The Death of Contracts
Franklin G. Snyder
Texas A&M University School of Law
Ann M. Mirabito
Baylor University - Hankamer School of Business
June 18, 2014
52 Duquesne Law Review 345 (June 2014)
Contract law is dying. Admittedly, given earlier erroneous reports of its demise, including (most prominently) that of Grant Gilmore in 1974, we might evoke memories of the boy who cried “Wolf!” But if we remember that story, the boy did eventually turn out to be right. The wolf eventually showed up.
In this paper, written for a law review symposium on “Contract Law in 2025,” we look at contract law and adjudication simply as a technology — what Jacques Ellul called a “technique” — that is used by particular societies to solve particular problems at particular times. We do not think that this idea is controversial. While many legal theorists have argued over the years for some sort of deeper status for contract and other forms of private law, Karl Llewellyn and other Legal Realists emphasized the practical connection between contract and business practice, and that idea still largely dominates the field today. In this paper, we look at contract law and adjudication with a very wide lens to examine how the various pieces of interrelated contract technique correspond with the realities of the modern contracting world. The question for us is not whether particular parts of contract law are good or bad, but is the system working? And, more important, is it likely to work in anything like its current form in the world of the future?
We examine what we call both the structural and the rule techniques of contract law. The former is the body of judicial institutions and systems that process breach of contract claims, while the latter is the body of what is usually called “doctrine” on which decisions are based. In this sense, the court system is the hardware on which contract law “software” runs. We find that the hardware (the judicial system) is built for a world in which transportation is easy but communication at a distance are hard, where legal costs are low, where decisions are rendered quickly, and where there is little competition in the business of resolving disputes. The software (contract doctrine) is rooted in a world in which it is difficult to tell commercial transactions from other interpersonal relationships; contracts are formed by individual haggling and reflect the unique individual understandings of the two parties; most contracting parties are sloppy and pay little attention to the deals they strike; lawyers are not usually involved in preparing contracts; language used by contracting parties varies sharply from place to place and is often different from that used by the general population; writings are expensive to produce and used rarely; parties do not usually need exactly what they bargained for; courts are the only available public mechanisms for dealing with fraud and unfair practices in transactions; and there are no good tools for making reliable estimates of gains and losses.
In other words, as we show, contract technique is designed for a world that looks exactly like the world that developed it, the United States in the period from 1860 to 1960. It bears very little resemblance to the world of today, which is dominated by mass-market standard-form written contracts crafted by skilled lawyers, sophisticated modern contracting practices, globalization, prohibitively expensive and time-consuming litigation processes, and consumers and other contracting parties who are protected by a host of legislative and regulatory tools much better adapted than contract law to root out bad practices. This bad technological fit is a major reason why vast chunks of what used to be contract law (e.g., products liability, consumer law, employment law, insurance law, pension benefit law, etc.) have been carved off for more efficient treatment under other schemes, and why parties at both the high end (global industries) and the low end (individual consumers) of the legal system have been fleeing the courts in increasingly large waves.
The changes that have occurred in the world to date, and which have resulted in this mismatch between technology and problems, are only going to accelerate. These processes will make the kind of contract rules embodied in common-law appellate opinions and reflected in the Restatements even less and less relevant. They have already lost much of their utility for the vast mass of contracting done in the U.S. and around the world. The bits that are likely to remain useful — and even grow more useful in a standardized age — will increasingly find themselves incorporated as principles in other bodies of law. The detritus that remains will serve not as helpful tools for furthering private ordering, but as hidden perils that will serve mainly to harm the unwary and drive up the costs of litigation.
Number of Pages in PDF File: 69
Date posted: June 26, 2014 ; Last revised: July 19, 2016