Thursday, March 9, 2023
Mel Eisenberg on Ethan Leib
Ethan Leib has had a long and fruitful career – almost sixty articles! – and it’s gratifying to learn that I contributed to his approach to thinking about the academic pursuit in some small measure. Ethan and I disagree about relational contracts, but my strong guess is that we would agree on almost everything else in the law of contracts. But to our disagreement:
Ethan’s strong and lucid critique of my article, and later my chapter in Foundational Principles of Contract Law, on relational contracts, has not led me to change my position in a fundamental way, but has led me to expand and clarify my position, which I do here.
To begin with, I believe I’m less rigid about rules than Ethan thinks I am. At the center of my thinking about the common law is that the common law is rule-based and that legal standards and legal principles are legal rules. The dictionary defines a rule as an authoritative prescribed direction for conduct. Expanding that definition a bit, a legal rule is an authoritative prescribed direction that can be applied to determine whether conduct, like nonperformance of a contract, was right or wrong, and whether activity, such as a contract or a will, was legally enabled. Narrow garden-variety legal rules, legal principles, and legal standards are all legal rules, because they can all be applied to determine whether conduct was legally right or wrong and whether activity was legally enabled.
So, for example, the principle of expectation damages, that a promisor who breaches a bargain contract is required to pay the promisee the amount required to put her in the position she would have been in if the promisor had performed that can be and is applied to measure a promisee’s damages. Typically, that principle is expressed in more specific formulas that apply to different contexts – seller’s breach of a contract for the sale of goods, buyer’s breach of a contract for the sale of goods, and so forth -- but these formulas are merely instantiations of the principle, and in any event the principle can be applied directly rather than through a formula, as in the famous case of Hawkins v. McGee. Similarly, the standard of due care is typically expressed in the form of the more specific rule that a negligent actor is liable to a person he injures, but the standard can also be applied directly, as when it is said that a defendant did not exercise due care.
Ethan points out that I reject an approach to contract law rules that involve a spectrum running from discrete contracts to relational contracts. Such an approach requires definitions of the two ends of the spectrum. Ian Macneil, who created relational contract theory as a school of thought about contract law, characterized a discrete contract as having less of certain characteristics – for example, less duration, less personal interaction, and less future cooperative burdens – and a relational contract as having more of those characteristics. The problem is – there are few or no discrete contracts, because almost every contract has relational elements. For example, even buying a car usually involves protracted interactions with a salesman and a sales manager, perhaps more than one visit to the showroom, and repeated cooperative burdens to make repairs in the seller’s shop.
Indeed, trying to imagine a discrete contract Macneil was driven to a fantastic extreme: “[A]t noon two strangers come into town from opposite directions, one walking and one riding a horse. The walker offers to buy the horse, and after brief dickering a deal is struck under which the horse is to be delivered at sundown upon the handing over of $10. The two strangers expect to have nothing to do with each other between now and sundown, they expect never to see each other thereafter, and each has as much feeling for each other as a Viking trading with a Saxon.” OMG! There are no spectrums in contract law to speak of, because a spectrum has to have two end points, and since discrete contracts are imaginary creatures there are no end points for a spectrums running from discrete contracts to relational contracts.
Ethan thinks I would not accept multi-factor rules as rules. I would. A rule that has three, four, five or more factors is a rule. A court must go through the factors and conclude that a party is liable or not, or that the law did or did not enable certain activity, like whether a contract Is enforceable or a will is valid.
Ethan reads me to be skeptical of the acknowledgement that many many real-world contracts involve dynamic and that relationships could do more than inform economics and sociology. Uh-uh. I regard contracts as dynamic. Tbey have a past, in the form of course of dealing, and a future, in the form of course of performance. Moreover, they are frequently modified, and under modern contract law modifications are enforceable if . . . . And the fact that parties have enjoyed a mutually advantageous business over the course of decades, as in Eastern Airlines, certainly may be relevant to interpreting their obligations. But that does not require a law that applies to, and only to, parties in a relationship that has lasted decades. The fact that parties have enjoyed a mutually advantageous relationship can be relevant to interpreting their contractual obligations even if that relationship has only lasted months. Again, my point is not that there are no relational contracts – my point is that there are no rules of contract law that apply to, and only to, relational contracts. Similarly, I don’t deny, as Ethan believes I do, that some rules can only be applied through a multi-factor test. First, such a rule is a legal rule, and second, such a rule can be applied to determine what category a relationship falls into even if the parties entered into their relationship two weeks or two days ago.
Finally, Ethan believes I am skeptical about spectrum approaches in the law. But I’m not.
So hip-hip hurray for relational contracts, but not for the proposition that there are rules of contract law that apply to relational contracts and no other contracts.
Previous posts in the Symposium:
Virtual Symposium on the Contracts Scholarship of Mel Eisenberg, Part V: Introducing the Second Week
Subsequent posts in the series: