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Contract Theory and the Limits of Contract Law
Alan Schwartz, Yale Law School
Robert E. Scott, Yale School of Management
ABSTRACT:
Contract law has neither a complete descriptive theory, explaining what the law is, nor a
complete normative theory, explaining what the law should be. These gaps are unsurprising given
the traditional definition of contract as embracing all promises that the law will enforce. Even a
theory of contract law that focuses only on the enforcement of bargains must still consider the
entire continuum from standard form contracts between firms and consumers to commercial
contracts between business firms. No descriptive theory has yet explained a law of contract that
comprehends such a broad domain. Normative theories that are grounded in a single norm -- such
as autonomy or efficiency -- also have foundered over the heterogeneity of contractual contexts to
which the theory is to apply. Pluralist theories attempt to respond to the difficulty that unitary normative theories pose by urging courts to pursue efficiency, fairness, good faith and the
protection of individual autonomy. Such theories need, but so far lack, a meta principle that tells
which of these goals should be decisive when they conflict. We attempt to make progress here
with a more modest approach -- to set out and defend a normative theory to guide decisionmakers
in the regulation of business contracts.
SUGGESTED CITATION:
Alan Schwartz and Robert E. Scott,
"Contract Theory and the Limits of Contract Law"
(April 25, 2003).
Yale Law School.
Yale Law School John M. Olin Center for Studies in Law, Economics, and Public Policy Working Paper Series.
Paper 275.
http://lsr.nellco.org/yale/lepp/papers/275
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