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Valparaiso Univ. Law School

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Friday, June 20, 2008

A Fault-Line Drawn in Contracts Theory

CohenThe University of Virginia Law School of Law's George M. Cohen has a new article out challenging conventional wisdom regarding contract law as a system of strict liability.  The piece, The Fault that Lies within Our Contract Law, was written for a University of Michigan Law School symposium on contract and fault and is forthcoming in the Michigan Law Review.  But those who can't wait can download the article here.

I have been toying with the idea of doing some legal scholarship on a pet theory of mine that damages in promissory estoppel cases are sometimes a form of punitive damages because courts award full expectation damages when the theory of harm is based on reliance but reliance damages would be paltry.  Professor Cohen's scholarship suggests that my theory (which may not be original, or in any other sense "mine" for all I know) might be just one small piece of a broader picture, so I am happy to learn of it.  The abstract of the article is presented below:

Scholars and courts typically describe and defend American contract law as a system of strict liability, or liability without fault. Strict liability generally means that the reason for nonperformance does not matter in determining whether a contracting party breached. Strict liability also permeates the doctrines of contract damages, under which the reason for the breach does not matter in determining the measure of damages, and the doctrines of contract formation, under which the reason for failing to contract does not matter.

In this essay, prepared for a symposium on Fault and Contract Law sponsored by the University of Michigan School of Law and to be published in the University of Michigan Law Review, I take issue with the strict liability paradigm, as I have in my prior work on contract law. In my view, the theoretical justifications for strict liability as a general paradigm for contract law oversimplify contractual intent, the relationship between intent and fault, and the nature of contractual fault. Moreover, the strict liability label is descriptively misleading, once one dips even slightly below the surface of contract doctrine. Fault shows up throughout contract law. Efforts to make contract law conform more to the strict liability paradigm and exorcise fault are wrongheaded. In any case, such efforts are doomed to fail. Fault may not be the dominant feature of contract law, but it plays an inherent, invaluable, and ineluctable supporting part. The strict liability impulse occurs when contract intent, contract terms, and contract doctrine coincide with a persuasive story of promisor fault, and when the consequences of strict liability are blunted because the promisor can easily mitigate them. But strict liability, like other contract rules, is merely a fault-based presumption. Determining the limits of that presumption means considering why parties make contract and why they do not perform them, in other words, fault. Courts and scholars should would do better to acknowledge the role of fault and think about how to use fault more effectively within the framework of contract doctrine.

[Jeremy Telman]

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