Managing Moral Risk: The Case of Contract

Abstract:     
The concept of moral luck describes how the moral character of our actions seems to depend on factors outside our control. Implications of moral luck have been extensively explored in criminal law and tort law, but there is no literature on moral luck in contract law. I show that contract is an especially illuminating domain for the study of moral luck because it highlights that moral luck is not just a dark cloud over morality and the law to bemoan or ignore. We anticipate moral luck, i.e., we manage our moral risk, when we take into account the possibility that our actions might result in serious harm to others for which we would be morally responsible, and adjust our conduct accordingly. Moral risk is present in contract both at the stage of contract formation and, later, when we must decide whether to breach or whether to accommodate a request for modification. We negotiate these risks both through collective background institutions that limit the harms we can inflict on others and through the rules of contract law itself, which align our material and moral interests.

Number of Pages in PDF File: 56

Keywords: Contracts, formation, performance, misfortune, breach, risk, outcome responsibility, moral responsibility, culpability, inequality, modification

Accepted Paper Series