A Property Theory of Contract
62 Pages Posted: 26 Feb 2009 Last revised: 29 Jun 2009
Date Written: February 26, 2009
This Article offers a new theory of contractual obligation, one which remedies the weaknesses of prior autonomy-based contract theories. Contracts should be understood as transfers of property in a promisor's future actions. Understanding contracts as transfers allows for a theory of contract obligations consistent with two basic features of common law adjudication: the harm principle and corrective justice. Under the harm principle, courts should only enforce an agreement if doing so will remedy or prevent a harm to the promisee. Under a corrective justice rubric, the remedy selected should correspond to the wrong committed by the promisor. Other theories, including promise-based and reliance-based theories, have struggled to meet these criteria.
This Article argues that contractual obligations depend on the making of a conditional promise. Assuming the promisor's consent, a promisee is then able to acquire the contractual performance by meeting the conditions of the promise. Applying principles of just property acquisition, the promisee comes to deserve contractual performance once she has acted in accordance with the promisor's terms. When this occurs, the result is a transfer of the promisor's ownership of her future actions to the promisee. Reconceptualizing contracts in these terms renders coherent existing doctrine. This theory provides a justification for the doctrine of consideration and the expectation remedy, and it supports the enforceability of both unilateral contracts and bilateral executory contracts. Prior theories have had difficulty explaining these doctrinal features under a single, consistent rubric. Moreover, recognizing property concepts as a foundation for contract obligations offers important new insights for further refinement of legal doctrine.
Keywords: contract theory, property theory, corrective justice
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