Here is a “refactored” version of the above dialogue, written in a summative prose style with the explicit attributions to individuals removed for the sake of conceptual clarity. Given I was a participant in the conversation, there is a possibility of bias in my interpretation, although I have attempted in good faith not to present misleading or caricatured representations of the positions held by other participants. Luckily, since we included the original 5000-word transcript above in addition to this summary (at the hopefully forgivable additional cost to the website server of maybe 100kB of data), interested readers still have the ability to make their own decision as to whether I’m fairly representational in my interpretation of the positions by others.

I’m two-thirds of the way through, at about 600 words, although the last question is perhaps the meatiest, so we’ll see if I get it out in 900 on first draft.

The discussion above centered around three normative questions:

1. What is the social purpose of establishing a system of legally recognized commitments (i.e. contract law)? 2. To what degree, if at all, should economic (i.e. utilitarian/consequentialist) outcomes be considered when determining the appropriate judicial response to an intentional breach of contract? 3. How, if at all, should the act of intentional breach itself be valued in the economic calculus when determining the relative costs and benefits of performance against non-performance of a contract?

In regards to the first, there was general agreement that contract law functioned to allow private actors the option to voluntarily bring the public to bear witness on their private commitments to each other, and to arbitrate disputes regarding those commitments as they arose. This arbitration capacity included the discretionary power to enforce commitments if the courts deemed such a solution to be socially optimal.

The first major point of disagreement was whether the aim of legal arbitration should be to promote the actual performance of commitments, where feasible, or merely to determine an appropriate form of compensation to a party that suffers a loss due to another party’s non-performance, irrespective of whether that performance was intentional or unintentional. This disagreement ultimately turned around whether or not courts should accord any implicit value to the integrity of a contract – in other words, whether or not they should remain ambivalent between performance and non-performance accompanied by compensatory monetary damages.

This question was determined to be a normative one, since Holmes’s “bad man” approach was useful in ascertaining the positive qualities of a particular court or jurist’s judicial approach rather than the its relative merit. There was general agreement that most self-styled “efficient breach” theorists such as Galabresi and Posner advocated the latter approach, while Eben appeared in class to be suggesting that the former interpretation may be preferable.

In order to answer this question, the discussion then turned to the question of what the appropriate framework for analysis was – in particular, whether or not the law should adopt a purely economic (i.e. utilitarian/consequentialist) perspective in determining the optimal form of legal remedy. There was disagreement between those who saw Eben as advocating that courts acknowledge and consider the external deontological value implicit in social trust, and those who saw him as accepting the fundamental consequentialist approach but making a more nuanced economic argument regarding the negative externalities associated with efficient breach theory. Ultimately the question was left unanswered, although the discussion of the original question proceeded upon the assumption of the latter approach.

It was also suggested that the claimed distinction between the two perspectives was illusory, given that the rule of law (including its protection of so-called natural “rights”) derives social legitimacy on the grounds that it purports to promote aggregate social utility, which is indistinguishable from a “perfect” economic outcome, although others disagreed and argued that under the former view Eben was attaching additional moral considerations to social trust beyond its instrumental value in promoting social utility. Those who held the latter view argued that contract law was qualitatively different to criminal law, which incorporated moral as well as economic claims, although they acknowledged that even in criminal law economic analysis is often employed. However, others disagreed that there is any qualitative distinction, pointing to the diamond industry as an example of imposing a criminal punishment-like sanction on violation of contract law due to a collective belief in the increased aggregate utility of preventing certain forms of conduct than allowing them when an individual actor deems them maximize personal utility over the cost of paying compensatory damages.

The final question discussed regarded how courts should conduct utility-maximization analysis – specifically, whether or not they should consider intentional breach a negative externality that warranted a Pigovian sanction in the interests of promoting aggregate utility.

-- RohanGrey - 25 Jan 2012