The Classical View of a Contract
By Joshua Peete

Primary Source: Contract as Promise

“The classical view of a contract,” according to Atiyah, makes individuals/parties liable for what they intent do. When individuals/parties promise one another they are held liable for the obligations they willfully put themselves into.

Fuller’s Contract Damages

The following are 3 functions that law should have in awarding contract damages:

  1. Restitution Interest – If X & Y promise each other and X defaults on the promise, then Y should obtain the gain of the promise at X’s expense. This prevents individuals from unjust gain.
  2. Reliance Interest - If X & Y promise each other and X defaults on the promise then compensate Y for the loss suffered through “detrimental reliance” from the promise.
  3. Expectation Interest - If X & Y promise each other and X defaults on the promise then Y should be given the equivalent of the promise’s value so that Y is in the same position had the promise been performed.
Fuller assumes that a promise doesn’t give the promisee anything until the action promised is performed. In his view, expectation damages are justified to rid and prevent reliance losses. The expectation interest is the main motive for reliance.

Then one might ask, why use expectation damages rather than reliance damages as the best way to recover damages of a broken promise/contract? Fuller explains that expectation damages cannot be put in the place of reliance damages but it is an incentive for organizations to keep their business agreements.

The conclusion of Fuller’s view on contracts is this: “We might easily base the whole law of contracts on a fundamental premise that only those promises which have been relied on will be enforced.” (Benson 29) So now a good question to ask would be is an individual harmed if someone breaks a promise that is not relied upon and the promise is not kept?

Atiyah’s Continuation of Fuller’s Contract Theory

Atiyah believes that individuals are liable for what they do, not what they indent on doing. He also explains that if a neither party would benefit from a promise then the promise is not binding. Atiyah looks at good theories of promising to find conditions that they must meet. One condition that promising theories must have is to show when individuals promise each other, neither can expect the other to change his/her mind.

Can people change their mind?

Atiyah explains that people ought to be able to change their minds. If people are not able to change their minds then we limit our freedom as autonomous beings. Promises can be enforced when someone benefits from the promise or reliance has occurred.

The Main Difference Between Fuller/Atiyah & The Classical View

Both Fuller and Atiyah’s theory of contracts eliminate expectation interest by minimizing the role of intentions in promising. Whereas the classical view, as stated above, explains that individuals are liable for what they intend to do.

Three Problems With The Fuller/Atiyah View on Contracts

  1. Atiyah does not answer the question as to why a promise ought to be treated as a “conclusive admission.”(Benson 31) No reasoning has been shown to explain why a person’s intention to keep a promise should be “treated as a conclusion” (Benson 31) even the promisor changed his/her mind.
  2. It is unclear how to measure the value of a promise that is not kept. Once that value is found, then how does one figure that into the legal result?
  3. Fuller/Atiyah do not explain how the current conception of a promise is binding at the moment of formation no matter if any action has been taken.
In Josh Peete’s Opinion, Autonomy Based Theories Are The Answer To Fuller/Atiyah

Autonomy Based Theories – Theories that allow promises to be enforceable. These theories accept the notion that people can willfully bind themselves by promising. Also, “these theories resist the reduction of contractual and promissory obligation to tort and unjust enrichment.”(Benson 33)

Teleological Theories – These theories attribute a value to the goal of contracts and promises. They show that contract law and promising is justified as long as some good comes from it.

I find autonomy based theories to be a closer account of how I intuitively perceive promises to be. Specifically Randy Barnett, an autonomy theorist, who explains that at the moment a contract/promise is made, a transfer of entitlement occurs. This seems correct because when a person promises Z to another, the person promising already accepts the fact that the other will have Z in the future when the promise is executed. The person that will be receiving the promised Z will expect that the promise to be executed and assumes that it will be. If X promises object Z to Y then X is transferring the title of Z from X to Y. Y owns Z at the moment the promise/contract is made. Therefore, since Y owns Z at the moment it was promised and X breaks the promise, then X would be stealing Z from Y. I accept this theory even though it relies on metaphysical concepts like the abstract notion of the transfer of entitlement by a promise statement. Therefore, since I find this theory to be the best in explaining what happens when individuals promise and Barnett’s theory is autonomy based, then I am forced to accept autonomy based theories to be a better account for understanding promising. I am forced to accept this because autonomy based theories and teleological theories are mutually exclusive. © 2002. All Rights Reserved.