Contracts And Communities In CorporationLaw

CONTRACTS AND COMMUNITIES IN CORPORATION LAW*Every general field of law embraces materials from which analysis can unearth the deepest questions that our social life recurringly presents to us. In some fields of law such questions lie near the surface, barely disguised by legal terminology and procedure. Most clearly, this is the case with the field of constitutional law, in which contests between claims of individual autonomy and claims of community are commonplace.(1) But it is hardly less true of criminal law, with its basic questions of culpability and punishment, or of tort law(2) or contract.(3) Other fields of law--one thinks of the various fields of commercial law, of intellectual property, or of taxation--appear or are more technical, more narrowly "legal." In such fields, legal problems may seem less pregnant with potentialities and answers may seem, and thankfully sometimes are, less controversial. It is easy in such fields to lose sight of--indeed it may sometimes be difficult to ever catch a first glimpse of--the contestable philosophical or political presuppositions that lie at their foundations, buried beneath the legal superstructure. Corporation law is such a field.In this short essay I offer, in brief summary, some thoughts about the controversial philosophical foundations of contemporary corporation law. I do so in the hope of setting forth a helpful context within which to consider the dual questions presented by the subject of this symposium: whether a fundamental change has or is likely to occur in either academic corporation law or in the field in practice and, in either event, whether such change is desirable.I tentatively and modestly offer these thoughts, recognizing that my own experience and expertise lie in a more prosaic direction. I am modest especially because in offering these thoughts I am mindful that I foreshadow ground more cogently surveyed in this volume by Professors Ronald M. Green and Alan Wolfe and Dean Karen L. Newman and by their legal academic commentators.I.I begin with the observation that a fundamental (if perhaps primitive) taxonomy of our intellectual life might perceive two contrasting models of human action, each bottomed on a different view of what it means to be a human being in society. Complex and contradictory real life, of course, cannot be fully captured by either model.A. THE LIBERAL-ULILITARIAN MODELThe first of the two competing paradigms can be represented as the classical liberal paradigm. Finding its roots in the work of Hobbes, Locke, and Smith, and importantly shaped by the work of Bentham and Mill, this perspective reached full development in the thought of Herbert Spencer. The classical liberal paradigm describes the social world as populated by individuals rationally (if sometimes imperfectly so) pursuing their own vision of the good life. In this model--ideally--legal institutions keep the peace, define and protect property and contract and ameliorate problems that individuals cannot effectively resolve through bargaining.For classical liberals, the law is positivistic and should be utilitarian. Thus, ideally, the law should be a clear set of rules that facilitate the private ordering of human affairs. If the law comprised such a set of clear rules, individuals would have maximum control over their condition, and presumably free bargaining would lead towards better states of the world. An incidental cost of a system of clear rules will be that attempted transactions will occasionally fail to comply with the rules and will, as a result, collapse, causing unexpected disappointment or even injury. That fact is regrettable, of course, but classical liberals also see it as a necessary cost of a beneficial system of clear rules. Distribution of gains and losses is a secondary concern in this model.Under the liberal-utilitarian model, the law creating and protecting property rights and the law enforcing contracts is the law of greatest importance to our welfare. …