The Law of Society: Governance Through Contract
54 Pages Posted: 24 May 2007 Last revised: 29 Oct 2014
This paper focuses on contract law as a central field in contemporary regulatory practice. In recent years, "governance by contract" has emerged as the central concept in the context of domestic privatization, domestic and transnational commercial relations and law-and-development projects. Meanwhile, as a result of the neo-formalist attack on contract law, "governance of contract" through contract adjudication, consumer protection law and judicial intervention into private law relations has come under severe pressure.
Building on early historical critique of the formalist foundations of an allegedly private law of the market, the paper assesses the current justifications for contractual governance and posits that only an expanded legal realist perspective can adequately explain the complex nature of contractual agreements in contemporary practice. The paper argues for an understanding of contracts as complex societal arrangements that visibilize and negotiate conflicting rationalities and interests.
Institutionally, contractual governance has been unfolding in a complex, historically grown and ideologically continually contested regulatory field. Governance through contract, then, denotes a wide field of conflicting concepts, ideas and symbols, that are themselves deeply entrenched in theories of society, market and the state. From this perspective, we are well advised to study contracts in their socio-economic, historical and cultural context. A careful reading of scholars such as Henry Sumner Maine, Morris Cohen, Robert Hale, Karl Llewellyn, Stewart Macaulay and Ian Macneil offers a deeper understanding of the institutional and normative dimensions of contractual governance. Their analysis is particularly helpful in assessing currently ongoing shifts away from a welfare state based regulation (governance) of contractual relations. Such shifts are occurring on two levels. First, they take place against the backdrop of a neo-liberal critique of government interference into allegedly private relations. Secondly, the increasingly influential return to formalism in contract law, which privileges a functionalist, purportedly technical and autonomous design and execution of contractual agreements over the view of regulated contracts, is linked to a particular concept of sovereignty. The ensuing revival of "freedom of contract" occurs in remarkable neglect of the experiences of welfare state adjudication of private law adjudication and a continuing contestation of the "political" in private relationships.
The paper takes up the Legal Realists' search for the 'basis of contract', but seeks to redirect the focus from the traditional perspective on state vs. market to a disembedded understanding of contractual governance as delineating multipolar and multirational regulatory regimes. Where Globalization has led to a fragmentation, disembeddedness and transnationalization of contexts and, thus, has been challenging traditional understanding of embeddedness, the task should no longer be to try applying a largely nation-state oriented Legal Realist perspective and critique to the sphere of contemporary contractual governance, but - rather - to translate its aims into a more reflexive set of instruments of legal critique. Even if Globalization has led to a dramatic denationalization of many regulatory fields and functions, it is still not clear, whether and how Globalization replaces, complements or aggravates transformations of societal governance, with and through contract.
Keywords: contractual governance, globalization, transnationalization, reflexive law
JEL Classification: K33
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