Fear of Contract

45 Pages Posted: 14 Dec 2004

See all articles by Roy Kreitner

Roy Kreitner

Tel Aviv University - Buchmann Faculty of Law


In recent years, a growing body of scholarly literature written from divergent perspectives has argued that courts should curtail the expansion of contractual liability. This article begins by distinguishing between two strains of formalism within this literature: Global conceptual formalism fears the expansion of contractual liability beyond what it considers the nature of contract and beyond its inherent justifications within corrective justice. Local instrumental formalism fears the expansion of contractual liability because such expansion undermines commercial parties' interests in efficiency in order to advance societal ideals about fairness. After rehearsing a legal realist-inspired critique of both strains of formalism, this article goes on to offer a view of contractual ordering that does not suffer from a fear of contract. It argues that contract is best understood as a framework for cooperation, or an infrastructure that provides means to carry out collaborative projects. Such a view of contract highlights the necessity of accounting for three types of considerations in generating and applying rules of contract law: ex post governance considerations; welfare considerations; and institutional considerations. These considerations sometimes cohere, but at other times conflict, and the article argues that narrower categories of contracts based on transaction types would advance our understanding of the design of default rules. The last part of the article takes issue with the claim from local instrumental formalism that efficiency concerns should always dominate ex post governance considerations, and suggests reasons for refusing to ignore ex post governance considerations, particularly considerations of cooperation, in the adjudication of contract disputes.

Keywords: Contract, default rules, formalism

JEL Classification: K12

Suggested Citation

Kreitner, Roy, Fear of Contract. Available at SSRN: https://ssrn.com/abstract=632262

Roy Kreitner (Contact Author)

Tel Aviv University - Buchmann Faculty of Law ( email )

Ramat Aviv
Tel Aviv, 69978
+972 3 6406505 (Phone)
+972 3 6409576 (Fax)

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