Uncertainty and Contract Law

The modern scholarship on contract law, particularly that which draws on the methods of law and economics, assumes substantial certainty in the outcomes of making contract decisions. For example, contract parties presumably know when they have entered into an advantageous agreement or when an efficient breach – harming no one and benefiting at least someone – is possible. Yet, in many instances, significant uncertainty exists. In this Article, Professor Seita argues that, under conditions of significant uncertainty, common beliefs in contract law may be mistaken. He explains that the presence of uncertainty and risk may cause contract parties – through no fault of their own – to make bad bargains, encourage inefficient breaches when contract parties of differing risk attitudes confront each other, and lead the courts to misallocate contract risks when they uphold standardized agreements. In short, he believes that modern contract law should take into account more fully how contract parties behave when uncertainty is present and when they have differing risk attitudes.