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Valparaiso Univ. Law School

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Thursday, April 21, 2005

Contract law and the constitution

Liberal theory in the 19th century saw in contract theory a powerful force for democracy and equality, and a good many battles were fought to give that right to disadvantaged groups, chiefly African-Americans and women.  Does contract law still have something to say about liberty and equality?  Hila Keren (Berkeley) thinks so, and has a new paper, "We Insist! Freedom Now": Does Contract Doctrine Have Anything Constitutional to Say?  In it, she argues for a greater role for the doctrine of good faith in negotiations as a means of combating lingering discrimination.  Click on the "Continue reading" link for the abstract.

ABSTRACT

On a daily basis countless people are refused contracts due to discrimination on account of their "Otherness" – their race, their disability, their gender, etc. Many of them are not welcomed by hotels, denied service in restaurants, rejected by banks when asking for a mortgage loan, and so on. The variety of transactions that are denied and the breadth of human interaction that they affect are simply overwhelming and result in a fundamental exclusion from the marketplace.

For years contract law has ignored this problem, while exclusive responsibility for contractual discrimination has been reserved for constitutional law and the antidiscrimination statutes that were enacted to fulfill egalitarian ideals. This Article attempts to break the contractual silence and to bridge the huge gap between discrimination and contracts by pressing up against traditional legal boundaries. Drawing on a broad understanding of the Thirteenth Amendment - as a promise of an egalitarian and mobile economy which heavily relies on contracts - the Article calls for addressing the problem of precontractual discrimination with contractual tools. Such a possibility has until now remained by and large unexplored, but as this Article seeks to show, it is an achievable and powerful step that can be well-integrated into up-to-date contract theory.

The Article first exposes the detachment between contract doctrine and the scattered antidiscrimination norms and analyzes the harmful consequences of this detachment. It then creates an original meeting point between the two bodies of law, one of which is intentionally located within contract doctrine. This point is found by dismantling the dominant concept of "freedom OF contact", and especially by defining and establishing the freedom to make a contract.

The novel insistence on the "freedom TO contract" – which gives the Article its name – is to be enforced, as proposed, through the duty to negotiate in good faith. Breaking contractual negotiations for discriminatory reasons, it is argued, should be seen as illegitimate business behavior, as an overt expression of bad faith that carries liability. One basis for imposing such precontractual liability can be found by applying to the issue of discrimination the "no-retraction" principle that was recently developed within the economic school of thought. Such reasoning is part of a more general effort to go beyond the opposition between equality and freedom by answering affirmatively the question raised by the Articles’ title: contract law has something constitutional to say and it is the commitment and enforcement of the essential freedom to contract.

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