More Contract Lore

Abstract

Contract lore consists of “traditional beliefs” about contract law that judges, lawyers, and scholars applying and writing about contract law, employ so routinely and confidently that the principles demonstrate how we perceive contract law today. Previously, I presented three illustrations of contract lore: First, expectancy damages put the injured party in as good a position as if there were no breach. Second, the reasons for a breach, “whether willful, negligent, or unavoidable, are irrelevant to the rules of performance and remedies.” Third, contract formation and interpretation focus on the parties’ intentions.

None of these principles are factually or historically even close to true and are nothing more than myths. For example, expectancy damages rarely if ever make the injured party whole. Important remedial rules, such as the obligation of injured parties to pay their lawyers win or lose, the bar to the recovery of prejudgment interest, the preclusion of unforeseeable and unquantifiable damages, and the high bar to recover emotional distress damages, means that injured parties usually recover well-short of their lost expectancy.

When pressed, most people with knowledge about contract law would admit that contract lore is not law. Nevertheless, why do these people invoke these “traditional beliefs” even though they are, in reality, nothing more than myths? I reckoned that “contract lore represents contracts people’s aspirations—their strong preference for how contract law should operate if realities did not preclude it.” Further, people tend to seek consistency in their beliefs, which “leads them to believe things that are not true and to avoid conflicting information.” As such, contract lore represents an example of the psychological phenomenon of cognitive dissonance.

In this symposium article, I delve deeper into the phenomenon of contract lore. I offer additional examples that focus on the contract lore of consent in the context of standard-form contracting, “intention of the parties” in the context of gaps in contracts, and the requirement of a “bargained-for exchange” in the context of promise enforcement. Based on these examples, I don’t abandon cognitive dissonance as one explanation of contract lore, but I offer additional explanations and show that context play an important role in explaining contract lore. My ultimate goal is to show how contract lore sheds light on possible areas of contract law in need of reform.

Keywords: expectancy, breach, fault, gaps, intentions, consent, consideration, fictions