Speculations of contract, or how contract law stopped worrying and learned to love risk

Contract law is at pains to distinguish illegitimate speculation from legitimate risk allocation. At the turn of the last century, courts grappled with speculation in two important areas of contract litigation - commodities futures trading and the assignment of life insurance policies - just as courts today must confront their modern analogues in two fast-growing industries: trading in derivatives and viatical settlements. This Essay focuses on a transformative moment in the development of contract law when the question of gambling was eventually swallowed and internalized, as if the problem were solved. However, no analytic formula could distinguish gambling from risk allocation. Instead, the gambling question was subjected to a complex and indecisive cultural negotiation and displacement. A close reading of judicial rhetoric reveals the role of legal discourse in the process of coming to terms with the fears and uncertainties that accompanied the transition into modernity. More than straightforward prohibitions on certain types of conduct, the judicial grappling with risk and uncertainty offered its audiences an image with which to identify: by recognizing that an element of gambling existed in all economic activity, contract discourse made way for the emergence of an individual who could claim mastery even while acknowledging uncertainty.