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Contract as Convention

27 Pages Posted: 16 Jan 2011 Last revised: 1 Feb 2011

F. H. Buckley

George Mason University - Antonin Scalia Law School, Faculty

Date Written: January 19, 2011

Abstract

Contract theory is a curiously neglected field. While the efficiency of contract law rules has received much attention, the same cannot be said of the more basic question why contracts should be enforced. The reliance and autonomy explanations which contract theorists most frequently offer are moreover unpersuasive. Reliance theories would ground relief on detrimental reliance, and fail to explain why promisees should be given an incentive to rely. Autonomy theories misfire by failing to account for the conventional nature of promissory institutions, and do not explain why they ought to exist, as opposed to any number of other conventions (or games) one might imagine. In their place I propose a conventional explanation of contractual institutions that is derived from David Hume’s analysis of promising. Unlike Hume, however, I argue that promissory theories are incomplete without a principle of fidelity linking a promisor to the institution; and I offer a positional explanation for such a duty.

Keywords: Adam Smith, beneficial, breach, brute, circularity, commitment, communitarianism, credible, duties, economics, facts, fairness, institutional, intentions, John Searle, nonobservance, normative powers, ontology, psychic costs, Rawls, regularities, statements, Thomas Hobbes, trust, utilitarianism

JEL Classification: K12

Suggested Citation

Buckley, F. H., Contract as Convention (January 19, 2011). George Mason Law & Economics Research Paper No. 11-03. Available at SSRN: https://ssrn.com/abstract=1740686 or http://dx.doi.org/10.2139/ssrn.1740686

Francis (Frank) H. Buckley (Contact Author)

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-8028 (Phone)
703-993-8088 (Fax)

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