Rethinking Contract Law and Contract Design

Rethinking Contract Law and Contract Design

Rethinking Law series

Victor P. Goldberg

Rethinking Contract Law and Contract Design presents a rich array of ideas that reassess the law and economics of contractual relations. Victor P. Goldberg uses a transactional framework to critically analyse and re-evaluate contract doctrine and specific legal cases. This important work examines particular contractual precepts whilst conducting a detailed exercise in legal archaeology, challenging readers to reconsider significant legal decisions by forensic exploration of records, briefs, and other materials, including the staple cases of textbooks and casebooks.

Chapter 1: Introduction

Victor P. Goldberg

Subjects: economics and finance, law and economics, law - academic, commercial law, law and economics, law of obligations

Extract

After I had submitted the manuscript, the editor asked whether I would consider including the book in the new “Rethinking Law” series. This struck me as fortuitous on two grounds. First, when I first began thinking about and teaching contract law nearly two decades ago, I came to it with the mindset of many of my colleagues who share a law and economics perspective, namely that contract doctrine is efficient. However, it now seems to me that in many instances contract doctrine is terribly inefficient; doctrine is a hurdle that good lawyers must overcome. Second, I have come to think about contract law differently. My approach now is to focus on how parties design their contractual relations and to glean from that insights into both doctrinal reform and contract interpretation. Contract law allows parties to set their own rules within constraints. It provides a set of default rules and if the parties do not like them, they can change them. Some of the rules, however, are mandatory, and others are, to varying degrees, sticky. That stickiness is in part due to the costs of tailoring a transaction. A more subtle source of stickiness is the beliefs of judges, scholars, and lawyers about the nature of contracts and contractual duties. The notion that a breach is a wrong and that victims of a breach of contract should be made whole is a powerful one. My concern, I must emphasize, is with the contracts of sophisticated parties.