Wednesday, February 22, 2023
My Relationship with Mel Eisenberg About Relational Contracts
Ethan J Leib
When I was a fresh-faced contracts professor in San Francisco, I was lucky enough to be invited to Mel Eisenberg’s class to defend a paper I was then publishing about relational contract theory. It felt exciting to be welcomed to the big leagues by a leading light in the field – but also daunting to be subjected to scrutiny by someone I was criticizing and by someone who knew a lot more contract law than I would ever know. The class was deeply stimulating and the students especially probing and thoughtful. I met a future co-author in that class, an intellectual partnership that continues to inform my scholarship.
But what I remember most – and the thing that shaped me most from that encounter – was Mel’s graciousness in engaging a young punk with sympathy and care. Experiencing someone who knows it all dealing with a know-it-all in a workshop setting provided a model for how I come to workshops today: Is there something I can learn here? Mel showed me how it is done, and I can still remember him asking me seriously rather than facetiously, “Do you think I am making a mistake, and am too rigidly interested in rules rather than standards in my approach to relational contract theory?” He saw intellectual exchange as a way to see his own thinking from others’ standpoints – and more than any specific paper of Mel’s, this is the most important mode of thinking he added to my life back when I was still impressionable.
I’ll admit I came to Chapter 54 of his Foundational Principles of Contract Law hoping to see him convinced by our dialogue. I had tried to impress upon him all those years ago that searching for a “relational contract law” that would apply only to “relational contracts” with specialized rules was not really the objective of a thoroughgoing relational contract theory. Although he was always happy to concede that many contracts do not fit the paradigm of contracts between strangers that occur in a single moment in time in a perfect market, as classical contract law often seemed to assume, he remained skeptical that the acknowledgement that many real-world contracts involve dynamic and ongoing relationships could do more than inform our economics and sociology. In short, he always felt that until one could really successfully define in a legally operationalizable way “relational contracts” there could be no “relational contract law.” In his recent book, he sticks to his guns, highlighting why using duration or incompleteness won’t do the trick in dividing the world between relational and discrete contracts.
I’m sticking to my guns, too. There is nothing legally impossible about a spectrum approach if one is comfortable with loose standards and judicial discretion. Here is what Mel says about that: “Under this approach a contract is characterized as lying at the discrete end of the spectrum if it has less of certain characteristics—for example, less duration, less personal interaction, less future cooperative burdens, and less in the way of units of exchange that are difficult to measure—and as lying at the relational end of the spectrum if it has more.” (735) Mel doubles-down here to say that the spectrum approach works if you are doing economics or sociology but not law: “the enterprise of contract law entails the formulation of rules and a spectrum approach is inadequate to that enterprise because it cannot be operationalized . . . Rules whose applicability depends on how many relational indicia a contract has . . . would be rules in name only.” (735)
By my lights, the law routinely uses a set of indicia to make legal categorizations. Contract and tax lawyers will easily be able to think of the employee/independent contractor distinction as an example (even if they aren’t sure whether it is a 9-factor test, a 20-factor test, or a 3-factor test). Notwithstanding that some want bright-line rules rather than multi-factor analysis, it would be hard not to acknowledge that these efforts to classify workers are legal rather than merely economic or sociological.
Thus it seems to me still, all these years later, that Mel continues to prefer not to adopt the spectrum approach largely because it feels too messy to him and isn’t “rule-like” enough to his taste. There is nothing wrong with that sensibility, of course, but it doesn’t prove that relationalists are unable to advocate for a spectrum approach in the law. I also don’t think the spectrum approach ultimately requires a legal system to proliferate regimes that toggle between different types of contracts necessarily; one could have one law and one “good faith” requirement – and then implement it differentially depending on relational dimensions. What counts as good faith for two companies in a multi-decade relationship may be different from what it requires for two companies in a new venture dealing far at arms’ length.
That seems like a relationalist contract law even Mel could live with – and it doesn’t seem to require a singular technical definition of a relational contract. I always like to point out the first line of Eastern Air Lines, Inc. v. Gulf Oil Corporation to my students: “Eastern Air Lines, Inc. and Gulf Oil Corporation, have enjoyed a mutually advantageous business relationship involving the sale and purchase of aviation fuel for several decades.” Isn’t this just a judge setting the stage for his decision-making by telling us that relationships matter in the application of contract law? Isn’t that enough to help remind us that there is such a thing as relationalist contract law, after all?
Related posts from the Mel Eisenberg Symposium:
Posts from the second week:
Virtual Symposium on the Contracts Scholarship of Mel Eisenberg, Part V: Introducing the Second Week