Macneil developed relational contact theory as one of a series of efforts to address the inadequacies of neoclassical contract law.¹ Classical contract’s most important features for Macneil’s subsequent criticism were that it was binary and presentiated, focused narrowly on the isolated, two-party transaction; the law’s role was simply to apply formal doctrines of offer and acceptance, consideration, and the like to recognize and enforce the parties’ express private ordering. The essence of the criticism of classical law and its reconstruction through succeeding scholarly generations was contextualization, both internal and external to the body of law itself. The internal criticism compared the ostensible doctrines with the results in the cases, finding that the rules did not explain the cases because no formal, general rules ever could. The external criticism, of which relational contract theory would become an important mode, situated the rules in the world of actual contracting practice, a practice characterized by rich social and economic relations, the haphazard ways in which parties bargained and attended to private law, and inequality and disadvantage, all of which undercut the formal notions of calculated private ordering.

Several of the chapters in this volume report and debate the extent to which courts in England and Wales increasingly are focusing on context and therefore developing their own version of neoclassical contract law. Hugh Beale notes that: ‘The traditional approach of English law to business-to-business contracts has tended towards abstraction, deliberately ignoring the context in which the agreement was made.’ He reports that the tendency toward abstraction may be changing, at least in interpretation cases. Adherence to plain or literal meaning of words is fading in light of a recognition that ‘the meaning of words depends on the context in which they are used’; whether or not this development is properly ascribed to inevitable logic, as he would have it, the development is a notable departure from the formality that characterized the classical approach (Beale, p. 135).

Roger Brownsword goes further and asserts that the contextualist development that began in interpretation cases has now spread ‘across the whole range of transactional disputes between commercial contractors’. ‘[T]he contextualist development of the English commercial law of contract that, having been initiated by Lords Steyn and Hoffmann, has now become a wide-ranging form of commercial realism that is sweeping all before it.’ Although he suggests that it is fair to ‘debate just how radical a departure this is from the classical mode and from orthodox English contract law thinking’ the elements of the ‘contextualist development’ are striking. The first and most fundamental element is that the protection of reasonable expectations in accord with ‘commercial common sense’ is the goal of contract law. Those reasonable expectations are defined not only by the express terms of the contract but also by implicit understandings of the parties and the commercial context in which they operate. However, agreement, where it is genuine, still reigns; the rules of contract law are only default rules, subject to being varied by the express or implied agreement of the parties, except where public policy clearly dictates otherwise (Brownsword, p. 25, citations omitted).

Both authors attribute the origins of the contextualist approach to cases in the late 1990s (Beale, p. 131; Brownsword, p. 23). In the United States, by contrast, the move toward contextualism had its origins in American legal realism beginning in the 1920s and 1930s and was widely adopted by the courts in the 1960s and 1970s. Brownsword’s first element mirrors the title of the first section of Arthur Corbin’s important treatise on contract law, the core of which was laid down in the 1920s though not eventually published until mid-century: ‘The Main Purpose of Contract Law Is the Realization of Reasonable Expectations Induced by Promises.’ (Corbin, 1952, p. 1) The Uniform Commercial Code 2001 (UCC), first promulgated in 1948 and widely enacted in the 1960s, and the Restatement (Second) of Contracts, begun in the 1960s and adopted in final form in 1979, each employ the kind of contextualization reflected in recent cases such as Rainy Sky v Kookmin Bank [2011] UKSC 50. As several authors discuss, in that case the court expressed a preference for meanings that reflect relevant back-ground knowledge and surrounding circumstances and, ultimately, ‘business common sense’. The UCC, for example, similarly defines agreement as ‘the bargain of the parties in fact, as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance’ (UCC §1–201(b)(3) (2001)).

Oddly enough, at the same time that English courts apparently have moved to contextualism, some US courts have reverted to older approaches that resemble the abstraction of traditional English courts described by Beale. To take only one example, Beale describes the parol evidence rule in English law largely as a relic of the nineteenth century, although subject to resurrection through a merger clause or no-reliance clause. In many jurisdictions in the US, the parol evidence rule in its traditional form remains strong, and the enforceability of a merger clause or a no-reliance clause is extremely important in many transactions. This reversion in contract law has been described as a classical revival (Feinman, 2004), a new conceptualism (Mooney, 1995), or a new formalism (‘Symposium: Formalism Revisited’, 1999; Scott, 2000), terms which parallel Beale’s description of abstraction. In part, this move means less attention is paid to the factual details of a particular case or of the class of cases of which it is representative and to the complexities of real-world contracting as means of better understanding and regulating the parties’ contract. It also makes contract law more abstract and rule-based, as the ideal of capable parties transacting in a well-functioning market becomes a primary source of doctrine, and such parties are hypothesized to respond to rules as effectively shaping their behaviour.

It would be a useful exercise in comparative law between jurisdictions with the same common law roots to fully examine these contrasting developments and their sources; although this is not the place for such an undertaking, the comparison is striking. And it is worth noting that in the US the changes in contract law developed in parallel with similarly conservative developments in the other elements of the trinity of private law – tort and property law. All of the doctrinal developments, in turn, were associated with and in part spurred by changes in the political culture. As the UK shared many of those changes – Thatcherism in the UK was analogous to Reaganism in the US – one wonders what a broader analysis of the state of private law would reveal.

In any event, many scholars recognized that neoclassical law corrected some of the errors of classical law but did not go far enough. Neoclassical contract law’s attention to commercial context, of which the move away from abstraction in the English courts is an example, is broader than the binary abstraction of classical law, but relational contract theory is broader still. Macneil began with an analysis that was as much sociological as legal, examining the ‘primal roots of contract’, which led him to broad definitions of ‘contract’ and ‘exchange’: ‘[C]ontract encompasses all human activities in which economic exchange is a significant factor’, and ‘exchange’ includes all interactions in which reciprocity is a dominant element, not just monetizable transactions (Macneil, 1999–2000, p. 877). From this analysis, Macneil identified a set of contract norms stated at a high degree of generality. One thing that the norms do is to suggest the categorization of contracts as discrete or relational or, more accurately, as situated with mixed elements along the discrete-relational spectrum. In examining an individual contract, the norms also can be used to direct attention to elements of the context that are particular to the contract at issue and to the relational context out of which it arises. Accordingly, relational contract theory provides a degree of contextualization that is at the same time more general, more focused and more highly structured than neoclassical law.

As several of the authors note, however, contextualization in relational contract theory, including even the recognition of the discrete–relational distinction, is only a first step, and more is demanded for a complete analysis. Relational contracts do not constitute a distinct class; instead, every contract is relational in the sense that every contractual relation has both discrete and relational elements, and even then the ways in which contracts and contractual behaviour vary are not fully captured by situating a relation along the discrete–relational spectrum.² In this respect, Macneil’s work is frequently misread by scholars as creating distinct classes of discrete and relational contracts with the entire relational analysis only applicable to the latter category (Feinman, 2000, p. 739).

As Hugh Collins notes: ‘The conventional contextual or neo-classical approach refers to the context in order to supplement the contractual agreement or to resolve ambiguities ... Under Macneil’s sociological approach, however, one has to start from the outside with the relations between the parties within which context the exchange is made, and then work inwards towards the contract.’ (Collins, p. 67) Context is essential but not sufficient. Context must be read through the structure of the ten common contract norms, in which different norms are of different value depending on the nature of the contract. By reference to the social matrix in which the parties’ relation is situated, those norms include customs of an industry or other relevant group, rules of a trade association or professional organization, and norms generated by any group intersecting with the relation at issue, as well as broader values of the society.

Relational contract theory with its contextualization and more is one of several attempts to respond to the limits of neoclassical contract law. Some approaches also use empirical analysis of actual contracting practices to draw inferences about the appropriate role and content of contract law from that practice; those inferences often suggest that contract law is and should be marginal in the world of commerce. More recent empirical work is of the experimental variety, adopting the techniques of psychological experimentation to attempt to understand contracting behaviour. Other approaches focus on abstraction rather than contextualization; law and economics, at least in its traditional form, and rights theories, such as Charles Fried’s Contract as Promise (1982), suggest that a systematic approach based on a limited set of fundamental principles and a defined method of applying those principles provides the best means of analysing and determining the content of contract law. And there is the unique contribution of critical legal studies, which draws on empirical and theoretical sources to reveal contract law as problematic, contested and ideological (Feinman, 1990).

Looking at these competitors to relational contract theory, the heyday of critical legal studies has passed (regrettably in my view), empirical work continues to make contributions, law and economics has diversified and occupies a large role in the scholarship, and rights theories surface occasionally. What Linda Mulcahy observes about relational contract theory surely is also true about the others: they always have been more directly influential on the academic discourse than on the courts (and, one might add, are likely to remain so) (Mulcahy, p. 194).

As the chapters here demonstrate, it is likely that relational contact theory remains the richest of the theoretical approaches to contracting and contract law that arose in response to neoclassical contract law. Now some 40 years old, the theory is sufficiently rich and complex to still command development on its own. To take only a few examples from this volume, David Campbell, its foremost contemporary expositor, continues the project of defining and defending it in his chapter, and argues that a relational approach has superior explanatory and normative power than either a market-individualist (classical with a dash of neoclassical) or a welfarist approach to contract law, remarkably illustrating his position by a relational analysis of the much criticized Arcos Ltd v EA Ronaasen and Son [1933] AC 470 HL. Collins adds to the refinement of the theory as well. He describes the need for an ‘integrated multi-level analysis’ that combines focus on the terms of parties’ agreements (contractual rationality), a cost/benefit calculus of both short-term and long-term economic interest (economic rationality), and the need for maintaining trust and other elements that support long-term relationships (relational rationality) (Collins, p. 79). Sally Wheeler offers a clarification of Macneil’s definition of discrete contract that focuses on large-scale issues of social and economic ordering; given that all contracts have discrete and relational elements, no individual contract is really appropriately labelled ‘discrete’. She also refines Macneil’s famous illustration of an apparently-but-not-really discrete contract, an isolated transaction for the purchase of gasoline on the New Jersey turnpike, in distinguishing ‘between the atomized process of making the contract itself and the informational and network structure that surround it’. (Wheeler, p. 46) But the best demonstration of the true vitality of the theory is shown by its ability to adapt to new issues and situations, including some that Macneil’s own work presaged and some that he could not have contemplated.

Jonathan Morgan’s chapter and Brownsword’s chapter initially demonstrate the extent to which relational theory engages with and to an extent frames scholarly debates long after the theory’s formulation. Both discuss the issue of whether and how relational norms might be translated into contract law, an issue that Brownsword states in a now-common form: ‘The real question is what the default approach of the law should be.’ (Morgan, p. 178) The concept of default rules and the debate over how they should be framed has become a central concern of contracts scholarship. The default rules discourse was spurred by classic articles by Ian Ayres (Macneil’s colleague at Northwestern University) and Robert Gertner, and Charles Goetz and Robert Scott, who became the principal author of a transformed version of relational contract theory (Ayres and Gertner, 1989; Goetz and Scott, 1981).

Relational contract theory, with its focus on the form of contracting and the contract norms, is useful in shaping the default rules debate. That debate is part of a broader discussion about the possible and desirable links among relational contracting as a social process, relational contract theory as an academic discourse, and contract law as applied in the courts.

A first issue is what Richard Danzig described as ‘the capability problem’, or the ability of courts to operationalize relational principles in developing rules of law and applying them in individual cases (Danzig, 2004). Mulcahy points out that Macneil and other relationists are aware of the difficulty courts have in defining and implementing relational norms. Part of this difficulty stems from the reluctance of commercial parties to litigate their disputes. Systemic factors cause problems, too. The vanishing civil trial and the decline in the number of appeals concerning contract cases provide fewer occasions for courts to see relational contract cases. Even in those cases, the filtering process of litigation and the tendency of lawyers to favour the framing of arguments stated in traditional legal form and to disfavour novel arguments based on extra-legal norms further diminish the relational grist for the judicial mill.

Even beyond what is possible, Morgan argues that it is undesirable to have more than a limited use of relational theory in law itself. He uses Baird Textile Holdings Ltd v Marks and Spencer plc [2001] EWCA Civ 274, [2002] 1 All ER (Comm) 737 to argue that Macneil’s account of relational contracting cannot and should not translate into a relational contract law. He recognizes the contribution of relational theory in directing attention to the context in which contracts are made and performed and the frequent relational character of that context, and of the usefulness of Macneil’s structure of norms in analysing that context. Yet there are two problems: whether courts can effectively define and enforce the normative structure as rules of law, and whether they should. He cites a wealth of literature that suggests that relational norms flourish even in the absence of legal enforcement, legalizing norms such as trust and co-operation may actually undermine the parties’ faith in and reliance on such norms, courts engaging in traditional adjudication are poorly equipped to define and apply the norms, and parties often do not want them to do so in any case.

This type of argument is not new. In an article in 1930, Zechariah Chafee colourfully identified four factors that a court should consider in deciding whether to intervene in an extensive relationship, and three of the four disfavoured intervention. For example, if the court intervenes it may be wading into a ‘dismal swamp’ where it cannot divine the appropriate norms, and it may cut down the ‘living tree’ of relationships that flourishes only in the absence of intervention (Chafee, 1930, pp. 1021–9). But, as Brownsword’s chapter demonstrates, the argument recently has been reframed and has achieved heightened attention.

Brownsword and Morgan both argue that parties prefer and the law should adopt default rules that are ‘strict, formal and rule-based’ (Morgan, p. 178) or rules that are ‘plain and modest’ because such rules ‘facilitate[ ] contracting out of the default position’ (Morgan, p. 179). In doing so, ...