For the last several centuries, there has been a powerful clash between two very different ways of understanding what contract law and contract remedies ought to accomplish. The older view, which found its most powerful philosophical expression in Kant and has been advanced by modern scholars like Charles Fried, is firmly rooted in the principle of respect for individual autonomy, and holds that parties have an obligation to keep their promises because they have invoked a convention (i.e., contract law) whose very purpose “it is to give grounds — moral grounds — for another to expect the promised performance.” According to this view of contract law, when a party invokes such a convention but nevertheless breaches their contract, not only do they wrong the other party by failing to properly value and respect them as autonomous agents, but their wrong frequently harms the other party as well, thereby creating a normative imbalance between the parties that seems to demand rectification on the ground of corrective justice. It is for this reason that, where such breaches occur, contract law remedies are typically fashioned to restore the equality that existed between the parties prior to the breach by requiring the wrongdoer to “hand over the equivalent of the promised performance,” which is typically measured by an award of expectation damages or, where appropriate, specific performance. By forcing the breaching party to render to the promisee the actual promise owed by way of specific performance, or to pay its equivalent by way of expectation damages, these remedies fit perfectly with Aristotle’s conception of corrective justice, which seeks to restore the balance between the parties by taking from the wrongdoing party, and giving to the injured party, that which rightfully belongs to the latter.

Juxtaposed against this older view is a more recent (and largely incompatible) theory about the way in which courts should think about, and therefore award remedies for, contract breaches. Specifically, this newer view, powerfully articulated by Oliver Wendell Holmes Jr. towards the end of the nineteenth century, holds that courts should not focus (primarily, anyway) on enforcing promises to prevent wrongs or to protect party autonomy. Rather, courts should focus on promoting economic efficiency, which is best accomplished by allowing the promisor to choose between performing the contract, on the one hand, or breaching and paying money damages to the injured party, on the other, depending not on which course of action is the most moral, which usually consists in performing one’s obligations, but on which course of action is the most efficient. According to this newer theory, the purpose of a contract is to fashion it in such a way that it encourages parties to perform their duties where such performance is efficient, and to breach their obligations where performance is inefficient. This idea has been picked up by many scholars and judges working within the law and economics tradition, who have suggested that contract remedies should not be primarily concerned with compensation, but with providing the contracting parties with the right economic incentives.

This Article argues that, as a descriptive matter, if we are to judge courts by what they actually do, rather than by what many commentators and judges say they do, then each of the previously-described theories of contract law remedies are incomplete at best, and misleading (to both the public and other judges following precedent) at worst. Specifically, this Article will argue that, when one looks at the way in which courts actually decide cases, the wrongfulness of the promisor’s breach plays an important role in a court’s determination of the remedy it ultimately awards. The problem with the two leading theories of contract law remedies is that they fail to take the promisor’s wrongfulness into account, and in doing so, fail to capture something quite surprising (to traditional ways of thinking about contract remedies, anyway) about the way many judges actually think about contract remedies. Indeed, contrary to frequent claims made by courts and commentators alike, this Article argues that the notion of retribution, or punishing promisors more severely for wrongful breaches than for innocent breaches, plays an important role in a court’s calculation of contract damages, though it has been scarcely recognized in the literature.

By marshalling evidence from breach of contract cases in which judges are confronted with a choice between awarding two or more different remedies to “compensate” the injured party, this Article argues that the court’s inquiry into the wrongfulness of the promisor’s breach, which traditional contract doctrine maintains courts simply do not (and should not) do, will frequently play an important role in the judge’s choice of remedy, with a larger remedy being awarded in proportion to the degree that the promisor’s actions are deemed “wrongful.” This behavior suggests that judges are not merely trying to compensate injured parties, but that they are trying to punish breaching parties for particularly wrongful breaches. More specifically, the cases seem to show that courts are concerned with the idea of proportional retribution, or with punishing the wrongdoer in proportion to both the wrongfulness of his or her acts, and the damages that are caused to the injured party by such acts.

This Article will proceed in three Parts. Part I discusses the ways in which traditional contract law is typically said to be unconcerned with the wrongfulness of the breaching party’s behavior. Part II will discuss the leading theories regarding how contract damages ought to be awarded, paying particular attention to the corrective justice view emphasizing compensation and the law and economics view emphasizing efficiency. At this time, the retributive view will be introduced as an alternative theory by which courts tend to think about contract damages, and will define more clearly what, exactly, is meant by retribution in the context of contract law. Finally, in Part III, this Article will examine a number of contracts cases across several different remedial frontiers to show how courts frequently consider the wrongfulness of the promisor’s breach when determining which “compensatory” remedy to award, which, of course, suggests that what they are really doing is not really compensation at all, but retributively punishing the breaching parties for their wrongful conduct.

This Article examines the relationship between contract and property law by examining the extent to which parties tend to conceptualize and treat contracts as property. In doing so, this Article seeks to answer a question residing at the intersection between contract and property law, namely, whether the promises underlying contracts merely constitute a form - an empty vessel into which substantive property rights are poured - or whether they constitute something more substantial, perhaps even a species of property itself. If it is the latter, which I suspect it is, this suggests that, at the very least, one can understand contract law and some of its more pressing problems much better (such as whether to allow efficient breach, or whether to continue the common law's expressed preference for money damages over specific performance) by viewing them, at least in part, through a property-based lens. More ambitiously, if the promises in contracts can be shown to be valued as a type of property, then policy makers would do well to consider various property-based solutions to contract law previously thought to be unavailable or inappropriate.

To test whether, and to what extent, contract law has its basis in property, I conducted an experiment to examine whether the endowment effect - a key component of property law and one of the most important findings in behavioral economics - plays a role in the way parties tend to think about contracts. The endowment effect, which has been called “the most significant single finding from behavioral economics for legal analysis to date,” holds that individuals tend to value those things they happen to own more than they would have valued those same things if they happened not to own them. So, for instance, the endowment effect has shown that individuals who tend to value a particular item (e.g., a candy bar) at $1 will frequently place a greater value on that item (more than $1) once it is given to them and they come to think about that item as their private property. This strange result not only challenges our understanding of how value is traditionally measured, but it stands in stark contrast to one of the most important tools of legal analysis: the Coase theorem.

According to the Coase theorem, an individual who places a one-dollar value on an item such as a candy bar should value that candy bar at $1 whether it is in the store or in their pantry: the mere ownership of an item should not change a party's valuation of that item one way or another. More formally, the Coase theorem predicts that “the allocation of resources to individuals who can bargain and transact at no cost should be independent of initial property rights.” Consequently, where bargaining is costless, the price an individual is willing to pay (WTP) to acquire an item (such as a candy bar) should be equal to the price an individual is willing to accept (WTA) to part with that same item. The endowment effect provides empirical evidence against the Coase theorem's prediction by revealing that, in fact, individuals frequently provide very different answers to the questions “how much would you buy item X for if you did not own it” and “how much would you sell item X for if you did own it.” The difference between the two values offered for “X” has come to be called the “willingness to pay” versus “willingness to accept” gap (or the WTP-WTA gap), and has also been referred to as the “offer-asking problem.”

While there is substantial research supporting the endowment effect in property law, there have been few tests, and little direct evidence, of such an effect in contract law. This seems strange, because contract law is a place where the WTP-WTA gap would, if it existed, seem to be of the greatest practical importance. This is because the offeree's WTP and the offeror's WTA is what accounts for the desire of parties to enter into contracts in the first place, and is therefore at the heart of the types of transactions with which contract law is concerned! Stated simply, unless a party believes it will increase its utility (broadly defined) by entering into a bargain with another party to exchange property rights, that party will refuse to contract. Instead, the party will prefer to maintain the status quo.

Not only is it strange, but the fact that the endowment effect has not been directly tested on the promises making up contract law is also unfortunate. As other scholars have argued, contract law seems to share a number of other important characteristics with property law, and both fields might benefit by bridging this theoretical divide. Specifically, if the presence of an endowment effect, which has heretofore only been associated with the ownership of property, can also be detected in contract law, it would seem to indicate that, on at least some level, that contract law behaves like and possesses characteristics of property law as well. This finding would not only help bridge these seemingly distinct areas of law, but would allow important insights gleaned from one area to be transferred to the other, as discussed more fully in the Article's conclusion.

Therefore, this Article fills this empirical gap and tests whether, and to what extent, the endowment effect applies directly to the promises to exchange goods (i.e., contracts), rather than to the property that is frequently exchanged through the medium of contract. More specifically, the question explored in this Article is whether an individual who does not yet “own” an item, but merely has some contractual right to obtain that item at some future date would also experience something like the endowment effect in the promise itself.

According to Aristotle, justice consists of giving each person his due: equal members of society should be treated equally, and unequal members, unequally. This justice, in turn, comes in two flavors: distributive and corrective. Distributive justice — which has as its purview society at large — is concerned with distributing society’s shares to individuals according to merit. Whereas, the purview of corrective justice concerns voluntary (e.g., contracts) and involuntary (e.g., torts) transactions, and it seeks to rectify unjust alterations in the distributive scheme by returning the parties to the position they occupied before the distributive scheme was altered, which is to say, before a particular harm occurred.

Even today, Aristotle’s classification of these two types of justice holds a firm grip on the judicial imagination, and perhaps nowhere is this truer than in contract law. There, it is taken for granted that the distributive shares held by members of society are determined both prior to, and outside of, contract law. The distributive question having been settled, it is believed that the proper role of contract law is merely to (a) facilitate the just exchange of these distributive shares by allowing parties to bargain and form agreements with one another and (b) rectify any unjust alteration to these previously established distributive shares. To couch this in Aristotelian terms, contract law should be concerned with enforcing the rules of corrective justice — which will facilitate and rectify the just exchange of previously allocated distributive shares — but should not be concerned with the initial distribution of those shares.

This Article challenges that view, and argues that the seemingly value-neutral rules of contract law are fundamentally distributive in nature, and that to ignore these distributive considerations is more than just bad policy — it is to misunderstand how the fundamental building blocks of the law are arranged to form contract law in the first place. Indeed, given the distributive nature of contract law, even the most non-activist judge imaginable, who sees it as his or her role to simply apply the law as written, and who views it as entirely improper to consider notions of distributive justice for the purpose of achieving a fairer distribution of wealth among members of society, nevertheless cannot help but make distributive decisions whenever he or she selects among or administers the rules of contract law, which have embedded within their very structure a deeply entrenched view of distributive justice.

This is because every determination of law, including the determination of which rights ought or ought not to exist, or ought to be applied in a particular contractual setting, is the product (intentional or otherwise) of a policy decision regarding not whether the legal relationship in question ought or ought not to be regulated, but how that relationship should be regulated. And this regulation, in turn, requires that judges — even judges who adamantly view themselves as non-activist judges — make an ex ante distributive decision regarding which rights ought and ought not to exist, which rules ought and ought not to apply, and how those rights and rules ought and ought not be protected. These decisions, in turn, must all be made as a matter of policy rather than law.

Teasing out the implications of these insights can fundamentally alter the way we view and understand contract law. For instance, once we realize that the various legal rules that govern contract law are made up of a conglomeration of policy decisions regarding how to regulate (rather than whether to regulate) the relationship between the contracting parties, one of the largest obstacles to regulation — that of the perceived judicial interference with the rights of the parties — is removed as the need for regulation is now seen as mandatory rather than permissive. And because regulation is mandatory, the real question ought to be how we should understand, if not change, the manner in which the selection, application, and interpretation of contract rules affects the distributive arrangements between the parties to a contract.

This Article provides a new way of organizing and thinking about what is perhaps the most important, useful, and ubiquitous – yet misunderstood, neglected, and underdeveloped – area in all of law: remedies. Even though remedial issues are present in every case, too little theoretical attention has been paid to them, leaving a wide array of remedial doctrines – ranging from injunctions to declaratory decrees, punitive damages to contempt, and unjust enrichment to specific performance – in search of a unifying theory.

This Article is the first to offer such a theory. Specifically, I argue that the broad array of seemingly distinctive remedies, operating over diverse subject matter areas, can be organized and justified by way of four distinct but related remedial principles: the principles of restoration, retribution, coercion, and protection. Each principle focuses on either the victim or the wrongdoer from a distinct (ex ante or ex post) temporal perspective. These principles, in turn, allow one to organize and unify a large swath of seemingly unique and unrelated remedies under a broad conceptual umbrella.

More importantly, however, by showing that all remedies are little more than specific instantiations of general remedial principles, it is my hope that this Article – by identifying and exploring the relationship between and among these principles – can help judges, practitioners, and policy makers think more clearly about what they are doing, as a descriptive matter, and ought to be doing, as a normative matter, when awarding and justifying a remedy – a matter they must consider no less frequently than in every single case.

This Article presents a reworking of Jorge Luis Borges’ short story, Pierre Menard, Author of the Quixote, as applied to the U.S. Constitution. In Borges’ original story, which deals with important issues governing interpretation, the creation of meaning, and the ascertainment of original intent, Borges’ fictional scholar, Pierre Menard, undertakes to translate Cervantes’ Don Quixote for a modern audience by creating a Quixote that could have been written by Cervantes today. To do so, Menard begins by immersing himself in the world of 17th century Spain, much as an originalist today might immerse him or herself in 18th century America, as a first step in providing an accurate, yet modern, “translation” of the text. As he undertakes the process of translation, however, Menard comes to recognize that the words and phrases used by Cervantes have come to mean something quite different today. Further, he realizes that any change to the words themselves would fail to produce a truly modern translation of this canonical text because it would cause the loss of textual richness and interpretative understanding accumulated over generations. Therefore, in a stroke of genius, Menard recognizes that the best way to translate the Quixote to preserve the text’s modern meaning is to produce word-for-word, line-for-line “translation” of the antiquated original! It is important to note that Pierre Menard adamantly maintains that his word-for-word rendition of the original words is not simply a “copy” of the original text. Rather, as Borges’ original story suggests, Menard has actually produced a much more nuanced text than Cervantes, one that, though verbally identical, “is almost infinitely richer” in that the words penned by Cervantes no longer mean what they once did, but have become imbued with the accumulated historical understanding of many generations.

The parallels to the current debate surrounding the interpretation (or translation, if you will) our own Constitution are unmistakable. The words no longer mean what they once did, and the best way to convey the current meaning of the Constitution is by using the antiquated words and phrases of the 18th century original. These words and phrases, though they have themselves remained the same, are now viewed through the lens of the historical events (e.g., the Civil War, Reconstruction, and New Deal) and judicial precedents (e.g., the Dred Scott decision, Plessy v. Ferguson, and Brown v. Board of Education) so powerful as to have changed the meaning (though not the spelling) of the words themselves!

Therefore, in the text that follows, I have attempted to present these parallels by adapting Borges’ story to the U.S. Constitution. I have tried to keep as much of Borges’ original text as possible – including even the structure of his seemingly obscure academic footnotes – while changing what was necessary of the characters, footnotes, and themes to discuss legal, rather than literary, topics.

More specifically, in my version of the story, I attempt to propose, through the text, and develop, through the footnotes, a theory of constitutional “interpretation as translation” based on the scholarship of Borges’ fictional character, Pierre Menard, as told by a law professor intimately familiar with Professor Menard’s work. In my version, Professor Menard takes it upon himself to update and revise the U.S. Constitution for the twenty-first century and, in so doing, is confronted with a difficult problem of preserving the document’s modern meaning. Professor Menard acknowledges that many of the original words, phrases, and clauses used by the Framers have taken on new meaning over time, or have lost their meaning altogether, which renders the process of interpretation particularly elusive and odious. In a deeply profound exploration of the meaning of meaning, Professor Menard comes to the stark realization that his project of updating the Constitution for the modern generation must necessarily consist not in interpreting the text, but in translating it.

Having made this methodological leap, Professor Menard is next faced with the daunting task of choosing carefully the words, phrases, and clauses that will convey to the modern generation how the Constitution’s text, which was drafted over two centuries ago, should be understood today. Here, Professor Menard makes his second leap: given that the words of the constitution have become imbued with new meaning over time, in part due to historical circumstances, in part due to subsequent legislation, and in part due to judicial “interpretation” and development, the best way of “translating” the Constitution to capture and preserve how it is commonly understood today consists, ironically, in rewriting the text so that it is identical to the original! In undertaking this task, Professor Menard shows how constitutional “interpretation,” even (especially) while remaining faithful to the original text, can be better thought of not as an act of constitutional discovery, but one of constitutional creationism, in which the reader (usually a judge, but arguably the governed) creates meaning by translating and transforming the source text into something simultaneously new and familiar. This places Professor Menard’s theory in the unique position of both accepting textualism while rejecting its usual bedfellow, originalism, at least as that latter concept is commonly understood today. According to Professor Menard, original intent is relevant only to the extent that We The People of the here and now have interpreted this intent, but by this point, it is our contemporary translation (or interpretation, if you prefer) of the Founders’ intent, rather than the Founders’ intent itself, that ultimately controls and governs what we call meaning.

This Article critically examines Holmes’ widely influential but controversial “bad man” theory of law from its inception during a speech Holmes gave for the dedication of a new hall of the Boston University School of Law in 1897, through its development over the next century, to its current influence over legal fields as diverse as contract law, tort law, and modern punitive damages jurisprudence. Despite its extraordinary influence, this Article will argue that Holmes’ theory has been widely misunderstood, and can be more profitably understood, by both supporters and critics alike, not as supporting the bad man but the good, by providing an effective counterpart to the traditional positivist theory of law for which Holmes’ bad man theory of law has so often been associated. Indeed, Holmes’ theory, which has been portrayed by some as supporting the argument for the strict separation of law and morality, has been attacked by its critics both descriptively (as providing an incomplete picture of the law) and normatively (as providing an immoral or, at best, amoral theory of law), and has been accused of artificially driving a wedge between law, on the one hand, and justice or morality, on the other. Far from overlooking this relationship, however, a careful reading of Holmes suggests that he was himself well aware of the intimate relationship between law and morality, and seems to have recognized, somewhat surprisingly, that only by engaging in an analytical separation of these two concepts can they then be normatively reunited in an intellectually consistent and satisfying manner. In short, Holmes’ theory supports the idea that only by recognizing the differences between the concepts of law and justice, rather than by stressing their similarities, can the two be brought together and integrated into the social fabric upon which law must necessarily rest.