Monday, March 6, 2023
Mel Eisenberg's Position in American Contracts Scholarship
Mel Eisenberg is an exemplar of the dominant strand of American private law scholarship in his generation. Philosophically he is pluralist and pragmatic. Politically he is progressive. He approaches contract law as a tool for private ordering and adjudication of private disputes. Like any good craftsman, he dispenses with legal doctrines that perform these functions poorly (e.g., the mutuality doctrine) while he sharpens legal doctrines that perform these functions well (e.g., modern rules on contract interpretation).
Of course, two or three generations of American private law scholars before him share these basic characteristics. One characteristic that distinguishes Eisenberg from previous generations of legal scholars is his interdisciplinary perspective. His scholarship draws deeply on disciplines like economics and psychology for the insights they offer on human behavior. Relatedly, like the legal realists before him, Eisenberg takes a less credulous approach to legal doctrine than most earlier legal scholars.
For much of Eisenberg's career law and economics scholars considered him a fellow traveler. He co-authored a paper with Bob Cooter justifying the expectation damage measure. He drew on information economics to explain why, at least in principle, a buyer should not be allowed to exploit foreknowledge about an object even if it is costly for the buyer to acquire the foreknowledge. And he drew on economic theory to explain why society should not enforce coercive contract modifications even though it is in the joint interest of the parties to enforce a modification.
Eisenberg and economists had a falling out in the last two decades as Eisenberg challenged their work advocating for simple, rigid rules of contract law on grounds of efficiency. For example, economists argue courts should enforce liquidated damage clauses in contracts between sophisticated parties even if a clause seems to impose a penalty on breach. Eisenberg argues courts should not enforce penal liquidated damages clauses even if the parties are sophisticated. I tell my students reasonable minds can differ on this question. Part of their disagreement is empirical. Economists have a high opinion of the capacity of sophisticated parties to design efficient contracts, and they have a low opinion of the capacity of judges to identify and correct mistakes in contract design. Eisenberg has a lower opinion of the capacity of sophisticated parties to avoid mistakes in contract design, and a higher opinion of the capacity of judges. Part of their disagreement is normative. Economists value long-run efficiency. Eisenberg values long-run efficiency but he also values getting the fair result in a particular case. On his view, it is not fair for a party to exploit a mistake in designing a liquidated damage clause to obtain a windfall at other party's expense.
Disdain for classical contract law has been a constant throughout Eisenberg's scholarly career. Eisenberg does not indulge in the principle of charity in approaching Williston (left) and his peers. He accuses Williston of engaging in formal, axiomatic reasoning. This type of reasoning leads to stupid rules, like the mutuality requirement or the rule that an offer for a unilateral contract can be revoked any time before performance is complete. But Williston is not guilty as charged. He understood contract law was provisional and that it was justified by its practical utility as a system for private ordering and adjudication of private disputes. Nor was Williston the thorough-going formalist in contract interpretation that Eisenberg makes him out to be. Reasonable people could disagree on most points on which Eisenberg and Williston disagree. My sense is that Williston was willing to live with an occasional unfair result (see, e.g., Mitchill v. Lath) in order to give people the power to determine their contracts for themselves, insofar as this was possible, by reducing an agreement to writing.
Eisenberg has had little to say about critical theories of contract. A distinction he draws between social morality and critical morality may explain why. According to Eisenberg "critical morality refers to moral standards whose validity does not depend on community beliefs and attitudes" while "social morality refers to moral standards that . . . can fairly be said to have substantial support in the community." Eisenberg, Foundational Principles of Contract Law (Oxford, 2018), 5. According to Eisenberg, only social morality, and not critical morality, is relevant to determining the content of a rule of contract law.
In a sense, this is a profoundly conservative premise about how one should think about contract law. Contract law generally takes the existing distribution of wealth and other forms of social power as a given, and allows people to use contract to exploit their power. One purpose of critical theories of contract is to remind us of that fact. But it is difficult to fault Eisenberg for not engaging with critical theories of contract for he consistently pushes to make contract law fairer. A recent example is his hopefully successful campaign to get the reporters for the Restatement of Consumer Contracts to embrace the doctrine of reasonable expectations.
Eisenberg also has had relatively little to say about interpretive theories of contract, like those of Peter Benson and the late Steve Smith. His reason for rejecting these theories is thoroughly pragmatic: it "will often result in an undesirable body of contract law because the aim of the theory is not to produce the best possible contract law but only an intelligible order in the law." Eisenberg, Foundational Principles of Contract Law (Oxford, 2018), 16. Of course, there is tension between this position and Eisenberg's position on critical morality. If the goal is "to produce the best possible contract law," then why should we limit relevant moral standards to those that "can fairly be said to have substantial support in the community"?
Previous posts in the Symposium:
Virtual Symposium on the Contracts Scholarship of Mel Eisenberg, Part V: Introducing the Second Week