Three Pictures of Contract: Duty, Power and Compound Rule

A fundamental divide among theories of contract law is between those that picture contract as a power and those that picture it as a duty. On the power-conferring picture, contracting is a sort of legislative act, in which persons determine what law will apply to their transaction. On the duty-imposing picture, contract law puts duties on persons entering into agreements for consideration whether they want them or not. Until now, very little attention has been paid to the problem of how to tell whether a given rule is power conferring or duty imposing -- a question that should lie at the center of contract theory. This Article argues that two characteristic features of legal powers are an expectation that actors will satisfy the rule with the purpose of achieving the legal consequences and legal rules designed to facilitate such uses. A law might exhibit these features in either of two ways, which define two types of legal powers. Many power-creating laws employ conditions of legal validity, such as legal formalities, designed to ensure the actor\u27s legal purpose. The presence of such validity conditions is strong evidence that the law\u27s sole function is to create a legal power, and I suggest reserving the term power-conferring for such laws. Other laws anticipate and enable their purposive use without conditioning an act\u27s legal consequences on the actor\u27s legal purpose. The structure of such laws suggests that they function both to create powers and to impose duties. I coin the term compound for laws that satisfy this description, and argue that the contract law we have is a compound rule. The dual function of compound rules provides empirical support for pluralist justifications of contract law. An example of such a theory can be found in Joseph Raz’s comments on the relationship between contract law and voluntary obligations

Contracts between Legal Persons

Contract law and the economics of contract have, for the most part, developed independently of each other. In this essay, we briefly review the notion of a contract from the perspective of lawyer, and then use this framework to organize the economics literature on contract. The title, Contracts between Legal Persons, limits the review to that part of contract law that is generic to any legal person. A legal person is any individual, firm or government agency with the right to enter into binding agreements. Our goal is to discuss the role of the law in enforcing these agreements under the hypothesis that the legal persons have well defined goals and objectives.contract law, law and economics, contract breach, contract theory, incomplete contracts

Contract Scholarship and the Reemergence of Legal Philosophy

It has been thirty years since Arthur Corbin\u27s eight-volume treatise on contracts appeared in condensed form as a one-volume edition. No scholarly book on contract law of comparable scope has been published since. This void in contract law scholarship has been filled only by the occasional law review article, by books discussing particular aspects of contract law, and by the ongoing revisions of the Restatement of Contracts that culminated in the publication of the Restatement (Second) of Contracts in 1979. The dominant legal climate has not been friendly to any form of literature that attempts to explicate legal doctrine systematically, and this attitude has been particularly prevalent in contract law. That Professor Farnsworth\u27s treatise on contracts should make its appearance now is, therefore, a development worth explaining. It is my contention that the publication of this book at this time may be in part a product of the increased support from legal philosophers in recent years for traditional forms of legal reasoning based on principle and expressed through doctrine

The Impact of China’s Labor Contract Law on Workers

ILRF\u27s report examines the impact of the Labor Contract Law on workplaces in China’s export manufacturing hubs. ILRF argues for various strategies, from a greater emphasis on collective bargaining to community-based legal education, to ensure full implementation of the Labor Contract Law

Interpretation and Construction in Contract Law

Interpretation determines the meaning of a legal actor’s words and actions, construction their legal effect. Although the interpretation-construction distinction has a long pedigree, contract scholars today rarely attend to it, and the relationship between the two activities remains understudied. This Article provides an account of the interplay between interpretation and construction in contract law. It begins with the history of the concepts, focusing on the works of Lieber, Williston and Corbin. It adopts Corbin’s complimentary conception, according to which interpretation alone never suffices to determine speech act’s legal effects; a rule of construction is always required. The Article departs from Corbin, however, by arguing that contract law recognizes multiple types of meaning, and therefore calls for different types of interpretation. Legally relevant meanings include plain meaning, contextually determined use meaning, subjective and objective meanings, purpose, and the parties’ beliefs and intentions. Which type of meaning is legally relevant when depends on the applicable rule of construction. Consequently, although interpretation comes first in the process of determining parties’ legal obligations, the correct approach to legal interpretation is determined by rules of construction. The Article identifies two additional ways construction can be said to be prior to interpretation in contract law. First, judicial acts of construction can attach to contract boilerplate standard legal effects that depart from the words’ ordinary meaning, turning them into a legal formality. Acts of construction can thereby give boilerplate new semantic meanings, to which interpretation must attend. Second, when parties choose their words in light of their legal effects, rules of construction often figure into their communicative intentions. Rules of construction can therefore also be prior the pragmatic meaning of what parties say and do. Understanding this complex interplay between interpretation and construction is essential to understanding how the law determines the existence and content of contractual obligations. Although this Article does not argue for one or another rule of interpretation or construction, it lays the groundwork for analyses of which rules are appropriate when

Contract law and economics: cycles and equilibrium in the cannon of north american legal thought

Abstract The dynamics of law and economics in the cannon of American legal thought was initially characterized by a denial of the independence of contract law, tailored by judicial decisions and the realist revolution. This paper shows that this denial begets the rebirth of contract law based on policy doctrines that asked for the turn to economics, by giving a new linguistic framework and foundation to contracts. After such process, an inconspicuous doctrine of contract law was built by the Critical Legal Studies (CLS) doctrine. Its effect was not constructive but deconstructive, but purposeless and proposeless. After the failure of CLS, law and economics consolidated as the actual base of US contract law.Contract, Law and Economics, Law-Theory.

Temporal Aspects of Smart Contracts for Financial Derivatives

Implementing smart contracts to automate the performance of high-value over-the-counter (OTC) financial derivatives is a formidable challenge. Due to the regulatory framework and the scale of financial risk if a contract were to go wrong, the performance of these contracts must be enforceable in law and there is an absolute requirement that the smart contract will be faithful to the intentions of the parties as expressed in the original legal documentation. Formal methods provide an attractive route for validation and assurance, and here we present early results from an investigation of the semantics of industry-standard legal documentation for OTC derivatives. We explain the need for a formal representation that combines temporal, deontic and operational aspects, and focus on the requirements for the temporal aspects as derived from the legal text. The relevance of this work extends beyond OTC derivatives and is applicable to understanding the temporal semantics of a wide range of legal documentation

The Transition from Relational to Legal Contract Enforcement

This paper studies the transition of contract enforcement institutions. The prevalence of relational contracts, low legal quality, strong cultural preference for personalistic relationships, low social mobility, and highly unequal endowment form a cluster of mutually reinforcing institutions that hinder economic development. The cultural element per se does not necessarily reduce social welfare though it may slow down the legal development, while the real problem lies in endowment inequality and low social mobility. Thus a more equal distribution of resources may be the ultimate key to unravel the above interlocking institutions. These results are generally consistent with the empirical evidence.relational contract, legal contract enforcement, institutions, endowment inequality, economic development

Intention to create legal relations and the reform of contract law: A conservative approach in the modern global era

This paper is partially to refute the submissions by Gulati’s article recently published on Beijing Law Review which proposes abandoning the requirement of proving intention to create legal relations for the formation of an enforceable contract. After a critical analysis of the abandonists’ arguments, this paper argues that intention to create legal relations is the “marrow of contractual relationships” and the arguments for abandoning such a requirement because of the existence of consideration and/or offer and acceptance as test(s) of contractual enforceability is untenable and unconvincing. Consideration and/or offer and acceptance may be evidence of serious intention to be bound somehow but unnecessary intention to be bound legally. For a number of reasons, the doctrine of consideration is very unlikely to work any better than the intention to create legal relations test. If a test of contractual enforceability must be abandoned, that should be the doctrine of consideration rather than the intention to create legal relations. This paper compares the current positions of some common law jurisdictions, upholds the needs of stability, consistency, and the harmonisation of contract law in the modern global era, and proposes a conservative approach of contract law reform regarding the intention requirement and the related presumptions, that is, all common law jurisdictions should “go back” to the orthodox English position