Markets as a Moral Foundation for Contract Law
Nathan B. Oman
William & Mary Law School
Iowa Law Review, Vol. 98, 2012
William & Mary Law School Research Paper No. 09-225
Contract law is pre-eminently a law of markets, yet markets get little attention in contract law theory, especially in what might be labeled moral theories of contract law. This article advances a simple thesis: Contract law’s primary goal should be to sustain markets, which are a normatively desirable practice providing a moral foundation for contract law. Markets are often justified as being efficient, but when the term “efficiency” is rigorously specified using the tools of welfare economics, it cannot justify markets as they actually exist. Any justification for the unruly reality of markets must lie elsewhere. Broadly speaking, the good of markets can be understood in three ways. First, markets reinforce a liberal political order. Second, markets generate wealth, which helps to deliver a host of social goods from health care to religious tolerance. Third, this Article argues that the process of market exchange inculcates a set of virtues that makes us into more peaceful, tolerant, decent human beings. Next, this Article contrasts the support of markets as a justification for contract law with well-known promissory theories, showing how such theories fail at precisely the point where a market-supporting view of contract succeeds. Markets, however, are not an absolute good, and the final section of this Article discusses objections to the market-sustaining view of contracts it advances. At times markets operate in ways that we should find normatively troubling. In these situations, markets do not provide a justification for contractual enforcement. Accordingly, this Article concludes that limitations on freedom of contract such as the rule against immoral contracts, far from being a paternalistic intrusion into the libertarian purity of contract flow naturally from contract’s role as a market sustaining institution.
Number of Pages in PDF File: 49
Keywords: contract, promise, markets, jurisprudence
Date posted: October 5, 2012
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