Ian MacNeil and the the relational theory of contract

efficiency” analyses of remedies rules (Macneil 1988b)): The microeconomic model assumes the existence of very complex relations between the parties ... But once such relations are assumed, the impact of those relations on the analysis is typically ignored. Ceteris paribus conquers all. Thus, it is extremely easy to introduce selected transaction costs to show that the model ‘proves’ what the modeller wants it to prove, while ignoring countless other transaction costs of equal or greater pertinence in the real world ... the ease of slipping in some but not all, transaction costs is a problem ... within the model. There is a fundamental intellectual flaw in using a model based on man-outside society to analyse the behaviour of man-insociety ... The particular fallacy of the simple-efficient-breach theory is relatively easy to uncover but potential fallacy lurks in all social analysis starting from the non-social, relation-omitting model of neo-classical economics (Macneil 1982b, 961). 5.2. Posner’s evaluation of Macneil Macneil has not been completely ignored by the proponents of the law and economics of the classical law, who have made two distinct responses to his views, though both amount to a rejection of those views. The first is to deny that Macneil’s view of contract is accurate. As Posner has put it: “I do not think ... Professor Macneil a reliable guide to the nature and problems of modern American contract law” (Posner 1993, n. 20). What really is at issue here is the extraordinary extent to which law and economics after Posner works with the most formal notions of contract doctrine, ones which by no means would now be maintained in the best black-letter scholarship. Macneil has recounted the following event which, on the basis of my own experience, I suspect captures a quite common experience: To refer to someone as a Willistonian is to describe them as addicted to discrete general contract law. In January 1986 at a panel of the Association of 30 American Law Schools, I referred to a particular view as Willistonian, and for the first time in decades heard a defence of Williston! Although I was taken aback at the time, I also recall musing on many occasions about the failure of those law and economic scholars habitually defending what are in fact Willistonian views to resurrect his sainthood (Macneil 1987a, n. 19). Comment here is superfluous on criticisms of Macneil that are not informed by an awareness of the difficulties of the classical law. To critics without such an awareness, his work must, indeed, seem outlandish (Feinman 1990, 1299-1300). A second response has been to register some of the difficulties of the classical law but to say that Macneil’s work does not assist in coming to terms with them. Posner puts the point this way: Macneil believes that contract law has been too much concerned with spot contracts to the exclusion of contracts embedded in an ongoing relationship between the contracting parties ... unfortunately, although all too commonly when one is speaking of legal ‘theories’ that lack a foundation in economics, Macneil’s theory of contracts has very little content ... If [Macneil] means that we must recognise the problems and opportunities that arise when parties have a continuing relation rather than merely meeting in a spot market, I agree. Such a relation may make contracts self-enforcing, because each party stands to lose if the relation terminates. Conversely, it may create temptations to opportunistic[ally] breach maybe one party’s performance precedes the other’s or problems of bilateral monopoly, which can be acute in cases in which one party seeks modification of a contract, because the parties can deal only with each other. These are problems on which economics has a strong grip; so far as I am able to determine, neither Macneil nor any other ‘legal theorist’ has anything to contribute to their solution (Posner 1993, 84). All one can say is that one is obliged to follow the line indicated by Macneil if one seeks to frame one’s answers to such problems as they are understood by the parties and dealt with by empirical contractual practices. Of course, one can substitute for these facts formal economic assumptions of remote relationship to the understandings of the parties and formal contractual doctrines which are quite inaccurate accounts of business practice. One really must make a choice about the approach one finds superior. More fairly, Trebilcock allows that “Macneil’s