Undermining Justice: The Two Rises of Freedom of Contract and the Fall of Equity
| Author | Hila Keren |
| Position | Professor of Law, Southwestern Law School |
| Pages | 339-402 |
339
(2016) 2(1) CJCCL
Undermining Justice:
e Two Rises of Freedom of
Contract and the Fall of Equity*
Hila Keren**
is article explores a crucial moment in American legal history, known as the Lochner
era, in which the rise of freedom of contract was sharp enough to defeat equity concerns,
and then argues that a second rise of the freedom of contract has recently been developed
by the Supreme Court in the domain of arbitration agreements. It contends that this
second rise is not only a revival of Lochnerism but also, and more so, what the article
names “neoliberal-Lochnerism”: a process of legal dissemination of neoliberal common
sense outside of the world of contracts. Via close reading of leading recent cases, the
article demonstrates that the genus of arbitration agreements now allowed by the US
Supreme Court represents an assault on fairness, morality, and justice that is larger
than the eye can see at rst glance. e result, it is argued, is “law without equity”, a
form of neoliberal jurisprudence that allows, and even incentivizes, humans who have
accumulated enough power to act opportunistically. Without equity’s restraining power,
the article concludes, those possessing a combination of economic means, political inuence,
and intellectual sophistication can and will exploit the legal rules to undermine justice.
* e title of this article responds to Patrick Atiyah, e Rise and Fall of
Freedom of Contract (Oxford & New York: Clarendon Press & Oxford
University Press, 1979). For an earlier response to the same book see FH
Buckley, ed, e Fall and Rise of Freedom of Contract (Durham: Duke
University Press, 1999).
** Professor of Law, Southwestern Law School. Part of this article was selected
for presentation at a working conference organized by e Vulnerability
and the Human Condition Initiative at Emory Law and I thank Martha
Fineman for the opportunity. I deeply thank Danielle Hart who took
the time to read this piece and share valuable insights. For their excellent
research assistance, I thank Alice Zakaryan and Aykanush Tabadzhyan.
Finally, I am grateful for the dedicated work of the editors of the Canadian
Journal of Comparative and Contemporary Law.
340
Keren, Undermining Justice
I. I
II. T F R F C
III. T S R F C
A. e New Aribitration Jurisprudence
B. e Meaning of New Arbitration Jurisprudence
C. e New Jurisprudence as a Neoliberal-Lochnerism
1. Economized Discourse
2. An Assault on Collective Agency
3. A Biased Approach in a Universal Disguise
IV. T F E
A. e Fall of Unconscionability
B. Freedom as Prison
C. Undermining Equity’s Rationality
D. Law without Equity
1. Arbitrariness
2. Inequality
3. Risking the Social Contract
V. C
I. Introduction
That a true freedom of contract necessitates legal enforcement of
agreements by courts is an accepted premise from time immemorial.
roughout the years, and until today,1 numerous American cases have
quoted a famous English case from 1875 that stated the idea as follows:
if there is one thing which more than another public policy requires it is that
men … shall have the utmost liberty of contracting, and that their contracts
when entered into freely and voluntarily shall be held sacred and shall be
enforced by Courts of justice.2
1. See e.g. the 1900 case of Baltimore & OSR Co v Voigt, 176 US 498 (1900)
at 505-506; and the 2015 case of Royston, Rayzor, Vickery, & Williams,
LLP v Lopez, 467 SW (3d) 494 (Tex Sup Ct 2015).
2. Printing & Numerical Registering Co v Sampson (1875), 19 LR Eq 462 at
465 (CA (Eng)).
341
(2016) 2(1) CJCCL
Although few would argue against the general presumption that the
freedom of contract requires an enforceability of contracts, there has also
been a much larger ongoing debate regarding the limits of this idea. Do
courts always have an obligation, or a duty, to enforce contracts, or are
they allowed to refuse enforcement under some circumstances? With
regard to this question numerous American cases have quoted another old
and famous English case, authored in 1751 in the “courts of conscience”
— England’s courts of equity.3 In this case, Lord Chancellor Hardwicke
explained that the courts of conscience would not enforce agreements
that “no man in his senses and not under delusion would make on the
one hand, and … no honest and fair man would accept on the other”.4
Moreover, he also described those undeserving agreements by
directly referring to equity and conscience, naming them “unequitable
and unconscientious bargains”.5 And, although it was not the rst time
that courts had refused enforcement of unfair contracts,6 it was certainly
one of the rst times the refusal was theorized in conscience-oriented
terms and reected the logic of equity. Lord Chancellor Hardwicke’s
words established the unconscionability principle as an equity-based
limit on the freedom of contract and his words have proven appealing
to generations of judges and legal commentators on both sides of the
3. See e.g. Dennis R Klinck, “e Nebulous Equitable Duty of Conscience”
(2005) 31:1 Queen’s Law Journal 206 at 208 [Klinck, “Nebulous”]
citing Ewing v Orr (1883), 9 App Cas 34 (HL)(in which the court said
“[t]he courts of equity in England are, and always have been, courts
of conscience” at 40); see also Klinck, “Nebulous” (stating that “no
doubt historically conscience and equity were intimately allied, even
synonymous” at 211).
4. Earl of Chestereld v Janssen (1751), 28 ER 82 at 100 (Ch) [Earl of
Chestereld].
5. Ibid [emphasis added].
6. For the “ancient roots” of unconscionability, see e.g. Stephen E Friedman,
“Giving Unconscionability More Muscle: Attorney’s Fees as a Remedy for
Contractual Overreaching” (2010) 44:2 Georgia Law Review 317 at 334-
43 (citing sources which connect the idea to ancient Jewish and Roman
law).
To continue reading
Request your trial