Vol. 9 No. 6 (June 1999) pp. 231-235.

THE STATE AND FREEDOM OF CONTRACT by Harry N. Scheiber (Editor). Stanford: Stanford University Press, 1999. 378 pp.

Reviewed by Christopher P. Banks, Department of Political Science, University of Akron.

THE STATE AND FREEDOM OF CONTRACT, the most recent publication from a continuing series of conferences and institutes (called "The Making of Modern Freedom") from the Center for the History of Freedom at Washington University in St. Louis, is an informative and sometimes provocative set of essays that collectively explore the contemporary meaning of "freedom of contract" from a legal historical perspective. As the various contributions to the book suggest, modern conceptions of economic liberty are strongly influenced by a variety of legal principles, commercial realties, and social norms that are firmly rooted in the past but which continuously affect the present and future. Given the book’s ambitious goal of "examining the place of economic liberty in the development of Anglo-American law from the end of the feudal era to the present day" (p. v), the bulk of the essays expectedly go well beyond analyzing freedom of contract from the standpoint of LOCHNER v. N.Y. (1905) or, more broadly, American constitutional law. As a result, while three (Chapters 5, 6, and 7) of the nine essays give LOCHNER extended discussion, the remaining contributions deal with other issues and historical interpretations of labor and contract law insofar as they purport to establish conclusively what freedom of contract means today. What remains is a diverse and able collection of scholarship that hangs together well and largely succeeds in meeting its stated objectives.

The first four essays provide a general background to establishing the meaning behind economic freedom by analyzing the relevant continental legal and political thought that predates the American property and contract law experience. In Chapter 1 ("Land Ownership and Economic Freedom"), Professor A.W.B. Simpson conveys the important point that English common law prior to the nineteenth century emphasized the principle of economic individualism through the jealous protection of private property rights. Using Blackstone’s idea that the "ideal state of economic freedom" (p. 17) consisted of a "despotic dominion which one man claims and exercises over the external things of the work in total exclusion of the right of any other individual in the universe (p. 17)," Simpson argues that English property law mostly presumed from the beginning that individuals ought to be able to possess, cultivate, and dispose of property with total control and the confidence that there is going to be little interference from the state. Nonetheless, Simpson also acknowledges (as he must) that the despotic dominion ideal yielded over time because of acts of Parliament (through Local and Personal Acts which, in effect, permitted the taking of private land for public purposes) and corresponding rapid economic development. This latter point is especially significant because in making it Simpson shows that any right -- including those implicating private property and which are at the core of classic liberal thought – is subject to limits and increasing governmental regulation in any complex society.

The remaining three essays in the introductory material build off of Simpson’s arguments by tracing the development of Anglo-American contract law up until the time it emerged as a coherent theory in America. In doing so, they help to set the tone of the book by routinely challenging the conventional view of the particular subject they are examining. In Chapter 2 ("Contract and the Common Law"), Professor John V. Orth debunks the belief that a cogent body of contract law was primarily responsible for organizing social relationships and applying its principles to other sub-categories of the law, such as labor or employment. Orth instead argues that the conventional view has it backwards: that a mature system of contract law did not emerge until the nineteenth century, and only after having been strongly influenced by common law principles that were rooted in property law. Only until about after the middle of the eighteenth century, as Orth puts it, when "contract began to emerge from the shadow of property" (p. 49) did contract law become generally recognized by the common law; and, in fact, it did so only after the development of labor law principles (and the regulation of wages and trade, along with will theory) that had the first crack at shaping what eventually became the law of contract. Orth suggests, then, that the freedom of contract is only understood by appreciating the significant historical role that labor and employment played in formulating the common law principles underlying modern contract jurisprudence.

Chapters 3 and 4 take a similar approach in rebutting the conventional wisdom surrounding the evolution of will theory and the individualistic hegemony (influenced by the writings of Adam Smith, Jeremy Bentham and Immanuel Kant) that allegedly makes a significant contribution to comprehending the freedom of contract. In Chapter 3 ("Contract, Property, and the Will-The Civil Law and Common Law Tradition"), Professor James Gordley takes issue with the historical view that claims that will theory (i.e. that defines contracts in terms of the will of the parties, often to the exclusion of all else) originated either as a response to changing nineteenth century societal or economic conditions, or from prevalent liberal philosophical, political, or economic theories that emphasized the role of the individual in property law. Nineteenth century will theories, Gordley instead argues, were strongly influenced by natural law theories of contract and property from Thomas Aquinas and Aristotle, who first considered the question of whether there were any limitations to what individuals can express through volition. The rejection by jurists of the Aristotelian natural law tradition -- which conceptualized property exchange as an equal act of commutative justice -- laid the groundwork for will theories that preserved in law the individual choice to make an enforceable contract without any regard for its substantive fairness or its impact on the public good.

Like Professor Gordley in the preceding essay, in Chapter 4 ("Contract Before ‘Freedom of Contract’") Professor David Lieberman contests the traditional historical scholarship that claims that nineteenth century liberal theories of freedom of contract are based in the political economy writings of Adam Smith and the utilitarian viewpoints of Jeremy Bentham. For Lieberman, conventional legal histories overstate the contribution Smith and Bentham made to the development of contract legal doctrine that stressed the absence of governmental restraints and the protection of individual free will. In that contract law played a "relatively modest role" (p. 104) in the thinking of Smith and Bentham, Lieberman extends his argument by concluding that the inter-relationship between law, property and commerce, and not capitalism or industrialism, transformed eighteenth century English society and in turn gradually produced a legal and economic regime of contract law in the nineteenth century that was more paternalistic, and less individualistic, in scope than previously outlined in standard legal histories.

Chapters 5, 6, and 7 address freedom of contract issues in the context of American law and disparate freedom of contract ideologies. In chapter 5 ("Economic Liberty and the Modern State"), Professor Harry N. Schieber reminds us that the traditional reverence that Americans have for property rights has always been counter-balanced against the need to express the public interest and a sense of community obligation through law, if not arbitrarily imposed. The history of American property and contract law, Schieber contends, is ironically borrowed in large part from the British model of mercantilism (favoring economic nationalism and a commitment to strongly protecting private property rights) that was rejected in the quest for independence but also incorporated into the legal regime by the republican experiment. As a result, a blend of negative and positive liberty allows individuals to enjoy the conditional privilege of being free from governmental interference in a legal regime endorsing a balance between individual and public property rights. For Schieber, then, LOCHNER – and the modern approach to contract law in general -- can only be understood as part of an American contract ideology that alternatively respects private property rights and public intervention during particular moments in its cultural, economic, political, and legal history.

The balance alluded to in Schieber’s essay is reconceptualized differently in Chapter 6 ("The ‘Liberty of Contract’ Regime in American Law") by Professor Charles W. McCurdy. By exploring the principles of the free labor ideology that helped form the intellectual basis of the liberty to contract era, he argues that a distinctive type of legal regime emerged from a judicial response that accommodated the tension between respecting an individual’s negative freedom to choose the terms of a contract and the positive liberty that results from using social legislation to correct the unequal distribution of wealth and goods for the benefit of all. Whereas the courts initially embraced the notion that the labor contract was unique and presumptively valid absent a countervailing health or safety public interest, McCurdy claims that the U.S. Supreme Court ultimately charted a middle course in the New Deal period that increasingly blurred the distinction between both conceptions of negative and positive liberty and, in the end, reflected the Court’s decision to defer to the will of legislative majorities when they ruled upon the constitutionality of social legislation. The liberty of contract doctrine, in other words, gradually led to a process of judicial accommodation that invariably took the Court out of the controversy altogether and emasculated its ability to do anything that helped social welfare reform. As McCurdy suggests, the Court’s decision to remove itself from the debate over freedom of contract and the state may be the new regime’s "most important legacy" (p. 197).

A logical extension of McCurdy’s thinking is that an individual’s freedom to contract is significantly curtailed in a post-New Deal regime characterized by judicial deference to legislative majorities. This suggestion is undermined, however, by Professor Arthur F. McEvoy’s analysis in Chapter 7 ("Freedom of Contract, Labor, and the Administrative State"). There, McEvoy identifies the pervasive impact that freedom of contract has had as a controlling guide for private and public conduct in three areas of labor regulation (the labor market, the workplace, and private households), or social spaces, from 1880 to the present. McEvoy argues that freedom of contract retained a formidable presence in each area and affected conduct ranging from the simple negotiation of private employment contracts to the complex ordering of legal expectations between employees, employers, and the state. Throughout this time period, he maintains, the liberty of individuals to make consensual choices -- either as a statement of political philosophy, a free labor principle, or as a basis for social equality -- in the realm of labor relationships has persisted as a legal norm over time. Consequently, in McEvoy’s view the freedom of contract has never really died out (as some have claim) as an ideological principle for organizing social and legal relationships in America.

The last two chapters of the book shift their attention to determining how freedom of contract affects natural resources and the globalization of contract. Professor Donald J. Pisani, in Chapter 8 ("Natural Resources and Economic Liberty in American History"), suggests that freedom of contract has been an important factor in facilitating the process by which nature either could be exploited for profit by the private sector or regulated (or conserved) by the federal government in the name of the public interest. He does this by indicating that the anti-feudal, Jeffersonian principle (that men have the natural right to possess and cultivate the earth’s resources without much governmental interference) is deeply ingrained in America’s legal history and has persistently affected land use public policy. He suggests, too, that the federal government has historically played an inactive, if not an ineffectual, role in managing (or conserving) natural resources by not resisting local or private control over nature and man’s relationship to it. Environmental protection by law, he maintains, is a twentieth century phenomenon that ironically raises the dual concerns of whether the federal government is competent to control nature (in terms of scientific uncertainty brought on by advances in technology) and whether the anti-feudal principle (in modified form) can be politically accommodated.

The speculative (if not amorphous) nature of the impact that the American style of contract law has on contemporary society and the larger global community is also alluded to in Martin Shapiro’s concluding essay in Chapter 9 ("Globalization of Freedom of Contract"). As Shapiro points out in his introductory remarks, the preceding essays underscore the point that "the expression ‘freedom of contract’ means different things in different contexts’" (p. 269). In treating contract law as a type of government regulation that affects global economic (or, business) behavior, Shapiro suggests that understanding the legal practice of contracting is more important than comprehending the principles of contract law. Put differently, globalization of contract means little when considered apart from what lawyers – especially American attorneys – actually do with the legal principles on an international scale. In this sense the true freedom of contract from a global perspective resides in the lawyers who invariably constrain the contracting freedom of sovereign nations and international businesses who are burdened with dealing with an increasing amount of complex (and Americanized) contract regulation. As a result, the modern globalization of the liberty to contract is defined by how well the law follows legal (and, in a related sense, business) practice, and not the other way around. This legal realist orientation is important because Shapiro implies that the legal history of contracting has presupposed that the law comes first. It also has significant consequences globally since Shapiro (by his own admission) floats the untested hypothesis that American legal practices (which tend to favor, for example, an aggressive style of litigation and the use of long contract forms by giant law firms that take into account every conceivable contingency) are assuming a position of dominance internationally, a circumstance that has wide implications for the world economy.

On balance, those who are expecting the book to analyze freedom of contract as an issue of constitutional interpretation will be mostly disappointed. With the limited exception of the middle essays (chapters 5, 6, and 7), the book does not discuss in any depth the constitutional significance of the LOCHNER doctrine. The essays, instead, are fairly comprehensive analyses of legal history, mainly from the continental and American political thought perspective. For the most part they only approach LOCHNER and its constitutional implications indirectly, as they effectively focus their arguments on the broader political, social, and economic issues that conjoin to formulate a legal and cultural history about freedom of contract and its relevance in the modern state. In this light the book is especially adept in outlining some of the major scholarly debates in the historical

literature about the genesis and contemporary application of economic liberty as a cultural and legal phenomenon. Also, the editor has done a good job in organizing the different essays in a logical sequence that is coherent and informative; and, the contributors have commendably done their part in presenting insightful analyses that are intellectually sound and, at times, stimulating. Clearly the book is a solid addition to the legal history literature on the subject.

Finally, while the book probably has limited application in most undergraduate public law courses (with the possible exception of legal history or constitutional law courses that deal with economic freedom), graduate students in political science or history (or, of course, those in law school) will mostly likely benefit from the book’s diverse and comprehensive treatment of a topic that too often is routinely dealt with in past public law scholarship. The fresh perspective that this collection brings to the field is certainly one of its main strengths and provides plenty of incentive to use it in the classroom.

References

LOCHNER v. NEW YORK, 198 U.S. 45 (1905).