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METHODOLOGY
RESEARCH PROBLEM:
The validity of the reasons given by the Relational Theory of contract law for
criticising the Classical Theory of Contract Law.
RESEARCH QUESTIONS AND HYPOTHESIS:
Question 1:
Hypothesis:
Question2:
Whether
Macneil
hasnt
sufficiently
substantiated
his
consent.
Yes, Macneil has sufficiently substantiated his opposition to the
Question3:
Hypothesis
to tacit assumptions?
No, Macneils study of consent with regard to tacit
assumptions isnt comprehensive.
Question4:
Hypothesis
Question5:
Hypothesis
METHOD OF REFERENCE: MLA Sheet has been used for method of reference
INTRODUCTION
The leading contemporary critic of the classical theory of contract law
has been Ian Macneil. (Macneil 1980, 47-48) Professor Ian Macneil is a strong
proponent of a humanized view of contracts is and often deemed the father
of relational contract theory. The rich social complexities of his life
probably contributed to Macneils escape from the narrow nuts of classical and
neo-classical contract into the openness of relational contract. There, relatively
direct transactions are important but only as part of a broad landscape.
Macneil went through hundreds of American agreement to agree cases and
concluded that these agreements to agree make sense only in terms of
relations outside any theoretical structure- where the consent is always either
100 percent on or 100 percent off. In real life, on-off consent (in contrast to
apparent expressions of such consent) is virtually if not totally non-existent.
This experience led Macneil to realise that only a fully relational approach can
deal adequately with either relations or the relatively discrete transactions
embedded in them.(Campbell 2001, 5)
contracts on perfect spot markets are likely to involve traders or brokers who
have continuing relationships of some sort.
It is only for the sake of argument that Macneil has quite naturally driven
to extremes:
[A]t noon two strangers come into town from opposite directions, one
walking and one riding a horse. The walker offers to buy the horse, and after
brief dickering a deal is struck in which delivery of the horse is to be made at
sundown upon the handing over of $10. The two strangers expect to have
nothing to do with each other between now and sundown; they expect never to
see each other thereafter; and each has as much feeling for the other as has a
Viking trading with a Saxon.
However, in the end, Macneil admits that a discrete contract is an
impossibility, (1978b, 857) and characterizes discrete contracts as entirely
fictional.
One reason for the overthrow of classical contract law is that it was tacitly
based on the empirically incorrect premise that most contracts were discrete.
Ironically, however, relational contract theory has made an empirical mistake
comparable to that made by classical contract law: insofar as relational
contract theory supports the idea that there should be a body of special rules to
govern relational contracts, it is tacitly based on the incorrect premise that
relational contracts are only a special subcategory of contracts as a class. Once
relational contracts are properly defined, however, and it is recognized that all
or almost all contracts are relational, it is easy to see that relational contracts
are not a special subcategory of contracts, and therefore should not and cannot
be governed by a body of special contract-law rules. There can be no special
law of relational contracts, because relational contracts and contracts are
virtually one and the same.
Macneil's has given the general rules for relational contracts in some of the
relational contract literature, however, he fails to demonstrate that there either
is or should be a law of relational contracts.
10
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tacit assumptions can be used to also affect the meaning of consent, especially
when the parties have not consciously taken up an issue? Can it be used to
give meaning to the silence between the parties? Thus a loophole arises in
Macneils relational theory of contract law.
Neither does Macneil explain why these default rules that reflect the
inferred or so called tacit assumptions of most persons or rather a majority of
the particular/relevant community of speech or in writing (discourse) brings
about the effect of the actual contracting parties is somehow contrary to the
liberal conception of contract. (Macneil 1974, 772-773)
Because Macneil is a prisoner of a purely subjectivist conception (Any
of various theories holding that the only valid standard of judgment is that of
the individual) of consent, he misses the fact that the existence of tacit
assumptions greatly expands the domain of actual consent and shrinks the
domain of coercively imposed gapfillers to plug gaps and loopholes.
Another reason for this oversight by Macneil is that he is a prisoner of
his communitarianism (A member or supporter of a small cooperative or a
collectivist community).
In sum, by acknowledging the importance of tacit assumptions in
planning, Macneil opens the door to an expanded, more realistic notion of
contractual consent that is not limited to matters about which the parties
consciously deliberated, the unconscious pathway to contract also arises. Thus
there exists an alternative to the stark contrast Macneil draws between
"conscious consent" and no consent. (Macneil 1980, 49) When Macneil
argues that "the 'great sea of custom' . . . forms the main structure of contract"
(Macneil 1974, 731) and explicit promise the exception, he does not realize
that this argument against consent turns on itself. For, if custom is a reflection
of our shared tacit assumptions and the reverse, then custom can be seen as the
embodiment of what parties in the relevant community actually, not
fictitiously, consent to when they manifest their intention to be legally bound.
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largely apart from the function played by the liberal concept of several
property.
In one passage, Macneil considers, and then misses, the knowledgegenerating function of exchange made possible by both freedom to and
freedom from contract: At first thought, one might conclude that knowledge, a
good, can be created by discrete exchange, e.g., the sale of a book on
carpentry. But, of course, a book is not knowledge, merely a source of it; the
production of knowledge comes, alas, from reading, not from acquiring, the
book. Knowledge can, however, be created by the processes of relational
exchange-witness any classroom1.
The criticism regarding this is not merely that Macneil fails to analyze
property as thoroughly as he analyzes exchange. He is certainly entitled to
concentrate his attention primarily on exchange if he wishes. Rather, we are
maintaining that his relational theory of contract is both greatly influenced and
distorted by his exclusive focus on exchange to the exclusion of any treatment
of its functional relationship to the conception of property that exchange
presupposes.
This omission is manifested in two ways.
First, as just explained, Macneil entirely fails to take into account the
vital social functions performed by the liberal principle of freedom from
contract (Barnett 1992a, p 859). Consequently, his relational theory of contract
makes no effort to deal with the danger of contractual over enforcement that
is, the enforcement of commitments that ought not be enforced. Without
considering these dangers, the advantages of liberal contract theory and
doctrine that, at least in part, address this problem will be seriously
underestimated. This accounts for Macneil's patent lack of concern to provide
Macneil apparently has in mind the direct impartation or explicit exchange of knowledge
between teachers and students.
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any
principled
distinction
between
enforceable
and
unenforceable
commitments.
Second, Macneil's relational theory takes an overly restricted view of
the social function of freedom to contract, or what he calls the power of
contract. The only function he acknowledges that this principle serves is that
of enhancing the value of resources that are the subject of exchanges.
According to Macneil, when an exchange of control of resources designated
by the concepts of ownership or property occurs, it is productive only because
the exchange per se-virtually by definition, and certainly in effect is expected
to enhance the value of the items exchanged. While discrete exchange is
commonly a prelude to further physical production, and while it enhances
value by itself, it does not achieve physical production. This is not to minimize
its importance or to denigrate its social value, but to recognize its nature2.
Whatever the reason, in considering the social function of exchange of
property rights, Macneil focuses exclusively on the physical effects of such
exchange while ignoring the informational effects3. Nowhere in his
voluminous writings, for example, does he consider the informational function
of the price system that the two liberal principles of contractual freedom,
along with the concept of several property, make possible (Barnett 1992b, p
62). When exercise my freedom to sell my house at the prevailing market
price my actions will affect the price signals that others receive concerning the
social demand for their houses. But as important, when I exercise my right to
refrain from selling my house I also affect, by my inaction, the market price of
2
The exact set of behavioral norms has evolved over the period of his writings. Recently
Search Term Begin Macneil Search Term End has offered the following list:
(1) role integrity, (2) reciprocity, (3) implementation of planning, (4) effectuation of consent,
(5) flexibility, (6) Search Term Begin contractual Search Term End solidarity, (7) the linking
norms of restitution, reliance, and expectation interests, (8) the power norm (creation and
restraint of power), (9) propriety of means (doing things the "right way"), and (10)
harmonization
with
the
social
matrix.
3
Transfer of control by discrete exchange often involves some movement of the goods and
services. This movement may be indeed usually is productive in the physical sense.
16
An omission this
serious cannot help but have significant implications for his relational theory
of contract. For example, at one juncture in his analysis, Macneil relies on the
institution of market cost, as though this information were not a product of the
very processes he was seeking to explain. Thus, the explanation of the value of
contractual freedom provided by Macneil's relational theory of contract, which
he never denies, is a pale one5.
In is submitted that Macneil's classificatory apparatus is not rich
enough (Oliver E. Williamson, 1979, p 233-236). In particular, by failing to
offer a social theory of property that corresponds to his social theory of
exchange, he attempts to view Macneilian contractual exchange-and a fortiori
legally enforceable contracts-largely apart from the function played by the
liberal concept of several property.
In light of this theoretical gap, it is especially intriguing that Macneil
has from his earliest writings to the present consistently asserted that the
concept or practice of contract presupposes the concept of property. In 1974,
he said that "exchange transactions can occur effectively only if property
rights receive socioeconomic support from others besides the parties to the
transaction6." His later writings are replete with similar observations.
4
Intriguingly, in another context, Macneil sees how organization can be a form of knowledge.
In 1962, Macneil wrote: Power of contract is one of two sides of freedom of contract. On
one hand, freedom of contract is freedom from restraint, an immunity from legal reprisal for
making or receiving promises. On the other hand, it is not really a freedom of contract but a
power of contract, a secure legal sanctions when another breaks his pomise.
6
In Macneil's lexicon, "transaction" lies on the discrete, presentiated end of the contractual
spectrum, so this quotation, and others as well, could be interpreted as limiting the role of
property rights to these sorts of exchanges. However, Macneil does not always confine this
17
"basic
property
and
liberty
rights":
The basis for the right not to contract is so obvious-and one would think
especially to those trained in economics-that it hardly seemed necessary at the
time to explain it or to explain that the basis is not to be found in the power of
contract. It arises out of the basic property and liberty rights underlying the
institution of contract. Property rights are rights to have others not interfere
with possession, use, etc., and normally these include rights not to have to
contract with others wishing to deprive the rights holder of those rights by
agreement.
Macneil's relational theory of contract, therefore, ignores the vital
social functions performed by freedom from contract because it ignores the
social functions of property rights as well as the functional relationship
between property and contract.
observation to this specific context. Moreover, because he generally acknowledges the social
necessity of having such transactions (his criticism is that contract is more than just
transactions), he could also be seen as acknowledging the social necessity of the concept of
property that lies behind transactions.
18
AND COMMUNITARIANISM
Unlike classical liberalism, which construes communities as originating from the voluntary
acts of pre-community individuals, it emphasizes the role of the community in defining and
shaping individuals. Communitarians believe that the value of community is not sufficiently
recognized in liberal theories of justice.
8
The liberal principles of several property and freedom of contract and the entitlements or
rights they recommend provide a "baseline" or framework within which productive and
satisfying social relations can evolve both spontaneously and by design.
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WORKS CITED:
(1974) Macneil, Ian R. "The Many Futures of Contracts." S. Cal. L. Rev. 47
(1974): 680
(1976) Goldberg, Victor Towards an Expanded Economic Theory of
Contract 10 J. Econ. Issues (1976) :45
(1978a) Macneil, Ian R. Contracts: Exchange Transactions and Relations
12-13 (2d ed. 1978)
(1978b)Macneil, Ian. R. Contracts: Adjustment of Long-Term Relations
Under Classical, Neoclassical, and Relational Contract Law 72 Nw. U.
L. Rev. 854,
(1979) E. Williamson, Oliver. "Transaction-Cost Economics: The Governance
of Contractual Relations." J.L. & Econ. 22 (1979): 233-236
(1980) Macneil, Ian R. The New Social Contract: An Inquiry into Modern
Contractual Relations Mod. L. Rev. 44(1980): 20-65
(1984) Barnett, Randy E. "Contract Scholarship and the Reemergence of
Legal Philosophy." Harv. L. Rev. 97 (1984): 1223.
(1984-85) Macneil, Ian R. . "The New Social Bureaucracy, Liberalism, and
Community-American Style." Nw. U. L. Rev. 79 (1984): 900-946.
(1985) Macneil, Ian R.
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