ARCHITECTURE

so as not to include ‘peculiar advantages of skill, shrewdness, and experience, regarding
which . . . no one has a right to call upon us to abandon. Here, justice permits us to use
our superiority freely.’ ‘All know what a wide difference exists among men in these points,
and whatever advantage may result from that inequality, is silently conceded in the
very fact of making a bargain. It is a superiority on one side – an inferiority on the other,
perhaps very great, but they are allowed. This must be so; the business of life could not
go on were it otherwise.’ Thus, while he refused in theory to separate law and morality,
Verplanck confined fraud to a range sufficiently narrow to permit the contract system to
reinforce existing social and economic inequalities.” Gulian C. Verplanck, An Essay on the
Doctrine of Contracts: Being an Inquiry How Contracts Are Affected in Laws and Morals,
By Concealment, Error, or Inadequate Price (New York: G. & C. Carvill, 1825), cited and
discussed in Horwitz, The Transformation of American Law, 182–183.
17. “[I]n a society in which value came to be regarded as entirely subjective and in which
the only basis for assigning value was the concurrence of arbitrary individual desire,
principles of substantive justice were inevitably seen as entailing an “arbitrary and
uncertain” standard of value. Substantive justice, according to the earlier view, existed
in order to prevent men from using the legal system in order to exploit each other.
But where things have no “intrinsic value,” there can be no substantive measure of exploitation
and the parties are, by definition, equal. Modern contract law was thus
born staunchly proclaiming that all men are equal because all measures of inequality
are illusory.” Horwitz, The Transformation of American Law, 161.
18. This is not to say that speculations over the future value of investments were not a
feature of pre-eighteenth century markets (in fact, market speculation has been traced
to, at least, the thirteenth century, such as with the development of Genovese contracts
of “comanda” for long-distance trade), but rather that contracts were not an essential
legal-bureaucratic vehicle for the establishment of regional, national, and international
market economies until the late eighteenth century. Until then, merchants had relied
on a variety of customs, documents, and instruments to stabilize, hedge, or attempt to
fix the risks associated with bad investments and the potential of a party’s failure to perform
as agreed. These ( juridically) non-enforceable instruments and practices included
private forms of mercantile arbitration, the use of bills of exchange, bonds, and sealed
agreements to govern business dealings—instruments that were rarely considered worthy
evidence in cases of contractual breach by pre-eighteenth century courts, but which were
able to exert pressure in the realms of banking and the market. See Ibid., 172.
19. “[T]he moment at which courts focus on expectation damages rather than restitution
or specific performance to give a remedy for nondelivery is precisely the time at which
contract law begins to separate itself from property. It is at this point that contract begins
to be understood not as transferring the title of particular property, but as creating an
expected return. Contract then becomes an instrument for protecting against changes
in supply and price in a market economy. The first recognition of expectation damages
appeared after 1790 in both England and America in cases involving speculation in stock.
. . . Between 1799 and 1810 a number of English cases applied the rule of expectation
damages for failure to deliver stock on a rising market. In America the transformation
occurred a decade earlier, in response to an active “futures” market for speculation in
state securities which rapidly developed after the Revolutionary War in anticipation of
the assumption of state debts by the new national government. The earliest cases allowing
expectation damages on contracts of stock speculation appeared in South Carolina,
Virginia, and Pennsylvania.” Ibid., 174.
20. “The underlying logic of the attack on a substantive doctrine of consideration came to
fruition in America with the great New York case of Seymour v. Delancey (1824), in
which a sharply divided High Court of Errors reversed a decision of Chancellor Kent,
who had refused to specifically enforce a land contract on the ground of gross inadequacy
of consideration between the parties. ‘Every member of this Court,’ the majority opinion
noted, ‘must be well aware how much property is held by contract; that purchases are
constantly made upon speculation; that the value of real estate is fluctuating.’ The result
was that there ‘exists an honest difference of opinion in regard to any bargain, as to its being
a beneficial one, or not.’ The court held that only where the inadequacy of price was itself
evidence of fraud would it interfere with the execution of private contracts.” Ibid., 179–180.
21. On the history of corporate “personhood”, see Joshua Barkan, Corporate Sovereignty: Law
and Governance under Capitalism (Minneapolis: University of Minnesota Press, 2013),
Chapter 3, “Personhood.”
22. “[C]ontractarian ideology above all expressed a market conception of legal relations.
Wages were the carefully calibrated instrument by which supposedly equal parties
would bargain to arrive at the proper “mix” of risk and wages. In such a world the old
ideal of legal relations shaped by a normative standard of substantive justice could
scarcely coexist. Since the only measure of justice was the parties’ own agreement, all
preexisting legal duties were inevitably subordinated to the contract relation.” Horwitz,
The Transformation of American Law, 209.
23. “The doctrine of “assumption of risk” in workmen’s injury cases expressed the triumph
of the contractarian ideology more completely than any other nineteenth century legal
creation. It arose in an economywhich already had all but eradicated traces of an earlier
model of normative relations between master and servants. And without the practice
of enforcing preexisting moral duties, judges and jurists could no longer ascribe any
purpose to legal obligations that were superior to the expressed “will” of the parties.
As contract ideology thus emasculated all prior conceptions of substantive justice, equal
bargaining power inevitably became established as the inarticulate major premise of all
legal and economic analysis. The circle was completed; the law had come simply to ratify
those forms of inequality that the market system produced.” Ibid., 210.
24. “Since the authority of commercial custom could not easily be absorbed into the traditional
category of ancient usage, Mansfield instead emphasized its universal character
and its correspondence with the dictates of natural reason. It was, Mansfield frequently
reiterated, not the law of any one country but of the entire civilized world. Proof of particular
commercial customs, therefore, served only as evidence of universal mercantile
custom that already had ripened into a rule of law.” Ibid., 189–90. “Once the subjective
theory of contract had performed the function of enabling judges and jurists to destroy
the connection between contract law and a conception of objective value, they felt free
once again to revive an objective theory of contract and to reintroduce its intellectual
companion, a conception of general mercantile custom.” Ibid., 196.
25. “Courts, in essence, were developing a series of new doctrines designed to apply to
large impersonal business dealings between commercially sophisticated insiders which,
we have seen, were rapidly replacing the face-to-face transaction as the dominant mode
of trade.” Ibid., 200.
26. “Once contractual obligation was founded entirely on an arbitrary ‘meeting of minds,’
it endowed the parties with a complete power to remake law. To the extent that it
was seriously followed it made every contract a unique event depending only on the
momentary intention of the parties. National markets, however, required uniformity and
standardization, which inevitably entailed a sacrifice, at least in theory, of the individual’s
power to contract. The emergence of the objective theory, then, is another measure of the
influence of commercial interests in the shaping of American law. No longer finding it
necessary to enter into battle against eighteenth century just price doctrines, they could
devote their energies to establishing in the second half of the nineteenth century a system
of objective rules necessary to assure legal certainty and predictability. And having
destroyed most substantive grounds for evaluating the justice of exchange, they could
elaborate a legal ideology of formalism, of which Williston was a leading exemplar, that
could not only disguise gross disparities of bargaining power under a facade of neutral
and formal rules of contract law but could also enforce commercial customs under the
comforting technical rubric of ‘contract interpretation’.” Ibid., 200–201.
27. Thorstein Bunde Veblen, Absentee Ownership. Business Enterprise in Recent Times:
The Case of America 3rd ed. (New Brunswick: Transaction Publications, 2009 [1926]).
See also: Adolf A. Berle, and Gardiner C. Means, The Modern Corporation & Private
Property (New York: Macmillan, 1932).
28. “[F]rom about the beginning of the twentieth century the preponderant nature of
property has been changing again, and property is again beginning to be seen as a right
to something; now, more often than not, a right to a revenue rather than a right to a
specific material thing. . . . [T]he rise of the corporation as the dominant form of business
enterprise has meant that the dominant form of property is the expectation of revenue.
The market value of a modern corporation consists not of its plant and stocks of materials
but of its presumed ability to produce a revenue for itself and its shareholders by its organization
of skills and its manipulation of the market. Its value as a property is its ability to
produce a revenue. The property its shareholders have is the right to a revenue from that
ability.” Macpherson, Property, 8.
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