Protecting Individual Self-Interest in Aggregate as the Basis of Fairness in Contract
Notice bibliographique
Résumé
Despite the existence of a near consensus on most of the specifics of common law contract law, there remains a great deal of uncertainty about how doctrines of contractual fairness are to be applied to excuse a party from a contract, and no clear justificatory principle has been found to explain them. This article attempts to reach a unifying principle for the exceptions to contractual enforcement, including unconscionability, undue influence, duress, and mistake, based on the premise that, in order to find a unifying principle for why we provide exceptions to contractual enforcement on the basis that the contract is unfair, we must first determine why contract is enforced at all. The exceptions to contractual enforcement can then be united by a principle that contracts should not be enforced where to do so would undermine the purposes of enforcing contract, or where the reasons for non-enforcement outweigh the reasons for enforcement. This article therefore establishes three general premises that underlie contractual enforcement: (1) the utility of contract law, as a state-enforced law of general application, should be judged on aggregative and societal level; (2) contractual enforcement encourages and enforces welfare-enhancing agreements, but only if we can assume that each party is able to rationally consider her own self-interest with respect to the terms of the agreement such that both parties increase their utility in the bargain; and (3) agreements that are rationally welfare-enhancing at the time of their formation should generally be enforced even in cases in which one party later regrets the agreement to protect the welfare-enhancing societal institution of contracting. Based upon these premises, this article argues that the doctrines of contractual fairness can be unified by an inquiry into whether, in the circumstances, both parties were rationally able to consider and protect their self-interest in the formation of the agreement. It then proposes that where both parties could not, the agreement should be set aside, as the purposes of contract are undermined. Where only one party could not, the agreement should be set aside where the other party knew, or should have known, that the other party could not rationally consider and protect their own interests. This latter caveat serves to protect the societal and aggregative nature of contract law. This article then demonstrates that this approach can justify existing doctrines of fairness and can also explain the outcomes of seminal contractual fairness cases. This article also explores what it means to be able to rationally protect one’s self-interest, and addresses a number of possible objections and concerns to the argument presented.
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