CONTRACT LAW IN AMERICA
A Social and Economic Case Study
by
LAWRENCE M.
FRIEDMAN
Classics of Law & Society Series
Quid Pro Books
New Orleans, Louisiana
Copyright © 2011 by Lawrence M. Friedman. All rights reserved. No material in this book may be reproduced, copied or retransmitted in any manner without the written consent of the current publisher. Foreword copyright © 2011 by Stewart Macaulay.
Originally published by the University of Wisconsin Press, Madison and Milwaukee, Wisconsin. Copyright © 1965 by the Regents of the University of Wisconsin. Library of Congress Catalog Card Number 65-13504.
Published in 2011 by Quid Pro Books, at Smashwords.
ISBN: 1610279786 (ePub)
ISBN-13: 9781610279789 (ePub)
Quid Pro, LLC
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Publisher’s Cataloging-in-Publication
Friedman, Lawrence M.
Contract law in America: a social and economic case study / Lawrence M. Friedman.
p. cm.
Includes bibliographical references, appendix, and index.
Series: Classics of Law & Society.
1. Legal history—United States. 2. Law—United States—contract law. 3. Law—United States—commercial law. 4. Law—United States—Wisconsin. I. Title. II. Series.
KFW2550 .F7 2011
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To Leah
FOREWORD | 2011
Dodos, Unicorns and Sleeping Rattlesnakes
THERE ARE many reasons to read a book that was published over 45 years ago. We could want to smile at the quaint assumptions of those working in the pre-computer age. We might want to feel some satisfaction that we have solved the problems raised by the book. We might wonder whether we could understand positions taken today if we traced their origins back to those who worked in the field at an earlier time. However, the best reason to read an older book is that it raises important problems that have not been solved yet. It is even better if the book offers important insights relevant to a solution.
Lawrence Friedman’s first book, Contract Law in America, still challenges those who research, write and teach in the field of contracts. His findings and arguments still call for a serious response today. He looked at the contracts cases coming before the Supreme Court of Wisconsin at three periods: the organization of the Wisconsin Territory to the Civil War (1836-1861); the Progressive era in the first two decades of the twentieth century (1905-1915); and a time ten years after World War II (1955-1958). He asked what kinds of contract cases came before the court, and how did it decide them? Once Friedman established this, he looked at scholars restating, writing, and teaching contract law. The conventional ideal is a contract law that is abstract and formal. This kind of law should be highly predictable. However, some professors see the actual American contract law, in Duncan Kennedy’s phrase, as a hard core of pure doctrine surrounded by a soft periphery of justice-seeking “exceptions.” Nevertheless, peripheries tend to expand and push aside cores.1 We always must watch out for the difference between what courts say and what they do.
Friedman found that the Supreme Court of Wisconsin did not confront the major economic issues of the state in its contracts decisions. People did not bring those issues before the court very often. Most cases were settled before or during litigation. Cost barriers increased, and more and more business involved long-term continuing relations which have their own norms and sanctions for failing to do what was promised. Moreover, during the periods that Friedman studied the court’s contract decisions, the subject matter of pure contract was taken away by other bodies of law. For example, the areas of insurance, employment and trade regulation all removed disputes from the domain of pure common law contract. However, few legal scholars noticed this. As a result, instead of hard, abstract and formal contract law, the court used malleable concepts such as waiver and estoppel, and substantial performance, and it limited damages to the difference in value of what was delivered and what was promised. It sought what it saw as just results on the facts of the particular case before it.2
Friedman asked what this means for contract research and teaching. He answered in a manner designed to offend many contracts scholars in 1965 and perhaps today as well. First, he said, “[T]he subject matter had long since flown away. Instructor and student were grappling with trivia.”3 Second, he put the situation in his own metaphor: “Carried into modern times by treatise writers and the Restatements, the common-law approach to law in the schools and in legal literature at its worst could be compared to a zoology course which confined the study to dodos and unicorns, to beasts rare or long dead and beasts that never lived.”4
In a recent review of this book,5 I sought to add a qualification to Friedman’s position. Much contracts scholarship is focused on dodos and unicorns. However, contract law itself could at times better be described as a sleeping rattlesnake that only looks dead. In appropriate (or sometimes inappropriate) situations, lawyers and courts could wake it up and it could bite the unsuspecting. My example was the way corporate lawyers undercut consumer and employee protection laws by hiding an incomprehensible arbitration clause in fine print that few consumers or employees would find and understand before the deal was closed. Then the lawyers assigned the arbitration to a kangaroo court in Patagonia. Some courts enforced these pretend contracts. Others found them unconscionable. I know, I know . . . not all consumer and employee arbitration has to be a joke, and some arbitration providers may be better for consumers and employees than courts. Maybe even the terrible arbitrators serve to cut costs, and maybe these savings are passed on to the total group of consumers and employees. In this way, perhaps those who are treated badly are sacrificing for the rest of us who get lower prices. The sleeping rattlesnake woke up and bit those who are suffering for the rest of us.
Friedman did see a role for courts applying what could be called contract law. Contract was the law of leftovers. He wrote:
So long as social change remained possible, so long as new kinds of business, new products, new techniques kept emerging, the court retained a small but vital role. Between the time when new business practices evolve and the time when the kinks have been smoothed out of forms and documents relating to the emerging practice, some agency of law must be ready to solve unforeseen problems. When continuing relations break down, or in cases of novel business problems or fluid business hierarchical arrangements, the court performed this role.6
How have contract scholars responded? Friedman’s book was widely reviewed, and it was quoted and praised in Grant Gilmore’s The Death of Contract.7 Gilmore’s 1974 book provoked much writing that defended the “old time religion, it was good enough for grandpa, and it’s good enough for me.” For example, Professor Stanley Henderson wrote:
That each beginning law course carries a designated title confirms the existence of an established body of learning, organized and subdivided into fields. In presenting one of these fields to students we are space-bound by received classifications; there is a language to be learned and a culture to be passed on.8
Professor Robert Childres taught (at that time) at New York University Law School. He challenged Friedman’s method. He objected to generalizing from the experience of “one provincial state.”9 I am reminded of Saul Steinberg’s A View of the World from Ninth Avenue, a classic cover from The New Yorker.10 I don’t think that Childres fairly could argue that a study of New York appellate opinions would come to a different result from Friedman’s findings without doing the hard work of gathering and analyzing the cases.
Indeed, I can think of three classic New York Court of Appeals opinions that have appeared in many casebooks. Mitchill v. Lath11 is the well-known ice house case. Ms. Mitchill argued that the sellers of property had promised to tear down what she saw as an ugly ice house that spoiled her view. However, this promise did not make it into the written real estate purchase contract. The Court of Appeals (the state’s highest court) drew on formal abstract principles to deny her claim. She was not allowed to offer evidence of the alleged oral promise.
In Jacobs & Young v. Kent,12 a wealthy lawyer was unhappy with the way a general contractor had built the lawyer’s expensive house. The owner looked for an out. He found that while the written contract called for cast iron pipe throughout the building manufactured by the Reading Pipe Company, the contractor had substituted another brand of pipe. There was evidence that the quality of the two brands of pipe was the same. Judge Benjamin Cardozo, writing for the court, found that the contractor had substantially performed, and so it was entitled to recover the contract price less the owner’s damages. However, Cardozo then calculated the owner’s damages as the difference in value between a house with Reading pipe and one with the brand actually installed. There was no difference, and so there was no damage.
In Allegheny College v. National Chautauqua County Bank,13 a donor made a promise to make a contribution to a college. Judge Cardozo construed the facts to find a return promise to use the funds for a memorial fund. As a result, the promise was supported by consideration.
Notice that none of the three New York cases involved transactions of great significance to the economy. Two of the three fit Friedman’s assertion that when this was true, a “court is more apt to turn to the particular situation before it, and to seek an adjustment which accords with current notions of fairness in the particular situation, untroubled by considerations of grand generality.”14 Of course, these are only three cases, but they suggest that the pattern that Friedman had found in Wisconsin might not be limited to that odd provincial state.
Perhaps more telling today than these examples is Professor Robert Scott’s study of appellate opinions applying Article 2 of the Uniform Commercial Code, particularly those sections calling for contracts to be interpreted according to the norm of commercial reasonableness.15 Scott looked at a much later period than was covered by Friedman’s work. Scott found, in Friedman’s terms, that the courts have not sought to create or apply abstract formal norms. Scott complains: “[C]ourts have consistently interpreted these statutory instructions not as inductive directions to incorporate commercial norms and prototypes, but rather as invitations to make deductive speculations according to ‘Code policy’ or other noncontextual criteria.”16 Scott is unhappy with what the courts have done; Friedman is not. However, Scott’s work supports Friedman’s factual findings if not his normative judgment.
Friedman’s charge that traditional contracts scholarship and teaching involve “grappling with trivia” remains. Are we writing and teaching in a fashion that “could be compared to a zoology course which confined its study to dodos and unicorns, to beasts rare or long dead and beasts that never lived”?17 First, we need some idea of what our courts do and what intellectual tools they use. Second, we need some picture of what is going on in the world of people drafting contracts and struggling to resolve disputes. Here we must ask whether the approaches taken by appellate courts matter much and how. We can expect that the answers might differ as we look to contracts issues in different kinds of cases. Industrial purchasing might be very different from contracts involving borrowing large sums of money or contracts to take over a large corporation. Standard form contracts and consumers may be still another world.
Is the goal of contract law to adjudicate disputes accurately or is it to coerce settlements and compromises? Again, we can ask what function it is playing and has played in the past. We can ask whether what it has done or is doing are good things. David Campbell says provocatively: “Far from it being the function of the law of contract to (so far as possible) prevent breach, the function of the law is to make breach possible although on terms which the law regulates.”18 In all but the exceptional situation, he notes, the aggrieved party will be limited to the difference between the contract price and the market price as damages. This duty to mitigate means that the cost of buying a substitute or the loss on a resale of the goods must be great enough to make a lawsuit a good risk to assume. If the damages are really large and would tempt even a contingent fee lawyer, we then run into Hadley v. Baxendale. Really big damages can be challenged as unforeseeable and not a risk assumed in the bargain. When a plaintiff can jump the Hadley hurdle, then she must get past the proof-of-damages-with-reasonable-certainty barrier. Moreover, sellers routinely disclaim consequential damages in standard form contracts. Add to this the practice of “the settling judge” who twists arms to get cases settled and off his or her docket. How should all this play into scholarship and teaching?
Or we can point to some of the work of Claire Hill.19 She finds that lawyer-drafted contracts often are unnecessarily long and complicated. They frequently have ambiguities that allow for multiple interpretations. Sometimes parties decide to leave matters uncertain. This way, each side has an argument in any potential litigation. Had they tried to negotiate the matter, they might have been forced to accept a clear rejection of their position. Moreover, some terms are hard for anyone to define precisely, and parties may read them differently. It is far easier to use terms such as “material,” “reasonable,” and “best efforts” than to try to give such matters a precise definition. Hill argues that uncertainty in drafting increases the costs of litigation, and this creates a bond against precipitous recourse to the courts. Each side knows that if it starts a lawsuit, the other will be able to impose significant costs. “What the murky contract does is lower the costs for the party sued to countersue.”20 What should we do with the tactics of negotiation and contract drafting? Do we get better settlements if the parties must speculate about what courts are going to do with such a case? Does it matter whether courts use formal abstract rules or attempt to find the just result with qualitative standards? Or is it enough that in many cases difficulties in proving the facts create a large degree of uncertainty whether a plaintiff might win?
What should contract teaching and scholarship be about if we are to avoid dodos and unicorns? How do we deal with sleeping rattlesnakes and contract law as duct tape, serving to patch up problems in a messy fashion that is hardly elegant? Good questions and questions just as alive as when Friedman wrote Contract Law in America.
In addition to struggling with alive problems, reading Contract Law in America will allow readers to experience the writing of Lawrence Friedman. He marches to his own tune. He went to the University of Chicago Law School but was not converted to an unquestioning faith in law and economics. He was a student and a young professor when Karl Llewellyn’s codification of legal realism in Article 2 of the Uniform Commercial Code was all the rage, but he was skeptical of what difference passage of the Code might make. Neutral principles and legal process didn’t do much better. Friedman asked where did these definitions of the roles of judges, legislators and presidents come from? Empirically, the roles that they actually had played throughout history were very different. Critical legal studies also failed to capture his total allegiance. He wanted some evidence that people were misled by the rules of law or that these rules affected their world view and behavior. Instead, Friedman combines scholarship that takes him into dusty archives with insight into the broader effect of both public culture and legal culture. I am continually and pleasantly surprised when I read Friedman.
Moreover, he is fun to read. Long ago, Lawrence and I taught a constitutional law class together. Often when I read Supreme Court opinions, I don’t know whether to laugh or cry. But it is more fun to laugh and so I try to do that. Nonetheless, I found that my role in that class was to play straight man and help set up Lawrence’s funny, if not outrageous, comments. I love his reaction to those law professors who criticized Chief Justice Earl Warren’s opinion in Brown v. Board of Education. They assumed that had the opinion been written better by their standards, it would have had a bigger impact. Friedman responded: “But anybody who feels that a more tightly crafted and better reasoned opinion in Brown would have had a bigger (or even different) impact on life in rural Mississippi (or Washington, D.C., for that matter) than what Warren actually wrote, can’t be living on this planet.”21 If you keep in mind Friedman’s sense of humor well mixed with his anger at stupidity that hurts people, you can understand him better. And just in case all this praise makes any reader question my objectivity about the work of a good friend and coauthor, I’ll raise an objection: Lawrence uses too many semicolons.
STEWART MACAULAY
Malcolm
Pitman Sharp Professor and
Theodore W. Brazeau Professor,
School of Law
University of Wisconsin
Madison, Wisconsin
August, 2011
PREFACE | 2011
MORE THAN 45 years have passed since this book, my first, was published; and it was a strange feeling to pick it up and read it, once more, after all these years.
Does it stand up, now that so much water has gone under the bridge? I suppose that’s not really for me to say. To be honest, I think it does stand up; but of course the author is not to be trusted.
What I can say, somewhat more objectively, is that this work has not been superseded by a flood of later, more rigorous, and more detailed studies. Let me say a word about the background. I wrote this book at the University of Wisconsin, where I was a young professor in the law school. The law school in those days was a remarkable institution. It definitely marched to its own drummer. The dominant figure at the school was Willard Hurst.
And it was Hurst who encouraged me to do this study; and the study, in turn, owes a lot to his influence. It was one of a series of studies of Wisconsin’s legal history for which Hurst acted more or less as a godfather.
It is not much of an exaggeration to say that Hurst invented American legal history. Invented: as least as a serious discipline, and as a branch of general social and economic history. For Hurst, law could not be understood outside of its social context. What I tried to do here was to take the decisions of the Wisconsin Supreme Court, in three separate periods, and look at them from this standpoint. It does not sound like rocket science; but nobody much had done this kind of thing before.
A lot has happened since 1965. A lot of books have been written. A lot of serious studies have been carried out. Legal history is a flourishing field. But surprisingly few studies that I know of have looked at high court decisions, in state courts—or federal courts, for that matter—from the angle of vision that this book exemplifies. And, again, with a few honorable exceptions, the teaching of contracts as an academic subject, has not found it useful or important to take this kind of work into account. Economic analysis: yes, to an extent. But history, culture, and the like; social context; very little indeed.
Of course, I am delighted to see this book in print again. Maybe a contract teacher or two will find it profitable to leaf through the pages. I hope my colleagues in legal history will take a look at it, and perhaps find something useful in its pages. If I had it to do over, I would try to simplify the prose and make the text more concrete, more vivid, more readable. Still, I have moved on, I hope; and on the whole I am satisfied with this, my first-born literary child.
I want to thank Alan Childress, who is responsible for the brash idea of bringing this book back to life; and Stewart Macaulay—for my money, the finest contracts scholar working in the academy today—for honoring me with a foreword. And I thank in advance that small band or readers—not, I hope, too terribly small—who will thumb through the pages. I hope they find what they are looking for.
LAWRENCE M. FRIEDMAN
Marion Rice Kirkwood Professor of Law,
School of Law
Stanford University
Stanford, California
September, 2011
PREFACE | 1964
THE RESEARCH on the subject of this study was largely accomplished during successive summers spent in Madison, Wisconsin, financed by a grant from the Rockefeller Foundation, administered through the University of Wisconsin Law School. Some of the work on the final draft was hammered out during a year’s leave from teaching duties financed by a grant from the Ford Foundation Law and Policy Program at the University of Wisconsin Law School.
This work is one of a series of monographs undertaken at the University of Wisconsin Law School by members of the faculty and visiting scholars, in the general field of American legal history, but with emphasis on Wisconsin materials and with a pronounced bias toward examining the relationship between legal development and economic, political, and social forces at work in the community as a whole. The latter bias (one hopes) hardly needs defending. The emphasis on Wisconsin poses the danger of falling into parochialism or triviality, but bears the promise of increasing knowledge of the legal and social order through attacking primary sources intensively and thoroughly. On the whole, the experiment must be pronounced a success, since the researcher who (as I did) begins his work not as the pioneer but in the middle of the series finds his task lightened and enlightened by the cumulative efforts of those who preceded him. Moreover, what legal history in this country has solely needed is precisely this: the cumulation of sustained and persistent work on a limited body of data. Probably nothing has so crippled historical study of American law as the traumatic effect of some fifty jurisdictions.
Nothing, that is, unless it is the devastating obsoleteness of legal education, which (except for some meager palliatives in upper-class seminars) tends to develop notions and habits of thought inimical to the study of law either as a branch of human behavior or as a chapter in the book of human ideas. Legal education, in general, seeks to teach students “how to think and act like lawyers” and turns its back on imparting “mere facts.” “Mere facts” (if this means rote learning) should of course not be the prime goal of education; but overemphasis on skills training has severe drawbacks of its own. It substitutes manipulation of data for understanding of data, In general, the law schools fail to teach the legal system as a whole, let alone the legal system as part of society; they teach disjointed fragments of a fragment.
This study was not begun as an attempt to debunk legal education or, in particular, the value of spending a good share of the first year of legal education on the classical contours of the law of contracts. But as the study proceeded, I became more and more convinced that the traditional course-work in contracts was outmoded. The subject-matter had long since flown away. Instructor and student were grappling with trivia. The fixed traditions of legal education permit this situation to continue. The conventional discipline is defended as “fundamental”; it grounds students in basic skills and basic legal habits of thought. The typical contracts course never questions the relationship of law to the functioning of our economic system. The materials of study are appellate cases classified by concepts and wrenched out of their social context. They do not pose large issues and are inappropriate for studying such issues. The world of legal education seems strangely unaware of how minor the subject matter of this “fundamental discipline” has become. And yet, in view of the small, residual function of the law of contracts, and the small, residual role of appellate courts in creating principles, institutions, and techniques for governing our economic life, is there any vital reason for the inordinate attention still paid to the classical law of contracts in the law schools? I would argue that there is not. The typical current course might be justified as an excursion into history; but it is not so taught. It might be justified on practical grounds—as a course on fundamental business law and dispute settlement in business. It is not so taught, and cannot be so taught, so long as appellate cases form the bulk of the teaching materials. The traditional course can only be justified as a mental exercise, as a way of inducting the young into the world of the law. But if so, why not inculcate legal reasoning through the study of living, vital institutions, viewed in the full richness of their social and economic meaning?
These are my personal convictions. They are not unrelated to the data of this study. Nonetheless, they involve a mental leap for the reader which (if he is not a law teacher) he may not be interested in making, or (if he is a law teacher) he may be philosophically uninclined to make. This is not a study of legal education, but of the legal system in its social context. It will, I hope, be persuasive in demonstrating certain connections between legal and social institutions. The idea that law is a product of its environment and responds to social and economic forces is certainly commonplace enough. But precise demonstrations of the manner in which law makes this response, and the degree of influence of particular social facts on the law, have not been commonplace. And such demonstrations have been particularly rare for common law (non-statutory) fields, of which contract law is one. This gap in research justifies this undertaking. The reader may judge whether the results in turn justify the effort.
In writing this book, I have run up an enormous intellectual debt to Professor Willard Hurst of the University of Wisconsin Law School. He has been the leading spirit behind the development of the program of research of which this book is one product. His own writings have provided a wealth of ideas and approaches to the field of legal history, particularly American legal history. In addition, he reviewed my work at every stage, spending countless hours discussing it with me, and subjecting the drafts to page after page of searching and invaluable criticism. It is no exaggeration to say that this book would not have been possible without his help.
Many others were of service to me, and I would like to express my gratitude. My colleague Stewart Macaulay made many useful suggestions, drawing on his large and precise knowledge of contract theory and current business practice. Professor Addison Mueller of the University of California at Los Angeles, and Professor Harold Havighurst of Northwestern University read the final draft and made valuable comments. Professor Malcolm Sharp of the University of Chicago read and commented on the manuscript at an earlier stage of its development. I also owe much to the faculties and staffs of the two law schools with which I was connected during the years this project was underway, St. Louis University Law School, and the Law School of the University of Wisconsin, where I presently teach. During the early stages of my work, Eileen Searls, Law Librarian of St. Louis University, went out of her way to be of service. The tortuous course of writing this book demanded the time and effort of many typists, secretaries, and administrative staff-members at the University of Wisconsin. I cannot name them all, but Ann Wallace and Sherry Bate deserve particular mention. Mrs. Ruth Wright helped me greatly with the tedious job of checking the accuracy of my citations. Finally, my wife Leah aided me immeasurably in my work, by serving as sounding-board, guinea pig, proof-reader, and all-purpose helper.
LAWRENCE M. FRIEDMAN
Madison, Wisconsin
Summer, 1964
Contents
Foreword, 2011, by Stewart Macaulay
Preface, 2011, by the author
Preface, 1964
I Toward a Working Definition of Contract
II Contract Law in the Wisconsin Supreme Court: An Analysis of Fact-Situations
III Contract Law in the Courts: A Legal Analysis
IV Contract Law and the Legislature
V Contract Law in the Courts: What the Study Shows
[Page numbers within this digital edition refer to the pagination used in the original edition of the book. Those numbers are found embedded into the text and endnotes of this edition by the use of {brackets}, for purposes of continuity and citation. The subject INDEX, as well, refers to the original page numbers.]
Contract Law in America
INTRODUCTION
THE study which follows deals with legal materials in the mass—cases, legislation, reports of the Attorney General of Wisconsin, other records of the proceedings of legal agencies. In particular, the study analyzes more than 500 contract cases, decided over a period of more than a century by the Wisconsin Supreme Court. It is easy to forget that each of these cases embodies the skeletal remains of a unique human situation: even at its most matter-of-fact and businesslike, the legal system rests on human raw material, both for its personnel and for the work which flows through its agencies. Indeed, one of the major points which this study will make is how the body of contract law—a body of law which presents, on the surface, an almost marmoreal imperviousness to the particular—changed under the attrition of a constant stream of concrete events moving in a definite direction. Before we plunge into the wilderness of theory and induction, it would be well to set out three such cases, drawn from each of the periods which form the major blocks of research effort. These are not random cases, but cases rich in implication. They are presented as a prelude to what follows.
Brown v. Peck (1853).1 Rosaline Peck was the first white woman to settle in the area of Madison, Wisconsin. She and her husband built an inn, to feed and house the workmen who were building the new state capitol. In 1845, Rosaline’s husband deserted her; he went to Oregon, leaving her in possession of a tract of land in Sauk County, which she occupied without title. The “times were very hard when this land, together with others, came into market.” For lack of money, Mrs. Peck was unable to perfect her squatter’s title by buying the land from the {page 3 ends; page 4 follows} federal government. In May, 1847, the land was sold to Chauncey Brown, who paid for the land through the register of the land office at Mineral Point.
On November 23, 1847, Brown was “in bed in the tavern house of one Marcus Warren, in Prairie du Sac, Sauk county.” After he retired for the night, “one or two men came into the house and inquired if Mr. Brown was there.” Later, “five, six, or eight, or ten more strangers” came into the bar-room. “They talked pretty loud.” After a while, they brought Brown downstairs with “nothing on but his shirt.” Warren talked the men into letting Brown dress. After he dressed, the men brought him down again, with “as many as five or six” holding his arms and legs. They threatened to throw him in the river, but “compromised by rolling him in the mud ... he was rolled in the mud and snow two or three times.” Then he was taken to Fife’s Tavern in Prairie du Sac; Cyrus Leland, the notary public, was called in, and came with a deed already prepared. Brown was “wet, muddy, cold and shivering”; he “spoke with difficulty.” Brown signed the deed conveying the property to Mrs. Peck. The price was $100, which somebody threw down on the table. Brown “did not count the money or touch it at all.”
In 1849, Rosaline conveyed the premises to Abraham Wood; Wood executed a mortgage in her favor, “to secure the payment of seven hundred dollars, according to the condition of five promissory notes.” The deed and mortgage were recorded.
In 1850, Brown filed a bill in equity, in the Circuit Court of Sauk County, to set aside the two deeds and the mortgage. He won the case. Mrs. Peck and Wood appealed to the Wisconsin Supreme Court. But here, too, Mrs. Peck met with disappointment. As she later put it, sarcastically, “our beautiful Court of Equity at Madison ... mulcted me.” Judge Abram Smith, speaking for the court, found it “perfectly apparent” that the conveyance by Brown to Mrs. Peck had lacked that “free assent” which is “essential to a valid contract.... The free, voluntary meeting and mingling, or acquiescence of minds.” A court could not enforce such a contract, made under duress; to do so would be “to withdraw the protection of the court from those unable to protect themselves, and prostitute its sacred functions to the purposes of lawless violence and outrage.”
This was the essential point; collateral issues were brushed aside by the court, which was determined that this should be “the last instance of the kind, which may ever come to our notice” (words spoken about {5} the inglorious role of the notary). Wood stood in no better position than Mrs. Peck; he was no “actual bona fide purchaser without notice.” Clearly, he knew the story of the deed; he “lived in the neighborhood,” where the incident was “a subject generally known, talked about and understood.” Nor was Brown barred from suit by “his delay in asserting his rights.” If “the feeling of indignation towards him was so rife and so general in that neighborhood,” he may well have acted “wisely” in “delaying a resort to legal means.”
Judge Smith did, however, set aside one paragraph of his opinion to castigate Brown. The court, said Judge Smith, had no intent to “justify or palliate” Brown’s actions. The “dictates of humanity” should have prompted him to leave the squatter’s land alone and “seek other fields for speculation or profitable investment.” But the law does not punish all “departures from a high standard of moral conduct”; some “departures” must “find their desert before that social tribunal erected by public sentiment.” If she read that paragraph (which is doubtful), Mrs. Peck derived small comfort. The land was the point; and that was Brown’s.
Pratt v. Darling (1905).2 At the turn of the century the village of Manawa, Wisconsin, situated in Waupaca County, northwest of the Lake Winnebago region, had a population of about 1,000. E. L. Darling ran a general store in Manawa; so did the Schuelke brothers (Adolph and William). Five other general stores and two druggists were located in the village. On March 31, 1903, a salesman named C. W. Killen paid Darling a call. Killen was the Wisconsin salesman for Walter Pratt & Co., a partnership, of Iowa and Chicago, “Manufacturing Chemists and Perfumers.” Though Darling dealt in “Dry Goods, Hats, Caps, Boots, Shoes, Groceries, Provisions and Lumberman’s Supplies” he did not stock many toilet articles. Killen had come to remedy that situation. On the day in question, in Darling’s own words:
I was standing in front of the store, between 7 and 8 o’clock in the morning. Mr. Killen came along the street and introduced himself, told me what he had; and I told him I didn’t think I cared to have anything to do with a line of that kind if it was to be placed in more than one place in a town.
Killen was more than willing to promise Darling exclusive rights. (Mr. Fritz, the clerk, “heard part of the talk” from the store.) Killen went back to his hotel, got his sample case and “showed up the stuff he had.” {6} Darling still wanted assurances that nobody else in town would get the line. Killen told him, “Bless your soul, I don’t want to sell it to anybody else if I can place it in this store.” Darling’s sales resistance was overcome. On the same day (March 31) he signed an order for a bill of goods, including Farina Cologne, Roger’s Hair Grower, Invisible Toilet Powder (white), Invisible Toilet Powder (flesh), Pratt’s Dentifrice, Cherry Lip Pomade, many kinds of Handkerchief Extract (including Parisian Rose), and White Rose, Jasmine, Crab Apple Blossom and Crushed Violet perfumes. It all amounted to $133.38; Darling agreed to maintain the stock through re-order; Pratt offered “free” one Atomizer, a show case, a “Sample Sterling Silver Thimble,” advertising material, and a “perpetual” promotion plan. The standard order form said nothing at all about exclusive rights in Manawa, but it did declare that: “Separate verbal or written agreements with salesmen are not binding upon Walter Pratt & Co. All conditions of sale must be shown in this order. Positively no goods on commission or open account. This order not subject to countermand.” On April 2 (or thereabouts), the goods were shipped by rail. They arrived in Manawa on April 14; James Fowzer, resident agent of the Green Bay & Western Railroad Company, took possession. But the goods were never claimed by E. L. Darling. On April 6, Darling had written the company countermanding his order; he had discovered that Killen had visited Schuelke Bros. on March 30, 1903, one day before Darling signed his own order, and that Schuelke Bros had bought the identical bill of goods—the same Farina Cologne, the same invisible toilet powders, the same Crab Apple Blossom Perfume. Darling had other complaints against Pratt, but this was the main one: his exclusive rights were a myth. Walter Pratt’s answer was firm; the order said nothing about exclusive rights; in fact it specifically said that the contract was complete as written. Furthermore, the line was “a staple line of goods”; there was “no reason why you should not be able to handle this line successfully,” despite any competition in Manawa.
Darling, however, was adamant; he neither collected nor paid for the goods, and Walter Pratt brought him to court. At the trial, Killen did not testify, although he still worked as a salesman for Pratt. Darling won the case, and Pratt appealed to the Wisconsin Supreme Court. The court seemed to have little trouble with the decision, which it handed down in the January term, 1905. Winslow, J., for the court, crisply affirmed the lower court decision. Killen had made a {7} “fraudulent representation”; the testimony on this point was “absolutely undisputed.” It was also “very certain” that Darling would never have bought the goods except for false promises made by Killen. The only difficulty was the parol evidence rule,* specifically reinforced by the terms of the written order. But Killen had already made his sale to Schuelke Bros.; his promise of exclusive rights was not “a mere promise” (which the rule might conceivably bar) but a false “statement as to an existing fact.” Testimony on this point was excluded neither by the contract nor the rule; the court therefore had a right to hear and act on its information. Judgment was affirmed; Walter Pratt & Co. remained unpaid; and perfumes, hair lotions, and toilet articles, to the wholesale value of $133.38, remained where they were, piled up in the back room of the depot at Manawa, Wisconsin.
Kelley v. Ellis (1956).3 Harlan W. Kelley, a blind and legless lawyer of Baraboo, Wisconsin, maintained an active professional career in law and politics despite his grave physical handicaps. He was elected District Attorney in 1951, but lost out in the primary in 1954. His term of office was due to expire on January 1, 1955. Before then, therefore, he had to make plans to return to private practice.
Baraboo is the county seat of Sauk County. In the 1950’s, the town had a population somewhat in excess of 6,000. Kelley was anxious to find a place where, if possible, he could “combine living quarters with office space”; he needed to be “near the courthouse ... and the banks.” Convenience of location was unusually important, because of Kelley’s physical handicaps. One day, Kelley’s wife, Louise, noticed an advertisement in the paper for what seemed a possible place; Willott Warren, a local real estate broker, was managing the sale. One night, when the Kelley’s “were eating dinner at Uphoff’s,” they “happened to bump into Mr. Warren.” The property was discussed. Louise, Kelley’s father, and a contractor named Malone later went out to examine the premises. It seemed to be just what the Kelleys needed. {8}
The house was owned by Mrs. Helena Ellis, a widow nearly 80 years old. She was anxious to be out of the house before winter, and listed it with Warren, suggesting a sale price of $11,500. The Kelley’s first offer was $8,000; on November 12, 1954, they raised their bid to $9,000; and the parties executed a contract at that price. The documents were in standard form. Kelley paid $500 in earnest money, and executed an offer form; Mrs. Ellis accepted it in writing. The offer did specify, however: “Possession to be agreed upon [by] buyer and seller.”
Baraboo is a small town, and the sale of Mrs. Ellis’s house was mildly newsworthy. The next day the following appeared in the local paper:
DISTRICT ATTORNEY HAS PURCHASED HOME AND OFFICE
Mrs. F. P. Ellis has sold her home and office space located at 123 Fifth Avenue, Baraboo, to District Attorney Harlan W. Kelley, who, after January 1st will practice law at this location. Mr. Kelley plans extensive remodeling to provide both offices and home on the ground floor, which will be advantageous to both himself and his clients. Both parties in the transaction were represented by Willott Warren, Realtor.
Warren was probably himself the source of this item. Most of the citizens of Baraboo no doubt read this piece of news with indifference; but it had a totally unforeseen effect at 123 Fifth Avenue. Mrs. Ellis reacted strangely and strongly; she lost faith in the way Warren had represented her interests. She may have felt that Kelley, with his grandiose plans for remodeling, had gotten a marvelous bargain at her expense. She called Warren on November 13, told him she was backing out, and that “she had been taken advantage of as to price.” She hired an attorney, who wrote a letter to Kelley saying that “This matter was misrepresented and Mrs. Ellis is not going to do anything further in the matter.” Kelley refused to bow out. He went to court and sought specific performance of the contract to sell. Mrs. Ellis counterclaimed for fraud and misrepresentation. At the trial, Kelley was absolved by the court of any fraud or misrepresentation; specific performance was decreed; on August 16, 1955, Mrs. Ellis appealed.
Before the Supreme Court, discussion mainly turned on the unfortunate phrase “Possession to be agreed upon.” Mrs. Ellis’s counsel insisted that there was “no meeting of the minds of the parties on an essential element of the contract, and, therefore, equity could not decree specific performance.” The court was not impressed. Currie, J., pointed out that “where a contract of sale of land is silent as to time of {9} change of possession, the law will imply a reasonable time.” The contract in Kelley v. Ellis was not entirely silent on the time of possession (since it included the ambiguous phrase), but it spoke in a whisper, and the court thought the rule of a “reasonable time” ought to be applied. There was some evidence, said the court, that both parties had a reasonable time limit in mind. Mrs. Ellis wished to avoid ordering coal for the winter, and preferred to auction off her furniture while the weather was still warm. The Kelleys needed possession by January 1, 1955. The court said: “It is thus apparent that both seller and purchaser did not have in mind any date for change of possession extending beyond a reasonable time. Furthermore, when Mrs. Ellis repudiated the contract ... she did so on other grounds than that there had been no meeting of the minds as to the time for yielding possession.” This amounted to saying that Mrs. Ellis’s reliance on the “meeting of the minds” was a lawyer’s afterthought. Was this the critical point? One cannot tell. But the court affirmed; specific performance was decreed. The house on Fifth Avenue, in Baraboo, was transferred irrevocably to Harlan Kelley, by command of the Wisconsin Supreme Court.
This study rests on these men, women, and events: on people like Rosaline Peck, Chauncey Brown, Walter Pratt and E. L. Darling, Harlan Kelley and Mrs. Ellis, the immediate actors; and on a large subordinate cast—the notary public, the eager salesman, the Baraboo broker, and others. Nor must one forget the role of the judges in these little dramas. The cases end up as statistics; in formal legal scholarship, each one is filed away in the law’s elaborate indexing system as an abstract proposition, establishing or confirming some precept of the law of contracts. Yet each case was firmly rooted in its time and place: a tract of pioneer farmland, a village store in the days of Theodore Roosevelt, a house on courthouse square. In addition, each case as it takes its place in the printed records of the law of Wisconsin speaks, in however muffled a voice, to the judges who apply the law, to the lawyers who act on and under that law, and to the clients who seek their advice. These are basic raw materials, out of which the law of contracts is made.
This study undertakes to examine the relations between the law of contract and the general life of society (particularly economic life) in one state (Wisconsin) over the course of a century, beginning with the {10} period of intensive settlement prior to the Civil War and ending with the 1950’s. The law of contracts has been much studied, examined, dissected, and analyzed in legal literature, but usually simply to achieve a pattern of formal concepts rationally classified so as to serve the needs of lawyers and judges who use contract concepts as tools of analysis, draftsmanship, and decision. The dominant purpose of contract scholarship has been taxonomy, despite an occasional glance at broader social, economic, and psychological implications of the concepts of the law of contract. This study asks, however, what more can be learned about contract behavior and contract law (and about the common law in the United States in general) by taking an approach less formal and static. From the standpoint of the historian or social scientist, one trouble with formal legal scholarship is that it tends to exhaust its energy with presenting the body of law (which is the end product of social and legal development) as if it were a timeless catalog of existing rules, without differentiating the contents in terms of their age, importance, and utility. An exposition of “current” contract law will typically tell nothing of the economic importance or unimportance of particular precepts; whether they are adhered to in practice or not; whether they pertain to living issues or to rare or peripheral situations. Yet contract law is essentially a series of rules inductively arrived at through generalizing appellate court cases; these cases typically arise out of bargains in the marketplace or behavior which can be analogized to marketplace behavior; economic and social forces must, therefore, have played a major, probably decisive, role in determining the character and content of contract law. Since the economic system of the United States gives freedom of contract (on which contract law depends) more legal scope than do pre-industrial and socialistic economic systems, the causal connection between the social background and the law of contract can be taken as axiomatic. It is also axiomatic that law changes along with its society, although the relative rates of change and the modes of interaction between legal and other social institutions have never been adequately researched.
In this study, we seek to examine contract behavior and contract law with greater emphasis on (a) the development of values and processes through the accretion of experience and custom (that is, “doctrine” considered as a product of time or history); and (b) the functions which contract behavior and contract law more or less fulfill in the {11} service of larger institutions of society (the legal order itself, the market, political, and social processes).
Legal scholarship has been much enriched, particularly in recent years, by adopting a historical, sociological, or economic approach in case-studies of the legal development of particular fields of law. Most of such studies, however, have chosen to explore statutory fields of law—railroad law or corporation law are two major examples. Case-studies of common-law fields have been much rarer. This study deliberately chooses a field—contract—which is basically judge-made. Study of such a field sacrifices the advantages of dealing with data which have major economic or political importance in themselves; no contract case is likely to be a great case which gives rise to public controversy and debate. On the other hand, the study gains the advantage of dealing with a field whose importance lies, if anywhere, in the aggregate of many mine-run cases and instances and which therefore may tell more about the legal and economic substratum of our society than a story written in blood or headlines.
This study explores contract law and contract behavior as revealed in the opinions of the Wisconsin Supreme Court and the work of some other agencies of Wisconsin government, especially the Wisconsin legislature. Our focus on Wisconsin is taken to obtain the benefits of a close, sharp view of the concrete reality of events. The choice of Wisconsin does not imply that the law of contract was a body of law which Wisconsin originated. Indeed, Wisconsin lawmakers did not greatly influence the general course of contract law. What we study is a general body of law whose formal contours were derived from other sources, modified and applied in the context of a particular social setting. We study Wisconsin contract law as a dialect, as it were, of the parent speech; like all dialects, it may shed valuable light on the parent speech as well as on the characteristics of its own native speakers.
The decisions of the Wisconsin Supreme Court on contract questions form the basic material of the study. These cases have been drawn from three periods. Period I covers the time between the organization of Wisconsin Territory (1836) and the outbreak of the Civil War (1861); the study embraces all reported contract decisions during this span of years. This period is significant in that it marks the beginning of Wisconsin’s functioning legal system; it also coincides with the “frontier” period in the state, a period which had just about ended at the time of {12} the Civil War. For Period II, 1905-1915, the cases were drawn from the years 1905-1907, and 1913. This period is equidistant in time between Periods I and III; more important, it provides a sample of legal materials drawn from the age of the Progressives in Wisconsin. This was a time in which the consequences of a maturing economic system and the effects of the post-Civil War industrialization and urbanization of the state had been strongly felt, and had called forth a set of major legal and social responses which reached a kind of climax during the days of the La Follette Progressives. For Period III (the decade of the 1950’s), the cases were drawn from the years 1955-1958. The major characteristics of this period, on the threshold of the present, will be known to most readers: the post-World War II economic boom, the growth of the metropolitan areas, the cold war, the continuance of the big government of wartime and depression, and an ever increasing unification of the country through mass communications and transport. In Periods II and III, the volume of decisions of the Court was heavier than in Period I, and reporting was more complete. For these two periods, it was necessary to use a sample (large but limited) in order to examine the materials with the necessary intensity.
Within each period the cases were analyzed and tabulated according to their underlying fact-situations and their use of legal doctrines. The total number of tabulated cases comes to 553. Intensive use was made of the briefs and records of the cases as well. Unfortunately, for Period I most of these have been lost; for Periods II and III the records were full and invaluable. Within each period some examination was also made of non-contract cases, which shed incidental light on major topics and helped place the contract cases in perspective, i.e., in relation to the general flow of appellate court business.
The second major source material for the study was the output of the Wisconsin legislature. For Period I the entire legislative output up to 1861 was surveyed, for Period II the sessions of 1905 through 1915, for Period III the sessions of 1955 and 1957. Selective use was also made of bills which did not pass and of whatever legislative history was available. The newspapers were an important source for Period I. For Periods II (especially) and III the opinions of the Attorney General of Wisconsin were quite useful. Manuscripts, treatises, government documents, and secondary sources of all sorts were used as much as possible where they seemed to be needed. The work of the lower courts offers a potentially {13} rich, though unwieldy, source, but one which was on the whole inaccessible because of the costs of exploring it. The study, therefore, can promise accuracy and rigor of measurement only insofar as it relates to the high court and the legislature.
Wisconsin: the Background.4 Wisconsin was the last state east of the Mississippi to be admitted to the union. The Wisconsin Territory was created in 1836 when Michigan became a state and what was left of Michigan Territory was reorganized. The boundaries of the Territory then included, in addition to the present state of Wisconsin, what is now Iowa, Minnesota, and portions of the Dakotas. Until the 1820’s, this area had been occupied sparsely by Indians and fur-traders. Lead mining, in the southwest corner of the state, brought in several thousand miners in the 1820’s. Land offices were opened in Green Bay and Mineral Point in 1834. In 1836 the population was about 11,000; by 1840 it had grown to almost 31,000. In the next decade a flood of settlers poured into the southeast and central parts of the state and along the Michigan shoreline, increasing the population by more than 800 per cent, to 305,391. In 1860 the population was 775,881. Since then the population has risen steadily, by increments of approximately 300,000 per decade, though naturally the percentage of increase has been declining. Between 1950 and 1960, however, more than one-half million people were added to the population of the state. According to the 1960 census, the state population was 3,952,765, a little less than double the 1900 population (2,069,042).
After the fur-trading and lead-mining days, the state settled into a typical agricultural pattern. The major cash crop before the Civil War was wheat. In northern Wisconsin the lumber industry grew spectacularly, but by the turn of the century had largely passed into history. Since the late nineteenth century Wisconsin has been famous as “America’s dairyland.” But the urban-industrial aspects of the state’s economy have been constantly increasing in importance. In 1850 about 90 per cent of the population was classified as “rural.” In 1900, 38.2 per cent was urban, in 1960, 63.8 per cent. The definition of “urban” and “rural” has not remained constant since the first censuses, but in any event the trend is unmistakable. In 1960 more than one out of every four residents of Wisconsin lived in Milwaukee County. The population in farm and timber counties was static and declining; in the urban areas, the growth was phenomenal. Basically, the state had only one great metropolitan area—Milwaukee, but other urban areas (e.g., Madison) were also growing rapidly while the population of Ashland County, in the far north, was about two-thirds what it had been in 1920. The shift from rural to urban population paralleled a shift in the major occupations of Wisconsin’s residents. The farm population constantly declined as the industrial-commercial population rose. Where men trapped fur-bearing animals and later farmed, now factories, stores, and offices pre-empted land and energy. Parallel with the increases in population, and the rural-urban population shift, went changes in economic organization: trails and plank roads were replaced by a railroad net and modern highways; marketing methods went through successive stages of increasing complexity, rationality, and economic interdependence. The precise flow of social events, the precise economic and demographic base that developed over the course of the century was unique to Wisconsin; but the waves of change were (in general) of national or at least regional significance. It was always a fact, for Wisconsin as for every other American state, that the boundaries of state jurisdiction were political barriers only, not economic or social. {page 15 follows, to begin the next chapter}