Peter Benson has been writing about contract theory, contract doctrine and related topics for over 30 years. His new book, Justice in Transactions, a magisterial work, grounds Benson's theory in the details of common law doctrine, while also evaluating its consistency with basic views about personhood and justice. The result is a formidable defence of a somewhat unconventional approach to contract law and theory.
Benson famously has a “transfer of ownership” theory of contract law. He portrays contracts as involving, at the time of execution, a transfer between the parties of “exclusive rightful control” (p. 10) of entitlements to goods or services. It is important to understand that in this approach “the right to performance is the normative consequence, not the object, of the promisee's base entitlement at formation” (p. 323). Performance thus becomes what the promisor must do not to interfere with the promisee's “rightful, contractually specified mode of exercising control” over the consideration (p. 324). Contract is a reciprocal exchange, to be distinguished from promise, gift, or a claim based (solely) on reasonable reliance. Breach of contract is the equivalent of conversion (p. 251).
Benson emphasises the contrast between his approach and two prominent alternatives: economics analysis of law, which sees contract law (and, indeed, all other types of private law) as trying to maximise efficiency; and promissory theories (most famously, that found in Charles Fried, Contract as Promise, 2nd ed. (Oxford 2015)), which see contract as essentially about enforcing promises. The field of contract theory is, of course, far broader and more diverse than that, with consent theories, reliance theories, civil recourse theories, and civil redress theories (just to give a partial list) joining promissory theories and efficiency theories, though Benson's choice to focus on just economic and promissory theories is understandable. Not that much would have been added by consideration of the other approaches.
What relative advantage might Benson's approach have among the crowd of competitors? The idea that contract involves an exchange of property rights at the time of execution gives answers to certain recurring problems in contract law, such as: Why should contracting parties be subject to significant liability if they renege just after the contract has been entered (and long before the other party could have relied in significant ways on the existence of the contract)? And why should expectation damages (as opposed to reliance damages) be the normal measure of liability for breach of contract?
Justice in Transactions starts from the position that “a first task of contract law is, or at least should be, to see whether modern contract law … can be accounted for in its own terms on a basis that is morally acceptable from the standpoint of a liberal conception of justice” (p. 1). Benson elaborates that alternative approaches cannot offer a “public political justification” for contract law (p. 3). The book emphasises the extent to which the argument throughout is “internal” rather than “external”: a justification grounded on current cases outcomes, judicial language, and accepted doctrines (at least those of the England and Wales, Canada, US and other common law countries), and understandings of rules and principles that are themselves grounded in the transactions between the parties rather than any general objective external to the parties, such as efficiency. Benson also emphasises the congruence of his approach with what he describes as a general principle of private law, “liability for misfeasance only” (p. 255).
While many other theorists, such as Charles Fried, treat the doctrine of consideration as an unfortunate historical remnant, for Benson it is central to understanding all of contract doctrine. As the text points out, the doctrine of consideration preceded the doctrinal rules of offer and acceptance by more than 200 years (p. 103). The doctrine of consideration encapsulates the essence of contracts for Benson: every contract involves each party giving the other something distinct from what is received, and that in each case it is something that has “use value” to the recipient (p. 176).
The book succeeds well at showing how many contract doctrines can be seen to derive from a focus on the reciprocal exchange: Benson is able to justify many implied terms and Hadley v Baxendale foreseeability, and even doctrines other commentators treat as requiring external justification, like unconscionability, the rules regarding liquidated damages provisions, and the refusal to enforce certain types of provisions in standard form contracts. In all cases, the arguments are careful and plausible, and respond to likely objections, though not all critics will be persuaded.
Consider the argument about unconscionability: the proper analysis, Benson argues, is to determine what can properly be attributed to the parties’ understanding (at the time of execution) of their exchange: “[P]arties who reasonably appear to be intending an exchange transaction are presumed, as between them, to intend to transact for equal value and a serious disproportion in value between the promised performances, as measured against a competitive market price or some other appropriate reasonable standard, calls for an explanation” (p. 174).
The book's position on standard form contracting is similar to that taken by Karl Llewellyn and by the American Second Restatement of Contract Law (the idea of “reasonable expectations”): with mutual trust and in a context where the form-taker would not be expected to read every term, “the form-giver's invitation must therefore include what is in effect a tacit representation that, in the absence of clear and effective notice to the contrary, there are no unknown terms that are beyond what would be reasonably and fairly expected in the circumstances” (p. 222). Any such unexpected and unreasonable terms would not be enforced.
Benson's work is theoretically ambitious, as it not only attempts to offer a theory of contract law that is consistent with doctrinal rules, but also one that fits with, on one hand, our general understanding of property rights, and is grounded, on the other hand, on a view of the status and equality of persons that is morally and politically attractive. This aspiration connects with a different, basic question: the objective of theories of doctrinal areas of law. The same inquiry might be put a different way: what are the criteria for success for such theories? For Benson, it is clear that consistency with contract law doctrine and practice is foremost, and he regularly criticises theoretical approaches that are grounded on or motivated by values “external” to contract law. The contract law, practice, and theory of Justice in Transactions is abstract and self-contained (one might say “formalistic”, though without the pejorative tone that label has in some quarters). For some scholars, these would be reasons to support Benson's views; for others, they would be, and have been, grounds for criticism and a reason to search elsewhere for a more favourable model.
Without question, Justice in Transactions is an important and foundational work. It is careful, scholarly and meticulous – perhaps to a fault. At over 600 pages, one might be reminded of Samuel Johnson's comment on Paradise Lost: “None ever wished it longer than it is.” Still, it is undoubtedly a work that should be read by all who are serious about contract law and contract law theory.
