Nonparty Interests in Contract Law

52 Pages Posted: 24 Feb 2022 Last revised: 23 May 2022

See all articles by Omri Ben-Shahar

Omri Ben-Shahar

University of Chicago Law School

David A. Hoffman

University of Pennsylvania Carey Law School; Cultural Cognition Project at Yale Law School

Cathy Hwang

University of Virginia School of Law

Date Written: February 19, 2022

Abstract

Contract law has one overarching goal: to advance the legitimate interests of the contracting parties. For the most part, scholars, judges, and parties embrace this party primacy norm, recognizing only a few exceptions, such as mandatory rules that bar enforcement of agreements that harm others. This Article describes a distinct species of previously unnoticed contract law rules that advance nonparty interests, which it calls “nonparty defaults.”

In doing so, this Article makes three contributions to the contract law literature. First, it identifies nonparty defaults as a judicial technique. It shows how courts deviate from the party primary norm with surprising frequency through a variety of default rules, interpretation practices, and remedies. These defaults are meant to protect nonparties’ interests and benefit society at large. Second, it develops a normative account as to when common law courts adjudicating contract disputes are a suitable forum to identify and advance nonparty interests. Finally, it documents and explains the surprising durability of nonparty defaults, which the parties could, but rarely do, disclaim.

Keywords: contract, externalities, COVID, default, mandatory, interpretation, remedies, nonparties

JEL Classification: k12

Suggested Citation

Ben-Shahar, Omri and Hoffman, David A. and Hwang, Cathy, Nonparty Interests in Contract Law (February 19, 2022). University of Pennsylvania Law Review, Forthcoming, Virginia Public Law and Legal Theory Research Paper No. 2022-17, Virginia Law and Economics Research Paper No. 2022-02, U of Penn, Inst for Law & Econ Research Paper No. 22-17, University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 955, Available at SSRN: https://ssrn.com/abstract=4038584 or http://dx.doi.org/10.2139/ssrn.4038584

Omri Ben-Shahar

University of Chicago Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

David A. Hoffman (Contact Author)

University of Pennsylvania Carey Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States

Cultural Cognition Project at Yale Law School

127 Wall St
New Haven, CT 06520
United States

Cathy Hwang

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

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