Contract Law, Default Rules, and the Philosophy of Promising

Among the topics addressed by moral philosophy is the obligation to keep one\u27s promises. To many philosophers, there is something strange (or, at least, something calling for explanatie1n) in the idea that moral obligations can be created simply by an individual\u27s saying so yet this is what seems to happen when a person makes a promise. Consequently, there is by now a large body of literature attempting to identify the exact source and nature of this moral obligation. Part I of this article presents a more detailed survey of recent philosophical writings about promises, for the benefit of legal readers who may be unfamiliar with that literature. Part II then discusses the role of background rules in contract law, and shows why the content of those rules cannot be derived from philosophical theories based on individual liberty, or on ideals such as fidelity or truthfulness. Finally, Part III examines the writings of Charles Fried and Randy Barnett to illustrate the consequences of attempting to apply philosophy to contract law without addressing these problems. These two authors have supplied the most comprehensive attempts to give contract law a philosophical grounding, yet each falls into exactly this error

Deterrence and Damages: The Multiplier Principle and Its Alternatives

One purpose of fines and damage awards is to deter harmful behavior. When enforcement is imperfect, however, so the probability that any given violation will be punished is less than 100%, the law\u27s deterrent effect is usually thought to be reduced. Thus, it is often said that the ideal penalty (insofar as deterrence is concerned) equals the harm caused by the violation multiplied by one over the probability of punishment. For example, if a violation faces only a 25% (or one-in-four) chance of being punished, on this view the optimal penalty would be four times the harm caused by the violation. This prescription, which I will call the multiplier principle, has a long pedigree. It figures prominently in texts on law and economics, and has been discussed in many scholarly works. Indeed, in the law review literature the multiplier principle is now routinely cited as part of standard deterrence theory. The multiplier principle has also begun to be recognized by courts - especially by economically sophisticated judges - as a possible rationale for punitive damages. What is less widely appreciated, however, is that the multiplier principle is almost never necessary to achieving optimal deterrence. Even when the probability of punishment is less than 100%, more recent work in law and economics has identified several other remedies that could also achieve optimal deterrence. These alternative remedies are often significantly less than those called for by the multiplier principle. In some cases, the alternative remedies could even be less than the harm caused by the violation, implying that optimal deterrence could be achieved if damages were reduced. My principal aims in this article are to explain why the multiplier principle is not necessary for optimal deterrence and to begin a discussion of the alternatives. While the mathematical analysis behind the recent work is often quite technical, the basic principles are not hard to grasp, and they can be illustrated with simple numerical examples. Thus, a secondary aim is to familiarize a larger audience with the conclusions of this technical body of work. Since this work identifies alternatives to the multiplier principle, its significance is potentially as broad as that of the multiplier principle itself

Remedies When Contracts Lack Consent: Autonomy and Institutional Competence

Autonomy-based theories hold that enforceable contracts require the knowing and voluntary consent of the parties. In defining knowing and voluntary, however, autonomy theorists have paid little attention to the remedy that will be granted if consent is round to be lacking, or to the question of what obligations (if any) will be enforced in place of the unconsented-to contract. In this paper, I expand on Michael Trebilcock\u27s argument that considerations of institutional competence-specifically, the relative ability of courts and private actors to craft acceptable substitute obligations-should sometimes play a key role in defining what counts as knowing and voluntary consent

Instrumental Theories of Compensation: A Survey

This Article is to argue (albeit reluctantly)against the union of a compensatory remedy that can be and have been defended from the standpoint of corrective justice on the theory that corrective justice requires that a wrongdoer compensates those that have been wronged versus compensatory remedies that have been defended by economists, and by others who rely on instrument arguments, on the theory that compensatory remedies promote efficiency. In the process, I will survey the economic or instrumental arguments for compensation in some detail, for the benefit of those who may not have kept up with the economics literature. But this is a survey with a purpose, which is to demonstrate the very different role that the concept of Compensation plays in economic as opposed to moral theories

Static Versus Dynamic Disclosures, and How Not to Judge Their Success or Failure

Disclosure laws can serve many different purposes. This Article is the first to distinguish two of those purposes, which I call static and dynamic disclosures. In brief, static disclosures aim to improve consumers’ choice from among the set of products that are already available on the market. By contrast, dynamic disclosures aim to improve the range of products from which consumers must choose, by sharpening sellers’ incentives to improve the quality of their products. The Article also discusses the various ways in which the effects of static and dynamic disclosures might be measured and evaluated. In doing so, it examines and mildly criticizes the position recently advanced by Professors Omri Ben-Shahar and Carl Schneider, who argue (approximately) that disclosure almost never works, and that it should not even be considered as a policy option. While I agree with much else that Professors Ben-Shahar and Schneider say, their claim that disclosures almost never work is far too broad