10 September 2014

Personalism and Contract Theory (Part 1)

The title of Robin Bradley Kar's Introduction to Contract As Empowerment: A New Theory of Contract (download here) states it all.  And in case we didn't believe him, the first sentence of the Introduction reiterates that "This article and its sequel present a new theory of contract ..." That was nearly enough to make me not read it. After all, why do we need a new theory of "contract" when we have so many old ones (and even more not-so-old ones)? But I persevered in part because I had found Kar very helpful in my piece, Principled Pluralism and Contract Remedies (download here). I am glad that I did.

Like me, Kar is dissatisfied with the current leading contenders for the title of the theory of contract law. Like me, Kar is unwilling to throw in the towel and admit there is no theory of contract law, that instead contract law represents a pastiche of rules supported by various incommensurate theories that are held together by a label and nothing more.

I argued in Principled Pluralism that "the law of God and the cultural mandate, humanity's reflection of the image of God, and the existence of sin  ... are foundational [to contract law], but broadly so ..." By "broadly so" I meant that no one could deduce contract law from these four fundamental biblical truths. I went on, however, to find warrant (at least to my satisfactions) for one of the rules of contemporary contract law that has proved to be a sticking point in some theoretical analyses--the expectation measure of damages--in terms of those foundational principles. I did not argue that contract law  must provide for vindication of the expectation interest, only that it was permissible. I also explained why invoking nonpublic reasons, like God and sin, in contemporary theoretical discourse was not per se objectionable.

Kar's project is far more ambitious. Like me, he seeks a unifying principle but over the course of two articles applies that principle to many "hot topics" in contract law. Suffice it to say that I appreciate his principle--"empowerment" and agree with his applications but observe that his explicit (pre)suppositions are themselves vulnerable to attack as lacking warrant. Let me explain in two steps.

First, what is "contract as empowerment"?
Contract as empowerment assumes that people have a broad range of real human needs and interests, which they can systematically further if they are empowered to use promises as tools to induce others to act in some manner.
How is that different from the standard neo-classical economic presumption of individuals as rational wealth-maximizers?
Empowerment is not the same thing as free choice. ... Contract as empowerment does not ... assume that the legal enforcement of subjective choice is always genuinely empowering ...
"Contracts as empowerment focuses on the interests of promisors in being able to induce other to act with legally enforceable promises." In other words, Kar takes the contracting promisor as a full-fledged human being, not a desiccated wealth-maximizing center of subjectivity.

Second, what are the (pre)suppositions of contract-as-empowerment? First, "it is a rule-governed social practice. This is important because the leading contemporary alternatives--neo- Kantian autonomy and Coasian efficiency--see contract primarily in terms of individuals. Second, and here's where Kar's personalism comes into view
Contract law should be understood as aiming to promote a special form of interpersonal empowerment, whereby parties can use legally enforceable promises as tools to influence one another's actions and thereby meet a broad range of real human needs and interests.
Kar's account of the significance of contract law takes into account the standard welfare-maximization principle of law and economics; how could he not since, after all, contracts are frequently used to increase one's welfare? But contracts are not limited to subjective welfare. Instead, the sanctions that accompany contract law make contracts more useful than they otherwise would be at influencing others. Kar's empowerment theory takes the other as well as the subject into account. In other words, a "broad range of real human needs and interests" represents more authentically why people use contracts than does welfare maximization alone.

This "humanization" of the purpose of contract law has a significant side effect:
Instead of suggesting that the law should always defer to the subjective choices of individuals who voluntarily impose obligations on themselves, it therefore recommends enforcing contracts only when needed to empower people to sue contracts as tools to influence other's actions and thereby meet a broad range of human needs and interests.
In other words, limits on "freedom of contract" are not always assumed to be impediments to a presumptively unfettered  libertarian "right" to maximize subjectively perceived welfare.

In my next post I plan to address the political theory that justifies state action, what Kar calls "contractualism," and how he distinguishes it from "contractarianism." In addition, I hope to indicate where I think his new theory falls short.

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