It’s Better Than Being Cut Up In Little Pieces

Nate Oman, who regularly teaches Contracts up the road from me at William & Mary, has recently posted an excellent article providing a back-handed justification for State-enforced civil remedies for breach of contract.  Oman goes back to the biblical account of God’s passing between the severed remains of dead animals while swearing an oath to remain in covenant with Abraham (Genesis 15).  Oman correctly notes that bloody events like this were common in the ancient world to solemnize self-maledictory oaths; in other words, the oath taker was stipulating to a “remedy” for violation of the terms of the covenant into which he was entering:  If I breach, you may chop me up.

Early English contract law was less bloody but still punishment oriented.  Penal bonds, an oath-bound obligation to pay to stipulated sum in the event a contract party breached, were typical until well into the 18th Century.

Covenant ratification ceremonies and penal bonds had something in common: both represented affirmative consent by the parties to enforcement of a sanction for breach.  The difference is in the more “civilized” nature of the agreed-upon remedy.  Today, Oman argues, contract parties implicitly stipulate to an award of damages of no more than the expected benefit of performance.  In this account, contract law is less interested in justice in the abstract (and in efficiency not at all) than it is in facilitating voluntary cooperation or, at least, reducing the potential for self-help violence.  Contract law reflects the interest of the State in giving folks something a little less drastic than seeking a literal pound of flesh when someone else fails to perform a contract.

Justice?  Maybe not.  But a whole lot better than the alternative.