Contract Fault: Fact or Fiction?

Next week will bring a batch of over 70 newbies will find their ways into my classes on contract law. Something that regularly surprises them is the extent to which the law of contracts formally eschews inquiry into fault. The common law of contracts tells us that liability for breach is strict. It doesn't matter why a promisor breached; from a vicious evildoer to the most virtuous of contract parties, the only relevant question, so the black-letter law tells us, is whether there was performance according to the terms of the contract. Also, it is generally claimed, morality has nothing to do with contract damages; intentional, malicious contract breachers pay no more than the innocent who tried her best but failed.

Not only does this strike most budding lawyers as bordering on the immoral, it's incorrect. Robert Hillman has recently written The Importance of Fault in Contract Law (abstract here) in which he systematically criticizes the leading theories of the a-moral view of contract law beginning with its direct lineal ancestor, Oliver Wendell Holmes, Jr. and moving through its contemporary exponents including Richard Posner. For example, Hillman relates the objective theory of contract formation to the moral judgment that one who harbors some idiosyncratic understanding of the meaning of his words (e.g., "I was only joking") has a duty to so indicate. Material breach, too, in Hillman's view, "goes a long way toward proving the importance of fault in contract law." And one hardly need mention that contract duties like good faith and unconscionability seem on their face to import morality into the law of contracts. With respect to defenses to breach like impossibility/impracticability, Hillman observes that "fault and the degree of harm caused by performance probably are the most influential factors" in determining whether they will be applied.

Hillman acknowledges at each turn that theorists of an a-moral contract law have their own explanations for these doctrines, explanations which do not make use of moral judgments or the concept of fault. It seems that Hillman simply prefers a morality-based justification; he doesn't, at least as far as I can tell, argue that fault is rightfully superior to efficiency, that morality is more fundamental than welfare maximization.

So what is to be done? Are students of contract law simply to learn that there are two different understandings of the place of fault and let it go at that? Suffice it to say that I think more can and should be done. I believe that faculty, students and practicing lawyers should develop a theory of contracts that takes both morality and efficiency into account and provide a lexical (rule-based) account of that relationship. And, if I do say so myself (and I do; after all, if I don't, who else will?), I have provided such an account.

For those interested in seeing how I have attempted to integrate efficiency and morality (and autonomy for that matter) into a coherent theory of contract law can start with Mission Possible: A Paradigm for Analysis of Contractual Impossibility (abstract here) (a general introduction with suggestions for application) and move on to Consideration in the Common Law of Contracts: A Biblical-Theological Critique (abstract here) (the title says it all) before concluding with Principled Pluralism and Contract Remedies (abstract here) (more fully work-out application).

Or, for a short version for those not excited about the prospect of slogging through three academic articles, you can read the very short The Law of Contracts: A Place to Start (abstract here). The bottom line of all of these pieces is to demonstrate that the leading contemporary theories of contract law are not so much wrong but incomplete. Not only do they need each other to explain fully what's going on in the law of contracts but to show that there's a deeper justification to the whole enterprise.

Go on. Read them. You'll be glad you did. (At least if you're one of my students.)