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American Contract Theory “The Good, The Bad & the Ugly”. Prof. Dr. Larry A. DiMatteo Huber Hurst Professor of Contract Law 2011-2012 University of Florida Teacher-Scholar of Year Shanghai University of Finance and Economics May 2013. Schools of Thought.

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american contract theory the good the bad the ugly

American Contract Theory“The Good, The Bad & the Ugly”

Prof. Dr. Larry A. DiMatteo

Huber Hurst Professor of Contract Law

2011-2012 University of Florida Teacher-Scholar of Year

Shanghai University of Finance and Economics

May 2013

schools of thought
Schools of Thought

Early 19th Century: Reign of Equity Late-19th: Laissez Faire

Early 20th Century: Legal Formalism1930s: Legal Realism

American Legal Realism

Critical Legal Studies LAE Empirical Legal Studies

Neo-Formalism

classical legal thought
Classical Legal Thought
  • Christopher C. Langdell (1870): Case Method
    • Law as Science
    • Few Basic Principles
  • Law is Determent, Objective & Impartial
  • Single Correct Answer (Legal Formalism I)
  • Plain Meaning Literalism (Formalism II)
attack by proto realists
Attack by Proto-Realists
  • Holmes, Path of the Law (1897)
  • Hohfeld, Fundamental Legal Conceptions (1913)
  • Hale, Coercion (1923)
  • Pound, Mechanical Jurisprudence
  • Isaacs, Standardization of Contracts
american legal realism basic tenets
American Legal Realism: Basic Tenets
  • Radical & Moderate Forms
  • Legal Indeterminacy
  • Rule Skepticism
    • Rules do not Decide Cases
    • ‘Later’ Llewellyn: Rules can be made to work
  • Law as a Social Science
legal realism 1930 s
Legal Realism (1930s)
  • Law is Indeterminate
    • Judge’s Breakfast (Jerome Frank)
    • For Every Principle a Counter-principle (Llewellyn)
    • Polices & Equities
  • Words are Indeterminate
    • Contextualism
llewellyn is ought
Llewellyn: ‘Is’ & ‘Ought’
  • Practice is relevant to decision, it is a separate

question whether the usual result is the

normatively correct result.

  • Llewellyn did not attempt to deduce ought

from is, but rather sought to learn from “is.”

  • The Normative: “Marking off the

Impermissible”(Good Faith; Unconscionability)

ucc innovations
UCC—Innovations
  • Open-textured Rules
  • Commercial Practice as Touchstone
  • Marking off the Permissible
    • Good Faith & Fair Dealing
    • Doctrine of Unconscionability
    • Impracticability
  • Merchant Rules
  • Rules of Interpretation (contextualism)
  • UCC & Common Law of Contracts
critical legal studies crits
Critical Legal Studies (CRITS)
  • 1970s: Duncan Kennedy, Morton Horwitz
  • Law is Radically Indeterminate
  • Rules are a Façade for Objectivity
    • Contradictions
  • Law Supports Status Quo Power

Structures

  • No Positive Theory of Law (nihilism)
law economics lae basic tenets
Law & Economics (LAE): Basic Tenets
  • Deferring to Individual Autonomy
    • Strict Enforcement of Party Agreement
    • Efficient Breach
    • Freedom to Contract (no required terms)
    • Freedom from Contract (no prohibited terms)
  • Reducing Transaction Costs
    • Default Rules
  • Legal Predictability
    • Formalistic Interpretation
lae contracts
LAE & Contracts
  • Eric Posner: Failure of LAE to Explain

Contract Law (112Yale LJ 829, 2003)

  • Other Values?
    • Fairness
    • Distributive Justice
    • ‘Contract as Promise’ (vs. Efficient Breach Theory)
enforceability of penalties
Enforceability of Penalties
  • ‘Common law abhors penalty & forfeiture’
  • Classical Contract Theory (enforce)
  • Compensatory Damages are Efficient (don’t

enforce)

  • DiMatteo Study: ‘Penalties as Rational

Response to Bargaining Irrationality’

(2006 Michigan St. L. Rev. 883)

behavior decision theory
Behavior Decision Theory
  • A/K/A Behavioral Law & Economics
  • Coase Theorem: Zero Transaction Costs/Full Info
  • Bounded Rationality
  • Heuristics & Biases
    • Optimism Bias, Status Quo Bias, Availability Bias, Endowment Effect
    • Opting in vs. Opting out
neo formalism
Neo-Formalism
  • Schwartz Scott Thesis: Formalism for

Business to Business Transactions

    • Business prefer Certainty & Predictability
    • Plain Meaning Interpretation
    • Hard Parol Evidence Rule
    • Formal Application of Rules (avoid standards)
    • Fosters Better Contracts (but, transaction costs & default rules)
empirical legal studies
Empirical Legal Studies
    • DiMatteo & Rich, An Empirical Analysis of Law in

Action (33 Florida St. Law Review 1067, 2006)

    • Substantive Fairness Doctrine
    • Procedural + Substantive Unconscionability
  • Employment Discharge
    • Psychological Contract Theory (HRM)
    • Fairness & Education
    • 90 Oregon Law Review 449 (2011)
justice employment psychological contract
Justice, Employment & Psychological Contract
  • DiMatteo, Bird & Colquitt, Justice, Employment & the

Psychological Contract, 90 Oregon Law Review 449 (2011)

  • Premise: Workers Believe Legally Protected & Fell Violated when Terminated
  • Survey of 763 persons; 12 Scenarios
  • All 3 Parameters Reduced Rates of Litigation &

Retaliation

  • Law & Society Perspective
feminist jurisprudence
Feminist Jurisprudence
  • Arthur Murray Dance Cases
    • Threedy, ‘Dancing around Gender (45 Wake Fort Law Review 749 (2010)
    • Legal Archeology
    • Doctrine of Undue Influence
  • Gender Stereotypes
    • Vulnerable, old women
    • Spry, energetic old men
critical race theory
Critical Race Theory
  • Ian Ayres Experiment: ‘Shopping

for a New Car’

  • Blake Morant: Expanded Contextualism
  • The ‘Burrito Case’
english vs american contract law
English vs. American Contract Law
  • Codification
    • English Sale of Goods Act
    • American Uniform Commercial Code
  • Duty of Good Faith & Fair Dealing
  • Unconscionability
  • Formalism vs. Contextualism
    • Exclusionary Rule (parol evidence rule)
theories of legal development
Theories of Legal Development
  • Henry Sumner Maine’s Progression Thesis
    • “From status to contract"
    • Ancient Law (1861)
  • Nathan Isaacs’ Cycle Theory
    • freedom to regulation to freedom
  • Gradualism and “Jumps”
sir henry sumner maine 1822 1888 nathan isaacs 1886 1941
Sir Henry Sumner Maine (1822-1888)Nathan Isaacs(1886-1941)

Forgotten Legal Realist

Philosopher of Law

false dichotomies
False dichotomies
  • Formalism-Realism
  • Textualism-Contextualism
  • Facilitation-Regulation
  • Rules-Standards Debate
thank you
Thank YOU
  • Dr. Larry A. DiMatteo