The Common Sense of Contract Formation

Authors

Tess Wilkinson-Ryan, University of Pennsylvania Carey Law SchoolFollow
David A. Hoffman, Temple University, Beasley School of LawFollow

ORCID

Document Type

Article

Publication Date

2015

Abstract

What parties know and think they know about contract law affects their obligations under the law and their intuitive obligations toward one another. Drawing on a series of new experimental questionnaire studies, this Article makes two contributions.First, it lays out what information and beliefs ordinary individuals have about how to form contracts with one another. We find that the colloquial understanding of contract law is almost entirely focused on formalization rather than actual assent, though the modern doctrine of contract formation takes the opposite stance. The second Part of the Article tries to get at whether this misunderstanding matters. Is it the case that, and when do, beliefs and misunderstandings about the nature of legal rules affect parties’ interactions with each other and with the legal system? We find that, indeed, information that a contract has been legally formed has behavioral effects, enhancing parties’ commitments to a deal even when there are no associated formal sanctions. However, we also document a series of situations in which misunderstandings have limited practical repercussions, because even parties who believe that legal obligation is about formalities take seriously the moral obligations associated with informal promises and exchanges. We conclude with brief speculations about the implications of these results for consumer contracts.

Keywords

Contracts, psychology, behavioral law & economics, microeconomic behavior, contract negotiation, drafting, formation, agreement, assent, formality, mailbox rule, terms that follow, moral norms, reciprocity, social obligation, performance, formalism, spectrum of obligation, empirical analysis

Publication Title

Stanford Law Review

Publication Citation

67 Stan. L. Rev. 1269 (2015)

Repository Citation

Wilkinson-Ryan, Tess and Hoffman, David A., "The Common Sense of Contract Formation" (2015). All Faculty Scholarship. 837.
https://scholarship.law.upenn.edu/faculty_scholarship/837