Three Pictures of Contract: Duty, Power and Compound Rule
59 Pages Posted: 28 Nov 2007 Last revised: 6 Jan 2009
Date Written: May 1, 2008
A fundamental divide among theories of contract law is between those that picture contract as a power and those that picture it as a duty. On the power-conferring picture, contracting is a sort of legislative act, in which persons determine what law will apply to their transaction. On the duty-imposing picture, contract law puts duties on persons entering into agreements for consideration whether they want them or not. Until now, very little attention has been paid to the problem of how to tell whether a given rule is power conferring or duty imposing -- a question that should lie at the center of contract theory.
This Article argues that two characteristic features of legal powers are an expectation that actors will satisfy the rule with the purpose of achieving the legal consequences and legal rules designed to facilitate such uses. A law might exhibit these features in either of two ways, which define two types of legal powers. Many power-creating laws employ conditions of legal validity, such as legal formalities, designed to ensure the actor's legal purpose. The presence of such validity conditions is strong evidence that the law's sole function is to create a legal power, and I suggest reserving the term "power-conferring" for such laws. Other laws anticipate and enable their purposive use without conditioning an act's legal consequences on the actor's legal purpose. The structure of such laws suggests that they function both to create powers and to impose duties. I coin the term "compound" for laws that satisfy this description, and argue that the contract law we have is a compound rule. The dual function of compound rules provides empirical support for pluralist justifications of contract law. An example of such a theory can be found in Joseph Raz's comments on the relationship between contract law and voluntary obligations.
Keywords: contract, contract theory, promise, voluntary obligation, power-conferring, duty-imposing, Raz, Hart
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