The characteristics and challenges of relational contracts

Northwestern University Law Review

Volumn 94, Issue 3, 2000, Pages 823-845

  Speidel, Richard E ^a  

^a NONE

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EID: 0041525054     PISSN: 00293571     EISSN: None     Source Type: Journal    
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References (124)

1. See IAN R. MACNEIL, THE NEW SOCIAL CONTRACT: AN INQUIRY INTO MODERN CONTRACTUAL RELATIONS (1980). In addition, in the last forty years there have been several notable books discussing the policy and theory of contract. At the core of all has been concern about promises and the permissible scope of freedom of contract. Interesting contrasts include CHARLES FRIED, CONTRACT AS PROMISE: A THEORY OF CONTRACTUAL OBLIGATION (1981) , GRANT GILMORE, THE DEATH OF CONTRACT (2d ed. 1995), and HAROLD C. HAVIGHURST, THE NATURE OF PRIVATE CONTRACT (1961). Since 1990 there have been five additions to the contracts academic library: E. ALLAN FARNSWORTH, CHANGING YOUR MIND: THE LAW OF REGRETTED DECISIONS (1998); JAMES GORDLEY, THE PHILOSOPHICAL ORIGINS OF MODERN CONTRACT DOCTRINE (1991); ROBERT A. HILLMAN, THE RICHNESS OF CONTRACT LAW: AN ANALYSIS AND CRITIQUE OF CONTEMPORARY THEORIES OF CONTRACT LAW (1997); W. DAVID SLAWSON, BINDING PROMISES: THE LATE 20TH CENTURY REFORMATION OF CONTRACT LAW (1996); MICHAEL J. TREBILCOCK, THE LIMITS OF FREEDOM OF CONTRACT (1993).
2. See IAN R. MACNEIL, THE NEW SOCIAL CONTRACT: AN INQUIRY INTO MODERN CONTRACTUAL RELATIONS (1980). In addition, in the last forty years there have been several notable books discussing the policy and theory of contract. At the core of all has been concern about promises and the permissible scope of freedom of contract. Interesting contrasts include CHARLES FRIED, CONTRACT AS PROMISE: A THEORY OF CONTRACTUAL OBLIGATION (1981) , GRANT GILMORE, THE DEATH OF CONTRACT (2d ed. 1995), and HAROLD C. HAVIGHURST, THE NATURE OF PRIVATE CONTRACT (1961). Since 1990 there have been five additions to the contracts academic library: E. ALLAN FARNSWORTH, CHANGING YOUR MIND: THE LAW OF REGRETTED DECISIONS (1998); JAMES GORDLEY, THE PHILOSOPHICAL ORIGINS OF MODERN CONTRACT DOCTRINE (1991); ROBERT A. HILLMAN, THE RICHNESS OF CONTRACT LAW: AN ANALYSIS AND CRITIQUE OF CONTEMPORARY THEORIES OF CONTRACT LAW (1997); W. DAVID SLAWSON, BINDING PROMISES: THE LATE 20TH CENTURY REFORMATION OF CONTRACT LAW (1996); MICHAEL J. TREBILCOCK, THE LIMITS OF FREEDOM OF CONTRACT (1993).
3. See IAN R. MACNEIL, THE NEW SOCIAL CONTRACT: AN INQUIRY INTO MODERN CONTRACTUAL RELATIONS (1980). In addition, in the last forty years there have been several notable books discussing the policy and theory of contract. At the core of all has been concern about promises and the permissible scope of freedom of contract. Interesting contrasts include CHARLES FRIED, CONTRACT AS PROMISE: A THEORY OF CONTRACTUAL OBLIGATION (1981) , GRANT GILMORE, THE DEATH OF CONTRACT (2d ed. 1995), and HAROLD C. HAVIGHURST, THE NATURE OF PRIVATE CONTRACT (1961). Since 1990 there have been five additions to the contracts academic library: E. ALLAN FARNSWORTH, CHANGING YOUR MIND: THE LAW OF REGRETTED DECISIONS (1998); JAMES GORDLEY, THE PHILOSOPHICAL ORIGINS OF MODERN CONTRACT DOCTRINE (1991); ROBERT A. HILLMAN, THE RICHNESS OF CONTRACT LAW: AN ANALYSIS AND CRITIQUE OF CONTEMPORARY THEORIES OF CONTRACT LAW (1997); W. DAVID SLAWSON, BINDING PROMISES: THE LATE 20TH CENTURY REFORMATION OF CONTRACT LAW (1996); MICHAEL J. TREBILCOCK, THE LIMITS OF FREEDOM OF CONTRACT (1993).
4. See IAN R. MACNEIL, THE NEW SOCIAL CONTRACT: AN INQUIRY INTO MODERN CONTRACTUAL RELATIONS (1980). In addition, in the last forty years there have been several notable books discussing the policy and theory of contract. At the core of all has been concern about promises and the permissible scope of freedom of contract. Interesting contrasts include CHARLES FRIED, CONTRACT AS PROMISE: A THEORY OF CONTRACTUAL OBLIGATION (1981) , GRANT GILMORE, THE DEATH OF CONTRACT (2d ed. 1995), and HAROLD C. HAVIGHURST, THE NATURE OF PRIVATE CONTRACT (1961). Since 1990 there have been five additions to the contracts academic library: E. ALLAN FARNSWORTH, CHANGING YOUR MIND: THE LAW OF REGRETTED DECISIONS (1998); JAMES GORDLEY, THE PHILOSOPHICAL ORIGINS OF MODERN CONTRACT DOCTRINE (1991); ROBERT A. HILLMAN, THE RICHNESS OF CONTRACT LAW: AN ANALYSIS AND CRITIQUE OF CONTEMPORARY THEORIES OF CONTRACT LAW (1997); W. DAVID SLAWSON, BINDING PROMISES: THE LATE 20TH CENTURY REFORMATION OF CONTRACT LAW (1996); MICHAEL J. TREBILCOCK, THE LIMITS OF FREEDOM OF CONTRACT (1993).
5. See IAN R. MACNEIL, THE NEW SOCIAL CONTRACT: AN INQUIRY INTO MODERN CONTRACTUAL RELATIONS (1980). In addition, in the last forty years there have been several notable books discussing the policy and theory of contract. At the core of all has been concern about promises and the permissible scope of freedom of contract. Interesting contrasts include CHARLES FRIED, CONTRACT AS PROMISE: A THEORY OF CONTRACTUAL OBLIGATION (1981) , GRANT GILMORE, THE DEATH OF CONTRACT (2d ed. 1995), and HAROLD C. HAVIGHURST, THE NATURE OF PRIVATE CONTRACT (1961). Since 1990 there have been five additions to the contracts academic library: E. ALLAN FARNSWORTH, CHANGING YOUR MIND: THE LAW OF REGRETTED DECISIONS (1998); JAMES GORDLEY, THE PHILOSOPHICAL ORIGINS OF MODERN CONTRACT DOCTRINE (1991); ROBERT A. HILLMAN, THE RICHNESS OF CONTRACT LAW: AN ANALYSIS AND CRITIQUE OF CONTEMPORARY THEORIES OF CONTRACT LAW (1997); W. DAVID SLAWSON, BINDING PROMISES: THE LATE 20TH CENTURY REFORMATION OF CONTRACT LAW (1996); MICHAEL J. TREBILCOCK, THE LIMITS OF FREEDOM OF CONTRACT (1993).
6. See IAN R. MACNEIL, THE NEW SOCIAL CONTRACT: AN INQUIRY INTO MODERN CONTRACTUAL RELATIONS (1980). In addition, in the last forty years there have been several notable books discussing the policy and theory of contract. At the core of all has been concern about promises and the permissible scope of freedom of contract. Interesting contrasts include CHARLES FRIED, CONTRACT AS PROMISE: A THEORY OF CONTRACTUAL OBLIGATION (1981) , GRANT GILMORE, THE DEATH OF CONTRACT (2d ed. 1995), and HAROLD C. HAVIGHURST, THE NATURE OF PRIVATE CONTRACT (1961). Since 1990 there have been five additions to the contracts academic library: E. ALLAN FARNSWORTH, CHANGING YOUR MIND: THE LAW OF REGRETTED DECISIONS (1998); JAMES GORDLEY, THE PHILOSOPHICAL ORIGINS OF MODERN CONTRACT DOCTRINE (1991); ROBERT A. HILLMAN, THE RICHNESS OF CONTRACT LAW: AN ANALYSIS AND CRITIQUE OF CONTEMPORARY THEORIES OF CONTRACT LAW (1997); W. DAVID SLAWSON, BINDING PROMISES: THE LATE 20TH CENTURY REFORMATION OF CONTRACT LAW (1996); MICHAEL J. TREBILCOCK, THE LIMITS OF FREEDOM OF CONTRACT (1993).
7. See IAN R. MACNEIL, THE NEW SOCIAL CONTRACT: AN INQUIRY INTO MODERN CONTRACTUAL RELATIONS (1980). In addition, in the last forty years there have been several notable books discussing the policy and theory of contract. At the core of all has been concern about promises and the permissible scope of freedom of contract. Interesting contrasts include CHARLES FRIED, CONTRACT AS PROMISE: A THEORY OF CONTRACTUAL OBLIGATION (1981) , GRANT GILMORE, THE DEATH OF CONTRACT (2d ed. 1995), and HAROLD C. HAVIGHURST, THE NATURE OF PRIVATE CONTRACT (1961). Since 1990 there have been five additions to the contracts academic library: E. ALLAN FARNSWORTH, CHANGING YOUR MIND: THE LAW OF REGRETTED DECISIONS (1998); JAMES GORDLEY, THE PHILOSOPHICAL ORIGINS OF MODERN CONTRACT DOCTRINE (1991); ROBERT A. HILLMAN, THE RICHNESS OF CONTRACT LAW: AN ANALYSIS AND CRITIQUE OF CONTEMPORARY THEORIES OF CONTRACT LAW (1997); W. DAVID SLAWSON, BINDING PROMISES: THE LATE 20TH CENTURY REFORMATION OF CONTRACT LAW (1996); MICHAEL J. TREBILCOCK, THE LIMITS OF FREEDOM OF CONTRACT (1993).
8. See IAN R. MACNEIL, THE NEW SOCIAL CONTRACT: AN INQUIRY INTO MODERN CONTRACTUAL RELATIONS (1980). In addition, in the last forty years there have been several notable books discussing the policy and theory of contract. At the core of all has been concern about promises and the permissible scope of freedom of contract. Interesting contrasts include CHARLES FRIED, CONTRACT AS PROMISE: A THEORY OF CONTRACTUAL OBLIGATION (1981) , GRANT GILMORE, THE DEATH OF CONTRACT (2d ed. 1995), and HAROLD C. HAVIGHURST, THE NATURE OF PRIVATE CONTRACT (1961). Since 1990 there have been five additions to the contracts academic library: E. ALLAN FARNSWORTH, CHANGING YOUR MIND: THE LAW OF REGRETTED DECISIONS (1998); JAMES GORDLEY, THE PHILOSOPHICAL ORIGINS OF MODERN CONTRACT DOCTRINE (1991); ROBERT A. HILLMAN, THE RICHNESS OF CONTRACT LAW: AN ANALYSIS AND CRITIQUE OF CONTEMPORARY THEORIES OF CONTRACT LAW (1997); W. DAVID SLAWSON, BINDING PROMISES: THE LATE 20TH CENTURY REFORMATION OF CONTRACT LAW (1996); MICHAEL J. TREBILCOCK, THE LIMITS OF FREEDOM OF CONTRACT (1993).
9. See IAN R. MACNEIL, THE NEW SOCIAL CONTRACT: AN INQUIRY INTO MODERN CONTRACTUAL RELATIONS (1980). In addition, in the last forty years there have been several notable books discussing the policy and theory of contract. At the core of all has been concern about promises and the permissible scope of freedom of contract. Interesting contrasts include CHARLES FRIED, CONTRACT AS PROMISE: A THEORY OF CONTRACTUAL OBLIGATION (1981) , GRANT GILMORE, THE DEATH OF CONTRACT (2d ed. 1995), and HAROLD C. HAVIGHURST, THE NATURE OF PRIVATE CONTRACT (1961). Since 1990 there have been five additions to the contracts academic library: E. ALLAN FARNSWORTH, CHANGING YOUR MIND: THE LAW OF REGRETTED DECISIONS (1998); JAMES GORDLEY, THE PHILOSOPHICAL ORIGINS OF MODERN CONTRACT DOCTRINE (1991); ROBERT A. HILLMAN, THE RICHNESS OF CONTRACT LAW: AN ANALYSIS AND CRITIQUE OF CONTEMPORARY THEORIES OF CONTRACT LAW (1997); W. DAVID SLAWSON, BINDING PROMISES: THE LATE 20TH CENTURY REFORMATION OF CONTRACT LAW (1996); MICHAEL J. TREBILCOCK, THE LIMITS OF FREEDOM OF CONTRACT (1993).
10. See Ian R. Macneil, Contracts: Adjustment of Long-Term Economic Relations Under Classical, Neoclassical, and Relational Contract Law, 72 NW. U. L. REV. 854 (1978).
11. See Gillian K. Hadfield, Problematic Relations: Franchising and the Law of Incomplete Contracts, 42 STAN. L. REV. 927 (1990).
12. See Elizabeth S. Scott & Robert E. Scott, Marriage as Relational Contract, 84 VA. L. REV. 1225 (1998).
13. See Ian R. Macneil, A Primer of Contract Planning, 48 S. CAL. L. REV. 627 (1975).
14. Ian R. Macneil, RESTATEMENT (SECOND) OF CONTRACTS and Presentiation, 60 VA. L. REV. 589 (1974).
15. Lewis Kornhauser, Book Review: The Resurrection of Contract, 82 COLUM. L. REV. 184, 188 (1990).
16. Professor Barnett, a "rights" theorist, criticizes Macneil for downplaying the importance of consent in relational contracts and by neglecting the relationship between contracts and property. Randy E. Barnett, Conflicting Visions: A Critique of Ian Macneil's Relational Theory of Contract, 78 VA. L. REV. 1175 (1992).
17. Richard E. Speidel, Article 2 and Relational Sales Contracts, 26 LOY. L.A. L. REV. 789 (1993). See also Symposium, Law, Private Governance and Continuing Relationships, 1985 WIS. L. REV. 483-579 (selected bibliography in app. A). The existence and importance of relational contracts in the real world has also been verified in an interesting empirical study. See Russell J. Weintraub, A Survey of Contract Practice and Policy, 1992 WIS. L. REV. 1, 16-24.
18. Richard E. Speidel, Article 2 and Relational Sales Contracts, 26 LOY. L.A. L. REV. 789 (1993). See also Symposium, Law, Private Governance and Continuing Relationships, 1985 WIS. L. REV. 483-579 (selected bibliography in app. A). The existence and importance of relational contracts in the real world has also been verified in an interesting empirical study. See Russell J. Weintraub, A Survey of Contract Practice and Policy, 1992 WIS. L. REV. 1, 16-24.
19. Richard E. Speidel, Article 2 and Relational Sales Contracts, 26 LOY. L.A. L. REV. 789 (1993). See also Symposium, Law, Private Governance and Continuing Relationships, 1985 WIS. L. REV. 483-579 (selected bibliography in app. A). The existence and importance of relational contracts in the real world has also been verified in an interesting empirical study. See Russell J. Weintraub, A Survey of Contract Practice and Policy, 1992 WIS. L. REV. 1, 16-24.
20. A Westlaw search of the ALLSTATES and ALLFEDS databases uncovered only one case of significance where the work of Ian R. Macneil was cited or relational contract scholarship was explicitly discussed. See McGinnis v. Cayton, 312 S.E.2d 765 (W. Va. 1984). See also Nathan M. Crystal, An Empirical View of Relational Contracts Under Article Two of the Uniform Commercial Code, 1988 ANN. SURV. AM. L. 293, 303 (1988) (concluding that reported decisions under Article 2 of the U.C.C. from its inception to 1987 show a "predominance of discrete over relational contracts in litigated cases").
21. A Westlaw search of the ALLSTATES and ALLFEDS databases uncovered only one case of significance where the work of Ian R. Macneil was cited or relational contract scholarship was explicitly discussed. See McGinnis v. Cayton, 312 S.E.2d 765 (W. Va. 1984). See also Nathan M. Crystal, An Empirical View of Relational Contracts Under Article Two of the Uniform Commercial Code, 1988 ANN. SURV. AM. L. 293, 303 (1988) (concluding that reported decisions under Article 2 of the U.C.C. from its inception to 1987 show a "predominance of discrete over relational contracts in litigated cases").
22. By "modern" (or neo-classical) contract law, I mean the rules and standards found in Article 2 of the Uniform Commercial Code and the Restatement, Second, of Contracts. See HILLMAN, supra note 1, at 241-66 (comparing relational contract theory with neo-classical doctrine).
23. Praise (or blame) for establishing the significance of this vital link goes to the realists. See Richard E. Speidel, Restatement Second: Omitted Terms and Contract Method, 67 CORNELL L. REV. 785, 786-92 (1982). See also James J. White, Legal Realism: Promise Fulfilled and Principle Betrayed, 1988 ANN. SURV. AM. L. 7 (1989).
24. Praise (or blame) for establishing the significance of this vital link goes to the realists. See Richard E. Speidel, Restatement Second: Omitted Terms and Contract Method, 67 CORNELL L. REV. 785, 786-92 (1982). See also James J. White, Legal Realism: Promise Fulfilled and Principle Betrayed, 1988 ANN. SURV. AM. L. 7 (1989).
25. This starting point is dictated by the promise-based theory of the RESTATEMENT (SECOND) OF CONTRACTS. Under the Restatement approach, the core questions to be considered in establishing liability are whether there was a promise, whether the promise was part of an offer and acceptance, and whether the promise was supported by consideration or induced reliance. See RESTATEMENT (SECOND) OF CONTRACTS §§ 1-5, 71, 90 (1981).
26. See Speidel, supra note 12.
27. See, e.g., U.C.C. §§ 2-201(3), 1-205, 2-202, 2-208 (1998).
28. See Richard E. Speidel, Contract Law: Some Reflections Upon Commercial Context and the Judicial Process, 1967 WIS. L. REV. 822, 829-832. The realist approach, attributable to Karl N. Llewellyn, has been criticized as resting on a "triad of dubious assumptions that self-evident ideal resolutions or situational problems exists, that they can be discovered by careful scrutiny of actual situations, and that once articulated they will be widely accepted." Richard Danzig, A Comment on the Jurisprudence of the Uniform Commercial Code, 27 STAN. L. REV. 621, 635 (1975). More recently, Dean Robert E. Scott has argued that, by and large, the courts under Article 2 have rejected the invitation to travel back along the vital link into the commercial context. Robert E. Scott, The Case for Formalism in Relational Contract, 94 NW. U. L. REV. 847 (2000).
29. See Richard E. Speidel, Contract Law: Some Reflections Upon Commercial Context and the Judicial Process, 1967 WIS. L. REV. 822, 829-832. The realist approach, attributable to Karl N. Llewellyn, has been criticized as resting on a "triad of dubious assumptions that self-evident ideal resolutions or situational problems exists, that they can be discovered by careful scrutiny of actual situations, and that once articulated they will be widely accepted." Richard Danzig, A Comment on the Jurisprudence of the Uniform Commercial Code, 27 STAN. L. REV. 621, 635 (1975). More recently, Dean Robert E. Scott has argued that, by and large, the courts under Article 2 have rejected the invitation to travel back along the vital link into the commercial context. Robert E. Scott, The Case for Formalism in Relational Contract, 94 NW. U. L. REV. 847 (2000).
30. See Richard E. Speidel, Contract Law: Some Reflections Upon Commercial Context and the Judicial Process, 1967 WIS. L. REV. 822, 829-832. The realist approach, attributable to Karl N. Llewellyn, has been criticized as resting on a "triad of dubious assumptions that self-evident ideal resolutions or situational problems exists, that they can be discovered by careful scrutiny of actual situations, and that once articulated they will be widely accepted." Richard Danzig, A Comment on the Jurisprudence of the Uniform Commercial Code, 27 STAN. L. REV. 621, 635 (1975). More recently, Dean Robert E. Scott has argued that, by and large, the courts under Article 2 have rejected the invitation to travel back along the vital link into the commercial context. Robert E. Scott, The Case for Formalism in Relational Contract, 94 NW. U. L. REV. 847 (2000).
31. See Stewart Macaulay, An Empirical View of Contracts, 1985 WIS. L. REV. 463.
32. Lisa Bernstein, The Questionable Empirical Basis of Article 2's Incorporation Strategy: A Preliminary Study. JOHN M. OLIN LAW & ECONOMICS WORKING PAPER NO. 74 (2d Series, 1999).
33. Ian R. Macneil, Relational Contract Theory: Challenges and Queries, 94 NW. U. L. REV. 877 (2000).
34. See Paul J. Gudel, Relational Contract Theory and the Concept of Exchange, 46 BUFF. L. REV. 763, 771-72 (1998) (describing the relationships in an employment contract terminated at will).
35. See Ian R. Macneil, Relational Contract Theory as Sociology: A Reply to Professors Lindenberg and de Vos, 143 J. INSTITUTIONAL & THEORETICAL ECON. 272 (1987).
36. See id. at 273-76.
37. In essence, "default" rules operate in the absence of enforceable agreements to the contrary and perform two basic functions. First, they supply terms to fill gaps in the agreement. Second, they supply the legal principles of contract formation, interpretation, performance, and remedy. The question is whether the default rules for relational contracts should be different from those for discrete contracts. See Jay M. Feinman, Relational Contract and Default Rules, 3 S. CAL. INTERDISC. L.J. 91 (1993).
38. This course of dealing may be the source of norms and expectations that carry from one short term deal to the next. See U.C.C. § 1-205 (1998).
39. The consequences of extended duration are well discussed in Charles Goetz & Robert E. Scott, Principles of Relational Contracts, 67 VA. L. REV. 1089 (1981). See also Robert A. Hillman, An Analysis of the Cessation of Contractual Relations, 68 CORNELL L. REV. 617 (1983) (discussing termination clauses).
40. The consequences of extended duration are well discussed in Charles Goetz & Robert E. Scott, Principles of Relational Contracts, 67 VA. L. REV. 1089 (1981). See also Robert A. Hillman, An Analysis of the Cessation of Contractual Relations, 68 CORNELL L. REV. 617 (1983) (discussing termination clauses).
41. An excellent example is Northern Indiana Public Service Co. v. Carbon County Coal Co., 799 F.2d 265 (7th Cir. 1986), where the parties entered into a twenty-year contract without a termination clause for the sale of a fixed quantity of coal each year at a fixed price with upward escalation. When the market price of coal (and other energy sources) dropped well below the contract price, the court held that the buyer, NIPSCO, was not excused from the contract because the risk had been allocated to it by the contract. The court awarded Carbon County damages rather than specific performance, noting that the workers and merchants at Carbon County's mine who had relied on the long-term contract assumed the risk that the mine would close down if it became uneconomical. See id. 27 See Victor Goldberg, Price Adjustment in Long-Term Contracts, 1985 WIS. L. REV. 527 (arguing that incentive to engaged in opportunistic behavior increases as divergence between contract price and market alternatives increases).
42. Such a clause is reprinted in EDWARD J. MURPHY ET AL., STUDIES IN CONTRACT LAW 746-47 (5th ed. 1997). See Robert E. Scott, Conflict and Cooperation in Long-Term Contracts, 75 CAL. L. REV. 2005 (1987).
43. Such a clause is reprinted in EDWARD J. MURPHY ET AL., STUDIES IN CONTRACT LAW 746-47 (5th ed. 1997). See Robert E. Scott, Conflict and Cooperation in Long-Term Contracts, 75 CAL. L. REV. 2005 (1987).
44. See Oglebay Norton Co. v. Armco, Inc., 556 N.E.2d 515 (Ohio 1990) (discussed infra note 37).
45. See RESTATEMENT (SECOND) OF CONTRACTS §§ 272(1), 240, 377 (1981). If a contract is discharged for impracticability, however, justice may require protection of the parties' reliance interests. Id. § 272(2).
46. Macneil identifies two other characteristics of relational contracts that will not be discussed here: (1) trouble is expected as a matter of course, and (2) the relationship apart from the exchange has independent value. The former encourages the parties to plan for dispute resolution and the latter helps to explain why parties to an extended relationship are willing to share risks and engage in cooperative behavior. See Macneil, supra note 21, at 275-76.
47. See generally Melvin A. Eisenberg, Third-Party Beneficiaries, 92 COLUM. L. REV. 1358 (1992).
48. Joshua P. Rubin, Note, Take the Money and Stay: Industrial Location Incentives and Relational Contracting, 70 N.Y.U. L. REV. 1277 (1995).
49. See Richard E. Speidel, Warranty Theory, Economic Loss, and the Privity Requirement: Once More into the Void, 67 B.U. L. REV. 9 (1987).
50. There is an extensive literature on the relational dimensions of business organizations. See, e.g., OLIVER E. WILLIAMSON, THE ECONOMIC INSTITUTIONS OF CAPITALISM: FIRMS, MARKETS, RELATIONAL CONTRACTING (1985); Victor Brudney, Corporate Governance, Agency Costs, and the Rhetoric of Contract, 85 COLUM. L. REV.1403 (1985); John P. Esser, Institutionalizing Industry: The Changing Forms of Contract, 21 L. & SOC. INQUIRY 593 (1996); Robert W. Hillman, Private Ordering Within Partnerships, 41 U. MIAMI L. REV. 425 (1987); Steven R. Salbu, The Decline of Contract as a Relationship Management Form, 47 RUTGERS L. REV. 1271 (1995); Steven R. Salbu, Joint Venture Contracts as Strategic Tools, 25 IND. L. REV. 397 (1991).
51. There is an extensive literature on the relational dimensions of business organizations. See, e.g., OLIVER E. WILLIAMSON, THE ECONOMIC INSTITUTIONS OF CAPITALISM: FIRMS, MARKETS, RELATIONAL CONTRACTING (1985); Victor Brudney, Corporate Governance, Agency Costs, and the Rhetoric of Contract, 85 COLUM. L. REV.1403 (1985); John P. Esser, Institutionalizing Industry: The Changing Forms of Contract, 21 L. & SOC. INQUIRY 593 (1996); Robert W. Hillman, Private Ordering Within Partnerships, 41 U. MIAMI L. REV. 425 (1987); Steven R. Salbu, The Decline of Contract as a Relationship Management Form, 47 RUTGERS L. REV. 1271 (1995); Steven R. Salbu, Joint Venture Contracts as Strategic Tools, 25 IND. L. REV. 397 (1991).
52. There is an extensive literature on the relational dimensions of business organizations. See, e.g., OLIVER E. WILLIAMSON, THE ECONOMIC INSTITUTIONS OF CAPITALISM: FIRMS, MARKETS, RELATIONAL CONTRACTING (1985); Victor Brudney, Corporate Governance, Agency Costs, and the Rhetoric of Contract, 85 COLUM. L. REV.1403 (1985); John P. Esser, Institutionalizing Industry: The Changing Forms of Contract, 21 L. & SOC. INQUIRY 593 (1996); Robert W. Hillman, Private Ordering Within Partnerships, 41 U. MIAMI L. REV. 425 (1987); Steven R. Salbu, The Decline of Contract as a Relationship Management Form, 47 RUTGERS L. REV. 1271 (1995); Steven R. Salbu, Joint Venture Contracts as Strategic Tools, 25 IND. L. REV. 397 (1991).
53. There is an extensive literature on the relational dimensions of business organizations. See, e.g., OLIVER E. WILLIAMSON, THE ECONOMIC INSTITUTIONS OF CAPITALISM: FIRMS, MARKETS, RELATIONAL CONTRACTING (1985); Victor Brudney, Corporate Governance, Agency Costs, and the Rhetoric of Contract, 85 COLUM. L. REV.1403 (1985); John P. Esser, Institutionalizing Industry: The Changing Forms of Contract, 21 L. & SOC. INQUIRY 593 (1996); Robert W. Hillman, Private Ordering Within Partnerships, 41 U. MIAMI L. REV. 425 (1987); Steven R. Salbu, The Decline of Contract as a Relationship Management Form, 47 RUTGERS L. REV. 1271 (1995); Steven R. Salbu, Joint Venture Contracts as Strategic Tools, 25 IND. L. REV. 397 (1991).
54. There is an extensive literature on the relational dimensions of business organizations. See, e.g., OLIVER E. WILLIAMSON, THE ECONOMIC INSTITUTIONS OF CAPITALISM: FIRMS, MARKETS, RELATIONAL CONTRACTING (1985); Victor Brudney, Corporate Governance, Agency Costs, and the Rhetoric of Contract, 85 COLUM. L. REV.1403 (1985); John P. Esser, Institutionalizing Industry: The Changing Forms of Contract, 21 L. & SOC. INQUIRY 593 (1996); Robert W. Hillman, Private Ordering Within Partnerships, 41 U. MIAMI L. REV. 425 (1987); Steven R. Salbu, The Decline of Contract as a Relationship Management Form, 47 RUTGERS L. REV. 1271 (1995); Steven R. Salbu, Joint Venture Contracts as Strategic Tools, 25 IND. L. REV. 397 (1991).
55. There is an extensive literature on the relational dimensions of business organizations. See, e.g., OLIVER E. WILLIAMSON, THE ECONOMIC INSTITUTIONS OF CAPITALISM: FIRMS, MARKETS, RELATIONAL CONTRACTING (1985); Victor Brudney, Corporate Governance, Agency Costs, and the Rhetoric of Contract, 85 COLUM. L. REV.1403 (1985); John P. Esser, Institutionalizing Industry: The Changing Forms of Contract, 21 L. & SOC. INQUIRY 593 (1996); Robert W. Hillman, Private Ordering Within Partnerships, 41 U. MIAMI L. REV. 425 (1987); Steven R. Salbu, The Decline of Contract as a Relationship Management Form, 47 RUTGERS L. REV. 1271 (1995); Steven R. Salbu, Joint Venture Contracts as Strategic Tools, 25 IND. L. REV. 397 (1991).
56. If the parties have failed adequately to plan for the relational contract or have failed to resolve a dispute by agreement, the ultimate policy question is whether contract law should impose further duties to preserve the relationship and facilitate further agreement. If the answer is no, the parties are left to their own devices. In short, the failure to plan or to agree in the relational contract leaves the parties with the nonrelational default rules of modern contract law.
57. 556 N.E.2d 515 (Ohio 1990). Virtually no attention has been paid to this case in either the state or federal courts or the law reviews.
58. The court noted that the "parties recognized that Oglebay could be required to ship up to 7.1 million gross tons of Armco iron ore per year." 556 N.E.2d at 519.
59. Id. at 516.
60. This is a perfect example of a transaction-specific investment. Whether the improvements would have aided Oglebay in contracts with other shippers is not clear from the opinion.
61. 556 N.E.2d at 517.
62. The court does not elaborate. Presumably, the demand for steel dropped sharply. In addition, the court does not discuss whether Armco could have reduced its output of iron ore in good faith or whether the price of shipping iron ore on the Great Lakes was affected by the steel industry decline.
63. Oglebay apparently accepted that substituted rate even though it was not satisfactory. It is not stated in the opinion how much ore was shipped that year.
64. The parties continued performance during 1986, but at rates fixed by Armco.
65. 556 N.E.2d at 519. U.C.C. section 2-305(1), which the court applied by analogy, provides that the parties, if they so intend, can "conclude a contract for sale even though the price is not settled." U.C.C. § 2-305(4) (1998). Further, if the "price is left to be agreed by the parties and they fail to agree," then the "price is a reasonable price at the time for delivery." Id. On the other hand, if the parties "intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed, there is no contract." Id. See also U.C.C. § 2-204 (1998). Section 33(1) of the Restatement states that an offer cannot be accepted "unless the terms of the contract are reasonably certain." RESTATEMENT (SECOND) OF CONTRACTS § 33(1) (1981). Even so, a purported acceptance may not create a contract if open or uncertain terms "show that a manifestation of intention is not intended to be understood as an offer or as an acceptance." Id. § 33(2) (1981). Section 34(2) states that part performance may "establish that a contract enforceable as a bargain has been formed." Id. § 34(2) (1981). Despite the intention of the parties, the "reasonably certain" requirement in Section 33(1) must be satisfied, either by proof that there is a basis for "determining the existence of a breach and for giving an appropriate remedy," in Section 33(2), or from part performance. Id. § 34(2) (1981). Section 34(3) provides that "action in reliance on an agreement may make a contractual remedy appropriate even though uncertainty is not removed." Id. § 34(3) (1981).
66. Professor Melvin Eisenberg has asserted that courts should not preserve contracts, whether or not they are relational. Melvin A. Eisenberg, Why There is No Law of Relational Contracts, 94 NW. U. L. REV. 805 (2000). This is clearly so if both parties agree before or after the judicial decision to terminate the contract. Where there is no agreement, however, relational characteristics such as transaction-specific investments and third-person involvement support an action to preserve the contract and intervene in some way to facilitate further agreement. That action may be followed by either an agreed termination or an agreed adjustment and continued performance.
67. See U.C.C. § 2-305(4) (1998).
68. If Armco had breached the long-term contract, the remedy of specific performance would probably have been available to Oglebay. See Laclede Gas Co. v. Amoco Oil Co., 522 F.2d 33 (8th Cir. 1975). The court apparently declared that the contract still existed and ordered performance without determining whether either party was in breach. See Oglebay, 556 N.E.2d 515.
69. 556 N.E.2d at 520.
70. See Charles L. Knapp, Enforcing the Contract to Bargain, 44 N.Y.U. L. REV. 673 (1969). Knapp argues that where the parties have agreed to agree and there is no agreement, the court ought not to fill the gap with a reasonable term unless the party has failed to agree in bad faith. The court must first know and evaluate the reasons why the agreement failed. Id. 51 Suppose that there was no agreement to agree if the external price mechanism failed. Should a duty be imposed anyway? Could it emerge as an internal norm over time?
71. Oglebay Norton Co. v. Armco Inc., 556 N.E.2d 515, 521 (Ohio 1990).
72. See generally Larry A. Dimatteo, Equity's Modification of Contract: An Analysis of the Twentieth Century's Equitable Reformation of Contract Law, 33 NEW ENG. L. REV. 265 (1999) (reviewing exercising of equitable powers to modify contracts).
73. See Alan Schwartz, Relational Contracts in the Courts: An Analysis of Incomplete Agreements and Judicial Strategies, 21 J. LEGAL STUD. 271 (1992) (concluding that courts, lacking sufficient information about party intent and market alternatives, are reluctant to intervene if the parties have failed to agree).
74. See Robert E. Scott, A Relational Theory of Default Rules for Commercial Contracts, 19 J. LEGAL STUD. 597 (1990) (arguing for clear, categorical default rules that facilitate agreement but rely primarily on social rather than legal norms to promote risk sharing and adjustment).
75. Ian R. Macneil, Economic Analysis of Contractual Relations: Its Shortfalls and the Need for a Rich Classificatory Apparatus, 75 NW. U. L. REV. 1018, 1023, n.20 (1981). See also Steven Burton, Good Faith Performance of a Contract Within Article 2 of the Uniform Commercial Code, 67 IOWA L. REV. 1, 24 (1981) (opportunism recaptures gains "foregone at the time of contracting"); Timothy Muris, Opportunistic Behavior and the Law of Contracts, 65 MINN. L. REV. 521 (1981) (opportunism is behavior by party A which is contrary to party B's understanding but not necessarily contrary to the explicit terms of the agreement and which results in a transfer of resources).
76. Ian R. Macneil, Economic Analysis of Contractual Relations: Its Shortfalls and the Need for a Rich Classificatory Apparatus, 75 NW. U. L. REV. 1018, 1023, n.20 (1981). See also Steven Burton, Good Faith Performance of a Contract Within Article 2 of the Uniform Commercial Code, 67 IOWA L. REV. 1, 24 (1981) (opportunism recaptures gains "foregone at the time of contracting"); Timothy Muris, Opportunistic Behavior and the Law of Contracts, 65 MINN. L. REV. 521 (1981) (opportunism is behavior by party A which is contrary to party B's understanding but not necessarily contrary to the explicit terms of the agreement and which results in a transfer of resources).
77. Ian R. Macneil, Economic Analysis of Contractual Relations: Its Shortfalls and the Need for a Rich Classificatory Apparatus, 75 NW. U. L. REV. 1018, 1023, n.20 (1981). See also Steven Burton, Good Faith Performance of a Contract Within Article 2 of the Uniform Commercial Code, 67 IOWA L. REV. 1, 24 (1981) (opportunism recaptures gains "foregone at the time of contracting"); Timothy Muris, Opportunistic Behavior and the Law of Contracts, 65 MINN. L. REV. 521 (1981) (opportunism is behavior by party A which is contrary to party B's understanding but not necessarily contrary to the explicit terms of the agreement and which results in a transfer of resources).
78. In Aluminum Co. of America v. Essex Group, Inc., 499 F. Supp. 53 (W.D. Pa. 1980), a highly relational contract was disrupted when unexpected events (e.g., the Arab oil embargo, inflation) dramatically increased the cost of energy and caused a negotiated price escalation clause to fail the purpose for which it was intended. The result was that Alcoa incurred substantial financial losses and Essex, because of a dramatic increase in the market price over the contract price for the services supplied, received a windfall. Alcoa claimed that it was excused from performance and that the contract should be discharged. Essex disagreed and filed a declaratory judgment action. The court held that the changed circumstances entitled Alcoa to "some relief" but refused to discharge the balance of the contract. Rather, the court, in effect, preserved the contract and supplied a new price term to supplant the failed escalation clause. This was done in the interest of avoiding hardship and preserving expectations, as part of what the court called a "new spirit" of contract. 499 F. Supp. at 91-92. I have argued elsewhere that this "new spirit of contract" is, in essence, relational contract theory, and that the result in this case was justified on the facts. See Richard E. Speidel, Court-Imposed Price Adjustments Under Long-Term Supply Contracts, 76 NW. U. L. REV. 369 (1981); Richard E. Speidel, The New Spirit of Contract, 2 J.L. & COM. 193 (1982). See also Mark P. Gergen, A Defense of Judicial Reconstruction of Contracts, 71 IND. L.J. 45 (1995).
79. In Aluminum Co. of America v. Essex Group, Inc., 499 F. Supp. 53 (W.D. Pa. 1980), a highly relational contract was disrupted when unexpected events (e.g., the Arab oil embargo, inflation) dramatically increased the cost of energy and caused a negotiated price escalation clause to fail the purpose for which it was intended. The result was that Alcoa incurred substantial financial losses and Essex, because of a dramatic increase in the market price over the contract price for the services supplied, received a windfall. Alcoa claimed that it was excused from performance and that the contract should be discharged. Essex disagreed and filed a declaratory judgment action. The court held that the changed circumstances entitled Alcoa to "some relief" but refused to discharge the balance of the contract. Rather, the court, in effect, preserved the contract and supplied a new price term to supplant the failed escalation clause. This was done in the interest of avoiding hardship and preserving expectations, as part of what the court called a "new spirit" of contract. 499 F. Supp. at 91-92. I have argued elsewhere that this "new spirit of contract" is, in essence, relational contract theory, and that the result in this case was justified on the facts. See Richard E. Speidel, Court-Imposed Price Adjustments Under Long-Term Supply Contracts, 76 NW. U. L. REV. 369 (1981); Richard E. Speidel, The New Spirit of Contract, 2 J.L. & COM. 193 (1982). See also Mark P. Gergen, A Defense of Judicial Reconstruction of Contracts, 71 IND. L.J. 45 (1995).
80. In Aluminum Co. of America v. Essex Group, Inc., 499 F. Supp. 53 (W.D. Pa. 1980), a highly relational contract was disrupted when unexpected events (e.g., the Arab oil embargo, inflation) dramatically increased the cost of energy and caused a negotiated price escalation clause to fail the purpose for which it was intended. The result was that Alcoa incurred substantial financial losses and Essex, because of a dramatic increase in the market price over the contract price for the services supplied, received a windfall. Alcoa claimed that it was excused from performance and that the contract should be discharged. Essex disagreed and filed a declaratory judgment action. The court held that the changed circumstances entitled Alcoa to "some relief" but refused to discharge the balance of the contract. Rather, the court, in effect, preserved the contract and supplied a new price term to supplant the failed escalation clause. This was done in the interest of avoiding hardship and preserving expectations, as part of what the court called a "new spirit" of contract. 499 F. Supp. at 91-92. I have argued elsewhere that this "new spirit of contract" is, in essence, relational contract theory, and that the result in this case was justified on the facts. See Richard E. Speidel, Court-Imposed Price Adjustments Under Long-Term Supply Contracts, 76 NW. U. L. REV. 369 (1981); Richard E. Speidel, The New Spirit of Contract, 2 J.L. & COM. 193 (1982). See also Mark P. Gergen, A Defense of Judicial Reconstruction of Contracts, 71 IND. L.J. 45 (1995).
81. See RESTATEMENT (SECOND) OF CONTRACTS § 205 (1981); U.C.C. § 1-203 (1998).
82. See RESTATEMENT (SECOND) OF CONTRACTS § 205 (1981); U.C.C. § 1-203 (1998).
83. For an excellent study, see Nadia E. Nedzel, A Comparative Study of Good Faith, Fair Dealing, and Precontractual Liability, 12 TUL. EUR. & CIV. L. F. 97 (1997). The study discusses United States law. Id. at 102-09, 118-25, 149-50.
84. For an excellent study, see Nadia E. Nedzel, A Comparative Study of Good Faith, Fair Dealing, and Precontractual Liability, 12 TUL. EUR. & CIV. L. F. 97 (1997). The study discusses United States law. Id. at 102-09, 118-25, 149-50.
85. See United Airlines, Inc. v. Good Taste, Inc., 982 P.2d 1259 (Alaska 1999); cf. Sons of Thunder, Inc. v. Borden, Inc., 690 A.2d 575 (N.J. 1997) (holding that while termination was in good faith, there was bad faith in performance before the termination).
86. See Missouri Pub. Serv. Co. v. Peabody Coal Co., 583 S.W.2d 721 (Mo. App. 1979). The court stated: "Where an enforceable, untainted contract exists, refusing modification of price and seeking performance of valid covenants does not constitute bad faith or breach of contract." Id. at 725.
87. For a concise summary of the authorities and arguments, see Richard E. Speidel, The "Duty" of Good Faith in Contract Performance and Enforcement, 46 J. LEGAL ED. 537 (1996). See also STEVEN J. BURTON & ERIC G. ANDERSEN, CONTRACTUAL GOOD FAITH: FORMATION, PERFORMANCE, BREACH (1995).
88. For a concise summary of the authorities and arguments, see Richard E. Speidel, The "Duty" of Good Faith in Contract Performance and Enforcement, 46 J. LEGAL ED. 537 (1996). See also STEVEN J. BURTON & ERIC G. ANDERSEN, CONTRACTUAL GOOD FAITH: FORMATION, PERFORMANCE, BREACH (1995).
89. The Unidroit Principles of International Commercial Contracts were published in Rome by the International Institute for the Unification of Private Law in 1994. They are, on one level, an international restatement of contracts. They may also be adopted by the parties as the law of the transaction. See E. Allan Farnsworth, The American Provenance of the Unidroit Principles, 72 TUL. L. REV. 1985 (1998); Boris Kozolchyk, The Unidroit Principles as a Model for the Unification of the Best Contractual Practices in the Americas, 46 AM. J. COMP. L. 151 (1998); Joseph M. Perillo, Unidroit Principles of International Commercial Contracts: The Black Letter Text and a Review, 63 FORDHAM L. REV. 281 (1994). The UNIDROIT Principles are reprinted in STEVEN J. BURTON & MELVIN A. EISENBERG, CONTRACT LAW: SELECTED SOURCE MATERIALS 333 (1999).
90. The Unidroit Principles of International Commercial Contracts were published in Rome by the International Institute for the Unification of Private Law in 1994. They are, on one level, an international restatement of contracts. They may also be adopted by the parties as the law of the transaction. See E. Allan Farnsworth, The American Provenance of the Unidroit Principles, 72 TUL. L. REV. 1985 (1998); Boris Kozolchyk, The Unidroit Principles as a Model for the Unification of the Best Contractual Practices in the Americas, 46 AM. J. COMP. L. 151 (1998); Joseph M. Perillo, Unidroit Principles of International Commercial Contracts: The Black Letter Text and a Review, 63 FORDHAM L. REV. 281 (1994). The UNIDROIT Principles are reprinted in STEVEN J. BURTON & MELVIN A. EISENBERG, CONTRACT LAW: SELECTED SOURCE MATERIALS 333 (1999).
91. The Unidroit Principles of International Commercial Contracts were published in Rome by the International Institute for the Unification of Private Law in 1994. They are, on one level, an international restatement of contracts. They may also be adopted by the parties as the law of the transaction. See E. Allan Farnsworth, The American Provenance of the Unidroit Principles, 72 TUL. L. REV. 1985 (1998); Boris Kozolchyk, The Unidroit Principles as a Model for the Unification of the Best Contractual Practices in the Americas, 46 AM. J. COMP. L. 151 (1998); Joseph M. Perillo, Unidroit Principles of International Commercial Contracts: The Black Letter Text and a Review, 63 FORDHAM L. REV. 281 (1994). The UNIDROIT Principles are reprinted in STEVEN J. BURTON & MELVIN A. EISENBERG, CONTRACT LAW: SELECTED SOURCE MATERIALS 333 (1999).
92. The Unidroit Principles of International Commercial Contracts were published in Rome by the International Institute for the Unification of Private Law in 1994. They are, on one level, an international restatement of contracts. They may also be adopted by the parties as the law of the transaction. See E. Allan Farnsworth, The American Provenance of the Unidroit Principles, 72 TUL. L. REV. 1985 (1998); Boris Kozolchyk, The Unidroit Principles as a Model for the Unification of the Best Contractual Practices in the Americas, 46 AM. J. COMP. L. 151 (1998); Joseph M. Perillo, Unidroit Principles of International Commercial Contracts: The Black Letter Text and a Review, 63 FORDHAM L. REV. 281 (1994). The UNIDROIT Principles are reprinted in STEVEN J. BURTON & MELVIN A. EISENBERG, CONTRACT LAW: SELECTED SOURCE MATERIALS 333 (1999).
93. See E. Allan Farnsworth, Duties of Good Faith and Fair Dealing Under the Unidroit Principles, Relevant International Conventions, and National Laws, 3 TUL. J. INT'L & COMP. L. 47 (1995);
94. Arthur Hartkamp, The Concept of Good Faith in the Unidroit Principles for International Commercial Contracts, 3 TUL. J. INT'L & COMP. L. 65 (1995);
95. Mary E. Hiscock, The Keeper of the Flame: Good Faith and Fair Dealing in International Trade, 29 LOY. L.A. L. REV. 1059 (1996);
96. Ulrich Magnus, Remarks on Goods Faith: The United Nations Convention on Contracts for the International Sale of Goods and the International Institute for the Unification of Private Law, Principles of International Commercial Contracts, 10 PACE INT'L. L. REV. 89 (1998).
97. The parties "may not exclude or limit this duty." UNIDROIT PRINCIPLES, supra note 63, Art. 1.7(2).
98. See Art. 4.8(1) on the power of a court or arbitrator to supply an appropriate term "where the parties to a contract have not agreed with respect to a term which is important for a determination of their rights and duties." Factors the court or arbitrator should consider are the intention of the parties, the nature and purpose of the contract, good faith and fair dealing, and reasonableness. UNIDROIT PRINCIPLES, supra note 63, Art. 4.8(2).
99. This, of course, was the situation in Oglebay. See supra text accompanying notes 37-53. The court, however, did not ask whether Armco's failure to agree was in bad faith.
100. See Speidel, supra note 62, at 543-45.
101. UNIDROIT PRINCIPLES, supra note 63, Art. 6.2.1. In Oglebay, the performance arguably was more onerous for Armco.
102. UNIDROIT PRINCIPLES, supra note 63, Art. 6.2.3(1). The grounds upon which the claim of hardship is based must be stated.
103. The options are to "terminate the contract at a date and on terms to be fixed" or "adapt the contract with a view to restoring its equilibrium." UNIDROIT PRINCIPLES, supra note 63, Art. 6.2.3(4). This response is similar to that invoked in the much-criticized Alcoa case, supra note 57, where the court, after finding that Alcoa was entitled to "some relief" after changed circumstances not foreseen as likely to occur, supplied a price-adjustment term to fill the gap left when the agreed term failed of its essential purpose. Like the Oglebay court, the Alcoa court declared that the contract should continue but under the supplied term. This general problem is discussed in Joseph M. Perillo, Force Majeure and Hardship Under the Unidroit Principles of International Commercial Contracts, 5 TUL. J. INT'L & COMP. L. 5 (1997).
104. International Institute for the Unification of Private Law, UNDROIT PRINCIPLES Art. 6.2.3, comment 5 (1994).
105. This caution is illustrated by Norcon Power Partners, L.P. v. Niagara Mohawk Power Corp., 705 N.E.2d 656 (N.Y. 1998), where the United States Court of Appeals for the Second Circuit certified the following question to the New York Court of Appeals: Does a party have a right to demand adequate assurance of future performance when reasonable grounds arise to believe that the other party will commit a breach by non-performance of a contract governed by New York law, where the other party is solvent and the contract is not governed by the U.C.C.? Id. at 658. In giving an affirmative answer on the facts of the particular case (a long-term contract for the sale of electricity), the court rejected a wholesale adoption of the broad principle of adequate assurance in RESTATEMENT (SECOND) CONTRACTS § 251: We conclude . . . that it is unnecessary . . . to promulgate so sweeping a change and proposition in contract law, as has been sought, in one dramatic promulgation. This approach might clash with our customary incremental common-law development process, rooted in particular fact patterns and keener wisdom acquired through observations of empirical application of a proportioned, less than absolute, rule in future cases. 705 N.E.2d at 669.
106. See BURTON & ANDERSEN, supra note 62, at 21-40.
107. A force majeure event, such as a fire, flood, strike, act of government, or war, actually impedes the agreed performance of the exchange. See Article 79; United Nations Convention on Contracts for the International Sale of Goods, Apr. 11, 1980, art. 9, UN. Doc. A/Conf.97/18 (1981);UNIDROIT PRINCIPLES, supra note 63, Art. 7.1.7.
108. See Larry A. Dimatteo, Equity's Modification of Contract: An Analysis of the Twentieth Century's Equitable Reformation of Contract Law , 33 NEW. ENG. L. REV. 265 (1999).
109. See Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher, 417 N.E.2d 541 (N.Y.1981), in which the court commented as follows: We begin our analysis with the basic observation that, unless otherwise mandated by law . . . , a contract is a private "ordering" in which a party binds himself to do, or not to do, a particular thing . . . . This liberty is no right at all if it is not accompanied by freedom not to contract. The corollary is that, before one may secure redress in our courts because another has failed to honor a promise, it must appear that the promisee assented to the obligation in question.
110. See Scott, supra note 15 (describing this tension).
111. Cass R. Sunstein, Must Formalism be Defended Empirically?, 66 U. CHI. L. REV. 636, 644 (1999).
112. See Scott, supra note 16; Eric A. Posner, A Theory of Contract Law Under Conditions of Radical Judicial Error, 94 NW. U. L. REV. 749 (2000).
113. See Scott, supra note 16; Eric A. Posner, A Theory of Contract Law Under Conditions of Radical Judicial Error, 94 NW. U. L. REV. 749 (2000).
114. Advocates of this approach rarely confront the dilemmas of bargaining beyond the shadow of the law. See Edward L. Rubin, The Nonjudicial Life of Contract: Beyond the Shadow of the Law, 90 NW. U. L. REV. 107 (1995).
115. See Scott, supra note 16, at 866; Posner, supra note 80, at 752.
116. See Scott, supra note 16, at 866; Posner, supra note 80, at 752.
117. See, e.g., Symposium, Formalism Revisited, 66 U. CHI. L. REV. 527 (1999); Symposia, Law, Economics, and Norms, 144 U. PA. L. REV. 1765 (1996).
118. See, e.g., Symposium, Formalism Revisited, 66 U. CHI. L. REV. 527 (1999); Symposia, Law, Economics, and Norms, 144 U. PA. L. REV. 1765 (1996).
119. For more of the gospel, see CLAYTON P. GILLETTE & STEVEN D. WALT, SALES LAW: DOMESTIC AND INTERNATIONAL 222-29 (1999), favoring ex ante risk allocation and supporting a rule of "no adjustment" without even consideration the relational alternatives.
120. I have taken my lumps. See, e.g., John P. Dawson, Judicial Revision of Frustrated Contracts, 64 B.U. L. REV. 1 (1984).
121. In an oft quoted phrase, William Twining said "realism is dead; we are all realists." WILLIAM TWINING, KARL LLEWELLYN AND THE REALIST MOVEMENT 382 (1973). Dean Scott now states that "[w]e are all relationalists." Scott, supra note 16, at 852. Nonsense. Those advocating the virulent strain of the new formalists are neither realists nor relationalists and the sooner we say so the better.
122. In an oft quoted phrase, William Twining said "realism is dead; we are all realists." WILLIAM TWINING, KARL LLEWELLYN AND THE REALIST MOVEMENT 382 (1973). Dean Scott now states that "[w]e are all relationalists." Scott, supra note 16, at 852. Nonsense. Those advocating the virulent strain of the new formalists are neither realists nor relationalists and the sooner we say so the better.
123. For evidence of that "return" in the courts, see Ralph J. Mooney, The New Conceptualism in Contract Law, 74 OR. L. REV. 1131 (1995).
124. The parties intend to contract even though material terms are indefinite. In most cases, the parties still intend to contract even though an open term or deferred agreement runs into difficulty during performance.