The Liberal Promise of Contract

Private Law and Practical Reason: Essays on John Gardner’s Private Law Theory (Haris Psarras & Sandy Steel eds., 2022 Forthcoming)

31 Pages Posted: 28 Apr 2021

See all articles by Hanoch Dagan

Hanoch Dagan

Tel Aviv University - Buchmann Faculty of Law

Date Written: April 7, 2021

Abstract

This Essay, prepared for a volume on John Gardner’s private law theory, studies Gardner’s reflections on contract and contractualization in order to evaluate the transfer theory of contract on which he implicitly relied. An additional much more speculative takeaway beyond contract theory of this inquiry suggests that whereas Gardner may be correct that reading our modern commitment to autonomy into private law is adventurous descriptively, he is too quick to refer to this commitment as “ephemeral” insofar as we move from description to defense.

Three indicia support the proposition that Gardner was a transfer theorist: (1) Gardner repeatedly refers to contract as the “This for That” way, and to contract formation as an assignment; (2) He insists that contract is subordinate, as a matter of both logic and justification to tort, and that contractual rights are security rights, aiming at vindicating the significance of keeping one’s life “on its existing track”; and (3) He implies that the “contract part” of the law is necessarily thin and cannot possibly include any special feature of the contractualized relationships or of the pertinent parties.

Contract’s thinness underlies Gardner’s harsh critique of contractualisation. The This for That view of contract implies that contractualisation necessarily requires regarding the parties as “merely contractually related humans,” which in turn suggests that the contractualization of special relationships – and particularly the idea of employment contracts – necessarily entail alienation and subordination.

I find Gardner’s elaboration of the implications of transfer theory convincing. But unlike Gardner, I refuse to take transfer theory for granted. Transfer theory may nicely fit contracts that follow the model of an extended barter, where the empowering work of contract is exhausted by legally effacing the temporal gap between agreement and performance. But as Ian Macneil, from whom Gardner borrowed the This for That picture, noted many years ago, this is a particular and not particularly happy view of contract.

Transfer theory is particular because it ill-fits a significant subset of contract law and the practice of contracting. Many (most?) wholly executory contracts are joint plans and the parties’ agreement is their co-authored script. Here formation does not stand for a set of reassignments of the parties’ entitlements. Rather, it is the moment in which they embark on a new path, in which they are interdependent. Enabling these forms of cooperative ventures with an irreducible inter-temporal dimension requires law to go beyond the thin enforcement services assigned to it by transfer theory.

Transfer theory is also not a particularly happy view of contract, and not only because its implementation would curtail law’s support of many human endeavors. Gardner’s critical insights are particularly significant here, since they vividly highlight the normative price of molding contract into the This for That picture. The contrast to the alternative, autonomy-enhancing view of contract – to which I simply refer as “liberal contract” – could not be sharper.

Indeed, understanding contract as a joint plan, rather than transfer, and recognizing its reliance on reciprocal respect for self-determination, rather than for independence, radically transforms the role of “the contract part.” The three main points are particularly significant here:

First, because liberal contract is fixated on contract’s service to autonomy, it carefully delineates the scope of enforceable contracts so as to avoid facilitating scripts that might entail an illegitimate authority of one party over the other. This maxim necessarily means that employment contracts can give a promisee-employer only a limited dominion over the promisor’s activities;

Second, because the legitimacy of liberal contract is founded on reciprocal respect for self-determination, this maxim of relational justice, which implies a substantive, rather than formal, conception of equality, is an endogenous component of liberal contract. Therefore, pace Gardner and his fellow transfer theorists, the floor of acceptable employment arrangements – labor law’s minimum terms and immutable rights on a range of topics, such as safety in the workplace, nondiscrimination, minimum wages, working hours, and labor organization – can all find a happy home within, and not only without, contract.

Finally, part of liberal contract’s mission of proactively facilitating people’s cooperative efforts is the creation and maintenance of a robust inventory of contract types, which need to be sufficiently different from one another so as to offer people viable alternatives in each sphere of contracting. This means that rather than obliterating the distinctions between different kinds of special relationships, liberal contract, properly so-called, participates in their constitution.

These three implications of substituting the security-based view of contract with its autonomy-based counterpart suggest that while liberalism is indeed historically contingent, liberal values are indispensable for a just private law.

Suggested Citation

Dagan, Hanoch, The Liberal Promise of Contract (April 7, 2021). Private Law and Practical Reason: Essays on John Gardner’s Private Law Theory (Haris Psarras & Sandy Steel eds., 2022 Forthcoming), Available at SSRN: https://ssrn.com/abstract=3821384 or http://dx.doi.org/10.2139/ssrn.3821384

Hanoch Dagan (Contact Author)

Tel Aviv University - Buchmann Faculty of Law ( email )

Ramat Aviv
Tel Aviv, 69978
Israel
+972 3 640 7302 (Phone)

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