why contracts scholars should read … philosophy: positivism, formalism, and the specification ......

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WHY CONTRACTS SCHOLARS SHOULD READ LEGAL PHILOSOPHY: POSITIVISM, FORMALISM,

AND THE SPECIFICATION OF RULES IN CONTRACT LAW

Curtis Bridgeman*

CONTENTS

I. Formalism and Anti-Formalism in Contract Law........................................1449 II. Legal Positivism as a Functional Account of Law ......................................1456 III. The Promise Theory of Contract as Norm-Sensitive Contract Law............1462 IV. Guiding With Vague Rules: The Role of Specification in Jurisprudence....1467 V. Context-Sensitive Laws: The Problem of Specification-Avoidance ...........1476 Conclusion: A Note of Caution and Optimism ....................................................1483

INTRODUCTION

After being embattled for most of the twentieth century, formalism

is on the rise again in contract law. Very roughly, formalism is the view that legal rules are legally binding because of their form—because they are rules, rather than because of their content or any substantive justification for the rules.1 Opponents of formalism often complain that rigid adherence to rules for the sake of rules too often leads to injustice, either because the rules may not comport with the requirements of justice, fairness, or morality, or because the rules, though perhaps justified as a general matter, lead to injustice when applied in particular cases.

In contract law, formalism covers such a wide range that it is

* James Edmund and Margaret Elizabeth Hennessey Corry Professor of Law, Florida State University College of Law. Earlier drafts of this work benefited from feedback from numerous people, including participants in workshops at Ohio State University, the Benjamin N. Cardozo School of Law, American University, the University of Florida, and Florida State University. Particular thanks for comments and/or conversation go to Peter Alces, Amitai Aviram, Brian Bix, Mark Fenster, Larry Garvin, Richard Gerberding, Andrew Gold, Bob Hillman, Alexandra Klass, Wayne Logan, Mark Movsesian, Dennis Patterson, Stefan Sciaraffa, Scott Shapiro, Paul Shupack, and Manuel Utset. Special thanks to Karen Sandrik for invaluable research assistance. 1 Frederick Schauer, Formalism, 97 YALE L.J. 509, 510-14 (1988).


1444 CARDOZO LAW REVIEW [Vol. 29:4

difficult to state succinctly what exactly it means to be a formalist. The so-called “classical” contract law of the late-nineteenth and early-twentieth centuries was highly formalistic.2 During that era there were several barriers to the enforcement of broken promises, even when there was good evidence that the promise was made, and that the promisor was under a moral duty to keep it (perhaps because the promisee had relied upon it). Contract law was a set of rigid rules, many of which (e.g., the consideration doctrine, the mailbox rule, offer-and-acceptance, the unenforceability of indefinite terms, the parol evidence rule) seemed only to have historical pedigree to recommend them. It did not help when Christopher Columbus Langdell, the don of the classical period in American contract law and the paradigmatic formalist figure, in arguing for his own preferred version of the mailbox rule, claimed that it was “irrelevant” that it might produce “unjust and absurd” results.3 The rule was the rule.

The realist movement of the mid-to-late-twentieth century was an assault on formalism across the law, and contract was no exception.4 Reformers whittled away at contract’s old formal requirements in favor of more flexibility, starting with the drafting of the first Restatement of Contracts and its inclusion of promissory estoppel, in effect an exception to the consideration doctrine. Most notably, the Uniform Commercial Code’s (U.C.C.’s) Article 2 on the sale of goods, drafted primarily by the realist Karl Llewellyn,5 relaxed many of the classical rules, including offer-and-acceptance, the parol evidence rule, and the definiteness requirement.6 Eager to find a contract, the U.C.C. sees offers as inviting acceptance in any reasonable manner unless clearly stated otherwise; invites (in effect) all evidence that does not contradict the writing to “supplement” the written terms; and will supply almost any missing term in a contract except quantity, including even a reasonable price if one is not stated.7 Moreover, Article 2 includes a host of default rules that are deemed part of all contracts for the sale of goods unless the contract specifically states otherwise. As a result, in the best-case scenario, the parties are happily saved the trouble of including terms they would have written themselves; in the worst-case 2 Mark L. Movsesian, Formalism in American Contract Law: Classical and Contemporary, 12 IUS GENTIUM 115, 116 (2006) (describing the formalist era in American contract law that occurred “[f]or about 60 years after 1870”). 3 C.C. LANGDELL, A SELECTION OF CASES IN THE LAW OF CONTRACTS 995-96 (2d ed. 1897). 4 In fact, since two of the people most identified with formalism, Langdell and Samuel Williston, were contracts scholars, contract law is perhaps more identified with formalism than any other area of the law. 5 WILLIAM TWINING, KARL LLEWELLYN AND THE REALIST MOVEMENT 271 (1973). 6 See, e.g., U.C.C. § 2-205 (2003) (offer and acceptance); § 2-206 (same); § 2-207 (same); § 2-202 (parol evidence); § 2-204 (indefiniteness); § 2-305 (same). 7 Id. § 2-202.


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scenario the parties later discover themselves saddled with terms they never even considered at the time of drafting. (In between are those cases where parties who know about the default rules but do not want them draft around them in their contract.)

While Langdell (allegedly)8 saw unjust or absurd results as irrelevant, the drafters of the U.C.C. took pains to avoid them, often by including normative language in the rules themselves. Every contract is said to include a requirement of good faith and fair dealing. And one can hardly find a page in the text of the U.C.C. that does not include the term “reasonable,” “commercially reasonable,” “reasonable under the circumstances,” or something similar. The general strategy was not only to avoid absurd results, but also to incorporate the norms and practices from relevant industries and to pay special attention to the circumstances of the parties involved. While classical contract law was accused of mechanically applying rules that had little to do with justice or even reason, and which often led to injustice in particular cases, the U.C.C. and Second Restatement refer explicitly to norms such as reasonableness in the rules themselves, and to the particular circumstances of the parties involved. The Second Restatement of Contracts later followed suit, echoing much of the informal language of the U.C.C.9

Over the last two decades, many have argued that modern anti-formalism in contract law goes too far, and that its flexibility has led to too much uncertainty and increased litigation costs.10 Judge Kozinski of the Court of Appeals for the Ninth Circuit claimed in frustration that under the law of California:

even when the transaction is very sizeable, even if it involves only sophisticated parties, even if it was negotiated with the aid of counsel, even if it results in contractual language that is devoid of ambiguity, costly and protracted litigation cannot be avoided if one party has a strong enough motive for challenging the contract. While this rule creates much business for lawyers and an occasional windfall to some clients, it leads only to frustration and delay for most litigants and clogs already overburdened courts.11

In response, some courts have arguably moved back toward a more formalistic approach (to the consternation of some commentators, who claim the rigidity of formalism leads to injustice in particular cases),12

8 In fact, Langdell’s approach was much more complicated than this one quotation that is frequently cited by his critics would suggest. See infra note 29 and accompanying text. 9 See generally RESTATEMENT (SECOND) OF CONTRACTS (1981). 10 See infra note 159. 11 Trident Ctr. v. Conn. Gen. Life Ins. Co., 847 F.2d 564, 568-69 (9th Cir. 1988). 12 See Ralph James Mooney, The New Conceptualism in Contract Law, 74 OR. L. REV. 1131 (1995); see also Movsesian, supra note 2, at 115 (“It is a truth universally acknowledged, that we live in a formalist era.”).



though the evidence for such a movement in the courts is debatable.13 Trends in the courts aside, there has certainly been a renewed

discussion of formalism in legal scholarship.14 Complaining about anti-formalism, however, is not the same as arguing for a return to formalism. Aside from a notable push from some law-and-economics scholars,15 no one has developed a sustained argument for a return to formalism in contract law, despite the apparent flaws of modern, informal contract law. The aim of this paper is to present such an argument. The strategy is to do something rarely done in contracts scholarship: take a step back to consider contract law as a form of law, that is, to consider what law is in general and why we have it, before narrowing the focus to contract law. There is a well-developed body of literature in the philosophy of law dealing with such questions, and it has been a mistake for contracts scholars to ignore this literature when dealing with such fundamental questions as the conflict between substance and form in contract law.16 This paper will draw from that literature for insights that can be useful to contracts scholars, and it will eventually argue that contract law should return to a higher degree of formalism.

My argument will proceed as follows. In Part I, I will explain in more detail what the term ‘formalism’ means, a task that is difficult enough in itself. I will argue that we can usefully divide complaints about formal contract law into two main groups. In the first group fall the claims that the rules of contract law often bear little relationship to justice or morality, a charge that I will call “norm insensitivity.” In the second group we find claims that some rules, though justified as a general matter, lead to injustice in particular cases, a charge I call “context insensitivity.” Modern, informal, contract law addresses the first group by adding normative content to the rule itself and the second group by making the content of the rule itself depend on the circumstances.

In Part II, I will very briefly describe a leading branch of legal philosophy, legal positivism. While formalism is the view that rules are binding because of their status as rules, positivism, roughly speaking, is the view that legal rules are social artifacts. This claim opens the door to the objection that there could be valid laws that are morally reprehensible, unjust, or unfair. In that sense, positivism also allows for the possibility that law can be norm-insensitive. In trying to figure out 13 See Robert Hillman, The “New Conservatism” in Contract Law and the Process of Legal Change, 40 B.C. L. REV. 879 (1999). 14 See, e.g., Symposium, Formalism Revisited, 66 U. CHI. L. REV. 527 (1999); Thomas C. Grey, The New Formalism (Stanford Law Sch., Pub. Law & Legal Series, Working Paper No. 4, 1999), available at http://ssrn.com/abstract=200732. 15 See infra notes 159, 160, 162 and accompanying text. 16 See infra Part II.



whether it makes sense to have formal legal rules that are binding irrespective of their content, it makes sense to ask why the positivists would see the validity of law as having nothing to do with its content. The answer the positivists give is instructive. Law performs a valuable function: it settles disputes about moral or prudential matters, thereby making society possible in the face of disagreements among its members. In particular, Part II will draw from some very thoughtful recent work in the positivist tradition called the planning theory of law, according to which law is meant to solve the problems associated with people living in unplanned communities. It does so by promulgating plans. Just as in our own everyday practical reasoning, these plans are very often initially partial, with the details then filled in over time. Many important legal questions may be usefully thought of as involving how government can best accomplish this process of filling in plans, and whom it should trust to do so.

With a basic understanding of formalism in place, and a basic understanding of the positivists’ functional account of law, in Part III we can finally turn to evaluating the informalities of modern contract law. The anti-formalist solution to formal law’s norm-insensitivity was to refer to norms specifically in the law itself. However, this approach raises a potential problem, which I illustrate with the simpler example of the promise theory of contract. The promise theory holds that the law of contract is based on our moral duty to keep our promises.17 It might seem at first that such an inclusion of moral terms in legal rules would disqualify them as law. We learned from the positivists that law is meant to settle disputes about controversial issues such as moral duty, and therefore it might seem that a rule that referred to the moral duty itself could not thereby be law. This imagined objection is based on a misguided understanding of positivism, as I will show.

However, positivism is a theory of what law is, not what it should be. A norm-laden theory like the promise theory, or modern contract law (with its ubiquitous references to justice, reasonableness, good faith, etc.) can still be a theory of law. But what we want to know is whether such a law would be a good law. Although positivism does not directly answer that question, the lesson from positivism is that we have law in order to guide conduct in the face of disagreement. Vague, norm-laden rules can, in principle, provide reasons for legal actors, but it seems such rules would be unable to provide effective guidance. Just because they qualify as law does not mean they are good law, the kind of law we would want. It seems they would leave us with just as much disagreement as before.

To see how such norm-laden rules could be not only valid but also 17 CHARLES FRIED, CONTRACT AS PROMISE: A THEORY OF CONTRACTUAL OBLIGATION 1 (1981).



effective law, we will return in Part IV to the planning theory of law. According to the planning theory, laws are plans that guide behavior, but they are often initially vague or partial plans.18 Their incompleteness alone does not render them ineffective, provided that there is a procedure for further specifying the plans over time. The common law, for example, contained many vague terms, such as the rule that immoral contracts are not to be enforced.19 Over time, however, the rule was further specified, so that the law eventually told citizens which contracts it considered immoral.20 Of course, what the best way to go about specifying such rules is and who are the best people to fill in those plans are still open questions. And in fact, we can understand many of the anti-formalists’ criticisms of the common law and the so-called new-formalist criticisms of the anti-formalists as an attempt to decide who should be trusted to specify initially partial legal rules.

Wherever one comes out in these debates, there remains an objection to modern, informal contract law that cannot be so easily addressed, as I will show in Part V. Rules that specifically refer to vague norms in order to avoid norm-insensitivity might still effectively guide conduct if there is a good procedure for specifying the content of those norms. But some of the anti-formalist reforms were aimed not just at norm-insensitivity, but at context-insensitivity. Again, context-insensitivity describes a case where the application of a rule leads to injustice for particular parties in their situation, perhaps despite justification for the rule in most cases. The response to context-insensitivity was to make legal rules depend on the particular circumstances or context of the parties. Such rules also fail to guide conduct, in that the parties engaged in a dispute already disagree about what their context requires. And unlike the inclusion of vague norms in legal rules, rules that refer to context cannot be specified except on a case-by-case basis. Parties eventually receive guidance, but only by 18 See Scott J. Shapiro, Laws, Plans, and Practical Reason, 8 LEGAL THEORY 307 (2002) [hereinafter Shapiro, Laws, Plans, and Practical Reason]; Scott J. Shapiro, Interpretation and the Economy of Trust (unpublished manuscript, on file with author) [hereinafter Shapiro, Interpretation and the Economy of Trust]. 19 See RESTATEMENT OF CONTRACTS § 512 (1932) (“A bargain is illegal . . . if either its formation or its performance is criminal, tortious, or otherwise opposed to public policy.”); see also RESTATEMENT (SECOND) OF CONTRACTS § 178 (1981) (stating that a promise or term within an agreement may be unenforceable if it is against public policy). 20 For example, in one section alone in the Second Restatement (and there are several similar sections), six comments with nineteen illustrations are used to demonstrate what is and what is not an immoral promise. RESTATEMENT (SECOND) OF CONTRACTS § 178. One such illustration found in section 178 is as follows:

11. A promises to pay B, a competitor, $10,000 if he will refrain from competing with A for a year. Although B’s refraining from competing with A would not in itself be improper, A’s promise unreasonably tends to induce B to refrain from competition (§ 186) and is unenforceable on grounds of public policy.



litigating each case. The problem is not only that such rules are partial plans that need to be specified, but also that they are actually designed to resist specification in any manner other than on a case-by-case basis. Making them resistant to specification in this way gives away much of the benefit gained by planning, and by having law in the first place. We would be better off returning to the more formal rules of classical contract law, such as a more strictly enforced parol evidence rule.

I. FORMALISM AND ANTI-FORMALISM IN CONTRACT LAW

Defining “formalism” is a tricky task. As stated above, most

fundamentally, formalism is the view that rules are legally binding because they are rules rather than because of any substantive justification for them.21 Historically, the term “formalism” has meant more than that, but exactly what it meant is far from clear.22 The traditional definition offered is the familiar caricature of classical formalism as “mechanical jurisprudence.”23 Because two of the early alleged purveyors of this jurisprudence were contracts scholars—Christopher Columbus Langdell and Samuel Williston—mechanical jurisprudence is often associated with contract law in particular, though the relationship between classical formalism and contract law may go no deeper than the alleged common parentage.24 According to so-called mechanical jurisprudence, legal adjudication is a matter of logical deduction, of moving “mechanically or automatically from category or concept to conclusion, without consideration of policy, morality, or practice.”25 This brand of formalism is often associated with transcendentalism; that is, it is often thought to be based on first principles or abstract truths, perhaps from natural law, that can be known a priori.26 At the very least, even if such legal principles were

21 Schauer, supra note 1. 22 There is, unfortunately, general agreement that the term is, or until recently was, used almost exclusively as a pejorative. See, e.g., BRIAN H. BIX, A DICTIONARY OF LEGAL THEORY 69 (2004) (“The term [‘formalism’] is usually used in a pejorative sense. . . .”); ERNEST J. WEINRIB, THE IDEA OF PRIVATE LAW 22 (1995) (“In contemporary academic discussion, ‘formalism’ is a term of opprobrium.”); Grey, supra note 14, at 1 (“It has long been an insult in sophisticated legal circles to call someone a formalist.”). 23 See, e.g., Roscoe Pound, Mechanical Jurisprudence, 8 COLUM. L. REV. 608 (1908); Felix S. Cohen, Transcendental Nonsense and the Functional Approach, 35 COLUM. L. REV. 809, 821 (1935); Duncan Kennedy, Legal Formality, 2 J. LEGAL STUD. 351, 359 (1973). 24 The most prominent non-contract-law classical formalist was Joseph Beale, who is known primarily for his work on conflict of laws. For an excellent discussion of classical formalism and the misconceptions about it, see ANTHONY J. SEBOK, LEGAL POSITIVISM IN AMERICAN JURISPRUDENCE 48-112 (1998). 25 BIX, supra note 22, at 69. 26 See SEBOK, supra note 24, at 48-112.



not claimed to be part of some “mystical absolute,”27 they had no obvious connection to the real world. Grant Gilmore uncharitably credited Langdell with the “great theory that law is doctrine and nothing but doctrine—pure, absolute, abstract, scientific—a logician’s dream of heaven.”28

The idea that anyone of note ever really held such an extreme view is a myth that has now thankfully been largely debunked by more careful thinkers.29 Today one finds a variety of proposed definitions of formalism,30 many of which are in tension, if not outright conflict, with one another. None of these definitions has anything to do with contract law in particular. In contract law and literature about contract law, complaints about formalism gradually centered on decisions not to enforce a contract or to read a contract a certain way. Critics complained about laws that prevented outcomes thought to be more reasonable, more fair, or a more accurate reflection of the intentions of 27 GRANT GILMORE, THE DEATH OF CONTRACT 97-98 (1974). 28 Id. at 98. 29 SEBOK, supra note 24, at 48-112 (arguing that formalism as understood by its realist critics was actually invented by those same critics and was unfairly attributed to Langdell and Beale); Thomas C. Grey, Langdell’s Orthodoxy, 45 U. PITT. L. REV. 1, 11-45 (1983) (arguing that classical legal orthodoxy, in particular that of Langdell, was not deductive or mechanical but rather inductive in the spirit of John Stuart Mill’s understanding of logic); Mark L. Movsesian, Rediscovering Williston, 62 WASH. & LEE L. REV. 207 (2005) (arguing that the typical understanding of Williston’s contracts theory as rigid and overly deductive fails to appreciate a strong pragmatic element in his work); see also RONALD DWORKIN, TAKING RIGHTS SERIOUSLY 15-16 (1977) (“The theory that there are such rules and chains [anti-formalists] call ‘mechanical jurisprudence’, and they are right in ridiculing its practitioners. Their difficulty, however, lies in finding practitioners to ridicule. So far they have had little luck in caging and exhibiting mechanical jurisprudents (all specimens captured—even Blackstone and Joseph Beale—have had to be released after careful reading of their texts).”); Movsesian, supra note 2 (distinguishing classical formalism from new formalism and arguing that the pragmatic element of classical formalism has been underappreciated). 30 See, e.g., Grey, supra note 29, at 8 (“A legal system is formal to the extent that its outcomes are dictated by demonstrative (rationally compelling) reasoning.”) (emphasis in original); Larry Alexander, “With Me, It’s All er Nuthin’”: Formalism in Law and Morality, 66 U. CHI. L. REV. 530, 531 (1999) (“By formalism I mean adherence to a norm’s prescription without regard to the background reasons the norm is meant to serve (even when the norm’s prescription fails to serve those background reasons in a particular case).”); Brian Leiter, Positivism, Formalism, Realism, 99 COLUM. L. REV. 1138, 1145 (1999) (defining formalism as “the descriptive theory of adjudication” according to which the class of legal reasons justifies one and only one outcome to a legal dispute and judges have no discretion in adjudicating cases); William Eskridge, Jr., The New Textualism, 37 UCLA L. REV. 621, 646 (1990) (“Formalism posits that judicial interpreters can and should be tightly constrained by the objectively determinable meaning of a statute . . .”); WEINRIB, supra note 22, at 24 (arguing that formalism is the view that the law is “rational,” “immanent,” and “normative,” and that each of these qualities are related such that the law has each “only insofar as it has the other two”); Schauer, supra note 1, at 510 (“At the heart of the word ‘formalism,’ in many of its numerous uses, lies the concept of decisionmaking according to rule.”) (emphasis in original); ROBERT S. SUMMERS, FORM AND FUNCTION IN A LEGAL SYSTEM—A GENERAL STUDY 1, 5 (2006) (developing a theory of law that emphasizes form, where “[t]his overall form is defined here as the purposive systematic arrangement of the unit as a whole—its ‘organizational essence,’ and is to be further analyzed in terms of its constituent features, and their inter-relations”).



the parties.31 An early example of a debate over formal requirements in contract

law is the famous debate over promissory estoppel and the consideration doctrine during the drafting of the First Restatement of Contracts.32 As any first-year law student can attest, contracts generally are not enforceable absent some form of consideration, i.e., something for which a promise was exchanged.33 A promise to make a gift without receiving anything in return (a “gratuitous” or “donative” promise) would not be enforceable. The consideration doctrine might be seen as legal formalism in the sense that the operation of a legal rule prevents certain arguments about what justice might require.34 The promisor may well have a moral duty to keep her promise, and the promisee may even be a victim of an injustice if she does not (especially if the promisee has relied to her detriment). But without meeting the formal requirement of a bargained-for exchange, the law would not provide a remedy.35 These sorts of restrictions were maddening to the anti-formalists, who saw no reason that courts should fail to provide justice just for the sake of strict adherence to rules, especially when the justification for a rule like the consideration doctrine was a matter of some debate.36

Grant Gilmore, perhaps the most vocal (and quotable) critic of classical formalism in contract law, is a particularly good example of such an anti-formalist. Gilmore conjectured that classical contract theory seemed “to have been dedicated to the proposition that, ideally, no one should be liable to anyone for anything.”37 That was apparently the only explanation Gilmore could imagine for the seemingly arbitrary barriers to the enforcement of contracts erected by the classical view. The consideration doctrine was the “balance-wheel of the great machine,”38 according to Gilmore, a machine he was tempted to call “monstrous.”39 This balance wheel of consideration was practically invented, or at the very least “newly reformulated and put to some hitherto unsuspected uses” by Holmes, Langdell, and Williston.40 But it 31 See David Charny, The New Formalism in Contract, 66 U. CHI. L. REV. 842, 842 (1999). 32 See GILMORE, supra note 27, at 65-71. 33 See RESTATEMENT OF CONTRACTS § 75 (1932); RESTATEMENT (SECOND) OF CONTRACTS § 75 (1981). 34 For a famous discussion of the consideration doctrine as a legal formality, see Lon L. Fuller, Consideration and Form, 41 COLUM. L. REV. 799 (1941). 35 See RESTATEMENT OF CONTRACTS § 75; RESTATEMENT (SECOND) OF CONTRACTS § 75. 36 See generally Fuller, supra note 34; GILMORE, supra note 27. The debate on this topic continues in the present era. Compare FRIED, supra note 17, at 28-39 with Peter Benson, The Unity of Contract Law, in THE THEORY OF CONTRACT LAW 118, 153-84 (Peter Benson, ed., 2001). 37 GILMORE, supra note 27, at 14. 38 Id. at 18. 39 Id. at 17. 40 Id. at 18.



had nothing to do with the real world; instead, it was an “ivory tower abstraction . . . [whose] natural habitat was the law schools . . . .”41

By the early part of the twentieth century, some courts had begun to use the doctrine known as promissory estoppel to enforce donative promises made to charities if the promise had induced reasonable, detrimental reliance on the part of the promisee.42 Anti-formalists, most of whom opposed the consideration doctrine as a bar to the enforcement of promises, favored a broadening of promissory estoppel so that it would be available generally and not just for promises made to charities.43 Formalists resisted inclusion of promissory estoppel in the First Restatement.44 Although the consideration doctrine was preserved in Section 75 of the Restatement, a broad (in the sense that it was not limited to claims by charities) promissory estoppel remedy was added in Section 90.45

The inclusion of promissory estoppel was a more significant triumph for the anti-formalists than it might at first seem. In practice promissory estoppel limits the consideration doctrine, a legal rule the point and purpose of which were a mystery to many scholars, most of whom attributed its existence in contract law more to historical accident46 than to its justification.47 But Section 90 struck a blow for anti-formalism in a more general way as well. It called for relied-upon promises to be enforced to avoid injustice.48 There is no bright-line test

41 Id. 42 See Allegheny Coll. v. Nat’l Chautauqua County Bank, 159 N.E. 173 (N.Y. 1927) (citing cases). The justification for the promissory estoppel doctrine was that having made the promise in a situation when she knew it might induce the promisee to rely to his detriment, the promisor ought to be estopped from asserting the consideration doctrine as a defense when the promisee does so rely. The doctrine is a cousin to the doctrine of equitable estoppel, according to which one who asserts a fact at one time may, under some circumstances, be estopped from denying that fact later. 43 GILMORE, supra note 27, at 65-72. 44 Id. 45 Gilmore claimed that Williston opposed the inclusion of promissory estoppel but was talked into it by Corbin; this claim has been taken to be received wisdom. Id. More recently, however, Mark Movsesian has argued persuasively that unlike other formalists, Williston himself was always in favor of promissory estoppel as a safety valve to the consideration doctrine. Movsesian, supra note 24, at 247-53. 46 Indeed, Gilmore implies rather strongly that it may have been no accident:

It seems apparent to the twentieth century mind, as perhaps it did not to the nineteenth century mind, that a system in which everybody is invited to do his own thing, at whatever cost to his neighbor, must work ultimately to the benefit of the rich and powerful, who are in a position to look after themselves and to act, so to say, as their own self-insurers.

GILMORE, supra note 27, at 104. 47 See, e.g., id. at 19-37; see also FRIED, supra note 17, at 28-39. 48 See RESTATEMENT OF CONTRACTS § 90 (1932) (“A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.”) (emphasis added).



in such a rule, no test that could be applied “mechanically.” Instead, by referring explicitly to the requirements of justice, Section 90 favors flexibility over rigidity, attempts to make legal rules comport with just outcomes, and seeks to avoid institutional barriers to such outcomes. Presumably the term “justice” also puts pressure on judges to reach just outcomes, rather than mechanically applying rules in order to avoid controversial moral questions, or, worse yet, to reach an arbitrarily desired outcome. The Second Restatement went even further, adding that the remedies for breach in promissory estoppel may also be limited “as justice requires,” meaning that there is not even a bright-line formula for calculating damages in promissory estoppel cases.49

Later in the twentieth century, other formal rules of contract came under attack. Perhaps the best example is the parol evidence rule. In its classical form, once an agreement had been reduced to writing, the parol evidence rule prevented introduction of evidence about the content of the agreement beyond that writing itself.50 Thus, even in the face of extremely compelling factual evidence that a promisor’s promise included an act not expressed in the writing, courts would not allow such evidence if it had not been included in the written agreement.51 Like the consideration doctrine, the parol evidence rule was an example of a legal rule standing in the way of what would otherwise be considered a just outcome. Of course, in the case of the parol evidence rule, the justification for the rule itself was perhaps more straightforward than the justification for the consideration doctrine,52 but in any given case the rule was to be applied irrespective of the justification for the rule. For formalists, the applicability of a rule is not determined by weighing its justification against the desirability of an outcome in a particular case.

Over the course of the twentieth century, however, the parol evidence rule was gradually whittled away by exceptions.53 By the mid-twentieth century, the classical version of the parol evidence rule was in such disfavor that Karl Llewellyn, a protégé of Arthur Corbin and a paradigmatic realist and anti-formalist, was able to do away with it almost entirely in drafting Article 2 of the U.C.C.54 Rather than 49 See RESTATEMENT (SECOND) OF CONTRACTS § 90 (1981) (“The remedy granted for breach may be limited as justice requires.”). 50 More precisely, the parol evidence rule excluded evidence about matters covered in the agreement, and (in its earliest, most formal version) evidence about any matters, if the writing appeared to be “fully integrated,” that is, if it appeared from the writing that the writing was a full expression of the agreement. JOSEPH M. PERILLO, CALAMARI AND PERILLO ON CONTRACTS 124-25 (5th ed. 2003). 51 The casebook chestnut Mitchhill v. Lath is a famous example. 160 N.E. 646 (N.Y. 1928). 52 For the standard policy justifications for the rule, see PERILLO, supra note 50, at 126-28. 53 Id. at 127-28. 54 See Century Ready-Mix Co. v. Lower & Co., 770 P.2d 692, 697 (Wyo. 1989) (“[T]he [U.C.C.] parol evidence rule is intended to liberalize the rigidity of the common law and to



excluding anything not in the writing, the U.C.C. invites evidence not only of prior communications between the parties, but also of industry-specific customs, both to explain and to supplement written contracts.55 The only limitation is that the proposed evidence may not contradict the written contract, and even that slim constraint has been eroded in some rather dubious decisions.56 As the official comments to the U.C.C. explain, these rules are designed to ensure that “the true understanding of the parties as to the agreement may be reached.”57 Stating a goal of reaching the parties’ “true understanding” when interpreting contracts would seem banal without the previous decades of debate over the parol evidence rule and its role as a frequent obstacle to such understandings. Clearly, Llewellyn and the other Article 2 drafters did not want form to preclude an examination of substance, substance in these circumstances meaning an accurate reading of the parties’ actual understanding of their agreement at the time of contracting.

These two examples—the inclusion of promissory estoppel as a limit on the consideration doctrine and the whittling away of the parol evidence rule—illustrate two distinct but related themes in anti-formalism. The first is a complaint that sometimes legal rules, especially legal rules inherited through the historical accidents of common-law development, can often be insensitive to concerns of justice, fairness, or morality, concerns that may be termed “normative.” Doctrines like the consideration doctrine provide seemingly arbitrary barriers to the enforcement of promises, often even in the face of normative concerns.58 Promissory estoppel provides a normative safety valve. It is not only an exception to the consideration doctrine, it is an exception that is applied “as justice requires.”59 The strategy is to avoid what might be called “norm-insensitivity” by including normative content in the law itself. And, in fact, this theme has become common in modern contract law. Modern contract law contains many more direct references to norms than classical contract law did, both in the eliminate the presumption that a written contract is a total integration.”). Recall, too, Judge Kozinski’s now famous complaint about the ineffectiveness of the U.C.C.’s parol evidence rule. See supra note 11 and accompanying text. 55 U.C.C. § 2-202 (2003). 56 Perhaps the most infamous is Hunt Foods & Industries, Inc. v. Doliner, 270 N.Y.S.2d 937 (App. Div. 1966) (holding that a written agreement giving the plaintiff an option to purchase the defendant’s stock was not inconsistent with an alleged oral agreement that the option to purchase would be conditional on the grounds that the writing did not specifically claim to be free of conditions). For a criticism of Hunt Foods, as well as a discussion of different approaches in similar cases, see JAMES. J. WHITE & ROBERT S. SUMMERS, UNIFORM COMMERCIAL CODE 94-102 (5th ed. 2000). 57 U.C.C. § 2-202 cmt. 2. 58 Another oft-cited example is contract’s mailbox rule. See supra note 6 and accompanying text. 59 Calabro v. Calabro, 15 S.W.3d 873, 878 (Tenn. Ct. App. 1999); see also RESTATEMENT (SECOND) OF CONTRACTS § 90 (1981).



U.C.C.’s Article 2 and in the Second Restatement. For example, note the many references to the requirements of reasonableness,60 justice,61 and the now statutorily ubiquitous duty of “good faith and fair dealing.”62 To the extent that rules overtly refer to norms such as justice or fairness, even formal application of these rules should not result in unreasonable outcomes, injustice, or unfairness.

The second, related complaint is that rigid application of rules like the parol evidence rule, rules which may be perfectly justifiable at some level of generality, can lead to injustice in particular cases for particular parties. While one may readily understand the prima facie justification for a rule like the parol evidence rule, in its classical form it was thought to be too blunt an instrument.63 Courts were asked to ignore strong evidence about what justice might require in the particular case in front of them, all for the sake of a rule justified as a means of excluding likely weak evidence. If a rule does not allow a court to consider the specific circumstances of the case in front of it and to notice the way in which those circumstances might make application of the rule unjust in the given case, we might call that rule “context insensitive.”

The solution to norm-insensitivity was to refer to the norm in the rule. The corresponding solution to context-insensitivity was, obviously, to refer to the context in the rule. In the case of the parol evidence rule, the U.C.C. specifically directs courts to pay attention to the particular circumstances of the case.64 Language is to be read in the “commercial context in which it is used.”65 If courts find no contradiction with the text, they are to look at course of dealing, course of performance, and usage of trade to interpret or even supplement an agreement.66 And if the course of dealing, course of performance, and usage of trade conflict, courts are to weigh them in that order,67 with the factors more specific to the context of the contract68 trumping the less specific ones, such as prior dealings on other contracts between the

60 See, e.g., U.C.C. § 2-316 (“Words or conduct relevant to the creation of an express warranty . . . shall be construed wherever reasonable. . .”); id. § 2-714 (the buyer “may recover as damages . . . as determined in any manner which is reasonable). 61 See, e.g., RESTATEMENT OF CONTRACTS § 90, RESTATEMENT (SECOND) OF CONTRACTS § 90; U.C.C. § 2-611. 62 U.C.C. § 1-304 (explaining that the U.C.C. “imposes an obligation of good faith in its performance and enforcement”); see also RESTATEMENT (SECOND) OF CONTRACTS § 184 (requiring that a party seeking partial enforcement of an otherwise unenforceable agreement be acting “in good faith and in accordance with reasonable standards of fair dealing”). 63 See, e.g., E. ALLAN FARNSWORTH, FARNSWORTH ON CONTRACTS § 7.2 (2d ed. 1998); PERILLO, supra note 50, at 127-28. 64 U.C.C. § 2-202. 65 Id. § 2-202 cmt 1(b). 66 Id. 67 Id. § 2-202(b). 68 Id. § 1-303.



parties69 and the industry standards for similar contracts and similar parties.70 All of this is established in order to find the “true understanding” of the parties.71 There are many other examples in both the U.C.C. and the Second Restatement where particular attention is called to the particular context or circumstances in which the agreement took place.72 Sometimes norm-insensitivity is addressed simultaneously with context-insensitivity, as when the statute calls for an outcome that is “reasonable under the circumstances.”

Eventually, I will argue that addressing norm-insensitivity by including norms in the rules is a problematic, though perhaps workable, solution, but that addressing context-insensitivity by including references to context in the rule is unacceptable. My argument is based not on the empirical question of which set of rules would maximize welfare, as most recent criticisms of anti-formalism have been.73 Instead, my argument proceeds from a certain understanding of what law most fundamentally is, and what function it performs. In the next section, I will briefly describe the family of views known as legal positivism. It is beyond the scope of the paper to argue for positivism. Instead, I will use its conclusions as a starting point. Its basic claim is that law is a social artifact,74 and it follows from this that it is possible to have valid law that is morally objectionable.75 It seems natural, therefore, to examine positivism when asking if rules should ever be binding just because they are rules without regard to their justification. Positivism is a descriptive account of what law is, not a claim about what law ought to be, but its arguments will be instructive nonetheless.76

II. LEGAL POSITIVISM AS A FUNCTIONAL ACCOUNT OF LAW

Defining legal positivism is as difficult as defining formalism,

though in this case not for lack of explicit debate. For our purposes, we can start with the most basic definition: Legal positivism is the claim

69 Id. § 1-303(b). 70 Id. § 1-303(c). 71 Id. § 2-202 cmt 2. 72 See supra notes 60-62. 73 See infra note 172 and accompanying text. 74 See Brian Leiter, Legal Realism, Hard Positivism, and the Limits of Conceptual Analysis, in HART’S POSTSCRIPT: ESSAYS ON THE POSTSCRIPT TO THE CONCEPT OF LAW 355, 356 (Jules Coleman ed., 2001)[hereinafter HART’S POSTSCRIPT]. 75 See id.; see also JOHN AUSTIN, THE PROVINCE OF JURISPRUDENCE DETERMINED—LECTURE V 157 (Wilfrid E. Rumble ed., 1995) (“The existence of law is one thing; its merit or demerit is another.”). 76 Leiter, supra note 30, at 1150.



that what counts as law is a matter of social fact.77 The statement, “Murder is against the law” is true not because of a moral prohibition of murder, but rather because of certain facts about our legal conventions or practices. Legal positivists disagree about whether there can be any relationship between morality and law,78 but they generally agree that valid laws give, or at least claim to give, citizens reasons for action (though not necessarily sufficient reasons) independently of the justification for those laws.79 For the positivists this is true by definition—that is, laws by their nature give so-called “content-independent” reasons for action.80

Positivism’s emphasis on the content-independent force of rules has led to objections similar to those raised against legal formalism.81 If the positivists are correct, there is no necessary check on the moral justifiability of a particular law or legal system.82 The validity of laws is at least potentially, and perhaps necessarily, insensitive to the norms of morality. Depending on the legal system, the complaint, “But that’s obviously morally wrong,” even if correct, may have no force in responding to a claim about a rule’s legal validity.

In order to appreciate why the positivists would adopt such a view of law, it is important to consider why we have law at all. Why not just allow parties to govern their actions according to what morality or prudence require? The answer usually given is the Hobbesian warning that in a society without law, individuals would pursue their own narrow self interest, murdering and stealing to suit their preferences. Since life in such a society would be “solitary, poor[], nasty, brutish, and short,”83 Hobbes famously argued, it is rational for individuals—even the powerful—to give up certain rights in exchange for a more ordered society.84 James Madison made the converse of this claim in the Federalist Papers, arguing that “[i]f men were angels, no

77 JULES COLEMAN, THE PRACTICE OF PRINCIPAL 75 (2001); Leiter, supra note 74, at 356. 78 “Hard” or “exclusive” legal positivists argue that law and morality must as a conceptual matter be distinct, while “soft” or “inclusive” legal positivists argue that the test for what counts as valid law can in some way incorporate moral constraints if a society so chooses. Leiter, supra note 74, at 356-57. 79 Thanks to Jules Coleman, this tenet is now typically called the “Practical Difference Thesis.” See COLEMAN, supra note 77, at 121-23. 80 Scott J. Shapiro, On Hart’s Way Out, in HART’S POSTSCRIPT, supra note 74, at 175-77. 81 Ronald Dworkin has been the most famous and consistent critic of positivism. See, e.g., RONALD DWORKIN, TAKING RIGHTS SERIOUSLY chs. 2 & 3 (1977). For a useful discussion, see Scott J. Shapiro, The “Hart-Dworkin” Debate: A Short Guide for the Perplexed, in RONALD DWORKIN 22 (Arthur Ripstein ed., 2007). 82 Positivists disagree as to whether it is even possible for there to be such a moral test of legality. See supra note 78 and accompanying text. But all positivists agree, unlike natural-law theorists, that it is at least possible that there could be valid law that is morally unacceptable. 83 THOMAS HOBBES, LEVIATHAN 89 (Richard Tuck ed., 1991)(1660). 84 Id. at 117-21.



government would be necessary.”85 But there is more to the story than traditional Hobbesian hand-

wringing about society in the state of nature. Recently, Larry Alexander,86 and before him (to a lesser extent) Gregory Kavka87 and John Rawls,88 emphasized that we have law not just to keep others from acting like brutes. Rather, even if we all agree on an appropriate standard of behavior, disputes about the application of that standard to individual cases would be inevitable.89 As Alexander puts it, the problem is not that people are not angels, but that they are not gods.90 We might all agree, for example, on the principle “all people are to be treated equally,” but, lacking omniscience, disagree a great deal about how to apply that principle in any given case. Law is a system of rules that pre-empts debate about such topics in everyday life. Legal rules give us guides for action because of their status as law independently of their content, and thus we need not debate the merits of those rules in every instance in order to know how to act. Unfortunately, the rules sometimes lead to injustices in particular cases, but, according to Alexander, that is an inevitable dilemma of law.91

Recent positivists have emphasized this “epistemic” function of law, i.e., that law informs citizens as to what conduct is and is not acceptable.92 Joseph Raz argued that an essential feature of law is that it claims to be authoritative.93 Law claims to mediate between reasons and persons. In the absence of law, people eventually would become embroiled in moral or prudential disputes about proper conduct. Law guides conduct by giving content-independent reasons for action.94 As H.L.A. Hart noted, legal reasons are also “peremptory,” that is, they are not only content-independent, they also give a reason not to deliberate about content.95 And according to Raz, in order for law to be an 85 THE FEDERALIST NO. 51, at 349 (James Madison) (Jacob E. Cooke ed., 1961). 86 Larry Alexander, Law and Formalism (San Diego Legal Studies Paper No. 07-18, Oct. 2005), available at http://ssrn.com/abstract=829327. See generally Alexander, supra note 30; LARRY ALEXANDER & EMILY SHERWIN, THE RULE OF RULES: MORALITY, RULES, AND THE DILEMMAS OF LAW (2001). 87 Gregory S. Kavka, Why Even Morally Perfect People Would Need Government, 12 SOC. PHIL. & POL’Y. 1 (1995). 88 JOHN RAWLS, POLITICAL LIBERALISM xviii-xxii, xxxix, 54-58 (1993). 89 See also H.L.A. HART, THE CONCEPT OF LAW 128 (2d ed. 1994). 90 Alexander, supra note 86, at 25-27; Alexander, supra note 30, at 549; see also HART, supra note 89, at 128 (“Put shortly . . . the necessity for such choice [between open alternatives] is thrust upon us . . . because we are men, not gods. It is a feature of the human predicament . . . that we labor under two connected handicaps whenever we seek to regulate. . . . The first handicap is our relative ignorance of fact: the second is our relative indeterminacy of aim.”). 91 See ALEXANDER & SHERWIN, supra note 86. 92 See Shapiro, supra note 80, at 172-75. 93 JOSEPH RAZ, THE AUTHORITY OF LAW: ESSAYS ON LAW AND MORALITY 30 (1979). 94 Id. at 30-33; see also Leiter, supra note 74, at 363. 95 See H.L.A. HART, ESSAYS ON BENTHAM: JURISPRUDENCE AND POLITICAL THEORY 253-54 (1982).



authority, people must be able to determine what the law is without resorting to argument about what the law should be. The law must be capable of making a practical difference; that is, it must be capable of giving us a reason for action as law that we did not already have from underlying moral or prudential considerations alone.96 As Scott Shapiro has put it, legal norms “eliminate the problems that arise when non-officials must answer all normative questions themselves and resolve all social controversies by themselves.”97

Of necessity, this very cursory account of legal positivism papers over many differences of opinion and decades of debates about the details. For example, leading positivists disagree over the important question whether it is ever possible for there to be a moral test for legality.98 The exclusive legal positivists claim that laws must be completely identifiable by their human source or pedigree, while inclusive legal positivists claim that it is possible that a legal obligation could depend on moral facts if the appropriate legal officials have incorporated moral norms by reference in the appropriate way.99 Despite such disputes, all legal positivists agree that it is at least possible to have valid yet morally reprehensible law. They also generally accept the claim that law is a social institution, one that gives citizens reasons for action in the face of moral or prudential disputes, and it does so in order to deal with the difficulties of social coordination in the face of inevitable disagreement.100 In fact, even non-positivists sometimes emphasize the desirability of legal rules that give clear, predictable guidance to citizens.101 Rather than dwell on these well-worn debates, I instead want to turn to some very recent work in the positivist tradition that may be of great help to us in contract law.

In the last few years, Scott Shapiro has drawn on the work of the philosopher Michael Bratman to add a new direction to the positivist tradition.102 Over the last two decades, Bratman has challenged the once-common view in philosophy that practical reasoning is means-end reasoning that can be explained completely in terms of an agent’s beliefs and desires.103 Bratman has shown that, in addition to desires,

96 See Shapiro, supra note 80, at 171-77. 97 Id. at 174. 98 Leiter, supra note 74, at 356-57. 99 The “exclusive” legal positivists are sometimes referred to as “hard positivists,” while the “inclusive” legal positivists are sometimes referred to as “soft positivists.” Id. 100 Shapiro, supra note 80, at 186-91. 101 See generally Lon L. Fuller, Positivism and Fidelity to Law—A Reply to Professor Hart, 71 HARV. L. REV. 630 (1958). 102 See Shapiro, supra note 80; Shapiro, supra note 81. 103 MICHAEL E. BRATMAN, FACES OF INTENTION: SELECTED ESSAYS ON INTENTION AND AGENCY (1999) [hereinafter, BRATMAN, FACE OF INTENTION]; MICHAEL E. BRATMAN, INTENTION, PLANS, AND PRACTICAL REASON 14-27 (1999) [hereinafter BRATMAN, INTENTION, PLANS, AND PRACTICAL REASON].



ordinary, everyday practical reasoning also requires plans.104 Rational agents form and follow plans of action that, unlike desires, extend over time and are at least somewhat resistant to revision.105 The primary advantages to plans over simple desires are that they save us time and effort by making deliberation more efficient in the long run, and that they make it possible for us to coordinate our behavior with others.106 It is beyond the reach of this paper to explain the important impact of this relatively intuitive idea in the philosophy of action. For the purposes of this paper, it is enough to note that Shapiro has begun to make use of this idea as a way to understand legal systems, which he sees as most fundamentally aimed at solving the problems associated with unplanned communities.107 According to his “planning theory” of law, the “business of legal institutions is to design, adopt and apply plans that assign tasks, set goals, impose constraints and, in general, distribute rights and responsibilities so that the political objectives of the system can thereby be achieved.”108

The planning theory does not fundamentally change the basic claims of legal positivism. The relevant plans are social artifacts, and they, of necessity, make a practical difference to citizens by giving citizens reasons they did not already have. But beyond this there are advantages to thinking of law as plans. As Bratman discusses at some length, plans are always to some degree partial.109 Much of practical reasoning consists of filling in these partial plans over time. Once we recognize this aspect of law, Shapiro argues, the planning theory can help us better to understand tricky questions like the challenges associated with constitutional interpretation.110 For Shapiro, seeing government officials as engaged in community planning brings consideration of trust to the center of legal interpretation as plan-designers must ask themselves to whom the task of filling in the partial plans should be entrusted.111 I shall return to this point later, as it will help us as we consider how formal our law of contract should be. I will eventually argue that although a planning theory of law is conceptually consistent with a law of contract that is either more or less formal, understanding law as a set of plans is likely to lead us to prefer a return to a more formal law of contract than we now have.112 104 BRATMAN, INTENTION, PLANS, AND PRACTICAL REASON, supra note 103, at 28-49. 105 BRATMAN, FACES OF INTENTION, supra note 103, at 61; BRATMAN, INTENTION, PLANS, AND PRACTICAL REASON, supra note 103, at 29. 106 BRATMAN, FACES OF INTENTION, supra note 103, at 59; BRATMAN, INTENTION, PLANS, AND PRACTICAL REASON, supra note 103, at 2-3. 107 Shapiro, Interpretation and the Economy of Trust, supra note 18, at 4, 11-12. 108 Id. 109 BRATMAN, INTENTION, PLANS, AND PRACTICAL REASON, supra note 103, at 29. 110 Shapiro, Interpretation and the Economy of Trust, supra note 18. 111 Id. at 16-24. 112 As far as I know, no one has yet applied the planning theory of law or Bratman’s work on



Let us summarize. We have seen that legal formalism, most broadly, is the view that rules are binding because they are rules, rather than because of any justification for the rules. This way of thinking about the law led to complaints in contract law that legal rules were often normatively insensitive, in that they erected seemingly arbitrary barriers to the enforcement of promises; and that formal application of legal rules is often context-insensitive, in that the application of rules in individual cases often leads to obvious injustices. We then briefly examined legal positivism, which is (again, roughly speaking) the view that law is a human artifact. Positivists are also criticized because their view is also normatively insensitive in its own way, in that, if they are correct, it is possible for morally reprehensible laws to be valid. The positivists actually embrace this would-be objection, and indeed argue that the whole point of law is to help to coordinate human behavior in the face of potential disagreements about moral truths or about the application of moral truths to the facts at hand in any given case. Law by its nature gives content-independent reasons. Finally, we saw that recent work shows that it is useful to think of legal officials as settling or avoiding disputes by promulgating plans—laws—which guide the behavior of citizens. These laws are often initially partial, and need to be filled in over time.

I have asserted that understanding legal positivism, and the motivation for legal positivism, can help us decide how formal our law of contract should be, even though positivism itself makes no normative claims about law. To show how this is so, it is useful to consider what legal positivism and the planning theory might teach us about one particular theory of contract law: the intuitively plausible and well-known promise theory of contract. The promise theory holds that contract law is based on the morality of promising. In this sense, it is an extreme version of some of the informal rules of modern contract law, which overtly refer to norms such as justice or reasonableness. The following section will describe the promise theory of contract and then consider whether law that includes such moral content is at odds with a functional account of law like legal positivism. Can a theory that explains law as an incorporation of controversial moral norms make a the role of plans in practical reasoning to contract law in particular in any systematic way. Both Daniel Markovits, Contract and Collaboration, 113 YALE. L.J. 1417 (2004), and Manuel A. Utset, see Reciprocal Fairness, Strategic Behavior & Venture Survival: A Theory of Venture Capital-Financed Firms, 2002 WIS. L. REV. 45, 83-84 (2002), briefly mention the possibility that Bratman’s work could be helpful in contract theory. But Markovits focuses on Bratman’s account of what Bratman calls joint intentional activities, rather than on the role of plans. Markovits also quickly departs from Bratman by using the concepts to build a moral theory of contract. For a discussion of Markovits’s very thoughtful work, see Curtis Bridgeman, Contract as Plans (unpublished manuscript, on file with author). Utset’s work is more on point but is also merely suggestive. Conversations with Utset (who is now a colleague, though we started working on these ideas independently) have been very helpful.



practical difference, even though the whole purpose of law is to settle disputes about such controversial norms? That question will be addressed in the next section. We shall see that it can make a difference in the technical sense described by the positivists. Whether it could be effective at settling moral disputes, and is thus a legal theory we might want to adopt, is a question addressed in Section IV.

III. THE PROMISE THEORY OF CONTRACT AS NORM-SENSITIVE

CONTRACT LAW

Recall that anti-formalists complained that formalism led to legal rules that were insensitive to moral or other norms, erecting seemingly arbitrary barriers to the enforcement of moral, promissory obligations. Somewhat similarly, anti-positivists113 complained that positivism allowed for the possibility of morally objectionable, yet valid, law.114 The positivists argue that such a possibility is necessary given the nature of law.115 The anti-formalists’ solution to formal contract law’s norm-insensitivity was to include normative content in the legal rules themselves, for example, the requirement of good faith and fair dealing, and overt references to the requirements of justice. The move to identify contract law with moral norms is not new; for centuries, legal theorists have studied the morality of promising for insight into the nature of contract law. And to this day, contract theorists worry especially about whether contract is insensitive to the norms of promising.116 In this section, I will consider whether the inclusion of norms in the content of contract law violates positivism’s requirement that law make a practical difference independently of our non-legal reasons for action. We will see that when the positivist constraint is properly understood, law can include normative content and still qualify as law. Whether it is desirable to include such content will not be discussed until the next section.

Before considering norms as vague as “justice” or “good faith and fair dealing,” it will be useful to consider a more thickly moral account of contract law. In the 1980’s, Charles Fried put forth the most comprehensive and well known modern theory of contract based on the

113 The anti-positivists include primarily the natural law theorists and Ronald Dworkin (assuming we take him at his word that he is not a natural law theorist as well). Jules L. Coleman & Brian Leiter, Legal Positivism, in A COMPANION TO PHILOSOPHY OF LAW AND LEGAL THEORY 241, 242 (Dennis Patterson ed., 1996). 114 See supra note 81. 115 See supra notes 74-75 and accompanying text. 116 For a particularly thoughtful example, see Seana Valentine Shiffrin, The Divergence of Contract and Promise, 120 HARV. L. REV. 708 (2007).



morality of promising.117 For Fried, contractual obligation is grounded in the moral duty to keep one’s promises,118 a moral duty best understood within a Kantian framework where an act of an autonomous agent’s free will binds itself.119 If responsibility cannot be traced to such an act an agent may still be liable for another’s loss, but her liability will not be grounded in contract law (even if it may be mislabeled as such by courts or contracts textbooks).120 Contractual duties are determined by one’s moral duties to keep one’s promises.

Much of the controversy surrounding Fried’s work has centered on his attempt to draw clear lines between the laws of contract and tort, lines the legal realists of the twentieth century were eager to blur.121 While so much emphasis has been placed on what counts as a theory of contract law, little attention has been paid to whether Fried’s theory of contract qualifies as a theory of law at all. At first blush, it might appear that if the positivists are right, then Fried’s theory of contract could not explain a body of law.

Recall that according to the positivists, law performs the epistemic function of guiding the conduct of citizens by informing them what is expected of them, even though they may think that morality or prudence require something else in a given situation. In order to be law, a rule must make a practical difference to the reasoning of citizens. That is, legal rules give citizens reasons for action that they otherwise would not have. If they did not, citizens would be left with exactly the same moral or prudential debates which would arise in the absence of law.

It might be thought at first that contract law as explained by Fried is unable to meet the positivists’ requirement. The argument would go as follows: For Fried, a contract must be kept because it is “first of all” a promise, and we have a moral duty to keep promises.122 By collapsing the distinction between one’s legal duty to perform a contract and one’s moral duty to keep a promise, Fried undercuts the law’s claim to authority as law. One presumably cannot determine one’s contractual duties without considering one’s moral duties entailed by the promise(s) in the contract. Law gives content-independent reasons for action, i.e., reasons based on nothing but the fact of its being law, but Fried’s 117 FRIED, supra note 17. 118 Id. at 17. (“The moralist of duty thus posits a general obligation to keep promises, of which the obligation of contract will be only a special case—that special case in which certain promises have legal as well as moral force. But since a contract is first of all a promise, the contract must be kept because a promise must be kept.”). 119 Id. at 14-21. 120 Id. at 23-27. 121 For an excellent recent discussion, see Richard Craswell, Expectation Damages and Contract Theory Revisited 24-26, 37-40, 48-49 (Stanford Law School, John M. Olin Program in Law and Econ., Working Paper No. 325, Aug. 2006), available at http://ssrn.com/abstract=925980. 122 FRIED, supra note 17, at 17.



promise theory of contract identifies legal reasons with moral reasons. If he is correct, contract law does not preempt discussion of morality, and it has no claim to authority as law. In disputed cases, parties are left to debate the moral consequences of their statements or actions in order to determine their legal obligations. It is therefore not surprising that theorists who appeal to arguments based on promising often use the terms “promise” and “contract” almost interchangeably.

Let us be clear about what the argument outlined above is and is not asserting. The positivist argument does allow one to appeal to a moral obligation in order to justify a law of contract. The claim is not a claim about what kind of law we should have. Rather, the positivists’ position delves much deeper: it is a claim about what it is to have law in the first place. Similarly, Fried’s claim is not so much a defense of contract on the grounds that we have a duty to keep our promises, though it at times has that flavor as well. Rather, Fried’s work purports to be a descriptive explanation of the law of contract, that is, an account of its concepts and rules. The stated purpose of his book is to “to display for students the underlying structure of this basic legal institution,” and “to show how [it] can be traced to and is determined by a small number of basic moral principles.”123 Although he clearly finds those moral principles persuasive, his primary purpose is descriptive and his aim is to give an account of what contract law is, not just what it ought to be. If the positivists are correct, while Fried may have explained a social practice we might loosely call contracting, it might seem at first that he has failed to explain contract law.

But the imagined argument is too simplistic. Taken to its extreme, it would suggest that laws can never have moral content and still qualify as law. Imagine that the relevant law-making body (to make it simple, suppose both the United States Congress and the legislatures of every state) enacted a law that said contracts are to be binding against a promisor if and only if the promisor has a moral duty to keep her promise in the particular case. Such a rule enacted in the proper manner would clearly be a law, despite its moral content (whether it would be a desirable law is another matter). The rule would be law not because it comported with the requirements of morality, but rather because it was enacted in the proper manner by the appropriate legal officials. To be sure, in order for a promisor to determine her legal obligations she would have to engage in moral reasoning, but that does not mean that the law makes no practical difference. Imagine that she would later like to avoid performing her promise because it has turned out to be disadvantageous for her. Someone advising her to keep her promise could reasonably say to her, “You have a moral duty to keep your

123 FRIED, supra note 17, Preface.



promise . . . and it’s the law.” If she were disinclined to be motivated by her moral obligation, she might still be motivated by her legal obligation.

It is possible to read Fried as giving an account of contract law not so different from this example. Under this reading, the morality of promising is the basis of contract law not because of truths about moral obligations to keep one’s promises, but rather because the appropriate legal officials have, over time, adopted the morality of promising in such a way as to make the moral truths legal truths:

Security of the person, stability of property, and the obligation of contract were for David Hume the bases of a civilized society. Hume expressed the liberal, individualistic temper of his time and place in treating respect for person, property, and contract as the self-evident foundations of law and justice. Through the greater part of our history, our constitutional law and politics have proceeded on these same premises. In private law particularly these premises have taken root and ramified in the countless particulars necessary to give them substance. . . . The regime of contract law, which respects the dispositions individuals make of their rights, carries to its natural conclusion the liberal premise that individuals have rights. And the will theory of contract, which sees contractual obligations as essentially self-imposed, is a fair implication of individual liberalism.124 Under this reading, Fried might be understood as asserting that it is

a fact of our legal history that our legal officials have adopted an individualistic, liberalist morality of promising as the foundation for our law of contract. Legal truths about contracts are determined by moral truths about promising not because of the demands of morality directly, but rather because those moral demands were chosen as standards in the appropriate way.125 Promise is the basis of contract not because of its status as natural law, but because legal officials have incorporated the morality rules of promising into contract law.126

On the other hand, there are very good reasons to read Fried’s theory as a natural-law account after all.127 But the primary aim here is 124 FRIED, supra note 17, at 1-2 (emphasis added, footnotes omitted). 125 We will see later that this is actually too simple a formulation of the positivists’ position, but it will suffice for the current point. 126 One must be careful here not to confuse the incorporation of moral rules into primary rules like the law of contract with the claim that a test for what law is in the first place could incorporate moral rules. The inclusive, or “soft” positivists argue for the possibility of the latter form of incorporation. See supra, note 78. Again, for the most part, I believe I can safely avoid that debate in this discussion. 127 Although passages like the one above suggest that Fried’s contract theory is that contract law includes the moral content associated with promising just because legal officials have chosen for it to include that content rather than because people have a natural-law duty to keep their promises, I ultimately wonder whether that is the correct reading of Fried. To see if Fried is truly committed to an account of contract law consistent with the requirements of positivism, consider



not exegetical. Rather, the point is that it is perfectly consistent with positivism to include moral content in the law. At most,128 positivism prevents a moral test for what counts as law. It is possible to read the promise theory as more consistent with the dictates of positivism. Under this reading, the morality of promising is the foundation of our law of contract because it has been adopted by our legal officials, not

the following test. Suppose the following two statements are true:

1. Promisors have a LEGAL duty (because of historical facts about decisions made by the appropriate legal officials) to keep whatever promises they are morally required to keep.

2. Promisors have a MORAL duty to keep their gratuitous promises. Notice that while (1) is a legal truth, (2) is a moral truth, i.e., a truth about what morality requires independently of any legal institution. Now suppose further that:

3. All appropriate legal officials, knowing (1), debate in the appropriate manner the morality of breaking gratuitous promises, and decide, unanimously but, as it happens, incorrectly (i.e., contrary to (2)), that promisors do NOT have a moral duty to keep gratuitous promises.

Here is the test: under these conditions, does Jones have a legal duty to keep the particular gratuitous promise P that he has made? The legal positivist must answer no. Law is determined by social facts, not moral facts. The fact that law is a social construct does not prevent legal actors from referring to morality in legal rules, but ultimately social facts about legal officials will determine the content of law, not moral facts. If it were otherwise, law would be incapable of performing its function, viz. guiding the conduct of citizens. Citizens would be left always to wonder and debate whether undisputed facts about legal officials were trumped by moral facts. Even supposing there are objective moral truths, those truths would still be up for debate among legal actors, and could not trump contrary statements by the appropriate legal officials. It is the job of law, and of legal officials, to give practical guidance in the face of such debates. Of course, in this case, the practical guidance would conflict with the moral truth—according to the hypothetical—that promisors have a duty to keep gratuitous promises, and therefore this law may not be the best one a society could have. But we must be careful to distinguish the question of what the best law is from what it means for something to be law in the first place. It is hard to know for sure how Fried would respond to the hypothetical. One might argue that for Fried, the mistake that legal officials make about morality leads to their being mistaken about legal duties. Again, the legal duties of contract are “determined by a small number of basic moral principles,” moral truths which do “not depend on fashion or favor.” FRIED, supra note 17, at 2. And in fact, Fried struggles to explain the consideration doctrine (which, roughly speaking, entails (3)). At first he dismisses the consideration doctrine as an objection to his theory simply because the doctrine is “too internally inconsistent to offer an alternative at all.” Id. Ultimately, though, Fried seems to recognize that the truth of (3) means that at least as a matter of “positive” law, there is not a legal duty to keep gratuitous promises:

[T]he life of contract is indeed promise, but this conclusion is not exactly a statement of positive law. There are too many gaps in the common law of promises to permit so bold a statement. My conclusion is rather that the doctrine of consideration offers no coherent alternative basis for the force of contracts, while still treating promises as necessary to it.

Id. This conclusion does not mean that Fried is a positivist, of course, even about contract law, since although he admits the conflict between positive law and the requirements of morality, he does not commit himself to the notion that all law is positive law. 128 “At most,” again, because of the dispute between exclusive and inclusive positivism. The exclusive positivists argue that there can never be a moral test for law. The inclusive positivists argue that while it is by definition possible to have valid law that contains no moral test, it is also possible to have such a test for the validity of law. For the inclusive positivist, whether there is such a test is a matter of contingent fact. See supra note 78.



because of its status as a form of natural law or because of its moral truth. Nothing about this version of the promise theory is inconsistent with legal positivism and its practical difference thesis. Even though law is meant as a practical solution to the problems associated with moral disagreement, a law of contract that contained disputed moral terms could still make a practical difference.

That said, positivism is merely an account of what law is: it is a source of content-independent reasons that aims to settle moral or prudential disputes. Positivism does not directly evaluate law or tell us what kind of law to adopt, and the aim of this paper is prescriptive: to determine how formal our law of contract should be. Nonetheless, the detour into legal positivism has been worthwhile. It seemed at first that positivism might allow us to rule out laws laden with moral language like ones based on the promise theory, or perhaps like the parts of modern contract law that include debatable normative terms like “justice,” “reasonable,” and “good faith and fair dealing.” We now see that such laws cannot be ruled out by positivism if adopted in the appropriate manner. At this point, when deciding whether we should keep our modern, anti-formal contract law, it is helpful to think about why we have law at all, considering that according to the positivists law must by definition be to some degree insensitive to norms. Having seen what law most fundamentally is and what it does, we are now in a better position to evaluate how well the law of contract performs its function. As we shall see in the next two sections, the informality of modern contract law makes it much less effective than it could be at guiding behavior.

IV. GUIDING WITH VAGUE RULES: THE ROLE OF SPECIFICATION IN

JURISPRUDENCE We have seen that there is a reading of the promise theory that

would still qualify it as law, despite its moral language. But we have said nothing about whether such laws would be desirable. The rule that contracts are legally binding if and only if they are morally binding is in principle capable of guiding conduct, because the adoption of the moral rules by legal officials gives citizens a reason to follow those rules beyond the reasons provided by the substance of the rules themselves. But could such a rule be effective at guiding conduct? Though valid, could they possibly be good laws, laws we would want? Arguably not.

Recall the discussion in Part II above about the function of legal rules. We have laws in order to guide conduct. But why should we add to the reasons that already apply to the conduct of citizens instead of simply allowing them to guide their conduct according to those reasons,



such as considerations of morality or prudence? One reason is that citizens will often disagree about which rules apply. Since cooperation, or at the very least co-existence, is required, legal rules intervene. But the problem is not just that citizens often disagree about which moral rules govern their conduct. Many times they will agree which moral rules apply, but fail to agree about what those rules entail in given cases. Again, as Alexander put it, we have law not just because people are not angels, but also because they are not gods.129 Laws inform as well as command. A law that simply told people to keep the promises that morality requires them to keep technically would give them a practical reason they did not have before, but it would not give them any new information about exactly what they ought to do. People already know they ought to keep the promises that morality requires them to keep, and though they now may have an additional, legal, reason to do so, any disagreement about what morality requires would spill over into disagreement about what the law requires, and thus the law would be of no help in settling their prior disagreement about what is to be done.130 It seems such rules would qualify as law, but they would be entirely ineffective at doing what law is supposed to do.

Indeed, similar complaints have been registered in recent years against some of the more vague provisions of the U.C.C. and the Second Restatement. For example, what does it mean to limit damages in a promissory estoppel action “as justice requires?”131 Does that mean that the plaintiff should receive only reliance damages? Restitution damages? Something else entirely? There is still no consensus.132 But at least promissory estoppel is a relatively narrow category, whereas the complaints against the U.C.C.’s “good faith and fair dealing” and numerous “reasonableness” requirements have been much more vigorous. Commentators complain that because no one knows what these terms mean, they introduce too much uncertainty.133 At best, they force parties to draft around the terms, increasing transaction costs; at worst, the terms are unavoidable, and litigation by motivated plaintiffs may be inevitable.134

129 See supra note 90. 130 Alexander, supra note 86, at 27 (“If law is a response to uncertainty and disagreement rather than to immoral motivation, then law that is nonformal—that incorporates or refers to moral principles whose applications are neither uncertain nor contentious—serves no function. That is, laws that direct people to be fair or just, or to do what is right and honorable, tell people no more than they already know. We do not need to be told through some posited norm that we should do what is right. We know that. What we need to be told is what course of action is right.”). 131 RESTATEMENT (SECOND) OF CONTRACTS § 90 (1981). 132 PERILLO, supra note 50, at 256. 133 See Alan Schwartz & Robert E. Scott, Contract Theory and the Limits of Contract Law, 113 YALE L.J. 541, 594-609 (2003). 134 Id.



Many difficulties associated with guiding conduct by means of vague standards rather than clear rules have been pointed out before, both generally135 and with respect to contract in particular.136 But these discussions have not taken into account what Shapiro’s planning theory of law has to teach us. Legal institutions do not merely give citizens reasons that make a practical difference; they do so by making plans. Recall that a part of Bratman’s insight was that plans are not only crucial to practical reasoning, they are also of necessity often partial.137 We cannot get far in the world operating only with beliefs and current desires; we must also make forward-looking plans and have some degree of commitment to those plans. But that does not mean that we need to plan every detail up front; indeed, it would usually be irrational to do so. Today I make plans to fly to New York in three months, but I need not figure out the best route to the airport until it is nearly time to go, and given the possibility of my plans changing, it may be irrational to spend time and effort making more detailed plans now. Similarly, legal institutions typically begin with plans that are quite partial: e.g., constitutions. Sometimes those plans are simply plans for further plan creation or specification. Our constitution empowers Congress to create plans that govern behavior in certain instances; Congress, in turn, often empowers administrative agencies to make more specific plans.

Contract doctrines which refer to vague or otherwise controversial terms like “morality” or “justice” are therefore not necessarily ineffective laws. Instead, we might view them as partial plans, plans which require further specification over time. And, in fact, the common law operates very much in this manner. Consider, for example, the common-law rule that immoral contracts are not to be enforced. If that were the only contract law we had, and the only one on the subject we ever could have, then it would likely be ineffective at guiding conduct. We already know that we should not enforce immoral contracts; the question presented in a given case is, is this contract immoral (or, if you prefer, contrary to public policy)? But in Anglo-American common-law systems, that need not be the last statement of the rule. Instead, courts further specify the rule by making judgments about different sets of facts. Over time, courts fill in what it is that the rule that immoral contracts are not to be enforced means so that now “any text book can tell you which contracts the law disapproves of.”138 For example, Section 2-207(2)(b) of the U.C.C. dictates that additional terms in a

135 See Alexander, supra note 30; Alexander, supra note 86. 136 See Schwartz & Scott, supra note 133, at 594-609. 137 See supra note 109. 138 Timothy A.O. Endicott, Raz on Gaps—the Surprising Part, in RIGHTS, CULTURE, AND THE LAW: THEMES FROM THE LEGAL AND POLITICAL PHILOSOPHY OF JOSEPH RAZ 99, 105 (Lukas H. Meyer et al. eds., 2003).



non-conforming acceptance will not become part of the contract if they “materially alter” the contract.139 Although what counts as a material alteration is not immediately obvious, by now we have a substantial list of examples which courts have said meet or fall short of the standard.140 In this manner, rules that are perhaps initially too vague to guide conduct effectively can be further specified into an informative, effective body of law.

This is not to say that the common law’s system of filling in initially partial law over time is free from problems, or even necessarily the best available method. Clearly, in such a system, early litigants do not enjoy the guidance that later litigants receive. Jeremy Bentham famously called the common law “dog law,” likening it to instructing a dog by catching it in the act and then punishing it for behavior that it previously did not know to be unacceptable.141 Parties in smaller jurisdictions (where there is not as much binding precedent) or parties with more unusual issues may particularly lack guidance.

Evaluating such a legal system will depend a great deal on how much one trusts the legal actors charged with filling in the partial law. Shapiro usefully explains that one way to approach problems of constitutional interpretation is to ask how much the designers of the system trusted those who were to be charged with interpreting its content. A designer who trusted judges less would give them less leeway in questions of interpretation, perhaps suggesting a textualist approach. In fact, such issues of trust are hardly new to debates about the common law. In the eighteenth and nineteenth centuries, for example, reformists like Jeremy Bentham simply did not trust England’s common-law judges, whom the reformists saw as members of a ruling elite who used the bench to entrench further their own power.142 Defenders of the common law like Blackstone, on the other hand, saw common-law judges as the embodiment of many years of intellectual progress on tough legal issues.143

Twentieth-century legal realists may be seen as continuing the reformist struggles of Jeremy Bentham. Early “proto-realists” like Corbin144 and Cardozo145 seemed content to reform contract law enough 139 U.C.C. § 2-207(2)(b) (2003). 140 See JAMES J. WHITE & ROBERT S. SUMMERS, UNIFORM COMMERCIAL CODE (3d ed. 1972). In this case, the specification was aided by a list of suggestions in the official comments. § 2-207 cmts. 4 & 5. 141 Jeremy Bentham, ‘Truth versus Ashhurst,’ in THE WORKS OF JEREMY BENTHAM 231, 235 (Edinburgh & Simpkin eds., 1843). 142 JEREMY BENTHAM, FRAGMENT ON GOVERNMENT (1776); see also Richard Posner, Blackstone & Bentham, 19 J.L. & ECON. 569, 570 (1976). 143 SEBOK, supra note 24, at 24-25. 144 One can’t help but be amused at Grant Gilmore, himself an unabashed realist, and his puzzlement as to why Corbin, his mentor, was not radical enough:

If Corbin was, as I have characterized him, a non-establishment revolutionary, the



to bring its principles into line with twentieth-century values, technology, and business practices, but otherwise leaving its basic structure intact. By the middle of the twentieth century, however, realists like Karl Llewellyn and the other drafters of the U.C.C. were not so patient. Llewellyn saw contract law as outdated and overly formal, based on an outdated model of commerce (he called it the law of “horse” and “hay stacks”), and insensitive to the business needs and practices of the twentieth century.146 He sought to bring contract law into line with business by reducing arbitrary barriers to enforcement; creating default rules that would govern agreements unless parties chose otherwise, in theory saving them the trouble of writing such rules into the contracts themselves; incorporating basic norms from the business world, like the principle of good faith and fair dealing; and introducing new norms into business transactions that would make them more “decent”147 and help to avoid “sharp dealing.”148 Llewellyn trusted business people and commercial-law experts more than common-law judges to create better rules for commercial law.149 The U.C.C. was an attempt to produce a single set of legal rules that would effectively govern all commercial transactions, rules much more practical than the ones that had been slowly developed by generalist common-law judges over the years.150

In some ways, the system that Llewellyn first envisioned is very different from the one ultimately realized. Llewellyn imagined specialized, industry-specific merchant juries.151 These merchant tribunals could be requested by either party and would serve as

question legitimately arises: What was he doing as part of the Restatement crew? Why was he not outside on the barricades leading the revolutionary troops with Llewellyn, perhaps, as his principal aide? I simply do not know the answer to the question.

GILMORE, supra note 27, at 60. 145 Much has been written on Cardozo’s role in reforming the common law and his historical fit between the classical period and the later realists. See, e.g., NEIL DUXBURY, PATTERNS OF AMERICAN JURISPRUDENCE 77 (1995) (describing Cardozo as a “proto-realist”); SEBOK, supra note 24, at 76 (describing Cardozo as a “pre-realist”); Curtis Bridgeman, Allegheny College Revisited: Cardozo, Consideration, and Formalism in Context, 39 U.C. DAVIS L. REV. 149, 181-86 (2005) (describing Cardozo’s contracts jurisprudence as an attempt to adapt the classical formalities of contract law to modern business practices). For an excellent study of Cardozo’s role in re-conceptualizing duty in tort to fit an industrialized world, see John C.P. Goldberg & Benjamin C. Zipursky, The Moral of Macpherson, 146 U. PA. L. REV. 1733 (1998). 146 Zipporah Batshaw Wiseman, The Limits of Vision: Karl Llewellyn and the Merchant Rules, 100 HARV. L. REV. 465, 503 (1987) 147 Id. at 537. 148 Id. 149 Sometimes this position is manifest explicitly in Article 2. See, e.g., U.C.C. § 2-609 cmt. 3 (2003) (“Subsection (2) of the present section requires that “reasonable” grounds and “adequate” assurance as used in subsection (1) be defined by commercial rather than legal standards.”). 150 Ingrid Michelsen Hillinger, The Article 2 Merchant Rules: Karl Llewellyn’s Attempt to Achieve the Good, The True, The Beautiful in Commercial Law, 73 GEO. L.J. 1141, 1163-64 (1985). 151 Wiseman, supra note 146, at 503-19.



impartial fact-finders for issues such as interpretation of the trade usage of terms, the “‘mercantile reasonableness of any action by either party,’ and ‘any other issue which requires for its competent determination special merchants’ knowledge rather than general knowledge.’”152 With impartial experts on call who were already familiar with industry-specific terminology (what the U.C.C. calls “trade usage”) and industry-specific norms, parties would not have to spend so much time defining these terms and norms in the contract, or presenting expert testimony about them at trial. To take a well-known example from contract law, a judge in the paving industry, faced with the “partial” rule that all contracts include duties of good faith and fair dealing, might be in a better position to specify whether that duty entailed price protection in the paving industry in the event of spikes in petroleum prices.153 Similarly, a judge in the poultry industry might well know whether the term “chicken” is ambiguous between stewer chickens and fryer chickens, or whether any chickens will suffice.154 Just as Llewellyn preferred U.C.C. experts over common-law judges as drafters of commercial laws, he also preferred specialized, merchant courts over common-law judges as interpreters of commercial law, or at least as finders of facts such as “reasonableness” in commercial cases. Employing such fact-finders could be seen as a means of eliminating the need for the judiciary altogether.155 Llewellyn complained that in the current judicial process “‘[f]ew judges have the specialized skill in such matters . . . and juries are notoriously out of touch with such matters.’”156

Llewellyn’s vision of merchant tribunals was never realized. If it had been, perhaps the success of the U.C.C. would be judged differently today. If parties could rely on specialized commercial-law courts similar to the specialized bankruptcy or tax courts we now have, then commentators might be more willing to trust them to fill in the extremely partial “plans” articulated in Article 2. But even the system as Llewellyn imagined it would not have been without problems. For one thing, the determinations of these merchant tribunals would not provide legal precedent. Therefore, although a tribunal might have been comprised of those especially skilled at further specifying broad principles into more narrowly tailored (and hence more easily applied) laws, it would have had no authority to do so beyond the case at hand. If it were otherwise, the members of a merchant tribunal would have

152 Id. at 512 (quoting REVISED UNIF. SALES ACT (Report and Second Draft, 1941)). 153 See Nanakuli Paving & Rock Co. v. Shell Oil Co., Inc., 664 F.2d 772 (9th Cir. 1981). 154 See Frigaliment Importing Co. v. B.N.S. Int’l Sales Corp., 190 F. Supp. 116 (S.D.N.Y. 1960). 155 Wiseman, supra note 144, at 515. 156 Id. at 513 (quoting REVISED UNIF. SALES ACT (Report and Second Draft, 1941)).



strong financial incentives to adopt rules that would favor their own personal situations in later cases.157 The fact that judges are removed at some distance from commercial practices is in many ways beneficial.

In addition, many of the recent complaints about the informalities of Article 2 have much more to do with drafting than with interpretation. Complaints from so-called “new formalists” about the U.C.C.’s default-rules project are good examples.158 One part of Article 2’s anti-formalist project was to provide a stable of default rules that would become part of all contracts for the sale of goods unless parties specifically opted out of these rules by drafting around them.159 While classical formalism would have insisted that the parties state the terms of the contract themselves,160 anti-formalists thought that contract law should better reflect business practices.161 If commercial-law experts could decide which rules most parties want, it would be better to make those rules statutory defaults and save parties the trouble of writing the rules into the contracts themselves. The law could simply incorporate the already-existing norms of business rather than forcing business people to make their practices fit into arbitrary and often counter-intuitive legal formalities.

Unfortunately, despite the good intentions of the drafters, in the eyes of many, the U.C.C.’s default-rules project has been a “flop,”162 and has led to a surge in “anti-antiformalism” (so called to distinguish it from classical formalism).163 Some of the objections concern the very possibility of incorporating such norms. It has been claimed, for example, that there simply are no national norms to incorporate, a result that should not be surprising given that Article 2 covers such a huge and diverse territory, i.e., the sale of goods.164 The norms in Article 2 are called vague and meaningless because they have been watered down in order to cover too many different kinds of transactions. And although there have been few in-depth studies of localized, industry-specific norms, those studies reveal that parties often prefer a very formalized

157 Id. at 515. 158 Schwartz & Scott, supra note 133, at 594-609. 159 Hillinger, supra note 150, at 1163-65. 160 See generally Wiseman, supra note 146. 161 See id. at 496; see also Hillinger, supra note 150, at 1147-48. 162 Charny, supra note 31, at 846. One might object that it is hard to call Article 2 of the U.C.C. a flop when it has been enacted in forty-nine states with very few changes and for decades has resisted revision. Even now the revised version has not yet been enacted in a single state. I thank Peter Alces for pressing me on this point. I am not sure that merely not being replaced counts as very much evidence of success, especially considering all the inertia associated with enacting would-be uniform laws, including lobbying by interest groups. But such survival is probably evidence that the term “flop” is too strong. 163 Id. at 846. 164 Schwartz & Scott, supra note 133; see also Robert E. Scott, The Case for Formalism in Relational Contract, 94 NW. U. L. REV. 847 (2000).



model of contract.165 Other criticisms are based on who can be trusted to craft the

specific rules. For example, it has been argued that even if localized customs do exist, they may be inefficient or otherwise unworthy of incorporation into a national code.166 Indeed, given localized political and market pressures, we should expect local norms to be flawed in many ways, or at least to be unsuitable for adoption as national norms. National norms drafted by a panel of experts or legislators may not be much better, as those actors will also be subject to political pressure from interest groups.167 Even if we could create efficient or otherwise favorable national norms, local groups still might prefer to employ non-legal sanctions for as long as possible,168 but then to apply rigid, formal rules in those cases where they must resort to legal sanctions.169

Most of these critics actually have the same basic goals for contract law that Llewellyn had. Although they are often lumped together as “new formalists,”170 that is a name they seldom use themselves. They seem to follow Holmes’s advice to avoid the “fighting tag,”171 perhaps because of its association with the essentialism of classical formalism. Instead, most recent critics of anti-formalism come from a law-and-economics perspective and use wealth- or welfare-maximization as the primary test for contract law or any proposed reform. Although the point is often not appreciated, Llewellyn himself had that same goal.172 Llewellyn wanted to bring contract law more into line with business practices not to respect the autonomy of contracting parties, but rather in order to decrease transaction costs and increase welfare.173 Llewellyn simply trusted business experts and social scientists more than common-law judges as creators of contract law. Turning away from traditional legal scholarship and toward the social sciences for insight into law 165 Lisa Bernstein, Merchant Law in a Merchant Court: Rethinking the Code’s Search for Immanent Business Norms, 144 U. PA. L. REV. 1765 (1996). 166 Charny, supra note 31, at 843. 167 Robert E. Scott, The Rise and Fall of Article 2, 62 LA. L. REV. 1009, 1009-12 (2002); Alan Schwartz & Robert Scott, The Political Economy of Private Legislatures, 143 U. PA. L. REV. 595, 610-11 (1995). 168 Bernstein, supra note 165; David Charny, Nonlegal Sanctions in Commercial Relationships, 104 HARV. L. REV. 373 (1990); Robert E. Scott, Conflict and Cooperation in Long-Term Contracts, 75 CAL. L. REV. 2005, 2039-46 (1987). 169 Bernstein, supra note 165. 170 Charny, supra note 31. Similar terms used include “new conceptualism,” Ralph James Mooney, The New Conceptualism in Contract Law, 74 OR. L. REV. 1131 (1995), and “new conservatism,” Robert A. Hillman, The New Conservatism in Contract Law and the Process of Legal Change, 40 B.C. L. REV. 879 (1998)). 171 Patrick J. Kelley, A Critical Analysis of Holmes’s Theory of Contract, 75 NOTRE DAME L. REV. 1681, 1684 n.10 (2000). 172 Alan Schwartz, Karl Llewellyn and the Origins of Contract Theory, in THE JURISPRUDENTIAL FOUNDATIONS OF CORPORATE AND COMMERCIAL LAW 12, 15, 18 (Jody S. Kraus & Steven D. Walt eds., 2000). 173 Id. at 18.



reform was a common practice in twentieth-century legal realism more broadly, and Llewellyn’s new-formalist critics follow the trend.174 They argue that Llewellyn was relying on bad economics, and we now know, or ought to know, better.175 The ultimate test for both Llewellyn and his modern-day law-and-economics critics is the empirical test of which approach will maximize welfare.176 Both Llewellyn and his critics have argued that we should trust the parties actually involved to craft rules that maximize welfare, not members of the American Law Institute.177 In their view, the best economic theory available now tells us to leave the drafting to the parties on a case-by-case basis, rather than trying to draft universal contract terms.178

Although the general view of the new formalists (the “anti-anti-formalists”) is largely persuasive, my emphasis here is on a structural point. The anti-formalists were concerned with classical contract law’s seemingly arbitrary barriers to contract enforcement such as the consideration doctrine or the requirement that even common business norms be stated in a contract in order to become part of it. Such rules arguably made contract law tone deaf, as it were, to norms of promissory morality or good faith and fair dealing. The U.C.C. and the Second Restatement’s solution to such norm insensitivity was to include overt references to norms in the laws themselves, by including such terms as “justice” or “good faith and fair dealing.” Many of the complaints by the new formalists center on the fact that, as stated, such rules are too vague to guide conduct as law must do. We have law because we often disagree about what the norms of justice and good faith require.

While I am not the first to argue that norm-sensitive rules are too vague to act as guides for conduct, I have tried to advance the discussion by considering the implications of a planning theory of law. Viewing law as plans allows us to see that laws which are vague at first potentially may be further specified into usefulness over time. We do not necessarily need to choose between clear but harsh rules and vague standards, since over time initially partial law can be filled in. Recognizing the need for specification also calls to the forefront issues of trust that are always central in a planning theory of law. Who is to do the specifying? Indeed, we can understand many of the anti-formalist’s objections to classical (formal) contract law as centered on whether we should trust common-law judges to craft commercial law. And we can 174 Interestingly, the new formalists, with their faith in social science over traditional legal scholarship, in some ways have more in common with the classical positivists of the nineteenth century like Bentham and Mill than with the classical formalists. 175 Schwartz, supra note 172, at 18. 176 Charny, supra note 31, at 850. 177 See Schwartz & Scott, supra note 133, at 594-609. 178 Id.



likewise understand many of the objections to anti-formalism as critiques of whom the anti-formalists trusted to draft commercial law.

Rather than taking up the debate about institutional competence, a subject on which much has been written,179 I will instead turn in the final section to a more original objection to the anti-formalism of modern contract law. I will argue that much modern contract law is ineffective at accomplishing what law is meant to accomplish not because it is not the product of the best social science, but rather because it is drafted specifically to resist the process of plan specification that is central to effective governance. Much of modern contract law is meant not just to be norm-sensitive, but also context-sensitive. Unfortunately, attempts to make law context-sensitive make it resistant to specification, the kind of specification that, as we saw above, allows initially vague, unhelpful laws to become effective at guiding conduct with time.

V. CONTEXT-SENSITIVE LAWS: THE PROBLEM OF SPECIFICATION-

AVOIDANCE As we saw in Part II, complaints against formal contract law can be

divided roughly into two broad objections: that formal rules are often insensitive to norms, and that they are often insensitive to context. That is to say, applying rules without regard to their justification may lead to arbitrary or unjust results. And applying rules without regard to context often results in injustice in individual cases, even if the rule is justified as a general matter. One solution to norm-insensitivity is to refer to norms in the rule; likewise, a solution to context-insensitivity is to refer to context in the rule. Referring to norms, however, can lead to problems, since laws exist in order to settle disputes about norms in the first place. It would seem that including the norm in the law would get us no further. But under the planning theory of law, such initially vague laws can be understood as partial plans that are intended to be filled in over time.180 Viewing laws as plans brings questions of trust and competence on the part of those who are to fill in those plans to center stage.181

Context-sensitive laws present a different challenge, however. Context-sensitive laws are laws that direct the courts to look specifically to the particular context of the parties at hand. Of course, in one sense, 179 See, e.g., Schwartz & Scott, supra note 133; Jody S. Kraus & Steven D. Walt, In Defense of the Incorporation Strategy, in THE JURISPRUDENTIAL FOUNDATIONS OF CORPORATE AND COMMERCIAL LAW, supra note 172, at 193. 180 See Shapiro, Interpretation and the Economy of Trust, supra note 18. 181 See id. at 16-24.



laws are always applied to particular cases, but what I am referring to as context-sensitive laws are laws that make the content of the law itself somehow dependent on the situation. For example, we saw earlier how the U.C.C.’s version of the parol evidence rule instructs the courts to interpret contracts in accordance with the course of performance or course of dealing of the parties in question.182 What is distinctive about such a rule is that since it refers specifically to dealings between these two parties, it cannot be specified except on a case-by-case basis. A rule that “immoral contracts are not to be enforced” can be further specified, such that eventually future parties learn that, for example, murder-for-hire contracts are not to be enforced. But context-specific laws cannot be specified in a way that is helpful to future parties, who by definition will have their own context.

The parol evidence rule is not the only such example of a context-sensitive rule. Indeed, Article 2 brims with references not only to vague standards such as “reasonableness,” “commercially impracticable,” and “good faith and fair dealing,” it also often insists that these standards are to be judged in light of the particular circumstances of the industry or the parties.183

To some degree, the desire to make rules context-sensitive may be understood as being related to issues of trust. For instance, Gilmore speculated that the nineteenth-century creation of formal classical contract law was perhaps due to a mistrust of civil juries (which would also explain why European contract law never became as formal as American contract law).184 Formal doctrines like the doctrine of consideration were used to turn almost every contracts question into a question of law rather than of fact.185 Since judges answer questions of law and juries answer questions of fact, turning factual questions into questions of law took contracts cases out of the hands of untrustworthy civil juries and put them into the hands of judges.186 Furthermore, Gilmore claims, the civil jury is now “on its way out,” and its “disappearance” helps to explain the collapse of classical contract law.187 With no jury to worry about, the law of contract can stop pretending that contracts cases turn on legal doctrines like the consideration doctrine and instead let judges dispense justice on the facts in front of them as they see fit. To put this argument in terms of this paper’s discussion, formal rules often lead to injustice on the individual facts of any given case. Perhaps such injustice is a necessary

182 See supra note 67 and accompanying text. 183 See supra notes 60-62 and accompanying text. 184 GILMORE, supra note 27, at 98-100. 185 Id. 186 Id. 187 Id. at 100.



lesser evil if we do not trust juries to dispense justice based on the facts. And once juries are out of the picture, we can have rules that demand context-specific (fact-specific) justice.

On the other hand, perhaps the issue here is not entirely one of trust. Suppose that the basic factual question is: What is “reasonable under the circumstances?” According to Gilmore’s way of thinking, the classical common law replaced such inquiries with inquiries into contract formalities such as offer and acceptance, privity, and consideration, because we do not trust civil juries to judge what is reasonable in given cases.188 Judges, by contrast, particularly those with good “situation sense” (to use Llewellyn’s term), may be better at saying what should be deemed reasonable under any given set of circumstances, and therefore we can do away with the formalities now that we have done away with civil juries.

But there is another possible explanation for why we might prefer the formal inquiries of classical contract law to a law that simply asks what is reasonable under the circumstances. The problem is not that juries cannot be trusted to say what is reasonable under the circumstances, but rather that such a rule provides no guidance to the parties prior to litigation. It could be the case that the formal laws of classical contract law were a way of breaking down broad normative inquiries into discrete, manageable questions that give more guidance to citizens. Recall once again Professor Alexander’s point that we have laws not just because people disagree about which principles apply, but also because people disagree about how those principles apply in given cases.189 Surely we all accept that we ought to do what is reasonable under the circumstances, yet we still have countless contract disputes despite (perhaps even because of) this universally accepted rule. The real question is, “What is reasonable in this case?”

It could be that rules such as the consideration doctrine are an attempt to specify further how the requirements of such broad principles of justice or fairness are to be applied in particular cases. To be sure, the question of whether the consideration doctrine may play any defensible role as part of a further specification of any broad principle of justice is quite open. But such rules at least provide guidance to future parties. Our intuitions will likely vary a good deal on a broad question like the (moral) enforceability of donative promises. The fact that we all agree that contract law ought to enforce promises that are morally enforceable is likely to be of little help in evaluating the facts of a particular case. The consideration doctrine helps us to narrow the range—or at least it did before promissory estoppel. And even promissory estoppel specifies which facts (for example, reliance) are 188 Id. 189 See supra note 86 and accompanying text.



relevant when looking at particular circumstances. If this analysis is correct, then when we abandon formal rules in

exchange for vague, context-specific mandates to do what is “reasonable under the circumstances,” we are losing valuable guidance. The formal rules were useful because they instructed us in not only what our broader principles meant, but also in how those broader principles were to be applied to particular events. They specified rules—filled in the partial plans, to use Bratman’s language190—and thereby made the rules more manageable and helpful. It is true that they are still necessarily partial. Even a long list of clear elements for a cause of action has to be checked off in any given case; this process can be controversial, and in some cases will lead to injustice. But the anti-formalist strategy of going from the extremely vague to the completely specified in one step is not the answer.191

We can usefully think of the objections to modern contract law’s anti-formal doctrine as follows: modern contract law threatens to turn every case into a “hard” case. H.L.A. Hart introduced the concept of hard cases and easy cases in order to illustrate his version of positivism.192 He argued that in at least some cases, the facts presented to a court fall within the semantic core of a legal rule.193 In such “plain” cases, at least, a rule could be applied without any need for interpretation, and thus without any consideration of its underlying social aim or policy.194 As Martin Stone has usefully shown, however, there are at least two senses in which a case might be hard:

First, there may be reasonable doubts about what the rules require. Secondly, there may be doubts about what should be done [i.e., whether the rule should be applied], even when it is clear what the rules require. The first type of case is presented when a court must apply a rule which is vague or ambiguous; the second, when under a legal system’s norms of decision, a court has the option of revising or creating an exception to a rule . . . when the rule requires an undesirable result.195

Thus, a case may be hard because it is hard to tell what the rule requires, or a case may be hard because it may be hard to tell whether to apply the rule, given that what the rule requires leads to an undesirable result. 190 BRATMAN, INTENTION, PLANS AND PRACTICAL REASON, supra note 103, at 29. 191 Of course, my description here is itself an unfair caricature of Article 2, which obviously does provide some more specific guidance than simply “whatever is reasonable under the circumstances.” But there can be no doubt that Article 2 also aims to provide more escape from doctrine, in particular by directing the court’s attention to the particular facts or circumstances of the parties. See supra notes 64-71 and accompanying text. 192 See HART, supra note 89, at 125-27. 193 Id. 194 Id. 195 Martin Stone, Formalism, in THE OXFORD HANDBOOK OF JURISPRUDENCE & PHILOSOPHY OF LAW 166, 179 (Jules Coleman & Scott Shapiro eds., 2002).



As we have noted, the anti-formalists complained that classical, formal rules of contract were flawed because they were norm-insensitive (the rules did not seem to comport with any defensible or even coherent set of norms) and context-insensitive (even when justifiable, the rules led to unjust outcomes when applied in some particular cases). These anti-formalists complained that formalist reasoning was mechanical, and that the formalists considered legal reasoning to be a simple matter of logical relationships. The imagined formalist saw few cases as hard in the first sense: he had great confidence in the ability of a few, broad legal rules easily and mechanically to produce clear outcomes when applied to the facts. In theory, these rules would lead to few hard cases of the first type. But the anti-formalists complained that these outcomes were often unjust, either because the rule was unjust or because of its unjust application in a given case. According to anti-formalists, formal rules led to many hard cases of the second type, i.e., cases where it is hard to know whether the rule should be applied considering the unjust result of its application.

We have seen that this variety of formalism is a caricature that never actually existed. More importantly, we have also seen that the anti-formalist cure to norm-sensitivity threatened to be worse than the disease. The anti-formalists simply referred to the norm within many laws, with the result that a connection between the laws and their underlying normative principles was guaranteed. But this solution produced the problem that such rules were too vague to give clear guidance. Drawing on Stone’s distinction, such rules threatened to make every case a hard case in his first sense.

We also have seen that initially vague rules can be further specified. Indeed, much of legal reasoning is concerned with the specification of vague laws. Stone notes that the problem with such vague legal rules is “essentially specificatory,” and that the process of filling in the details of vague rules involved jurisprudence in the older sense of the term, i.e., “a form of thought dependent on analogy and judgment, and directed towards the elaboration of the content of principles in light of concrete situational demands. . . .”196 I have stressed in this Article that this process of specification is done not just with respect to “situational demands,” but also can be accomplished by making vague laws—partial plans—more specific. By doing so, we can over time ensure that fewer cases will be hard cases in Stone’s first sense; that is, we can describe more and more of the instances that will be seen as within the core meaning of a vague rule, and thus avoid hard cases of the first type even when we began with an overly vague rule.

196 Id. at 195.



The anti-formalists also were concerned with cases where the application of a law to the facts at hand would lead to injustice, cases that were hard in Stone’s second sense. Here we know what result the rule calls for, but it is unclear whether applying the rule is the right thing to do. What modern, anti-formal contract law does in response, as we have seen, is to make many of its rules context-sensitive, that is, to refer in the rule itself to what is reasonable under specific circumstances. Context-sensitive rules by definition eliminate hard cases in the second sense. They call for the right result for the parties by definition. Unfortunately, like the solution to norm-insensitivity, they also create hard cases in the first sense. These laws are at least as vague as a law that tells one simply to do what morality requires. But while we can further specify vague normative principles, it is impossible to specify vague references to the circumstances of the case except on a case-by-case basis. In other words, the anti-formalist strategy trades the second kind of hard case for the first, and unlike the vague principles, context-sensitive rules will often result in hard cases in the first sense because they cannot be specified prior to litigation.197

Presumably it would be better if the law presented no cases that were hard in either sense. It would be nice if there were no doubt about either what outcomes laws called for in particular cases, or whether those outcomes were just. In the real world, however, we are likely to be faced with both kinds of hard cases at least occasionally. One important question before us, then, is: Is it worth trading one kind of hard case for another? Is it so important to us to have laws that always avoid injustice in individual cases that we live with the uncertainty of what those laws require?

One immediately apparent problem is that if we are unsure what outcome a law requires, we are certain to be unsure whether the outcome that the law requires will be just. That complication aside, exchanging the second kind of hard case for the first might be a good trade as long as the vague rules can be specified further so that eventually there will be fewer hard cases in the first sense as well. But as we have seen, context-sensitive rules cannot be so specified except on a case-by-case basis.

We might also respond that substituting hard cases of the second kind for hard cases of the first is a good trade, as long as we have confidence in the judiciary to handle those hard cases well. Of course, the judiciary theoretically could be capable of handling either kind of hard case, but handling hard cases of the first type is supposedly a 197 That is not to say that such rules will forever lead to hard cases in every case. I leave open the possibility that some circumstances will so clearly call for one result that they will be easy cases in the first sense despite the vague language. For an interesting discussion of the possibility that such gaps might always result from vague language, see ENDICOTT, supra note 138.



particular strength of judges. It seems Llewellyn thought something much like this, or at least thought that judges are at times particularly good at it. This is not so different from his discussion of what he called the Grand Style of judging,198 or his famous “situation sense” that judges are to employ when applying laws to facts.199

However, this response is also flawed. Laws that depend on the circumstances are hard because they are vague, and their particular kind of vagueness resists specification. Therefore, even if we are fortunate enough to have a very capable judiciary, individuals can be guided by its special skills only if they go to trial. Ideally, legal outcomes should be reasonably predictable prior to litigation, particularly in contract law, where parties are creating law for themselves. No doubt all citizens want to have clear guidance as to which behavior is punishable at law. But there is a special irony in setting up a system of contracting where parties create obligations for themselves—obligations they were free not to undertake—under a system where the application of the rules is unclear even to the contracting parties. If the lack of clarity is their own fault (because of poor drafting), it is one thing, but if the lack of clarity is because the laws by which the state governs the creation of such obligations are unclear, then much of the purpose of contracting in the first place is frustrated.200

One final potential argument for trading the second kind of hard case for the first is suggested by Larry Alexander and Kim Ferzan.201 As we saw earlier, Professor Alexander has argued that it is a necessary dilemma of law that it must at times result in injustice in particular cases.202 Law by its nature governs by rules, but rules applied to individual cases without regard for the justification for those rules will necessarily lead to a certain amount of injustice.203 But because we need law in order to live in civilized society, we must sometimes tolerate such injustices. On the other hand, just because some such injustices are inevitable does not mean that we are indifferent to them, or that we should not work to reduce them. Alexander and Ferzan argue that one way to reduce the injustices is to adopt broad standards instead

198 Wiseman, supra note 146, at 496. 199 See, e.g., TWINING, supra note 5, at 219-20. 200 This is a point Llewellyn himself seemed at times to appreciate, as he sought “a body of sales law which is clear, guidesome . . . , [and] almost impossible to misconstrue.” Hillinger, supra note 150, at 1163. Similar language made its way into the U.C.C.’s statement of its “[u]nderlying purposes and policies” which “are . . . to simplify, clarify, and modernize the law governing commercial transactions; . . .” U.C.C. § 1-102(2) (2003). How Llewellyn expected the vague principles he in fact endorsed to satisfy these constraints is, I must confess, a mystery. 201 Larry Alexander & Kim Ferzan, What a Culpability-Based Criminal Code Might Look Like (unpublished manuscript, on file with authors). 202 See supra note 90 and accompanying text. 203 See ALEXANDER & SHERWIN, supra note 86.



of clear rules.204 To use Stone’s categories again, although vague rules increase the number of hard cases of the first type, in that it will be less clear what outcome such rules would produce, they provide flexibility which can decrease the number of hard cases of the second type.

Alexander and Ferzan’s argument is particularly compelling in the criminal context, the context that is their primary concern, where the cost of individual injustice is high. The argument is less compelling in contract law, the subject of this paper. In criminal law, we might prefer to err on the side of caution, allowing for more uncertainty in outcome in order to have fewer injustices. But two responses are in order. First, although the need to avoid errors is particularly strong in criminal law, the need for ex ante guidance is also particularly strong. When rules are vague, we are necessarily less certain about what is allowed.205 Secondly, in contract law, risks associated with injustice are simply not so high; the thing at stake is normally money. Contract law does not even involve the kind of moral condemnation associated with tort law, much less with criminal law. Contract law has strict liability and is unconcerned with assigning moral judgment to breach, either by allowing defenses or by awarding punitive damages.206 Even if adopting vague standards is a good way to be cautious, there is no reason to be as cautious in contract law as we should be in criminal law.

In sum, the vague, anti-formal laws of modern contract law should be replaced by a return to clearer, more predictable laws like those of the classical period (though, of course, not necessarily exactly identical ones). Vague, norm-laden rules may be ineffective guides to conduct, but as the planning theory of law teaches, vague rules can be further specified. But when vague laws are context-specific, for example because their content depends on the circumstances of each case, they cannot be further specified except on a case-by-case basis. Given that one of law’s primary functions is to deal with cases where individuals disagree about what their circumstances call for, such vague rules will never be helpful guides without adjudication. It would be better if the law avoided rules whose vagueness is so entrenched.

CONCLUSION: A NOTE OF CAUTION AND OPTIMISM

Grant Gilmore closes his book The Death of Contract by noting

204 See Alexander & Ferzan, supra note 201, at 44-48. 205 Alexander & Ferzan briefly address the problem of a lack of notice. Id. at 62-63. This is not the place to evaluate their arguments about criminal law in any depth. 206 This point is consistent even with at least one version of corrective-justice theory. See Curtis Bridgeman, Reconciling Strict Liability with Corrective Justice in Contract Law, 75 FORDHAM L. REV. 3013 (2007).



that literature and the arts often witness “alternating rhythms of classicism and romanticism.”207 According to Gilmore, the “classical aesthetic, once it has been formulated, regularly breaks down in a protracted romantic agony.”208 It is followed by a “confused, sprawling, formless” romantic period, but then, “the romantic energy having spent itself, there is a new classical reformulation—and so the rhythms continue.”209 Thus, although (classical) contract law is dead (according to Gilmore), having been killed off in a romantic agony of anti-formalist legal realism, the time could come when it should be resurrected.210

Perhaps that time is here. We have certainly seen a resurgence in formalist thinking.211 Gilmore seems to think that intellectuals tend to return to classical themes simply because of the cyclical nature of academic fashion, and perhaps he is correct. But on the other hand, perhaps we often return to the classical ways of thinking because they have much to offer, and because the “romantic agony” which leads us so quickly to criticisms of the classical—or, more often, to criticisms of caricatures of the classical—often stumbles when forced to provide a positive view to replace the one that has been criticized.

And so it seems with anti-formalism in contract law. Many of the criticisms of classical contract law are understandable, and there are undoubtedly unavoidable problems with its application, such as its content-insensitivity and context-insensitivity.212 Nonetheless, the anti-formalist cure has proven to be worse than the disease, at least in contract law.213 It has made law much less effective at doing what law is supposed to do, i.e., guide conduct. We are left with vague terms like “reasonableness” and “good faith,” terms that nobody seems to be able to define, and which leave us unable to predict outcomes without litigation. Sometimes vague terms can be specified and thus may become able to guide us. Then a debate arises about who is in the best position to make the specifications. But in many cases rules are actually designed to resist specification except on a case-by-case basis; we should expect such a strategy to be a “flop.”214 Instead we would benefit by avoiding vague normative terms and returning to a stricter, more formalist version of the law that would make outcomes more predictable.

That said, a note of caution is in order. Although I have argued that modern, anti-formal contract law is largely ineffective at doing 207 GILMORE, supra note 27, at 102. 208 Id. 209 Id. 210 Id. at 102-03. 211 See supra notes 12-15 and accompanying text. 212 ALEXANDER & SHERWIN, supra note 86. 213 Again, criminal law might call for more caution. See Alexander & Ferzan, supra note 201. 214 See supra note 160 and accompanying text.



what we want law to do, I have not argued that we should be as formal as possible, or that more formalism is always better. For example, a rule that allowed a promisee to enforce any contract so long as she could somehow, by hook or by crook, get the promisor to sign on the dotted line would obviously be unacceptable, despite the fact that it would guide the parties’ behavior very effectively by predicting the outcome of potential litigation with a high degree of certainty. A rule that leads to systematic injustices does not become acceptable just because it offers predictability. There is no easy test for finding the right balance of form versus substance in law. But I am optimistic that perhaps we can best find this balance by returning to the classical, not just as a passenger on Gilmore’s swinging pendulum of intellectual fashion, but instead with a renewed critical yet sympathetic eye for classical contract law. If we can try better to understand its doctrines more charitably, we will be in a better position to judge them and, more importantly, to learn from them.

This Article is but one step in a larger project in that spirit. I have argued that the planning theory of law can help us to understand how formal our law of contract should be. My more ambitious conjecture is that understanding contracts as plans, and contract law as a plan for private planning, will be more broadly instructive.215 I find persuasive Shapiro’s thesis that law is a form of government planning for its citizens, and I think that we have much to gain by thinking about law in this fashion. I would add that contract law is a vehicle for private planning by citizens for themselves, a way for them to create specially tailored legal obligations that govern their own situations and that provide practical guidance. Hopefully, by thinking of contracts as plans we can both better understand and better justify many of the otherwise somewhat perplexing doctrines of contract law, especially those of the classical period. But that is a larger project that must wait for another day.

215 Curtis Bridgeman, Contracts As Plans (unpublished manuscript, on file with author).

why contracts scholars should read … philosophy: positivism, formalism, and the specification ......

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