V. Fault and Institutional Harm

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harmless breach any more than it would from its punishment, and would not benefit from the disproportionate deterrence of a harmful breach any more that it would from its excessive punishment. On the contrary, the institution’s capacity to fulfil its true functions would only diminish if it did so, as parties would be more reluctant to deploy it if by doing so they were subjecting themselves to an otherwise unnecessary, potentially coercive scrutiny of their moral rectitude.

Yet exceptional cases may exist wherein the two types of harm do not entirely overlap – cases where the potential harm to the institution of contract a breach may engender is independent of, or markedly exceeds, the harm caused to the innocent party. And I suspect that fault can sometimes be intrinsic to this sort of harm in a way it usually is not when it comes to harm to contracting parties.

Th e type of case I have in mind here is a particular subcategory of cases where the breach is a constitutive part of a profitable enterprise, not just by removing an obstacle to undertaking it (as in the case of the standard, socalled efficient breach) or making it more profitable than it would have otherwise been (as in another type of efficient breach),20 but by facilitating it in the first place. It is this type of case that has presented perhaps the greatest temptation to depart from the claimant-centric norm, to award disgorgement damages or punitive damages, and at any rate, to fashion a response that directly reflects a judgment as to the defendant’s moral culpability. But whereas such a response may fall foul of the harm principle inasmuch as the harm suffered by the defendant is concerned, it may be justified, on occasion, by reference to the need to protect the institution of contract. The circumstances of the famous Blake litigation21 – where the defendant made a profit from the proceeds of a memoir published in breach of a confidentiality clause (which, being a spy, he never intended to keep) in his contract of employment with the claimant, and disgorgement damages were sought – provide a good example for the possible combination of all such elements. In a case such as this, a remedial response limited to redressing the harm suffered by the claimant, and thus, potentially, leaving the defendant with a significant profit, can indeed fall short of redressing the likely institutional harm at stake, and the latter would indeed be a function of fault on the part of the defendant: It is precisely the fact that the defendant is allowed to keep an ill-gotten gain – ill-gotten, that is, in the sense of having been accrued

20Namely, where the expectation interest of the fi rst buyer forms a platform for price negotiation with the second.

21Attorney General v. Blake [2001] 1 AC 268 (HL). For a detailed account, see J. Edelman, GainBased Damages ch. 5 (Oxford, 2002).

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directly through calculating, fraudulent, and in any event clearly blameworthy conduct – that can have adverse ramifications in terms of the public perception of contract or the legitimate purposes for which the institution may be deployed.

I would not want to argue conclusively that the temptation to depart from the claimant-centric norm, or indeed to pay closer attention to fault on the part of the defendant, must always be resisted in such cases; perhaps it should not. But whereas I cannot here undertake the detailed analysis such cases merit, it should be noted just how exceptional they really are and, regardless, that inasmuch as they open the door to giving more of a role to fault in breach still in line with the harm principle, they open it very slightly. First, the obvious remedy in cases such as the Blake litigation is actual enforcement of the contract (i.e., in the circumstances, an injunction against breach): While best suited for protecting the legitimate interests of the claimant, it is also the remedy that would completely preempt the institutional harm in question, and its award need not require giving fault in breach more than its usual (non)role. Therefore, cases where this sort of institutional harm is at stake are exceptional not just in terms of the type of breach in question, but also in terms of their arising in circumstances where the obvious and standard remedial response is not available.22 Second, such cases often involve the commission of a criminal offence or incurring liability in tort (or both), and these noncontractual liabilities often provide the best opportunity to redress both the individual and the institutional harms associated with the breach. Third, inasmuch as the implications of focusing on the defendant’s fault in the context of an action for breach of contract is thought to counsel in favor of awarding damages exceeding the harm suffered by the claimant, such as the disgorgement damages sought in the Blake litigation, the claimant is placed (or places itself) in a tenuous moral position: It asks to benefit from the proceeds of culpable conduct that, according the claimant’s own position, should not have accrued to anyone. That the defendant ought to be stripped of such benefits, in other words, falls short of fully explaining why they should go to the claimant; that, in turn, lends further support to the previous point, namely, that an action for breach of contract, with or without attention to fault, is rarely the ideal medium through which to redress the institutional harm that particularly culpable breaches of this sort sometimes involve.

22In the Blake case, the book was published more than 30 years after George Blake escaped from prison, where he served a sentence for spying; at the time he lived in Moscow, and the prosecuting authorities became aware of the publication too late to obtain an injunction.

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Conclusion: Toward a Moral Law of Contract

My defense of a doctrinal tradition by which fault in breach of contract receives very little attention may be thought to implicate a broader view, which takes contract law as a whole to be divorced or isolated from (all but very few) moral considerations – perhaps particularly so in light of the fact that it was presented as part of a case against the theoretical trend toward overmoralizing contract law. I have hinted earlier that such an impression would be profoundly misguided, and in concluding this chapter I wish to make this point more explicit by sketching out my view as to what it means to make the law of contract moral.

I started out by describing contract as the legal equivalent of agreement. Agreement is a moral institution, the limits of which – if you like, the limits on the freedom of which – are delineated by the entirety of moral considerations that have a bearing on the question of what agreements it is desirable, or at least permissible, for people to make, as well as under what conditions. Thus, agreements for the furtherance of immoral aims, or agreements that are decidedly exploitative or otherwise fall outside of the relevant scope of moral permissibility, may be, and usually are (morally speaking) void.

Th ings are not different when it comes to contract. The facilitative nature of this legal domain – the fact that, here, the law furnishes prospective parties with the power to make legally binding transactions, thus also availing them, in the context of such transactions, of the adjudicating as well as enforcing agencies of the state – means that the law is implicated in the moral quality of the agreements it recognizes and enforces in a particularly direct and active way. When the law fails to criminalize a particular type of, say, exploitation or advantage-taking or undue influence or manipulation, or when it refrains from criminalizing otherwise reprehensible pursuits, it merely fails to do what (arguably) it ought to do. When it recognizes and enforces agreements that are similarly morally tainted, however, it actively partakes in enabling them and securing their ends.

For that reason, when it comes to the appropriate scope of the freedom of contract, the pressing question is not how far it would be legitimate or desirable for the law to go in terms of imposing restrictions (as the customary terms of engagements in debates over the freedom of contract would have us believe), but quite the opposite: The question is how far the freedom of contract must extend in the first place; what kind of transactions the law of contract ought to facilitate, and why. In her masterful study of the narrower debate surrounding market alienability, Margaret Radin has demonstrated, if nothing else, the inevitability of a case-by-case approach to the question of

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what people should be allowed to buy and sell through contracting, as well as the potential intricacy of the moral analysis that determines the result in each case.23 All this applies with equal force to all other dimensions of the freedom of contract. And whereas that does not mean that the law of contract ought to limit itself to enforcing perfect bargains and nothing else – that would doubtless be self-defeating – it does mean that the comprehensive moral footwork involved in establishing the case for or against extending the freedom of contract over any type of transaction (or any type of circumstances under which transactions are made, etc.) is an integral part of the ongoing endeavor of making the law of contract such that it contributes to, or at least does not undermine, all those forms of human flourishing (to use Radin’s language) on which it can have an effect.

Th us, a moral law of contract is not a punitive law of contract, nor a law of contract that sets out to simply enforce moral norms, promissory or otherwise. A law of contract law that allows contracts for, say, the sale of human beings, or fails to protect vulnerable parties from the worst repercussions of inequality of bargaining power and enforces exploitative terms against them, can be said to be immoral, and in quite a paradigmatic way: It facilitates immoral conduct and avails those who engage in it with powerful means with which to secure the rewards. By contrast, a law of contract that does not enforce the moral norms of promise keeping beyond that which the harm principle permits does not facilitate immoral conduct; it merely holds back from enforcing morality for its own sake. The mistake of conflating these two propositions, if adopted as a starting point for legal reform, would result in a law of contract not more, but significantly less moral. It may not lend itself as much as the law as it is apparently does to being misinterpreted as setting out to actively encourage the commission of harmless wrongs (justified wrongs, excusable, or otherwise),24 but it would become divorced from one of the foundational tenets of a political morality that gives freedom, correctly interpreted and aptly integrated into the overall scheme of good government, the place it deserves in informing the appropriate limits on the use of state power. Morally speaking, that can only be a step in the wrong direction.

23Market-Inalienability 100 Harv. L.R. 1849 (1987).

24An anxiety expressed by Seanna Shiff rin in The Divergence of Contract and Promise 120 Harv L.R. 708 (2007).