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George Mason School of Law. Contracts I IV. Formation F.H. Buckley fbuckley@gmu.edu. Last day. We saw the economic argument for contractual enforcement. Last day. We saw the economic argument for contractual enforcement Contract law as a solution to the trust problem in PD games

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George Mason School of Law


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george mason school of law
George Mason School of Law

Contracts I

IV. Formation

F.H. Buckley

fbuckley@gmu.edu

last day
Last day
  • We saw the economic argument for contractual enforcement
last day1
Last day
  • We saw the economic argument for contractual enforcement
  • Contract law as a solution to the trust problem in PD games
    • Promisor makes a credible commitment
    • Promiseetrusts
hume on beneficial reliance
Hume on Beneficial Reliance
  • Your corn is ripe to-day; mine will be so tomorrow. `Tis profitable for us both, that I shou'd labour with you to-day, and that you shou'd aid me to-morrow. I have no kindness for you, and know you have as little for me. I will not, therefore, take any pains upon your account; and shou'd I labour with you upon my own account, in expectation of a return, I know I shou'd be disappointed, and that I shou'd in vain depend upon your gratitude. Here then I leave you to labour alone: You treat me in the same manner. The seasons change; and both of us lose our harvests for want of mutual confidence and security.
hume on promising
Hume on promising

“Men being naturally selfish, or endow'd only with a confin'd generosity, they are not easily induc'd to perform any action for the interest of strangers, except with a view to some reciprocal advantage.”

hume on promising1
Hume on promising

[We may have altruistic sentiments, but it’s a constrained altruism]

hamilton on the gene s eye view
Hamilton on the Gene’s Eye View
  • Bodies are temporary, genes (or their copies) are forever
  • The gene directs the body
hamilton s rule altruism and kinship selection
Hamilton’s Rule:Altruism and kinship selection
  • Gene to Body: be altruistic if
    • rB > C, where
  • r = the genetic relatedness of the recipient to the actor, B = reproductive benefit gained by the recipient of the altruistic act,
  • C = reproductive cost to the individual performing the act
hamilton s rule altruism and kinship selection1
Hamilton’s RuleAltruism and kinship selection
  • rB > C: How does that work?
    • We share 50% of our genes with our parents, children and (non-identical) siblings, and 12.5% with first cousins
    • I would spent $5 to confer a $10 benefit on a brother
hamilton s rule altruism and kinship selection2
Hamilton’s RuleAltruism and kinship selection
  • Gene to Body: be altruistic if
    • rB > C, where
  • r = the genetic relatedness of the recipient to the actor, B = reproductive benefit gained by the recipient of the altruistic act,
  • C = reproductive cost to the individual performing the act
  • JBS Haldane: I would give my life for two brothers or eight cousins
hamilton s rule altruism and kinship selection3
Hamilton’s RuleAltruism and kinship selection
  • Gene to Body: be altruistic if
    • rB > C, where
  • r = the genetic relatedness of the recipient to the actor, B = reproductive benefit gained by the recipient of the altruistic act,
  • C = reproductive cost to the individual performing the act
  • Bonus questions:
    • Can you see how r might be greater than 1? Less than 1?
hamilton altruism and kinship selection
Hamilton: Altruism and kinship selection
  • Let us hypothesize that we are genetically programmed to ensure the survival of our genes
  • We share nothing with strangers
hamilton altruism and kinship selection1
Hamilton: Altruism and kinship selection
  • Such altruism as we see, amongst men and animals, is importantly explained as a genetic survival instinct that prefers brothers to stangers
strangers vs brothers
Strangers vs. Brothers
  • Where have we seen the distinction made?
strangers vs brothers1
Strangers vs. Brothers
  • Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the Lord thy God may bless thee
    • Deuteronomy 23:20.
strangers vs brothers2
Strangers vs. Brothers
  • Unto a stranger thou mayest lend upon usury; but unto thy brother thou shalt not lend upon usury: that the Lord thy God may bless them.
  • So what happens when everyone is supposed to be your brother?
what kind of economy would we have in a kinship selection society1
What kind of economy would we have in a kinship selection society?

Edward Banfield’s “Montegrano”

Chiaramonte, Italy

contract law and equality
Contract Law and Equality

Pseudolus (Zero Mostel) in A Funny Thing Happened to me on the Way to the Forum

and the novihomines

that was the economic case for promissory enforcement
That was the economic case for promissory enforcement
  • Now: Is there a libertarian (non-economic) argument for contract enforcement?
autonomy theories
Autonomy Theories
  • In order that I be as free as possible it is necessary that I should be permitted to bind myself
    • Freedom and the domain of alternatives
autonomy theories1
Autonomy Theories
  • In order that I be as free as possible it is necessary that I should be permitted to bind myself
    • But if I promise I limit my future autonomy, and why is ex ante autonomy better than ex post autonomy (except from a consequentialist perspective)?
autonomy theories2
Autonomy Theories
  • Can autonomy theories explain why the institution of contract law should exist?
    • If it’s not there, how can one promise?
tonga where people don t promise
Tonga: Where people don’t promise

The Queen of Tonga with the Queen Mother

at the Coronation, 1953

could promising exist without promissory institutions
Could promising exist without promissory institutions?

There is apparently no word for “promise” in Tonganese

could promising exist without promissory institutions1
Could promising exist without promissory institutions?

“I intend to do x, but if I change my mind, well, then was then, now is now.”

could promising exist without promissory institutions2
Could promising exist without promissory institutions?

In such a place, is an autonomy theory intelligible?

consent theories
Consent Theories
  • Can I bind myself at law or in morals by giving my consent to an act?
consent theories1
Consent Theories
  • Can I bind myself by giving my consent to an act?
    • E.g., I consent to your taking something which belongs to me
consent theories2
Consent Theories
  • Problem: Do I have the right (or the power) to bind myself with a contractual obligation where the institution of contract law doesn’t exist?
will theories
Will Theories

Can I will an obligation to perform a promise (e.g., by clenching my teeth)?

hume on conventions
Hume on conventions

“A promise is not intelligible naturally, nor antecedent to human conventions.”

will theories1
Will Theories
  • Suppose the institution of promising doesn’t exist: Can will theories explain why they ought to exist?
will theories2
Will Theories
  • Suppose the institution of promising doesn’t exist: Can will theories explain why they ought to exist?
  • Suppose the institution of promising exists: Can will theories explain why it shouldn’t be abolished?
will theories3
Will Theories
  • Suppose the institution of promising exists. Can will theories explain why it shouldn’t be abolished?
  • If everyone could take a mulligan whenever they wanted, the game of golf would disappear. So what?
the humean account of promising
The Humean Account of Promising
  • Assumes that happiness is desirable, that institutions which promote happiness are morally desirable.
  • Assumes that people are happier in societies with promissory institutions.
  • Grounds a duty to perform one’s promises in the duty to support just institutions to which one is tied by reasonable connecting factors.
so the value of promissory institutions may supply a justification for enforcement
So the value of promissory institutions may supply a justification for enforcement
  • But is there another reason to enforce promises?
so the value of promissory institutions may supply a justification for enforcement1
So the value of promissory institutions may supply a justification for enforcement
  • But is there another reason to enforce promises?
  • Are there promises which ought to be made, and as such ought to be enforced?
natural obligations
Natural obligations?
  • A father knows it to be his duty to take care of his children: But he has also a natural inclination to it. And if no human creature had that inclination, no one cou'd lie under any such obligation. But as there is naturally no inclination to observe promises, distinct from a sense of their obligation; it follows, that fidelity is no natural virtue, and that promises have no force, antecedent to human conventions.
    • David Hume
the common law struggles with the basis for enforcement
The common law struggles with the basis for enforcement
  • Suppose A sold X goods and X didn’t pay. What remedy?
    • And what should the pleading look like?
pleadings trespass on the case in indebitatus assumpsit
Pleadings: Trespass on the case in indebitatusassumpsit

The King to the sheriff &c. as in Trespass to show:

  • for that, whereas the said Xheretofore, to wit (date and place) wasindebted to the said A in the sum of £ for divers goods wares and merchandises by the said A before that time sold and delivered to the said X at his special instance and request.
  • and being so indebted, he the said X in consideration thereof afterwards to wit (date and place aforesaid) undertook and faithfully promised the said A to pay him the said sum of money when he the said X should be thereto afterwards requested.
  • Yet the said X, not regarding his said promise and undertaking but contriving and fraudulently intending craftily and subtilly to deceive and defraud the said A in this behalf, hath not yet paid the said sum of money or any part thereof to the said A (although oftentimes afterwards requested). But the said X to pay the same or any part thereof hath hitherto wholly refused and still refuses, to the damage of the said A of ___ pounds as it is said. And have you there &c.
so the basis for enforcement is unclear in the 16 th century
So the basis for enforcement is unclear in the 16th century
  • To take one case, suppose A holds promissory notes of B. A then sells and endorses these over to C. But B fails to pay C. Can C sue A (even if he has agreed not to do so?)
moses v macferlan 2 burr 1005 1760 per lord mansfield
Moses v. Macferlan2 Burr. 1005 (1760) per Lord Mansfield
  • "This kind of equitable action, to recover back money, which ought not in justice to be kept, is very beneficial, and therefore much encouraged. It lies for money which, ex aequo et bono, the defendant ought to refund; it lies for money paid by mistake; or upon a consideration which happens to fail; or for money got through imposition, (express or implied) or extortion; or oppression; or an undue advantage taken of the plaintiff's situation, contrary to laws made for the protection of persons under those circumstances. In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity, to refund the money."
just what does natural justice and equity mean
Just what does “natural justice and equity” mean?
  • In the circumstances of Bailey v. West?
bailey v west
Bailey v. West
  • Was there a contract?
bailey v west1
Bailey v. West

Strauss West

Trainer

Kelly (driver)

Bailey

bailey v west2
Bailey v. West
  • Restatement § 19 CONDUCT AS MANIFESTATION OF ASSENT
  • (1) The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act.
  • (2) The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents.
  • (3) The conduct of a party may manifest assent even though he does not in fact assent. In such cases a resulting contract may be voidable because of fraud, duress, mistake, or other invalidating cause.
bailey v west3
Bailey v. West
  • Was there an Implied Contract?
      • Restatement § 19(1): What about “by failure to act”?
bailey v west4
Bailey v. West
  • Was there a implied contract?
    • Was § 19(3) triggered?“The conduct of a party may manifest assent even though he does not in fact assent.”
      • What did Kelly tell the plaintiff?
      • Was Kelly the defendant’s agent?
what is an implied at law contract1
What is an implied at law contract?
  • Quasi-contract
  • Quantum meruit
  • Unjust Enrichment
  • Restitution
moses v macferlan 2 burr 1005 1760 per lord mansfield1
Moses v. Macferlan2 Burr. 1005 (1760) per Lord Mansfield
  • "This kind of equitable action, to recover back money, which ought not in justice to be kept, is very beneficial, and therefore much encouraged. It lies for money which, ex aequo et bono, the defendant ought to refund; it lies for money paid by mistake; or upon a consideration which happens to fail; or for money got through imposition, (express or implied) or extortion; or oppression; or an undue advantage taken of the plaintiff's situation, contrary to laws made for the protection of persons under those circumstances. In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity, to refund the money."
bailey v west5
Bailey v. West
  • When is quasi-contractual liability imposed?
bailey v west6
Bailey v. West
  • When is quasi-contractual liability imposed?
    • Benefit conferred on defendant by plaintiff
    • Appreciation by defendant of the benefit
    • Acceptance and retention of benefit by defendant where it would be inequitable to retain the benefit without payment
bailey v west7
Bailey v. West
  • When is quasi-contractual liability imposed?
    • Is consent by the recipient necessary?
bailey v west8
Bailey v. West
  • When is quasi-contractual liability imposed?
    • Is consent by the recipient necessary?
      • You ask me as your agent to trade your horse for a cow. I do so, and get a bribe of $100 which I pocket
bailey v west9
Bailey v. West
  • When is quasi-contractual liability imposed?
    • Is consent irrelevant?
consent and the definition of a benefit
Consent and the definition of a benefit?
  • I think orange aluminum siding is neat. When you are on holiday I cover your house with it. A benefit?
what is a benefit
What is a benefit?
  • No recovery for “officious” benefits from “volunteers”
    • What does this mean and just how do you tell?
what is a benefit1
What is a benefit?
  • What about the Good Samaritan?
what is a benefit2
What is a benefit?
  • What’s the difference between aluminum siding and the Good Samaritan?
day v caton p 11
Day v. Caton p. 11

Poussin, Summer

what is a benefit3
What is a benefit?
  • In what way is the aluminum siding example unlike the day laborer?
what is a benefit4
What is a benefit?
  • In what way is the aluminum siding example unlike the day laborer?
    • The informational problem
    • How might the informational problem be cured?
what is a benefit5
What is a benefit?
  • Should Bailey be permitted to recover for the first 4 months of board?
what is a benefit6
What is a benefit?
  • So was the care of Bascom’s Folly officious?