The Concept Of Law

This chapter analyses the ideal of the rule of law in the spirit of Hayek's quoted statement of it and to show why some of the conclusions which he drew from it cannot be thus supported. The rule of law is a political ideal which a legal system may lack or may possess to a greater or lesser degree. The ideal of the rule of law in this sense is often expressed by the phrase "government by law and not by men". Many of the principles which can be derived from the basic idea of the rule of law depend for their validity or importance on the particular circumstances of different societies. Conformity to the rule of law is a virtue but only one of the many virtues a legal system should possess. This makes it all the more important to be clear on the values which the rule of law does serve.

The Rule of Law and Its Virtue

The Life of the Law

Two conceptions of the performance interest in contract damages

This paper addresses the role of formal contract law and contract enforcement institutions in economic development. Its inquiry is consequentialist: whether the existence of a formal contract law and enforcement regime significantly contributes to economic growth in developing countries. We also address the related issue of the extent to which it is possible for a state to adopt an effective formal contract law and enforcement regime, without also adopting a particular type of political regime. Our inquiry further addresses the extent to which political theorizing about the role and structure of private law (in our case, contract law) applies universally, or whether such theorizing is highly contingent on context-specific political, cultural, and social values and practices. As the paper elaborates, two different hypotheses emerge from the literature. One takes the view that strong formal contract law and enforcement mechanisms are indispensable to economic development, while the other contends that much economic development is realizable through informal contracting mechanisms. To test the validity of these two hypotheses, we provide a critical review of existing literature, including literature on two cases of great contemporary development significance: the so-called 'China Enigma' and the 'East Asian Miracle.' In both of these cases, high rates of economic growth have been achieved, often in the absence of strong formal contract law and enforcement regimes. We argue that at low levels of economic development informal contract enforcement mechanisms may be reasonably good substitutes for formal contract enforcement mechanisms, but become increasingly imperfect substitutes at higher levels of economic development involving large, long-lived, highly asset-specific investments or increasingly complex traded goods and services, especially outside repeated exchange relationships. In the case of the 'China Enigma,' for example, even if the lack of effective formal contract enforcement has not been a major impediment to economic development to date (although some commentators contend otherwise), weak rule of law surely carries other significant costs in a more complete conception of development which embodies other non-instrumental values. We conclude that on one of the central questions in contemporary development debates - do good institutions cause growth, or does growth cause good institutions? - the answer, in the context of contract enforcement mechanisms, is a nuanced one.

Formal Contract Law and Enforcement in Economic Development

La Forma del Derecho

In a recent article, Brian Bix has raised some important concerns about general and universal theories of contract law. Particularly, he has claimed that differences within doctrinal areas like contract law, and across different jurisdictions, undermine the plausibility of general and universal theories, which might end up being descriptively inaccurate, and even legitimizing unjust practices. This article is a partial response to Professor Bix’s insights, and argues why, despite his legitimate concerns, universal theories of contract law are plausible—and preferable over local theories.

Against Parochialism in Contract Theory: A Response to Brian Bix

Formalism has a bad name. It is often seen as a naive and unsophisticated approach to the adjudication of legal disputes. This negative view of formalism is widespread in American legal culture, and has been particularly influential in contract law. This Article goes against this prevailing view, and argues that a formalist theory of adjudication is the best approach to resolve contractual disputes.

The argument of the Article starts from the assumption that contract law is not morally justified because of its enforcement of promissory rights or some other dimension of interpersonal morality. Instead, like contemporary law and economics, this Article assumes as its starting point that the law of contracts is an instrumentally justified legal institution, i.e. an institution justified because of its valuable social consequences. Starting from this assumption, the Article asks what approach to the adjudication of contractual disputes facilitates the achievement of contract law’s instrumental goals. The answer, against what is commonly assumed, is that a formalist approach—the specific contours of which are set out by the Article—would be instrumentally best. The reason for this is that formalism, with its commitment to an ex post, rule-bound, doctrinalist, and modest approach to legal adjudication, has important instrumental benefits. Formalism contributes to simple, generalizable, and cost-effective decision-making; it is consistent with the institutional competence of courts; reduces the risks and overall costs of legal mistakes; and increases predictability, protecting contractual parties’ legitimate expectations. Moreover, formalism is an adequate means to deal with value pluralism, and is consistent with the main values served by the law of contracts, such as autonomy and efficiency.

Thus, encouraging judges to make socially optimal decisions in contractual disputes might not be the optimal strategy. The overall socially optimal outcome might, instead, be achieved through a decision procedure that deliberately recommends judges not to pursue the aim of reaching socially optimal outcomes in each and every case, but rather to decide by applying pre-existing doctrine and expanding it incrementally. If that is the case, then, despite their disagreement about contract law’s foundations, instrumentalist and formalist theorists might agree about the narrower question of how judges should decide contractual disputes.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID3543859_code2565206.pdf?abstractid=3428765&mirid=1

A Formalist Theory of Contract Law Adjudication

The Supreme Court has repeatedly characterized arbitration as a “creature of contract,” and as the upshot of parties’ voluntary choices that the Court must honor. Based on this metaphor, the Court has expanded the scope of arbitration even in employment and consumer contracts, giving broad authority to arbitrators and limiting parties’ access to procedural mechanisms like class actions and judicial review. The metaphor does not fit the Court’s jurisprudence and its aggressive pro-arbitration policy, and rests on a mistaken view about the structure of contract law, ignoring that contract—and, therefore, arbitration—is a creature of law. The contractual view of arbitration also generates normative problems. It leads to a form of “everyday libertarianism,” which shields arbitration law from critical scrutiny, generates significant problems in mandatory arbitration in employment and consumer transactions, and even leads the Court’s critics to mistakenly assume that lack of consent is the cause of the problems in these contexts. As the Article argues, the mistaken notion of arbitration as a creature of contract is not limited to the domestic level—it also extends to international arbitration. 

We thus need to replace the contractual metaphor. The Article offers a better account of the structure of arbitration, based on the notion that arbitration law, like contract law, is a compound rule generating both powers and duties. Based on this more accurate picture of arbitration law, the Article offers two criteria for the evaluating arbitration as a legal enforcement institution: its effectiveness as a device for producing law and its aptness as a rights enforcement mechanism. Ultimately, because arbitration requires the law’s assistance, law has the authority and the responsibility to ensure that arbitration works adequately. As every exercise of legal authority, arbitration stands in need of justification and should be subject to normative evaluation.

The Grounds of Arbitral Authority

Peter Benson’s Justice in Transactions offers a compelling internal, non-instrumental Hegelian conception of the law of contracts. It also connects this non-instrumental conception with broader iss...

Felipe Jiménez

Papers

La Forma del Derecho

Against Parochialism in Contract Theory: A Response to Brian Bix

A Formalist Theory of Contract Law Adjudication

The Grounds of Arbitral Authority

Contracts, markets, and justice