The Emergence of Dynamic Contract Law

Abstract

Contract law doctrines can be ranged along various spectra. One of these spectra runs from the static to the dynamic. A contract law doctrine lies at the static pole of this spectrum if its application turns entirely on what occurred at the moment in time when a contract was formed. A contract law doctrine lies at the dynamic pole if its application turns in significant part on a moving stream of events that precede, follow, or constitute the formation of a contract. Another spectrum runs from the binary to the multifaceted. Contract law doctrines are binary if they organize the experience within their scope into only two categories. Contract law doctrines are multifaceted if they organize the experience within their scope into several categories, including one or more intermediate categories.

Classical contract law was a rigid, rather than a supple, instrument. Its rules were often responsive to neither the actual objectives of the parties, the actual facts and circumstances of the partiesâ transaction, nor the dynamic character of contracts. Instead, the rules of classical contract law were centered on a single moment in time, the moment of contract formation. accordingly, classical contract law doctrines were almost wholly static and also tended to be binary.

The twentieth century witnessed the development of a modern contract law that has largely overthrown classical contract law. This overthrow has occurred in two ways. To begin with, in many cases modern contract law has reversed or fundamentally modified the rules of classical contract law. More important than the overthrow of specific rules of classical contract law, however, has been the overthrow of the deep structure of classical contract law. Where classical contract law had an overriding preference for rules that were objective and standardized, modern contract law has been highly flexible in adopting rules that are individualized and even subjective. Where classical contract law rules were typically binary, modern contract law rules are often multifaceted. Finally, where classical contract law was largely static, modern contact law is, in large part, dynamic. So, for example, static rules of interpretation have been replaced by dynamic rules that take into account events before and after the moment of contract formation; the static legal-duty rule has withered almost completely away, to be largely replaced by a dynamic modification regime that takes into account the value of ongoing reciprocity; a static judicial review of liquidated damages provisions is giving way to a dynamic review that takes account of the actual loss; and static offer-and-acceptance rules have been replaced by dynamic rules, such as the duty to negotiate in good faith.