Welcome Contracts Students!
posted by Lawrence Cunningham
As new 1Ls begin to immerse themselves in the wonderful world of law, we welcomed them here on this blog recently with an overview of the first-year curriculum that has been in place for ages. It concluded with a particular reference to the course on Contracts, about which I’ve recently published a new book connecting its classic cases and doctrines to contemporary contract disputes in popular culture and covered in the media.
From that book, Contracts in the Real World: Stories of Popular Contracts and Why They Matter, the following continues to provide a gateway into that field by introducing two legends whose venerable work on the subject continues to define the boundaries of recognized debate on most of the issues. The legends are Samuel Williston and Arthur Corbin.
In 1920, Williston, a Harvard professor, published a monumental treatise on the entire law of contracts, and updated it until his death in 1963. In 1950, Arthur Corbin, a professor at Yale, promulgated an equally magisterial and comprehensive treatise, based on earlier writings throughout his career.
These works—still kept up-to-date by successor editors—influenced generations of lawyers and judges addressing contract disputes. Williston’s philosophy dovetailed with that of the eminent jurist, Oliver Wendell Holmes, Jr., and Corbin’s resonated with that of the esteemed judge, Benjamin N. Cardozo.
Williston epitomized a formalist approach to law and reflected what some call the “classical” school of contract. It looks to whether parties in a transaction were giving and getting something, emphasizing a concept called “consideration” as the signal of an enforceable contract. This school of thought held unenforceable not only promises to make gifts or attend dinner but promises merely inducing another party to take some action.
In this view, the remedy for breach of a bargain is to pay the injured party money to put them in the same economic position they would have enjoyed had the other performed. This classical conception of contract law dominated well into the twentieth century, and remains a force today.
Corbin took a realist approach to law and offered a more pragmatic conception of contract. Though agreeing with Williston on many points, Corbin recognized, as courts increasingly did in the twentieth century, a wider range of circumstances that create contractual obligations. Williston’s bargain model of consideration remained, but loosened so that even some promises to make gifts could be enforced, so long as there was an identifiable return, like naming a college endowment. It recognized reliance on a promise as a basis of contractual liability, in a novel doctrine commonly called “promissory estoppel.”
Compensation for disappointed expectations remains the primary measure of remedy. But recognizing promissory estoppel gave equal dignity to measuring remedies by out-of-pocket costs incurred relying on a promise.
These twentieth century developments that Corbin captured, and helped to shape, reflected broader social developments as well, moving law’s orientation from a formalist to a realist conception. For example, classical contract’s relative strictness, limiting the scope of contractual obligation, was accompanied by an equivalent strictness of enforcement: if a contract was hard to get into, it was also hard to get out of. People could be bound to contracts that were made based on mutually mistaken assumptions or even where performance became impossible.
But as the ambit of contractual obligation expanded, so did grounds for excusing it, like mutual mistake about the terms of a trade, or impossibility of performance, such as a power outage in a rented banquet hall. Similarly, classical contract law venerated written records, limiting the scope of obligation to what was plainly meant within a document’s four corners. Corbin and his realist descendants were more willing to consider evidence supplementing these written expressions.
An example of this shift appears in a classic case from the 1920s. In the fall of 1923, the Laths proposed selling their Schenectady (New York) farm to the Mitchills. The parties discussed how the Laths would remove an unsightly ice house they owned on the property of a neighbor. Their written contract took an elaborate form, containing a wealth of recitals about price, insurance, water supply, a land survey, a deed, and broker commissions. It said nothing about removing the ice house.
After the deal closed, the Mitchills renovated the place for use as a summer home and sued the Laths for failing to remove the ice house. The Laths stressed that the two couples had written up an elaborate contract that said nothing about any ice house. The Mitchills tried to persuade the court to look beyond the writing to the discussions they said the couples had about the ice house.
The court sided with the Laths. Judge William Andrews, an acolyte of Williston, explained that the written agreement, with its wealth of recitals, looked complete. Had the parties made a deal about removing an ice house, he would naturally have expected to see it in the writing. Therefore, the Mitchills were not even allowed to present at a trial any testimony about their negotiations with the Laths.
In dissent, Judge Irving Lehman, more in tune with Corbin, was skeptical. When deciding whether the contract was complete, he took the negotiations into account and, with them in mind, said he would not naturally expect a side deal about the ice house to be included in the writing.
Judge Andrews reflected the era’s dominant view: classical, formal, “four-corners.” Lehman was ahead of his time, reflecting the ascendant view: contemporary, realistic, and contextual. But even these oppositions are neither extreme nor ironclad, as Cardozo, a realist, joined the majority opinion in the case, siding with Andrews not Lehman.
The positions of these judges in this typical case show that most of the disagreements within contract law are differences with a practical rather than an ideological edge. The case was not about the rich or poor, the powerful or the oppressed, or a fight between freedom and control.
Like most issues contract law addresses, it was about a pragmatic question: what weight to give a written contract compared to oral negotiations. Healthy debate continues about this and many other questions that divided titans like Williston and Corbin. But the range of credible debate is substantially bounded by positions those two staked out. Look for those boundaries in your casebooks and in classroom discussion.