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 11: Excuse doctrine: the Eisenberg uncertainty principle

Victor P. Goldberg

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


Professor Mel Eisenberg argued for an expansion of the excuse doctrines. He argued that performance should be excused in those instances when parties tacitly assume that a given kind of circumstance will not occur during the contract time (the shared-assumption test). In addition, he argued that there should be a partial excuse when a change in prices would be sufficiently large to leave the promisor with a loss significantly greater than would have reasonably been expected (the bounded-risk test). This chapter questions his first proposition by re-examining the Coronation cases and Taylor v. Caldwell. His bounded-risk analysis is badly flawed, resting on a dubious proposition, inconsistent with the cases he relies on, and, most importantly, recognizing the wrong set of circumstances in which parties would choose to limit their exposure to large cost changes.

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