The Fault that Lies within Our Contract Law

Abstract:     
Scholars and courts typically describe and defend American contract law as a system of strict liability, or liability without fault. Strict liability generally means that the reason for nonperformance does not matter in determining whether a contracting party breached. Strict liability also permeates the doctrines of contract damages, under which the reason for the breach does not matter in determining the measure of damages, and the doctrines of contract formation, under which the reason for failing to contract does not matter. In my Article, I take issue with the strict liability paradigm, as I have in my prior work on contract law. In my view, the theoretical justifications for strict liability as a general paradigm for contract law oversimplify contractual intent, the relationship between intent and fault, and the nature of contractual fault. Moreover, the strict liability label is descriptively misleading, once one dips even slightly below the surface of contract doctrine. Fault shows up throughout contract law. Efforts to make contract law conform more to the strict liability paradigm and exorcize fault are wrongheaded. In any case, such efforts are doomed to fail. Fault may not be the dominant feature of contract law, but it plays an inherent, invaluable, and ineluctable supporting part. Like other contract rules, strict liability is merely a fault-based presumption. Determining the limits of that presumption means considering why parties make contracts and why they do not perform them, in other words, fault. Courts and scholars should acknowledge the role of fault and think about how to use fault more effectively within the framework of contract doctrine.

Number of Pages in PDF File: 25

Keywords: contract law, contract theory, strict liability, fault, opportunism, precaution, least cost avoider, intent, mitigation

Accepted Paper Series