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Published online by Cambridge University Press: 20 July 2015
This paper explores the following question: if, as John Rawls famously suggests, justice is the first virtue of social institutions, how are we to understand the institution of contract law? On the one hand, many writers take the view that the rules of contracts are merely a tool for bringing about distributive justice; on the other hand, some libertarian writers contend that the rules of contract leave no space for any idea of distributive justice. In this paper, I propose an alternative account. I situate contract law in terms of what John Rawls calls “the social division of responsibility”: society as a whole has to provide individuals with an adequate share of opportunities and resources that they need in order to set and pursue their own conception of the good. Once individuals have those fair shares, citizens have to take responsibility for how their own lives go. An important way that people may pursue their plans is by entering into arrangements with others. This requires a system of contract rules. I argue that justice requires that we understand contract rules in terms of the idea of fair terms of interaction – that is, terms that would be accepted by reasonable persons moved by a desire for a social world in which they, as free and equal, can cooperate with others on terms they accept. The underlying idea is that of reciprocity, that is, the idea that individuals should not set the terms of their interactions with others unilaterally. Those fair terms of interaction are reasonable terms. Thus, in this paper, I claim that contractual interactions should be approached from the perspective of the reasonable person. My aim is to explain the formation of a contract, the legal response to a breach, and other issues that come up with contractual interactions from that perspective.
I am grateful to Arthur Ripstein for valuable criticisms and suggestions on my work. I am also grateful for the support of the Comparative Law and Political Economy Program (CLPE) at Osgoode Hall Law School, where I spent the winter of 2008 as a Fellow.
1. Rawls, John, A Theory of Justice, rev. ed. (Cambridge, MA: Harvard University Press, 1999) at 3.Google Scholar
2. Rawls, John, Political Liberalism (New York: Columbia University Press, 1993) at 53.Google Scholar
3. See, for instance, Kronman, Anthony, “Contract Law and Distributive Justice” (1980) 89 Yale L.J. 472 CrossRefGoogle Scholar; Kordana, Kevin & Tabachnick, David, “Rawls and Contract Law” (2005) 73 Geo. Wash. L. Rev. 598 Google Scholar; “On Belling the Cat: Rawls and Tort as Corrective Justice” (2006) 92 Va. L. Rev. 1279 Google Scholar. For a discussion of the distributive account of contracts, see my “Kronman on Contract Law and Distributive Justice” (2007) 23 J. Contract L. 105.Google Scholar
4. See, for instance, Barnett, Randy, “A Consent Theory of Contract” (1986) 86 Colum. L. Rev. 269.CrossRefGoogle Scholar
5. Ripstein, Arthur, Equality, Responsibility, and the Law (Cambridge: Cambridge University Press, 1999) at 206.Google Scholar
6. Rawls, John, “Justice as Fairness: Political not Metaphysical” in Freeman, Samuel, ed., John Rawls: Collected Papers (Cambridge, MA: Harvard University Press, 1999) 388 Google Scholar at 396.
7. Rawls, John, Justice as Fairness—A Restatement (Cambridge, MA.: The Belknap Press of the Harvard University Press, 2001) at 9.Google Scholar
8. Ibid. at 24.
9. By “normative,” Rawls means to say that persons are taken to have certain particular features. By “political,” Rawls does not mean that the content of this conception of the person is filled in by democratic assemblies, nor that it is inevitably the result of partisan struggles for power. Instead, he means that the conception of the person is specific to political morality rather than dependent on a more comprehensive moral or political account. In this context, then, “political” means “for the purposes of public standards” as opposed to either private or ultimate. See Ripstein, supra note 5 at 12, n. 8.
10. Rawls, supra note 7 at 24.
11. Ibid. at 18-19.
12. Ibid. at 19. These two powers should be complemented by what Rawls calls the “powers of reason.” These powers are those of judgment, thought, and inference. They are essential companion powers to the two moral powers and are required for their exercise. See, also Rawls, supra note 2 at 19.
13. It is also important to note that even if persons change their conception of the good, their public or legal identity as free persons is not affected by those changes. People may change their political or religious affiliation. For instance, as Rawls says, “[o]n the road to Damascus Saul of Tarsus becomes Paul the Apostle.” However, their basic rights and duties are not affected at all. Furthermore, even if they change their political or religious views, they are entitled to make the same claims that they were entitled to do before those changes took place. See Rawls, supra note 7 at 23.
14. Rawls, “Justice as Fairness: Political not Metaphysical,” supra note 6 at 407.
15. Rawls, supra note 7 at 23.
16. Ibid.
17. Ibid. at 20.
18. See Rawls, supra note 1 at 445.
19. Ibid. at 443.
20. Ibid.
21. Rawls, supra note 2 at 51. It is important to note that, in his A Theory of Justice, Rawls had made a statement that he later rejected. He had said that “[t]he theory of justice is a part, perhaps the most significant part, of the theory of rational choice.” See Rawls, supra note 1 at 15. He rejected this claim because he thought that it may lead one to think that everything in his account of distributive justice was based on notions of rationality. If that were the case, so Rawls said, justice as fairness would be at bottom Hobbesian. See Rawls, supra note 7 at 82, n. 2. In his later work, Rawls wanted to emphasize the importance of the role played by the notion of reasonableness in his account of justice.
22. Rawls, supra note 2 at 50.
23. Ibid.
24. Ibid. at 52.
25. Ibid.
26. Rawls, John, “Social Unity and Primary Goods” in Sen, Amartya & Williams, Bernard, eds., Utilitarianism and Beyond (Cambridge: Cambridge University Press, 1982) 159 at 170CrossRefGoogle Scholar.
27. Ripstein, Arthur, “Private Order and Public Justice: Kant and Rawls” (2006) 92 Va. L. Rev. 1391 Google Scholar. T. M. Scanlon explains the division of responsibility in the following way:
The idea is this. The ‘basic structure’ of society is its legal, political, and economic framework, the function of which is to define … positions to which different powers and economic rewards are attached. If a basic structure does this in an acceptable way—if citizens have no reasonable complaint about their access to various positions within this framework or to the package of rights, liberties, and opportunities for economic reward that particular positions present with—then that structure is just. It is up to individuals, operating within this framework, to choose their own ends and make use of the given opportunities and resources to pursue those ends as best they can. How successful or unsuccessful, happy or unhappy they are as a result is their own responsibility.
See Scanlon, T. M., What We Owe to Each Other (Cambridge, MA: Harvard University Press, 1998) at 244.Google Scholar
28. I borrow this point from Ripstein, Arthur, “The Division of Responsibility and the Law of Tort” (2004) 72 Fordham L. Rev. 1811.Google Scholar
29. Rawls, supra note 7 at 169.
30. Ibid.
31. For Rawls, the list of primary of goods is as follows:
• the basic liberties: freedom of thought and liberty of conscience; freedom of association; freedom defined by the liberty and integrity of the person, as well as by the rule of law; and finally, the political liberties.
• freedom of movement and choice of occupation against a background of diverse opportunities;
• powers and prerogatives of offices and positions of responsibility, particularly those in the main political and economic institutions;
• income and wealth (having an exchange value) needed to achieve the different ends people may endorse; and
• the social bases of self-respect (the fact that people have equal basic rights and that everyone supports the basic institutions).
See ibid. at 58-60.
32. Rawls, supra note 26 at 171, n. 11.
33. Note that, so far, I have made reference only to individuals’ plans of life, but that should not be understood as meaning that those plans should necessarily be “individualistic”: people can choose to pursue their plans by becoming members of different groups and associations. See Rawls, “Fairness to Goodness,” supra note 6 at 273.
34. See Ripstein, supra note 28 at 1838.
35. This point is made by Stephen Smith, who develops this explanation in the context of his discussion of contracts for the benefit of third parties. See Smith, Stephen, “Contracts for the Benefit of Third Parties: In Defence of the Third-Party Rule” (1997) 17 Oxford J. Legal Stud. 643.CrossRefGoogle Scholar
36. The law usually distinguishes between rights in personam and rights in rem, which are property rights. In contrast to rights in personam, rights in rem are exigible wherever the thing at stake is located and hence, are exigible against anyone who has the thing or interferes with it. A right in rem does not have a transactional nature. Of course, just like personal rights, rights in rem can be acquired by an interaction between two parties. For instance, a right in rem can be created when I acquire something from you. But, in contrast to a right in personam, the existence of the right in rem over that thing is not limited to an interaction between the two of us.
From the Rawlsian perspective, rights in rem can be understood in the following way. In order to pursue their purposes, persons need to be able to acquire means. But they also need to be protected against any infringement to the rights that they have over those means. In order for there to be such protection, a system of reciprocal limits on freedom that applies to all must be in place. People must be assured that others will refrain from interfering with their possessions or, otherwise, there would be nothing wrong in interfering with the possessions of others. An individual has a right against all persons when his or her right is based on, and so mediated through, their membership in the class of persons where reciprocal limits on freedom apply. To put it slightly differently, I have a right against all persons through something that involves everyone. That is a general system of law that includes enforceable property rights. In contrast, I have a personal right against you through an affirmative deed of yours. There must be something that binds the two of us together, and not the rest of the world. In order for me to have a personal claim against you, a transaction must have taken place between us.
37. See Kronman, supra note 3.
38. Ripstein, supra note 28 at 1838-39.
39. Rawls, supra note 2 at 268-69.
40. Ibid.
41. For a discussion of Nozick’s view, see Hevia, Martín & Spector, Ezequiel, “The Bizarre World of Historical Theories of Justice—Revisiting Nozick’s Argument” (2008) 34 Social Theory & Practice 533 CrossRefGoogle Scholar.
42. Rawls, supra note 7 at 51-52.
43. Rawls, supra note 2 at 268.
44. Ibid.
45. Ibid.
46. This account of private law and the division of labour contrasts with a different account that may be identified with Richard Epstein’s idea that private law is a matter of “simple rules for a complex world.” For Epstein, the rules of private law are chosen on the basis of utilitarian reasons. Like Rawls, Epstein argues that there are good reasons to make private law as simple as possible. It is this simplicity that makes it formal. See Epstein, , Simple Rules for a Complex World (Cambridge, MA: Harvard University Press, 1995)Google Scholar. Rawls’s remarks about the need to have simple and practical rules of private law may invite an interpretation of his account of private law that is similar to Epstein’s account of private law. As I mentioned Rawls says that the rules of private ordering “are framed to leave individuals free to act effectively in pursuit of their ends and without excessive constraints.” Rawls, supra note 2 at 268. However, as Ripstein explains, “[t]he notion of freedom to act effectively is best understood in terms of reconciling the capacities of a plurality of persons to set and pursue their ends, rather than any aggregate notion of efficiency.” See Ripstein, supra note 27 at 1399, n. 21.
47. Rawls, supra note 2.
48. Ibid. at 53-54.
49. See Chapman, Bruce, “Rational Choice and Reasonable Interactions” (2006) 81 Chicago-Kent L. Rev. 75 at 79.Google Scholar
50. Ripstein, supra note 5 at 206.
51. See Holmes, O. W., The Common Law [1881] (Boston: Little Brown, 1963) at 86–87.Google Scholar
52. See Bruce Chapman, supra note 49 at 78; Arthur Ripstein, “Kant on Law and Justice” [forthcoming]; Valcke, Catherine, “The ‘Common Will’ of Offer and Acceptance” (2005) Nexus Magazine (Spring/Summer 2007) at 37.Google Scholar
53. Kant, Immanuel, The Metaphysics of Morals, Gregor, Mary, ed. (Cambridge: Cambridge University Press, 1996) at 23–24.CrossRefGoogle Scholar
54. See Benson, Peter, “Philosophy of Property Law” in Coleman, Jules & Shapiro, Scott, eds., The Oxford Handbook of Jurisprudence and Philosophy of Law (New York: Oxford University Press, 2002) 752 at 785-86Google Scholar.
55. (1871). L.R. 6 Q.B. 597.
56. See Chapman, supra note 49 at 79. For an example of the subjective approach, see Dickinson v. Dodds (1876), 2 Ch. D. 463 (CA.)Google Scholar, which is sometimes taken to be an example of a subjective theory of contracts and of contract formation in particular. In that case, the court held that no contract of sale had been formed between the parties because, when the offeree was purporting to accept the offer, he already knew that the offeror no longer intended to sell to him. The private intentions of the parties were externally observable in the case. The offeree Dickinson had been informed by someone else of the fact that Dodds, the offeror, had offered to sell the property or had agreed to sell it to someone else. The offer had been withdrawn but Dickinson had not been formally notified by Dodds about that. The fact that it was not the offeror, but someone else who had informed the offeree of the withdrawal was considered to be irrelevant.
57. I borrow this idea from Catherine Valcke, “Comparative Law as Comparative Jurisprudence-Objectivity and Subjectivity in the English, French, and German Law of Contractual Mistake” (Paper presented to the Special Workshop on Ethics, Economics and the Law at the XXII World Congress of Philosophy of Law and Social Philosophy, May 2005) [unpublished]. For similar points, see, also, Hauser, Jean, Objectivisme et Subjectivisme Dans L’Acte Juridique (Paris: Librairie Générale de Droit et de Jurisprudence, 1971).Google Scholar
58. Valcke, ibid.
59. Chabas, J., De la declaration de volonté en droit civil française 81–82 (Syrey, 1931)Google Scholar, cited in Valcke, supra note 57.
60. For this objection, I rely on Duff, R.A., “Choice, Character, and Criminal Liability” (1993) 12 Law & Phil. 345 at 381CrossRefGoogle Scholar. In that essay, Duff discusses—although not at length—individualist and communitarian conceptions of criminal responsibility. I find Duff’s explanation of some of the basic communitarian tenets useful for the point I am trying to develop.
61. Ibid. at 382.
62. Ibid. at 362.
63. Ibid. at 382-83.
64. This argument has also been made by non-communitarian writers. See, for instance, Smith, S.A., “Performance, Punishment and the Nature of Contractual Obligation” (1997) 60 Mod. L. Rev. 360 CrossRefGoogle Scholar.
65. See, in general, Kimel, Dori, From Promise to Contract—Towards a Liberal Theory of Contract (Oxford: Hart, 2003).Google Scholar
66. Rawls, supra note 2 at 139-40, 217. For a discussion of this point, see Mulhall, Stephen & Swift, Adam, “Rawls and Communitarianism” in Freeman, Samuel, ed., The Cambridge Companion to Rawls (Cambridge: Cambridge University Press, 2003) 460 at 466Google Scholar.
67. Rawls, supra note 2 at 50.
68. Ibid. at 146, n. 13 cited in Mulhall & Swift, supra note 66 at 468-69.
69. See, in general, Moran, Mayo, Rethinking the Reasonable Person (Oxford: Oxford University Press, 2003)CrossRefGoogle Scholar. For an interesting review of Moran’s book, see Horder, Jeremy, “Can the Law Do Without the Reasonable Person?” (2005) 55 U.T.L.J. 253 CrossRefGoogle Scholar.
70. Moran, ibid.
71. Ripstein, supra note 5 at 6-8.
72. Ibid.
73. Rawls, supra note 7 at 20.
74. Against my claim, it may be pointed out that some passages in A Theory of Justice are devoted to explaining the institution of promises. Rawls explains that “[promising is an action defined by a public system of rules” which are like the “rules of games.” Moral philosophers can explain why, if someone voluntarily takes advantage of a fair institution, he or she has to abide by its rules. In this view, the reason why we have to keep our promises is that the social institution of promise is valuable for society. If we do not abide by our promises, we do something wrong, to wit, we undermine a socially valuable practice. See Rawls, supra note 1 at 344-48.
In this paper, I offered reasons to explain why the promissory account does not help us to understand contract law at all: approaching contract law from the perspective of promises is the wrong starting point. “Promissory approaches” do not help us to see why, when I breach my contract with you, I am not, say, merely free-riding on a socially valuable convention, but wronging you: by breaching the agreement, I am depriving you of something that is already yours. See my discussion of Fried’s, Charles Contract as Promise—A Theory of Contractual Obligation (Cambridge, MA: Harvard University Press, 1981)Google Scholar in “Fuller, Fried and the Nature of Contractual Rights and Duties” [unpublished manuscript, on file with author].