Reviewing Larry DiMatteo and Irma Russell and Barbara K. Bucholtz, Part III

This is the third post in my series on  Larry Di Matteo‘s Principles of Contract Law and Theory (Principles) and Irma Russell and Barbara K. Bucholtz‘s Mastering Contract Law (Mastering).  The aim is to all some attention to these two books while using them to stimulate my thinking as I once again consider how to teach contracts law to first-year students.  The two books are very different.  Principles is a scholarly textbook addressing advanced topics at a very high level of sophistication.  Mastering is a study-guide for first-year students.  They both have their charms, but they are very different.  Each entry in this series will cover a chapter in each book, with some splitting of chapters because the books don’t have the same number of chapters.  Most weeks, the chapters will not cover corresponding subject-matters.  So be it.

The third chapter of Principles begins with a discussion of freedom of contract, which it splits into negative and positive freedom.  Positive freedom is the freedom of individuals to contract without state interference in the form of required terms; negative freedom is freedom from state interference in the form of prohibited terms.  And yet Principles notes that, at least in the context of asymmetrical bargaining, which is ubiquitous, some limitations on freedom of contract are unavoidable. (58)

Editorializing here, this is a highly libertarian presentation of positive and negative freedom. The tradition of positive freedom rooted in continental liberalism acknowledges the role of states in creating spheres in which individuals can exercise their freedom. That is, from the perspective of central Europeans prior to German and Italian unifications and the collapse of the Habsburg Empire, it was hard to imagine freedom without a strong state to create a realm in which freedom could develop and nourish. 

From this perspective, the two freedoms that Principles describes are simply two sides of the same negative conception of freedom.  What is left out is the, in my view, necessary intervention of the state, through, to give just one obvious example, the provision of a court system facilitating the enforcement of contractual obligations.  We will soon be posting reviews of recent works by Hanoch Dagan (above left) and Rebecca Stone on freedom of contract, and suffice to say that both of them articulate theories of freedom of contract capacious enough to accommodate much more forceful interventions than contemplated in Principles. That said, the difference may come down to Principles regarding freedom of contract as a relatively narrow principle subject to external limitations, while Professors Dagan and Stone, especially the former, see freedom of contract itself as the source of the limitations.

The next section of the chapter explores five tensions that contracts law seeks to balance.  First, Principles acknowledges that while contract law needs to project stability in order to promote confidence in the enforceability of binding promises, the law evolves, usually slowly but sometimes jarringly, in response to exogenous impulses like the arrive of the New Deal or electronic contracting. (58-59)   In the next section, Principles veers away from the libertarian perspective discussed above and acknowledges the role of default terms and gap fillers in facilitating contract formation.  Regulation might seem in tension with facilitation. In fact, they are symbiotic. (60-61) Third, Principles identifies a tension in theories of enforcement.  Classical doctrine enforces based on promises; modern doctrine also enforces based on estoppel. (62-63) Principles next explores a tension between formal and substantive rules. The former may at times prevent the effectuation of the latter, as when a statute of limitation lapses or a contract cannot be enforced for wont of a wax seal. The abandonment of the writ system and a more capacious concept of consideration have eased some of these tensions, but they persist. (64-65) Finally, Principles notes that the seeming tension between the civil law tradition, which favors  specific performance and the common law preference for expectancy damages is not as pronounced as it seems.  The common law embraces specific performance when unique goods or property are involved, and Article 2 provides for an expansion of the availability of the remedy.  Civil courts encourage settlement in lieu of specific performance, because the latter requires potentially costly monitoring  (65-66) 

In the final section of the chapter, Principles explores tensions in contracts theory as opposed to contracts doctrine. Freedom of contract is tempered by concerns over justice in asymmetrical contracts of adhesion.  One-sided terms can be enforced only if reasonable (68-69) or meaningful consent can be guaranteed through disclosure requirements. (70) There follows a discussion of how relational contract theory and the doctrine of good faith result in shifts in contracts doctrine. (71-73) I would add that relational contract theory is especially important in understanding a tension mentioned earlier in the chapter (59) between the law on the books and the law in action.  Non-breaching parties may forgive the breach in order to preserve the relationship, or the parties might renegotiate the present deal to adjust for changed circumstances.

Chapter 3 of Mastering is about interpretation.  This strikes me as a surprising choice and not the only organizational idiosyncrasy of the book. I would treat formation before getting to interpretation.  I suppose the justification for starting with interpretation is that it permits the Authors to foreground the principle that what courts ought to enforce is the intentions of the parties.  So even before we learn about formation, we are thinking ahead to the end game of expectation damages.

An additional benefit of foregrounding rules of interpretation is that many of them have applications beyond the realm of contracts law. (20)  They begin with Williston’s distinction between interpretation and construction (21), on which see Gregory Klass’s work, reviewed here.  They then proceed to a discussion of interpretation in the statutory context, beginning with the “no vehicles in the park problem” and discussing the role of statutory definitions, legislative history,  explication through case law, and public policy as a tool of interpretation. (22-24)

The Authors next discuss canons of construction, mostly focusing on contractual construction, but occasionally referencing statutory construction as well.  (24-28) This is valuable material and it is well presented. I just think about how a first-year student would use this book.  I have never seen a casebook or treatise that discusses interpretation before formation.  The Restatement begins with formation.  And so, if I were assigning or recommending Mastering to my students as a supplement, I would tell then to skip chapter 3 and return to it after we have completed formation.  By that time, they will have read enough case law so that we could draw from that material to give examples of how the cannons might be deployed.

After a very short section on treatment of extrinsic evidence under the common law (29), the chapter next covers extrinsic evidence under Article 2, which they say is similar to common law rules on extrinsic evidence. (29-31) The chapter concludes with a brief section on the parol evidence rule (32), which certainly makes sense in connection with the discussion of extrinsic evidence, but is a bit odd, given that the authors say the parol evidence rule is not a rule of interpretation (19) and is covered separately in Chapter 9.  I teach the parol evidence rule in the section of my course devoted to interpretation, but I agree that it is not a rule of interpretation.  However, I would say the same about rules relating to the admissibility of extrinsic evidence. 

Again, I have reservations about organization and scope of treatment.  Chapter 9 provides a thorough treatment of the parol evidence rule but no further discussion of extrinsic evidence. Again, thinking about this book as something for first-year students, I think the discussion of extrinsic evidence is misplaced here and too cursory, given the importance of the subject matter and its conceptual difficulty.  The Authors lay out the relevant UCC rules relating to extrinsic evidence clearly enough, but they provide only one concrete example, and even there they do not cite to a case but just describe it.  Absent an opportunity to see how these rules play out in the case law, I don’t think students can appreciate the dramatic effects of the UCC’s rules on extrinsic evidence in cases like Nanakuli and Columbia Nitrogen.  But those are pretty complex cases, best introduced after students have gained some familiarity with the material.

The first post in this series can be found here
Part II is here.