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we could identify a common underlying problem only after examining several different solutions.

Our last task, then, will be to ask what is the most straightforward way to address the problems we have identified. By the most straightforward solution, I mean the one that comes the closest to giving the right result

– the one that resolves the problem – in the largest number of cases. It is the rule that directs the judges’ attention to what is ultimately at stake. Paradoxically, such a rule may not be the best one in practice. What ultimately matters may require factual determinations that are too difficult to make directly. One might be better off with a rule that gives the wrong answer more of the time but is clearer and simpler. As we have seen, nearly all the rules we have examined have their advantages and disadvantages, many of a practical nature. Nevertheless, it will still be useful to formulate a rule that states so far as possible what really does matter. It at least provides a bench-mark for gauging how often the clearer simpler rule gives the wrong result.

1. Gifts and favours

a. Promises of money or property

As we have seen, in all the legal systems we have examined, the promisor must surmount some obstacle in order to obligate himself to give away money or property. The difference is in the height of the obstacle. In one system (Belgium), he cannot give it away in advance of making the actual transfer; in most, he cannot do so without completing a formality that typically requires the help of a legal professional; in two systems (Spain and Scotland), he must promise to do so in writing.

It is generally acknowledged that one of the underlying problems is to prevent the donor from rashly making himself poorer. If that were the only problem, surely the most straightforward solution is not simply to refuse to enforce a promise unless a formality is completed. With some informal promises of gifts, that problem might not arise, or it might not be serious. Suppose, for example, that the promise was small compared with the promisor’s resources and commitments, and made to an apparently deserving person or cause. It is hard to see why a court should treat the promise as without legal significance if the only problem were a fear of rashness.

Admittedly, there may be other problems as well. The American jurist Melvin Eisenberg has described two of them. First, for the promisee to demand performance as a matter of right might be inconsistent with the

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relationship of trust and affection that led the promisor to make the promise.20 If Gaston promises his niece Catherine a large sum of money for her birthday, part of what is important to their relationship may be that she must trust him to perform – that she cannot legally compel him to do so. Second, both parties may be aware that the promise is subject to implicit conditions which are inchoate in the sense that a court would find it hard to identify them.21 Both Gaston and Catherine may understand that he need not perform if his business fails or his house burns down or he needs an operation for which his medical insurance will not pay.

Again, however, the most straightforward solution to those problems is not to require a formality. With some informal promises of gifts, such problems may not arise. In principle, such promises should be enforced even if the formality was not completed. That does not mean that the formality should be abolished. It serves the useful function of creating what American jurists sometimes call a ‘safe harbour’: it permits a promisor who does wish to bind himself to ensure he is bound by completing the relevant formality. But the more straightforward rule would consider directly whether these reasons for caution about enforcing informal promises apply.

For example, suppose that the promisor clearly indicated that he wished to be legally bound. One might still be afraid he was acting rashly. But the two reasons for caution just mentioned would not be present or would be far less significant. It would be presumptuous to assume his relationship with the promisee would be impaired if he succeeded in binding himself, or that his obligation is subject to implicit conditions that a court cannot determine. Indeed, under some circumstances, these reasons would be unlikely to matter even if the promisor did not indicate that he meant to be legally bound. Perhaps there is no relationship of trust or affection to be impaired, as, for example, in a promise to a charity. Perhaps the promise is unlikely to be subject to implicit conditions, as, for example, if it is made so that the promisee can change his position in reliance upon it.

Thus, the problems which dictate a need for caution in the enforcement of donative promises themselves suggest that one need not always be cautious. The straightforward approach would be to enforce any such promise when the court is convinced (1) that it was not rashly made, taking into

20Melvin Aron Eisenberg, ‘The Theory of Contracts’, forthcoming in The Theory of Contract Law: New Essays (ed. P. Benson, Cambridge Univ. Press).

21Melvin Aron Eisenberg, ‘The World of Contract and the World of Gift’, Cal. L. Rev. 85 (1997), 821, 850.

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determine whether the promise should be enforced whether or not he relied upon it. The promisee who relied upon a rash promise is not a sympathetic figure, particularly if there is any possibility that he relied on the promise in order to be legally protected. The promisee who relied upon a promise subject to a tacit condition cannot complain that the promise is broken unless the condition is fulfilled. And if enforcing the promise would undermine a relationship of affection and trust, so, presumably, would holding the promisor liable because the promisee relied.

Nevertheless, it might matter if the promise was made so that the promisee could act in reliance on it. In that case, it is unlikely that the promise was subject to the sort of inchoate conditions we have described. It is unlikely, in other words, that the parties imagined that there were all sorts of unspoken reasons why the promisor might not have to perform. In that event, the promise should be enforced if it is not rash and if enforcing it would not undermine a relationship of trust and affection.

b. Favours that need not entail expense

As we have seen, most legal systems will enforce a promise to do a favour which can be performed without significant cost provided, as most of the reporters mentioned, that the arrangement was meant to have legal consequences. That is as it should be since, in such cases, the reasons for caution that we have seen in the enforcement of promises of gifts are not present. If there is no significant cost, there is no danger that the promisor rashly decided to enrich the promisee at his own expense. It might be, as in the case of gifts, that enforcing the promise would be inconsistent with a relationship of trust and affection between the parties. But if so, the promise would not be enforceable because the arrangement was not meant to have legal consequences – ambiguous as that requirement may be in other contexts.

The problem, as we have seen, is what to do when the promise unexpectedly entails a significant cost. We have examined two such situations. In one, exemplified by our cases of the loan of a car and the deposit of furniture, the promisor unexpectedly developed a need of his own: for the car (Case 7) or for the storage space (Case 5). In the other situation, exemplified by the promise to insure the plane (Case 6), the promise is broken, and the cost to the promisor will be significant if he is held liable.

We can come closer to a solution if we bear in mind the principle that explains why legal systems are cautious about enforcing donative promises: the promisee should not be enriched at the promisor’s expense unless the promisor has deliberately decided that he should be.

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In the first situation, a benefit that was meant to be conferred costlessly is no longer costless since the promisor needs the car or the storage space himself. Let us first suppose that if the promise is enforced, the promisor will have to purchase a replacement – he will have to rent another car or other storage space – but that if it is not enforced, the promisee will have to do so. Suppose also that the promisee would have to rent the car or storage space and could have done so as cheaply if the promise had never been made. Enforcing the promise under these circumstances violates the principle just mentioned. It confers a benefit on the promisee at the promisor’s expense. Moreover, the promisor has not decided to do so at his own expense. He thought the arrangement would be costless.

On the assumptions we have just made, the promisee is no worse off than if the promise had never been given. He would have had to rent a car or storage space anyway. Of course, he could be made worse off. Perhaps he cannot rent the car or the space now, or cannot do so as cheaply, or perhaps he could have borrowed a car or stored his goods gratuitously with someone else and has now lost the chance to do so. The problem in such cases is like the one raised by the next situation we have to consider: the promise to insure the plane. In that case, the promisee is also worse off than if the promise had never been made. Indeed, she is worse off due to the promisor’s negligence. If the promisor should not be liable in that situation, a fortiori, he should not be liable simply because the promisee is worse off.

In the case of the plane, the promisee is worse off because the promisor negligently failed to perform a service which he could have performed costlessly. To see how to deal with this case, we should recognize that the promisor incurs a cost if he has to run the risk of being held liable for negligence just as he would if he promised to indemnify the promisee for the consequences of a chance event. It would be like a promise to insure someone against a risk. As economists and people in business look at the matter, a risk of loss is itself a cost. Here, admittedly, the promisor can reduce the size of this risk by trying not to act negligently. But people sometimes act negligently even when they have resolved to act with care. The risk could only be reduced to zero for conduct that is so careless that it can be avoided by anyone who makes the effort. Otherwise, there will be a risk of liability, and therefore the promise will not be costless.

Of course, if the promisor is not held liable for his own negligence, the risk of suffering the consequences will fall on the promisee. That, too, is a cost. It may be, however, that the net benefit to the promisee is positive even taking the risk of these consequences into account. The value of the

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benefit that promisee is to receive may be sufficiently great as to outweigh the risk. In that case, at the time the promise was made, the promisee would consider himself to be better off even after taking into account the possibility that the promisor will be negligent. Consequently, it would seem that the promisor should not be liable for negligence. To hold him liable is to make the promisee better off at his expense.

It might be, however, that the promisee is worse off, even if the matter is viewed ex ante at the time the promise is made. The consequences of the promisor’s negligence may be sufficiently severe, and the chance that he will be negligent sufficiently great, to outweigh the benefit the promisee is to receive. In that case, the promisee would not have wanted the promise to be made. He would not have relied upon it if he had understood the risks. Since he did rely on the promise, it is likely that he did not understand the risks because he did not understand how likely it was that the promisor would be negligent. In that event, it would seem that the promisor should be held liable. He has not benefited the promisee even when the matter is viewed ex ante. He has harmed him by leading him to rely on a promise while failing to inform him of the risk of doing so.

We can see, then, that the legal systems that hold the promisor liable only for gross negligence are not far off the mark. Gross negligence can be defined in two ways. It can be defined as conduct so careless that it can be avoided by anyone who tries to do so. In this sense, gross negligence is like an intentional wrong: culpa lata dolo aequiparatur. Liability for gross negligence is more like liability for a choice one makes than for a chance event. A person who does not make this choice runs no risk of liability. Thus, a promise is still costless if the promisor is held liable for gross negligence in this sense. It is not if he is held liable for ordinary negligence.

Gross negligence can also be defined in terms of the risks and consequences to others. In this sense, it is conduct which is exceptionally likely to harm them or to do them serious harm. If the promisor is grossly negligent in this sense, the risk of harm to the promisee is likely to outweigh whatever benefit he was promised. If so, as we have seen, the promisor should be held liable. We can conclude then, that the promisor should be liable for gross negligence in either of these two senses but not for ordinary negligence.

2. Promises to pay for benefits received or owed

a. Promises to pay for benefits already conferred

As we have already seen, many legal systems will enforce a promise to pay a debt discharged in bankruptcy, a time-barred debt, or a debt contracted

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before reaching one’s majority. Some will enforce a promise to compensate a person who was injured rescuing the promisor. The doctrines used to reach these results are quite varied. Yet the cases are similar. In each case, unless the promise is enforced, the promisor will have benefited at the promisee’s expense even though the promisee did not intend to make him a gift. In each case, there is a reason why, even absent a promise, the promisor should have to pay for the benefit. In three of the cases, he had obtained the benefit by agreeing to pay for it. In the other, because he was benefited at the rescuer’s expense, one would expect the rescuer to have a claim for unjust enrichment. Yet in each case, absent a promise, the party who conferred the benefit faces some obstacle to recovery: the discharge in bankruptcy (in some jurisdictions); the passage of time; the rules protecting minors; and reluctance (in some jurisdictions) to allow an action in unjust enrichment for the performance of an unrequested service.

As suggested earlier, enforcing these promises makes sense if, because the promise was made, the law no longer has a reason to interpose an obstacle to recovery. When debts are discharged in bankruptcy, the reason is to allow the debtor to make a new start. The fact that he made the promise is evidence that he can now repay the debt without compromising his new start. The reason debts become time-barred is the fear that evidence has been lost or that the debtor has changed his position in the belief that he will not be called upon to pay. The promise is evidence that the debt was truly owed and that the debtor expects to pay. The contracts of a minor are unenforceable for fear that minors have bad judgment. The promise is evidence that payment is consistent with the debtor’s now mature judgment. In some jurisdictions, it is difficult to recover in unjust enrichment for unrequested services because of doubts as to whether the service was desired and what it was worth to the recipient. The promise may remove these doubts.

If so, however, the promise is not important, as promises usually are, because it is a commitment. It is important because it is evidence. The straightforward approach would not be to lay down a general rule such as ‘promises to perform a natural obligation will be enforced’. It would be to treat the promise as evidence and give it whatever weight seems appropriate. It may be that the bankrupt can now afford to repay the debt, or it may be that he blurted out the promise rashly. It may be that the promise proves the time-barred debt was genuine, but if the promise is vague, it may not be clear evidence. The promise made upon majority may reflect a judgment that the prior contract was a fair one or it may reflect an exaggerated view of the obligations one should be bound to honour. In such cases, one cannot say what weight to give the promise until one has looked

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at the other relevant evidence: the financial circumstances of the bankrupt, the other indications that the debt was genuine, the terms of the contract with the minor, and the circumstances in which it was entered into.

The same is true of the rescue. The promise may resolve doubts as to whether the rescue was needed and what it was worth to the promisor. But the extent to which it will do so depends on the seriousness of these doubts. It may be obvious that the rescue was needed and was worth a great deal. Or it may be unlikely. Similarly, how far the promise will resolve these doubts depends upon the circumstances. The promisor might or might not have been in a position to decide whether he needed to be rescued. The promise may have expressed a sense of obligation to pay for what he has received, or it may merely have expressed generosity or admiration. Again, the most straightforward approach would be to treat the promise merely as evidence bearing on the ultimate question of whether the person rescued was benefited and by what amount.

b. Promises to pay for benefits to which one has a contractual right

As we have seen, when someone agrees to pay more or take less than originally agreed for a benefit to which he is contractually entitled, there are two possibilities. It may be that the parties envisioned from the beginning that the contract price would be adjusted from time to time to reflect changed economic conditions or new information about the value of the performance received in return. The adjustment in question was made in an effort to be fair and to honour this original understanding. Or it may be that the contract price was not intended to be flexible. It was an allocation of risks between the parties. The promisee who demands an adjustment is reneging on a bet which he has lost. Since he cannot appeal to the promisor’s sense of fairness, he will normally have to appeal instead to his own power to harm the promisor by breaching the contract and withholding performance.

In the first of these situations, the price set originally does not reflect the risks of new information and changed conditions since the parties meant to adjust the price in response to this risk. In the second situation, the price will be set to reflect these risks. Thus, in the first situation, if the party who was trusted to act fairly refused to adjust the contract price, he would in effect be enriching himself at the other party’s expense since the contract price was set in the expectation that he would agree to adjust it. In the second situation, the party who demands that the price be changed is trying to enrich himself at the other party’s expense since the original

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price was set in the expectation that he would bear the risks in question. Consequently, if neither party should be enriched at the expense of the other, the promise should be enforced in the first situation but not in the second.

The straightforward approach, then, would be to ask which of these two situations we are dealing with. A number of indicia could help a court to decide. One important consideration is the likelihood that the parties would have intended the terms of the contract to be flexible, at least with respect to the sort of event that allegedly led to the later adjustment. One reason they may have done so is that allowing for that event in the original contract would have been difficult. The difficulty is greater when the contract is long term, and when current information is known to be much less accurate than later information. It is not surprising, then, that courts often uphold later adjustments in long-term leases and employment contracts. Again, the difficulty is greater when it is hard to state in the contract in advance how its terms are to be modified in response to future events. It may be hard to specify in advance exactly the sort of event that warrants an adjustment and how much the contract price should be adjusted. For example, in long-term leases and employment contracts it is hard to specify when economic conditions are so much worse than expected, or when an employee’s services are so much more valuable, that the rent or salary should be adjusted. It is hard to state in advance how large the adjustment should be since that may depend on how economic conditions have affected the lessor or employer. Again, the contract may include certain terms in order to ensure that a party gets the performance he wants when he needs it. Examples are dates of delivery or the requirement of an architect’s certificate. These terms may prove to be unnecessary. The party they protect may discover that he does not need the performance to be made at the time called for, or that he can tell if the work is satisfactory without the architect’s inspection. For that very reason, it is more likely that the parties inserted these terms with the expectation that the beneficiary will be flexible if he discovers he does not need their protection.

Another important consideration is the promisor’s reason for agreeing to take less or pay more than the contract provided. We have been assuming it was either a sense of fairness (the first situation) or fear (the second). Yet it may have been generosity as when Company promises Vito money on his retirement. If so, the promise is not meant as fair compensation but to enrich Vito at Company’s expense, and it should receive the same scrutiny as other donative promises. Indeed, the executives voting to enrich