A complainant-oriented approach to unconscionability and contract law.

Author:Cornell, Nicolas

This Article draws attention to a conceptual point that has been overlooked in recent discussions about the theoretical foundations of contract law. I argue that, rather than enforcing the obligations of promises, contract law concerns complaints against promissory wrongs. This conceptual distinction is easy to miss. If one assumes that complaints arise whenever an obligation has been violated, then the distinction does not seem meaningful. I show, however, that an obligation can be breached without giving rise to a valid complaint. This Article illustrates the importance of this conceptual distinction by focusing first on the doctrine of substantive unconscionability. I claim that the doctrine can be best explained by the way in which a party who engages in exploitative behavior may lose her moral standing to complain. It is because such a party has lost her moral standing to complain that the law, through unconscionability doctrine, bars her from bringing a legal complaint. This explanation avoids the oft-issued charge of paternalism and it also offers benefits over an alternative state-oriented account developed recently by Seana Shiffrin. Using the conceptual distinction behind this account of unconscionability, this Article further argues that recent theoretical debates about the relationship between contract law and morality have been largely misconceived. Those debates have focused on whether contract law and morality impose parallel obligations. Once one appreciates the difference between imposing obligations and recognizing complaints, the comparison looks quite different. Contract law recognizes valid complaints against broken promises, much as morality recognizes moral complaints.

INTRODUCTION I. TWO THEORIES OF CONTRACT LAW II. TWO THEORIES OF SUBSTANTIVE UNCONSCIONABILITY A. The Doctrine of Substantive Unconscionability B. A State-Regarding Approach C. A Complainant-Oriented Approach III. ARGUMENTS FOR THE COMPLAINANT-ORIENTED APPROACH A. Can One Complain Morally? B. Cohesion with Connected Doctrine 1. Fraud 2. Duress 3. Unclean Hands IV. THE ALLEGED DIVERGENCE OF CONTRACT AND PROMISE A. Contract Law as Complainant Oriented B. The Alleged Divergence C. The Mistaken Defense D. Corrective Justice and Civil Recourse CONCLUSION INTRODUCTION

The theoretical underpinnings of contract law have been subject to several major debates in recent years. Descriptively, there is an ongoing dispute about how well the legal institution of contracting tracks the moral institution of promisemaking. (1) Normatively, there is an ongoing dispute about what values we should want and expect the institution of contract law to advance. (2) And doctrinally, there is an ongoing dispute about how contract law is or is not distinguishable from other areas of the law--in particular, torts and property. (3) These disputes are interrelated, but the resolution of each does not necessarily hinge on the others. For example, two people might agree that, as a matter of fact, contract law tracks morality quite poorly, and yet they might disagree on whether this is regrettable or not. Or two people might agree that contract law tracks our moral ideas about wrongdoing but disagree about whether this means that contract law collapses into tort law.

Although these disputes take place at a relatively high level of abstraction, they hold pervasive and inescapable practical significance. One cannot engage with any important topic in contract law without quickly arriving at the question of what the institution is designed to do. For example, if one wants to understand how the implied duty of good faith applies to noncognized employment discrimination, one will naturally want to know how courts conceptualize such a duty, whether it be in terms of fairness or economic efficiency. (4) Or, if one wants to consider the enforceability of electronic terms-of-use agreements, one will need to reckon with the role of knowing and voluntary assent in contract law. (5) Thus, each new and important practical question in contract law inevitably draws scholars back into the fundamental theoretical disputes about contract law's underpinnings. And so the debates continue.

This Article argues that these debates have been afflicted by conceptual confusion. Scholars generally inquire about the obligations of contract law. Do these obligations line up with the obligations that morality imposes? Should our law impose such obligations? Are these obligations similar to or distinct from the obligations of tort and property law? I believe these are the wrong questions.

Contract law, I will argue, concerns the complaints that we have when agreements are broken. It is not about imposing obligations. Despite how we often talk, contract law does not actually impose an obligation to perform. Rather, it addresses whether a party can legitimately complain about having been aggrieved by another's breach.

This conceptual distinction can be hard to appreciate. Most people naturally assume that whenever someone breaches a contractual obligation, then the other party is in a position to complain. Complaint and obligation thus seem to be flip sides of the same coin; contractual liability appears to be the mirror image of contractual obligation. But careful philosophical examination of these concepts reveals that they are not linked as we typically assumed I aim to show that, as a conceptual matter, it is possible for one party to breach an obligation while the other party has no valid complaint against that breach. One way that this happens, I suggest, is if a nonbreaching party has lost the moral standing to complain by virtue of his or her own misconduct. Complaint and obligation, then, can come untethered from one another.

In order to illustrate this conceptual point, this Article begins by focusing on the doctrine of substantive unconscionability. The law typically understands substantive unconscionability to work by releasing imprudent bargainers from their voluntarily assumed obligations. (7) Put this way, one naturally wonders why we should so relieve freely acting parties of their obligations. Seana Shiffrin has recently argued that the explanation for such a release concerns the state's interests in not facilitating exploitation^ In contrast, I think that the unconscionability doctrine is best understood not as releasing an obligation, but instead as recognizing legally that the plaintiff is not in a position to complain. The doctrine reflects the idea that a party who takes advantage of wildly unfair terms cannot complain when those terms are breached. This account is simple and intuitive, draws on basic moral concepts, avoids the oft-issued charge of paternalism, and explains how unconscionability coheres with other contract doctrines. If nothing else, this Article thus offers a new way to understand the doctrine of substantive unconscionability.

Unconscionability, though, is just one locus--albeit an especially perspicuous one--of a conceptual error that is widespread. Contract law is typically characterized as imposing an obligation to perform.? As a result, debates about the nature of contract law are cast in terms of the nature of the obligation to perform. But this characterization derives from the assumption that, whether courts grant litigants relief or not, they are necessarily deciding questions of obligation. It is assumed that one can pursue a complaint in contract law if the other party has breached her obligation. As I aim to show, this assumption is false: one can be the victim of a breach and yet have no complaint. (10) Theorists and jurists have overlooked the fact that the breach of an obligation is not sufficient to ensure a valid complaint.

Although the conceptual distinction here is admittedly subtle, when the classic debates about the nature of contract law are reframed in light of it, I believe that they take on a different character. Gone are questions about the obligations of contract law. In their place are questions about what sorts of complaints we can level against one another. And, with this reoriented perspective, the alleged divergence between contract law and morality dissipates. The supposed divergence, it turns out, was built around the idea that contract law does not impose the same sort of obligations that are imposed by the morality of promises. But this construction misunderstood the function of contract law. Contract law is inherently ex post. It is about how we respond to complaints after alleged wrongdoing; it is not directly about what we are obligated to do. And, ex post, contract law recognizes complaints in much the same way that morality recognizes complaints.

This Article proceeds in an hourglass structure--beginning broadly with debates about the nature of contract law, narrowing in to a focal point concerning unconscionability, and then broadening back out to the larger debates about contract law's foundations. In this spirit, Part I describes the tension between theories of contract law that view it as fundamentally concerned with interpersonal morality and theories that view it as fundamentally an institution of the state. The important difference is that the former view the basic features of contract law as explicable from within morality, whereas the latter view contract law as explained primarily from outside morality. Part II focuses on the doctrine of unconscionability. I consider two different explanations of the doctrine: the first focuses on the interests of the state in having such a doctrine, and the second focuses on the moral standing of the complainant. This second explanation draws on the key conceptual distinction between obligations and complaints. Part III describes several reasons for preferring this second explanation. I believe that the complainant-oriented approach offers an intuitively satisfying explanation for the doctrine, gives it a moral foundation, and coheres better with...

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