Учебный год 22-23 / Binding Promises - The Late 20th-Century Reformation of Contract Law

faculty, students, or members of the news media. Moreover, they generally work in close association with other employees, all doing parts of common tasks. People have to be courteous and friendly and possess at least a decent demeanor and appearance to perform one of these jobs properly. They have to be willing to do more than their usual share sometimes because teamwork inevitably sometimes falls more heavily on particular members of the team. They should be honest in minor matters as well as major ones; for example, they should admit mistakes and not take illness absences unless they are ill. Most of these jobs also require highly developed skills. Not even considering the faculty members, practically all of whom have doctoral degrees, there are numerous professionals, scientists, technicians, and members of skilled trades. Even the office work now generally requires competence in word processing and in the operation of technical devices or systems for telephone services, mathematical computation, accounting, or recordkeeping of other kinds. Yet the employment contracts that cover these people require the university to prove by objective criteria that they performed their jobs inadequately before they can be discharged.

At a hearing at which I was present some years ago, for example, the hearing board decided that a hospital could discharge an employee whose job required him to perform tests so that physicians could learn the results in time to know what medical procedures to use on patients in the emergency rooms. The hospital had documented instances in which the employee had left his workplace without leaving word where he was. It is frightening to contemplate the damage this employee may have done before the hospital was able to gather sufficient documentation of his poor performance to justify removing him from his job.

Unless public policy considerations are involved, as they are for tenured faculty, for example, we should change the civil service laws and employment contracts to replace guaranteed tenure with rights of involuntary severance pay for jobs for which there are not adequate objective measures of performance. For example, an employee could earn an entitlement to one month’s involuntary severance pay for each year of work. An employer could discharge an employee without severance pay if the employer could prove inadequate job performance by objective criteria, just as an employer currently can, but an employer could also discharge an employee without such proof by paying the severance pay.

Most employers would thereby save substantial sums while not reducing the value of their employees’ rights at all. Employers would save the costs of having to keep badly performing employees in their jobs, the costs of the hearing procedures, and the costs of contesting discharged employees’ cases in court. The employees, on the other hand, would ordinarily end up with at least as much as they would get now, because they would get their severance pay without having to incur any costs. Discharged employees

who bring actions against former employers currently ordinarily have to pay their lawyers about 50 percent of what they win. Guaranteed severance pay would also protect employees against a device by which employers can sometimes evade the current employment contracts or civil service laws. If the employer can make it seem that it has independent reasons for reorganizing the section or department in which the employee works, so as to eliminate the employee’s job, it can discharge the employee without liability under many such contracts or laws.

Finally, the American Rule is a source of abuse insofar as it still protects a losing plaintiff’s lawyer with a contingency fee from having to pay the defendant’s litigation costs. Lawyers will continue to bring unmeritorious suits, and defendants with deep pockets, such as insurance companies, will continue to buy them off with big settlements, as long as the law allows the lawyers to make big profits if they win but to pay only their costs of operation if they lose. I explained the unfair and distorting effects of the American Rule in Chapter 5.

It will require legislation to change the civil service laws, and of course only employers can change their employment contracts. The courts cannot change the American Rule insofar as legislatures have incorporated it in statutes, but in certain situations the courts have the constitutional duty, as well as the authority, to abolish the American Rule whether or not legislatures have incorporated it in statutes, as I explained earlier in this chapter. By and large, therefore, the courts have the authority to “reform the reforms” as I have here proposed, because, with the exceptions just noted, all the laws and practices I have described are common law. However, although all these abuses have been evident almost since the reforms began, not a single state highest court has yet changed the law to try to prevent them. They should. Even judges who oppose the reforms should be willing to prevent abuses of them.

Making Promises Binding Again

The principal purpose of contract law is to make certain kinds of promises binding. Before the recent reforms, producers could use their superior bargaining powers to defeat this purpose. They could make contracts that did not include the promises they had made, and they could breach their contracts with impunity. These results were unjust because they systematically favored producers over consumers, and they were socially harmful because they weakened the incentives for producers to produce safe products and products of good quality.

The reforms make producers’ promises binding again. Reasonable expectations requires that contracts reflect the promises made. Relational

torts impose duties on producers for aspects of their products or contracts that one cannot reasonably expect consumers to understand. Bad faith breach deters producers from breaking their promises or evading the liabilities that breaking them should impose. The new or expanded remedies provide incentives for producers not to breach and adequate compensation for consumers if they do. All the reforms except the first also impose public responsibilities on producers. Relational torts impose such responsibilities directly. The remedies reforms help to enforce the public responsibilities by imposing sufficient damages to deter producers from engaging in socially harmful conduct if the compensatory damages to which the plaintiff is entitled would not be enough. The duties that the tort of bad faith breach imposes are public responsibilities, both because producers cannot contractually avoid them and because the damages for a bad faith breach are designed to go beyond compensating the plaintiff in order to deter the breacher and others from engaging in similar wrongful conduct in the future.

American contract law since 1960 has been undergoing its first great reform since the English and American courts completed their creation of modern contract law at the end of the nineteenth century. Now, as before, courts have played the leading role, but this time legal scholars have also made major contributions. Scholars largely drafted the Uniform Commercial Code, they publicized and analyzed the new judicial lawmaking decisions, and they made proposals for new laws to the courts. The fact that American common law consists of the independent common laws of fiftyone jurisdictions has had a stimulating influence. It greatly increases the chances that a judge will have the authority to put new ideas into effect long enough for scholars and other judges to notice them.

The history of the reforms demonstrates the superiority of judicial lawmaking over legislation for contract law. Although scholars contributed to both the judicial lawmaking and the legislation, their efforts proved to be much more successful when they were combined with the efforts of judges than when they drafted the laws for legislatures to enact. I have tried in a modest way to express my admiration for our judicial lawmaking system by dedicating this book to the American common law judge.

Notes

Introduction

1. Mark Peterson et al., Rand Corp., Punitive Damages: Empirical Findings viii (1987). The survey found punitive damages awarded in 35 percent of the contract cases in which judgment was for the plaintiff. This almost certainly demonstrates that more than 50 percent of the cases involved a relational tort, because California law requires that there be a commission of a tort if there are to be punitive damages, even though many commissions of a relational tort do not entitle the winning plaintiff to punitive damages. Additionally, virtually all of the 35 percent must have involved bad faith breaches, because under California law there is virtually no way of obtaining punitive damages in a contractual situation unless the defendant breached in bad faith.

Chapter 1

1.Alfred W. B. Simpson, A History of The Common Law of Contract: The Rise of the Action of Assumpsit 227–58 (1975); Oliver Wendell Holmes, Jr., The Common Law Lecture V, at 182–200 (1938).

2.Sources for freedom of contract and the developments associated with it, some of which are also specifically cited herein, are:

Patrick S. Atiyah, An Introduction to the Law of Contract (2d ed. 1971); Patrick S. Atiyah, The Rise and Fall of Freedom of Contract (1979); Paul Brest & Sanford Levinson, Processes of Constitutional Decision-making: Cases and Materials 215– 34 (2d ed., 1983); Maurice Cranston, Annotation, “Liberalism,” 4 Encyclopedia of Philosophy 458, 458–61 (1967); Patrick Gardiner, Annotation, “Schopenhauer, Arthur (1788–1860),” 7 Encyclopedia of Philosophy 325, 325–32 (1967); James Gordley, The Philosophical Origins of Modern Contract Doctrine (1991); Charles M. Haar & Daniel W. Fessler, The Wrong Side of the Tracks 15, 109–54 (1986); Louis Hartz, The Liberal Tradition in America (1955); Holmes, Jr., supra note 1; Morton J. Horwitz, The Transformation of American Law, 1780–1860, at 160–210 (1977); Jerome C. Knowlton, “Freedom of Contract,” 3 Mich. L. Rev. 619 (1905); Anthony T. Kronman & Richard A. Posner, The Economics of Contract Law ch. 7, at 230–67 (1979); John E. Nowak et al., Constitutional Law § 11.4 (3d ed. 1986); Simpson, supra note 1; Alfred W. B. Simpson, “Innovation in Nineteenth Century Contract Law,” 91 Law Q. Rev. 247, 260–61 (1975); Richard H. Tawney, Religion and the Rise of Capitalism (1958); Samuel Williston, “Freedom of Contract,” 6

Cornell L.Q. 365 (1921).

3.Winterbottom v. Wright, 152 Eng. Rep. 402 (Ex. 1842).

4.MacPherson v. Buick Motor Co., 111 N.E. 1050 (N.Y. 1916).

5.Edward H. Levi, An Introduction to Legal Reasoning 7–19 (1949); Robert L. Rabin, “The Historical Development of the Fault Principle: A Re-Interpretation,” 15 Ga. L. Rev. 925, 936–38 (1981).

6.Sir Henry S. Maine, Ancient Law ch. IX, at 331–88 (1861).

7.Printing Co. v. Sampson, 19 L.R.-Eq. 462 (1875).

8.Id. at 465.

9.Williston, supra note 2, at 373 & n.10.

10.Lochner v. New York, 198 U.S. 45 (1905).

11.Id. at 53.

12.Coppage v. Kansas, 236 U.S. 1 (1915).

13.State v. Coppage, 125 P. 8, 10 (1912).

14.Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations bk. 1, ch. 8 (1776).

15.Coppage, 236 U.S. at 17.

16.Compare, e.g., Mitchell v. Lath, 160 N.E. 346 (N.Y. 1928) (the rule in a strict form) with Pacific Gas & Elec. Co. v. G. W. Thomas Drayage & Rigging Co., 442 P.2d 641 (Cal. 1968) (the rule greatly ameliorated). The current status of the rule is described in E. Allen Farnsworth, Farnsworth on Contracts § 7.2 (2d ed. 1990).

17.Farnsworth, supra note 16, § 2.9a; Daniel A. Mathews, Comment, “A Common Law Action for the Abusively Discharged Employee,” 26 Hastings L.J. 1435, 1438–42 (1975).

18.Collins v. Parsons College, 203 N.W.2d 594 (Iowa 1973).

19.John Leubsdorf, “Toward a History of the American Rule on Attorney Fee Recovery,” 47 Law & Contemp. Probs. 9, 10–27 (1984).

20.Cal. Civ. Proc. Code § 1021 (West 1980).

21.See, e.g., Lytle v. State, 17 Ark. 608, 669–71 (1857); Adams v. Stevens & Cagger, 26 Wend. 451, 455–57 (N.Y. Sup. Ct. 1841); Bayard v. McLane, 3 Del. (3 Harr.) 139, 220–21 (1840).

22.See, e.g., Reggio v. Braggiotti, 61 Mass. 166 (1851), quoted in Leubsdorf, supra note 19, at 23 n.96; St. Peter’s Church v. Beach, 26 Conn. 355 (1857), quoted in Leubsdorf, supra note 19, at 15 nn.32, 23 nn.97–98.

23.John D. Calamari & Joseph M. Perillo, Contracts 646 (3d ed. 1987).

24.Adams v. Lindsell, 106 Eng. Rep. 250 (K.B. 1818).

25.Id. at 251.

26.Household Fire & Carriage Accident Ins. Co. v. Grant, 4 Ex. D. 216, 221 (1879).

27.Dickenson v. Dodds, 2 Ch. D. 463 (1876).

28.Id. at 473.

29.Restatement (First) of Contracts § 43 (1931).

30.Restatement (Second) of Contracts § 43 (1981).

31.Holmes, supra note 1, Lecture VIII, at 304–05.

32.Grant Gilmore, The Death of Contract 35–53 (1974).

33.Hotchkiss v. National City Bank of New York, 200 F. 287, 293 (S.D.N.Y. 1911). See also Eustis Mining Co. v. Beer, Sondheimer & Co., 239 F. 976, 984–85 (S.D.N.Y. 1917) (Hand, J., stating that “The whole House of Bishops might satisfy us that he had intended something else, and it would make not a particle of difference in his obligation”).

34.John D. Calamari & Joseph M. Perillo, The Law of Contracts § 9-42, at 328–29 (2d ed. 1977).

Chapter 2

1.Contracts created by the doctrine of promissory estoppel can have this effect. If the promisee reasonably relies on the promise to its substantial detriment, the law may make the promise a contract whether or not the promisor expressed its intention that it be a contract.

2.James J. White & Robert S. Summers, Uniform Commercial Code § 4-9, at 205 (3d ed. 1988).

3.A Lexis search (unconscion! and “uniform commercial code” or ucc and date aft(1990)) on July 6, 1992, turned up eighty-three cases. Both parties were corporations in 40 percent of the cases. In addition, I noticed that a sizable fraction of the individual parties in these cases were farmers, and farming, of course, is a business.

4.For a discussion of implied warranties as applied to leases and the sale of residences, see Myron Moskovitz, “The Implied Warranty of Habitability: A New Doctrine Raising New Issues,” 62 Cal. L. Rev. 1444 (1974); Peter J. Shedd, “The Implied Warranty of Habitability: New Implications, New Applications,” 8 Real Est. L.J. 291, 303–06 (1980).

5.E.g., John E. Murray, Jr., Murray on Contracts § 226 (relaxation of certainty requirements), § 232 (expansion of allowance of damages for mental suffering) (2d rev. ed., Grismore on Contracts 1947) (1974).

6.Gary T. Schwartz, “Foreword: Understanding Products Liability,” 67 Cal. L. Rev. 435 (1979).

7.W. Page Keeton et al., Prosser and Keeton on the Law of Torts §§ 39–40 (5th ed. 1984) (expansion of res ipsa loquitur).

8.E.g., U.C.C. §§ 9-503 to 9-505 (1983).

9.See, e.g., Robert E. Keeton, Basic Text on Insurance Law (1971).

10.See, e.g., White & Summers, supra note 2, § 4-2, at 184. The opinion expressed on this point in the 1980 second edition of the treatise was stronger, however, as one might expect. James J. White & Robert S. Summers, Uniform Commercial Code § 4-2, at 149 (2d ed. 1980).

11.See Henningsen v. Bloomfield Motors, Inc., 161 A.2d 69, 87 (N.J. 1960).

12.Wilson Trading Corp. v. David Ferguson, Ltd., 244 N.E.2d 685 (N.Y. 1968).

13.Wetherbee v. United Ins. Co., 71 Cal. Rptr. 764, 765 (Cal. Ct. App. 1968), aff’d on second appeal, 95 Cal. Rptr. 678 (Cal. Ct. App. 1971).

14.Duncan Kennedy, “Distributive and Paternalist Motives in Contract and Tort Law, with Special Reference to Compulsory Terms and Unequal Bargaining Power,” 41 Maryland L. Rev. 563 (1982).

15.Stewart Macaulay, “Non-Contractual Relations in Business: A Preliminary Study,” 28 Am. Soc. Rev. 55, 60–62 (1963).

16.Lake River Corp. v. Carborundum Co., 769 F.2d 1284 (7th Cir. 1985).

17.Id. at 1289.

18.Alan Schwartz & Louis L. Wilde, “Intervening in Markets on the Basis of Imperfect Information: A Legal and Economic Analysis,” 127 U. Pa. L. Rev. 630 (1979).

19.Douglas G. Baird & Robert Weisberg, “Rules, Standards and the Battle of the Forms: A Reassessment of § 2-207,” 68 Va. L. Rev. 1217 (1982).

20.Schwartz & Wilde, supra note 17, at 632–39, 671–82. See also W. David Slawson, The New Meaning of Contract: Transformation of Contract Law by Standard Forms 21, 42–46 (1984) (describing both articles’ arguments in greater detail).

21.See, e.g., Harlow & Jones, Inc. v. Advance Steel Co., 424 F. Supp. 770, 773 (E.D. Mich. 1976); Construction Aggregates Corp. v. Hewitt-Robbins, 404 F.2d 505, 508 (7th Cir. 1968).

Chapter 3

1.Robert E. Keeton, “Insurance Law Rights at Variance with Policy Provisions” (pt. 1), 83 Harv. L. Rev. 961 (1970); Robert E. Keeton, “Insurance Law Rights at Variance with Policy Provisions” (pt. 2), 83 Harv. L. Rev. 1281 (1970).

2.Keeton, “Insurance Law Rights” supra note 1, at 967.

3.Gerhardt v. Continental Ins. Co., 225 A.2d 328 (N.J. 1966).

4.Id. at 332.

5.Kenneth S. Abraham, “Judge-Made Law and Judge-Made Insurance: Honoring the Reasonable Expectations of the Insured,” 67 Va. L. Rev. 1151 (1981). Abraham went deeper into the theoretical justifications in a 1986 book, but he continued to assert essentially the same justifications. See Kenneth S. Abraham, Distributing Risk: Insurance, Legal Theory, and Public Policy 104–09 (1986).

6.Robert E. Keeton & Alan I. Widiss, Insurance Law: A Guide to Fundamental Principles, Legal Doctrines, and Commercial Practices (1988).

7.Id. at 634–36.

8.Mark C. Rahdert, “Reasonable Expectations Reconsidered,” 18 Conn. L. Rev. 323, 323–25 (1986).

9.Roger C. Henderson, “The Doctrine of Reasonable Expectations in Insurance Law after Two Decades,” 51 Ohio St. L.J. 823, 838 (1990).

10.Robert H. Jerry II, Understanding Insurance Law § 61 (1987).

11.Hunter v. Jefferson Standard Ins. Co., 86 S.E.2d 78 (N.C. 1955). The quotation is from Jerry, supra note 10, §61, p. 269.

12.Jerry, supra note 10, § 61.

13.See, e.g., id.; John A. Appleman, Insurance Law and Practice (1987); George C. Couch, Couch on Insurance (2d ed. 1984); John F. Dobbyn, Insurance Law (2d ed. 1989).

14.See, e.g., Keeton & Widiss, supra note 6; Kenneth S. Abraham, Insurance Law and Regulation (1990); Kenneth H. York & John W. Whelan, Insurance Law: General Practice (2d ed. 1988).

15.See Lawrence E. Blades, “Employment at Will vs. Individual Freedom: On Limiting the Abusive Exercise of Employer Power,” 67 Colum. L. Rev. 1404 (1967). Professor Blades’s article not only reported the earliest developments, but also had a major influence on the course of the law after its publication. For example, see the New Jersey Supreme Court’s use of it in Pierce v. Ortho Pharmaceutical Corp., 417 A.2d 505 (N.J. 1980).

16.Wagner v. Sperry Univac Div. of Sperry Rand Corp., 458 F. Supp. 505 (E.D. Pa. 1978), aff’d without opinion, 624 F.2d 1092 (3d Cir. 1978).

17.For the current law on the subject, see Michael A. DiSabatino, Annotation,

“Modern Status of Rule that Employer May Discharge At-Will Employee for Any Reason,” 12 A.L.R. 4th 544, §§ 7–11 (1982 & Supp. 1992).

18.Karl N. Llewellyn, Book Review, 52 Harv. L. Rev. 700 (1939).

19.Karl N. Llewellyn, The Common Law Tradition: Deciding Appeals (1960).

20.Friedreich Kessler, “Contracts of Adhesion,” 43 Colum. L. Rev. 629 (1943).

21.Id. at 637.

22.See Gray v. Zurich Ins. Co., 65 Cal.2d 263, 419 P.2d 168, 171 (1966).

23.Arthur Alan Leff, “Contract as Thing,” 19 Am. U. L. Rev. 131, 131–47 (1970).

24.Id. at 144–47.

25.Id. at 147–57. See also Arnold L. Rotkin, “Standard Forms: Legal Documents in Search of an Appropriate Body of Law,” 1977 Ariz. St. L.J. 599 (making the same suggestion and expanding on it).

26.W. David Slawson, “Standard Form Contracts and the Democratic Control of Lawmaking Power,” 84 Harv. L. Rev. 529 (1971).

27.W. David Slawson, “Mass Contracts: Lawful Fraud in California,” 48 S. Cal. L. Rev. 1 (1974).

28.Restatement (First) of Contracts § 20 (1932); Arthur L. Corbin, Corbin on Contracts § 3 (1963).

29.Restatement (First) of Contracts §§ 20, 230, 233 (1932); Samuel Williston, Contracts §§ 603-04, 607 (3d ed. 1961).

30.Kenneth S. Abraham, Insurance Law and Regulation: Cases and Materials

28–31 (New York: Foundation Press, 1990).

31.Todd D. Rakoff, “Contracts of Adhesion: An Essay in Reconstruction,” 96

Harv. L. Rev. 1174 (1983).

32.Id. at 1283–84.

33.“Restatement (Second) of Contracts (Presentation of Tentative Draft No. 5),” 47 A.L.I. Proc. 485, 523–37 (1970).

34.See generally id.

35.Id. at 524.

36.Id. at 535–36.

37.Llewellyn, The Common Law Tradition, supra note 19, at 370.

38.Id. at 525.

39.Id. at 524–27.

40.Id. at 533.

41.Darner Motor Sales, Inc. v. Universal Underwriters Ins. Co., 682 P.2d 388, 396–99 (Ariz. 1984)

42.C & J Fertilizer, Inc. v. Allied Mut. Ins. Co., 227 N.W.2d 169, 176–77 (Iowa 1975) (using a tentative draft of the section).

43.Bond Bros., Inc. v. Robinson, 471 N.E.2d 1332 (Mass. 1984).

44.C & J, supra note 42, 227 N.W.2d at 176.

45.Farm Bureau Mut. Ins. Co. v. Sandbulte, 302 N.W.2d 104, 112 (Iowa 1981); Cairns v. Grinnell Mut. Reinsurance Co., 398 N.W.2d 821, 825 (Iowa 1987); Lepic

v.Mut. Ins. Co., 402 N.W.2d 758, 761 (Iowa 1987); AID (Mut.) Ins. v. Steffen, 423 N.W.2d 189, 192 (Iowa 1988); Grinnell Mut. Reinsurance Co. v. Voeltz, 431 N.W.2d 783, 786 (Iowa 1988); Moritz v. Farm Bureau Mut. Ins. Co., 434 N.W.2d 624, 626 (Iowa 1989); Weber v. IMT Ins. Co., 462 N.W.2d 283, 288 (Iowa 1990).

46.Henderson, supra note 9, at 842–53.

47.Ilan v. Shearson/American Express, 632 F. Supp. 886, 891 (S.D.N.Y. 1985).

48.Forell v. United States, 16 Cl. Ct. 700, 720 (1989).

49.Edwin W. Patterson, “The Delivery of a Life Insurance Policy,” 33 Harv. L. Rev. 198 (1919).

50.Id. at 222.

51.Friedrich Kessler, “Contracts of Adhesion—Some Thoughts about Freedom of Contract,” 43 Colum. L. Rev. 629 (1943).

52.Graham v. Scissor-Tail, Inc., 623 P.2d 165, 171–73 (Cal. 1981); see also Perdue v. Crocker Nat’l Bank, 702 P.2d 503 (Cal. 1985).

53.Obstetrics and Gynecologists v. Pepper, 693 P.2d 1259, 1260–61 (Nev.

1985).

54.Leong v. Kaiser Found. Hosps., 788 P.2d 164, 168 (Haw. 1990).

55.Anderson v. Union Pac. R.R. Co. 790 P.2d 438, 441–42 (Kan. Ct. App.

1990).

56.Hartland Computer v. Insurance Man Inc., 770 S.W.2d 525, 527–28 (Mo. Ct. App. 1989).

57.Bishop v. Washington, 480 A.2d 1088, 1094 (Pa. Super. Ct. 1984).

58.Slawson, supra note 23, at 549–61.

59.Wassink v. Hawkins, 763 P.2d 971, 974 (Alaska 1988); Batterman v. Wells Fargo AG Credit Corp., 802 P.2d 1112, 1116 (Colo. Ct. App. 1990); McRand, Inc.

v.Van Beelen, 486 N.E.2d 1306, 1314 (Ill. App. Ct. 1985); In re Estate of Szorek, 551 N.E.2d 697, 700 (Ill. App. Ct. 1990); Agrimerica, Inc. v. Mathes, 557 N.E.2d 357, 362 (Ill. App. Ct. 1990); Morris v. Metriyakool, 344 N.W.2d 736, 742–43 (Mich. 1984); Ryoti v. Paine, Webber, Jackson & Curtis, Inc., 371 N.W.2d 454, 455 (Mich. Ct. App. 1985); Muscat v. Lawyers Title Ins. Corp., 351 N.W.2d 893, 896 (Mich. Ct. App. 1984); Interfund Corp. v. O’Byrne, 462 N.W.2d 86, 88–89 (Minn. Ct. App. 1990); Hoiland v. Minneapolis Child. Medical Ctr., 457 N.W.2d 241, 243 (Minn. Ct. App. 1990); In re Baby M, 525 A.2d 1128, 1159 (N.J. Super. Ct. Ch. Div. 1987); Albuquerque Tire v. Mountain States Tel. & Tel., 697 P.2d 128, 131–32 (N.M. 1985); Guthmann v. La Vida Llena, 709 P.2d 675, 678–79 (N.M. 1985); Rozeboom v. Northwestern Bell Tel. Co., 358 N.W.2d 241, 242–43 (S.D. 1984); Southwestern Bell Tel. v. Delanney, 762 S.W.2d 772 (Tex. Ct. App. 1988); Calarco

v.Southwestern Bell Tel. Co., 725 S.W.2d 304 (Tex. Ct. App. 1986).

60.See, e.g., C & J, supra note 42.

61.James J. White & Robert S. Summers, Uniform Commercial Code §1-2 (3d ed. 1988).

62.See discussion of warranties and remedies infra chapter 6.

63.James J. White & Robert S. Summers, Uniform Commercial Code § 12-12 (3d ed. 1988).

64.Patterson v. Meyerhofer, 97 N.E. 472 (N.Y. 1912).

65.E. Allan Farnsworth, Contracts § 8.16 (1982).

66.Silberg v. California Life Ins. Co., 521 P.2d 1103 (Cal. 1974).

67.See also Tymshare, Inc. v. Covell, 727 F.2d 1145 (D.C. Cir. 1984); Best v. United States Nat’l Bank, 739 P.2d 554 (Or. 1987).

68.Ellsworth Dobbs, Inc. v. Johnson, 236 A.2d 843, 856–57 (N.J. 1967); Allied Van Lines v. Bratton, 351 So. 2d 344 (Fla. 1977) (McKnab portion of holding).

69.Morin Bldg. Prods. Co. v. Baystone Constr., Inc., 717 F.2d 413 (7th Cir.

1983).

70.Id. at 414.

71.Id. at 416.

72.Nanakuli Paving & Rock Co. v. Shell Oil Co., 664 F.2d 772 (9th Cir. 1981).

73.U.C.C. §§ 1-205 & 1-201(3) (1983).

74.Nanakuli, 664 F.2d at 794–805.

75.Arthur L. Corbin, Corbin on Contracts § 1, at 1 (1950).

76.C & J Fertilizer, Inc., v. Allied Mut. Ins. Co., 227 N.W.2d 169 (Iowa 1975).

77.Rodman v. State Farm Mut. Ins. Co., 208 N.W.2d 903, 918 (Iowa 1973).

78.Farm Bureau Mut. Ins. Co. v. Sandbulte, 302 N.W.2d 104 (Iowa 1981).

79.Henderson, supra note 9, at 843–46.

80.Darner Motor Sales, Inc. v. Universal Underwriters Ins. Co., 682 P.2d 388 (Ariz. 1984); Gordinier v. Aetna Casualty & Surety Co., 742 P.2d 277 (Ariz. 1987).

81.Henderson, supra note 9, at 846, 851.

82.Davis v. M.L.G. Corp., 712 P.2d 985 (Colo. 1986).

83.Hurtig v. Terminix Wood Treating & Contracting Co., 692 P.2d 1153 (Haw. 1984) (dissenting opinion); Sturla, Inc. v. Fireman’s Fund Ins. Co., 684 P.2d 960 (Haw. 1984).

84.Transamerica Ins. Co. v. Royle, 656 P.2d 820 (Mont. 1983) (alternative holding).

85.Sparks v. St. Paul Ins. Co., 495 A.2d 406 (N.J. 1985); Werner Indus., Inc. v. First State Ins. Co., 548 A.2d 188 (N.J. 1988).

86.Great Am. Ins. Co. v. C. G. Tate Constr. Co., 279 S.E.2d 769 (N.C. 1981), rev’d on other grounds, 340 S.E.2d 743 (N.C. 1986).

87.Tonkovic v. State Farm Mut. Auto Ins. Co., 521 A.2d 920 (Pa. 1970).

88.Elliot Leases Cars, Inc. v. Quigley, 373 A.2d 810 (R.I. 1977) (applying the doctrine to an automobile leasing contract).

89.Estrin Constr. Co., Inc. v. Aetna Casualty & Surety Co., 612 S.W.2d 413 (Mo. Ct. App. 1981); Spychalsky v. MFA Ins. Co., 620 S.W.2d 388 (Mo. Ct. App. 1981).

90.Pauline Afuso, Reference Librarian at the Law Center, University of Southern California, ran the computer tests on WESTLAW on November 8, 1994, for all reported state and federal decisions for the calendar years 1992 and 1993.

91.Slawson, supra note 26, at 544.

92.The U.S.C.A. General Index 1992 contains approximately 200 entries for debtor and creditor, and West’s Cal. Codes Ann. General Index 1992 contains approximately 300 entries for debtor and creditor.

93.The U.S.C.A. General Index 1992 contains approximately 550 entries for insurance, and West’s Cal. Codes Ann. General Index 1992 contains approximately 3,000 entries for insurance.

94.A copy can be found in Kenneth S. Abraham, Insurance Law and Regulation: Cases and Materials 439–48 (1990).

95.Weber v. IMT Ins. Co., 462 N.W.2d 283 (Iowa 1990).

96.See, e.g., Kenneth S. Abraham, Distributing Risk: Insurance, Legal Theory, and Public Policy 100–32 (Yale U. Press, 1986) (describing reasonable expectations as “judge made insurance”); Richard Craswell, “Property Rules and Liability