Renegotiations and Settlements: Dr. Pangloss' Notes on the Margins of David Campbell's Papers

Abstract

Professor David Campbell presented a paper praising the consequences of Hadley v. Baxendale and related rules. He said provocatively: "Far from it being the function of the law of contract to (so far as possible) prevent breach, the function of that law is to make breach possible although on terms which the law regulates." In all but the exceptional case, he notes, the aggrieved party will be limited to the difference between the contract price and the market price as contract damages. The limited remedies available provoke a sharing of losses in most cases. I welcome the opportunity to look at the impact on long-term continuing relations of doctrines such as mitigation, Hadley v. Baxendale and the rule requiring damages to be proved with reasonable certainty. It also gives me yet another chance to advocate the approach that we at the University of Wisconsin Law School and the American Bar Foundation call "new legal realism." That is, parties to contracts renegotiate because of these rules about remedies but also because of the law in action. Insofar as Professor Campbell and I differ, I think that I may like the present uncertain-law plus the chaotic law-in-action better than he does. I am tempted to take Dr. Pangloss' position: this is the best of all possible worlds.

Keywords: contracts, law in action, new legal realism, expectations, breach, adjustment, negotiated process rationality