Contract Law Now - Reality Meets Legal Fictions
University of Baltimore Law Review, Vol. 41, No. 1, 2011
59 Pages Posted: 27 Sep 2010 Last revised: 5 May 2015
Date Written: September 26, 2010
Modern contract law is designed to achieve a fundamental objective, namely, to ensure that voluntary agreements between private parties are legally binding. The appropriateness of this objective and the assumptions underlying it are rarely questioned. Legal scholars, practitioners, and policymakers alike presuppose that the binding-nature of contracts is a desirable and a positive feature of our legal system. But are the assumptions underlying the modern contract system sound? Do people behave in the way that contract law supposes? And are the concepts of voluntary, informed consent and freedom from state interference really the hallmarks of the modern contract system? This Article explores and seeks to answer these questions. In so doing, it reveals an overlooked gap between theory and practice that calls into doubt the notion that contract law has anything to do with freedom and voluntary consent.
Drawing on leading social science literature, this Article seeks to make two contributions. First, the Article shows that the assumptions underlying the modern contract law framework are flawed both theoretically and practically. Many contracts are not entered into voluntarily by rational actors, and the state regularly interferes. Imbalances of power, not freedom and consent, form the cornerstones of the modern system of contract law. Second, the Article attempts to reveal the way contract law promotes and privileges these power imbalances. While the positions staked out in this Article are admittedly foreign to conventional contract law theory, they are far from radical. Instead, they flow naturally from well-accepted social science insights, including from the work of Legal Realists, Critical Legal Studies scholars, relational contract theorists, and, more recently, from the field of behavioral law and economics. What is striking is not that the positions advanced here depart from conventional belief, but that the lessons from leading social science research has had, to date, so little impact on contract doctrine. This Article seeks to change that.
Keywords: contract law, bargaining power, contract enforcement, coercion, disclosure statutes, subprime mortgage
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