Contract Theory: 'Introduction to General Theories' and 'the Justification of Contractual Obligations'

Abstract

Introduction to Contract Theories and The Justification of Contractual Obligations comprise Chapters 2 and 4 of Contract Theory (Oxford University Press, 2004). The book provides a comprehensive discussion of, and contribution to, contemporary contract theory. Part 1 examines methodological issues, setting out frameworks for distinguishing different kinds of theoretical work about contract law and for evaluating the interpretive theories that are the book's focus. Part II, which includes the above chapters, discusses general theories of contract - theories that attempt to explain the basic notion of contractual obligation and, by implication, most of the main substantive features of contract law. An example is the idea that contractual obligations are rights-based promissory obligations. Introduction to Contract Theories explains the importance, when comparing general theories, of distinguishing analytic questions about the nature of contractual obligations (e.g., are contracts promissory obligations or reliance-based obligations) from normative questions about the justification for contractual obligations (e.g., are contractual obligations justified by rights-based moralities or utilitarian moralities) and provides a classification scheme based on this distinction. The Justification of Contractual Obligations then discusses the normative question in more detail, focusing on rights-based and utilitarian accounts of contract law (using economic theories as the main example of the latter). The chapter explains the basic assumptions of each theory, how each account for the main features of contract law, and the most important objections to each theory. It is argued that despite the radically different explanations of the law offered by rights-based and utilitarian theories (as highlighted by their approaches to remedies), each fits equally well (or poorly) with the main contract law doctrines. The main differences between rights-based and utilitarian theories concern how well each is able to account for the fact that contract law, like law generally, is presented and understood from the internal perspective as both justified (morally) and transparent (meaning that the reasons for a rule or decision are the real reasons). The chapter concludes that the most significant difference between these two groups of theories is that rights-based theories better satisfy the transparency criterion. Finally, Part III of the book examines in more detail the theoretical issues raised by the main substantive contract law doctrines (e.g., offer and acceptance, interpretation, remedies, etc.). An overview of this discussion can be found in the Preface and Table of Contents that are available to download together with Chapters 2 and 4.

Keywords: contract theory, contract law, legal theory

JEL Classification: K00, K12, K10