The Common Law of Contracts: Are Broad Principles Better than Detailed Ones? An Empirical Investigation

30 Pages Posted: 29 Jul 2005

See all articles by Fred Ellinghaus

Fred Ellinghaus

University of Melbourne - Law School

Ted Wright

University of Newcastle (Australia) - Faculty of Business and Law

Abstract

The law of obligations consists of rules of varying levels of determinacy stated in non-canonical form in judgments given in the course of deciding actual legal disputes. It includes, at one end of a spectrum, rules formulated for specific transactions (detailed rules) and, at the other end, rules applying to all or most transactions (broad principles). The level of determinacy of case law rules, and the degree of discretion entailed in their application, are the subject of a long-standing jurisprudential debate.

Broad principles arouse concern among common lawyers, whose tendency is to mediate their application by the elaboration of more detailed rules which, it is hoped, will deprive broad principles of open-ended operation and reduce the scope of forensic inquiry. This is particularly true in the law of contracts.

The view that detailed rules promote determinacy and therefore produce more predictable and just outcomes has dominated the development of the common law for at least two centuries. It also stands in the way of proposals to codify the law, it being generally assumed that codification entails the use of broad principles. However, the assumptions on which this view is based have never been subjected to empirical verification. This paper describes such an investigation.

The authors conducted three experiments involving the participation of 1800 subjects (law students and non-law students) in the resolution of disputes and the evaluation of judgments, using three different law models: (1) the Australian Case Law of contracts; (2) the UNIDROIT Principles of International Commercial Contracts (UPICC), a model code published by the International Institute for the Unification of Private Law in 1994; (3) The Australian Contract Code, a model code published by the Law Reform Commission of Victoria in 1992 (ACC). The results of the experiments reflect both the relative utility of codes and case law, and also the relative utility of detailed rules and broad principles, since two of the models (Case Law and UPICC) rely on the former, while the third (ACC) relies on the latter.

The results described in the paper show that it would be beneficial to codify contract law. They also show that there are no clear disadvantages, and some advantages, to the direct application of broad principles to contract disputes, and support the following conclusions:

- Broad principles are more likely than detailed rules to lead to just outcomes. - Broad principles are not less likely than detailed rules to lead to more predictable outcomes overall, and are more likely to do so in easier cases (where predictability is most important). - Broad principles are more accessible than detailed rules. - Broad principles are more time-efficient than detailed rules.

Some profound implications of these empirical findings for the future of the common law of obligations are identified in the paper.

The experiments are comprehensively described in M. P. Ellinghaus & E. W. Wright, Models of Contract Law, An Empirical Evaluation of their Utility (Federation Press, July 2005).

Keywords: obligations, case law, broad principles, rules, codification

JEL Classification: K12, K10

Suggested Citation

Ellinghaus, Fred and Wright, Ted, The Common Law of Contracts: Are Broad Principles Better than Detailed Ones? An Empirical Investigation. Texas Wesleyan Law Review, Vol. 11, No. 2, 2005; U of Melbourne Legal Studies Research Paper No. 122. Available at SSRN: https://ssrn.com/abstract=771204

Fred Ellinghaus (Contact Author)

University of Melbourne - Law School ( email )

University Square
185 Pelham Street, Carlton
Victoria, Victoria 3010
Australia

Ted Wright

University of Newcastle (Australia) - Faculty of Business and Law ( email )

University Drive
Callaghan, NSW 2308
Australia

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