Defects in Contracting

Catalog description

There is a commonplace rosy picture of the virtues of exchange. Two parties get together and each agrees to exchange some assets (a tangible good, work, forbearance from doing something they are otherwise entitled to do etc.) for some assets their exchange partner controls. Each of the parties is presumptively made "better off" by the exchange. (And, in "autonomy" terms, each has acted to realize some aspect of their considered life plans.) Enforcing contracts (promises to perform in the future) is a bit more complex because by the time performance is due, it may no longer be the case that each party believes that mutual performance is in their interests (the assets they will receive are now worth less to them than those they are bound to give up; a third party values the assets they are bound to give up more highly than what the contractual partner has promised to surrender.) But enforcing contracts permits a party to reduce the risks from exposure to spot markets and reduces vulnerability to opportunistic exploitation of those who make efficient preliminary investments in performance. We recognize though that the rosy picture is not always the true picture, though we may disagree about how often exchanges prove non-beneficial and whether the legal system can respond appropriately to non-beneficial exchanges and contracts. What we will explore in this class is how political theorists, philosophers, and social scientists (above all economists and psychologists) have dealt with defective exchanges (and contracts). We will start by examining the question of what we mean when we say that an exchange makes a party "better off" and whether that judgment is "subjective" (grounded in the judgments or feelings of the parties themselves) or "objective" (grounded in the judgment of a third-party observer). We will also discuss the significant distinctions between the claims…