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demonstrated positive reciprocity. In the traditional trust game, a Proposer is endowed with a sum of money, and permitted to transfer some or all of that money to a Responder.24 Th e experimenter triples the transfer amount, so the Responder receives three times as much as the Proposer gave up. The Responder is then permitted to send some money back to the Proposer. The amount that Responders return is positively correlated with the amount transferred by the Proposer, which is to say, many Responders return something, even though they are not required to do so, will not play with the Proposer again, and, because the players do not meet in person, will never suffer any social embarrassment or sanctions.

Moral norms affect peoples’ beliefs about their legal system, their beliefs about the normative expectations of their fellow citizens, and their intrinsic preferences for their own moral and legal choices. These studies suggest that the norms of reciprocity and promise keeping are powerful enough in some experimental settings to guide behavior even when they are in some tension with the background rule or self-interest.

Conclusion

Behavioral research on moral judgment in contracts has potential implications for how parties draft agreements, how they understand their contractual obligations, and whether they breach or perform. People’s moral intuitions may inhibit the parties’ ability to settle out of court if there is a breach, especially if they have differing notions of what constitutes fair compensation. When parties disagree about appropriate damages in light of a breach of contract, they may be less likely to settle and more likely to undertake litigation.

More sophisticated parties may also be deterred from efficient breach because they do not want to offend their customers or get a bad reputation. Empirical research has demonstrated the real effects of psychological breach. The loss of consumer trust may have financial effects that override the potential profits from the breach, no matter that the consumer’s judgment seems irrational. Parties to a contract will have different interactions with one another and with the legal system depending on their beliefs about contracts. These beliefs, in turn, may be partially informed by intuitions imported from the moral domain.

“The line between legal and moral guidelines is a very blurry one in my mind,” commented one subject in an experiment. The results reviewed here

24Joyce Berg, John Dickhaut, & Kevin McCabe. Trust, Reciprocity and Social History. 10 Games Econ. Behav. 122–42 (1995).

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suggest that the connection between law and morality is not a philosophical abstraction; for most people, it is an entrenched component of their intuitions about legal decision making. Moral responses to breach of contract affect legal judgments. Empirical results like those reviewed here have bearing on practical legal matters, including bargaining during contract drafting as well as negotiations over the breach of a contract.