, 168, 184–85, 393 generic sales 32–34

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544 Comparative contract law Germany 28–29, 49, 54, 95, 206, 465; see also juridical National Socialism BGB (Bürgerliches Gesetzbuch) 49, 51, 60–61, 106, 207, 209–11, 459, 461 Civil Code 37–38, 49, 106, 155, 206, 459 courts 34–35, 60–62, 460, 466 law 52, 459, 461, 466, 488 gifts 21, 44, 325, 328, 343–44, 368 Gilmore, G. 245–300, 483, 486 as legal humanist 260–96 Ginsberg case 386–87, 391, 405–6 global markets 112, 114, 201, 523 globalization 195, 201, 205–6, 209, 212–14, 522, 525–26, 529 goals 134–35, 174–77, 179–82, 187, 189, 304, 306, 417–18 compatibility of 174–77 golden rule 454, 457, 460, 466 good faith 35, 38–39, 385–406, 459, 462–66, 469, 499, 502–6 doctrine of 4, 385, 389, 393, 396, 399, 401, 404 duty/obligation 387, 391, 404, 465, 505 implication of 402–6 implied covenant of 390–91, 405–6 implied covenant of good faith and fair dealing 387–88, 392 and preemption 386–92 subjective 246, 505 governance 100, 113, 129, 201, 330, 522 private 1–2, 123, 196, 516 gratuitous loans 30–31 Greece 28–29, 95 Grotius, H. 21 Hadley v. Baxendale 41, 43–44 harmonization 107, 117, 127, 385, 417, 443 harmonization of contract law in Europe 108, 208, 421 Harris v. Watson 285–86 Haubold, J. 425–26

Hayek, F.A. 173–74, 176–77, 179, 181–84, 186–91 hegemony, jurisprudence 216–19 hermeneutics 86, 263, 339 heterodoxy 289 legacy 102–4 heterosexuality 3, 310 compulsory 313–19 High Trees case 471–76 Hobbes, T. 305, 309, 312, 399 Hoffman v. Red Owl Store 483, 505 Hoffmann, Lord 71, 456, 458–60, 463 Holmes, Oliver Wendell 250–51, 263–65, 267–71, 282–84, 288–90, 292, 296–99, 478–80 human body 208, 210, 308, 314–16, 318 human dignity, see dignity human rights 200, 207, 352, 521, 525 husbands 220, 344, 370–71, 474 identification 3, 54, 105, 217, 226, 236–38, 339, 341 identity 32, 213–14, 250, 349, 362, 375, 377–79, 420 ideology 91, 98, 237 and legal arguments 104–6 illnesses 89, 91–92, 223, 228 immoral contracts 322–32 imperfect compensation 167–68 imperfect enforcement 169 implicit exceptions 225, 228, 231–32 implied covenant of good faith 390–91, 405–6 implied covenant of good faith and fair dealing 387–88, 392 implied terms 340, 388, 403, 406 implied warranty 38–39, 403 impossibility 62, 176, 185, 259, 284, 289, 335, 337 supervening 223 inapplicability 3, 225, 228, 230, 232, 236–37 of contractual terms 226, 232, 237 of default norms 230–32 incentives 107, 148, 156–57, 159, 161, 163–68, 200, 521 economic 159, 200, 521

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Index 545 effort 167 performance 161, 163–65, 170 reliance 148, 156, 163–66, 170 social 150, 160, 163 index 67–68, 70, 73–74, 78, 81, 87, 89–90, 92 individual autonomy 378, 410–12 individual interests 50, 52, 56, 124, 347 inefficiencies 163, 165–67, 171 influence, poetic 274, 278 information 13, 71, 109, 182, 188, 190, 255, 421–22 information society services 419–20 injunctions 69, 369 innominate contracts 21–26 innovation 19, 47, 55, 106, 178, 357 insolvency 163, 166–67 level of 168 instability 3, 289, 341, 363 institutional arrangements 173, 183, 186, 189 institutional structure 97, 109, 189 institutions 3, 13, 50, 55, 62, 412, 417, 420 social 3, 303–4, 354, 409, 411 insurance contracts 26, 35 integration 55, 98, 134, 335 intelligibility 83, 335, 533 intent 21–22, 48, 50, 53, 55–56, 60–61, 402, 404 intentions 322, 325, 365, 389, 391–92, 399, 459, 461–62 common intention 62, 454, 456–57, 460, 462–63 to create legal relations 472–73 presumed 62, 392, 394, 403–4 subjective 404, 451, 453–54, 456–57, 460 interests 49–51, 57, 73–74, 88–90, 199–201, 356, 358, 520–22 contradictory regulatory 197, 518 economic 28, 53, 59 general 60, 62, 194, 514 individual 50, 52, 56, 124, 347 party 200–201, 523 private 116, 123–24, 130 public 68, 96, 116, 122, 124, 135, 195–96, 516–17

reputation 73 societal 200, 521 internal market 417, 419–20, 444 international arbitration 200, 521 international contracts 196–98, 415–16, 435, 517–18 international transactions 194, 197, 514, 518 Internet 413–15, 429, 435 interpretation 103, 105, 227–28, 234, 236, 391, 399–400, 473 contractual 451–66 problem 332–43 of statutes 465 interpreters 86, 104–6, 226, 326, 334, 451, 460, 462–63 intertextual authorship 245–50 intra-textual relations 282–83 invalidity 225, 236, 348 invasion 73 and behaviour 83–85 investments 149, 158, 162, 170, 195, 358, 502, 516 reliance 156–57, 159–62, 165, 168 Italy 28–29, 151, 155, 272 Civil Code 53, 56–57, 59–61, 331–32 Constitution 95, 206, 211 Fascism, see Fascism law of promise 495–500 legal system 487, 496 Jorden v. Money 471–73 judges 75–77, 83–87, 95–96, 120–21, 218–19, 223–33, 235–38, 272–74; see also courts revision of contracts by 61–63 judicial activism 239 juridical Fascism 63–64 contract law in courts 59–61 and juridical National Socialism compared 49–53 keywords and formalisms of debate on 48–49 protection of weaker contracting party 57–59 juridical National Socialism contract law in courts 59–61

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546 Comparative contract law and juridical Fascism compared 49–53 protection of weaker contracting party 57–59 revision of contracts by judges 61–63 jurisprudence 282, 287, 289, 337–38, 471, 473, 501, 505 hegemony 216–19 justice 116–17, 180, 333, 338, 392, 396–98, 405–6, 464 commutative 40 contractual 106 distributive 117, 135, 211–12 social 95–96, 117, 130, 202, 209, 303, 317, 512 justiciability 218, 225 of fundamental rights 220, 236 justifiable reliance 478–85, 497, 499 justified reliance 469, 478 Justinian 33, 36, 40–42, 324, 401 juxtaposition 87, 101, 262, 336, 341 Kafka, F. 370 Kant, I. 340, 352–53 Kelsen, H. 10 kenosis 296, 298 knowledge 67–68, 90, 100, 185, 187–88, 212–13, 324, 332 problem 180–81 Landes, W. 200, 521 Langdell, C.C. 255, 265–71, 277, 282, 292–95, 297, 299, 478 language 288, 336, 339, 403, 405, 451, 456, 458 contractual 114, 385 late scholastics 19, 21, 26–27, 29, 33, 40, 44 law of obligations 53, 55, 68, 453, 457 leases 20, 23, 32, 35, 39, 390, 404, 472 legal community 251, 259, 480, 505–6 legal costs 167, 169 legal education 16, 91, 294–95, 386 legal orders 193–94, 202, 270, 512–13, 515, 523, 529 legal persona 352, 354–55, 357–58, 364 legal personhood, acquisition 352–58

legal realism, see realism legal reasoning 80, 84, 87, 91, 101, 105 legal subject 205, 207, 209, 211, 213, 406 transformation 205–14 legal theory 13, 274–75 legal traditions 3, 96, 98, 124–25, 129, 248–49, 273–74, 285 construction 96–100 Western 112, 115, 129, 135 legal transplants 470–87 legality 83, 328–29, 344, 464 legislation 95–96, 175, 179, 416–17, 419, 424, 444, 446 private 196, 198–99, 512, 516, 519 legislators 115–16, 180, 190, 232, 436, 438, 441, 444 legitimacy 97, 131, 200, 327, 362, 427, 435, 521 democratic 116, 197, 518 lenders 26–28, 30–31 Lessius 22–23, 26–27, 40 letters of patronage 497–99 lex mercatoria 198, 414, 518, 521, 525, 530, 533 liability 72, 74–75, 161, 164, 283–84, 497–98, 500, 503 limited 163, 166–69 pre-contractual 495, 500, 503–4, 506 promissory 478, 481 liberal states 194, 198, 201, 515, 518–19, 522 liberalism 52, 212, 214, 512 liberty 82, 85, 173, 175, 179, 186, 189, 208 limited liability 163, 166–69 limited statehood 129 literal meanings 459–60, 462 literalism 402, 457, 459 literary criticism 277–78, 282 literature 1, 3, 127–28, 259–61, 274–75, 278, 280, 322–59 livery of seisin 328 Lloyd’s litigation 200–201, 521–22 loans 20, 23, 26–28, 30, 32, 35, 74, 485 gratuitous 30–31 Locke, J. 173–74, 186, 188, 191, 305, 312, 350, 354

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Index 547 loss 33–35, 39, 42–43, 83–84, 168, 170, 377, 379 Louisiana 487, 491, 493, 495 lucrum cessans 39–40 mail box rule 430, 432 mandates 20, 32, 35, 200, 457, 521 mandatory rules 15, 117, 119–20, 199, 358, 461, 520 marginal damages 160–61 market integration 417–18 market prices 34 market regulation 193, 197, 514, 518 markets 98, 107, 112, 194–95, 199, 392–93, 405–6, 514–16 global 112, 114, 201, 523 reversal of relationship between law and market 198–200, 519–22 Marlowe, C. 323–32 marriage 343–51, 365–69, 371, 402 contracts 310, 343–51, 365, 367, 371, 375 moralization of 349, 351 pacts 343, 347 promises of 343–44 real 345 secret 345–46 maxims 55–57, 61, 256, 263, 401, 453 meaning, literal 459–60, 462 memory 99, 217, 238–39, 248, 274, 296, 370–71, 527 Mephistopheles 325, 327–29, 331–32 Merchant of Venice 32, 332–43, 346 metaphors 255–57, 271–72, 334 methodologies 1, 89, 197, 260, 518, 529–31 Micklitz, H.W. 117–18, 122, 124–25, 135 Millamant 348–50 minors 206, 222–23, 228 misinterpretations 278–80 misrepresentation 92, 276, 367, 387, 394 mock-marriage contracts 372, 376 model laws 413–15, 424, 453, 463 modernity 197, 518, 525, 532 Molina, L. 21–22, 26–27, 40

money 25, 32, 68, 75, 79, 371, 379, 472–73 moral law 326 moral obligation 11, 394, 478 morality 54, 60, 82, 178, 465 moralization of marriage 349, 351 mothers 71, 222, 348, 366–68, 371, 483 motives 254, 284, 386, 392, 491 mutual obligations 145, 150, 158, 169 mutuum 26–27, 30–32 narrative voice 374–76 National Socialism 47–55, 57–63 and contract law 53–55 juridical, see juridical National Socialism nation-state politics 528–29 natural difference 308–9 natural law 396, 481–82 school 19, 21, 41 necessity 190–91, 218, 332, 335, 348, 356, 390, 395 negotiations 84–85, 221, 327, 329, 334, 454–55, 483–84, 499–503 Netherlands 28–29; see also Dutch law neutrality, technological 415–16 non-breaching parties 12–13, 149–50, 152–55, 160–63, 170 non-ergodicity 177–78 non-performance 75, 77–78, 84, 147–48, 150–53, 156, 158–66, 168–70 defense 148, 150–53, 156, 160–66, 168–70 non-state actors 129, 195, 515 non-state law 198, 519 non-state norms 198, 518–19 non-subjects 211, 213–14 normative gaps 226, 228, 238 normative preferences 120–21, 194, 515 norms 86–88, 176, 182–83, 224–34, 236–37, 337, 340, 529–30 constitutional 530 contractual 88, 224, 229, 236 evolution of 182–84, 188–89 expressly defeasible 231–32

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548 Comparative contract law permissive 230–32 unexpressed 228–29, 231, 233, 238 notaries 328–29, 331, 492 novation 221, 231 objective factors 460–61 objective theory 284–85 obligations 69–71, 74–75, 145–47, 149–51, 154–55, 158, 220–23, 227–28; see also duties bilateral 149, 154, 222, 227–28, 234 contractual 75, 84, 159, 167, 222–23, 233, 285, 322 law of 53, 55, 68, 453, 457 moral 11, 394, 478 mutual 145, 150, 158, 169 recognition of 496–97 obligors 155, 365, 374, 377 offer and acceptance 88, 90, 365, 409, 411, 414, 431, 438 offerees 145, 322, 340, 350, 430 offerors 340, 430–32, 489 operational rules 97–98, 105–8 optimal choices of effort 165–66 optimal choices of effort and reliance 165–66 optimal effort 165, 167, 169 optimal performance 156–57 efforts 166, 169 optimal remedies 148, 156–57, 162, 170 order of actions 173, 182, 184–85, 190–91 ordering, private 2, 112, 119, 121, 193–94, 393, 512–13, 515 otherness 249, 373 over-regulation 198, 519 overriding mandatory rules 194, 197, 514, 517 owners 28, 31–33, 42, 76, 79, 352, 354, 373 ownership 21, 79, 82–83, 88, 352, 354, 356, 358 pacts 323, 325–27, 329, 344, 346, 365, 377 Parisi, F. 151, 158, 167 parody 254–55, 326

parol evidence rule 454, 457, 459, 461, 466 partial compensation 166–67 partnership 20, 32, 35 party autonomy 2, 193–202 distributional effects 200–202, 522–24 in global context 512–33 theoretical representations 514–16 theoretical repsresentations 193–96 party choice 15, 197, 199, 201, 518, 520, 523 party interests 200–201, 523 Pateman, C. 305, 309 patriarchal law 370, 380 patrimony 353, 368, 376–77 patronage, letters of 497–99 payments 39, 75, 153, 158, 220–22, 326 payoffs 154, 159, 164, 176, 182 PECL (Principles of European Contract Law) 107 performance 23–27, 54–56, 75, 77–79, 145–57, 159–60, 162–65, 399–400 actual 145–46, 158 efforts 157, 160–61, 166 excessive 165–66, 170 incentives 161, 163–65, 170 optimal 156–57 probability of 168 promised 156, 158, 489 specific 13, 16 withholding of 151, 160 permission 196, 230–31, 517 permissive norms 230–32 personality 70, 220, 332 Philippines 151, 155 PICC, see Principles of International Commercial Contracts plaintiff in default preclusions 154–56, 165, 170 planners 179–80, 187 plural autonomous orders 524–30 pluralism 524–25, 529 poetic influence 274, 278 poetics of law 260–96 poets 274, 276, 278–79, 298 strong 276–77, 296

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Index 549 policy choices 112, 133–35 political community 313, 315–16, 319 political economy 2, 193, 512 of private ordering 513 political orders 54, 184, 312 political power 50, 55, 57, 59–64 political theory 1, 9, 303 politics 3, 48, 64, 178, 213, 294, 312, 525–26 Pollock, F. 31 polycentricity 134 Portia 32, 332, 334–42 Portugal 28–29, 95 Posner, R.A. 200, 333, 389, 394, 470, 521 Pothier, R. 41–42, 401, 453, 460–61, 464 Pothier’s rule 42–43 power 97, 108–9, 125–28, 275, 307–9, 335–36, 370–72, 525–26 bargaining 128, 191, 485 political 50, 55, 57, 59–64 preclusion rule 148, 155–56, 159, 163–70 for bilateral breach 164–65, 170 defense 166, 169 pre-contractual liability 495, 500, 503–4, 506 precursors 275–76, 278, 282–83, 289, 298 predecessors 276, 278, 280, 298, 376 predictability 102, 199, 201, 520, 522 preemption 385–406 and good faith 386–92 preferences, normative 120–21, 194, 515 prescriptive theories 8–9, 15 presumed intentions 62, 392, 394, 403–4 price system 187–88 prices 23–24, 33–35, 42–43, 187, 372, 387–88, 400–401, 472 Principles of International Commercial Contracts (PICC) 453, 462 privacy 82, 356–57, 418 private actors 196, 198–99, 441, 517, 519–20 empowerment of 194, 514–15

private autonomy 2, 58, 96, 117, 123, 133, 322, 417 private enforcement 124–27 private governance 1–2, 123, 196, 516 private interests 116, 123–24, 130 private law 47, 49–50, 52, 55–56, 95–97, 117, 120, 122 doctrine 201, 392, 522 socialization of 95–96 private legislation 198–99, 512, 519 and technical design 196–98, 516–19 private ordering 2, 112, 119, 121, 194, 393, 512–13, 515 political economy of 193, 513 private regulation 113, 121, 123, 132 private regulators 115, 118, 124, 128 probability of performance 168 profits 39–40, 107, 371, 374, 377, 401 loss of 39, 43, 503 promisees 28–32, 145–47, 157–59, 469–70, 480, 484, 489–90, 495–97 promises 11–13, 21–23, 28–31, 145–47, 394–400, 402–6, 472–76, 484–97 bilateral, see bilateral promises commercial 481–83 enforcement of 8, 28, 148, 170 exchange of 148–49, 169, 350, 365, 428, 430 free 479, 499 Italian law of promise 495–500 of marriage 343–44 reciprocal 148, 156 Scots law of promise 487–95 simple 346, 489 unilateral 470, 488, 495–97 promisors 27–28, 30–32, 76–77, 157–58, 469–70, 484–85, 489–90, 495–97 promissory estoppel 4, 289, 299, 469–506 applicability 480–81 application 481, 485 codification 491 definition 469–70 Dutch law 502–3 English discipline 470–77 evolution of North American discipline 477–87

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550 Comparative contract law Italian law of promise 495–500 Scots law of promise 487–95 promissory liability 478, 481 proof 15, 76, 84, 126, 272, 328–29, 331, 398 burden of 76, 78 property 70–71, 73–75, 79, 82–83, 95–96, 186, 189–90, 351–58 property rights 12, 79, 206, 352, 441 property theories 12 prospective imaginations 3, 247, 273, 275 protection of freedom of contract 173, 186–87, 189 Protestantism 344–45 public economic regulation 195, 515 public goals 113–14 public interest(s) 68, 96, 116, 122, 124, 135, 195–96, 516–17 public policies 194–95, 198, 200, 464, 514–15, 519, 521, 531–32 public policy rule 465 public regulation 122–23, 199, 520 public regulators 115, 124, 128 publicity 253, 328–29 Pufendorf, S. 22, 351 punishment 342, 369–70 quasi-contracts 155–56, 299, 400 queer theory 309, 319 queering contractual paradigm between law and political theory 275, 303–19 racial contract 310–11 Radin, J. 352, 354, 434 Raffles v. Wichelhaus 288 rationality 81–82, 309, 316, 327, 378, 532 Rawls, J. 303, 306, 317 real contracts 20, 23, 26–32 realism 3, 262, 287, 289, 292, 295, 298 realists 287, 289, 481 reason, law of 398 reasonable expectations 390, 403–4, 476, 482 reasonable people 404

reasonable person 39, 82, 365, 403, 458, 460, 462 reasonable reliance 13, 501 reasonableness 4, 68, 86–87, 90–92, 390, 462, 464, 469 notion 80–82 and rights 79–83 reasoning 72, 82, 85–87, 99, 166, 226–27, 229, 232 reasoning methods 85, 87, 89, 92 receipt 430, 432–33 rule 429–32 reciprocal promises 148, 156 recognition of obligations 496–97 recovery 12, 39–41, 43–44, 164, 385, 472, 489 rectification 69, 90, 340, 458 redeployment value 163 regulation 111–36, 193, 195–97, 231, 386–88, 410–11, 423–24, 516–18 mapping relationship with contract law 111–12 market 193, 197, 514, 518 policy choices 112, 133–35 private 113, 121, 123, 132 state 198, 387, 390, 402, 411, 519 typologies 112–15 regulators 114, 118, 122, 125–26, 131, 133 private 115, 118, 124, 128 public 115, 124, 128 regulatory approaches 117, 131, 409, 417–18, 443–44 regulatory contract law 2, 111–12, 132–36 beyond Western legal tradition 129–33 in the making 115–24 regulatory purposes 113, 116, 128, 132–33 regulatory remedies 115 and contract remedies 124–29 regulatory role 114, 116, 122, 442 regulatory state 111, 116, 122, 129–32, 197, 517 regulatory systems 112, 117, 129, 135–36

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Index 551 regulatory tools 112–13, 116, 131, 135–36 reliance 13, 28–29, 157–63, 165–66, 168, 472–74, 482–85, 495–98 detrimental 13, 16, 482, 492 incentives 148, 156, 163–66, 170 investments 156–57, 159–62, 165, 168 justifiable 478–85, 497, 499 justified 469, 478 reasonable 13, 501 theories 2, 12–13 remedies for bilateral contracts 160–64, 166, 168 contract, see contract remedies optimal 148, 156–57, 162, 170 regulatory, see regulatory remedies Renaissance 3, 322–23 reproduction 313–14, 318, 373 rescission 69, 153 resources 13, 40, 108–9, 129, 188, 212–13, 441–42, 444 responsibility 151, 276, 314, 327, 496–98, 503, 529 Restatements 30–31, 145, 290–92, 388, 474, 476–81, 483, 505–6 restitution 11, 151, 155, 343 resurrection 258, 298–99 review 122, 218, 220–22, 251, 255, 481 reviewing reviewers 250–60 revision 280, 361, 364, 492–93 revocation 431–32 rhetoric 257, 323–24, 327, 330, 334 rights 89–91, 173–74, 205–7, 209, 219–20, 233–34, 343, 356 human 200, 207, 352, 521, 525 property 12, 79, 206, 352, 441 and reasonableness 79–83 social 195, 201, 207, 209, 211, 218, 515, 523 subjective 226, 232–33, 237 risk 25–26, 33–34, 42, 127–28, 132, 174, 176, 431 Roman contract law 19–44 consensual contracts 20, 23, 32–35 contracts bonae fidei 35–39 contracts stricti iuris 35–39

damages 39–44 and Fascist and National Socialist private law 51–53 innominate contracts 21–26 real contracts 20, 23, 26–32 rejection of Roman distinctions 21–23 when contracts are binding 20–35 romantic agony 280–81, 296 Rome Convention 195–96, 199, 516–17, 520 Rome I Regulation 193, 195, 197, 516–18, 520 Romeo and Juliet 343–47 Rousseau, J.J. 305, 312 Rudden, Bernard 67–70, 93 rules golden 454, 457, 460, 466 operational 97–98, 105–8 positive 87, 312 procedural 88, 186 Sacco, R. 104, 147 sacrificial victims 374, 376–77 safety 72, 287, 333, 349, 378 Sage, L. 371 sale 20–21, 23–24, 26, 32–35, 67, 69, 221, 272 contract of 33, 75, 147, 326, 441 generic 32–34 of goods 69, 391, 426 schemes of intelligibility 2, 82, 85–87, 89–90, 92 scholastics, late 19, 21, 26–27, 29, 33, 40, 44 Scotland 28–29, 74 law of promise 487–95 seal, contracts made under 30, 325, 346, 458 secrecy 328, 353, 356–58 secret marriages 345–46 securities 74, 195, 325, 327–28, 332, 346, 354, 515 seisin, livery of 328 selection processes, intra-group 183, 186 self-determination 96, 98, 372

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552 Comparative contract law self-expression 280 self-regulation 201, 414, 523 sellers 13, 32–35, 40, 106, 400 separation approach 131–32 service providers 421, 432–33, 438 services 53–56, 73–75, 78–79, 331, 387–88, 420, 426, 440–41 sex 309, 311–12, 314, 318, 348–49, 358 sexual contract 309–10 sexuality 206, 315, 370 Shakespeare, William Merchant of Venice 32, 332–43, 346 Romeo and Juliet 343–47 Shavell, S. 156 ships 76, 78, 88, 287, 353, 401 Shylock 332–40, 342 signatures 329, 353, 425 electronic 415, 419, 424–25 signing 37, 307, 323, 329, 350–51, 400, 501 silence 250, 253, 489 simple promises 346, 489 Simpson, A.W.B. 19 social classes 206, 209, 212 social context 100–101, 211, 342 social contract 307–9, 317, 379 social cooperation 173, 177, 212 requirements for 174–77 social embeddedness 529–30 social function 95, 130 social game 175–77, 188 social incentives 150, 160, 163 social institutions 3, 303–4, 354, 409, 411 social justice 2, 95–96, 117, 202, 209, 303, 312, 317 social optimum 160–63, 165 social orders 97, 175, 177, 181, 183, 337 social rights 195, 201, 207, 209, 211, 218, 515, 523 social values 52, 98, 131 socialization of private law 95–96 societal constitutionalism 524, 526, 528–29 societal interests 200, 521 software 178, 425, 440–41 solicitors 74, 353, 356–57 solidarity 106, 207, 209–10, 213, 233

duty of 232–33, 236 Somma, Alessandro 47 sources of law 55, 219, 226, 293, 411 South Africa 451–66 continental European and supra-national comparisons 459–63 developing approach 453–57 and English law 457–59 good faith, Constitution and African customary law 463–65 sovereign states liberal 195, 516 like-minded community of 194, 514 sovereignty 195, 300, 330, 512, 516 state 119, 194, 236, 408, 413, 514, 524, 533 Spain 22, 28–29, 95 special constitutional protection 222–23, 228–29, 231, 234–36 specific performance 13, 16 speculation 106, 250, 254, 357 spicilège 270 sponsalia 344 spontaneity actual 188–91 in origin 186–90 spontaneous order 2 and complexity 177–79 definitions 182–89 explanation of principle 184–86 and freedom of contract 173–91 theory of 177, 179, 183 and utilitarianism 179–81 stability 3, 102, 115, 342, 347, 354–55, 486 Stair, Viscount (James Dalrymple) 487–90 standard form contracts 37, 386, 456 standard terms 426, 445 state intervention 119, 123, 132, 414 state law 198, 386, 388, 413, 415, 442, 519, 532 state regulation 198, 387, 390, 402, 411, 519 state sovereignty 119, 194, 236, 408, 413, 514, 524, 533 Statute of Frauds 424–25, 430

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Index 553 Stilk v. Myrick 285 stipulatio 20–21, 36–38 Stoker, Bram 265, 352–58 structural approach 82, 100, 102–3 structural scheme 82, 85–86 structuralism 103 sub-contractors 201, 523 subjective good faith 246, 505 subjective intentions 404, 451, 453–54, 456–57, 460 subjective rights 226, 232–33, 237 subjectivity 100, 207, 213, 352, 377 subject/object dichotomies 211, 213 suboptimal performance effort 166, 169 substance 79, 84, 253, 255, 262, 290–91, 332, 341 subversion 347, 364, 374 suitors 332, 336, 342 sum-positive games 176–77, 188 sunk investment 161 supermarkets 88–89 supervening impossibility 223 suppliers 75, 201, 523 supra-national model rules 462, 465 supremacy 57, 311–12, 529 Supreme Courts 125, 455–56, 464–65, 482, 494, 498 surplus, contractual 163–64, 170 surpluses 150, 155, 158, 164–66 Switzerland, Constitution 210–11 symbols 248, 308, 357, 368–71, 380 symmetric-value contracts 166 symmetry 85, 164–65 synecdoche 105, 249, 272 systematizers 19, 44 technical design 196–98, 516–19 technological contracts 408–46 digital technologies and meeting of minds 434–40 European normative framework 416–24 new lex mercatoria 414–27 from post to instant messaging 429–34 relationships among technology, law and contract law 411–14

United States 424–27 technological neutrality 415–16 technology 408–14, 417–18, 420–21, 425, 427–28, 430, 440–43, 445 as content 440–43 as tool 427–40 termination 79, 150–51, 387–88 terms contractual 3, 15, 122, 225–26, 229, 231–33, 237, 365 implied 340, 388, 403, 406 standard 426, 445 unfair 37, 224, 236, 444 territoriality 193–94, 513–14 Teubner, G. 526–27, 532 textbooks 81, 84, 89–90 theorists 8, 10–16, 19, 23, 33, 173, 208, 280 Tiger’s Bride 364, 372, 376–80 tolerance, duty of 219–23, 227, 229, 231, 233, 236, 531–32 torts 8, 11, 67–70, 73, 77, 83, 95–96, 299 traditional contract law 2, 111, 115–16, 118–19, 121, 133, 135–36, 409–11 transaction costs 178, 410, 413 transaction types 16–17, 87 transactions 59, 61, 68–69, 79, 353, 356, 435–36, 460–61 commercial 348, 353, 417 cross-border 194–96, 198, 411, 416, 514, 516–17, 519 international 194, 197, 514, 518 Transylvania 353, 355 trespass 69, 83, 262 trust 307, 332, 404, 485–86 truth 87–88, 323–24, 326–27, 330–31, 334–35, 339, 343, 397–98 ubuntu 464–65 UCC (Uniform Commercial Code) 35, 39, 152, 388, 391, 426, 505 UCITA (Uniform Computer Information Transaction Act) 423–24, 426, 438, 443–44 UETA (Uniform Electronic Transaction Act) 421, 424–26, 435

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554 Comparative contract law Ulpian 39, 397 unbridled freedom of choice 201, 522 unburiable contract 245–300 UNCITRAL (United Nation Commission on International Trade Law) 413, 415 unconscionability 38, 394, 418, 439 under-enforcement 127–28 unexpressed norms 228–29, 231, 233, 238 unfair terms 37, 224–25, 236, 444 UNIDROIT Principles 107, 453, 462 UNIDROIT rules 198, 518 Uniform Commercial Code, see UCC Uniform Computer Information Transaction Act, see UCITA Uniform Electronic Transaction Act, see UETA unilateral breach 150–53, 155, 159–60, 163–65, 170 unilateral contracts 145–46 unilateral declarations 496–99 unilateral promises 470, 488, 495–97 United Kingdom, see English law; Scotland United Nation Commission on International Trade Law, see UNCITRAL United States 120–32, 175, 385–86, 415–18, 423–24, 443–45, 476–77, 504–5 courts 4, 31, 149, 418, 445 E-Sign 421, 425–26, 435 exceptionalism 385–406 Federal Energy Regulator (FERC) 122–23 promissory estoppel 471, 476–87 Restatements 30–31, 145, 290–92, 388, 474, 476–81, 483, 505–6 Supreme Court 199, 385, 401 technological contracts 424–27 UCC (Uniform Commercial Code) 35, 39, 152, 388, 391, 426, 505 universalism and fragmentation 207–11 unjustified withdrawal 496, 499

US, see United States utilitarianism and spontaneous order 179–81 validity 85, 226, 229, 323, 326–29, 331, 343, 346 valuers 75, 89–90 values 13–17, 50–52, 54–55, 59–60, 96–97, 162–64, 167–68, 207–8 vis maior 34 Vogenauer, S. 460–61 volition 386, 402 waivers, class action 386 Walking Dead 174 Waltons Stores (Interstate) Ltd v. Maher 471, 476 warranties 221, 340, 344, 403 implied 38–39, 403 Way of the World 343, 347–51 wealth 82, 159, 167–68, 355, 367–68, 371, 378, 395 wealth level 167–68, 355 weddings 328, 345, 368–69, 403 Weir, Tony 36, 68–70, 73, 75, 90, 92–93 Western legal tradition 112, 115–24, 129, 135 Westphalian model 193, 195, 514, 516 Williston, S. 31, 265, 282, 284–85, 287, 289–90, 478, 481 withdrawal, unjustified 496, 499 witnesses 36, 328–29, 331, 335, 338, 346, 486, 488 women 235, 308–12, 314, 318, 339, 345–46, 348–51 and contracts 361–80 words and things 70–74 written contracts 36, 38, 43, 86, 324, 327–28, 333, 335 written documents 328–29, 364, 457 written law 238, 335–36, 339 Yablon, C. 296, 298 Zimmermann, R. 37, 40, 457

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