A Pragmatic Defense of Contract Law

Abstract

Since the end of the nineteenth century contract law has been shrinking as specialized bodies of law such as labor law or employment law are created to govern particular kinds of transactions. The trend is not an accident. Many contract theorists see the generality of contract law as a historical accident born of a formalism whose basis was ultimately more aesthetic than functional. Accordingly, calls for more specialized bodies of law have generally met with arguments based on the specifics of the proposals rather than any defense of generality per se. This article breaks with the conventional wisdom by arguing that the generality of contract law serves concrete, pragmatic goals, namely the insulation of the law against capture by special interests and the facilitation of a pragmatic search for solutions to collective problems. It then applies these arguments to some of the transactions figuring in the current financial crisis, looking at how the tension between specialization and generalization has played out in the rise of asset securitization law out of the law of contracts.

Keywords: contracts, generality, specificity, public choice, asset securitization, assignment, pragmatism