Harvard Law School’s Private Law Workshop: Hanoch Dagan and Michael Heller, The Choice Theory of Contracts

Post by Samuel Beswick, Frank Knox Memorial Fellow, SJD candidate, Harvard Law School

Let’s put freedom back into “freedom of contract.” That’s the ambition Professors Hanoch Dagan and Michael Heller set out in their forthcoming book, The Choice Theory of Contracts, excerpts of which the authors presented at this week’s HLS Private Law Workshop.

Dagan and Heller contend that contract law’s ultimate value is, and ought to be, enhancing individual autonomy. They say that only a “choice theory” of contracts facilitates such autonomy: only when contract law offers a sufficient array of contract “types” will individuals be free meaningfully to author their own destinies. The explication of this liberal theory entails engaging with, and unseating dogma on, two fundamental questions: what is contract? And what is freedom?

What is contract? Contract is more than just commerce. The apparent virtue of treatises has been to help students of law to come to grips with contract. But Dagan and Heller lament that this has been at the expense of an inclusive understanding of the subject. Since Williston’s acclaimed treatise on The Law of Contracts, contract law texts and classrooms have essentially narrowed their analyses to commercial contract examples, from which has been derived an underlying contract value of utility maximization. By sidelining other types of contracts or relegating their analysis to “separate” fields like employment law or family law, we have (perhaps inadvertently) sidelined values of autonomy and community which also explain people’s reasons for contracting.

What is freedom? Dagan and Heller reject the Kantian answer—that freedom is personal independence—and found their theory on liberal philosophy à la H.L.A. Hart and Rawls. Freedom is the enhancement of personal autonomy and it can be grasped when people have choice. The law facilitates freedom when it facilitates a diversity of contract types from which we can choose. Sometimes the market does this for us, as it often does in the case of commercial contracts. But where the market fails to produce a multiplicity of contract types, a liberal state is justified—indeed Dagan and Heller say obliged—to shape the law in order “to enhance people’s autonomy so that they can make their lives meaningfully their own”.

The choice theory seeks to answer autonomy theorists who have failed to derive an adequate uniform principle of contract. The authors tell us such efforts are fruitless: contract law is a diverse landscape. General contract law principles do not have a single meaning across contract types. (Comparative law scholars may recognize here echoes of the debates between the “principled view” and the “logical view” of English unjust enrichment.)

Choice theory also extends an olive branch to efficiency theorists, emphasizing that self-determination in contracting embraces “the economic and social benefits people seek in working together”. The economists in our workshop were hesitant to take the branch: for theorists have (admittedly imperfect) tools to measure and compare utility which we do not have for (moral) autonomy. Though perhaps like law and economics 50 years ago, such tools are waiting to be discovered.

For Dagan and Heller, neither Fried’s principled uniformity nor economists’ efficiency theories have delivered a persuasive theory of contract. Choice theory stands poised for a new era of principled multiplicity in contract law.