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The Death of Contracts Texas A&M University School of Law Texas A&M Law Scholarship Faculty Scholarship 6-2014 The Death of Contracts Franklin G. Snyder Texas A&M University School of Law, [email protected] Ann M. Mirabito Follow this and additional works at: https://scholarship.law.tamu.edu/facscholar Part of the Law Commons Recommended Citation Franklin G. Snyder & Ann M. Mirabito, The Death of Contracts, 52 Duq. L. Rev. 345 (2014). Available at: https://scholarship.law.tamu.edu/facscholar/68 This Article is brought to you for free and open access by Texas A&M Law Scholarship. It has been accepted for inclusion in Faculty Scholarship by an authorized administrator of Texas A&M Law Scholarship. For more information, please contact [email protected]. The Death of Contracts Franklin G. Snyder & Ann M. Mirabito* INTRODUCTION ............................. ....... 346 I. CONTRACT LAW AS TECHNOLOGY...... .......... 350 II. THE STRUCTURAL TECHNIQUE OF CONTRACT LAW...... 353 III. THE RULE TECHNIQUE OF CONTRACT LAW.................. 357 A. Development of ContractRule Technique........ 359 B. Contract Rule Technique in Contemporary America .............................. 365 1. The Fragmentation of Contract Technique.......................366 2. The Elements of Contract Rule Technique................ ....... 367 IV. THE WORLD AS REFLECTED IN CONTRACT LAW TECHNIQUE ............................ ..... 376 A. The World Reflected in Structural Technique. 376 B. The World Reflected in Rule Technique........... 377 V. THE WORLD AS IT (REALLY) Is............ ............... 381 A. Structural Technique .................... 381 B. Rule Technique. ......................... 384 C. The Shape of Things to Come ... ............ 394 VI. IMPLICATIONS FOR "CONTRACTS" AS A SUBJECT .......... 398 A. Consideration .................. ........ 399 B. Reliance ......................... ..... 400 C. Formation. ....................... ...... 401 D. Writing Requirements .............. ..... 404 E. Defenses ........................ ...... 405 F. Interpretation ...................... 407 G. Performance and Breach.............. ........ 408 1. Substantial Performance. .......... 408 2. Impracticabilityand Frustration.........409 H. Capacity ......................... ..... 410 * The authors are, respectively Professor of Law, Texas A&M University School of Law, and Associate Professor of Marketing, Hankamer School of Business, Baylor Universi- ty. We are grateful to the editors of Duquesne Law Review with particular gratitude to Symposium Editor Paul Roman and Editor-in-Chief James Doring for their invitation to participate in this Symposium in honor of Dr. John Murray and their excellent editorial work. 345 346 Duquesne Law Review Vol. 52 I. Damages........................... 411 CONCLUSION ................................... 411 INTRODUCTION In 1897, writer Mark Twain read a newspaper account that re- ported that he had become seriously ill and died. In response, he wrote the New York Journal, "The report of my death was an ex- aggeration."' The response caused a good deal of humor at the time, and it is a joke so good that it is still quoted today. But Twain, at the time, was sixty-two years old, in deep depression, and frequently ill.2 Nearly all of his best work was behind him. He went on to live for another thirteen years, and even wrote at least two highly acclaimed pieces-The Man Who CorruptedHad- leyburg comes to mind-but he was already on the downhill slope. The Journal'sonly mistake was in being premature. In 1974, Grant Gilmore created something of a tempest in the world of contract law scholarship with the publication of The Death of Contract.4 "We are told that Contract, like God, is dead,"' he wrote. "And so it is."' The book was derived from a series of lectures Gilmore had given in 1970. The lectures and the book were developed against the background of the legal revolution of the 1960s, with the Warren Court,' the rise of class action litiga- tion,8 the vast court-wrought revolution in products liability,9 the rise of promissory estoppel'o as an alternative to contract, and even court-ordered busing for desegregation." This was the zen- ith of enthusiasm for the idea that creative, idealistic lawyers and 1. 2 MARK TWAIN, AUTOBIOGRAPHY OF MARK TWAIN 11 (Benjamin Griffin et al. eds., 2013). 2. See RON POWERS, MARK TWAIN: A LIFE 563-98 (2005). 3. Reprinted in THE MAN THAT CORRUPTED HADLEYBURG, AND OTHER STORIES AND ESSAYS (Oxford Mark Twain 1996) (1899). 4. GRANT GILMORE, THE DEATH OF CONTRACT (1974). 5. Id. at 1. 6. Id. 7. See generally MORTON J. HORwITz, THE WARREN COURT AND THE PURSUIT OF JUSTICE: A CRITICAL ISSUE (1998). 8. See generally Stephen C. Yeazell, Group Litigation and Social Context: Toward a History of the Class Action, 77 COLUM. L. REV. 866 (1977). 9. See generally PETER W. HUBER, LIABILITY: THE LEGAL REVOLUTION AND ITS CONSEQUENCES (1990). 10. The doctrine at its zenith was enshrined in RESTATEMENT (SECOND) OF CONTRACTS § 90 (1981). 11. See generally CHARLES T. CLOTFELTER, AFTER BROWN: THE RISE AND RETREAT OF SCHOOL DESEGREGATION (2004). Summer 2014 The Death of Contracts 347 disinterested, legally expert judges-relying on the work of bril- liant, cutting-edge legal academics-could solve even the bitterest social problems through litigation in the courts. That thinking is apparent in Gilmore's arguments. After all, the losses caused by a breach of a contract can in some cases dwarf the losses caused by even the most egregious torts,1 2 and in each case the responsible party is made to pay for the losses. Why should contract be treat- ed differently than any other area of law in which injured people are compensated? The nineteenth century insistence on "the agreement," "consent," and "the intent of the parties," and the pe- culiar set of doctrines that embodied them, was out of date. Gil- more theorized that "Contract"-by which he meant classical American contract common law and its assorted doctrines-would be "reabsorbed" into the common law of torts,1 3 and that the judg- es who had done so much to alter and extend tort law to create massive new areas of liability 4 would wash away the doctrinal detritus and dictate a new and improved approach to contractual liability. As things turned out, Gilmore's funeral oration for contract law was about as accurate as the Journal's report of Twain's death. The enthusiasm for judicial revolutions was already starting to wane, and hardly survived the 1970s. State courts that had shown some early infatuation with reliance-based theories began to move away from them. Observers noted that courts were be- coming even more doctrinaire in their allegiance to classical con- tract theory." Reliance as an alternative to the traditional bar- 12. See, e.g., Texaco, Inc. v. Pennzoil Co., 729 S.W.2d 768 (Tex. Ct. App. 1987), cert. dismissed, 485 U.S. 994 (1988) (affirming award of $7.53 billion for interference with a merger contract). 13. GILMORE, supra note 4, at 95. 14. The period saw the invention of strict liability for manufacturers of products, the decline of venerable defenses like contributory negligence and assumption of risk, and the invention of the modern class action lawsuit. There was considerable enthusiasm for these developments at the time, but a half-century later opinions are less favorable. See, e.g. ERIC HELLAND & ALEXANDER TABARROK, JUDGE AND JURY: AMERICAN TORT LAW ON TRIAL1-22 (2006) (noting "explosion" of tort liability since 1970 has doubled the percentage of GDP devoted to tort litigation). 15. See, e.g., THE FALL AND RISE OF FREEDOM OF CONTRACT (F.H. Buckley ed. 1999); Jay M. Feinman, Un-Making Law: The Classical Revival in the Common Law, 28 SEATTLE UNIV. L. REV. 1 (2004); Jean Braucher, The Afterlife of Contract, 90 Nw. U. L. REV. 49 (1995); Catherine L. Fisk, Lochner Redux: The Renaissance of Laissez-FaireContract in the Federal Common Law of Employee Benefits, 56 OHIO ST. L.J. 153 (1995). 348 Duquesne Law Review Vol. 52 gain theory of contract seemed to wither almost into desuetude." On the surface, at least, contract law was very much alive. But Gilmore, like the New York Journal, was merely prema- ture. "Contract" in 1974, like Mark Twain in 1897, was old, sick, and unlikely to burst back into full youthful vigor. It had a few good decades left, but, like the ageing writer, it was on the down- hill slope. There were important cases and doctrinal innovations still to come, as a quick perusal of any contemporary contract law casebook will show. Just as with the old codger who everybody recognizes is still an inventive writer and humorist, the handwrit- ing is already there on the wall. Our thesis here is that contract law as a distinct, coherent, and important body of law-the law generated through the appellate decisions of American courts and taught in American law schools for nearly a century and a half-is dying. The last few decades have seen a steady erosion of its importance, and it functions to- day less as a tool that enables a rich vein of private ordering than as a series of arbitrary traps that lie in wait for the unwary. Be- cause sophisticated commercial parties are always free to opt out of contract regimes they do not find helpful, 7 much of the current law school contracts course, in our view, is likely to become almost entirely irrelevant to practicing lawyers and their clients. And in a world in which most law schools will face considerable pressure to adapt their curricula to meet the needs of the profession and the clients, it will become, for all practical purposes, dead." Our argument rests upon general observations of the disconnec- tions between the structure of contract law and the realities of 16. The extent of its decline is a matter of some debate, but all seem to agree that it has made little progress since 1980 and has been relatively unsuccessful in the courts. See Robert A. Hillman, Questioning the "New Consensus" on PromissoryEstoppel: An Empirical and Theoretical Study, 98 COLUM.
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