ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, March 5, 2012

Spring Contracts Live: Contractual Fairness

HartProfessor Danielle Hart of Southwestern Law School presented her paper on Contract Law and Inequality.  She would eradicate the public/private law distinction in an effort to shift the frame from the current free market, neo-liberal frame to one that focuses on the propensity of law to promote inequality.  In particular, Professor Hart views contract law as public law because of the extent of state involvement in every aspect of contracting.  

Her paper focuses on bargaining power, a term that we use all the time but rarely pause to define.  Professor Hart supplements the realist view that bargaining power is a form of property with Pierre Boudieu's notion that capital is any form of power that can be used to obtain an advantage.  

Professor Hart identifies three cardinal principles of barganing power.  1) Bargaining power has never been and never will be distributed equally; 2) bBargaining power is always "inerested" in the Bourdieuvian sense; and 3) finally (and depressingly) unequal bargaining power begets unequal bargaining power. Unequal bargaining power affects bargains all the time, but contracts law addresses it (and then inadequately) only in cases when there is both an actionable misuse of inequality of bargaining power and undue advantage taking.

Professor Hart presents a fully realized, theoretically complex approach to some fundamental contractual concepts, to which it is hard to do justice in 1/3 of a blog post.  We'll have to look forward to the publication of her paper.

KerenProfessor Hila Keren, Professor Hart's colleague at Southwestern Law School, presented what she described as an example of Professor Hart's thesis, Consenting Under Stress.  Her presentation focused on a 10th Circuit case, Gascho, in which a nurse with 35 years of experience agreed to a separation agreement with her employer, abandoning her Title VII claims, while under conditions of extreme stress.  The stress was mostly the product of her husband, who beat her, raped her and then demanded a divorce, and who was also her boss and had fired her after having an affair with his (and her) co-worker.  The court articulated the doctrine of stress as a ground for excusing a party's duties under a contract.  The doctrine, so understood, is very limited, and for that, according to Professor Keren, we have Judge Posner's Selmer decision to thank. The 10th Circuit affirmed the District Court's dismissal of the suit, finding that Ms. Gascho had not presented evidence from which a reasonable jury could conclude that the agreement was valid.  

Professor Keren then undertakes an analysis of our legal understanding of stress.  Courts treat stress as a subjective feeling, but Professor Keren, drawing on a scientific understanding of stress, questions the accuracy of that description.  Stress is actually a predictable human response to certain external events.  She proposes a solution that would take stress a lot more seriously as a physiological response to external factors that could indeed negate a claim that a party had knowingly and willingly consented to an agreement. The paper has many more illustartions of the harsh consequences of courts' misunderstanding of stress.

MillerFinally, our co-blogger, Meredith Miller presented her paper on Party Sophistication and Pluralism in Contract, building on her 2010 article that appeared in the Missouri Law Review.  This paper grows out of last year's conference celebrating the 30th anniversary of the publication of Charles Fried's Contract as Promise.  At that conference, Roy Kreitner delivered a paper on the new pluralism in contract theory. 

Isaiah Berlin defines value pluralism as a recognition of the fact that human goals are many, not all of them are commensurable, and they are in potential conflict with one another.  So it is with contract law, say pluralists.  They disagree with monists who seek to elevate one value above all others in order to unify contracts theory.  Identifying parties as sophisticated or unsophisticated provides an ordering mechanism that helps us to determine which contracts principles to prioritize in different contexts.  When courts and scholars are trying to navigate a pluralist system, they ask whether parties are sophisticated, and they elevate certain principles or others depending on their conclusion as to sophistication.  Those interested in Meredith's take on how courts should go about determining sophistication need to look to her Missouri Law Review piece linked to above.


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