CO L U M B I A UNI V E R S I T Y

I N T H E C I T Y OF N E W Y O R K

L A W S C H O O L

Nicholas W. Sage
Associate-in-Law, Postdoctoral Fellow
& Lecturer in Law
212.854.1608
nsage@law.columbia.edu
law.columbia.edu/fac/Nicholas_Sage

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Jerome L. Greene Hall 435 West 116th Street New York, NY 10027
ABSTRACT:
COMPENSATION IN CONTRACT AND PROPERTY (WORKING TITLE)

COMPENSATION AND THE COMMON LAW CONFERENCE
UNIVERSIT DE MONTRAL, MARCH 21, 2014

One fundamental aspect of contract law that theorists seek to explain is why, in the event
of breach, a contractual promisee is generally entitled to compensation in the form of an award
of specific performance or its equivalent in damages.
An increasingly popular explanation holds that, at contract formation, a promisee
acquires a right to the subject-matter of the parties contract: a right to the good or service or
other thing that is promised.
1
On this view, a contract right is just like a property right, except
that the subject-matter of a contract right may include future actions or other things that do not
yet exist. And on this view, it seems to make sense that in the event of a breach the promisee can
sue for compensation in the form of an order that the promisor provide the contractual subject-
matter (i.e., specific performance) or its equivalent in damages.
I contend, however, that this proprietary explanation for contractual compensation is
problematic. It explains neither who is liable to provide compensation for breach of contract, nor
how they become liable. That is, the proprietary explanation cannot account for the contractual
doctrines of privity or strict liability. I argue that if, at contract formation, a promisee simply
acquires the subject-matter of the contract, then everyone in the world, and not just the promisor,
should be equally liable for the deprivation of that subject-matter from the promisee through
nonperformance. Furthermore, given that liability for interference with true property rights often
requires negligence, the proprietary explanation of contract cannot account for why a contractual
promisor is strictly liable to provide compensationirrespective of fault.
The solution to these problems about contractual compensation, I suggest, is to view the
contractual promisee as acquiring a right at formation, not over the subject-matter of the contract,
but over the promisors choice to provide the subject-matter of the contract. This subtle
difference enables us to explain who becomes liable, in the first instance, to provide
compensation for breach of contract: the promisor. It also, I will argue, provides a basis for
holding the promisor strictly liable. Finally, I also suggest that this approach provides a
theoretical foundation for many differences in compensatory treatment traditionally afforded to,
respectively, property and contract rights, rights in rem and rights in personam, and
negative and positive obligations.


1
E.g. RANDY E. BARNETT, CONTRACTS (2010); Andrew Gold, A Property Theory of Contract, 103 NW. U. L. REV. 1
(2009); Peter Benson, Contract as a Transfer of Ownership, 48 WM. & MARY L. REV. 1673 (2007).