“You don’t have to be Ludwig Wittgenstein”: How Llewellyn’s Concept of Agreement Should Change the Law of Open-quantity Contracts

In this article, Professor Allen Blair examines the preeminent role of exclusivity in open-quantity contracts under the Uniform Commercial Code (“UCC”). Although the text of the UCC does not mandate that open-quantity contracts be exclusive, the vast majority of courts considering the issue have held that exclusivity is necessary to prevent such contracts from failing for lack of mutuality of obligation. The Article traces the historic development of open-quantity agreements, focusing on pre-Code cases recognizing the commercial utility of such agreements but struggling with how to accommodate them under a classical model of contract formation. It was in this historic context that courts forged the requirement of exclusivity. Despite the fact that the UCC was intended to supplant rigid notions of contract formation, thus expanding the range of legally enforceable commercial agreements, post-Code courts have remained constrained by classic contract law and still require exclusivity. This Article argues that by demanding exclusivity in open-quantity agreements, the majority of courts have relied on an outmoded conception of contract formation, which unduly restricts commercial dealmaking and ignores the relational benefits at the heart of the UCC and Karl Llewellyn’s concept of agreement. INTRODUCTION...................................................................................... 68 I. THE SELF-ADJUSTMENT OF SOCIETY TO THE PROBABLE: THE LEGAL HISTORY OF OPEN-QUANTITY AGREEMENTS .................... 75 A. The Development and Use of Open-Quantity Agreements .......................................................................... 76 ∗ Assistant Professor, Hamline University School of Law. BLAIRFINAL2.DOC 10/20/2006 10:22:28 AM 68 SETON HALL LAW REVIEW [Vol. 37:67 B. Early Reticence of Courts to Enforce Open-Quantity Agreements .......................................................................... 81 C. Growing Recognition of the Commercial Value of Open-Quantity Contracts and a Concomitant Need to Enforce At Least Some Such Contracts.............................. 84 D. Pre-Code Consensus About Enforcing Open-Quantity Agreements .......................................................................... 88 E The Code’s Standard For Enforcing Open-Quantity Agreements .......................................................................... 94 F. Post-Code Consensus About Enforcing Open-Quantity Agreements .......................................................................... 97 II. A CRITIQUE OF THE MAJORITY RULE: ARGUMENTS IN FAVOR OF A MORE LIBERAL VALIDATION PRINCIPLE FOR OPENQUANTITY CONTRACTS...............................................................101 A. Practical and Theoretical Problems With the Majority Rule .....................................................................................102 B. Caroline Brown’s Proposal for Validating OpenQuantity Agreements .........................................................107 C. A Small Minority of Courts’ Approach to OpenQuantity Agreements .........................................................111 III. A FRESH LOOK IS ALWAYS A FRESH HOPE: A PROPOSAL FOR VALIDATING ALL OPEN-QUANTITY AGREEMENTS.......................114 A. The Legal-Realistic Foundations of the UCC ...................115 B. Llewellyn’s Concept of Agreement....................................119 CONCLUSION: HOPE FOR THE VALIDATION OF OPEN-QUANTITY AGREEMENTS UNDER THE CODE ................................................125