'The Reliance Interest in Contract Damages' and the Morality of Contract Law

Abstract

This essay explores the moral foundations of Fuller and Perdue’s The Reliance Interest in Contract Damages. Part I explains and further develops Fuller and Perdue’s moral objection to promissory theories. Part II examines two alternative theories of contract, each of which can be regarded as responses to the moral objection: (1) the reliance theory (Fuller and Perdue, Atiyah, Gilmore); and (2) the transfer theory (Barnett, Benson). Part III then presents a new moral defense of the traditional promissory theory of contract, drawing on an analogy between contract law and property law. Lastly, in Part IV, I summarize the essay’s arguments by offering a new ‘map’ of private law. The essay’s main argument is that while Fuller and Perdue correctly identified the central moral question of contract theory, and (even more importantly) rightly stressed the importance of reliance-based liability in private law, their moral objection to promissory liability was unfounded and their moral acceptance of reliance-based liability was (and remains) in need of supporting arguments.

Keywords: contract law, remedies, damages, contract theory

JEL Classification: K10, K12, K40