No contractual rights without perfection rites : Reinventing the freedom of contract with formality

Contracts provide managers and entrepreneurs an instrument of governance through which legally distinct parties can pursue transactions--from supply agreements to joint ventures—that the market has not standardized and priced. The willingness of common law courts to enforce contracts—with nothing more than evidence of an exchange—lubricates the economy with a valuable source of commitment that nourishes enterprise. Unfortunately, the social benefit of contract law is compromised by the opportunism that often results from the formalistic approach courts take to enforcing contracts, which is to construct contract terms to apply at all events unless expressly qualified. The party who bargained to receive performance is armed by law to sue even where the deal was disrupted by circumstances the parties did not plan for or price into the bargain. By welcoming opportunistic lawsuits, courts diminish the attractiveness of contracts for economic governance. ^ Tempering the potential injustice of such lawsuits, courts have developed excuse doctrines that justify discharging the defendant from liability notwithstanding the implications of formalistic construction. To date, all efforts to optimize contract law in respect of disruption have sought to strike the right balance between some and no excuse. This dissertation argues that what requires reinvention is not excuse doctrine but rather contract law\u27s doctrine of construction. Formalistic construction should give way to perfectionistic construction, meaning that courts should withhold enforcement unless there is sufficient evidence that parties perfected the allegedly breached obligation by planning for and pricing terms for a disruption like the one that undermined the deal. ^ With the support of strong yet overlooked precedents, this position is defended through four arguments, each anchored in a commitment to the freedom of contract. First, courts committed to enforcing those and only those contract terms parties selected should demand the formality of perfection. Second, perfectionistic construction better advances party autonomy than formalistic construction, with or without excuse. Third, perfectionistic construction pulls the rug out from formalistic opportunism, enhancing the attractiveness of contracts for economic governance. Fourth, requiring parties to undertake the formality of perfection resonates with the legislative aspirations of contract as an autonomous instrument of governance.