CHAMPAIGN, Ill. — A new paper by a University of Illinois legal scholar offers a novel interpretation of contract law.
The theory, dubbed “contract as empowerment,” can help adjudicate contemporary debates over the proper shape of the law that governs many different markets – from those in consumer goods to labor, finance, credit and mortgages, among many others, said Robin B. Kar, a University of Illinois professor of law and of philosophy.
“Contracting is first and foremost a rule-governed social activity, and the rules that govern contracts are complex and interlocking,” said Kar, an internationally recognized scholar of contract law, philosophy of law, and moral and legal philosophy. “Any social scientists or philosophers interested in understanding contract law should therefore begin by seeking the best interpretation of this entire body of rules.”
On the best interpretation, contract law is neither a mere means to promote efficiency, as economists typically suggest, nor a mere reflection of familiar moral norms such as promise keeping, property or corrective justice, as some philosophers suggest, said Kar, also the Walter V. Schaefer Visiting Professor of Law at the University of Chicago.
Instead, it’s a mechanism of empowerment. “It enables people to use legally enforceable promises as tools to influence the actions of others and thereby meet a broad range of human needs and interests,” he said.
“My paper argues that many of contract law’s deepest doctrinal and policy tensions can be harmonized by a single and normatively satisfying principle relating to empowerment,” Kar said. “I call this view ‘contract as empowerment.’”
According to Kar, the theory begins with a simple premise: People sometimes have good reasons to use promises as a tool to induce others to make return promises or actions in return. The effectiveness of promises for this purpose will typically depend upon whether one party trusts the other to fulfill them.
“Interpersonal trust of this kind can sometimes be generated in informal ways, but especially among relative strangers in many modern settings, it’s often lacking, absent law,” Kar said. “When that is the case, contract enforcement can empower people to use promises as tools to influence another’s actions and thereby meet a broad range of human needs and interests.
“It also empowers people in a special way, which reflects a moral ideal of equal respect for all. This explains why contract law can produce genuine legal obligations and is not just a system of coercion.”
In the paper, Kar argues that his “contract as empowerment” theory is uniquely capable of “harmonizing contract law’s core constellation of doctrines while explaining the legally obligating force of contracts,” he said.
“Because of its harmonizing power, contract as empowerment demonstrates how a broad range of seemingly incompatible surface values in modern contract law – like fidelity, autonomy, liberty, efficiency, fairness, trust, reliance and assurance – can work together and each serve its own distinct but partial role,” Kar said. “The whole of this explanation is greater than the sum of its parts.”
Although some believe that contract law must involve trade-offs between those values, the contract-as-empowerment theory suggests that tensions between them are not always real, Kar said.
“So long as the complex system of rules that govern contracts is fashioned in the right way, these doctrines can work together to serve a deeper satisfying principle distinct to contract,” he said. “This framework can be used to guide legal reform and identify places where market regulation is warranted – from those involving consumer goods to labor, finance, credit, landlord-tenant, home mortgages and many others.
“It’s time to dispense with outdated ways of framing the debate over contract law and market regulations, so that we can identify the true principles that unify contract law and make modern markets work. I believe these principles are related to empowerment.”
The paper will be published in the University of Chicago Law Review.