- •CONTENTS
- •CONTRIBUTORS
- •PREFACE
- •Introduction
- •I. A Positive Account
- •II. Normative and Historical Accounts
- •III. Explaining Legal Doctrine
- •A. Willful Breach
- •B. Comparative Fault
- •Conclusion
- •ACKNOWLEDGMENT
- •Introduction
- •C. Summary
- •Conclusion
- •Introduction
- •B. Some Striking Nuances in Common Law Systems
- •II. A Market Function Approach
- •A. Ethics or Economics – The Wrong Question
- •B. Party and Market Expectation as Guidelines
- •D. Fault, Foreseeability, and Other “Softeners” of Strict Liability
- •Conclusion
- •I. Fault and Uncertain Contractual Intent
- •II. An Expanded Law and Economics Approach to Fault
- •III. A Fault-Based Approach to Contract Damages
- •Conclusion
- •Introduction
- •A. A Model
- •B. Fault
- •C. A Comparison: Strict Liability Versus Negligence
- •II. Doctrine
- •A. Impossibility/Impracticability
- •B. Reasonable or Substantial Performance
- •C. Good Faith and Best Efforts
- •D. Interpretation/Implied Terms
- •E. Conditions
- •F. Damages
- •Introduction
- •I. Unconscionability
- •A. Markets
- •B. Moral Fault
- •II. Unexpected Circumstances
- •III. Interpretation
- •IV. Mistake
- •C. Cases in Which the Nonmistaken Party Neither Knew nor Had Reason to Know of the Mechanical Error
- •V. Nonperformance
- •Conclusion
- •Introduction
- •I. Modernizing Tort and Contract Around Fault
- •II. Explaining the Fault Swap
- •Conclusion
- •Introduction: From Fault to Negligence – and Back
- •I. Tort Law
- •III. Gratuitous Transactions: Bailment and Agency
- •A. Coggs v. Bernard
- •C. Siegel v. Spear and Comfort v. McGorkle
- •D. Medical Malpractice, Occupier’s Liability, and Guest Statutes
- •IV. Frustration and Impossibility
- •Conclusion
- •Conclusion
- •A. Analogies in Criminal Law
- •B. Lay Assessments of Culpability
- •C. Two Ways of Defining “Willful”
- •B. “Willful” as a Test for Inefficiency?
- •B. Optimal Damages Under Strict Liability
- •Conclusion
- •II. Cost of Correction Versus Diminution in Value
- •B. Treatment by the Courts
- •Conclusion
- •Introduction
- •C. An Information-Based Explanation
- •B. Informal Lessons from the Example
- •D. From Moral Hazard to Adverse Selection
- •II. Willful Breach Doctrine
- •A. Overcompensatory Expectation Damages
- •B. Tort Damages for Bad-Faith Breach
- •C. Restitution
- •Conclusion
- •Introduction
- •I. Expectation Damages and Willful Breach
- •II. Willfulness, Material Breach, and Damages
- •Conclusion
- •Introduction
- •A. Noncooperation
- •B. Overreliance
- •A. Setting the Stage
- •B. Noncooperation
- •1. When Should Avoiding Overreliance be the Default Rule?
- •Conclusion
- •Introduction
- •I. Stipulation, Fault, and Mitigation
- •II. Encouraging Stipulation
- •A. How Courts Encourage Parties to Stipulate
- •B. Two Advantages of Stipulation: Knowledge and Mitigation
- •Conclusion
- •Introduction
- •II. Comparative Negligence
- •III. Mitigation
- •IV. Reasonable Reliance
- •V. Causation
- •VI. Foreseeability
- •Conclusion
- •I. Summary of the Argument that Breach May Not Be Immoral Given the Incompleteness of Contracts
- •F. When Is Breach Immoral and When Is It Moral in Practice?
- •II. Criticism and Discussion of the Foregoing Argument
- •Conclusion
- •Introduction
- •I. Promise De-moralized, Contract Moralized
- •II. Contract and Promise: More on the Relationship
- •IV. Harm, Fault, and Remedies for Breach
- •V. Fault and Institutional Harm
- •Conclusion: Toward a Moral Law of Contract
- •I. Breach as Moral Harm
- •III. Moral Norms as Default Rules
- •Conclusion
- •CASE INDEX
- •SUBJECT INDEX
SIX
Th e Role of Fault in Contract
Law: Unconscionability, Unexpected
Circumstances, Interpretation, Mistake,
and Nonperformance
Melvin Aron Eisenberg
It is oft en asserted that contract law is based on strict liability, not fault. This assertion is incorrect. As this chapter demonstrates, fault is a basic building block of contract law, and pervades the field. Contract law discriminates between two types of fault: the violation of strong moral norms, such as the prohibition of deception, and the violation of somewhat weaker norms, such as the requirement of due care. Where both types of fault are relevant, one party’s violation of a strong moral norm will normally override the other party’s violation of a weaker moral norm. Fault is pervasive in contract law because it should be. If moral obligation and fault were removed from contract law, the contracting system would be much less efficient. The efficiency of the contracting system rests on a tripod whose legs are legal remedies, reputational effects, and the internalization of social norms – in particular, the moral norm of promise keeping. All three legs are necessary to ensure the reliability, and therefore the efficiency, of the contracting system.
Introduction
Th e Second Restatement of Contracts states that “[c]ontract liability is strict liability. It is an accepted maxim that pacta sunt servanda, contracts are to be kept. The obligor is therefore liable in damages for breach of contract even if he is without fault.”1 Similarly, Farnsworth’s treatise states that “contract law is, in its essential design, a law of strict liability, and the accompanying system of remedies operates without regard to fault.”2 Th ese statements, and many others like them, are incorrect.
As a normative matter, fault should be a building block of contract law. One part of the human condition is that we hold many moral values concerning
1 Restatement (Second) of Contracts ch. 11, introductory note (1981).
2 E. Allan Farnsworth, Farnsworth on Contracts § 12.8, at 195–6 (3d ed. 2004).
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