22 Pages Posted: 11 Jul 2012 Last revised: 31 Oct 2014
Date Written: July 10, 2012
In a previous article, Contract Law, Party Sophistication and the New Formalism, 75 Missouri L. Rev. 493 (2010), I documented a trend in United States case law and scholarship that fashions a dichotomy between sophisticated and unsophisticated parties. That article set out to explain the trend as a theoretical compromise between formalism and realism in the face of a renewed formalism.
However, as I noted in the previous article, the “new formalism” may not be formalism at all because it retains normative concerns. Indeed, the shift in legal thought may be more appropriately and simply characterized as embracing pluralism. This piece will place observations about party sophistication within recent scholarship discussing pluralist conceptions of contract doctrine and suggest that the focus on sophistication is a means to order contract law’s competing values (e.g., autonomy, efficiency, fairness and equality, certainty and predictability).
With reference to my previous writing on the subject, Section I of this Article addresses the increasing significance of party sophistication. The next section summarizes the argument that party sophistication preserves fairness norms in the face of a resurgence of formalism. Section III provides a brief overview of existing pluralist contracts scholarship. The Article then presents its central claim: the attention to the sophistication of contracting parties fits neatly within a theoretical shift toward pluralism and provides a way to strive for coherence and yet still order the competing values of contract law.
After addressing some case examples in Section IV, this Article concludes that, once the status-based label of “sophisticated” or “unsophisticated” is applied, the law can prioritize values. For sophisticated parties, the supervalues are autonomy and individual liberty, which leads to a rules-driven and a-contextual approach that lends itself to efficiency, predictability and certainty. For unsophisticated parties, the supervalue is a normative one of reasonableness and fairness; it is guided by a contextual and standards-based approach. This allows for a general and comprehensive body of contract law that is both principled and pragmatic, a difficult task given the wide variety of parties and transaction types that contract law serves.
Keywords: contracts, theory, formalism, realism, pluralism, party sophistication, contract law
JEL Classification: K12
Suggested Citation: Suggested Citation
Miller, Meredith R., Party Sophistication and Value Pluralism in Contract (July 10, 2012). 29 Touro L. Rev. 659 (2013); Touro Law Center Legal Studies Research Paper Series No. 14-40. Available at SSRN: https://ssrn.com/abstract=2103351