From Langdell to law and economics: Two conceptions of stare decisis in contract law and theory

Virginia Law Review

Volumn 94, Issue 1, 2008, Pages 157-195

  Kraus, Jody S ^a,b  

^a Department of Law ^*

^b UNIVERSITY OF VIRGINIA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 42449139203     PISSN: 00426601     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (93)

1. (1791) Peake 102, 102, 170 Eng. Rep. 94, 94 (K.B.).
2. Id.
3. (1809) 2 Camp. 317, 170 Eng. Rep. 1168 (K.B.).
4. 2 Camp, at 319, 170 Eng. Rep. at 1169.
5. Samuel Williston, The Law of Contracts § 130 (1931).
6. Grant Gilmore, The Death of Contract 30 (Ronald K.L. Collins ed., Ohio State Univ. Press 2d ed. 1995).
7. Id. at 29-30 & 127 n.57.
8. Id. at 30.
9. Holmes wrote that: [I]t is the essence of a consideration, that, by the terms of the agreement, it is given and accepted as the motive or inducement of the promise. Conversely, the promise must be made and accepted as the conventional motive or inducement for furnishing the consideration. The root of the whole matter is the relation of reciprocal conventional inducement, each for the other, between consideration and promise.Oliver Wendell Holmes, The Common Law 230 (Mark DeWolfe Howe ed., Belknap Press of Harvard Univ. Press 1963) (1881).
10. Restatement (Second) of Contracts § 71 (1981). The Restatement of the Law of Contracts incorporated the bargain theory of consideration in § 75 by defining consideration for a promise as "an act other than a promise, or... a return promise, bargained for and given in exchange for the promise." Restatement of the Law of Contracts § 75 (1932).
11. Gilmore, supra note 6, at 15.
12. Gilmore never provides an example of a case that Langdell allegedly misinter-preted. Instead, he claims Langdell based his theory of contract on an unreasoned and dogmatic explanation of a set of precedents that itself was unrepresentative of American contract law: [Langdell's contracts casebook], according to Langdell, was to contain-and presumably did contain-all the important contract cases that had ever been decided. "All the cases" turned out to be mostly English cases, arranged in historical sequence from the seventeenth century down to the date of publication; the English cases were occasionally supplemented by comparable sequences of cases from New York and Massachusetts-no other American jurisdictions being represented. The Summary [of the Law of Contracts, which Langdell added as an appendix to the second edition of his casebook in 1880],... is devoted almost entirely to explaining which of the cases in the main part of the casebook are "right" and which are "wrong." The explanation, typically, is dogmatic, rather than reasoned; Langdell knew right from wrong, no doubt by divine revelation...." Gilmore, supra note 6, at 13.
13. Karl Llewellyn defined the first question of case interpretation as an inquiry into what the court actually decided in a given case: judgment reversed, and new trial ordered. And the question of what express ratio decidendi it announced. These are facts of observation. They are the starting point of all discussion. Until you have them there is no use doing any arguing about anything. K.N. Llewellyn, The Bramble Bush: On Our Law and Its Study 76 (1960). The second question, however, is what the rule of the case is, as derived from its comparison with a number of other cases. This is not so simple, but the technical procedures for determining it are clear. Skilled observers should rather regularly be able to agree on two points: (i) the reasonably safe maximum rule that case can be used for; (ii) the reasonably certain minimum rule the case must be admitted to contain. Id. Llewellyn referred to the view of precedential authority that identifies cases with the minimum rule as the "orthodox" or "strict" view of precedent. According to the orthodox view, "[t]he express ratio decidendi is prima facie the rule of the case, since it is the ground upon which the court chose to rest its decision." Id. at 66. In contrast, Llewellyn referred to the view of precedential authority that identifies cases with their maximum rule as the "loose" view: the view that a court has decided, and decided authoritatively, any point or all points on which it chose to rest a case, or on which it chose, after due argument, to pass- In its extreme form this results in thinking and arguing exclusively from language that is found in past opinions, and in citing and working with that language wholly without reference to the facts of the case which called the language forth. Id. at 67-68. Note that Llewellyn's two conceptions both identify precedential authority with the express language of cases. While the orthodox view limits the rule of a case to the express reasoning that determined its outcome (its ratio decidendi), the loose view includes as the rule of a case potentially all express reasoning in that case, regardless of whether it was outcome determinative in that case (obiter dicta). In contrast, the precedents-as- outcomes view I identify and associate with the classical theorists rejects the claim that the rule of a case is necessarily defined by its express reasoning, including express reasoning that Llewellyn would characterize as its ratio decidendi. For the classical theorists, the ratio decidendi consists in the best theory of the case's outcome, and the express reasoning of the case is just one theory among others.
14. It is misleading only because the doctrinal precedent set by a case, on this view, consists not merely in its outcome, but rather in the theory that best explains and justifies that outcome, together with other outcomes that the theory treats as related. So characterized, however, the precedents-as-outcomes view confronts a bootstrap problem: If case outcomes are the data that legal theories explain, then they must be identifiable pretheoretically. Yet even a minimal characterization case requires some theory for determining which facts are relevant. The precedents-as-outcomes view need not claim, however, that outcomes can or must be characterized independently of theoretical presuppositions. Rather, it characterizes case outcomes by making the fewest theoretical presuppositions possible and identifies precedential authority with the theory that best explains those outcomes. In contrast, the express reasoning view holds that precedential authority resides entirely in the court's express reasoning. It therefore treats competing theories of case outcomes that are inconsistent with the express reasoning of those cases as irrelevant to a case's precedential authority.
15. For a detailed argument that economic contract theories embrace the precedentsas-outcomes view and deontic (that is, nonconsequentialist) contract theories endorse the express reasoning view, see Jody S. Kraus, Philosophy of Contract Law in The Oxford Handbook of Jurisprudence and Philosophy of Law 687 (Jules Coleman & Scott Shapiro eds., 2002).
16. The claim here is not that a conception of adjudicative legitimacy logically entails any particular view of precedential authority, but only that some pairings of particular conceptions of adjudicative legitimacy with certain views of precedential authority will be more theoretically congenial than others. See infra Part I and Section II.B.
17. Thomas C. Grey, Langdell's Orthodoxy, 45 U. Pitt. L. Rev. 1, 2 (1983).
18. Grey, supra note 17, at 2.
19. See, e.g., Llewellyn, supra note 13, at 43-44 (1960); Caleb Nelson, Stare Decisis and Demonstrably Erroneous Precedents, 87 Va. L. Rev. 1, 23-27 (2001).
20. See Grey, supra note 17, at 34 ("The classicists did not regard public law, including constitutional law, as amenable to scientific study at all.... Constitutional law was unscientific, because hopelessly vague....").
21. See Samuel Williston, Change in the Law, 69 U.S. L. Rev. 237, 239 (1935) ("I believe also that the best path at the present time and in the future for judicial decisions is in a fuller recognition of stare principiis as a qualification of stare decisis. This involves both a greater willingness to overrule outworn cases and outworn principles, and greater frankness in so doing."); Samuel Williston, Fashions in Law with Illustrations from the Law of Contracts, 21 Tex. L. Rev. 119, 133 (1942) ("Though Langdell's colleagues differed from him in many ways, they agreed in seeking fundamental legal principles and testing them by observing their logical consequences in every conceivable aspect. If precedents conflicted with some of these consequences, and no good reason could be found for the precedents, they were criticized. Stare principiis, rather than stare decisis, controlled much of the thought in the school."); see also William Draper Lewis, Introduction in Restatement of the Law of Contracts, at viii-ix (1932).
22. See, e.g., Grey, supra note 17, at 12-13.
23. Williston, supra note 5, at § 130.
24. (1809) 2 Camp. 317, 319, 170 Eng. Rep. 1168, 1169 (K.B.).
25. (1876) 2 Ch.D. 463.
26. See Gilmore, supra note 6, at 31-33.
27. Dickinson, 2 Ch.D. at 463-64.
28. Gilmore, supra note 6, at 31.
29. Id. at 31-32.
30. Williston, supra note 5, at § 55.
31. Gilmore, supra note 6, at 32.
32. Here, Gilmore himself is playing fast and loose with Dickinson. Even a superficial reading of Lord Justice James's opinion, the other opinion in Dickinson, proves that the court expressly decided the case, at least in part, on consideration theory: "This offer to be left over until Friday...." That shews it was only an offer. There was no consideration given for the undertaking or promise, to whatever extent it may be considered binding, to keep the property unsold until 9 o'clock on Friday morning... [I]t is clear settled law, on one of the clearest principles of law, that this promise, being a mere nudum pactum was not binding, and that at any moment before a complete acceptance by Dickinson of the offer, Dodds was as free as Dickinson himself. 2 Ch.D. at 472. Moreover, Lord Justice Mellish begins his opinion by explicitly agreeing with Lord Justice James on this question:I am of the same opinion.... [T]his being only an offer, the law says-and it is a perfectly clear rule of law-that, although it is said that the offer is to be left open until Friday morning at 9 o'clock, that did not bind Dodds. He was not in point of law bound to hold the offer over until 9 o'clock on Friday morning. Id. at 473-74. It is therefore quite clear that both opinions in Dickinson interpret Dodds's statement that his offer would be "left over" until Friday morning as a promise not to retract his offer until Friday morning, and both Justices rule that this promise is unenforceable for lack of consideration. But the ruling that the promise to hold the offer open was not enforceable was not sufficient to decide the case. The Justices still had to consider whether a contract was formed when Dickinson attempted to accept Dodds's offer. Both opinions concluded that acceptance did not occur because, on the version of the meeting of the minds theory to which Lord Justices James and Mellish subscribed, Dickinson lacked the power to accept Dodds's offer once he knew that Dodds had sold the property to Allan. Id. Thus, while Gilmore was right that Dickinson was decided in part on the basis of the meeting of the minds theory, he was wrong that this is the sole basis of the opinion. And he was certainly wrong that Williston distorted the facts by interpreting the term "left over" to mean "held open" and that Williston ignored or distorted the express reasoning in Dickinson when he cited it as authority for the proposition that a promise to hold an offer open is unenforceable if not supported by consideration. But as I argue in the text below, even if Gilmore had been right, Williston's citation of Dickinson would have constituted distortion only if its precedential authority is presumed to reside in its express judicial reasoning, rather than its outcome alone.
33. Gilmore, supra note 6, at 32.
34. Id. at 33.
35. See supra note 32.
36. (1884) 9 App. Cas. 605 (H.L.) (appeal taken from England).
37. Gilmore, supra note 6, at 33-36.
38. 9 App. Cas. 605.
39. Gilmore, supra note 6, at 35.
40. Williston, supra note 5, at § 120.
41. Id.
42. Gilmore, supra note 6, at 35-36.
43. Restatement of the Law of Contracts § 20 (1932).
44. Id. § 20, cmt. a.
45. "[T]he formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration." Restatement (Second) of Contracts § 17(1) (1981). "Manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance." Id. at § 18. "A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made." Id. at § 2(1).
46. (1864) 2 H. & C. 906, 159 Eng. Rep. 375 (Exch.).
47. 2 H. & C. at 907, 159 Eng Rep. at 376.
48. Gilmore, supra note 6, at 43-44.
49. Holmes, supra note 9, at 242.
50. Gilmore, supra note 6, at 45.
51. For the same reason, Holmes's objective intent account is just as plausible as Gilmore's subjective intent account of the court's implicit ground of decision. When the court interrupted following defense counsel's argument that there was no consensus ad idem, it could be fairly read as treating either the lack of subjective intent or the lack of objective intent as dispositive. Notably, in commenting on the first Restatement's embrace of Holmes's interpretation of Raffles, Arthur Corbin endorsed it as correct: [T]he actual decisions being rendered cannot be explained and their rules restated without making use of the objective theory.... With respect to the case of the ship "Peerless" ... it is believed that there was no contract, not because of the absence of a meeting of two hypothetical "minds," but because the objective expressions of the two parties were not in agreement and did not so identify the subject matter of the contract as to make it enforceable. In the light of the surrounding facts, the words used by the two parties might equally well be taken to express any one of the following: (1) agreement to sell the cotton on the October "Peerless"; (2) agreement to sell the cotton on the December "Peerless"; (3) a promise to sell cotton on the October "Peerlees" and a return promise to buy cotton on the December "Peerless"; (4) a promise to sell cotton on the December "Peerless" and a return promise to buy cotton on the October "Peerless." Arthur Corbin, The Restatement of the Common Law by the American Law Institute, 15 Iowa L. Rev. 19, 34-35 (1929).
52. Gilmore, supra note 6, at 45, 46.
53. "Until the late eighteenth century there was no such thing as a... law of contracts. Before then there were cases... about contracts. But cases are one thing and a systematically organized, sharply differentiated body of law is quite another thing." Gilmore, supra note 6, at 9. "For [Justice Joseph] Story, then, there was no such thing as a generalized law of - or theory of - contract.... Story, indeed, during his astonishingly productive career, wrote treatises on most... specialized bodies of law; it never occurred to him to write a treatise on 'Contracts.'" Id. at 12. Justice Story's son, William Wetmore Story, wrote the Treatise on the Law of Contracts Not Under Seal (1844), revised and expanded in the 1847 second edition. But this treatise did not attempt to present contracts as a unified field but instead treated it as consisting in independent branches corresponding to different types of transactions, each governed by distinct doctrine (for example, contracts of factors, brokers, auctioneers, executors and administrators). Id. at 116 n.16. Even Parsons on Contracts (1853), written by Theophilus Parsons, the Dane Professor of Law at Harvard Law School from 1848 until 1870, "also turns out to be, on examination, simply a treatment, seriatim, of the several types of 'commercial contracts' identified by Justice Story and analyzed in his own Commentaries and in his son's two Treatises." Id.
54. "[T]he theory of contract, as formulated by Holmes and Williston, seems to have gone into its protracted period of breakdown almost from the moment of its birth." Gilmore, supra note 6, at 63. "During the past forty years we have seen the effective dismantling of the formal system of classical contract theory. We have witnessed what it does not seem too farfetched to describe as an explosion of liability." Id. at 72.
55. See, e.g., P.S. Atiyah, Promises, Morals, and Law (1981); P.S. Atiyah, Essays on Contract (1986); L.L. Fuller and William R. Perdue, Jr., The Reliance Interest in Contract Damages, 46 Yale L.J. 52 (1936).
56. As Gilmore pointed out, the realists ironically used Langdell's Socratic case method to prove that any formal construction of legal doctrine could be equally deconstructed by the same method. "By the 1930s, at least in the law schools, the Langdellian position had become untenable-and, in an unkind reversal, the case method of teaching had been turned on its head and used to disprove everything its inventor had held dear." Gilmore, supra note 6, at 65.
57. For an excellent critical introduction to CLS, see Mark Kelman, A Guide to Critical Legal Studies (1987). For an overview of American Legal Realism, see Brian Leiter, Rethinking Legal Realism: Toward a Naturalized Jurisprudence, 76 Tex. L. Rev. 267 (1997), and Brian Leiter, Naturalizing Jurisprudence: Essays on American Legal Realism and Naturalism in Legal Philosophy (2007).
58. Ronald Dworkin, Taking Rights Seriously 81-130 (1977).
59. For Hart's classic statement of American legal positivism, see H.L.A. Hart, The Concept of Law (1961). For Dworkin's critique of Hart's positivism, see Dworkin, supra note 58, at 14-45; see also Jules L. Coleman, The Practice of Principle: In Defence of a Pragmatist Approach to Legal Theory 65-217 (2001).
60. John Rawls, A Theory of Justice (Belknap Press 1999) (1971).
61. Charles Fried, Contract as Promise: A Theory of Contractual Obligation 1 (1981).
62. Id. at 2.
63. Id. at 6.
64. See id. at 8, 16.
65. In Fried's words, [T]rust becomes a powerful tool for our working our mutual wills in the world.... The device that gives trust its sharpest, most palpable form is promise. By promising we put in another man's hands a new power to accomplish his will, though only a moral power: What he sought to do alone he may now expect to do with our promised help, and to give him this new facility was our very purpose in promising. By promising we transform a choice that was morally neutral into one that is morally compelled. Morality... is itself invoked, molded to allow us better to work that particular will. Id. at 8.
66. Because they are not germane to the present discussion, I do not discuss two fundamental criticisms of Fried's theory that have featured prominently in contract theory scholarship. The first critique is that Fried's theory presupposes without argument that the law should enforce the moral obligation to keep promises. Given the well-developed arguments against legal moralism, defense of Fried's theory requires either a defense of legal moralism or an argument for why the legal enforcement of morality is justified in the case of promises. The second is that his theory is unfalsifiable because it defines contract law as those doctrines that can be explained by the promise principle, rather than claiming that the promise principle can explain most doctrines that are widely regarded, pretheoretically, to be core contract doctrines. See Kraus, supra note 15, at 703-15. Although Fried can dismiss most cases not explicable in terms of the moral promise principle by relegating them to other areas of the law (such as tort law), there is no plausible alternative doctrinal home for the consideration cases. Even for Fried, the consideration doctrine, if internally coherent, is a counterexample to his theory.
67. Fried, supra note 56, at 29.
68. Id.
69. These second Restatement sections state rules for enforcing promises made for benefits received (the material benefit rule, § 86), modifying agreements (§ 89), and reviving otherwise unenforceable debts (§§ 82 and 83).
70. Fried, supra note 56, at 32.
71. Restatement (Second) of Contracts § 1 (1981).
72. See supra text accompanying note 62.
73. See, e.g., Richard Craswell, Contract Law, Default Rules, and the Philosophy of Promising, 88 Mich. L. Rev. 489 (1989).
74. Charles J. Goetz & Robert E. Scott, Enforcing Promises: An Examination of the Basis of Contract, 89 Yale L.J. 1261 (1980).
75. Restatement (Second) of Contracts § 90 (1981).
76. Goetz & Scott, supra note 75, at 1280 (emphasis added).
77. Id. at 1294-95.
78. Id. at 1296.
79. Id. at 1315 (emphasis added).
80. Id. at 1265 (emphasis added).
81. Id. at 1321.
82. The Death of Contract was published in 1974 and Contract as Promise was published in 1981.
83. Richard Posner, Economic Analysis of Law, at xx (3d ed. 1986).
84. Id. at 21.
85. Richard Posner, Economic Analysis of Law 6 (1st ed. 1972).
86. See Posner, supra note 84, at 24.
87. Thomas Grey also observes that the law-and-economics movement generally, and Richard Posner's work in particular, has a Langdellian foundation: A movement in legal theory that has closer links to the Benthamite dream of policy science is the school of law and economics. But, on closer inspection, that school turns out to be neo-orthodox too. Its leader, Richard Posner, says that economic analysis cannot supplant, but only predict and criticize, a course of legal decision carried on case-by-case according to orthodox methods. And Posner finds "efficiency," with all the connotation of approval that term carries in his theory, in the content as well as the methods of Langdellian private law. Grey, supra note 17, at 51.
88. 41 N.W. 338 (Wis. 1889).
89. Another example is Posner's discussion of causation in torts cases: "The results in these cases seem to owe little to refined notions of causation, and much to considerations of (economic) policy, yet they are conventionally discussed by lawyers under the rubric of cause in fact." Posner, supra note 84, at 169.
90. Id. at 83.
91. Describing the seminal status of Ronald Coase's famous article "The Problem of Social Costs," 3 J.L. & Econ. 1 (1960), in the history of the economic analysis in law, Posner claims that: An important although for a time neglected feature of Coase's article was its implications for the positive economic analysis of legal doctrine. Coase suggested that the English law of nuisance had an implicit economic logic. Later writers have generalized this insight and argued that many of the doctrines and institutions of the legal system are best understood and explained as efforts to promote the efficient allocation of resources.... Posner, supra note 84, at 20. Posner then claims that: Although few judicial opinions contain explicit references to economic concepts, often the true grounds of legal decision are concealed rather than illuminated by the characteristic rhetoric of opinions. Indeed, legal education consists primarily of learning to dig beneath the rhetorical surface to find those grounds, many of which may turn out to have an economic character.... It would not be surprising to find that legal doctrines rest on inarticulate gropings toward efficiency, especially when we bear in mind that many of those doctrines date back to the late eighteenth and the nineteenth century, when a laissez faire ideology based on classical economics was the dominant ideology of the educated classes in society. Id. at 21.
92. For a brief review of Posner's early attempts to defend the principle of wealth maximization, see Jody S. Kraus, Reconciling Autonomy and Efficiency in Contract Law: The Vertical Integration Strategy, 11 Phil. Issues 420, 428-31 (2001).
93. The deontic critique of the economic analysis of the common law sets out what is perhaps the best known objection to the view that the precedential authority of cases consists in the best theory of their outcomes and not in their express or implied judicial reasoning. In Jody S. Kraus, Transparency and Determinacy in Common Law Adjudication: A Philosophical Defense of Explanatory Economic Analysis, 93 Va. L. Rev. 287 (2007), I consider the claim advanced by deontic theorists that the economic analysis is disqualified as an explanation of the common law because it lacks an adequate account of express judicial reasoning in common law cases. That critique argues that any explanation of the common law must explain or adequately explain away the fact that common law judges use express reasoning that is often couched in deontic terms which are inconsistent with the exclusively consequentialist reasoning of the economic analysis. I argue that the economic analysis has a plausible account for this divergence based on semantic evolution and therefore does not presuppose that judges either conspire to mislead others or delude themselves. The deontic critique of the economic analysis of the common law sets out what is perhaps the best known objection to the view that the precedential authority of cases consists in the best theory of their outcomes and not in their express or implied judicial reasoning. Apart from this debate, many additional obstacles confront the precedents-as-outcomes view. For example, John Rawls's highly influential theory, Political Liberalism, holds that the justification of political coercion must be provided using public reason, which in turn requires that judicial reasoning be publicly accessible. If express judicial reasoning provides either no guide or an opaque guide to the legal reasoning on which the case was actually decided and the precedential authority for which the case stands, then arguably Rawls's public justification requirement is not met in most common law decisions. I discuss this point in Jody S. Kraus, Legal Determinacy and Moral Justification, 48 Wm. & Mary L. Rev. 1773, 1785 (2007).