THE LIMITS OF COGNITION AND THE LIMITS OF CONTRACT

Contract law recognizes a number of exceptions to the rule that courts should fully enforce bargains between capable actors. In this article, Professor Eisenberg argues that we can best justify a number of these doctrines by reference to the limits of human cognition. He canvasses recent empirical research on the cognitive limits relevant to contracting and then shows how these discoveries shed light on six areas of contract: liquidated damages, the excuse of express conditions, form contracts, contracts to waive fiduciary obligations, agreements governing thick relationships, and prenuptial agreements. While the limits of cognition do not explain all of contract law, Professor Eisenberg argues, an understanding of the psychological constraints on decisionmaking should play a central role in the development of contract doctrine.