How Fault Shapes Contract Law

Abstract

This essay will appear as a chapter in a forthcoming book entitled Fault in American Contract Law, to be published by Cambridge University Press and edited by Omri Ben-Shahar and Ariel Porat. In the essay, I describe three defects in the strict liability paradigm of American contract law, and use these to demonstrate how fault in fact significantly shapes contract law. First, the justifications for strict liability frame the issue as one of implementing contractual intent, when the main problem of contract law is interpreting contractual intent. Fault helps interpret contractual intent. Second, the strict liability paradigm focuses too much on a single fault variable – the superior ability of the promisor to control his own performance – and downplays other relevant fault variables. In particular, the strict liability paradigm ignores the potential for opportunistic behavior by the promisee. A broader conception of fault recognizes and emphasizes the potential for fault by both parties as well as the need to make relative fault assessments. Third, the strict liability paradigm overlooks doctrinal avenues in contract law that incorporate or accommodate fault. I discuss one important set of such doctrines: the law of contract damages. Fault helps explain contract damages doctrine and fill doctrinal gaps.

Keywords: contract law, fault, strict liability, opportunism, damages