Managing moral risk: The case of contract

Columbia Law Review

Volumn 111, Issue 8, 2011, Pages 1878-1932

  Bagchi, Aditi ^a  

^a UNIVERSITY OF PENNSYLVANIA   (United States)

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EID: 84055216988     PISSN: 00101958     EISSN: None     Source Type: Journal    
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References (299)

1. Thomas Nagel, Mortal Questions 24-38 (Canto ed. 1991) [hereinafter Nagel, Mortal Questions] (defining concept of moral luck and exploring challenge it poses for Kantian moral theory).
2. Bernard Williams, Moral Luck 20-39 (1981) [hereinafter Williams, Moral Luck] (same). Together, these works introduced the concept and founded the literature on moral luck.
3. Moral Luck (Daniel Statman ed., 1993) (exploring various dimensions of moral luck in collection of articles).
4. Robert Merrihew Adams, Involuntary Sins, 94 Phil. Rev. 3, 3 (1985) (arguing one may be morally responsible for involuntary states of mind).
5. Jonathan E. Adler, Luckless Desert Is Different Desert, 96 Mind 247, 247 (1987) (defending problem of moral luck on grounds that there is "imperfect alignment of our ideals for attributing desert and the practices in which those attributions are rooted").
6. Brynmor Browne, A Solution to the Problem of Moral Luck, 42 Phil. Q. 345, 345 (1992) Arguing it is mistaken to understand problem of moral luck as based on assumption that moral responsibility requires control by agent).
7. Randolph Clarke, Agent Causation and the Problem of Luck, 86 Pac. Phil. Q. 408, 408 (2005) (defending agent causation against argument that one's very decision to act one way or the other is matter of luck).
8. Darren Domsky, There Is No Door: Finally Solving the Problem of Moral Luck, 101 J. Phil. 445, 446 (2004) (denying problem of moral luck because "[b]lameworthiness does not vary with luck in cases of negligence").
9. David Enoch & Andrei Marmor, The Case Against Moral Luck, 26 Law & Phil. 405, 410-411 (2007) (rejecting problem of moral luck on grounds that agent is not properly regarded as responsible for all causally connected consequences of her acts).
10. Alfred R. Mele, Ultimate Responsibility and Dumb Luck, 16 Soc. Phil. & Pol'y 274, 275 (1999) (defending notion of ultimate responsibility and moral responsibility against specific deterministic challenges).
11. Brian Rosebury, Moral Responsibility and "Moral Luck," 104 Phil. Rev. 499, 524 (1995)
12. Arguing there is no problem of moral luck once one recognizes "moral agents are to be judged in light of knowledge available to them at point of decision to act, given acknowledged underlying condition of universal individfallibility in pursuit and deployment of knowledge").
13. Michael Zimmerman, Taking Luck Seriously, 99 J. Phil. 553, 562 (2002)
14. Arguing "anyone who takes seriously the view that we Can not be morally responsible for that which is not in our control must ...accept the more general claim that luck is irrelevant to moral responsibility" and suggesting practice of punishment must be revised accordingly).
15. Larry A. Alexander, Causation and Corrective Justice: Does Tort Law Make Sense?, 6 Law & Phil. 1, 22-23 (1987) [hereinafter Alexander, Corrective Justice] (arguing backward-looking focus of "but-for" causation inquiry in tort law is unjustified).
16. Ronen Avraham & Issa Kohler-Hausmann, Accident Law for Egalitarians, 12 Legal Theory 181, 181 (2006) (arguing corrective justice and existing tort law are unjust to both defendants and plaintiffs because damages depend on arbitrary factors).
17. John C.P. Goldberg & Benjamin C. Zipursky, Tort Law and Moral Luck, 92 Cornell L. Rev. 1123, 1132-1163 (2007) [Goldberg & Zipursky, Tort Law] (rejecting arguments that tort law is unjust because wrongdoers' compliance and liability both turn on luck).
18. Jeremy Waldron, Moments of Carelessness and Massive Loss, in Philosophical Foundations of Tort Law 387, 389-391 (David G. Owen ed., 1995) [hereinafter Waldron, Moments of Carelessness] (arguing massive liability imposed on individuals for ordinary negligence is morally arbitrary).
19. Michael Davis, Why Attempts Deserve Less Punishment than Completed Crimes, 5 Law & Phil. 1, 28-32 (1986) (defending differential punishment for attempts on grounds that criminals who have not successfully completed their crimes have not usurped same advantage as those who have accomplished their crimes).
20. Joel Feinberg, Equal Punishment for Failed Attempts: Some Bad but Instructive Arguments Against It, 37 Ariz. L. Rev. 117, 119 (1995) [hereinafter Feinberg, Equal Punishment] (arguing attempts and completed crimes should be treated equally because arbitrariness has corrosive effect on criminal law).
21. Stanley Kadish, Forward: The Criminal Law and the Luck of the Draw, 84 J. Crim. L. & Criminology 679, 679 (1994) (arguing harm principle at work in array of criminal law doctrines is indefensible).
22. David Lewis, The Punishment that Leaves Something to Chance, 96 Phil. & Pub. Aff. 53, 58 (1989) (suggesting we can understand less severe punishment for attempts as kind of penal lottery, in which criminal who commits given act is subject to risk of punitive harm that turns in part on harm he commits).
23. David M. Cutler & Richard Johnson, The Birth and Growth of the Social Insurance State: Explaining Old Age and Medical Insurance Across Countries, 120 Pub. Choice 87, 88+91-96 (2004) (providing overview of political and economic theories of social insurance).
24. Mark Huggett & Juan Carlos Parra, How Well Does the U.S. Social Insurance System Provide Social Insurance?, 118 J. Pol. Econ. 76, 76-77 (2010)
25. ("One rationale for a government-provided, insurance system is the provision of insurance for risks that are not easily insured in private markets."). For economic literature explaining social insurance as a response to the inadequacy of private insurance for labor market risk,
26. J.A. Mirrlees, Private Risk and Public Action: The Economics of the Welfare State, 39 Eur. Econ. Rev. 383, 384+388 (1995) (summarizing social insurance as response to problems of adverse selection and impossibility of individuals purchasing insurance privately at optimal time of birth).
27. Greg Warren Kaplan, Essays in Inequality, Risk-Sharing and the Lifecycle (May 2009) (unpublished Ph.D. dissertation, New York University) (on file with the Columbia Law Review) (detailing different models of risk sharing to deal with labor market risk).
28. infra Part IV.A (suggesting background institutions mitigate moral risk inherent in contract formation by providing social safety net).
29. Robert L. Birmingham, Breach of Contract, Damage Measures, and Economic Efficiency, 24 Rutgers L. Rev. 273, 284 (1970) ("Repudiation of obligations should be encouraged where the promisor is able to profit from his default after placing his promise in as good a position as he would have occupied had performance been rendered.").
30. Charles J. Goetz & Robert E. Scott, Liquidated Damages, Penalties, and the Just Compensation Principle: Some Notes on an Enforcement Model and Theory of Efficient Breach, 77 Colum. L. Rev. 554, 558 (1977) ("Generally, breach will occur where the breaching party anticipates that paying compensation and allocating his resources to alternative uses will make him 'better off' than performing his obligation.").
31. Steven Shavell, Damage Measures for Breach of Contract, 11 Bell J. Econ. 466, 478 (1980) [hereinafter Shavell, Damage Measures] ("The seller will default if and only if his gain exceeds the buyer's expectancy ...." (internal quotation marks omitted)).
32. Samuel Williston, A Treatise on the Law of Contracts § 64:7 (Richard A. Lord ed., 4th ed. 2002) ("Mental suffering caused by a breach of contract, although it may be a real injury, is not generally considered as a basis for compensation in contractual actions.").
33. R. Joseph Barton, Note, Drowning in a Sea of Contract: Application of the Economic Loss Rule to Fraud and Negligent Misrepresentation Claims, 41 Wm. & Mary L. Rev. 1789, 1789 (2000) ("[C]ontract law ...[is] expressly designed to deal with disappointed economic expectations and, therefore, the recovery of economic losses.").
34. Restatement (Second) of Contracts §§ 89, 261-268 (1981) (outlining circumstances under which performance of promise is difficult or impossible). Section 261 holds that a party's obligation may be discharged if performance "is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made." Id. § 261. 10. Consider a contractor who asks a homeowner to increase the contract price to nanda12,000 from nanda10,000 because the poor state of the existing plumbing will require a variety of pipes to be replaced before the planned work can proceed. The expected duration of the work was not specified in the written agreement. The contractor may have been in a better position to appreciate the significance of existing conditions, but the homeowner was in a better position to know of conditions behind a wall. It is therefore unclear whether the contractor could successfully avoid the contract on the grounds of mistake of fact or some variety of changed circumstances. The possibility that the contractor may escape liability for breach makes it more likely that the homeowner will acquiesce to some modification that pools the harms associated with the poor quality of the existing plumbing.
35. Williams, Moral Luck, supra note 1, at 20-39 (noting "morality is subject ...to constitutive luck" and exploring moral luck through series of examples).
36. id. at 21+29 ("[T]he aim of making morality immune to luck is bound to be disappointed.").
37. Nafsika Athanassoulis, Common-Sense Virtue Ethics and Moral Luck, 8 Ethical Theory & Moral Prac. 265, 265 (2005) (noting "morality ...is about control, choice, responsibility and the appropriateness of praise and blame and on the other hand luck ...is about lack of control, unpredictability and the inappropriateness of praise and blame").
38. A.W. Moore, A Kantian View of Moral Luck, 65 Philosophy 297, 297-298 (1990) (observing Kant and Plato share "the belief that our true worth, indeed our true being, is something isolable and pure which is not subject to the contingencies and vicissitudes of our empirical surrounds").
39. Aristotle, Nicomachean Ethics bk. I, ch. 9, §7 (Terence Irwin trans., Hackett Publ'g Co. 2d ed. 1999) ("[I]t would be seriously inappropriate to entrust what is greatest and finest to fortune.").
40. John Cooper, Reason and Human Good in Aristotle 123 (1975) ("Aristotle points out that the actual attainment of external goods is in large measure the result of sheer good fortune; but eudaimonia [human flourishing] must be something which is attained, if at all, by a person's own efforts.").
41. Martha C. Nussbaum, The Fragility of Goodness: Luck and Ethics in Greek Tragedy and Philosophy 1-8 (1986) (discussing dichotomy between luck and human goodness in Greek ethical thought).
42. Julia Annas, Ancient Ethics and Modern Morality, 6 Ethics 119, 125 (1992) ("[V]irtue requires voluntariness, the free exercise of choice to act one way rather than another.").
43. Immanuel Kant, Grounding for the Metaphysics of Morals 20 (James W. Ellington trans., Hackett Publ'g Co. 3d ed. 1993) (1785) [hereinafter Kant, Grounding]
44. "[M]oral law ...must be valid not merely under contingent conditions and with exceptions but must be absolutely necessary."). The moral theory is complex and cannot be adequately treated here. A brutally reductive version of the argument is that human beings may be motivated by desires that are the product of the external world and subject to the natural laws of the physical world. To the extent our actions are guided merely by these desires, we do not act freely but are subject to laws outside ourselves. Only when we subject our will to the internal law of reason, i.e., the categorical imperative, do we act freely.
45. Henry E. Allison, Kant's Theory of Freedom 239-242 (1990) (discussing deduction of freedom from moral law in Kant's theory).
46. Christine M. Korsgaard, The Authority of Reflection, in The Sources of Normativity 90, 97-98 (Onara O'Neill ed., 1996) [hereinafter Korsgaard, Reflection] ("[B]ecause the will is free, no law or principle can be imposed on it from outside.").
47. Kant, Grounding, supra note 15, at 6-8+17.
48. Judith Andre, Nagel, Williams, and Moral Luck, 43 Analysis 202, 202 (1983) (describing Kantian view that morality is "the sphere of life in which, no matter what our circumstances, each of us can become worthy" and suggesting "moral worth is the highest worth of all, and so there is a kind of ultimate justice in the world").
49. Williams, Moral Luck, supra note 1, at 39.
50. It disrupted theoretical understandings of morality, which take moral agency to entail control over the moral quality of actions. See supra note 13 (discussing importance of individual control to conceptions of morality). It similarly disrupted the basic intuition that many have that we ought not to be credited or blamed for things beyond our control. See Margaret Urban Walker, Moral Luck and the Virtues of Impure Agency,
51. Moral Luck, supra note 2 at 235+237 (describing "'control condition,' the intuitive principle limiting moral assessment to just such factors as an agent controls" as "held to be virtually self-evident").
52. Daniel Statman, Introduction, in Moral Luck, supra note 2, at 1+6 (noting normative aspect of Williams's agent-regret theory).
53. Williams, Moral Luck, supra note 1, at 36.
54. Id. at 27.
55. Nagel, Mortal Questions, supra note 1, at 27+24.
56. Id. at 28.
57. Id.
58. Adams, supra note 2, at 3-4 (arguing individuals should be held ethically accountable for "involuntary sins").
59. Nagel, Mortal Questions, supra note 1, at 33.
60. Id. at 33-34.
61. Id. at 35.
62. Williams, Moral Luck, supra note 1, at 37+39.
63. Nagel, Mortal Questions, supra note 1, at 37-38+31.
64. Tony Honoré, Responsibility and Luck, 104 Law Q. Rev. 530, 543 (1988) ("If actions and outcomes were not ascribed to us on the basis of our bodily movements and their mental accompaniments, we could have no continuing history or character.").
65. John Gardner, Obligations and Outcomes in the Law of Torts, in Relating to Responsibility: Essays for Tony Honore ́ on His Eightieth Birthday 111, 136 (Peter Cane & John Gardner eds., 2001) [hereinafter Gardner, Obligations and Outcomes] ("To deny that success can have independent rational significance is to leave us without any story of our lives as practical reasoners.").
66. Stephen R. Perry, The Moral Foundations of Tort Law, 77 Iowa L. Rev. 449, 505-507 (1992) [hereinafter Perry, Moral Foundations]
67. Arguing agency is "meaningful notion" because one can imagine agent with knowledge of all relevant causal regularities who is capable of controlling natural processes, and observing outcome responsibility involves "retrospective evaluation of action" that turns on what would have been foreseeable to such an idealized agent).
68. Stephen R. Perry, Responsibility for Outcomes, Risk, and the Law of Torts, in Philosophy and the Law of Torts 72, 83 (Gerald J. Postema ed., 2001) [hereinafter Perry, Responsibility for Outcomes] ("[O]utcome-responsibility in the achievement sense comprises a fundamental element in our understanding of our own agency.").
69. Nagel, Mortal Questions, supra note 1, at 25+30-31 (considering scenarios where drunk driver kills pedestrian and baby is left in running bathwater).
70. Berit Brogaard, Epistemological Contextualism and the Problem of Moral Luck, 84 Pac. Phil. Q. 351, 351 (2003) (considering situation in which driver with uninspected brakes kills pedestrian).
71. Heidi M. Hurd, What in the World Is Wrong?, 5 J. Contemp. Legal Issues 157, 176 (1994) (expanding upon misfiring gun example).
72. Ken Levy, The Solution to the Problem of Outcome Luck: Why Harm Is Just as Punishable as the Wrongful Action that Causes It, 24 Law & Phil. 263, 265 (2005)
73. Describing how actors knowingly assume risk of "metaphysical luck" in certain situations (internal quotation marks omitted)). Levy defends the centrality of outcome to criminal liability on the grounds that those who engage in risky criminal behavior assume the risk that their actions will result in harms that justify criminal punishment. He stresses, as does this Essay, that just as a gambler risks that she will have poor "metaphysical luck" that will result in monetary loss, someone who shoots a gun gambles with the "dealer of morality." Id. at 265. An agent who engages in behavior that puts others in harm's way "voluntarily create[s] a situation" that she "[knows] or at least should have known would let the moral status of her action be determined by one or another reasonably foreseeable outcome of her action." Id. at 303.
74. The failure to recognize the ways in which we continually manage moral risk follows in part from our tendency to associate ordinary luck with extreme, unanticipated outcomes.
75. Anders Schinkel, The Problem of Moral Luck: An Argument Against Its Epistemic Reduction, 12 Ethical Theory & Moral Prac. 267, 269 (2009) ("We call something a matter of (good or bad) luck when 1) it is of interest or importance to us, 2) it was not under our control, and 3) we had no reason to expect its occurrence.").
76. Jules L. Coleman, Contracts and Torts, 12 Law & Phil. 71, 90-93 (1993)
77. Exploring requirement that one impose only "reasonable risk" as neither fully encompassing nor limited to cost-justified risks, and expressly allowing that imposition of such risk may be justified). Of course, there is substantial disagreement on what constitutes unreasonable risk.
78. Jules L. Coleman, Risks and Wrongs 238-239 (1992) [hereinafter Coleman, Risks & Wrongs] ("[T]he agent who fails to take cost-justified precautions acts unreasonably, and the risks he imposes are unreasonable.").
79. Richard A. Epstein, A Theory of Strict Liability, 2 J. Legal Stud. 151, 152-160 (1973) ("If the defendant harms the plaintiff, then he should pay even if the risk he took was reasonable ....").
80. George P. Fletcher, Fairness and Utility in Tort Theory, 85 Harv. L. Rev. 537, 542-56 (1972) ("[A] victim has a right to recover for injuries caused by a risk greater in degree and different in order from those created by the victim and imposed on the defendant-in short, for injuries resulting from nonreciprocal risks.").
81. Daniel Statman, Doors, Keys, and Moral Luck: A Reply to Domsky, 102 J. Phil. 422, 423-424 (2005) (explaining there is more to problem of moral luck than blameworthiness).
82. Tom Baker, Liability Insurance, Moral Luck, and Auto Accidents, 9 Theoretical Inquiries L. 165, 166 (2008).
83. Id. at 172-175.
84. id. at 184 (shifting discussion away from luck of drivers to luck of victims).
85. That is, the principle of moral luck implies that outcomes affect the moral quality of acts. Negative outcomes may be mitigated by social institutions like law; therefore, these institutions may help mitigate the risk that luck will render us vulnerable to moral opprobrium.
86. Williams, Moral Luck, supra note 1, at 22-26 (examining whether fictionalized Gaugin's success as artist affects moral character of his earlier act of abandoning his family).
87. Nagel, Mortal Questions, supra note 1, at 30-31 (discussing how resultant luck determines moral upshot of leaving baby unattended in bath).
88. supra note 13 and accompanying text (describing persistent and fundamental nature of claim that morality is immune to luck).
89. John Gardner, Wrongs and Faults, 59 Rev. Metaphysics 95, 107 (2005) [hereinafter Gardner, Wrongs and Faults] (noting although "[l]awyers are used to thinking of the person wronged as the main person whose life was made worse by the wrong," there is also "moral damage to the life of the wrongdoer").
90. supra notes 3-4 and accompanying text (noting examinations of moral luck in torts and criminal law).
91. Andrew Ashworth, Criminal Attempts and the Role of Resulting Harm Under the Code, and in the Common Law, 19 Rutgers L.J. 725, 733 (1988) ("[T]he essence of a criminal attempt lies in the defendant's firm intention to commit the substantive offense, and the failure to achieve that aim is invariably attributable to factors such as luck, chance and misjudgment which do not significantly diminish culpability.").
92. Lawrence C. Becker, Criminal Attempt and the Theory of the Law of Crimes, 3 Phil. & Pub. Aff. 262, 276 (1974) ("[T]here is no difficulty in seeing that the killer who fails because his bullet accidently hits his victim's belt buckle is no less a social menace in the requisite sense than one who succeeds because his victim happens to be wearing suspenders.").
93. Feinberg, Equal Punishment, supra note 4, at 132 ("I find no intuitive plausibility at all in basing criminal liability on moral blameworthiness, thus securing for one's position a certain prima facie respectability, but then basing moral blameworthiness upon, as luck would have it, the actual harm or absence of harm caused.").
94. Larry Alexander is among those arguing that attempts should be punished equally.
95. Larry Alexander, Crime and Culpability, 5 J. Contemp. Legal Issues 1, 30 (1994) ("[T]he case for the centrality of the culpable act in criminal law is stronger than the case for taking the causation of harm into consideration, as all criminal codes currently do.")
96. Larry Alexander, Insufficient Concern: A Unified Conception of Criminal Culpability, 88 Calif. L. Rev. 931, 935 (2000) ("[A]ttempts and successes should be regarded not only as equally culpable, but also equally blameworthy and punishable ...."). For the argument that punishment appropriately turns on outcome,
97. Michael Moore, The Independent Moral Significance of Wrongdoing, 5 J. Contemp. Legal Issues 237, 237-238 (1994).
98. R.A. Duff, Criminal Attempts 116-127 (1996) (highlighting that attempts are punished differently from incidents causing relevant harm).
99. Gardner, Obligations and Outcomes, supra note 31, at 125 ("[T]he tort of negligence at common law is morally speaking a variation on the strict liability model of a tort, in which what is of the essence is what one actually does (injures P), never mind what one merely tries to do ....").
100. Honoré, supra note 31, at 530 ("[T]o bear the risk of bad luck is inherent in the basic form of responsibility in any society ....").
101. Perry, Moral Foundations, supra note 31, at 506-507 (arguing responsibility as recognized in tort encompasses outcome responsibility, not just intended consequences of our acts).
102. Arthur Ripstein, Closing the Gap, 9 Theoretical Inquiries L. 61, 68 n.9 (2008) (noting absence of literature on moral luck in contract).
103. Grant Gilmore, The Death of Contract 87-103 (1975) (arguing famously for declining role of consent in contract and related collapse of contract into tort).
104. Richard Craswell, Against Fuller and Perdue, 67 U. Chi. L. Rev. 99, 129 (2000) (suggesting contract is no longer seen as special species of purely voluntary obligations).
105. Hanoch Sheinman, Contractual Liability and Voluntary Undertakings, 20 Oxford J. Legal Stud. 205, 205-206 (2000) (same).
106. Timothy Endicott, Objectivity, Subjectivity, and Incomplete Agreements, in Oxford Essays in Jurisprudence: Fourth Series 151, 170-171 (Jeremy Horder ed., 2000) (defending imposition of obligations parties did not intend to assume).
107. Honoré, supra note 31, at 530-531 (describing and defending outcome responsibility).
108. Perry, Responsibility for Outcomes, supra note 31, at 72-74 (same).
109. Benjamin C. Zipursky, Two Dimensions of Responsibility in Crime, Tort, and Moral Luck, 9 Theoretical Inquiries L. 97, 97 (2008) (distinguishing between fault-expressing and agency-linking responsibility, where outcome responsibility is instance of agencylinking responsibility).
110. Coase showed that the law may protect one landowner's right not to have his corn damaged, or another landowner's right to allow his rabbits to roam and burrow with the consequence of destroying corn, but that in the absence of transaction costs, the legal entitlement would not affect whether the corn was, in fact, destroyed.
111. R.H. Coase, The Problem of Social Cost, 3 J.L. & Econ. 1, 8+36 (1960).
112. Jules Coleman & Arthur Ripstein, Mischief and Misfortune, 41 McGill L.J. 91, 96 (1996) [hereinafter Coleman & Ripstein, Mischief and Misfortune] (highlighting that determining causation presupposes assignment of obligations, rights, and possible violations).
113. Perry, Responsibility for Outcomes, supra note 31, at 111 ("[T]he imposition of risk ...is not a simple factual state of affairs.").
114. Id. at 74 (defending concept of joint risk creation).
115. Steven Feldman, Autonomy and Accountability in the Law of Contracts: A Response to Professor Shiffrin, 58 Drake L. Rev. 177, 193 (2009) (citing cases from several jurisdictions in which contract law is described variously as "'amoral,'" "'morally neutral,'" and unconcerned with "'the notion of wrong-doing'" (quoting TruGreen Cos. v. Mower Bros., 199 P.3d 929, 933 (Utah 2008).
116. Ortiz v. Lyon Mgmt. Grp., Inc., 69 Cal. Rptr. 3d 66+75 (Ct. App. 2007).
117. Glendale Fed. Bank v. United States, 239 F.3d 1374+1379 (Fed. Cir. 2001))).
118. Morton J. Horwitz, The Transformation of American Law: 1870-1960, at 35 (1992) (noting classical contract theory viewed contract doctrine as "a neutral and voluntary system in which the judge simply carried out the will of the contracting parties").
119. Michael Zimmerman, Moral Luck: A Partial Map, 36 Canadian J. Phil. 585, 607 (2006) ("[L]uck can be a factor in the fulfillment of obligation in a way that it cannot be in the incurring of responsibility.").
120. Ronald Dworkin, What Is Equality? Part 2: Equality of Resources, 10 Phil. & Pub. Aff. 283, 293 (1981).
121. Id.
122. Avraham & Kohler-Hausmann, supra note 3, at 184 (using option luck/ brute luck distinction to identify morally problematic luck).
123. Gambling represents the purest example of option luck. If two people who are identically situated choose to bet a fixed amount on a coin toss, few have the intuition that awarding that amount to the winner is unfair.
124. Gilmore, supra note 50, at 95-103 (arguing for "death of contract" as it collapses into tort).
125. Richard A. Posner, Economic Analysis of Law 75 (8th ed. 2011) (discussing identification costs as obstacle to efficient contract).
126. Melvin A. Eisenberg, The Limits of Cognition and the Limits of Contract, 47 Stan. L. Rev. 211, 213-225 (1995) [hereinafter Eisenberg, Limits of Cognition] (discussing limits on rational decisionmaking when faced with uncertainty).
127. Ian Ayres & Robert Gerner, Filling the Gaps in Incomplete Contracts: An Economic Theory of Default Rules, 99 Yale L.J. 87, 90 (1989) (describing existing academic view that defaults represent terms parties would have negotiated).
128. Id. at 93-94
129. Noting penalty defaults may be used to motivate parties to supply terms where they are more efficiently supplied ex ante than by court ex post, and in order to motivate parties to reveal information they strategically withheld in order to obtain greater proportion of transactional surplus).
130. Eisenberg, Limits of Cognition, supra note 65, at 213+224-225 (explaining limits on cognition and risk assessment).
131. Shavell, Damage Measures, supra note 7, at 468 ("[I]t may be less costly in the expected sense for the parties to resolve difficulties only on the chance that they arise than to bear with certainty the costs of providing for the contingency in the contract.").
132. Robert A. Hillman & Jeffrey J. Rachlinski, Standard-Form Contracting in the Electronic Age, 77 N.Y.U. L. Rev. 429, 446 (2002) ("[T]he terms included in standard-form contracts tend to be uniform within an industry ....").
133. Russell Korobkin, Bounded Rationality, Standard Form Contracts, and Unconscionability, 70 U. Chi. L. Rev. 1203, 1263 (2003) (citing several cases in which courts recognized that most employees have no choice but to accept odious arbitration clauses).
134. Arthur Allen Leff, The Leff Dictionary of Law: A Fragment, 94 Yale L.J. 1855, 1931 (1985) (indicating that certain form contracts are "used by all members of a particular industry such that a consumer could not acquire certain goods or services at all except on a particular set of terms").
135. Shelley Smith, Reforming the Law of Adhesion Contracts: A Judicial Response to the Subprime Mortgage Crisis, 14 Lewis & Clark L. Rev. 1035, 1040 (2010)
136. "Residential mortgages have been classified as contracts of adhesion because their terms are selected by professional lenders for unsophisticated borrowers who have no choice but to accept the lenders' terms or forego purchasing their home."). This characterization of the lack of choice in these instances is not so much factual as normative. There is always some literal sense in which each party has a choice to reject proposed terms. What is implied when this Essay argues that choices were not freely chosen is that the party in question should not be held fully or solely responsible for their consequences. This point is analogous to that made by John Rawls with respect to market outcomes for individuals more generally. Rawls observed that whatever one's talents, one's remunerative value turns on the state of the world in which one finds oneself.
137. John Rawls, A Theory of Justice 72 (1971)
138. "The existing distribution of income and wealth ...is the omnicumulative effect of prior distributions of natural assets ...and their use favored or disfavored over time by social circumstances and such chance contingencies as accident and good fortune." (emphasis added)). It is mere luck (though not accident) that one finds oneself in an economy that rewards those with a talent for banking acumen more handsomely than one with a knack for resolving the mysteries of plumbing. Similarly, it is morally arbitrary that one's contractual options are what they are. If misfortune befalls someone who choses not to purchase protection in the contract under which that misfortune arose, it was partly that person's choice, but partly the luck-saturated market within which that person exercised the choice that caused the negative outcome. To the extent contractual behavior reflects morally arbitrary features of our environment, transactional conduct- like the market outcomes it generates over time-cannot be taken as self-justifying on grounds of free choice.
139. David Enoch and Andrei Marmor argue that the idea of luck is "not relative to some initial assessment of probabilities." Enoch & Marmor, supra note 2, at 407. This might be taken to imply that the difficulty of assessing risks at the time of contract does not bear on the presence of luck. Technically, this is true. However, where the assumption of risk is taken to wash away the moral significance of uncertainties that would otherwise clearly qualify as matters of luck, the difficulty in assessing risk is relevant to whether assumption of risk in fact has that normative effect. See also supra note 50 and accompanying text (describing developing consensus that contract is not fully voluntary).
140. This is not a metaphysical claim-whether the unpredictability is ultimately traceable to the bare exercise of free will or just imperfect information about relevant circumstantial facts is not important here.
141. This point is analogous to the objections raised against John Rawls's theory of justice. A number of critics contend that the argument justifying inequalities as necessary to incentivize the talented to productively employ their talents fails because it puts the talented themselves in the morally indefensible position of taking their own talents hostage.
142. Joseph H. Carens, Equality, Moral Incentives, and the Market 2, 200-208 (1981) (discussing possibility and scope of social duty to contribute talents for collective gain).
143. Joseph H. Carens, Rights and Duties in an Egalitarian Society, 14 Pol. Theory 31, 35-36 (1986) (revising maximalist version of social duty to require only that individuals make good use of their talents).
144. G.A. Cohen, Incentives, Inequality, and Community, in The Tanner Lectures on Human Values 263, 268-269 (G.B. Petersen ed., 1992) (noting talented people "would not need special incentives if they were themselves unambivalently committed to the [difference] principle").
145. G.A. Cohen, The Pareto Argument for Inequality, 12 Soc. Phil. & Pol. 160, 172-173 (1995) (rejecting as inconsistent Rawls' argument that notwithstanding prima facie commitment to equal outcomes we should prefer unequal state where it is possible to improve situation of talented individuals without injuring others).
146. G.A. Cohen, Where the Action Is: On the Site of Distributive Justice, 26 Phil. & Pub. Aff. 3, 8-9 (1997) [hereinafter Cohen, Where the Action Is]
147. "[T]he difference principle can justify inequality only in a society where not everyone accepts that very principle."). While a third party, like the state, may have to take the actions of talented persons (in the context of justifying inequality) or potential breachers (in the context of contract law) as given, the talented and the would-be breachers cannot themselves cite a lack of material incentive as justification for otherwise immoral conduct.
148. Andrew Williams, Incentives, Inequality, and Publicity, 27 Phil. & Pub. Aff. 225, 226-227 (1998) (arguing against Cohen's critique of Rawls's defense of inequalitygenerating incentives).
149. Coleman & RipsteinS, Mischief and Misfortune, supra note 53, at 123 ("[O]ption luck seems to be everywhere and so provides no way of deciding to whom particular misfortunes belong.").
150. Aditi Bagchi, Intention, Torture, and the Concept of State Crime, 114 Penn St. L. Rev. 1, 22-26 (discussing conditions for rational belief in duty of obedience to legitimate state authority).
151. That article argued that the legitimacy of the state depends on it being possible for individual citizens to view the state as acting on their behalf, such that they have reasons (other than fear) to defer to political authority. Individuals cannot view situathe state in this way if it conducts itself on the apparent presumption that those individuals lack the capacity to deliberate and exercise choice. Id.
152. Joseph Raz, Promises in Morality and Law, 95 Harv. L. Rev. 916, 933-938 (1982) (suggesting contract law supports moral practice of promise).
153. Amoco Oil Co. v. Ashcraft, 791 F.2d 519, 522 (7th Cir. 1986) (Posner, J.) (arguing poor man may be "worse off by a rule of nonenforcement of hard bargains").
154. Cohen, Where the Action Is, supra note 73, at 6-10
155. Arguing that Rawls's defense of distributive inequities as necessary to motivate talented individuals to employ their talents productively is not available to those very individuals when they demand high compensation for something they could choose to do without).
156. The prospect of interpersonal (or intersubjective) justification grounds many contemporary theories of morality.
157. T.M. Scanlon, What We Owe to Each Other 153 (1998) (characterizing right actions as ones that we can justify to others on grounds they could not reasonably reject).
158. Korsgaard, Reflection, supra note 15, at 136 (describing right actions as reflecting reasons we can share).
159. Heidi M. Hurd, The Moral Magic of Consent, 2 Legal Theory 121, 123 (1996) ("[C]onsent can generate a permission that allows another to do a wrong act. When consent operates in this ...manner, it does not morally transform a wrong act into a right act ....").
160. For an account of when a choice of terms might amount to a culpable wrong, see infra Part III.A.
161. Philip Pettit & Robert Goodin, The Possibility of Special Duties, 16 Canadian J. Phil. 651, 653 (1986) ("[A]n agent has special duties towards those to whom he has implicitly or explicitly made certain commitments. These are obligations to fulfill those commitments, even though the general welfare might be improved far more by ignoring them.").
162. Douglas W. Portmore, McNaughton and Rawling on the Agent-Relative/Agent- Neutral Distinction, 13 Utilitas 350, 350 (2001) (using example of promise as creating agent-relative reasons for promisor). Agent-relative reasons may permit agents to do something that will not lead to the best results over all, or they may require it.
163. Thomas Nagel, The View from Nowhere 175 (1986) ("An individual is permitted to favor himself with respect to an interest to the degree to which the agent-relative reason generated by that interest exceeds the corresponding agent-neutral reason.").
164. Shelly Kagan, The Structure of Normative Ethics, 6 Phil. Persp. 223, 231-232 (1992) (discussing agent-relative permission as factor relevant to determining moral status of act).
165. Philip Pettit, Universalizability Without Utilitarianism, 96 Mind 74, 75 (1987) (defining agent-relative reasons).
166. Steve Lohr, An 'Unvarnished' Peek into Microsoft's History, N.Y. Times, Apr. 18, 2011, at B3 (describing Paul Allen's view of central role he played in early years of Microsoft and his relationship with Bill Gates).
167. Christopher J. Robinette & Paul G. Sherland, Contributory or Comparative: Which Is the Optimal Negligence Rule?, 24 N. Ill. U. L. Rev. 41, 44-45 (2003) (describing how doctrine barring recovery in cases of contributory negligence has been repealed in almost all states).
168. Comparative negligence usually requires each party to pay his or her proportion of the damages. Scott v. Rizzo, 634 P.2d 1234, 1242 (N.M. 1981) ("Pure comparative negligence ...holds all parties fully responsible for their own respective acts to the degree that those acts have caused harm.").
169. Pettit & Goodin, supra note 82, at 666 (presenting criteria for allocation of responsibility which permits assignment of responsibility to agent where multiple agents may exercise simultaneous control over outcomes).
170. Seana Valentine Shiffrin, The Divergence of Contract and Promise, 120 Harv. L. Rev. 708, 724 (2007) (noting duty to mitigate in legal institution of contract is point of divergence from moral practice of promise).
171. Even in cases of comparative negligence, the legal liability of the parties is reduced to reflect the liability of the others. See Alvis v. Ribar, 421 N.E.2d 886, 897 (Ill. 1981) ("In a suit under a 'pure' form of comparative negligence in which the defendant counterclaims for his own damages, each party must bear the burden of the percentage of damages of all parties in direct proportion to his fault.").
172. For example, in situations where we assume that a risk warrants some preventive measure, the conclusion that one person could not have been expected to prevent the accident may suggest that another individual ought to have taken steps to prevent the accident.
173. Perry, Responsibility for Outcomes, supra note 31, at 73.
174. Id.; see supra note 31 (discussing key articles laying out concept of outcome responsibility).
175. supra note 49 and accompanying text (discussing dearth of literature on moral luck in contract law).
176. Earl of Chesterfield v. Janssen, (1751) 28 Eng. Rep. 82 (Ch.) 100, 2 Ves. Sen. 125, 155 (defining unconscionable agreement as one that "no man in his senses and not under delusion could make on the one hand, and no honest and fair man would accept on the other; which are unequitable and unconscientious bargains; and of such even the common law has taken notice"); see also Zoneff v Elcom Credit Union Ltd. (1990) 94 ALR 445, 463 (Austl.) ("[C]onduct will be unconscionable where the conduct can be seen in accordance with the ordinary concepts of mankind to be so against conscience that a court should intervene"); Harry v. Kreutziger (1978), 95 D.L.R. 3d 231, 241 (Can. B.C. C.A.) (finding conduct unconscionable where "sufficiently divergent from community standards of commercial morality").
177. This Essay is not making a general claim that moral conditions are never binary, only that unconscionable terms are not equally unconscionable and terms which do not rise to the level of unconscionability are not equally meritorious from a moral standpoint. The concept of a "hard case" illustrates the point.
178. Austl. Competition & Consumer Comm'n v Samton Holdings Pty Ltd (2002) 117 FCR 301, 320 (Austl.) (finding behavior must be "toward the extreme end of the scale" to be unconscionable).
179. For example, we may find an arbitration clause in a computer purchase agreement that does not rise to the level of an adhesive contract substantively unconscionable and unenforceable. E.g., Fiser v. Dell Computer Corp., 188 P.3d 1215, 1217-22 (N.M. 2008) (finding class action prohibition in contract unconscionable). But, we may find an arbitration clause in an employment contract that waives judicial remedy for violations of civil rights laws even more unconscionable when it is both substantively oppressive and adhesive. E.g., Armendariz v. Found. Health Psychcare Servs., Inc., 6 P.3d 669, 689-99 (Cal. 2000) ("'[E]ssentially a sliding scale is invoked' .... [T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required." (quoting 15 Walter H.E. Jaeger, Wililston on Contracts § 1763A, at 226-27 (3d ed. 1972))).
180. Aditi Bagchi, Distributive Injustice and Private Law, 60 Hastings L.J. 105, 135 (2008) [hereinafter Bagchi, Distributive Injustice] (arguing for existence of background imperfect duties between private citizens).
181. Jules Coleman, The Mixed Conception of Corrective Justice, 77 Iowa L. Rev. 427, 432 (1992) [hereinafter Coleman, Mixed Conception] (noting distributive justice "requires a certain state of the world be brought about, but no one in particular has a special reason in justice for bringing it about," i.e., distributive justice does not give rise to any perfect duties).
182. Bagchi, Distributive Injustice, supra note 96, at 131-135 ("[W]here the state has not achieved distributive justice, individuals have imperfect social duties and rights.").
183. Id.
184. Id.
185. Id. at 117.
186. For the argument that taking matters of distributive justice into account in private law arbitrarily burdens wealthy defendants who happen to injure poor plaintiffs,
187. Coleman & Ripstein, Mischief and Misfortune, supra note 53, at 93 ("The duties imposed by distributive justice are ...agent-general-everyone has a duty to create and sustain just distributions.").
188. Melvin A. Eisenberg, The Theory of Contracts, in The Theory of Contract Law: New Essays 206, 257-258 (Peter Benson ed., 2001) (considering rules for contracts between parties of disparate wealth).
189. Stephen R. Perry, On the Relationship Between Corrective and Distributive Justice, in Oxford Essays in Jurisprudence, supra note 50, at 237+238-239 (comparing corrective and distributive justice).
190. Eric A. Posner, Contract Law in the Welfare State: A Defense of the Unconscionability Doctrine, Usury Laws, and Related Limitations on the Freedom to Contract, 24 J. Legal Stud. 283, 284 (1995) (offering defense of unconscionability doctrine that does not turn on its distributive effects, in light of various objections raised against distributive defenses of unconscionability, including charge of arbitrariness).
191. For this reason, the principle prohibiting exploitation or exacerbation of distributive injustice is compliant with Liam Murphy's "Compliance Condition," should the suggested principle fall within the domain of the latter condition.
192. Liam B. Murphy, The Demands of Beneficence, 22 Phil. & Pub. Aff. 267, 278 (1993) ("[A] principle of beneficence should not increase its demands on agents as expected compliance with the principle by other agents decreases.").
193. Of course, not everyone feels so constrained, nor would everyone regret a transaction that turned out very badly for their partner. But they should. See Gardner, Wrongs and Faults, supra note 44, at 125 ("[N]ot everyone actually experiences the relevant regrets. My point was that experiencing them is rationally appropriate. Our lives should be blemished subjectively because and to the extent that they are blemished objectively.").
194. Martin A. Nowak, Karen M. Page & Karl Sigmund, Fairness Versus Reason in the Ultimatum Game, 289 Science 1773, 1773-1774 (2000) (describing experiments in which most individuals prefer to walk away empty handed rather than permit highly asymmetrical division of fixed amount between themselves and another person).
195. James Gordley, Equality in Exchange, 69 Calif. L. Rev. 1587, 1625 (1981) ("If there are reasons why a party should be free to exchange but should not be free to redistribute wealth in his own favor, then the law should insist that he exchange without redistributing. To put it another way, exchange should require equality.").
196. Id. at 1612
197. Noting while "a society wishing to avoid redistributions of wealth would prefer that contracts be equal in outcome and not merely actuarially," it might tolerate "actuarial equality" and enforce contracts that discount for market risk so long as exchange occurs at market price).
198. In fact, this could be one way of understanding the doctrine of mutual mistake: Courts are reluctant to allow a bargain to stand in which the result is overly lopsided, even where the bargain was fair based on facts known to the parties at the time of contract. Consider the classic case of Sherwood v. Walker, 33 N.W. 919, 923-24 (Mich. 1887) (determining sale of cow was voided after seller learned cow was not infertile, as previously believed).
199. Aditi Bagchi, The Myth of Equality in the Employment Relation, 2009 Mich. St. L. Rev. 579, 585 ("[T]he bare fact that one contracting party is more powerful than the other, and, therefore, able to extract forms favorable to it, tells us little about the fairness of the transaction, let alone the need for legal treatment favorable to the weaker party.").
200. Nicholas Theocarakis, Antipeponthos and Reciprocity: The Concept of Equivalent Exchange from Aristotle to Turgot, 55 Int'l Rev. Econ. 29, 32-34 (2008) (describing early intellectual history of concept).
201. Matt Adler & Chris Sanchirico, Inequality and Uncertainty: Theory and Legal Applications, 155 U. Pa. L. Rev. 279, 279-280 (2006) (discussing "ex ante/ex post problem" in context of macro questions of distribution).
202. A weaker version of the requirement of equal exchange might claim just that receipt of something of value generates an obligation to confer something of value, quite apart from whether or what terms were agreed upon. The obligation to confer something of value might not be an obligation to confer something of equal value. This principle would appear to find support in doctrines like unjust enrichment. Even a weaker version of the principle of fair exchange would explain moral risk in contract formation, since there is a risk that the contract will be a losing transaction for the other party.
203. Honoré, supra note 31, at 537-545 (introducing concept of outcome responsibility in absence of blameworthy conduct).
204. Perry, Responsibility for Outcomes, supra note 31 (developing and defending concept of outcome responsibility to encompass outcomes that are foreseeable and one could have taken steps to avoid).
205. Coleman, Mixed Conception, supra note 96, at 442 ("The duty to correct the losses derives not from the agent's having done wrong as such, but from the losses being in an appropriate sense the agent's responsibility. They are the consequences of agency: the agent's causal power.").
206. supra Part II.
207. supra Part II.D.
208. Athanassoulis, supra note 13, at 275 ("Responsibility, blameworthiness and a desire to make reparations do not always go hand in hand.").
209. Curtis Bridgeman, Reconciling Strict Liability with Corrective Justice in Contract Law, 75 Fordham L. Rev. 3013, 3017 (2007) ("Under our strict liability regime, a breach alone suffices for liability regardless of whether the breaching party was justified- morally or otherwise-in breaching.").
210. For elaboration of this distinction, see Gardner, Wrongs and Faults, supra note 44, at 100 (discussing famous case of Vincent v. Lake Erie Transportation Co., 124 N.W. 221 (Minn. 1910), in which defendant justifiably used property to weather storm but was still liable for resulting damage to property); see also id. at 120-21 (explaining "[p]rivate law cares about wrongdoing" but fault principle governs criminal punishment).
211. Michael G. Pratt, Contract: Not Promise, 35 Fla. St. U. L. Rev. 801, 813 (2008) ("My plea that in doing some act, P, I manifestly did not intend to attract a moral obligation to do X, cannot justify or excuse my not doing X if doing P is otherwise sufficient to obligate me to do X.").
212. Ian R. Macneil, The Relational Theory of Contract (David Campbell ed., 2001) (covering Macneil's various works on the subject).
213. Ian R. Macneil, Contracts: Adjustment of Long-Term Economic Relations Under Classical, Neoclassical, and Relational Contract Law, 72 Nw. U. L. Rev. 854 (1978) (discussing how economic and contractual relations plan for, and respond to, change).
214. Stewart Macaulay, Non- Contractual Relations in Business: A Preliminary Study, 28 Am. Soc. Rev. 55 (1963) (explaining that transactional planning and legal sanctions occur when beneficial to parties involved).
215. Christine M. Korsgaard, Personal Identity and the Unity of Agency: A Kantian Response to Parfit, 18 Phil. & Pub. Aff. 101, 113-114 (1989) ("[W]e both presuppose and construct a continuity of identity and of agency.... [Y]ou need to identify with your future in order to be what you are even now. When the person is viewed as an agent, no clear content can be given to the idea of a merely present self.").
216. Thomas Nagel, The Possibility of Altruism 28 (1970) (arguing from interest of self in future self to interest of self in others).
217. Susan Wolf, Self-Interest and Interest in Selves, 96 Ethics 704, 708-709 (1986)
218. Defending person over time as appropriate locus of moral interest, as compared to slice of experience). The relevant legal literature tends to focus on what obligations we have directly to future persons (whose lives may or may not temporally overlap with our own) rather than on our duty to anticipate obligations that we will later have.
219. I. Glenn Cohen, Intentional Diminishment, the Non-Identity Problem, and Legal Liability, 60 Hastings L.J. 347, 348 (2008) (discussing potential tort liability for conceiving a disabled fetus).
220. Aaron-Andrew P. Bruhl, Note, Justice Unconceived: How Posterity Has Rights, 14 Yale J.L. & Human. 393, 397 (2002) ("Recognizing future people's rights is not a radical proposition requiring revolutionary changes to current moral categories and legal practices ....").
221. Carter J. Dillard, Rethinking the Procreative Right, 10 Yale Hum. Rts. & Dev. L.J. 1, 32-34 (2007) (discussing balance between basic right of couples and individuals to choose procreation freely and needs and rights of both living and future children).
222. Philip G. Peters, Jr., Harming Future Persons: Obligations to the Children of Reproductive Technology, 8 S. Cal. Interdisc. L.J. 375, 386 (1999) (noting "prima facie duty to minimize suffering" of future children).
223. Norvin Richards, Luck and Desert, 95 Mind 198, 206 (1986) (positing moral luck should affect moral verdicts).
224. Michael J. Zimmerman, Luck and Moral Responsibility, 97 Ethics 374, 374-375 (1987) (arguing against proposition of moral luck). Both are prepared to condemn equally those who would commit an immoral act but are not placed in circumstances in which it is a possible course of action.
225. Most examples of circumstantial luck revolve around the bad moral luck of being present in Nazi Germany. An exception, not specifically oriented toward the more general problem of moral luck, is.
226. Allen Buchanan, Political Liberalism and Social Epistemology, 32 Phil. & Pub. Aff. 95, 129 (2004) (discussing moral risk of growing up in racist society and arguing "for liberal institutions ...relying upon ...the commitment to ameliorating the moral and prudential risks to which we are all liable by virtue of our social epistemic dependency").
227. Todd Bernard Weber, Tragic Dilemmas and the Priority of the Moral, 4 J. Ethics 191, 192 (2000) (describing tragic dilemmas).
228. Tess Wilkinson-Ryan & Jonathan Baron, Moral Judgment and Moral Heuristics in Breach of Contract, 6 J. Empirical Legal Stud. 405, 423 (2009) (concluding "the connection between law and morality is not a philosophical abstraction; for most people, it is an entrenched component of their intuitions about legal decision making").
229. Seana Shiffrin, Could Breach of Contract Be Immoral?, 107 Mich. L. Rev. 1551, 1552 (2009) [hereinafter Shiffrin, Could Breach].
230. Daniel Markovits, Contract and Collaboration, 113 Yale L.J. 1417, 1446-1474 (2004).
231. Steven Shavell, Is Breach of Contract Immoral?, 56 Emory L.J. 439, 442-458 (2006) [hereinafter Shavell, Immoral] ("[W]hen efficient breach does occur, it coincides with the terms of completely detailed contractual promises and thus should not be seen as immoral .... [This] conclusion flows from the logic explaining the nature of the contract that the parties themselves would want ....").
232. supra note 7 and accompanying text (describing theory of efficient breach).
233. Shavell, Immoral, supra note 130, at 441 ("[W]e can deduce from the fact that the party in breach was willing to pay the expectation measure of damages that the breach was probably not immoral because the parties likely would not have stipulated performance had they addressed the contingency that arose.").
234. Aditi Bagchi, Unequal Promises, 72 U. Pitt. L. Rev. 467, 482 (2011) (discussing both legal and subjective understandings of contractual promises and describing possible deviations from "perform or pay" promise).
235. Shiffrin, Could Breach, supra note 128, at 1567 (criticizing Shavell's view on morality of breach).
236. For example, if one contracts to have a driveway cleared of snow on Monday for nanda100, it would constitute breach to arrive on Tuesday, even if one charges only nanda50 and even if the homeowner would have preferred delayed service for a lower price.
237. The previous example holds even if it turns out that the street is not plowed until Tuesday, such that clearing the driveway in accordance with the contract would have delivered no additional gain to the homeowner. Of course, the consequences to the homeowner of breach are relevant to the calculation of damages, but whether the homeowner would have agreed to different terms with information the parties acquire ex post does not speak to the preliminary question of breach, unless the original contract is actually modified by mutual consent.
238. For a more general philosophical argument that individual moral obligations are not reducible to an obligation to maximize an overall state of affairs,
239. Paul Hurley, Agent-Centered Restrictions: Clearing the Air of Paradox, 108 Ethics 120, 122 (1997).
240. In contrast to the more rigorous requirements of Pareto efficiency, Kaldor-Hicks efficiency is obtained so long as one party gains enough to offset the losses of the other party, without requiring transfers.
241. J.R. Hicks, The Foundations of Welfare Economics, 49 Econ. J. 696, 701+711 (1939) (discussing welfare movements that would be Paretosuperior if accompanied by compensation for losers, but noting likely disagreement about conditions under which compensation should be offered).
242. Nicholas Kaldor, Welfare Propositions of Economics and Interpersonal Comparisons of Utility, 49 Econ. J. 549, 550 (1939) (arguing economist need not defend proposed policy on grounds that "nobody in the community is going to suffer," but need only demonstrate it would be possible to compensate losers and still improve welfare of others).
243. supra note 82 and accompanying text (discussing agent-relative reasons and corresponding academic literature).
244. Consider cases that refuse to restrict damages under a Hadley rule (limiting damages to those were foreseeable to breaching party at time of contract) on the grounds that the business purpose of a transaction was self-evident, Victoria Laundry (Windsor), Ltd. v. Newman Indus., Ltd., [1949] 2 K.B. 528 (C.A.) at 540 (Eng.), or which excuse performance on the grounds that the obvious purpose of the contract has been frustrated, Chandler v. Webster, [1904] 1 K.B. 493 (C.A.) at 493 (Eng.); Krell v. Henry, [1903] 2 K.B. 740 (C.A.) at 740 (Eng.) (discussing frustration in context of contracts to rent space to view coronation procession of King Edward VII when king became ill and coronation was rescheduled); Griffith v. Brymer, (1903) 19 T.L.R. 434 (K.B.) at 434 (Eng.) (same).
245. L.L. Fuller & William R. Perdue, Jr., The Reliance Interest in Contract Damages: 1, 46 Yale L.J. 52, 55 (1936) ("[T]hough reliance ordinarily results in 'losses' of an affirmative nature ...it is also true that opportunities for gain may be foregone in reliance on a promise. Hence the reliance interest must be interpreted as at least potentially covering 'gains prevented' as well as 'losses caused.'").
246. Daniel J. Gifford & Robert T. Kudrle, The Law and Economics of Price Discrimination in Modern Economies: Time for Reconciliation?, 43 U.C. Davis L. Rev. 1235, 1256 (2010) (noting in "perfectly operating competitive market ...all purchasers would pay the same price for any given product").
247. James F. Nieberding & Robin A. Cantor, Price Dispersion and Class Certification in Antitrust Cases: An Economic Analysis, 14 J. Legal Econ. 61, 73-74 (2007) ("The law-of-one price ...states that in competitive markets comprised of many buyers and sellers, identical goods and services ought to sell in a given market at identical prices ...under conditions of product homogeneity, zero transaction costs, zero search costs, no informational asymmetries, and no market imperfections.").
248. Goldberg & Zipursky, Tort Law, supra note 3, at 1135 (noting tort law "empowers victims to respond to wrongdoers whose wrongs have injured").
249. Williams, Moral Luck, supra note 1, at 27. Nagel and others have described Williams's conception of agent-regret as ultimately an amoral notion.
250. Nagel, Mortal Questions supra note 1, at 69 n.3 ("My disagreement with Williams is that his account fails to explain why such retrospective attitudes can be called moral.").
251. It may be an essential feature of morality that it be a source of universal reason and judgments. One cannot revise a moral concept to one as relativistic as agent-regret and have it retain its moral character. One cannot endorse the moral quality of an action but still condemn it as immoral from the particular point of view of a particular actor.
252. For further discussion of how the reasons relevant to a legal rule differ from the reasons relevant to moral judgment of individual action, see infra Part IV.
253. Aditi Bagchi, Separating Contract and Promise, 38 Fla. St. U. L. Rev. (forthcoming 2011) (manuscript at 1) (on file with the Columbia Law Review) (distinguishing voluntary character of private promises from contractual promises).
254. Jules L. Coleman, Moral Theories of Torts: Their Scope and Limits: Part II, 2 Law & Phil. 5, 7-8 (1983) ("Sometimes the justifiable, i.e., nonwrongful, taking of what another has a well-established right to justifies a claim to rectification.").
255. Joel Feinberg, Voluntary Euthanasia and the Inalienable Right to Life, 7 Phil. & Pub. Aff. 93, 102 (1978) (stressing "almost everyone would agree that you owe compensation to the homeowner" for justified trespass).
256. This reason is not dispositive and may be overridden by other considerations, including self-interest. The point here is that there is shared responsibility for outcomes of a transaction-and that this justifies distinguishing between requests for modification prompted by unexpected opportunity and requests prompted by unexpected costs. Notably, this view is consistent with the asymmetry we see in the legal rule itself, which treats increased costs as a change in circumstance that may motivate good faith modification but treats demands for modification based on increased opportunity costs as bad faith, if not extortion. An economic perspective fails to account for this asymmetry, instead focusing on whether a threat to breach is credible.
257. Oren Bar-Gill & Omri Ben-Shahar, Threatening an "Irrational" Breach of Contract, 11 Sup. Ct. Econ. Rev. 143, 145 (2004) ("Economic analysis provides a standard tool to evaluate the issue of threat credibility .... It is only when the pecuniary loss from performance exceeds the pecuniary cost of breach that the threat is deemed credible.").
258. Andrew Latus, Moral and Epistemic Luck, 25 J. Phil. Res. 149, 166 (2000) ("Our attempts to solve the problem of moral luck have been misguided. Attempts to show that cases of moral luck do not occur are futile. The existence of moral luck is both inescapable and worrying.").
259. For a summary of scholarship on either side of this debate, see supra notes 46-47.
260. Alexander, Corrective Justice, supra note 3, at 23 (rejecting tort system as indefensibly arbitrary).
261. Christopher H. Schroeder, Causation, Compensation and Moral Responsibility, in Philosophical Foundations of Tort Law, supra note 3, at 347+353 (same).
262. Waldron, Moments of Carelessness, supra note 3, at 388 (same).
263. John Goldberg and Ben Zipursky Expressly argue that torts should be viewed as wrongs, but deny that corrective justice theorists similarly account for torts as wrongs.
264. John C.P. Goldberg & Benjamin C. Zipursky, Torts as Wrongs, 88 Tex. L. Rev. 917, 918+925 (2010) [hereinafter Goldberg & Zipursky, Wrongs]. However, numerous scholars associated with corrective justice theory understand themselves to be concerned with explaining torts as wrongs.
265. Ernest J. Weinrib, The Idea of Private Law 11, 147 (1995) ("[A]n internal account ...interprets ...[a] right of action simply as what it purports to be: the assertion of a right by the plaintiff in response to a wrong suffered at the hands of the defendant.").
266. Arthur Ripstein, As if It Had Never Happened, 48 Wm. & Mary L. Rev. 1957, 1962 (2007) (distinguishing between harms and wrongs).
267. John Gardner, What Is Tort Law For? Part 1: The Place of Corrective Justice 52 (University of Oxford Legal Research Paper No. 1/2010), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1538342 (on file with the Columbia Law Review) ("Tort law is concerned with the wrongs one committed, one's wrongful actions.").
268. ColemanS, Risks & Wrongs, supra note 35, at 325 (distinguishing retributive justice from corrective justice and associating private law with latter).
269. Goldberg S & Zipursky, Wrongs, supra note 152, at 951 ("Liability is imposed even though the defendant has caused harm through conduct that the courts themselves are at pains to say is entirely permissible.").
270. For literature on outcome responsibility and tort, see supra note 31.
271. Gardner, Obligations and Outcomes, supra note 31, at 121 (distinguishing between failing to take care not to injure and causing injury).
272. Goldberg S & Zipursky, Tort Law, supra note 3, at 1135 ("The reckless driver, when his recklessness ripens into the running down of a victim, is literally re-sponse-able by (and therefore to) the victim ...in a way that the reckless driver who does not injure anyone is not.").
273. A duty to rescue may be imposed either by tort or criminal law. For arguments challenging the prevailing rule in the United States that bystanders have no duty to aid,
274. Theodore M. Benditt, Liability for Failing to Rescue, 1 Law & Phil. 391, 396 (1982) ("[T]here can be a duty to rescue even though one's failure to rescue does not cause the harm that befalls the victim.").
275. Alison McIntyre, Guilty Bystanders?: On the Legitimacy of Duty to Rescue Statutes, 23 Phil. & Pub. Aff. 157, 160 (1994) ("The duty to give emergency assistance is grounded ...in the state's duty to protect the general welfare and in the reasonableness of the burden imposed on citizens who are 'deputized' to report emergencies or to provide easily rendered assistance.").
276. Arthur Ripstein, Three Duties to Rescue: Moral, Civil, and Criminal, 19 Law & Phil. 751, 751 (2000) (arguing for "a criminal penalty for certain failures to rescue").
277. Ernest J. Weinrib, The Case for a Duty to Rescue, 90 Yale L.J. 247, 251 (1980) ("[A] duty of easy rescue would strengthen an already-broad pattern of common-law principles and ...such a duty can plausibly be justified within both of the ethical traditions that inform the common-law system.").
278. John Klein & Carla Bachechi, Precontractual Liability and the Duty of Good Faith Negotiation in International Transactions, 17 Hous. J. Int'l L. 1, 16 (1994) ("A primary distinction between the civil and common law approaches to the duty of good faith is that the latter generally imposes no good faith obligation prior to the execution of the contract.").
279. Ralph B. Lake, Letters of Intent: A Comparative Examination Under English, U.S., French, and West German Law, 18 Geo. Wash. J. Int'l L. & Econ. 331, 346-348 (1984) (noting United States and England traditionally "did not recognize a contract to make a contract or an agreement to bargain").
280. However, Klein and Bachechi argue that other doctrines do impose precontractual liability for precontractual conduct.
281. Klein & Bachechi, supra, at 16.
282. Friedrich Kessler & Edith Fine, Culpa in Contrahendo, Bargaining in Good Faith, and Freedom of Contract: A Comparative Study, 77 Harv. L.Rev. 401, 408 (1964) (arguing range of doctrines recreate precontractual duty of good faith in common law).
283. Torben M. Andersen, International Integration, Risk and the Welfare State, 104 Scandinavian J. Econ. 343, 345 (2002)
284. "In a broad interpretation of the welfare state we can ...include all public sector activities which affect the risk faced by society and its individuals as instruments for social risk diversification or insurance."). The United States is the prototypical example of a state with low levels of social insurance.
285. Gøsta Esping-Andersen, Social Foundations of Postindustrial Economies 75 (1999) (discussing how United States uses "narrow conception of what risks should be considered 'social'").
286. Gøsta Esping-Andersen, The Three Worlds of Welfare Capitalism 21, 53-54 (1990) (discussing continuously low "de-commodification" of individuals in United States, defined by lack of inviolable social rights "granted on basis of citizenship rather than performance").
287. Agnar Sandmo, Introduction: The Welfare Economics of the Welfare State, 97 Scandinavian J. Econ. 469 (1995) (discussing costs and benefits of welfare state, including social insurance and redistribution).
288. Of course, there is a political economic story behind each of these programs, but I take these narratives to be the more detailed content of any claim about legal culture.
289. My argument that, by subjecting their promises to the regime of contract law, parties moderate the severity of their later choices (from the standpoint of their promisees) is similar in flavor to Melvin Eisenberg's argument that there is an implicit "duty to rescue" in contract law, as expressed through doctrines that require cooperative behavior between parties.
290. Melvin A. Eisenberg, The Duty to Rescue in Contract Law, 71 Fordham L. Rev. 647, 675 (2002).
291. He points to the doctrines of mitigation and offer and acceptance, among others, as evidence that more is required of parties in a contractual setting than in tort or criminal law. Id. at 654. This Essay does not rely on these doctrines to illustrate its point; this Essay relies instead on doctrines that create rights in promises through contract, which apply only after contract formation.
292. Restatement (Second) of Contracts § 89 cmt. b (1981) (describing provision permitting modification of executory contract in event of circumstances not anticipated by contract).
293. id. § 261 (permitting discharge from contract in event terms become impracticable); id. §§ 263 (permitting excuse from contract upon nonoccurrence of specific thing necessary for performance); id. §§ 265-268 (allowing discharge by supervening frustration, existing impracticability or frustration, and effect on other party's duties of prospective failure justified by impracticability or frustration).
294. id. §§ 265-267 (defining the defenses).
295. Jeremy Waldron, Kant's Legal Positivism, 109 Harv. L. Rev. 1535, 1537-1540 (1996) [hereinafter Waldron, Positivism] (discussing how positive law helps solve normative challenge of living with others with their own values and viewpoints).
296. Dori Kimel, From Promise to Contract: Towards a Liberal Theory of Contract 79 (2003) (stating contract facilitates personal detachment).
297. Immanuel Kant, The Metaphysics of Morals 124 (Mary Gregor ed. & trans., 1996) (1785) [hereinafter Kant, Metaphysics].
298. Waldron, Positivism, supra note 164, at 1558 (discussing need for legislative will of state to ensure people uphold their obligations).
299. Kant, Metaphysics, supra note 166, at 89-90 ("[H]owever well disposed and law-abiding men might be, it still lies ...that before a public lawful condition is established individual human beings ...can never be secure against violence from one another, since each has its own right to do what seems right and good to it ....").