Contract and tort as finite and infinite games

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Acontract does not care how well you meant, just whether you met a minimum standard. Now JC often bemoans those who apply sporting metaphors to commerce: zero-sum games have little to tell us about the infinite games of business — but occasionally sporting metaphors apply.

To wit — the rules of tennis care not whether you flubbed the ball off the frame or ripped it savagely from the middle of the string bed: only whether it went over the net and into the court. Thereafter it cares nothing beyond whether your opponent managed to hit it back — and again, with how much form, style or cunning is not the point.

In one sense, the JC approves: this is the ultimate in substance over form, and in a bureaucratic world which the prefers the formal to the substantial, it is something we should all be glad about.

But.

Surely there is a difference between form and style. It may be true that McEnroe beat Borg on that sweltering Wimbledon day in 1982, but is it just a mark in the win column that the world remembers? When we trot down to the court for our weekly hit with the sclerotic old fogies that can be bothered to take us on, is it the outcome, or the moments of drama we go through in getting there, however inexpert, that we savour?

We make no bones about it: JC’s most effective shots are ungainly shanks that scrape over the net in a direction sharply oblique to the one in which they were aimed. But one in twenty comes off as hoped and that is enough to keep him coming back, even if these are not usually the ones that win the points.

Contracts

It is the same with a transactional contract. (Here we distinguish a relationship contract, being one of those architectural arrangements under which we set ourselves up so that we might in later times, if the mood catches us, transact. These are, by nature, designed with infinity in mind.)

A transactional contract sets out tersely who should do what and by when. Once inked, it is a set of rules designed to wipe out any doubt. It cares nothing for form: not how diligent one’s preparation nor how honourable one’s intention is: only whether the outcome you agreed to deliver came about.

This is the allocation of risk: if I have sold you my car, it is not your problem if, the night before delivery, someone steals it from me, any more than it is my problem if your fairy godmother unexpectedly gives you a new car so you don’t need the one you bought from me. We have agreed our rules and we must go ahead with it.

A contract is a finite game in the broader infinite game of commercial life. It is as if we have pegged off a rectangle, agreed upon some rules and must now batter the subject matter back and forth to the terms of the agreement, abiding by the laws you have laid down until everyone has done what they said they would do. There is even a referee, of sorts, though the cost of engaging it is usually beyond the proportions of the contest.

In a transactional contract, there is always scope for a cheapest to deliver strategy — in the confines of a sporting contest it is explicitly the best strategy, within a single contract it is rationally the best strategy.

Torts

Compare this with tort. When strangers meet, there is no prior agreement between them as to who must do what. So the law of civil wrongs intervenes. Unlike contract, tort cares little about the substantive outcome, as long as the formal process — one’s intention and the defensibility of one’s conduct — in getting to it.

In this regard, just as a zero-sum contest like a sport is an finite game so is a specific transaction.

But not a relationship contract. And the law of tort sets the ground runs for an infinite game.