In and Out -- Contract Doctrines in Action

This Article was written to test a hypothesis, namely, that it is easy to get into a contract but very difficult to get out of one. After reviewing case law from the Seventh and Ninth Circuits, contract law in action suggests that reality may be slightly different from theory. That is, the data from the cases show that it may not be so easy to get into a contract in practice, but it is extremely difficult to get out of one. Pacta sunt servanda seems to be alive and well in twenty-first century contract law. Perhaps the more significant finding from the cases, however, is that the party with more bargaining power tends to get the outcome that it wants in a given case, regardless of its preferred outcome. The implications of this finding are unsettling to say the least, in large part because it is so difficult to get out of a contract once it is formed. More specifically, misuse of unequal bargaining power by the stronger party during formation of the contract will likely go unchecked, the weaker party will be locked into whatever bargain is made, and the stronger party will get to keep even “ill-gotten gains,” so to speak, because the contract and all of its terms (both reasonable and unreasonable) will be binding. Any solution to the problems confronting contract law, therefore, will have to address bargaining power directly and effectively, which is by no means an easy task as the Home Affordable Mortgage Program reveals. Nevertheless, this task is one worth undertaking given that any discussion of contract law is, at least in part, also a discussion of contract law’s place within the American legal system and that system’s role in helping us to live up to our individual and collective aspirations.