Friday, July 24, 2020
Generally, readers of this blog tend to think of contracts with a certain reverence. To break a promise is not something that contracts profs take lightly. But during times of crisis and turmoil, the inviolability of a contract is less a given. The past few months have been an unusually volatile period of time. "Contract" is often referred to in a negative light during times of social turbulence, as something that is broken or should be broken. There has been a lot of discussion in the media in the past few months about the breaking of the social contract when it comes to race and economic equality. And last week, Greta Thunberg, the environmental activist, talked about the need to “tear up and abandon valid contracts and deals.”
This isn’t the first time, of course, that social disruption has led to calls to breach existing contracts. The last time it reverberated throughout larger society was during the Great Recession when scholars, such as Brent White , argued for the morality of "strategic default" where homeowners breach their contracts with large banks by walking away with from their underwater mortgages.
Maybe contracts law and (at least some) contracts scholars have been too complacent. For the past few decades, the role of contracts in promoting marketplace efficiency has dominated contracts scholarship, without equal discussion of its role in promoting fairness - or perpetuating unfairness. Have contracts profs allowed contracts to be hijacked by free market economics?
The next few months - maybe years - will see performance defaults that will require courts to consider which promises must be kept and which may be excused -- and should prompt contracts scholars and courts to rethink the meaning and purpose of contracts and contract enforcement.