The Legal Invention of the Incomplete Contract: Law and Capitalism in Early U.S. History

Daniel MacDonald*, PhD. Student

Department of Economics, University of Massachusetts Amherst

Abstract

This paper models the relationship between changes in contract law and the rise of factory work in early U.S. history. Underlying the argument is a model of capitalist transformation which places central emphasis on the methods by which employers procure and secure a sufficient labor supply for surplus extraction. I focus on the role of contract law in this process: drawing from case law, legal treatises and legal journals my main argument is that courts changed their conception of different kinds of employment contracts to fit with the needs capitalist employers, suggesting that economic interests promoted capitalist development through state power. I prove my main argument by breaking it up into two subtheses: first I show how courts freed up the laborer in the early 1800s by reducing the legal obligation of third parties to pay for damages in master-apprentice contracts if the worker breached contract by leaving early; second, I argue that courts secured workers in the factory by redefining what would constitute legal action on an implied promise or “special contract”, reducing the ability of the worker to “contract out” of a general employment contract (something which would have increased his or her bargaining power). I also support my main claim regarding the causal link from economic interests to legal change by linking the courts' views on implied contracts, which was essentially a legal invention of contractual incompleteness, to models of labor discipline which focus on how incomplete contracts give employers power to extract effort from workers.

* Email: dmacdona@econs.umass.edu. Thanks to my advisors Gerald Friedman and Larry Zacharias for helpful comments and conversations. Participants at the University of Massachusetts Amherst History and Development Workshop saw an early draft of the paper. This paper was also presented at the Association for Institutional Thought (AFIT) as part of the student paper awardees’ seminar. All errors in this paper are my own.

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Section 1: Introduction

In the last 30 to 40 years, the historiography of American capitalism has enriched our

understanding of the economic and cultural processes underlying social change. Labor historians

have studied the rise of the factory system within the context of employer power. Historians of

work and culture have examined the ways in which employers sought to change cultural norms

of work to fit with the regular routine of factory work. Overall, the framework of these studies

conceives of worker-employer conflict as having the potential to change social conditions.

Absent from the themes of many of these social histories of capitalism’s success is an

explicit treatment of the effects of political institutions and power on social change. The legal

history of early America has helped fill in some of these gaps, including work done by Morton

Horwitz, Robert Steinfeld, and Christopher Tomlins. The thesis of this paper seeks to add to this

literature through a history of employment contract law. My central point is that, between the

late eighteenth and mid nineteenth century, courts created contractual conditions for the rise of a

new political economy centered on wage labor and factory work.

Caution must be exercised, however, because looming behind this paper’s narrow focus

on contract law is a much larger question: what is the social-historical importance of the law to

the rise of American capitalism? For example, account books of farmers, payroll records, and

local court records contain little evidence that employers enforced an early nineteenth century

labor law in some states that denied the worker the right to quit. 1 If the worker was legally

bound to serve out his term, why was this law not being used by employers to maintain workers?

Was labor law significant to the constitution of the employment relationship?

1 See Winifred Rothenberg, “When the Rules Changed.” “Right to Quit” law will be examined thoroughly in this paper. The contested claim made in nineteenth century courts was whether, if workers agreed to work for a certain period and left before the end of that term, they would be allowed compensation for the time that they did work.

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My thesis suggests that law was significant, but not through channels which have become

standard to address in the legal historiography of early American capitalism, such as the class

biased nature of court decisions or the role law takes in legitimizing employer authority in the

workplace. Rather, in a move that was reflected in the economic needs and ideology of the era,

courts invented contractual incompleteness. It is known that Marx “was the first to stress the fact

that the employment contract did not concern such things as the amount or quality of work done;

rather, it specified the hours during which the employee agreed to submit to the authority of the

employer.”2 Samuel Bowles formalizes Marx’s discussion in order to link contractual

incompleteness to the extraction of effort by the employer.

A related point is the surprising finding that the legal system itself took part in defining

which contract terms and conditions would be seen as valid to address in a contract dispute. In

turn, this led to stricter requirements for the legal validity of implied promises, strengthening the

general terms of an employment contract whose primary purpose was, as Marx noted, to define

the limits of worker obedience and employer control. The overarching theme of the paper is one

of conflict: both worker-employer conflict and also worker-bureaucratic conflict. My argument is

that in responding primarily to the needs of capitalist accumulation and the constellation of

employer power vested in those needs, the law changed to create the contractual conditions for

the success of industrialization in the northeast.

Of course, it is not as though the existing legal historiography has ignored these themes

of law and conflict in bringing about social transformation in America. As Morton Horwitz has

noted with regard to property law, property rights are not distributionally neutral. Any change in

their allocation will favor one party at the expense of another, leading to political conflict among

2 The reference to Marx here is found in Bowles, Microeconomics, pg. 268. Bowles cites Marx’s Grundrisse, pg. 275 for this insight.

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competing interests.3 And while Christopher Tomlins argues that developments in early

American labor law were not functional responses to the needs of employers, the effects of these

legal conceptualizations on the reproduction of the existing social system (particularly the

reproduction of hierarchies in the workplace) are clear.4 I suggest a more purposeful role played

by law than what has been suggested by Tomlins. It is also at odds with the laissez-faire

interpretation of early American economic development found in, for example, the work of

Winifred Rothenberg.5

Beginning with a discussion of the relevant literature to identify the key historical and

economic questions motivating this paper, I then develop a framework for answering these

questions. Using case law, legal treatises, journals on contracts and covenants (the law of

covenants was used in employment contract disputes in the early nineteenth century prior to the

development of a law of contracts), as well as newspapers from the early nineteenth century

northeast, I analyze the legal conditions of early nineteenth century master-apprentice contracts

to explore the law’s changing understandings of the contracts made between master and

apprentice. Finally, I turn to the crucial changes in employment contract law: how incomplete

contracts (that is, contracts containing implied promises which were conceived as being

unenforceable by the courts) were invented by law and what it meant for the employment

relationship.

3 Horwitz, Transformation of American Law. 4 Tomlins, Law, Labor, and Ideology. 5 Rothenberg, From Market-Places to a Market Economy.

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Section 2: Literature Review

In the 1970s social historians began to draw on rich datasets of economic statistics and

“ground level” evidence from working people in order to counter what had become the

prevailing “Whig” history of the Revolution, put forward most prominently by Gordon Wood,

that the early nineteenth century was primarily characterized by a proliferation of democracy and

economic opportunity amongst all classes of Americans. Arguing against the point that the

radicalism of the Revolution can be found in the bursts of individualist ideology found most

clearly in political pamphlets and religious movements, these social historians found in account

books, political movements, and court and town records significant continuities between pre- and

post-Revolutionary views on worker governance of workplace conditions, polemics on rising

inequalities, and the commanding influence of wealth on social policy. Some followed a moral

economy route which emphasized efforts to create a fair market economy where power and

control would not be concentrated in the hands of “the few.”6 Others, most notably in the labor

history tradition, uncovered evidence of class consciousness of laborers in the early nineteenth

century – workers who drew attention to early problems with the wage labor system, in particular

its nondemocratic and coercive nature.7

Most relevant to the thesis of this paper is the historical model put forward by a group of

economists in the early 1980s: Richard Edwards’ Contested Terrain (1980) and Gordon,

Edwards and Reich in Segmented Work, Divided Workers (1982) argued that the

proletarianization of the workforce in the early nineteenth century was predicated upon the

freeing up of a labor supply as well as the securing of that labor power in a factory for surplus

6 Merrill, “Cash is Good to Eat”, and Key of Libberty. 7 Wilentz, “Against Exceptionalism” and Chants Democratic.

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extraction. 8 In terms of the former freeing up process, employers monopolized technological

growth, leaving the independent producer without the means of sustaining him or herself at home

production or in the local shop. In terms of the latter securing process, employers sought to

deskill the production process and create a division of labor that reduced the means for collective

bargaining, leaving workers to fend for themselves in the workplace, without the human capital

to market themselves to other employers or to survive economically as independent producers.

While the social historiography did not emphasize the role class conflict played in the

evolution of state institutions (such as the law), the findings of these writers clearly suggest that

capitalist institutions were anything but democratic, because the concentrated wealth and power

in early American society formed barriers to democratic participation in decision making at the

firm level. In addition, social historians (especially those writing from the perspective of

proletarianization model) questioned the efficiency of technical change in the firm, arguing that

technological growth was primarily determined by the need in capitalism for employers to assert

control over workers. Thus, political power clearly must have played some role in aiding the

capitalist development process, for example through the actual institutional process of assigning

property rights over the means of production, or through some other means of delegating

employer authority to direct and control in the workplace.

The crucial question remains: precisely how were employers able to convert their class

power into realizable economic outcomes? The proletarianization story is incomplete because it

fails to document the reorganization of political power required in the workplace in order for the

worker to legally submit to the employer’s authority. In other words, at the point of entering into

the employment relationship, workers presumably had some impression that it would be an

8 Gordon, Edwards, and Reich, Segmented Work, Divided Workers; also Edwards, Contested Terrain; Braverman’s Labor and Monopoly Capital is similar in its emphasis on employer power in the employment relationship but it focuses on the deskilling process of, and class struggle behind, technological change.

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approximately equal exchange relationship. How was law used to justify the new rules of

exchange? Also, given their experiences with employers in the pre-Revolutionary period,

employers most likely came to the firm with a conception, fundamentally different from

employers, of the kind of input they would have into the production process and into workplace

conditions more generally. How did employers use their power to change the rules of bargaining

over these parts of the contract, and were workers compensated in return?

Existing models of legal change are inappropriate for addressing the social context of

employer power. Morton Horwitz’s analysis of antebellum law in The Transformation of

American Law, 1780-1860 (1977) was an early attempt to do so. Horwitz’s thesis was that the

transitions undergone by law after the Revolution can be separated according to prevailing

economic needs and ideologies of the period in question: for example there was a period in early

nineteenth century law where judges took an activist instrumentalist stance whereby the law was

seen as being able to promote economic growth. Judges justified this stance by claiming that

their position in the state had expanded after the Revolution to include governance and active

defense of the “public good.” And then as capitalism grew to become more ubiquitous in society,

with its laws of motion entrenched, there was a corresponding shift in the legal sphere away from

instrumentalism towards legal formalism, which sought to codify legal concepts to apply

scientifically to a wider and more general range of employment relationships.9

However appropriate the thesis that economic needs relate to state power may have

seemed to social historians of the period, who had themselves worked hard to uncover the

contours of class power in early American history, Horwitz’s thesis was briefly lived as it came

under attack from a variety of corners of legal and economic historiography in the 1980s and

early 1990s. First, there was the backlash from liberal economic historians such as Winifred 9 Horwitz, Transformation, Chapter 8 on “The Rise of Legal Formalism.”

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Rothenberg who questioned whether the types of cases Horwitz and his followers cite as being

class-biased were ever applied on a large scale in contract disputes between worker and

employer.10 Her arguments were supported in evidence uncovered in Peter Karsten’s study of

right to quit cases. Right to quit cases involved the freedom of the worker to quit from a long-

term contract and still recover partial compensation for the work that was put in. Horwitz and

others found that the right to quit was denied in several northeastern states, though not in New

Hampshire. Karsten digs into the court cases to find that the decision in New Hampshire can also

be found supported in several other northeastern states, so that the right to quit of the worker was

upheld in the early nineteenth century.11

In a more sweeping critique of Horwitz’s thesis, Tomlins argues in Law, Labor, and

Ideology in the Early American Republic (1993) that “law is politics,” that the evolution of post-

Revolutionary law can primarily be understood through the conflicts among different political

groups for state power, not through the needs of a changing economic “base.” For example, the

decline of “police” as a decentralized, locally based mode of governance, and the ascension of a

centralized legal system with lawyers and judges playing a central part in the new political

economy, can be explained by Federalist reactions to an “excess of democracy” and the

subsequent arguments for state control to reign in democratic institutions.12 This movement was

not class-based – it was a product of different political groups vying for power as the aristocracy

was ousted. Of course, elements of the aristocracy remained, and this can even be seen in law

pertaining to economic relations of the time (such as Master-Servant law).

Tomlins’s “law as politics” thesis has become the dominant way of thinking about

antebellum labor law and it is crystallized into a longer historical period (from the colonial

10 Winifred Rothenberg, “When the Rules Changed.” 11 Karsten, “Bottomed on Justice.” 12 Tomlins, Law, Labor, and Ideology.

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period up to the Civil War) in his most recent book, entitled Freedom Bound (2010). In the

historical model presented in the next section, I take issue with some of the central assumptions

and implications of this thesis, focusing primarily on what I see to be its weakness in terms of

lacking a socioeconomic context. Without a better understanding of the different trajectories the

American economy could have taken after the Revolution, it is difficult to say that politics did

not play a role in directing the economic trajectory more purposely along one path or another.

Historical Model: Law and the Politics of Capitalist Development

The modeling strategy used in this paper follows a counterfactual analysis. I start with the

assumption that the trajectory taken by the American economy in the early nineteenth century

could have gone in several different directions. The particular path to industrialization taken in

the U.S. was influenced by the particular kinds of power that employers exercised, and this

political power in turn gave rise to a specific kind of contract law. First, contract law in the U.S.

developed in such a way that the creation of a nominally free labor force was achieved through

the considerable loss in the ability of masters to maintain their hold over apprentices (Stage 1).

Second, courts changed their views on what constituted legal action on ancillary clauses of the

employment contract, reducing the ability of the worker to “contract out” of a general

employment contract – something was usually done in order to improve the worker’s position in

the final agreement (Stage 2).

The underlying current running through my thesis is that a different constellation of

political power among workers and employers may very well have led to a different kind of

industrialization and corresponding capitalist employment law. In this way, my thesis can be

seen as an extension of Sabel and Zeitlin’s thesis regarding the interplay between politics and

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historical alternatives to mass production.13 While the resulting contract law would still have

been a product, in part, of capitalist ideology, it is clear that it would have been considerably

different from a situation in which workers had more bargaining power and there was a greater

political presence of traditional modes of production. The model thus demonstrates that law is

strongly influenced by the particular class forces in a given economy, rejecting Tomlins’ thesis

that the evolution of law is primarily a product of different political groups contending for state

power. I turn now to a more in-depth explanation of stages 1 and 2 of my thesis.

Stage 1: Proletarianization and Law in the Early Nineteenth Century U.S.

The fact that there was no strong agricultural interest in U.S. politics after the Revolution

meant that the biggest challenge to capitalist development came from apprenticeship, household

production, and a strongly based subsistence economy, all of which were largely informal. Thus

capitalism required in the U.S. the overthrow of the political power of the master and the creation

of formal economic relationships between worker and employer. A significant point of debate is

whether these political developments were promoted in a bottom-up way from individualist

values (as in the “Whig” history mentioned above) or were promoted structurally, through

capitalists wielding state power.

Consider the model of the “Whig” historians of the American Revolution. If the

development of a “free” labor force was promoted primarily by the radicalism of the Revolution

– i.e., republican individualism – then a new individualist conception of work must have

occurred as well, leading to no significant conflicts of interest. This argument is made most

prominently by Gordon Wood, but more importantly in this paper, it is also the implicit model

adopted Robert Steinfeld. In The Invention of Free Labor, Steinfeld accepts Wood’s thesis

13 Sabel and Zeitlin, “Historical Alternatives to Mass Production.” The methodology adopted is also similar in its emphasis on political agency to Robert Brenner’s argument for the transition to capitalism in “Agrarian Class Structure and Economic Development in Pre-Industrial Europe.”

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regarding the burst in individualist values after the Revolution but gives agency to the law by

arguing that the law needed to work out what “free” labor would mean in a democratic republic.

In this thread of argument, the result – capitalism – is due to us, because from Americans’ own

individualist values of hard work and the profit motive, a new social system was created with all

of the characteristics we normally associate with it (wage labor and profit-oriented production,

rather than moral economies which place significant social restrictions on competition and labor

markets).14 While the resulting political economy was unfavorable to workers in some respects

(it delegated a hierarchical system of authority in the workplace), it was simply a consequence of

the individuals’ separation of the spheres of polity and economy: freedom based on self-

governance and not on property ownership led to a view of the contract as both voluntarily

entered into and freely exited out of.

However, there were significant cultural and political concerns expressed by workers

regarding how labor institutions would be governed in an increasingly market-oriented

economy.15 It is unlikely that laborers so radically changed their view of work that they

separated spheres of politics and economy, reducing their own power to govern the terms of

contractual relations in the process.16 Political power must have been wrested from workers in a

way that led structurally to the creation of a nominally “free” labor force. This is precisely the

position taken in stage 1 of my thesis: law sought to reduce the political position of traditional

modes of production in order to release the fetters of capitalist development. Without the

presence of political forces, there was no internal economic law of motion, no “objective

14 Wood, “The Enemy is Us.” 15 Social historians in the 1970s and 80s sought to debunk the view that America is exceptional for its lack of a strong labor movement: see Wilentz, “Against Exceptionalism” for a study of class consciousness in early America. On class consciousness and politics in early America, see Pessen, Most Uncommon Jacksonians. 16 If there is one thing we learn from labor histories of American capitalism it is that its rise was not uncontested or an “unintended consequence” of unbridled individualism.

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economic conditions” that would naturally have led to capital-intensive technological growth or

the rise of the factory.

Stepping back for a moment: the breakup of traditional norms and employment

relationships is related to the well-known economic forces of competition and decline in property

ownership. I argue that changing legal conditions of contractual agreements which reordered

power among economic agents served to create the contracting environment for dissolving the

legal conditions of household and artisanal production. The second part of the transformation –

the rise of the factory system, or wage labor organized in spaces owned by managers – is also

partly explained by patterns in contract law, and is explored next.

Stage 2: Capitalist Ideology and the Creation of Contractual Incompleteness

Beginning with the “objective economic conditions” of this social transformation to

capital-intensive factory work, we know that employer ownership of the capital and tools

required for larger-scale production, as well as the heightening of competition which began in

the transition to the outwork stage, escalated in the transition to the factory mode of production.

Patriarchy and power combined to create the new labor supply of young women from rural New

England who played a crucial role in the beginnings of the factory system.17 In terms of political

processes, it is clear that employer power mattered greatly in guiding the particular trajectory the

American economy took: in addition to employer-led technological change embodied in

speedups, stretch-outs and mechanization that clearly benefited employers more than workers,

the early conflicts in the textile mills over rate cuts and the rights of workers to organize in the

17 Kessler-Harris, Out to Work.

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1830s demonstrated how employers could use their upper hand in the production process to

maintain their positions in the firm.18

In such an environment, the rise of factory work was clearly not inevitable: as Stephen

Marglin argued in “What Do Bosses Do?” the rise of factory work was contingent on a particular

set of class struggles over the organization of work.19 It is therefore fair to assume that under a

different arrangement of political rights among workers and employers, workers may have been

more resistant to the factory mode thus leading to different organizations of work. In fact, this

point is behind the main thesis of Sabel and Zeitlin’s study of the historical alternatives to mass

production. I wish to extend the argument made for political forces one step further by

translating variations in political power and industrial structure into variations in contract law.

Thus in this section I ask, what were the specific contracting problems American employers were

faced with in getting workers to formally agree to the factory organization of work?

First, consider again the view that the Revolution changed people’s attitudes toward

freedom of contract fundamentally (the thesis of Gordon Wood, Robert Steinfeld, and others). In

this thesis, the transition to factory work is due to norms reflecting the new values of self-

government and hard work. According to Wood, “the enemy is us” because new social norms

embodied in politics, religious movements and culture more generally lead to the separation of

political and economic spheres so that hierarchy can be accepted in economic relations in

exchange for a “voluntary exchange” view of the employment contract. Steinfeld best

summarizes the view of institutions implied by the Whig historians’ implicit model in The

Invention of Free Labor:

18 Dublin, Women at Work is an early social history of the textile mills at Lowell and gives a survey of the struggles involved between the women, immigrants, and employers. 19 Marglin, “What do Bosses Do?”

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[a]s the nineteenth century wore on, wage workers complained more and more bitterly that the power of property was making them slaves to their employers….But their argument was now more difficult and more contradictory. Having prevailed in their contention that they were among the self-governing because they owned and disposed of themselves, and having gained the franchise on this basis, wage workers found it more difficult to argue that their propertylessness subjected them to the rule of others.20

Essentially, Steinfeld’s view is that the “paradox of democracy” involved a conflicting set of

institutions: in the public sphere, political freedom prevailed. In the private sphere, economic

freedom was achieved (symbolized best by the freedom of contract) but only at the expense of

political freedom, since workers were made to subject themselves to the authority of their

employer and were left to bargain but only individually for higher pay – and even then, the

bargaining field was not level but it did not have to be level since this may conflict with the

freedom of contract. Their view of institutions in this period is democratic: individualist values

among all workers in society led to the particular set of capitalist institutions that arose in the

northeast.

Alternatively, in a world where political power matters to the type of political economy

that ultimately prevails, class conflict explains the particular course of economic change.

Specifically for the case of stage 2 of my thesis, I argue that the increased capital-intensity of

work and the factory organization in the firm was a product of the unique distribution of power

in the American political economy. It remains to show what set of contractual relations was

implied by this industrial regime. First, it is clear that workers would need to suffer a loss in

bargaining power if the division of labor was to extend itself with such intensity according to the

capital-deepening technical choices made by managers – the process was not a natural part of

labor scarcity, as some have argued. Second, contractual relations must have been conceived

more generally by the courts: if most industrial work becomes centralized and largely determined 20 Steinfeld, Invention of Free Labor, pg. 187.

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by a significantly detailed division of labor, then a general contract may be more “efficient” from

the standpoint of the firm. How can we make these ideas concrete with regard to currently

existing economic and legal models of the employment contract?

Economist Samuel Bowles uses the fact that effort is partially unobservable to the

employer (making it an unenforceable term of the contract and thereby making the contract

incomplete) to argue that the firm must therefore extract effort from the worker. In other words,

the contract’s incomplete nature with regard to specification of other aspects of the employment

relationship (say, the specific bargaining conditions of workers or specific implied promises

made by employers – to be defined below) results in a more general employment contract

concerned solely with the exchange of the worker’s labor power for a wage, giving room for the

employer to have power over the worker.21

Related to Bowles’ point regarding incomplete contracts in the economic sphere is the

corresponding change in the court’s view of the enforceability of implied promises (as part of a

“special contract”). According to Black’s Law Dictionary, an implied contract “is one not

created or evidenced by the explicit agreement of the parties, but inferred by the law, as a matter

of reason and justice from their acts or conduct, the circumstances surrounding the transaction

making it a reasonable, or even a necessary, assumption that a contract existed between them by

tacit understanding”.22 It is argued in this section of the paper that the courts took a significant

turn in the early nineteenth century toward a more incomplete version of the employment

contract reflected in the definition above, with significant effects on employer bargaining power.

John F. Witt in “Rethinking the Nineteenth Century Employment Contract” provides a

legal framework for understanding the importance of these implied promises. He notes that new

21 This observation was in fact first made by Marx in his discussion of commodified labor power in capitalism in Capital, Vol. 1. 22 Black’s Law, 8th Edition.

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labor law historians focus on “immutable” and “default” rules of contract law. The difference,

Witt explains, is that “default rules govern employment contracts only in the absence of some

contrary indication of the parties’ intent”.23 For example, collective bargaining, part of early

nineteenth century conspiracy law, is an immutable rule because it directly affects the design of

the contract by limiting of the behavior of economic agents entering into the contract (workers

are not allowed to strike, for example). “Right to quit” law, or the law of workplace accidents, is

concerned with a set of rules which do not apply to the parties in the absence of the issue arising

during the course of the employment relationship (quitting early or getting injured on the job)

and are thus termed “default” rules.

The dilemma suggested by this separation is the following: as a result of how these

default rules are treated by the contracting parties and by the courts, it is impossible to say that

court decisions involving default rules of contract ever consciously promoted the employer’s

power: since the rules are addressed on a case-by-case basis, there is a lot of variation in the

law’s effect on employer power. Indeed, their impact on conventions in contracting and the

ensuing complexity of the law in dealing with default rules on a case-by-case analysis is

especially important if economic agents choose to “contract out” of the default rules. Witt notes

that while evidence of this is slim, it is likely that employers and workers found ways around

these default rules, reducing the social-historical relevance of labor law because the default rules

would rarely come up in court.24 For example, employers may have let workers leave early,

giving them the right to quit even where the formal right did not exist in the common law.

Overall, Witt’s discussion of default rules is interesting, and the main project of stage 2 of my

23 Witt “Rethinking the Nineteenth Century Employment Contract”, pg. 629. 24 Witt, “Rethinking the Nineteenth Century Employment Contract,” pg. 630.

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thesis is historicizing them and seeing whether there are any implications of class conflict in their

evolution.

In summary, the main argument of this section of the paper is that the process of labor

extraction in Bowles’ labor discipline model that evolved in the second quarter of the nineteenth

century was aided by changes in economic and political conditions. Essentially, I historicize the

model by providing evidence for the claim that contractual incompleteness was invented by the

courts. The broader point is that employer power mattered to the particular evolution of

industrialization in the early U.S.: under a different set of historical conditions with a different

constellation of political power among workers and employers, contract law may very well have

turned out to be less general and more focused on the evolution of legal remedies that would

increase workers’ bargaining power.

Data Analysis

Stage 1: The Evolution of Apprenticeship Law

How and why did the law matter for an economy that was, around the turn of the century,

largely informal and agricultural? Giving my story motivation is a short story titled “Habitonuk,”

first appearing in a Connecticut paper and then appearing in several other newspapers around the

northeast in late 1806. The story was meant to be a social commentary on the nature of

republican political institutions and how they are dominated by propertied interests. I select this

passage because it highlights social consciousness of the law during this time period, an

appreciation of which is crucial for understanding my thesis in this section:

I walked near a snug farm house -- everything around wore the aspect of industry and improvement. I saw the aged inhabitant and his family departing from their

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dwelling -- I saw them turn and take a farewell view, and march away in silent sorrow. This property had been bequeathed to him by an affectionate wife, now deceased. He had sold his other property and laid out the avails in the improvement of this favorite spot, on which he wished to close his eyes. The common law of a foreign country, the odious remnant of a barbarous feudal system had dispossessed him of this, and turned him and his children, houseless and destitute, upon the world.25

Pouring over this old piece, its arguments strike the reader of the common “few against

the many” polemics that have dominated the historiography of post-Revolutionary society.

However, there is much more to the writer’s discussion than simply an attack on the

“privileged”. The idea of the “few against the many,” still alive today in popular media, was used

in post-Revolutionary America to criticize those who owned property, and therefore held status,

without the necessary hard work to earn it.26 In the above, however, there is hard work: there is

“industry and improvement,” and yet something still disturbs this social commentator about the

nature of the legal system – one that has feudal remnants but continues to affect those in

republican America. How?

Morton Horwtiz’s Transformation of American Law, 1780-1860 gives the legal

background for the experience of the family mentioned in the story, giving it credibility by

establishing a striking connection between people and legal systems – a connection which is not

always easy to make. It also highlights an acute awareness in republican society of the ways in

which it people were being affected by certain persons who had power to change the law and

who may also have had economic interests in the status quo. 27 The connection to be established

25 “From the Witness,” The Sun (Pittsfield, MA), 6 Sept. 1806. (Emphasis my own.) 26 Merrill, “Key of Liberty.” 27 The law of waste as it applied to inheritance changed over the course of the late eighteenth to early nineteenth century. The American legal understanding of waste is that it is any action which causes “permanent harm to real property committed by a tenant” (Black’s Law, 2009), though it could simply mean productive investment in the land by the tenant. The common law view of waste as applied to inheritance developed over time to hold that one could not receive unproductive lands in inheritance, because development of that land would constitute waste. The economic logic behind the” instrumental conception” of the law was that the market for land knew best, especially

18

here between the law and the social (in particular through how the contract law serves to

constitute the social) is one main goal of this paper. I argue that, similar to the processes

involved in property law highlighted by the experience of the traveler above, changes in contract

law had significant effects on the dissolution of artisanal work relations. In short, I contend that

legal conditions underpinning master-apprentice contracts reflected influences of conflicts of

economic interest in bringing about the first steps in the industrialization of New England.

The core of the master-apprentice contract gives the master control over the regulation of

the labor supply to his trade as well as the skills necessary for it. The contract is also important

because it is seen as a way of securing the future gains to an investment of both time and money

into the apprentice. The tension point in this relationship is clear: it is time, specifically the

duration of the contract and the ability of masters to control the investment process into the

worker.

E. Bott’s Laws Relating to the Poor addresses the relevant legal conditions of master-

apprentice relationships, paying particular attention to the responsibility of third parties to be

held responsible in the event of the apprentice breaching contract.28 Given that most apprentices

were children, the obligations of the guardian were important to the stability of the relationship.

The master was protected from the regular absconding of servants through the covenant of a

third party – usually the father or mother, or in the absence of one or the other, an overseer of the

poor – to the deed. Early master-apprentice contracts contained the guardian’s signature as well

as a series of terms which would stipulate the duties of the apprentice and master. A typical

contract would look like the following: “This indenture shows that A, a minor, under the

in the early nineteenth century, so that a dower would constrain the future productive value of the land. Horwitz goes so far as to suggest that the judges’ goal in this thread of case law was to “undermine the right of dower itself.” For a discussion of the issue, see Horwitz, Transformation of American Law, pp. 56-58. 28Bott, Laws, pg. 514.

19

guardianship of B, puts himself voluntarily and with the consent of B, put and bind himself

apprentice to C, part of [the trade], to learn his art, and to serve for and during the term of X

years.” The contract would be signed by A, B, and C, sealed, and thus become legally binding.

There was also case law to support these views of Bott. The defining case is Woodrow v.

Coleman (1804)29 in which a District of Columbia Circuit Court found that the general

understanding of the contract ought to be upheld on the principle that if “the son embezzles the

master’s money” the father (or guardian in general) should be liable since “it is upon the faith of

this [principle] that the master takes the apprentice.” In other words, the intention of entering into

an apprenticeship is, in part, to secure against moral hazard claims.30

In Blunt v. Melcher (1806) the court overturned its traditional understanding of this type

of contract. The minor had absented himself from the master (Blunt, a printer), and Blunt sued

the guardian (Melcher) on an action of covenant broken, since the minor himself could not be

held legally bound to perform.31 As traditional practice suggested, legal conditions were set to

give the master an insurance mechanism for large investments made in the course of the

apprenticeship. But in Blunt v. Melcher the court denied the original interpretation of English

courts as well as existing practice in America. Justice Parker for example argued that any

particular responsibility of the guardian would have to be explicitly stated in the contract for the

nonperformance of that agreement to contain a legal basis for action against the contract breaker:

“[t]he apprentice binds himself, with the consent of his guardian. To express that consent, and, in

my opinion, with no other intent, and for no other purpose, the guardian signs and seals the

29 1 Cranch C. C. 171 30 Woodrow v. Coleman seems to be the first American case of its kind. Other British cases support this construction: see Cuming v. Hill (B. & Ald. 59). 31 2 Mass. 228.

20

instrument.”32 In other words, the guardian does not, by expressing consent to the apprentice’s

binding, become responsible if the apprentice breaks the contract by leaving. The other justices

in the case argued similarly, i.e., in accordance with the general idea that more was needed from

the contract in order for these contracts to represent viable employment contracts.

Since the abovementioned treatise was written by a British judge, it could be argued that

this was a point of discontinuity in a legal code which was, to an extent, trying to break from

British tradition. But later American treatises upheld the traditional legal understanding of the

master-apprentice contract as well. Nathanial Dane’s legal treatise titled General Abridgement

and Digest of American Law, first published in 1823, supports Bott’s interpretation – i.e., that the

courts should view these contracts as general in that by simply signing them the guardian is

given a set of obligations concerning the minor’s fulfillment of the contract.33 Dane questioned

the decision in Blunt on the basis that the master-apprentice contract ought to be seen as general

– the guardian’s responsibility was part of his consenting to the terms of the contract. Otherwise,

what would consent of the guardian mean? Other later treatises on contract law including A

Treatise on the Law Relating to Infants by William MacPherson (published in the U.S. in 1841)

upheld the traditional understanding as well, even in the face of an evolving thread of case law

that began to confirm the decision in Blunt v. Melcher.

It is interesting to note that the social effects of the ruling in Blunt were recognized and

ignored. Arguments for the master in that case turned on the general nature of the contract as

supported in cases such as Branch v. Ewington, which saw the crucial aspect of the master-

apprentice contract as legally binding the guardian to the consent of the terms agreed to by the

32 2 Mass. 228, at 231. 33 Dane’s General Abridgement, vol. 3, pg. 539. Other treatises supporting this position were Wood, Treatise on the Law of Master and Servant (1877).

21

minor. 34 In particular, in Branch v. Ewington the court argued that the apprenticeship contract

with the guardian covenanting with the master should be seen as a general contract in which

tradition deems that the guardian will be held responsible for breach if the minor absents himself.

Interesting to note is that, in addition to this line of reasoning, arguments for the master in Blunt

v. Melcher claimed that“[u]nless this construction is supported, every apprentice in the

commonwealth, as soon as he has become master of the trade which he is to learn, may leave his

master's service, and the master is without remedy."35 Judges consciously recognized the social

implications of the changes in the law of apprenticeship contracts implied by their decisions – for

example Justice Parker noted social implications in his decision in Blunt in a very telling quote

which signifies the court’s changing conception of the legal basis for apprenticeship contracts:

“It is objected to this, that great inconveniences and mischiefs [sic] will arise from this construction of this species of indenture. But, to guard against these, the guardian may enter into covenants explicitly with the master, and there is no doubt such covenants will be valid, and binding upon him.” Later cases either confirmed the general ruling of Blunt or ruled in favor of the master

because specific clauses obligating the guardian were found in the contracts. In terms of the

former line, the cases fall under the argument that the signature and seal of the three parties to

the contract does not legally obligate the guardian.36 All were cases similar to Blunt where the

master sued for compensation given an apprentice’s breach of contract. In one notable

counterexample, (Bull v. Follett, N.Y. 1825) Justice Sutherland moved for a new trial to be

granted after the guardian was held to not be responsible for the apprentice’s breach of contract,

because “although it is not necessary for the parent or guardian to bind himself for the good

34 2 Doug. 518. 35 2 Mass 228 at 230. 36 Cases following the precedent established by Blunt are Chapman v. Crane (20 Me. 172, 1841), Ackley v. Hoskins (14 Johns. 374 [New York], 1817), Sacket v. Johnson (3 Blackf. 61 [Indiana], 1832) , Bull v. Follett (5 Cow. 170 [New York], 1825), and Holbrook v. Bullard (27 Mass. 68, 1830). It is also interesting to note that marine law did not require guardian obligation, and this was codified in various treatises, including Flanders, Law of Shipping.

22

conduct, &c. of the apprentice; yet, if the language of the indenture evinces his intention to do

so, he shall be held responsible.” The final outcome of the case is not clear.

It was mentioned above that some cases did decide in favor of the master in winning

compensation from the guardian. The decisions were made using the logic that in those cases, the

relevant clauses signed in the contract explicitly bound the guardian to all covenants of the

apprentice and master.37 Of course, this is in line with the decision in Blunt v. Melcher: "[h]ad

[this contract] concluded, as in the case of Branch v. Ewington, 'and for the true performance of

all and every of the said covenants, each of the said parties bound himself to the other,' there

would have been some color to charge the guardian".38 The point is that, given the variety of

outcomes in the courts, it is clear that apprenticeship contracts made in practice did not follow a

certain trajectory – it was much more likely now that the apprenticeship contract would as a

means of keeping the employment relationship stable.

In summary, to the extent that home and artisanal production was constituted in the early

nineteenth century by contractual obligations (as well as, of course, economic and cultural

conditions which were slowly deteriorating in the face of the rise in new organizations of work),

the changing legal conditions of apprenticeship further disrupted these relationships. Further,

there is a clear pattern of economic and social interests in these decisions whereby the most

important factors sustaining the apprenticeship contract dissolved in the face of masters’ claims

for a different solution, explicitly in favor of a particular party, and where the social implications

of this dissolution are consciously permitted. Contract law in the early nineteenth century

released the master’s rights to the worker’s labor power; the question of how those rights were

reallocated to the employer will be explored next.

37 For example, see Lobdell v. Allen (1857), 75 Mass. 377 for a case where, due to the guardian explicitly covenanting to be liable in the employment relationship, at responsibility was upheld. 38 2 Mass 228 at 229.

23

Stage 2: Into the Factory Mode – the Politics of Contractual Incompleteness

In securing the new factory organization of work, the particular case of the law of

covenants and contracts suggests that over the course of the late eighteenth to early nineteenth

century changes in the law of implied promises created the contractual conditions for a general

employment contract primarily based on the limits of employer authority to set wages and direct

and control employees. The courts broke from their eighteenth century tradition by conceiving of

the employment contract in more general terms, in the process creating a contract law which

conceived of a set of special contracts as appended to the contract and which could only be

enforced under a strict set of legal contingencies. These political forces, in turn, were highly

sensitive to the specific economic needs of a capital-intensive, factory-oriented mode of

production (as it was argued in the historical model section of the paper).

After discussing the evolution of this process in contract law, I reinterpret the entirety

doctrine in light of my findings in order to provide a specific example of how compulsion to

perform was enforced by the courts and how it aligns with my thesis regarding capitalist power

and ideological origins of nineteenth century contract law. The entirety doctrine strictly specified

performance of a contract’s terms. The doctrine was used to argue that if a contract was breached

prior to the end of the contract’s term (say after four months on a twelve month contract), agents

may not collect compensation for performance. I argue that while the entirety doctrine was used

in some states to deny the worker the right to quit, it was not a nineteenth century invention as

some have argued: late eighteenth century courts used the doctrine, but in a way less conducive

to the assertion of employer power over the worker. The differences in use of the doctrine reflect

employer interests underlying the shifts in the law: courts used entirety explicitly to compel

performance in the early nineteenth century.

24

The basic outline of the early nineteenth century contract is described as follows.

"A contract or agreement requires, as essential to its existence, the assent of two or more minds; duorum vel plurium in idem placitum consensus. If particular pacts or conditions are annexed to the contract, qualifying its general nature or varying and modifying its general obligations, there must be the same assent of the parties to these conditions to give them validity, as to the substance of the contract"

The definition continues, "[i]f the parties have not taken care to express these accessory

conditions in the terms of the contract, or what juridically amounts to the same thing, if they

cannot be proved, the law will not presume the assent of the parties to them, unless... these are

plainly to be inferred.”39

This separation of the contract into general and special conditions was commonly applied

in the early nineteenth century to cases on employment contract disputes. For example, the case

of Mills v. Wyman (1825)40 ruled that moral obligations of a contract were not to be considered

implicit in the agreement aside from in “cases where a good or valuable consideration has once

existed." In employment contracts there existed a simple agreement to work for a set period of

time with the amount of compensation specified, and any additional aspects of the employment

relationship – requirements for worker temperance, product quality, or how often the worker

would be paid – needed to be identified explicitly in the contract if a future legal action were to

be taken based on them.

What was and was not left out of the employment contract was a common point of

dispute in courts: for example, a conflict might arise where the worker claimed some “implied

promise” or habit of the employer to pay monthly on a yearly contract was made by an employer.

Another example of an implied promise being violated is a wage cut. Piece rates, particularly in

the textile mills, were rarely included on the general contracts agreed to by the workers. The 39 Monthly Law Reporter, Vol. 3 (1840-1841), pg. 73. 40 20 Mass. 207.

25

amount of the piece rate and the form of payment was therefore made, in the eyes of the court, as

an implied promise. Employers exercised their own discretion in determining the amount paid,

and since the method and rate of payment was not specified in the contract, there was little that

workers could do in the event of a reduction aside from protest (often unsuccessfully).

Interest in the origins of the nineteenth century legal understanding of the special contract

(as well as its economic relevance) derives from a reading of Morris’ Government and Labor in

Early America. Morris studies colonial court records of contract disputes and finds that courts

continually reinforced implied economic relationships and conditions. Composed of a meticulous

study of colonial court records, Morris’ book is filled with various examples of courts taking a

more general view of the wage bargain. For example, “[i]f an employee could prove that he was

fully competent to harvest a crop, the court ordered that he receive the same wages as any other

harvest hand. However, where a master was able to prove to the satisfaction of the court that the

artificer had misrepresented his skill and was in fact ‘not a master of his trade,’ the court

generally ordered a substantial reduction in the amount of his yearly wages or otherwise ruled

that he be considered an ordinary servant and reimbursed according to custom”.41 It is very

likely that colonial courts saw these formal relationships as containing a significant amount of

implied aspects, including those of the relevant skill of the parties in question, and judged the

cases accordingly. In sum, colonial courts recognized that there were many economic conditions

determining the terms and bargaining conditions of an employment contract, and they actively

considered these conditions when resolving disputes.

Most interesting is the fact that evidence of these same considerations can be found in

post-Revolutionary case law as well. In Perkins v. McIntosh (1797), an action of assumpsit was

brought against the defendant who had agreed to pay a certain sum to the plaintiff for the 41 Richard Morris, Government and Labor, pg. 217.

26

temporary use of a saw mill.42 The special contract, formed by the plaintiff and agreed to in

writing by the defendant, stipulated that yearly rent were to be paid for the saw mill over a span

of two and a half years. The crucial decision point in the courts turned on whether there was

evidence of that implied promise to pay rent.43 In his decision affirming for the rent to be paid,

Justice Waties noted that “[i]f the plaintiff declares on a special agreement, in indebitatus

assumpsit, and has also other general counts in his declarations, if he fails in proving the special

agreement, he may go into evidence on the general counts.” The “general counts” referred to by

Waties include common law remedies for obtaining compensation for partial performance of a

contract. On the point of whether a strict construction of special contracts is appropriate (i.e.

whether courts should strictly consider whether there existed a legal obligation to pay), Justice

Waties stated that “the practice of the English courts, is, in this respect, extremely strict and

technical. I see no occasion to adopt so rigid a practice here.”44

While the courts’ shift to a more rigid consideration of the legal basis for implied

promises sometime in the early nineteenth century may have had little social implications on

relations between two parties to an exchange, the impact on employment relations was much

larger. In particular, the ability of parties to appeal to implied promises in contractual disputes

may have been a way for workers to improve their relative bargaining power by enforcing the

employer’s obligation to pay partial compensation if the worker breached contract (say, by

quitting). This is especially true in an era when quitting might be preferred in the event of

employer misbehavior or a better economic opportunity on another farm or in another factory.

Having set out the initial conditions by a look at colonial and late eighteenth century contract

42 South Carolina Court of Constitutional Appeals (S.C. Const.), 1797 43 S.C. Const. 1797 44 S.C. Const. 1797

27

law, we now turn to the details of the creation of contractual incompleteness in the early

nineteenth century.

My goal is twofold: I will demonstrate the law’s role in promoting the formation of an

employment relationship based on obedience and control; and I will show how the logic of the

case law in this period was primarily a function of employer power. First I show that many cases

concerning breach of contract actually turned on the nature these implied promises; second, I

argue that narrowing the view of the employment contract reduces the relative economic

bargaining power of the worker. Peter Karsten has shown that there is little evidence for the

conclusion that there was class bias in the “right to quit” cases. But a common pattern in many

cases involving the worker’s right to quit is the court’s call for complete contracts. This begs the

question: what was the main issue at stake in these cases – the law of special contracts or the

entirety doctrine?

Consider a case mentioned by Tomlins in Law, Labor, and Ideology: in Stevens v. Reeves

(1829), the worker had been employed in a woolen factory, and later left without giving 4 weeks’

notice.45 While it is true that the courts assumed in this case that the employer had ultimate

power in determining the rules in the workplace (this is the most important aspect of these cases,

according to Tomlins), the court was also concerned with the implied and express parts of the

contract. The facts of the case were as follows. The employer sued for damages on the basis that

the worker breached his contract; the worker contested that he had not known of the rule about

giving advance notice before quitting. In his defense, the worker contended that the rule was not

stated clearly to him upon entering into the agreement. The court ruled in favor of the worker on

the grounds that it was necessary for the employer to make all rules explicitly acknowledged by

both parties if the employer wanted to sue for contract breach. This point is crucial. If the 45 26 Mass. 98.

28

contract were completely specified, it wouldn’t matter who made the rules: all that would matter

is that the courts could enforce those rules in the event of a breach.46 The court required all

contract terms to be explicit in order for there to be a legal basis for them, and in addition, there

was no reference to entirety (as some scholars have argued was the main point of early “right to

quit” cases).47

A similar situation arose in Hunt v. Otis Company (1842). In this case, a textile worker

had left after working for the Otis Company and leaving after three weeks. The employers

argued that Hunt did not give the company enough notice, but the company’s rules concerning

quitting early were not explicit, leading Judge Hubbard to argue that “the defendants’ regulation

… did not contain in its terms the stipulation that in case of quitting without giving the four

weeks’ notice, the wages accrued should be forfeited”.48 The result was that the worker was

allowed recovery – a significant point if we realize that an express contract in the contested term

(i.e., payment in lieu of early leave) would have given both parties sufficient consideration to

make their claims in court. The logic of the court was framed in the context of which agreements

were expressly made, because implied agreements contained no legal basis unless they were

proved to have been assented to.

Both Stevens v. Reeves and Hunt v. Otis centered on whether the worker had a right to

quit, but in neither case was the entirety doctrine raised. Thus, the courts’ call for complete

contracts is the central theme of these cases, and this fact demonstrates the role that courts played

46 This point brings to mind Samuelson’s famous quip: “Remember that in a perfectly competitive market, it really does not matter who hires whom; so have labor hire capital.” from Samuelson, “Wages and Interest: A Modern Dissection of Marxian Economics.” In the absence of the conditions for perfectly competitive markets, power clearly plays a role in determining who hires whom. 47 26 Mass. 98 at 100. 48 45 Mass. 464.

29

in defining contractual incompleteness as well as this incompleteness’s effects on employer

power and the factory organization of work.

If things revolved around the relative completeness or incompleteness of contracts, then

where and why was entirety doctrine raised in cases on contract breach, and what were its social

effects? Consider again Perkins v. McIntosh, and recall that in that case the special contract

concerned a promise to pay partially (yearly rent) and that the courts affirmed this ruling. The

court’s decision was based on the logic that special agreements could be supplemented by

general counts, including the general conditions under which the contract was made – an

important difference from these later cases. Those familiar with entirety doctrine will note that

the entirety doctrine may also have been used in Perkins. Most interestingly, the court in fact

goes on to argue in Perkins v. McIntosh that “[b]ut where the plaintiff declares on a contract,

which is entire, the plaintiff must recover on the whole contract taken together, and cannot either

apportion, or recover on the common counts.” And still, even with explicit mention of entirety,

the court ruled in favor of the plaintiff to receive partial compensation. Why?

In Perkins v. McIntosh the doctrine of entirety and the doctrine of special contracts were

both present. The entirety doctrine was acknowledged but not used. My contention is that the

doctrine of entirety, present in both eighteenth and nineteenth century courts, was used

especially in the nineteenth century for the purpose of compulsion to perform. It is important to

clarify that I am not saying that it was always used to compel performance, as if these cases were

class-biased. Rather, my point is that when it was used, compulsion was the goal. To support my

argument, I draw on the following point made in “Are Property and Contract Efficient?” by

Duncan Kennedy. Kennedy discusses the logic behind common arguments for private property

30

and enforceable contracts. In arguing against the notion that enforceable contracts are efficient

because they secure conditions for gains from trade, he notes that

[i]ndeed, as of the time of the lawsuit, the enforcement of a contract cannot be said to make both parties better off. If performance was in the interest of both parties it would normally occur without enforcement. There is, to be sure, always the possibility that parties engaged in strategic maneuvers over division of the surplus might bluff each other into a jointly mistaken ‘no deal.’ This possibility cannot be avoided by enforcing contracts, and is therefore irrelevant to our argument here. … In other words, the meaning of enforcement of contracts is the application of ineluctable force to make people do things they don’t then want to do.49

Based on the evidence from the “right to quit” cases I argue that compulsion is the true

motivation behind enforcement of the doctrine of entirety. In particular, the power to compel

work lay at the intersection of contract law and employer power in the mid-nineteenth century.

This is different from the “class bias” argument because either party – the worker, employer, or

even entrepreneur – can be compelled to perform based on the legal validity of the underlying

implied promises: if legality was present, entirety could be used to compel performance. Law’s

use of the entirety doctrine, in conjunction with the creation of contractual incompleteness

outlined above, gave the employer greater power over the worker by limiting his ability to breach

contract solely to “legally justified” reasons.50

In a striking case of law’s justification of the entire contracts doctrine, M’Millan and

M’Millan v. Vanderlip (1815) upheld the right of authority of a manufacturer who employed a

worker for ten and a half months to spin yarn at a piece rate.51 The judges in the case listed the

reasons why entirety should be upheld, all within the perspective of the employer: “It is well

49 Kennedy, “Are Property and Contract Efficient?” 50 The common law absolved of one’s duty to perform if there was an “act of God” that prevented them from fulfilling the agreement. See Willington v. Inhabitants of West Boylston (21 Mass. 201, 1826). In another oft-cited example Olmstead v. Beale (36 Mass. 528, 1837), it was found that the “equitable principle” of giving partial compensation would not apply to voluntary leave – only to exogenous factors such as in Willington. 51 12 Johns. 165.

31

known, that the labor of a man, during the summer months, is worth double the labor of the same

man in winter; but upon the principles contended for by the defendant's counsel, if the farmer

hires in the autumn, for twelve months, at monthly wages, the laborer may quit his employ on the

first of May, and sue for his wages, and recover them; leaving the farmer the poor resort of a suit

for damages. The rule contended for holds out temptations to men to violate their contracts.”52

The uncertainty faced by the worker in engaging in these long term contracts (due to, say, a

better opportunity on another farm) is not considered in the decision. In other words, entirety was

clearly a doctrine derived for the benefits coming from legal compulsion.53

To summarize stage 2 of my thesis and wrap up the analysis of the data presented thus

far, the rising importance of factory work required the creation of contractual conditions which

would place strict limits on the ability of workers to bargain collectively and to “contract out” of

the hostile environment characterized by the general employment contract. Responding to

sources of worker-employer conflicts regarding implied promises, including how often the

worker would be paid and what would constitute a valid reason to quit, courts narrowed their

view of the general employment contract, requiring essentially that any of these types of issues to

be expressly stated in the contract in order for them to be legally valid. The result was the

promotion of the power asymmetries embodied in factory work.

Conclusion: Social-Historical Importance of Incomplete Contracts in Early U.S. History

In early 1843 a petition signed by a group of textile mill operatives was sent to the

Massachusetts state legislature in protest of a company-wide cut in piece rates. In defense of

their position, the leader of the group noted that "we did not imply by agreeing to this Regulation

52 12 Johns. 165. 53 The commonly-cited example in the literature is Stark v. Parker (19 Mass. 267, 1824), but here Justice Parker compelled performance by framing the case in terms of the value of the worker’s labor power to the farmer.

32

Paper [i.e., their employment contract], that our wages were to be subject to any reduction which

the company might see fit to make."54 While many social historians have cited the protests as

examples of labor exercising its right to "voice" in the industrializing northeast, the form of the

contract itself (the "Regulation Paper" cited in the operatives’ defense) also plays an important

role in the above story. Given the admittedly sparse evidence on such contracts, we know that it

is unlikely that the Paper specified wage rates to begin with – instead, wages were recorded in

employer payroll records, which in some court cases meant nothing to the substance of the

case.55 We also know from the available evidence in court records that other questions pertaining

to payment, such as the validity of implied promises to pay workers on piece rate either monthly

or weekly, were also commonly debated.

The success of the factory system was contingent on a set of political issues outlining

who would have authority in the workplace, on what terms the agreement would be made, and

what the legal condition of the employer and worker would be. To the extent that the social

constitutes the law and the law constitutes the social, employer assertions of authority in the

workplace were reflected in contracts, and contract law determined the conditions of their

design. That is to say, law and the political forces behind it did more than graft a legal hierarchy

onto the employment relationship – law took an active role in the promotion and constitution of

worker-employer relationships through developing a new set of rules on how power would be

ordered in the workplace.

54 Barre Gazette (Barre, MA), 10 February 1843 (Vol. 9, Issue 40): pg. 2 55 12 Johns. 165

33

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