Virtual Symposium on the Contracts Scholarship of Mel Eisenberg, Part X(C): Response to Sid DeLong

Comment on Sidney DeLong’s Post on Relational Contracts
Melvin A. Eisenberg

Sidney DeLong’s post on relational contracts prompts me to expand the comments on relational contracts that I made on Ethan’s post on that subject.

Several unsuccessful attempts to define relational contracts were made in the past.

For example, Goetz (left) and Scott (right) proposed that a contract is relational to the extent that the parties are incapable of reducing important terms to well-defined obligations. This definition unsoundly omits any mention of a relation between the contracting parties. Furthermore, parties are often incapable of reducing all terms to well-defined obligations, instead leaving some terms to implication, as illustrated by Fritz Lieber’s famous hypothetical, “Fetch some soup meat.”

Vic Goldberg (right) defined a relational contract as a contract "in which no duties exist between the parties prior to the contract formation." This definition too omits any mention of a relation between the contracting parties. Moreover, in the case of almost all contracts no duties exist between the parties prior to contract formation.

Ian Macneil, who originated the concept of relational contracts, argued at one point that a contract is relational if it has more duration, more personal interaction, more future cooperative burdens and more units of exchange that are difficult to measure.  This definition is much too vague to serve as a basis for making legal rules or deciding cases.

What is striking about these unsound definitions of relational contracts is that a sound definition is ready at hand: A relational contract is one that involves not only an exchange but also a relationship between the contracting parties that bears on the exchange. Under this definition almost all contracts are relational because almost all contracts involve some sort of relationship between the contracting parties. By the same token, few or no contracts are discrete. Ian Macneil, who originated the concept of relational contracts, at one point adopted a comparable definition, formulated in the negative. “A discrete contract,” he said, is one in which “no relationship exists between the parties apart from a simple exchange of goods.” And, he accurately said, a discrete contract is “an impossibility” and discrete contracts are “entirely fictional.”

But if there are no discrete contracts then every contract is relational.

In contrast to my own view and that of Macneil, Sidney DeLong (left) believes there are discrete contracts, and endeavors to support that view by arguing that UCC Article 2 embodies a dramatic recognition of the differences between discrete and relational contracts This recognition is manifested, DeLong maintains, in the distinction between (1) UCC Section 2-601 contracts, which are discrete because they fall under the perfect tender rule, and (2) UCC Section 2-612 contracts, which are relational because relational contracts are subject to the doctrines of good faith, course of dealing, and course of conduct, and, presumably, those doctrines apply to Section 2-612 contracts but not to Section 2-601 contracts.

But just because a contract falls under the perfect tender rule doesn’t make it non-relational. Even parties to a Section 2-601 contract will normally have a relationship. Section 2-601 contracts are seldom made by strangers. Rather, Section 2-601 contracts are usually made between merchants who have dealt with each other in the past and, even where that’s not the case, between merchants who introduce themselves, get to know each other, negotiate, and are likely to be in contact after the contract is made -- in short, between parties do not merely make an exchange but also have, or form, a relationship. Furthermore Section 2-601 contracts are relational even under DeLong’s test. All contracts, including Section 2-601 contracts, must be performed in good faith, and all contracts include the parties’ course of dealing and course of performance. Finally, many Section 2-601 contracts involve the sale of a complex good, such as a machine, a plane, or a locomotive, which involve much relational interchange concerning the good before a contract is signed and, typically, further relational interchange thereafter.  

Previous posts in the Symposium:

Virtual Symposium: Mel Eisenberg and Contracts Law Scholarship

Virtual Symposium on the Contracts Scholarship of Mel Eisenberg, Part I: Shawn Bayern

Virtual Symposium on the Contracts Scholarship of Mel Eisenberg, Part II: Douglas Baird

Virtual Symposium on the Contracts Scholarship of Mel Eisenberg, Part III: Ethan Leib

Virtual Symposium on the Contracts Scholarship of Mel Eisenberg, Part IV: Nancy Kim

Virtual Symposium on the Contracts Scholarship of Mel Eisenberg, Part V: Introducing the Second Week

Virtual Symposium on the Contracts Scholarship of Mel Eisenberg, Part VI: Mark Gergen

Virtual Symposium on the Contracts Scholarship of Mel Eisenberg, Part VII: Jennifer Martin

Virtual Symposium on the Contracts Scholarship of Mel Eisenberg, Part VIII: Harris Hartz

Virtual Symposium on the Contracts Scholarship of Mel Eisenberg, Part IX: Hila Keren

Virtual Symposium on the Contracts Scholarship of Mel Eisenberg, Part X(A): Response to Ethan Leib

Virtual Symposium on the Contracts Scholarship of Mel Eisenberg, Part X(B): Response to Nancy Kim