Justice for Contracts

69 Pages Posted: 13 Aug 2019 Last revised: 23 Jun 2020

See all articles by Hanoch Dagan

Hanoch Dagan

Tel Aviv University - Buchmann Faculty of Law

Avihay Dorfman

Tel Aviv University - Buchmann Faculty of Law

Date Written: August 11, 2019

Abstract

This Article develops a theory of just contractual relationships for a liberal society and demonstrates its manifestations in vast areas of modern contract law. As a liberal theory, properly-called, our account is premised on the canonical commitments of liberalism to self-determination and substantive equality. As a theory of contract law, it focuses on the parties’ interpersonal interaction, rather than on the justice of the social order as a whole. As a theory of just contractual relationships, it attends to the justness of both the formation of contracts and of their implications.

After surveying and criticizing the leading competing theories of contractual justice, we explain how relational justice – namely: reciprocal respect for self-determination and substantive equality – both justifies the enforcement of contracts and prescribes a mandatory floor of contractual justice. This floor explains the rules that regulate the parties’ bargaining process in a way that goes beyond the traditional laissez faire mode of proscribing only the active interference of one party with the other’s free will. It thus accounts for the expansion of the law of fraud beyond the traditional categories of misrepresentation and concealment to include also affirmative duties of disclosure. The same conceptual expansion also underlies doctrines as diverse as unilateral mistake, duress, anti-price-gouging laws, and admiralty rules of salvage. Finally, concern for relational justice offers the most charitable explanation of unconscionability doctrine and some of its modern regulatory cognates.

The justice of an on-going contract presents an additional challenge because the typically sequential contractual performance generates heightened interpersonal vulnerability. This is why modern contract law solidifies a cooperative conception of contract performance that goes beyond the mandatory floor of relational justice. The duty of good faith and fair dealing, which sets up the contractual rules of the game, stands at the core of this web of doctrines. The substantial performance doctrine in service contracts and the principle against forfeiture in applying the condition/promise distinction, as well as the burden to mitigate and the choice of the expectation interest as the default measure of recovery can likewise be interpreted as belonging to this cooperative framework. All these doctrines require contractual parties to assist each other up to a point. Here, relational justice is functioning not as a floor, but rather as an aspirational idea, one that informs contract law’s normative defaults.

Suggested Citation

Dagan, Hanoch and Dorfman, Avihay, Justice for Contracts (August 11, 2019). Available at SSRN: https://ssrn.com/abstract=3435781 or http://dx.doi.org/10.2139/ssrn.3435781

Hanoch Dagan (Contact Author)

Tel Aviv University - Buchmann Faculty of Law ( email )

Ramat Aviv
Tel Aviv 69978, IL
Israel
+972 3 640 7302 (Phone)

Avihay Dorfman

Tel Aviv University - Buchmann Faculty of Law ( email )

Ramat Aviv
Tel Aviv 69978, IL
Israel

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