George M. Cohen (University of Virginia School of Law) has posted The Fault that Lies within Our Contract Lawn (Michigan Law Review, Vol. 107, 2009) on SSRN. Here is the abstract:
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cholars and courts typically describe and defend American contract law as a system of strict liability, or liability without fault. Strict liability generally means that the reason for nonperformance does not matter in determining whether a contracting party breached. Strict liability also permeates the doctrines of contract damages, under which the reason for the breach does not matter in determining the measure of damages, and the doctrines of contract formation, under which the reason for failing to contract does not matter. In my Article, I take issue with the strict liability paradigm, as I have in my prior work on contract law. In my view, the theoretical justifications for strict liability as a general paradigm for contract law oversimplify contractual intent, the relationship between intent and fault, and the nature of contractual fault. Moreover, the strict liability label is descriptively misleading, once one dips even slightly below the surface of contract doctrine. Fault shows up throughout contract law. Efforts to make contract law conform more to the strict liability paradigm and exorcize fault are wrongheaded. In any case, such efforts are doomed to fail. Fault may not be the dominant feature of contract law, but it plays an inherent, invaluable, and ineluctable supporting part. Like other contract rules, strict liability is merely a fault-based presumption. Determining the limits of that presumption means considering why parties make contracts and why they do not perform them, in other words, fault. Courts and scholars should acknowledge the role of fault and think about how to use fault more effectively within the framework of contract doctrine.
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[T]here is an additional problem with rigorous and systematic strict liability regime: it cannot work. Law is an inherently normative enterprise and judges are part of that enterprise. They are not automatons; they exercise judgment, which includes making normative assessments like fault. Coase taught us that contracting parties can often contract around unwanted legal rules. But we sometimes forget the legal realist lesson (perhaps we should call it the Court Theorem) that courts can often find ways to exercise fault judgments if they are inclined to do so, through interpretation of contract terms, contract doctrine, or other legal doctrines outside of contract. Game theorists fail to capture this phenomenon because they model courts as setting the rules the parties play by and then largely disappearing from the scene. In reality, courts are players in an ongoing and constantly changing game. There will of course be differences in inclinations toward strict liability or fault approaches, not only across judges but for individual judges across cases. The point is, however, that fault will out.
