Calculating Promises: The Emergence of Modern American Contract Doctrine (review)

Maine taught us that law moved from status to contract: A general law of contract replaced the specific rules regulating the relations of employers and workers ("masters" and "servants," in the traditional language), parents and children, and the like.¹ By the late nineteenth century, the legal relations between contracting parties were regulated by the choices that they made and not by a pre-established set of rules dealing with everyone in the category into which the parties fit.

Kreitner observes that "contract" is no less protean than "status." The late nineteenth-century formalists who accepted Maine's insight contended that contract law depended on the parties' "will." The legal realists then showed that a contract law predicated on enforcing the parties' will was no less regulatory than the status-based law that it replaced. The realists focused on legal doctrines such as capacity to contract. To enforce a party's "will," the law had first to establish that the person had a will sufficiently free to count, and identifying the contours of capacity to contract was a regulatory exercise.

Kreitner pursues the realist enterprise into new domains, looking for the boundaries of contract itself. Three categories of apparent agreement posed problems for early twentieth-century legal theory: promises to give someone a gift or bequest ("gratuitous promises"), agreements to transfer property if some random event occurred (wagers), and incomplete contracts leaving important terms unspecified. Gratuitous promises were a problem because contract was the domain of exchange, but gifts did not involve exchanges. Wagers were a problem because of a residual moralism in contract law, but they were hard to distinguish from insurance contracts and, even more, futures contracts in commodity markets. Incomplete contracts were a problem because, by definition, the parties had no "will" with respect to the omitted terms.

Kreitner examines the first two problems through a detailed examination of early twentieth-century cases. His treatment of the third problem shifts gears, looking at late twentieth-century controversies in legal theory concerning the treatment of incomplete contracts. His theme, stated early and repeated with respect to each of the topics, is that contract theory constructed the individual whose will it then enforced. That individual was "a calculating individual subject, whose actions would be open to objective economic analysis" (17; see also 91, 219, 233). Gratuitous promises would be enforced when judges could understand the promises as something a calculating individual might make; futures contracts were enforceable because they resulted from calculation; incomplete contracts would be completed with reference to economic rationality.

Kreitner's argument is provocative and might even be correct. But, as he acknowledges, the evidence supporting it is highly inferential, as may be inevitable in efforts like his to link doctrinal legal and intellectual history. Judges do not generally talk about calculating individuals, and on the rare occasion when they do, we cannot know whether they are merely evincing an idiosyncratic view or a deep statement about law. Kreitner's view about the content of modern contract theory is intriguing, but readers should take his suggestions as provocations for further thinking, not as firmly established conclusions.