Culpa in Contrahendo

• Contracts testify to an important liberal principle, namely, that people can come together as strangers and voluntarily commit themselves to an agreement that takes the place of the law between them.

• The final contract, whether it is written or spoken, is not the only manner in which the law acknowledges voluntary actions that give rise to commitments a stranger may enforce.

• In the common law, such commitments may arise through conduct on which another person has a right to rely, or act in detrimental reliance.

• The right of reliance may occur as a result not just of the making of a contract but also of the negotiation and conduct prior to a contract.

• In the process of negotiating a contract, the negotiators establish a relationship, and they come to expect certain behavior of their negotiating partners.

  • This relationship is particularly important in the civil law, and we will illustrate the common law aspect of it through its civilian counterpart.

  • The nineteenth-century German legal philosopher Rudolf von Jhering and his followers have referred to this relationship as one of reciprocal trust. Trust breeds duties. And if you negligently breach the trust of another, you should pay compensation. They captured this idea in the doctrine of culpa in contrahendo.

    • The idea behind Jhering’s emphasis on the contracting relationship is that duties arise, and they are not necessarily duties of performance. They might be duties of concern, of reciprocal attention to the interests of the other, and to the success of the venture as a whole.

• With the emphasis on trust and reciprocity, the contract is converted from a competitive institution determining who gets the best deal into a potentially cooperative enterprise.

• In the common law world, these precontractual duties would be hard to ground because there would be no consideration to support them.

• The importance of culpa in contrahendo is the shift in political theory it represents.

• Contracts cease being the instrument of the liberal individualist and become the expression of a communal philosophy of reciprocal caring.

• Common lawyers would probably think of this doctrine as something like a tort of “abuse of trust” committed in the course of negotiations.

Communal Judgments of Fairness

• The common law of contract was wary of judging the adequacy of consideration, that is, of deciding whether the bargain was fair.

• The liberal view is that everyone is responsible for the choices he or she makes. The state should not interfere and judge whether the price is just.

• All codes contain a principle that, in cases of duress, the nominal giving of consent is not binding.

  • The principle is fundamental in the common law as well.

• If the buyer buys several items from the seller, the debt on all items must be paid in full before the buyer acquires full title to any single item.

  • It goes without saying that the typical buyer would not understand this condition written into the standard printed sales agreement .

  • The liberal theory says: Enforce the contract.

    • The alternative is a form of paternalism: The courts will undertake to protect the weak, the needy, and the ill informed.

• There are two traditional techniques for asserting judicial power in order to protect people.

  • One technique is to expand the idea of duress or undue influence to include these cases of imposing conditions on consumers of inferior bargaining power.

  • The alternative to invoking the idea of “good morals and public order” is to read into the law certain conditions of fairness as a condition of valid contracts.