Ian Roderick Macneil
|The Baron of Barra|
|Born||20 June 1929|
|Died||16 February 2010 (aged 80)|
|Alma mater||Harvard Law School
University of Vermont
|Influences||Lon L. Fuller|
|Influenced||Oliver E. Williamson|
Ian Roderick Macneil of Barra (The Macneil of Barra, Chief of Clan MacNeil, also known as Clan Niall and 26th of Barra, also Baron of Barra) was a Scottish American legal scholar. He was born 20 June 1929 and died 16 February 2010.
Macneil was the son of Robert Lister Macneil. He was educated at the University of Vermont, USA (BA, 1950, majoring in Sociology), and Harvard (LL.B., 1955) where he studied contracts under the noted theorist Lon L. Fuller. He was a Fellow of the American Academy of Arts and Sciences. He served as an infantry Lieutenant in the US Army from 1951 to 1953 and remained in the reserve until 1969, when he was honourably discharged with the rank of Major. He married Nancy (née Wilson) and they had three sons (one deceased) and a daughter.
His legal career began as a Clerk to the US Court of Appeals (1955–1956), followed by practising law in Concord, New Hampshire, until 1959, when he became Assistant Professor of Law at Cornell University, advancing to Associate Professor in 1962, then a full professorship, and finally becoming the Frank B. Ingersoll Professor of Law. In 1972 he became professor of law at the University of Virginia and in 1980 Wigmore Professor at Northwestern University. After retirement he became John Henry Wigmore Professor Emeritus at Northwestern but went to live in Edinburgh throughout his retirement, where he was highly active in the affairs of the Clan Macneil. He spent some time at the University of East Africa at Dar es Salaam (now the University of Dar es Salaam) as visiting professor in 1965–1967, part of a highly distinguished tradition at Dar es Salaam that also hosted William Twining and Patrick Atiyah.
- 1 Macneil as Clan Chief
- 2 Scholarship
- 2.1 Essential Contract Theory
- 3 Reception
- 4 Death
- 5 Select bibliography
- 6 References
Macneil as Clan Chief
According to clan tradition, Ian Macneil, having succeeded his father, Robert Lister Macneil of Barra in 1970, was the 46th Chief of the Clan, in line of descent from Niall of the Nine Hostages, High King of Ireland, and 26th Macneil of Barra. Notable events during his tenure included his gifting of the crofting estate of Barra to the Scottish nation, and his granting of a lease of the mediaeval Kisimul Castle to Historic Scotland for 1000 years at an annual rent of £1 and one bottle of whisky. On his death he was succeeded in the position of Chief by his son Roderick Wilson Macneil.
Macneil was one of the world's leading and best known scholars in the field of contract law and is particularly associated (along with Stewart Macaulay) with the invention of "Relational Contract Theory". This theory had its first outing at the Association of American Law Professors' annual conference in late 1967 and was first alluded to in print in Macneil's article "Whither Contracts?" in 1969. However, the first really substantial articles laying down the foundations of the theory appeared in 1974. "Restatement (Second) of Contracts and Presentiation":589 and "The Many Futures of Contracts".:691 He developed the theory further in "Contracts: Adjustment of Long-Term Economic Relations Under Classical, Neoclassical, and Relational Contract Law",:854 and in his famous monograph The New Social Contract. He wrote a good deal more on relational contracts after 1980, mainly concerned with explaining and defending the theory, which has been much misunderstood by academic commentators, whether critical of or in favour of relational theory, but the outlines and much of the detail of the theory were settled by 1980.
In 2000 Macneil renamed his theory "essential contract theory" to distinguish it from other possible versions of relational contract Further interesting explanation has been given by Macneil in "Reflections on Relational Contract Theory after a Neo-classical Seminar".
Macneil was also responsible, with Speidel and Stipanowich for a magisterial five-volume treatise on US arbitration law, Federal Arbitration Law: Agreements, Awards, and Remedies under the Federal Arbitration Act(Little, Brown: Boston, 1994), which in 1995 won the American Association of Publishers' Best New Legal Book award, as well as a monograph on arbitration.
The main elements of Macneil's relational contract theory were developed in a series of publications from 1969 to 1980, some of which are outlined below. He continued to publish articles and participate in colloquia in this field after 1980; however, the publications discussed below represent the key, formative literature of Macneil's version of relational theory. Subsequent publications have been mainly explanatory of the work done throughout the 1970s.
Essential Contract Theory
Macneil's theory posits that the traditional approach of doctrinal contract law in the common law countries, which he calls "classical" and "neoclassical", which concentrates on "the deal" at its time of making, and treats individual contracts as discrete entities, is an inadequate and inaccurate tool for the study of contracts. He argues that all contracts are in fact not discrete at all but belong in the context of complex webs of exchange relations. This theory can be seen as a counter to both the "death of contract" idea, that contract as a separate idea was no longer relevant and that breach of contract is best regarded just as another tort (civil wrong), most closely associated with Grant Gilmore, and to Legal formalism in contract, in which the approach is to ignore, to a large extent, contextual matters surrounding the contract and concentrate only on the express terms and a strictly limited range of implied terms (though Robert E. Scott has argued that a formalist approach can still work within the context of an acceptance of a relational view of contract). Contract relations fall along a spectrum from the highly relational (e.g., long-term employment contracts) to the "as if discrete", largely transactionalised relation (e.g., spot purchases of commodities). All relations, though, are connected with and belong within a broader social context, with which successful relations must be harmonised. It is possible to draw axes through many facets of contractual relations, indicating the likely features of such facets in relations falling at different points along the spectrum.
What is particularly distinctive about his approach is his postulation of a number of "norms in a positivist sense", of which 10 common contract norms apply to all contracts: (i) role integrity; (ii) reciprocity (or 'mutuality'); (iii) implementation of planning; (iv) effectuation of consent; (v) flexibility; (vi) contractual solidarity; (vii) the 'linking norms' (restitution, reliance and expectation interests); (viii) the power norm (creation and restraint of power); (ix) propriety of means; and (x) harmonisation with the social matrix. By "norms in a positivist sense" Macneil means that they are norms-in-fact, that is to say that they are observable in operation, to distinguish them from norms in the sense of normative as opposed to positive economics. The extent to which a particular exchange relation is in harmony with the norms is likely to influence the success of the relation in terms of its longevity (where appropriate) and the ability of the parties to gain the full range of benefits that the exchange can potentially offer. The extent to which the actual doctrinal law harmonises with these norms can arguably determine the usefulness of legal tools and interventions in exchange relations, but it is a complicated question.
Some major milestones in Macneil's development of relational (or essential) contract theory are described below.
1. 'Whither Contracts?'
This is a version of a paper given by Macneil to the annual meeting of the Association of American Law Schools in 1967 or 1968 (the annual meeting of the AALS being at that time held shortly after Christmas). At the conference it was rather overshadowed by Grant Gilmore's contribution to the same session. Gilmore was then promoting the view that there was no such thing as 'contracts'; this paper provided a radically opposing view. Gilmore believed in subsuming contracts into torts. Others at the time took a highly atomised approach, as Macneil describes:
- Is there such a thing as contracts? My friends teaching such courses as Contracts 201 (Sales), Contracts 202 (Negotiable Instruments), Contracts 307 (Creditors' Rights), Contracts 312 (Labor Law), Contracts 313 (Corporations) and Contracts 319 (Trade Regulation) delight in telling me that there is no such thing as contracts. There are, they say, sales contracts, negotiable instruments, real estate transactions . . . and a host of other contract-types, but contracts-in-gross there ain't. . . . [A] personal vested economic interest in the existence of contracts-in-gross caused me to search further. Since you too share that vested interest you will be pleased to know that I have reached the conclusion that contracts exists.:303 at 338–339
This, in a sense, is the foundation stone of Macneil's relational contract theory: the view that contracts need neither be subsumed into torts, nor be viewed in an atomised manner. Another key aspect of the theory is a belief in the essential bankruptcy of conventional contract theory, which becomes apparent in later writings, and particularly in Many Futures.
'Whither Contracts?' also introduces some other fundamental elements of relational contract theory. First, that there is no overarching law of contracts, which governs all contracts. Secondly, that what we can study, when we study 'contracts' is the phenomenon of contracting. Thirdly, there is a foreshadowing of a tendency to widen the scope of contract to cover a previously unprecedented range of human activity.
2. 'Restatement (Second) of Contracts and Presentiation'
This is the first of the articles to which Macneil himself refers in New Social Contract and is often regarded as the real debut for relational contract. Macneil introduces readers to the obscure dictionary word 'presentiation'. He suggests that presentiation is a useful concept for examining what (at this point in the article) he calls 'traditional' contract systems, because these systems are, he says, '. . . among the greatest intellectual expressions of presentiation'.:589 at 590–591 He goes on to say, '[s]ince before recorded history we have been developing the notion that certain kinds of manifestations of assent, promises, can be used to reduce future choice and enable us to presentiate.':592 The basis for his consideration of the Restatement is that it is 'primarily founded' upon the concept of mutual assent, and points out that '[w]hen we conclude that . . . mutual assent to a future exchange . . . is a promise . . . then the future has been bound and presentiation has been accomplished'. Despite Macneil's dissatisfaction with 'transactional' or 'conventional' contract law, he states his belief as to the importance of presentiation nonetheless:
- The ability to act now on the basis of something which we know will not come into being until the future is one of the most productive human tools. Mutual assent in contracting is one of the most important ways we exercise this ability.:592
He also states here that conventional contract law is designed to facilitate just this activity: "Primarily through manipulations of the notion of consent, traditional contract theory created a legal structure which in theory attempted to presentiate not just part of the relation between contracting parties, but virtually all of it."
Macneil further argues that even objective consent turned out to be too vague a concept to achieve the goal of total presentiation through the principle of mutual assent, so that which did not fit the test of objective consent were cast out of the scheme of contract altogether and relegated to quasi-contract and tort.
Macneil's analysis of the conventional, 'total presentiation' approach is summarised in terms of two main characteristics: first, as much as possible of the content '. . . is forced into a pattern of mutual assent expressed at some instantaneous point of time. . .';:593 and secondly, content that is needed for presentiation but that cannot be fitted thus is provided eo instante by the legal system as predictably as possible.:593–594 Macneil gives as the epitome of a discrete transaction, the case of two men approaching a town from opposite directions, each intending to pass through. One is on foot and the other mounted. They meet in the town and after some negotiation a sale of the horse is agreed at a price of $10; the sale to be completed at sunset. Little or nothing remains to be dealt with: everything has been presentiated. Here he appears to accept the possibility of truly discrete transactions: 'A high degree of presentiation is possible in truly discrete transactions. . .',:594 though it is his case throughout this literature that transactions are generally not fully discrete. This introduces a crucial point in Macneil's case. Under the heading 'Relational Contracts and Presentiation' he says:
- Few economic exchanges occur entirely in the discrete transactional pattern. Virtually all economic exchange takes place in circumstances characterised by one or more of the following: The relations are of significant duration (for example, franchising). Close whole person relations form an integral aspect of the relation (employment). The object of exchange typically includes both easily measured quantities (wages) and quantities not easily measured (the projection of personality by an airline stewardess). Many individuals with individual and collective poles of interest are involved in the relation (industrial relations). Future cooperative behaviour is anticipated (the players and management of the Oakland Raiders). The benefits and burdens of the relation are to be shared rather than divided and allocated (a law partnership). The bindingness of the relation is limited (again a law partnership in which in theory each member is free to quit almost at will). The entangling strings of friendship, reputation, interdependence, morality and altruistic desires are integral parts of the relation (a theatrical agent and his clients). Trouble is expected as a matter of course (a collective bargaining agreement). Finally the participants never intend or expect to see the whole future of the relation as presentiated at any single time, but view the relation as an ongoing integration of behaviour which will grow and vary with events in a largely foreseeable future (a marriage; a family business).:595
Macneil goes on in the remainder of this article to look at other ways in which the Restatement deals with the challenge posed by contracts falling outside the transactional paradigm. In particular, he points to illustrations that produce inconsistent results, contrasting conveyancing with collective bargaining, for instance:600 and cites employment contract illustrations.:601
3. 'The Many Futures of Contracts'
This was the second article by Macneil on relational contract published in the same year. It is probably, along with the monograph The New Social Contract, Macneil's best-known and most oft-cited work on relational theory.
The major premise of the article is the prevalence today of relation as against transaction.: 691 at 694 The article (after a definition of contract, as to which see below) begins with a definition of 'transaction': 'A transaction is an event sensibly viewable separately from other events accompanying it temporally – one engaging only small segments of the total personal beings of the participants.:693 Macneil then discusses the definition of contract and starts by reproducing a definition of contract from the Restatement: 'A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognises as a duty'. He then criticises this definition in the following terms.
- The future in contract under this Restatement definition is promise ("manifestation of intention to act or refrain from acting in a specified way") and law. A long and unsuccessful struggle to reconcile this pure and simple concept with what seems to me the real life of contractual behaviour has led to this essay.
Part 1 of the article is then devoted to what Macneil calls the 'primal roots of contract', beginning with 'specialisation and exchange' in which his argument seems to be that specialisation can only take place where there is exchange (a doubtful thesis with reference to the animal kingdom, which Macneil prays in aid in this section, though not in relation to this argument, which he supports by the idea of the village potter, who will not continue to make pots unless someone is willing to provide him with, for instance, food.:698–699), and the point that specialisation and exchange may be organically determined, as in the case of communities of ants.
The second 'primal root' is that there should be a 'sense of choice'. As Macneil puts it: 'The concept of some freedom to elect among a range of behaviours is one of the four primal roots of contract. . .':701 but '[i]t is . . . unimportant to the practical impact of that concept of human behaviour to determine how much, if any, of the exercise of conscious choice is "real" as distinguished from being acted upon as if real.':702 Indeed, he goes further, arguing that coercive situations should be included in contract. His argument encompasses two categories. The first category covers the general idea of coercive situations; the second category is what might be termed customary situations.
So far as the first category is concerned, Macneil argues:703f that while it is not useful to include extreme coercive situations in contract (e.g. an armed 'hold-up'), it is 'inutile' to draw a clear line on the spectrum of coercive – non-coercive, indicating the point of change between the realms of non-contract and of contract; all that can safely be excluded altogether is 'complete physiological determinism'. Going on from this, he writes:
- Moreover, turning from discrete transactions to ongoing relations we find even stronger reasons for including within the scope of the term 'contract' extremes of social coercion. Even slave labour camps tend to leave some room for the exercise of choice of allocation of time and effort.:703–704
In a footnote:704 he takes this to its logical conclusion by claiming that this applies even to camps the purpose of which is not so much labour as extermination. Macneil's argument here is that all contracts involve pressure, arising from inequalities of bargaining power, knowledge et cetera: "Since pressure is always actually or potentially present, considerable virtue resides in including all pressure situations within the realm of contract, even where the pressure is so great that it overwhelms or distorts all the other elements."
As far as the second category (i.e. customary situations) is concerned, Macneil does not actually explain here why he wishes to include this type of situation, but justifies including pressure situations generally to bring in communal or kinship situations, which, as he says, involve at least an 'internalised' coercion.:705 Aware of the possible criticism that this brings too much into contract, Macneil's answer to this in 'Many Futures' is
- While we may have trouble integrating such patterns into our notions of contract, it is plain that they often exist side by side (and integrated with) highly choice-oriented patterns that are clearly contractual in nature. Moreover, if we exclude such "coercive" patterns from the scope of contract, what do we do with modern corporate employment involving pensions not vesting until 20 or 30 years or more of employment have occurred?
- Clearly slavery in an Arabian satrapy is not as "contractual" a relationship as is a contract to work in an American corporation . . . nor is an adhesion contract for goods sold by a high-pressured [sic.] door-to-door salesman in the ghetto as "contractual" as a contract to sell a used car between one consumer and another. But all have significant contractual elements. Twisted 18-inch specimens near the final tree line are usefully called trees, just as are their straight 150-foot cousins on the lower slope; so too with twisted little specimens of contract. . .
Macneil's third primal root of contract is 'conscious awareness of past, present and future.':706–710
The fourth section in the discussion of the primal roots of contract is what Macneil calls 'the social matrix'.,:710ff by which he means that promises and/or contracts have to have some sort of social background against which they are made and there needs to be language in order for promises to be made to one another.
Macneil's next section, on projecting exchange, is devoted to the idea that contract is about projecting exchange into the future, and particularly to the idea that as well as promissory exchange-projectors in contract there are non-promissory ones too. Indeed, his argument is that while promise is a powerful exchange-projector, it is not the only, nor necessarily the most effective, giving as instances of alternatives '[c]ommand, status, social role, kinship, bureaucratic patterns, religious obligation [and] habit. . .'.:715 Probably most important of all the non-promissory exchange-projectors are our expectations that exchange now will, due to dependence on ongoing relations, cause future exchange to occur in at least partially predictable patterns. As Macneil puts it ". . . the very existence of people and their predictable wants supplies the projection of exchange into the future needed to justify the expenditure of effort in production.":716 The argument continues along the lines that a transactional outlook has blinded us to non-promissory exchange-projectors. The most important of all exchange-projectors is this most important of non-promissory projectors, i.e. that previous market behaviour will continue. An example would be that a motor-car manufacturer will be able to employ staff, build factories, enter into long-term contracts for component supply and so on, not because anyone has promised to buy a single car from them, but because a certain pattern of demand in the past makes likely a certain level of demand in the future. Only the doing now of something that affects the future, is necessary for both promissory projection and non-promissory projection. The discussion in this article of non-promissory exchange projectors concludes with these words:
That exchange can be projected into the future by non-promissory techniques does not, of course, mean that the term "contract" should encompass them as well as promises. I believe, however, that very good reasons exist for such definition. . .:719–720
Macneil goes on to discuss choice,:742–743 where he begins with an apparent acceptance of the idea that high levels of choice tend to accompany more highly transactional behaviour, while in limited choice, collectivist conditions, behaviour is more likely to be relational, before going on to refute the idea by claiming that our status or role to a large extent makes our choices for us, but that we choose our own status, and he cites Rehbinder in support, with the following quotation:
- There is freedom in modern law to choose statuses; status is no longer hierarchic and hereditary; and, contrary to the old status law, modern law endeavours to reduce economic pressure and thereby promote social mobility. . .
- Contract law burdened man by forcing him to create for himself a legal position; the law of roles now allows him to choose among positions and behavioural standards, created and safeguarded by the state.
The conclusion is that one cannot accurately predict the scope for choice by the degree of propinquity of any given socio-economic organisation to one or other of the poles (relational – transactional, or free-market – centrally planned).
The bulk of the article is taken up with part III C, a discussion of a number of transactional/relational axes, which Macneil first sets out in summary in the shape of a table.:738–740 Macneil proposes twelve axes (with extremely transactional at one pole and extremely relational at the other) to illustrate the contrasts between contract transactions and contract relations: (1) overall relationship type; (2) measurability and actual measurement; (3) basic sources of socio-economic support; (4) duration; (5) commencement and termination; (6) planning; (7) degree of future coöperation required in post-commencement planning and performance; (8) incidence of benefits and burdens; (9) obligations undertaken; (10) transferability; (11) number of participants; and (12) participant views.
Of particular significance is the planning axis, because contract planning is a central theme in Macneil's writings, and one case that can be made for relational contract theory is its possible usefulness in contract planning. According to Macneil, planning in a transaction follows a fixed pattern. First, all mutual planning is done before commencement of the contract. Secondly, the primary focus of planning is the definition of the subject of the contract – what is to be exchanged. Thirdly, while some process planning may take place, this is directed at how disputes or other difficulties should be dealt with, rather than the process of performance. Fourthly, a transaction is more likely to involve goods of adhesion for which the planning has been unilateral, and there is thus likely to be less mutual planning in total. Fifthly, (presumably mutual) planning in transactions is essentially conflict-laden, as the question inevitably ends up as 'how much?' (i.e., price on one side, and quantity, quality, timeliness etc. of goods on the other).
Planning in a relation is quite different. Firstly, future mutual planning is expected when initial planning is taking place, that is to say it is expected that some planning of the relationship will take place after performance has begun. Secondly, while the substance may be the primary focus of planning in a relation as in a transaction (because of a human tendency to 'transactionise' to deal more readily with available information), there will be more process planning not only as to dispute resolution or trouble-shooting, but also as to performance. Relational planning will involve some detailed specificity as to elements that can be regarded as essentially transactional, and the process planning will probably be very detailed too, but these specifics are not seen as the end of planning, nor necessarily immutable in themselves,:762 and in any event, '. . . planning in relations always involves an element of tentativeness, and with it an inherent limitation on the degree of specificity and completeness possible or desirable'.:763 Thirdly, there is likely to be far more mutual planning. An instance might be having goods made to order, where the buyer is involved to some extent in the design process. Fourthly, while there are what might be called 'relations of adhesion', typically where a new entrant joins an existing relation, this adhesion is made reasonable because the essential fuzziness of the context makes for the possibility of modification of aspects of the relation found undesirable by the entrant.:771–772 & 772 n.231 Finally, while planning in transactions is inevitably resolved into the conflict-laden question of 'how much?', planning in relations need not involve conflict, because it involves a separable mix of enterprise and allocative planning, of which the former need not be conflictual at all, and the latter may be less conflictual than in transactions because of the distribution of burdens and benefits.
It is also Macneil's argument here that the 'pure transaction' is in any event impossible 'even in theory' because of the relational backdrop to transactions provided by the existence of tacit assumptions,:773 n.235 so that there will, of course, be some degree of overlap between the features of planning in relatively transactional exchanges and in relatively relational exchanges. This is also an important point in relation to his theory generally, and one that is frequently missed: that a pure transaction is not possible, so all contracts are relational ones, they will merely vary as to the point where they fall on the axis of highly relational to very-nearly-a-transaction. This means that any theory of relational contracts must be true also of the most 'transactional' contracts.
The axis through the incidence of benefits and burdens, is also worthy of note partly because it has implications for contract planning, and partly for its implications for the impossibility of wholly transactional contracts. Macneil's point is that in a transaction the entire incidence of any one particular benefit or burden is assigned to one or other of the parties, while in relations, benefits and burdens are shared. In short, transactions are allocative while relations are not.
The implications for planning are obvious: where a highly relational contract is envisaged, allocations of risks and benefits are not conducive to success, since they are transactional in nature and supposedly antithetical to a relation. The implication for the theory as a whole is that if allocative planning is found to be the rule rather than the exception, or even just very common in longer-term or more complex contractual relations, then what ought to be relational exhibits highly transactional features, which is the contrary to what the theory leads us to expect.
'Obligations undertaken' are the content of the contract and, as such, are also central to planning, which consists of process planning and content planning. Macneil sub-divided his discussion into three: 'sources of content'; 'sources of obligation'; and 'specificity of obligation and sanction'. In sum, he states that in transactions the source is the communicated express agreement of the parties, the sources of obligation are wholly external, and specificity is high. In relations, on the other hand, some at least of the obligational content develops through the relation itself and may never be made express, the bindingness arises from sources internal to the parties as well as external sources, and specificity is likely to be very low or non-existent.
Further denying the existence of true transactions, Macneil argues in the first section that since bindingness is external to the parties, part of the content of the obligation (i.e. its bindingness) is not expressly agreed by the parties, so the transactional norm is impossible of fulfilment.
It is in this article that Macneil first sets out his contract norms, or five of them, at any rate: (1) reciprocity; (2) rôle effectuation; (3) limited freedom of exercise of choice; (4) effectuation of planning; and (5) harmonising with the social matrix.:809
In his 'postscript' Macneil writes that the article ". . . is intended as an initial effort at conceptualizing contract behavior in the interplay of transaction and relation.":806 He proposes that once it is recognised that most (all) contracts are actually relational, and once his five contract norms have been accepted, it will be possible to build a unified law of contract (i.e., a single general theory of contracts that covers all contracts equally well – as opposed to the present state of affairs in which specific contracts have their own special rules and the general theory primarily covers novel contract situations).
4. 'Contracts: Adjustment of Long-Term Economic Relations Under Classical, Neoclassical, and Relational Contract Law'
It is in this article that Macneil gives his famous example of the gasoline purchase ". . . at a station on the New Jersey Turnpike by someone rarely traveling the road. . .".:854 at 857 He further argues,
- Discreteness is lost even in the simple promise situation, because a basis for trust must exist if the promise is to be of any value. Trust in turn presupposes some kind of a relation between the parties. Whether it is that created by a shared morality, by prior experience, by the availability of legal sanction, or whatever, trust depends upon some kind of mutual relation into which the transaction is integrated. And integration into a relation is the antithesis of discreteness.:858
According to Macneil, even the gasoline purchase was only 'quite discrete':857 because there is something shared: the morality that one does not simply steal petrol; the understanding that a $10 banknote is an acceptable exchange item for the gasoline, because prior experience has shown that it is useful elsewhere, too; and so on. In other words, we cannot have a truly discrete transaction because the occurrence of a transaction must necessarily be within a social matrix.
The discussion here turns on the argument,:from 859 that in a system of discrete transactions, flexibility can only be planned outside the confines of the transaction. The example Macneil gives is of a nineteenth century stove manufacturer, who requires cast-iron stove parts in quantities that are likely to vary because he has limited information as to likely demand. According to Macneil,
- The required flexibility has to be achieved, in a pattern of discrete transactions, by keeping each iron purchase contract small in amount, thereby permitting adjustment of quantity up or down each time a contract is entered. Thus the needed flexibility comes
from the opportunity to enter or to refrain from entering the market for iron. The market is external to the transaction rather than within it.:859
In a concluding paragraph to this section, Macneil summarises his argument in the following manner. A discrete transaction system, in resolving the conflict between the need for stability and the need for flexibility, does not shift risks between parties, which are largely left to fall on suppliers of goods and services. To such extent that risks are shifted, they are shifted totally; there is no sharing of risks. Planning for risk minimisation is thus part of the internal planning of the firm, rather than of any mutual planning process. He concludes here by asserting that ". . . there will be no planning or dealing with the conflicts or possible conflicts through cooperative risk sharing between the iron manufacturer and stove manufacturer.":861 In a footnote, he dismisses an objection by Professor Oliver E. Williamson to the effect that he has ignored the effect on risk distribution of inventory-holding market intermediaries.:n.22
The next (sub)section of the article discusses again the idea of the classical contract (or 'transactional') norms. The point of Macneil's argument here is that ". . . classical contract law very closely parallels . . . discrete transactional patterns . . . [which system] . . . constitutes the stereotype of interfirm . . . contracting of the laissez faire era.":865
The final section is titled 'Relational Contract Law'. In Macneil's own words:
- The concluding section of this paper will deal with some of the consequences of slipping the bounds of the classical contract system altogether, of reducing discreteness and presentiation from dominant roles to roles equal or often subordinate to relational norms such as preserving the relation and harmonisation of all aspects of the relation, whether discrete or relational.:886
The section proper begins by emphasising the need for a contract law system to enhance discreteness and presentiation, and even with the concession that some form of neoclassical contract law is likely to continue to exist to serve these goals. He does not, however, approve:
- Such a system will . . . continue to rub in an unnecessarily abrasive manner against the realities of coexistence with relational needs for flexibility and change. Only when the parts of the contract law system implementing discreteness and presentiation are perceived . . . not as an independent system, but only as integral parts of much larger systems, will unnecessary abrasion disappear.:888
He goes on to say that such abrasion will not disappear even if this does happen. Some abrasion will disappear, however: namely that resulting from ". . . the assumption that all of a contractual relation is encompassed in some original assent to it. . ." Moreover, eliminating that abrasion would also eliminate the ". . . penultimate classical characteristic justifying calling a contract law system neoclassical.":889
Macneil here offers what might be an initial definition of relational contract law: that which ". . . replaces the neoclassical system when . . . all that remains of classical contract law are discreteness and presentiation-enhancing segments of far larger systems . . . often playing roles subordinate to countless other goals. . ." This is followed shortly by the statement that ". . . no such system as yet exists in American law. . ."
Macneil then turns his focus on dispute resolution to illustrate the contrast between conventional contract and relational contract, and quotes:891 a model of the litigation (or rights arbitration) process, which obtains in conventional contract, from Chayes' article 'The Role of the Judge in Public Law Litigation'. There are five elements of the model, put briefly: (1) litigation is organised as a contest between two unitary interests; (2) the controversy concerns an identified set of completed events; (3) the scope of the relief is derived from the substantive violation; (4) litigation is a self-contained episode, i.e. the impact of the judgment is confined to the parties and entry of judgment ends the court's involvement; (5) the process is party-initiated and party-controlled. Macneil comments that '[n]aturally, no such model will do when the relation is supposed to continue in spite of the dispute, and where a main goal must always be its successful carrying on after the dispute is resolved or otherwise eliminated or avoided.
Macneil then proceeds to a discussion regarding the existence of hierarchies conventional contract: formal communication over informal; linguistic over non-linguistic communications; communicated circumstances over uncommunicated ones.:'Adjustment' at 893 According to Macneil, these both do and do not continue in relational contract. They have a rôle in the sense that they reflect relative importance placed upon them by parties: one puts in writing that which is considered particularly important and binding; one communicates circumstances that seem significant and will generally only leave uncommunicated those that are relatively trivial. They do not continue in the sense that the hierarchies are much more mutable and conditional. Macneil suggests, though, that the formal, written parts of contractual relations, can (though with care) be looked at as constitutional instruments; though only if they have not become moribund, in which case to treat them in this way would be 'dysfunctional' and neoclassical.:894 Changes in expectations will have occurred, either gradually, by accretion, or else suddenly, by command within the accepted and acceptable limits of the relation,:895ff and these must be given effect to 'harmonise conflict within the internal matrix of the relation'.:895 Where it occurs at all (since some relations are expected to endure indefinitely – e.g., Harvard University:899), termination is treated similarly to other change, except, presumably, in the application of the norm of maintaining the relation. In sum, adjustments, including termination, can be expected to be messy, rather than following the classical pattern of sharp-in, sharp-out.:900
Macneil finishes this article with a summary. A system based on the classical paradigm of the discrete transaction, he argues, depends for flexibility on the market outside the transaction itself, rather than internal factors. A more relational system allows the planning in of flexibility and change. Eventually, as relations become longer and more complex, conventional contract breaks down and a fully relational system is needed, with very different adjustment processes.
5. The New Social Contract
The New Social Contract was based on Macneil's 1979 Rosenthal Lectures at Northwestern University and, together with 'Many Futures' is Macneil's best-known work on relational contract.
The arguments as to conventional contract theory being based on an unrealistic paradigm are restated at the beginning of the book, in particular the argument that there is no such thing as a truly discrete transaction. Macneil then goes on to set out in some detail in the text a version in connected prose of the table, which appears in both Many Futures and Adjustment, contrasting the discrete transaction with the contract relation.
Much of the remainder of the first chapter sets out to deal, essentially, with how the model of the primitive contractual relation has to be adapted to describe the modern contractual relation. This is approached under eight headings: (1) measurement and specificity; (2) sources of contractual solidarity; (3) planning; (4) sharing and dividing benefits; (5) obligations; (6) transferability; (7) attitudes; and (8) power, hierarchy and command. There is a higher degree of measurement present, largely because of the existence of cash as one side of the bargain (for want of a better word).:21–22 'Contractual solidarity' is achieved in both cases through internal relations of interdependence and custom, but in the case of the modern relation these will have a significant legalistic element of precision.:23–24 There will also be a greater sense of separation between the relation and that which is outside it in the modern relation.
It appears from chapters two and three that relational contract theory not only depends on, but actually consists of a number of norms. Macneil states that his norms are "norms in a positivist sense".:37 He justifies this by pointing out that one definition of a norm can be a 'pattern or trait taken to be typical in the behaviour of a social group', quoting Webster's Seventh New Collegiate Dictionary.:37–38
The first set of norms, common to all contracts, are nine in number: (1) rôle integrity; (2) mutuality; (3) implementation of planning; (4) effectuation of consent; (5) flexibility; (6) contractual solidarity; (7) 'the linking norms: restitution, reliance and expectation interests'; (8) creation and restraint of power; and (9) harmonisation with the social matrix.:40
The remainder of the second chapter is devoted to a consideration of those norms that are special to, or of special significance to, conventional and relational contract respectively. In the case of conventional contract there is 'the discrete norm', which Macneil calls 'enhancing discreteness and presentiation'.:60 In the case of relational contract, they are four in number:61 (perhaps): one that belongs to the common norms, that of rôle integrity, which is specially enhanced in relations; and three new ones specific to relational contract: 'preservation of the relation', 'harmonisation of relational conflict', and the 'supracontract norms'.
The relational norms are those that are specially intensified in contractual relations as opposed to transactions. They are four in number: (1) rôle integrity; (2) preservation of the relation; (3) harmonisation of relational conflict; and (4) supracontract norms. The last three of these are new, in the sense that they are not previously mentioned by these names. Macneil explains, however, that 'preservation of the relation' is "an intensification and expansion of the norm of contractual solidarity".:66 The norm "involves preservation of particular memberships in relations – individual preservation – as well as preservation of the larger relation – collective preservation". The next, 'harmonisation of relational conflict' is, of course, linked with relationship preservation, but Macneil treats it separately because of particular problems that he perceives as arising in modern contract relations: in particular, the problem of harmonising the more presentiated and measured aspects with the remainder of the relation. Problems also arise in terms of internal versus external relations within/of the relation.:esp. 69 Supracontract norms are those factors in contractual relations that are not particularly contractual in nature, for example factors arising from large contractual relations forming 'minisocieties and ministates'.:70
Chapter three is titled 'Relational Contract Law', and is a wide-ranging discussion of some of the bases for and consequences of adoption of a relational contract theory. A number of points are canvassed, including the role of discreteness and presentiation in contract relations (important, but relegated where conflicting with the norm of relationship preservation) and the argument that we live in a world of agents without principals. Macneil also discusses the involvement of the state in promoting relational norms, both externally (i.e., inflicting changes in the power balance on private contracting parties) and internally through its bureaucracy (since the state itself is perceived as a giant – though not the biggest – contractual relation).
The scheme of the chapter is a series of discussions, in turn, of the role of discreteness and presentiation in contractual relations, the importance of 'constituencies' for those conducting contractual relations, mutuality and power, contractual solidarity, the notion of disproportionate harm, and 'purpose, planning, power and perfectionism'.
There is also a discussion of the notion of agency. Macneil explains that contracts are not, by and large made directly between principals, but rather via agents: a shopper principal buys in a supermarket from an agent (servant)-assistant; a firm's buyer (an agent) buys from another firm's salesman (another agent/servant), and so on. But who are the principals? Not the buyer or the salesmen. Not their line managers either. Nor their respective Chief Executives. Nor the boards of directors. Ultimately it is in each case the company in question. But a company isn't a real person, so how can it know what its interests are and secure them? Do its agents always even try to act in the company's interests? This point is very important for Macneil, for contract becomes much more complex and 'relational' where those engaging in contracting activity are essentially acting for 'constituencies' (fellow employees, shareholders, customers, the government, and so on).
In relation to fairness in bargaining Macneil notes,
- A feature of discrete transactional law is acceptance as a given of the power status quo before an exchange. Indeed, it has no mechanisms for dealing with that subject, lying as it does outside the discrete transaction. . . [U]nbalanced power before the contract [is irrelevant] in . . . discrete transactional law. . .:85
What he is referring to here is made clear by a quotation from Lord Devlin (see Patrick Devlin, Baron Devlin):
The common lawyers hardly recognised the principle of fair dealing as one that needed independent support. For them free dealing was fair dealing. So long as fraud and deceit were kept out of the ring, it was up to each party to fight for the best bargain he could get; a fair fight meant that a fair bargain would result.
Mutuality, then, in classical contract law at least, is something with which the positive law is not concerned, except insofar as the courts will decline to enforce fraudulently obtained bargains. Macneil, though, concedes that 'neoclassical' contract law does concern itself with mutuality and the power status quo prior to making a bargain (the then infant doctrine of economic duress and the equitable doctrine of undue influence).:85
Macneil defines solidarity as "no more than the norm of holding exchanges together".:90 Macneil's analysis of solidarity takes in Durkheim's division into 'organic' and 'mechanical' solidarity. Briefly, mechanical solidarity is that which exists between likes, and organic solidarity that between the unalike.
It is the latter that is the product, among humans, of specialisation of labour, one of Macneil's primal roots of contract, and therefore it is organic solidarity with which Macneil is concerned. He has argued elsewhere that solidarity may produce an identity of selfish interest, so that where one party acts to decrease the utility of the other, then his own utility decreases too, resulting in a need for co-operation. Campbell comments that '[t]his co-operative attitude makes the notion of the individual utility maximiser inappropriate to [relational contracts]'. However, it is arguable that the individual utility maximiser simply becomes a long-run individual utility maximiser, i.e., short-term advantage is sacrificed to gain a (greater) long-run advantage, thus maximising utility for the individual. People co-operate, not for the sake of it, but to increase their own utility. That this manifestation of self-interest may not be obvious in a particular course of conduct does not, for Macneil, make it absent: ". . .put two or more self-interested participants into a cohesive relation . . . and see what happens to self-interest . . . Interest in such circumstances cannot afford the luxury of inconstancy".:96–97
Macneil observes that law provides general stability and also directly facilitates solidarity in two ways. The first is that it "provides for the accomplishment of cooperation",:93 through its very existence (we feel able to work with others not because we think it likely that we will ever sue them, but because the fact that we could do so means that our co-operation is likely to be reciprocated). The second is the law's provision of a "relatively precise expression . . . [or 'index'] . . . of the great underlying and diffuse sea of custom and social practices in which human affairs are conducted.":94 The 'index' identifies which customs et cetera are most important, thus helping us maintain our sense of solidarity (including, in the case of contract law, such ideas as the obligation to pay bills). Thus law in general (and contract law in particular) provides a base for and promotes solidarity. The rest of his discussion focuses on the social and psychological roots of organic solidarity in a technological society, about which Macneil comments
- . . . [T]his book is titled The New Social Contract as a metaphor for modern contractual relations, thus distinguishing the term from the social contract as that term has normally been used since Rousseau . . . I would be the last to wish to see the resurrection of theories of the social contract, but it is plain enough to me that, far from precluding a very sizeable common conscience, the division of labour not only is utterly dependent on such a social consensus but generates it. It is upon this edifice of common morality that is built what Durkheim called restitutive law, elements of which include the Uniform Commercial Code, the Securities Act, and even the law of contract.:101
So, Macneil argues, in a sense, the law of contract is a support of solidarity, because it is the result of the need for solidarity, which division of labour (which is an essential condition for the development of contract) creates. Contractual solidarity is thus a norm of contract law. The concept of disproportionate harm is part of what comes under consideration in the discussion of solidarity: where the positive law fails to prevent the infliction of disproportionate harm, then solidary feeling tends to lessen or break down altogether. The example Macneil gives is of trade unions in Britain inflicting considerable harm on the public to obtain quite modest gains (he seems to have had in mind the public-sector strikes in the 1978–9 'Winter of Discontent').
The final section, 'Purpose, Planning, Power and Perfectionism' provides an insight to the attitudes behind Macneil's contract thinking. Macneil gives here an account of his own Utopia, the land of 'Post-Technique'.:112ff The inhabitants have abandoned the idea of 'the one best way' in favour of having good ways of doing things and less planning. Their production is perhaps a bit lower, but possibly not significantly so, since they have discovered that the elaborate planning of today is time-consuming and unproductive,:114 as well as being somewhat hit-and-miss.:114–115 To minimise planning and the power and bureaucratisation that go with it, the one best way must be avoided altogether. To do that competition has to be limited (heavy taxes would be used to discourage new technology, for instance).:113
As to the rest of the law of Post-Technique and its relational constitution:
- Post-Technique requires much of what Durkheim calls restitutive law to help the decentralised centrs keep peace among themselves and co-operate affirmatively. Since the Post-Techniquans are not keen on formal bureaucratic structures, wherever possible this law tends to be conciliatory in nature, rather like the customary law of primitive societies. But the relatively high levels of presentiation and discreteness in the advanced technology of Post-Technique require a good bit of law implementing these norms. This occasionally results in efforts to perfect the restitutive law into far more precise rules than is commensurate with the spirit of Post-Technique. These have thus far been resisted in favour of statements of rather broad principles such as those of restitution, reliance, and expectations, administered through negotiation, conciliation, and arbitration, rather than through more discrete judicial processes.:116
A symposium on relational contract theory was held at Northwestern University in 1999, with papers given by a number of very distinguished American contract scholars including Stewart Macaulay, Melvin Eisenberg, Jay Feinman, Eric Posner, Robert E. Scott, and Richard Speidel.
Macneil's work is often considered inaccessible and difficult to read. And Macneil himself has expressed some disappointment at the reception of the work among legal scholars: 'I have now had over a decade to accept that there had never been any race to a relational theory of contract, nor have the succeeding years seen either widespread acceptance of (or indeed much challenge to) my particular theory or the development of other relational theories.' However, the Northwestern symposium and other more recent work goes some way to correcting that omission. In particular, David Campbell has published an edited collection of Macneil's relational contract theory work. Macneil's work in particular has also been discussed by Richard Austen-Baker, who relates Macneil's system of norms to English contract law doctrine, and used Macneil's theory to discuss the need or otherwise of further regulation of consumer contracts.
Relational contract theory has probably wider use and acceptance in management scholarship, and there is a considerable volume of management scholarly literature that refers to and uses Macneil's insights.
Macneil died 16 February 2010, at the age of 80.
Copy of his obituary from The Scotsman:
"MACNEIL OF BARRA Ian Roderick (Edinburgh – Isle of Barra) Prof Ian Roderick Macneil of Barra. BA. LLB. Wigmore Professor of Law Emeritus, Northwestern University School of Law, on February 16, 2010, at home, in his 80th year, much loving and loved husband of Nancy (nee Wilson), dear dad of Rory, Sandy and Jennie and father-in-law of Sau Ming and Adrienne, and loving grandfather of Ruari, Isla, Seumas, Torin, Phoebe, and Michael. Funeral services, Our Lady Star of the Sea, Castlebay, Isle of Barra, on Wednesday, February 24, at 11 am, interment thereafter Cueir Cemetery."
Macneil is the author of well over 60 papers, monographs and other works. A full bibliography up to 2000 can be found in D. Campbell (Ed)The Relational Theory of Contract: Selected Works of Ian Macneil (Sweet & Maxwell: London, 2001). The following is a representative selection of Macneil's work.
'When Acceptance Becomes Effective' in R.B. Schlesinger (Ed) Formation of Contracts: A Study of the Common Core of Legal Systems (Oceana Pubs: Dobbs Ferry, 1968)
'Whither Contracts?' (1969) 21 Journal of Legal Education 403
'Restatement (Second) of Contracts and Presentiation' (1974) 60 Virginia Law Review 589
'The Many Futures of Contracts' (1974) 47 Southern California Law Review 691
'A Primer of Contract Planning' (1975) 48 Southern California Law Review 627
'Contracts: Adjustment of Long-Term Economic Relations Under Classical, Neoclassical, and Relational Contract Law' (1978) 72 Northwestern University Law Review 854
Contracts: Exchange Transactions and Relations, 2d edn (Foundation Press: Mineola, 1978) (1st edn, 1971)
The New Social Contract (Yale UP: New Haven, Conn, 1980)
'Economic Analysis of Contractual Relations: Its Shortfalls and the Need for a "Rich Classifactory Apparatus"' (1981) 75 Northwestern University Law Review 1018
'Efficient Breach: Circles in the Sky' (1982) 68 Virginia Law Review 947
'Values in Contract: Internal and External' (1983) 78 Northwestern University Law Review 340
'Reflections on Relational Contract' (1985) 141 Journal of Institutional and Theoretical Economics 541
'Exchange Revisited: Individual Utility and Social Solidarity' (1986) 96 Ethics 567
'Relational Contract Theory as Sociology: A reply to Professors Lindenberg and de Vos' (1987) 143 Journal of Institutional and Theoretical Economics 272
'Contract Remedies: A Need for a Better Efficiency Analysis' (1988) 144 Journal of Institutional and Theoretical Economics 6
American Arbitration Law: Reformulation – Nationalisation – Internationalisation (OUP: Oxford, 1992)
(with R.E. Speidel and T.J. Stipanowich) Federal Arbitration Law: Agreements, Awards and Remedies Under the Federal Arbitration Act (5 vols) (Little, Brown: Boston, 1994)
'Contracting Worlds and Essential Contract Theory' (2000) 9 Social and Legal Studies 431
'Relational Contract Theory: Challenges and Queries' (2000) 94 Northwestern University Law Review 877
'Reflections on Relational Contract Theory after a Neo-classical Seminar' in H. Collins, D. Campbell and J. Wightman (Eds), The Implicit Dimensions of Contract (Hart: Oxford, 2003)
Robert Lister MacNeil
|Chiefs of Clan MacNeil
Roderick "Rory" Wilson Macneil
- burkes-peerage, Scottish Chiefs Index
- See further, Who's Who (A&C Black: London).
- See Clan MacNeil
- See Who's Who' (A&C Black: London).
- I.R. Macneil, 'Whither Contracts?' (1969) 21 Journal of Legal Education
- "Restatement (Second) of Contracts and Presentation", (1974) 60 Virginia Law Review
- I.R. Macneil, 'The Many Futures of Contract' (1974) 47 Southern California Law Review
- I.R. Macneil, 'Contracts: Adjustment of Long-Term Economic Relations under Classical, Neoclassical and Relational Contract Law' (1978) 72 Northwestern University Law Review
- I.R. Macneil, The New Social Contract (Yale UP: New Haven, Conn., 1980)
- "Contracting Worlds and Essential Contract Theory" (2000) 9 Social & Legal Studies 431.
- (H. Collins, D. Campbell and J. Wightman (Eds) The Implicit Dimensions of Contract (Hart: Oxford, 2003).
- I.R. Macneil, American Arbitration Law – Reformation – Nationalization – Internationalization (OUP: Oxford, 1992).
- R.E. Scott, 'The Case for Formalism in Relational Contract' (2000) 94 Northwestern University Law Review 847.
- See G. Gilmore, The Death of Contracts ( Ohio State UP: Columbus, Ohio, 1974)
- M. Rehbinder, 'Status, Contract, and the Welfare State', (1971) 23 Stanford Law Review 941 at 949, 955, cited in 'Many Futures' at 743
- A. Chayes, (1976) 89 Harvard Law Review 1281 at 1282–1283.
- P. Devlin, The Enforcement of Morals (OUP:, London, 1965) 47.
- See generally, E. Durkheim, La Division du Travail Social, 7e éd. (Presses Universitaires de France: Paris, 1960), or E. Durkheim (trans. G. Simpson), The Division of Labor in Society (Free Press of Glencoe, Collier MacMillan: London, 1964).
- See I.R. Macneil, 'Economic Analysis of Contractual Relations: Its Shortfalls and the Need for a "Rich Classificatory Apparatus"' (1981) 75 Northwestern University Law Review 1018 at 1034.
- D. Campbell (Ed), The Relational Theory of Contract: Selected Works of Ian Macneil (Sweet & Maxwell: London, 2001), p.17.
- 'Relational Contracts Floating on a Sea of Custom? Thoughts about the Ideas of Ian Macneil and Lisa Bernstein' (2000) 94 Northwestern University Law Review 775.
- 'Why There is No Law of Relational Contracts' (2000) 94 Northwestern University Law Review 805.
- 'Relational Contract Theory in Context' (2000) 94 Northwestern University Law Review 737.
- 'A Theory of Contract Law Under Conditions of Radical Judicial Error' (2000) 94 Northwestern University Law Review 749.
- 'The Case for Formalism in Relational Contract' (2000) 94 Northwestern University Law Review 847.
- 'The Characteristics and Challenges of Relational Contracts' (2000) 94 Northwestern University Law Review 823.
- See J.M. Feinman, 'The Reception of Ian Macneil's Work on Contract in the USA' in D. Campbell (Ed) The Relational Theory of Contract: Selected Works of Ian Macneil (Sweet & Maxwell: London, 2001).
- I.R. Macneil 'Reflections on Relational Contract' (1985) 141 Journal of Institutional and Theoretical Economics 541.
- See David Campbell
- D. Campbell (Ed) The Relational Theory of Contract: Selected Works of Ian Macneil (Sweet & Maxwell: London, 2001).
- R. Austen-Baker, 'A Relational Law of Contract?' (2004) 20 Journal of Contract Law 125.
- R. Austen-Baker, 'Consumer-Supplier Relations, Regulation and Essential Contract Theory' (2008) 24 Journal of Contract Law 60.