Mortgage Debt and the Social Function of Contract
Mortgage debt and the social function of contract, European Law Journal Vol 22 No 6, 758-771.
Centre for the Study of European Contract Law Working Paper No. 2018-02
Law and Justice Across Borders Research Paper No. 2018-03
16 Pages Posted: 14 Jun 2018
Date Written: June 12, 2018
The high numbers of over-indebtedness and of evictions in Europe since the financial crisis have highlighted the need to re-think the role that mortgage credit plays for societies. This contribution examines the social function of contract law, based on the observation that contract law is a means of allocating welfare in a political economy in which the welfare state is in retreat. The claim asserted in this article is that EU law in the field of mortgages does not fulfil its social function because it is based on a formalistic understanding of contract law. In order to close the protective gap brought about by a shift in the allocation of welfare from public provision to private markets without altering the understanding of contracts, the proposal is to follow the cooperative contract model of contracts as social cooperation. This approach allows for an assessment of fairness that acknowledges the long-term character of mortgage contracts and the ensuing need to distribute market risks between both contracting parties.
Keywords: Contract law, consumer law, debt, social function, welfare, legal theory
JEL Classification: K12
Suggested Citation: Suggested Citation