The Only Fair Way: What the rule of law should look like

National Review, Dec 18, 2000 by Richard A. Epstein

As the torrid electoral dispute between Bush and Gore works its way to its conclusion, anxious citizens have been forced to reflect on the proper balance between a just substantive law and the workable procedures needed to implement it. The refrain of the Gore forces employs the rhetoric of aspirations: Let justice be done; let every vote count; let the true intention of each voter be determined. The Bush camp offers the opposite approach: Let consistent rules govern election outcomes; let simple tests determine what counts as a vote; and let the principle of finality govern. The time is therefore propitious to step back from the present political brawl to ask how a well-run legal system routinely reconciles these twin demands. Aspirations would always prevail if the operation of a legal system were costless and error-free; but it obviously is not. How, therefore, must we temper these aspirations-and minimize the administrative imperfections at the same time? The oft-neglected virtues of process and formalism must come into their own.

One bedrock legal principle condemns retroactive changes in the rules. Even if the older and established rules could easily be inferior to some proposed alternative, the parties to an ongoing dispute still have the right to rely on them. If the law, for example, says that a will shall be valid once it is signed, then it should not be invalidated because it was not notarized; if the law requires the will to be both signed and notarized, then it should not be counted valid if signed but not notarized. The enforcement of existing law must be kept separate from law reform; legislative changes should be applied only to future transactions. The common saw "Don't change the rules in the middle of the game" represents a powerful bulwark against bias, opportunism, and favoritism.

The law's concern with formal virtues is also illustrated by the law of contracts. It is generally accepted that private contracts should be performed in accordance with the mutual intentions of the parties. But how are those intentions to be determined once the parties start to squabble and each side has an incentive to shade the truth or even lie? A judicial search for unexpressed intentions would quickly degenerate into a hopeless swearing contest. So the law typically allows only outward expressions of intention into evidence, even if philosophers rightly praise the subjective nature of intention. A buyer cannot ordinarily back out of a deal by saying that he meant to buy the seller's horse, and not his cow, for $1,000. Each party is entitled to rely on what the other says, so long as the stated intentions look reasonable from the context. It is too dangerous to let the seller back out of the deal if the value of the horse drops to $500.

In the same vein, the parol evidence rule normally excludes oral evidence offered to vary or contradict the terms of a written agreement. Written agreements are a good way of avoiding "he said, she said" disputes, and courts wisely refuse to open the floodgates by letting in oral evidence-which is, in general, less reliable than the written evidence it is said to supplement or contradict. Indeed, sophisticated parties often stipulate that their written agreement counts as their entire contract, no matter what oral communications have passed between the parties. Similarly, the fraud statutes in every state provide that certain contracts, such as those for the sale of real estate, are enforceable only if done in a writing signed by the party to be charged. This rule helps avoid endless wrangles over when negotiations did-or did not-ripen into a binding agreement.

None of these formal requirements is meant to restrict the freedom of contract; their purpose is to force contracting parties to create a careful record at the outset, to reduce the stresses of litigation later. No one knows how to dispense with these forms in cases where the true intentions of the parties diverged from what they said or wrote. To allow systematic breaches of these formal rules is to undermine the security of exchange indispensable to a market economy. But the conscious price we pay for our devotion to formalism is an unjust outcome in the occasional case: A rogue may escape from honoring an oral promise to sell his horse. But in the long run the formal rules work-by giving all people the incentive to say (and write) what they mean, and to mean what they say (and write). Sensible formal precautions thus reduce the frequency of misunderstanding.

Paradoxically, then, formalism increases the overall reliability of the system, by eschewing futile efforts at administrative perfection. Any inquiry into subjective intention will make more mistakes, at greater cost, than the formal rules that it displaces. Yielding to the temptation to measure subjective intention will increase in practice both the rate of error and the cost of adjudication.

The law that prizes formality also prizes finality, through the vital procedural rules of res judicata: Disputes are litigated on their merits once, not twice. Of course, the first round of litigation on the merits could have resulted in error. But that possibility hardly justifies the delay, cost, and uncertainty of a second trial, whose outcome is likely to be no more reliable than the first-and perhaps less so, if the passage of time has dulled memories and degraded evidence. The exceptions to the rule are in general very narrow; and only rarely does newly discovered evidence come to light after the first trial is completed. As with rules of form, res judicata induces people to make their best shot first, and then requires them to live with the result. If a litigant misses his most promising line of attack or defense the first time through, too bad. Over the long run, we have fewer trials-and they are better handled-under res judicata than we would in a system that gave a disappointed litigant as many bites at the apple as he desired. Once again, in the long run, the tough procedural rules do not frustrate, but rather promote, the desired substantive outcomes.