Contract Law & Racial Inequality: A Primer
37 Pages Posted: 4 Mar 2021 Last revised: 2 Apr 2021
Date Written: February 28, 2021
America was founded on institutionally recognized and supported racial oppression, namely, slavery and conquest. The fact that the inequality spawned by this oppression continues to exist today should therefore surprise absolutely no one. That said, the extent of the racialized social and economic inequality that pervades American society today is being exposed in horrifying and glaring detail, as a result of the Covid-19 pandemic. But the devastation is not being felt equally--people of color are dying at greater rates and suffering the economic consequences of the pandemic much more than white people. And, of course, Wall Street and American billionaires are doing really well. The Haves come out ahead. We’ve all seen and heard this before. But two important details are obscured and therefore overlooked in this widely accepted observation, namely, the role that contracts and contract law play in facilitating this reality and the profound and often devastating social consequences that contracts and contract law help produce in this process. This Essay attempts to redress this oversight. The Essay first provides a brief step by step analysis of contract law in action, the practical effect of which is to ensure that contracting parties who start with more end up with more. The first part thus shows how contracts and contract law help to create and perpetuate inequality in American society. The Essay then explains why contracts and contract law’s role in producing economic and social inequality is largely ignored. The short answer is because, depending on who the adversely affected contracting party is, a contract is usually understood as a private transaction between private parties asserting their private rights. To understand how you get everyone to buy into the fiction that contracts are usually private is to understand ideology and how it is reproduced in the field of contract law. Perhaps counterintuitively, the Essay traces part of contract law’s evolution story to Emancipation of the slaves and the Reconstruction that followed it. The final part of the Essay briefly revisits the housing market crash that precipitated the Great Recession of 2007-2009 to illustrate the devastating consequences that contracts and contract law help produce and the skewed response to those consequences that are engendered, at least in part, because we cling to the fiction that contracts and contract law have nothing to do with inequality. Unless we do something differently, like acknowledging that the day-to-day practice of contracts and contract law help create and perpetuate inequality in American society, then it seems very likely that the Haves will continue to come out ahead. But the Have Nots will end up being evicted from their homes and remain on the hook to their landlords for the back-rent.
Keywords: contract law, contract formation, bargaining power, critical race theory, racial capitalism, law and political economy, Emancipation, ideology
JEL Classification: K12, I30, I31
Suggested Citation: Suggested Citation