Justice and the Law of Contracts: A Case for the Traditional Approach

Abstract

I thought that because the Federalist Society is a society tied to law schools, someone should discuss a traditional legal concept. So, I shall discuss a traditional legal concept: justice and contract law. By justice, I mean two things. One aspect, which I will discuss first, follows from utilitarian premises and basically holds that just outcomes arise when people are permitted to do the best they can, given their circumstances. This is because, the theory goes, people are the best judges ofwhat maximizes their own utility; hence, allowing them to make unrestrained choices is most likely to maximize utility for the individual and for society as a whole. The second aspect of justice, which I will discuss more briefly later, is called justice as fair distribution. This principle holds that the state has an obligation to insure that the circumstances in which people are trying to do the best they can are not terribly unfair to them. I want to begin this discussion of contract law by using the first concept of justice: that utilitarian and Kantian notion that says that just outcomes result when people are allowed to do the best they can. In the Nineteenth Century, contract law was thought to promote justice in just this sense because contract law permitted the parties to make almost any agreement they wanted and would then enforce the result. This was seen as letting people do the best they could for themselves. In the Twentieth Century, this traditional view is thought to be obsolete. It is commonly believed that contract law in the traditional sense is an obstacle to justice because it permits the strong to exploit the weak in the name of freedom of contract. Through such doctrines as unconscionability, contract law today is attempting to perform its traditional function of insuring justice in the marketplace, not by permitting people to do what they want to do, but by preventing them-in certain circumstances- from doing what they have agreed to do. I argue that the traditional theory was-with some exceptions- basically correct for several reasons. The principal reason is that, while there are evils in markets, they are evils that judges, given the tools that are available to judges, can seldom rectify. They are evils that are best rectified by other social institutions. Thus, it is still as true today as it was in the Nineteenth Century that judges who are deciding contract cases will best effect just outcomes by letting people do the best they can for themselves, given their circumstances.