Chapter 13

No one of the four theories of enforcing promises which are current today is adequate to cover the whole legal recognition and enforcement of them as the law actually exists. Putting them in the order of their currency, we may call them (1) the will theory, (2) the bargain theory, (3) the equivalent theory, (4) the injurious-reliance theory. That is, promises are enforced as a giving effect to the will of those who agree, or to the extent that they are bargains or parts of bargains, or where an equivalent for them has been rendered, or where they have been relied on by the promisee to his injury, according to the theory chosen. The first is the prevailing theory among civilians. But it must give way before the onward march of the objective theory of legal transactions and is already fighting a rear-guard action. In our law it is impossible. We do not give effect to promises on the basis of the will of the promisor, although our courts of equity have shown some tendency to move in that direction. The attempt in the nineteenth century to Romanize our theories of liability involved a Romanized will-theory of contract. But no one who looks beneath the surface of our law reports can doubt that the attempt has failed wholly. We no longer seek solutions on every side through a pedantic Romanized law of bailments and in the law of bailments itself we are coming to talk in common-law terms of negligence in view of the circumstances and not in Romanist terms of the willed standard of diligence and corresponding degrees of negligence. In America, at least, the objective theory of contract is orthodox and the leader of English analytical jurists of the present generation has expounded it zealously. Courts of equity, which inherit modes of thought from the time when the chancellor searched the conscience of a defendant by an examination under oath, and believed he could reach subjective data that were beyond the cognizance of a jury, are the last stronghold of the exotic subjective theory in the common law.

Probably the bargain theory is the one most current in common-law thinking. It is a development of the equivalent theory. It will not cover formal contracts but under its influence the formal contracts have been slowly giving way. The seal "imports" a consideration. Legislation has abolished it in many jurisdictions and often it does no more than establish a bargain _prima facie_, subject to proof that there was in fact no consideration. Courts of equity require a common-law consideration, at least on the face of their general rule, before they will enforce a sealed contract. Also the formal contracts of the law merchant are subject to defeat by showing there was no consideration, except when in the hands of holders for value without notice. Here, however, consideration is used in the sense of equivalent, to the extent of admitting a "past consideration," and the bargain theory, appropriate to simple contracts, is not of entire application. On the other hand the extent to which courts today are straining to get away from the bargain theory and enforce promises which are not bargains and cannot be stated as such is significant. Subscription contracts, gratuitous promises afterwards acted on, promises based on moral obligations, new promises where a debt has been barred by limitation or bankruptcy or the like, the torturing of gifts into contracts by equity so as to enforce _pacta donationis_ specifically in spite of the rule that equity will not aid a volunteer, the enforcement of gratuitous declarations of trust, specific enforcement of options under seal without consideration, specific performance by way of reformation in case of security to a creditor or settlement on a wife or provision for a child, voluntary relinquishment of a defense by a surety and other cases of "waiver," release by mere acknowledgment in some states, enforcement of gifts by way of reformation against the heir of a donor, "mandates" where there is no _res_, and stipulations of parties and their counsel as to the conduct of and proceedings in litigation--all these make up a formidable catalogue of exceptional or anomalous cases with which the advocate of the bargain theory must struggle. When one adds enforcement of promises at suit of third-party beneficiaries, which is making headway the world over, and enforcement of promises where the consideration moves from a third person, which has strong advocates in America and is likely to be used to meet the exigencies of doing business through letters of credit, one can but see that Lord Mansfield's proposition that no promise made as a business transaction can be _nudum pactum_ is nearer realization than we had supposed.

Yet the equivalent theory and the injurious-reliance theory are even less adequate to explain the actual law. The equivalent theory must wrestle at the outset with the doctrine that inadequacy of consideration is immaterial so that the equivalency is often Pickwickian. Hegel could argue for it on the basis of the Roman _laesio enormis_. But when a court of equity is willing to uphold a sale of property worth $20,000 for $200, even a dogmatic fiction is strained. Moreover the catalogue of anomalies with which the bargain theory must wrestle contains more than one difficulty for the adherent of either theory. Stipulations in the course of litigation do not need equivalents nor do they need to be acted on in order to be enforceable. A release by mere acknowledgment, when good at all, needs no equivalent and need not be acted on. Waiver by a surety of the defense of release by giving time to the principal needs no element of consideration nor of estoppel. Defectively executed securities, settlements and advancements need no equivalent and need not be acted on in order to be reformed. Options under seal are held open in equity on the basis of the seal alone. A gratuitously declared trust creates an obligation cognizable in equity without more. In truth the situation in our law is becoming much the same as that in the maturity of Roman law and for the same reason. We have three main categories. First, there are formal contracts, including sealed instruments, recognizances, and the formal contracts of the law merchant, in which latter the form consists in the use of certain words, requirements as to sum certain, payment at all events, and certainty as to time. Second, there are the real contracts of debt and bailment. Third, there are simple contracts, without form and upon consideration. The latter is the growing category although the formal contracts of the law merchant have shown some power of growth and the business world has been trying to add thereto letters of credit using the formal words "confirmed" or "irrevocable." But the category of enforceable simple promises defies systematic treatment as obstinately as the actionable pacts in Roman law. Successive additions at different times in the endeavor of courts to hold men to their undertakings, in view of the social interest in the security of transactions and the jural postulates of the civilization of the day, proceed on all manner of different theories and different analogies and agree only in the result--that a man's word in the course of business should be as good as his bond and that his fellow men must be able to rely on the one equally with the other if our economic order is to function efficiently. It is evident that many courts consciously or subconsciously sympathize with Lord Dunedin's feeling that one can have no liking for a doctrine which enables a promisor to snap his fingers at a promise deliberately made, fair in itself, and in which the person seeking to enforce it has a legitimate interest according to the ordinary understanding of upright men in the community. It is significant that although we have been theorizing about consideration for four centuries, our texts have not agreed upon a formula of consideration, much less our courts upon any consistent scheme of what is consideration and what is not. It means one thing--we are not agreed exactly what--in the law of simple contracts, another in the law of negotiable instruments, another in conveyancing under the Statute of Uses and still another thing--no one knows exactly what--in many cases in equity.

Letters of credit afford a striking illustration of the ill-adaptation of our American common law of contract to the needs of modern business in an urban society of highly complex economic organization. Well known abroad and worked out consistently on general theories in the commercial law of Continental Europe, these instruments came into use in this country on a large scale suddenly during the war. There was no settled theory with respect to them in our books and the decisions warranted four or five views leading to divergent results in matters of vital moment to the business man who acted on them. Characteristically the business world set out to make of them formal contracts of the law merchant by the use of certain distinctive words which gave the instruments character and made their nature clear to those who inspected them anywhere in the world. But for a season our category of mercantile specialties had ceased to admit of growth and the doctrine of consideration with its uncertain lines stood in the way of many things which the exigencies of business called for and business men found themselves doing in reliance on each other's business honor and the banker's jealousy of his business credit, with or without assistance from the law. Certainly no one would say that such a situation bears witness to wise social engineering in an economically organized society resting on credit.

Two circumstances operate to keep the requirement of consideration alive in our law of simple contract. One is the professional feeling that the common law is the legal order of nature, that its doctrines in an idealized form are natural law and that its actual rules are declaratory of natural law. This mode of thinking is to be found in all professions and is a result of habitual application of the rules of an art until they are taken for granted. In law it is fortified by the theory of natural law which has governed in our elementary books since Blackstone, was taught to all lawyers until the present century, and is assumed in much of our judicial decision. Later it was strengthened by the theories of the historical school which ruled in our law schools in the last quarter of the nineteenth century and taught us to think that growth must inevitably follow lines which might be discovered in the Year Books. These things co-operated with the temper of the last century and the instinctive aversion of the lawyer to change, lest in some unperceived way a door be opened to magisterial caprice or to the personal equation of the judge. Thus some thought of consideration, whatever it was, as inherent in the very idea of enforceable promises. Others assumed that it was a historically developed principle by which the future evolution of the law of contracts must be governed. Many others simply thought that it was dangerous to talk of change. And yet change has gone on rapidly, if subconsciously, until the present confused mass of unsystematized and unsystematizable rules has resulted. The second circumstance operating to keep alive the requirement of consideration is a more legitimate factor.

Nowhere could psychology render more service to jurisprudence than in giving us a psychological theory of _nuda pacta_. For there is something more than the fetish of a traditional Latin phrase with the hallmark of Roman legal science behind our reluctance to enforce all deliberate promises simply as such. It should be compared with the reluctance of courts to apply the ordinary principle of negligence to negligent speech, with the doctrine as to seller's talk, with the limitations upon liability for oral defamation and with many things of the sort throughout our law. All of these proceed partly from the attitude of the strict law in which our legal institutions first took shape. But they have persisted because of a feeling that "talk is cheap," that much of what men say is not to be taken at face value and that more will be sacrificed than gained if all oral speech is taken seriously and the principles applied by the law to other forms of conduct are applied rigorously thereto. This is what was meant when the writers on natural law said that promises often proceeded more from "ostentation" than from a real intention to assume a binding relation. But this feeling may be carried too far. Undoubtedly it has been carried too far in the analogous cases above mentioned. The rule of _Derry_ v. _Peek_ goes much beyond what is needed to secure reasonable limits for human garrulousness. The standard of negligence, taking into account the fact of oral speech and the character and circumstances of the speech in the particular case, would amply secure individual free utterance. So also the doctrine that one might not rely on another's oral representation in the course of a business transaction if he could ascertain the facts by diligence went much too far and has had to be restricted. Likewise we have had to extend liability for oral defamation. Accordingly because men are prone to overmuch talk it does not follow that promises made by business men in business dealings or by others as business transactions are in any wise likely to proceed from "ostentation" or that we should hesitate to make them as binding in law as they are in business morals. Without accepting the will theory, may we not take a suggestion from it and enforce those promises which a reasonable man in the position of the promisee would believe to have been made deliberately with intent to assume a binding relation? The general security is more easily and effectively guarded against fraud by requirements of proof after the manner of the Statute of Frauds than by requirements of consideration which is as easy to establish by doubtful evidence as the promise itself. This has been demonstrated abundantly by experience of suits in equity to enforce oral contracts taken out of the Statute of Frauds by great hardship and part performance.

Revived philosophical jurisprudence has its first and perhaps its greatest opportunity in the Anglo-American law of contracts. The constantly increasing list of theoretical anomalies shows that analysis and restatement can avail us no longer. Indeed the lucid statement of Williston but emphasizes the inadequacy of analysis even when eked out by choice from among competing views and analytical restatements of judicial dogma in the light of results. Projects for "restatement of the law" are in the air. But a restatement of what has never been stated is an impossibility and as yet there is no authoritative statement of what the law of consideration is. Nothing could be gained by a statement of it with all its imperfections on its head and any consistent analytical statement would require the undoing of much that the judges have done quietly beneath the surface for making promises more widely enforceable. Given an attractive philosophical theory of enforcement of promises, our courts in a new period of growth will begin to shape the law thereby and judicial empiricism and legal reason will bring about a workable system along new lines. The possibilities involved may be measured if we compare our old law of torts with its hard and fast series of nominate wrongs, its distinctions growing out of procedural requirements of trespass and trespass on the case and its crude idea of liability, flowing solely from causation, with the law of torts at the end of the nineteenth century after it had been molded by the theory of liability as a corollary of fault. Even if we must discard the conception that tort liability may flow only from fault, the generalization did a service of the first magnitude not only to legal theory but to the actual administration of justice. No less service will be rendered by the twentieth-century philosophical theory, whatever it is, which puts the jural postulate of civilized society in our day and place with respect to good faith, and its corollary as to promises, in acceptable form, and furnishes jurist and judge and lawmaker with a logical critique, a workable measure of decision and an ideal of what the law seeks to do, whereby to carry forward the process of enlarging the domain of legally enforceable promises and thus enlarging on this side the domain of legal satisfaction of human claims.

Bibliography

LECTURE I

Plato (B. C. 427-347), Republic.

----, Laws.

Translations in Jowett's Plato. The translation of the Republic is published separately.

Pseudo-Plato, Minos.

Now generally considered not to be a genuine work of Plato's and variously dated from as early as c. 337 B. C. to as late as c. 250 B. C. There is a convenient translation in Bohn's Libraries.

Aristotle (B. C. 384-322), Nicomachean Ethics.

Convenient translation by Browne in Bohn's Libraries.

----, Politics.

Translation by Jowett should be used.

Reference may be made to Berolzheimer, System der Rechts- und Wirthschaftsphilosophie, II, §§ 13-16 (World's Legal Philosophies, 46-77); Hildenbrand, Geschichte und System der Rechts- und Staatsphilosophie, §§ 1-121.

Cicero (B. C. 106-43), De Legibus.

Reference may be made to Berolzheimer, System der Rechts- und Wirthschaftsphilosophie, II, §§ 17-20 (World's Legal Philosophies, 78-92); Hildenbrand, Geschichte und System der Rechts- und Staatsphilosophie, §§ 131-135, 143-147; Voigt, Das Ius Naturale, aequum et bonum und Ius Gentium der Römer, I, §§ 16, 35-41, 44-64, 89-96.

Thomas Aquinas (1225 or 1227-1274), Summa Theologiae.

Convenient translation of the parts relating to law in Aquinas Ethicus.

Reference may be made to Berolzheimer, System der Rechts- und Wirthschaftsphilosophie, II, §§ 21-23 (World's Legal Philosophies, 93-111).

Oldendorp, Iuris naturalis gentium et ciuilis [Greek: eisagôgê] (1539).

Hemmingius (Henemingsen) De Iure naturale apodictica methodus (1562).

Winckler, Principiorum iuris libri V (1615).

These are collected conveniently in Kaltenborn, Die Vorläufer des Hugo Grotius.

Reference may be made to Berolzheimer, System der Rechts- und Wirthschaftsphilosophie, II, § 24 (World's Legal Philosophies, 112-114); Hinrichs, Geschichte der Rechts- und Staatsprincipien seit der Reformation, I, 1-60; Gierke, Johannes Althusius, 2 ed., 18-49, 142-162, 321.

Soto, De justitia et iure (1589).

Suarez, De legibus ac deo legislatore (1619).

Reference may be made to Figgis, Studies of Political Thought from Gerson to Grotius, Lect. V.

Grotius, De iure belli et pacis (1625).

Whewell's edition with an abridged translation is convenient.

Pufendorf, De jure naturae et gentium (1672).

Kennet's translation (1703) may be found in several editions.

Burlamaqui, Principes du droit naturel (1747).

Nugent's translation is convenient.

Wolff, Institutiones juris naturae et gentium (1750).

Rutherforth, Institutes of Natural Law (1754-1756).

Vattel, Le droit des gens, Préliminaires (1758).

There are many translations of Vattel.

Rousseau, Contrat social (1762).

Tozer's translation is convenient.

Blackstone, Commentaries on the Laws of England, Introduction, sect. II (1765).

Reference may be made to Berolzheimer, System der Rechts- und Wirthschaftsphilosophie, II, §§ 25-27, 29 (World's Legal Philosophies, 115-134, 141-156); Hinrichs, Geschichte der Rechts- und Staatsprincipien seit der Reformation, I, 60-274, II, III, 1-318; Korkunov, General Theory of Law, transl. by Hastings, § 7; Charmont, La renaissance du droit naturel, 10-43.

Hobbes, Leviathan (1651).

Spinoza, Ethica (1674).

----, Tractatus theologico-politicas (1670).

Elwes' translation of the two last in Bohn's Libraries must be used with caution.

Bentham, Principles of Morals and Legislation (1780).

A convenient reprint is published by the Clarendon Press.

----, Theory of Legislation. (Originally published in French, 1820). Translated by Hildreth (1864), and in many editions.

Mill, On Liberty (1859).

Courtney's edition (1892) is convenient.

Reference may be made to Duff, Spinoza's Political and Ethical Philosophy; Berolzheimer, System der Rechts- und Wirthschaftsphilosophie, II, § 28 (World's Legal Philosophies, 134-141); Dicey, Law and Public Opinion in England, Lect. 6; Albee, History of English Utilitarianism; Stephen, The English Utilitarians; Solari, L'idea individuale e l'idea sociale nel diritto privato, §§ 31-36.

Kant, Metaphysische Anfangsgründe der Rechtslehre (2 ed. 1798). Translated by Hastie as "Kant's Philosophy of Law" (1887).

Fichte, Grundlage des Naturrechts (1796, new ed. by Medicus, 1908). Translated by Kroeger as "Fichte's Science of Rights" (1889).

Hegel, Grundlinien der Philosophie des Rechts (1821), ed. by Gans (1840), new ed. by Lasson (1911). Translated by Dyde as "Hegel's Philosophy of Right" (1896). This translation must be used cautiously.

Krause, Abriss des Systemes der Philosophie des Rechtes (1828).

Ahrens, Cours de droit naturel (1837, 8 ed. 1892). Twenty-four editions in seven languages. The German 6th edition (Naturrecht, 1870-1871) contains important matter not in the French editions.

Green, Principles of Political Obligation. Lectures delivered in 1879-1880. Reprinted from his Complete Works (1911).

Lorimer, Institutes of Law (2 ed. 1880).

Lasson, Lehrbuch der Rechtsphilosophie (1882).

Miller, Lectures on the Philosophy of Law (1884).

Boistel, Cours de philosophie du droit (1870, new ed. 1899).

Herkless, Lectures on Jurisprudence (1901).

Brown, The Underlying Principles of Modern Legislation (1912).

Mention may be made of Beaussire, Les principes du droit (1888); Beudant, Le droit individuel et l'état (1891); Carle, La vita del diritto (2 ed. 1890); Dahn, Rechtsphilosophische Studien (1883); Giner y Calderon, Filosofia del derecho (1898); Harms, Begriff, Formen und Grundlegung der Rechtsphilosophie (1889); Hennebicq, Philosophie de droit et droit naturel (1897); Herbart, Analytische Beleuchtung des Naturrechts und der Moral (1836); Jouffroy, Cours de droit naturel (5 ed. 1876); Kirchmann, Grundbegriffe des Rechts und der Moral (2 ed. 1873); Krause, Das System der Rechtsphilosophie (posthumous, ed. by Röder, 1874); Miraglia, Filosofia del diritto (3 ed. 1903, transl. in Modern Legal Philosophy Series, 1912); Röder, Grundzüge des Naturrechts oder der Rechtsphilosophie (2 ed. 1860); Rosmini, Filosofia del diritto (2 ed. 1865); Rothe, Traité de droit naturel, théorique et appliqué (1884); Schuppe, Grundzüge der Ethik und Rechtsphilosophie (1881); Stahl, Philosophie des Rechts (5 ed. 1878); Tissot, Introduction historique et philosophique à l'étude du droit (1875); Trendelenburg, Naturrecht auf dem Grunde der Ethik (1868); Vareilles-Sommières, Les principes fondamentaux du droit (1889); Wallaschek, Studien zur Rechtsphilosophie (1889).

Reference may be made to Gray, Nature and Sources of the Law, §§ 7-9; Bryce, Studies in History and Jurisprudence, Essay 12; Pollock, Essays in Jurisprudence and Ethics, 1-30; Korkunov, General Theory of Law, translated by Hastings, § 4; Bergbohm, Jurisprudenz und Rechtsphilosophie, §§ 6-15; Pound, The Scope and Purpose of Sociological Jurisprudence, 24 Harvard Law Rev., 501; Pound, the Philosophy of Law in America, Archiv für Rechts- und Wirthschaftsphilosophie, VII, 213, 285.

Jhering, Der Zweck im Recht (1877-1883, 4 ed. 1904). The first volume is translated by Husik under the title "Law as a Means to an End" (1913).

Jhering, Scherz und Ernst in die Jurisprudenz (1884, 9 ed. 1904).