The Sacred and Profane Contracts Machine: The Complex Morality of Contract Law in Action

Article excerpt

   When e're you make a promise    Consider well its importance    And when made    Engrave it upon your heart (1) 


The central argument of this article is that the song sung by Brownies about the importance of keeping promises needs a second verse, one about forgiving others who have made promises to you. A forgiveness principle is conventional but under-articulated promissory morality, crucial to building sound relationships in business as well as other realms of social life. In his 1981 book Contract as Promise: A Theory of Contractual Obligation, Charles Fried begins with a Kantian exposition of why keeping promises is a moral thing to do. (2) Promise-keeping, in this view, is moral behavior because it vindicates the autonomy of the promisor and also respects the promisee's trust and confidence. (3) Fried sees promissory morality not as communitarian but as based on respect for individuals' ability to plan and define the good for themselves. (4) Reacting to ideas at the time that contract was being absorbed into tort, with obligations imposed by law based on duty, (5) Fried pushed back. For example, he stressed that the expectation interest is ordinarily the appropriate remedy for contract breach because that is what was promised. (6) Contract, for Fried, is not about the wrong of inducing reliance, but about the liberty to engage in private ordering. (7)

My purpose is not to evaluate how successful Fried was in his attempt to explain contract doctrine as primarily based upon autonomy, trust, and respect for persons, vindicated by enforcing promises. (8) Rather, we should applaud his lack of embarrassment about talking about law and morals in the same breath and see where that might take us today in the study of contractual relationships. in a forward-looking spirit, i want to suggest some projects to build on the legacy of Fried's focus on contractual morality. The first area of inquiry is whether there is any way to explain contract law in action--in its many varieties--in moral terms, Kantian or otherwise. (9) Fried is explicit that his concern is with common-law doctrine. He is a case-law man, not an empiricist, quantitative or qualitative, and he makes no pretense of examining the business of business. He does not delve into the mechanics of how businesses and individuals, sometimes aided by lawyers but often not, adjust their deals to preserve relationships and reputation to the greater glory of making money, keeping customers and suppliers happy, and spending as little as possible on law, which is not free. (10) Along the way, as will be discussed in Parts III and IV below, those doing deals are often guided by moral concerns, although not necessarily the same ones reflected in law on the books or Fried's theory. Contract law in action seems to involve recognition of a need for flexibility about adjustment, release, and forgiveness, operating in tension with promise-keeping, as an important part of promissory morality.

Fried lists Ian Macneil and Lawrence Friedman as among those who saw legal obligation enforced by the state as inevitably pursuing community concerns, thus presenting a challenge to his autonomy-based theory. (11) However, Fried does not engage with Macneil's ideas about relational rather than discrete contract being the paradigm in practice, largely regulated by nonlegal norms and sanctions. (12) Nor does Fried answer Friedman's criticism of a focus on common-law doctrine as opposed to the making and adjustment of deals in the context of the modern regulatory state. (13) Fried does not even cite Stewart Macaulay's Non-Contractual Relations in Business, published eighteen years before Fried's book. (14) Macaulay found that businesses often deliberately fail to plan completely, mostly do not use legal sanctions to deal with disappointment, and have norms that are different from legal norms, such as regarding canceling the order as something different from breach of contract and seeing the reliance interest as the appropriate remedy for doing so. …