Moral-Promise Approach or Instrumental Approach in Contract Law: An Economic Analysis

Economic analysis of law generally observes the law, as what it must be, from a prescriptive and normative viewpoint. That is to say, it defines the musts for the society and guides the legal rules in order to achieve them. One of the law branches, which distinctively has an appropriate ground for economic analysis, is the substance of contract. In Contract Law, the instrumental approach – based on normative analysis – considers the contract as an instrument for realization of economic efficiency. On the opposite point, the moral approach considers the contract solely as a moral obligation to fulfil a promise. Therefore, in respect of moral aspects implied by it, implementation of a contract is a duty for the contract parties. An essential question is that which of these approaches is in more conformity with the rules of the Contract Law? Picking either of these approaches may make different effects on attainment of contractual goals. By considering the Contract Law as an instrument of social policy, as opposed to pacta sunt servanda, as a moral principle, a more appropriate description of it can be presented. In addition, stating the functional grounds of instrumental approach will show its prevalence and preference over the moral approach.