Obligations & Contract Law II 2020/2021
Content:
Lecture 1: Introduction
Lectures 2 – 6: Labor Law
, HC 1: Contract & Regulation
Readings:
• Hugh Collins, ‘Regulating Contract Law’, in Christine Parker et al (eds), Regulating Law, Oxford
University Press: Oxford 2004, pp. 13-32, available via Worldcat.
o After logging into Worldcat via your TiU student account, copy in the search form the following:
COLLINS, Hugh, « “Regulating Contract Law”. You will then see the edited book as the first
result. Click on eBook and then select Chapter I. Once this opens, you can read the chapter in
original PDF print, which is more enjoyable
• Cass R. Sunstein & Richard. H. Thaler, ‘Libertarian Paternalism Is Not an Oxymoron’, 70 University of
Chicago Law Review (2003), p. 1159-1202, available here:
https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=5228&context=uclrev
• Recommended reading: Christine Jolls, ‘Behavioural Law and Economics’, in Peter Diamond & Hannu
Vartiainen (eds), Behavioural Law and Applications (Princeton University Press: Princeton 2007), pp.
115-140, available here:
http://repository.umpwr.ac.id:8080/bitstream/handle/123456789/291/Behavioral%20Economics%20and
%20Its%20Applications.pdf?sequence=1&isAllowed=y
Preparation
After reading the mandatory materials, think about how you might answer the following question: How does
the concept of ‘libertarian paternalism’ as described by Sunstein (Harvard) and Thaler (Chicago) fit in to the
frame Collins (Oxford) sketches for regulating contract law?
• How do Sunstein and Thaler describe ‘libertarian paternalism’?
• What is the frame that Collins sketches for regulating contract law?
• How does ‘libertarian paternalism’ fit into the frame?
Course overview
• Contract & regulation (introductory meeting)
• Labor law (five meetings)
• Contracts in Global Value Chains (four meetings)
o Commercial contracts
o Consumer law
Exam
• Written exams: weighted average. Mid term concerns labor law, end term concerns contracts in GCVs
• Materials: mandatory readings / in class topics
• Requirements: attendance
• Read syllabus for details!
What is regulation?
• Rule-making, monitoring, enforcement
• Process-based and goal-oriented
• Invites questions on effectiveness: when does the regulatory process lead to the attainment of the goal?
• Many approaches (theories) exist
• Applied beyond the law
,Regulatory regime
• Standard: rule
• Information gathering: monitoring
• Behavioral change: enforcement
• What goals does contract law have?
• What about contract law, what goals does it have?
o Conventional view: libertarian
o Regulatory view: distributive justice or social welfare
• Collins (2004)
• Sunstein & Thaler (2003)
Contract (law) and regulation
• Collins (2004): “Contract law cannot be seen as facilitative only”
o Distributive justice (optimize social welfare)
▪ E.g. mandatory rules on informatory disclosure
o Strategic litigation
o Purposive legal reasoning
→ Understanding contract law as a regulatory mechanism invites new questions for research and practice
• Three views on interplay
o Contract law as regulation
o Contracts as regulatory tools
o Contract law being regulated
• Collins (2004), Sunstein and Thaler (2003)
Contract law as regulation
• How is contract law regulatory?
• Defines rules on:
o When is a there a legally enforceable contract?
▪ Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256, CA
o Who can contract? (legal capacity, agency)
o What is contracted for? (interpretation, gap-filling)
o What happens in case of non-compliance? (remedies for breach)
Contacts as regulation
• Contracts as a means of regulation
• Contracts regulate the obligations between the parties
o Self-regulation at the micro-level / private ordering
▪ Contracts as statutes
o Freedom of contract / pacta sunt servanda
• Certain types of contracts
o Commercial, general terms and conditions, long-term (relational) contracts
• Both public and private actors
• Example: Global Value Chains (meeting 6 and 7)
• Contracts as a means to regulate supply chains
, • The limits of contract to bind third parties
• Mechanisms to resolve this
• Example: Advanced Purchase Agreement (APA) between the European Commission and AstraZeneca
In class assignment: APA European Commission – AstraZeneca → The contract
I would like you to study the Advanced Purchase Agreement (APA) concluded between the European
Commission and AstraZeneca on the sale of Corona vaccines. When studying this contract, assume a
regulatory perspective and answer the following questions:
• What is the European Commission contracting for?
• What does AstraZeneca commit to?
• What happens in the case of delays?
• How is a dispute between the two parties to be resolved?
Contract law being regulated
• Contract law as a subject of regulation
• How can it better deliver on goals of fairness and justice
• State intervention
o Public laws introducing, adjusting or removing contract law rules
• Why is state intervention needed?
o Power imbalance / positions of dependency
o To resolve market failures, in particular information asymmetry
• Examples from labor law: Minimum wages, collective bargaining rights, job termination, work safety,
social security
o But what about new ways of organizing labor? E.g. platform workers, the ‘gig economy’ etc.
• Examples from consumer law: information disclosure rules (contract details, qualities product,
payments); unfair commercial practices (misleading and aggressive practices); unfair terms (plain
intelligible language).
o But what does this all assume to effectively protect consumers?
▪ Rational behavior → are we all so rational, in each transaction?
▪ Time, access to, and knowledge and skills to assess
Limits to the information paradigm
• The information paradigm is not enough to achieve that people choose what is in their best interest
• Sunstein and Thaler (2003): infusion of economic theory by insights from psychology
• Behavioral (law &) economics
Choice architectures
• Biases and heurists (short-cuts) influence how people process complex information and make (ill-)
informed decisions
o Bounded rationality
o Bounded self-control
• Best to direct them to the optimal choice for their own welfare
• ‘default rules’ → opt out / opt ins
o No pre-ticked boxes for additional payments (EU Consumer Rights Directive)
o Cooling-off periods for consumer sales (EU Consumer Sales Directive)
