International production networks → GVCs
Week 1 - Contract and Regulation
Contract law = at the heart of the domain of private law and is concerned with the creation and
consequences of enforceable agreements between private individuals
- → may be seen as regulatory in itself
- infused by public law regulation in an effort by state authorities to promote fairness,
distributive justice or other policy goals in specific economic relationships, including
employment and B2C relations
Regulation
= developed and enacted by state authorities to enhance the functioning of markets in goods or
services, public law
Creation of rules that set a standard and the monitoring compliance of rules and enforcement
of the regulation (Rule-making monitoring (information gathering) as well as information from
which we can go back to standard) enforcement (behavioral change))
(1) Rule-making (setting a standard)
(2) Monitoring (oversight of compliance of rules)
(3) Enforcement (steer back into compliance)
→ the 3 needs to be effective, they are linked to one
another e.g. enforcing feeds into setting a standard
● Perspective on law: process-based and goal-oriented
○ How is law performing on those goals?
● Invites questions on effectiveness: when does the regulatory process lead to the
attainment of the goal?
● Many approaches (theories) exist
● Applied beyond the law; not linked to law per se
Regulatory Regime: Contract Law
Example
● The Sale of Goods Act 1979 specifies that the implied terms that the sold goods must be
of satisfactory quality, fit for purpose and comply with the given description are
conditions
○ satisfactory quality:
1. Standard (rule) = Sufficient / satisfactory quality
, 2. Information gathering (monitoring) = Parties to the contract themselves
3. Behavioural change (enforcement) = Claim damages, without going to court
If studying law from a regulatory perspective, we can assess whether law is sufficient
Goal of Contract Law: Rules need to facilitate legal certainty → then market transactions can
be provided
● Conventional view: libertarian (freedom of contract)
○ CL goal is respecting the basic right of citizens to freedom of association
○ Hugh Collins, p17
■ Traditional/Conventional view of CL:
■ CL performs facilitative role → facilitates market transactions → principle
sources of wealth (p13)
■ CL enables individuals to pursue their own goals → achieved through
freedom of contract
■ No distributive aim → cannot see if CL is effective achieving its goals
● Regulatory view: promote distributive justice or optimising social welfare (DJ is in CL)
○ CL is infused by public law regulation in an effort by state authorities to promote
fairness, distributive justice or other policy goals in specific economic
relationships
○ Governance mechanisms contribute to steering of social practices (p14)
○ if CL is effective achieving its goals can only be assessed with Regulatory view
■ E.g. admin agencies and courts may invalidate Implied / unfair terms to
respond to the interest of consumers / employees
○ Hugh Collins, ‘Regulating Contract Law’, in Christine Parker et al (eds), Regulating Law, Oxford
University Press: Oxford 2004, pp. 13-32
■ “Contract law cannot be seen as facilitative only” → not only facilitating
regulation, bur also in itself a regulatory mechanism
■ Understanding contract law as a regulatory mechanism invites new
questions for research and practice
■ Contract law through a regulatory lens: contract law as a governance
mechanism for steering and controlling markets or private ordering
■ Regulating contract law: rules of contract law are a regulatory
mechanism and are further the subject of regulatory mechanisms
1) Contract law as regulation = regulating rules between parties / steering and controlling
the contractual relationship (p 16)
● How is contract law regulatory?
● Objective: establish enforceable obligation for the parties
● Is CL effective on this goal? → case law
● Defines rules on:
○ When does a legally enforceable contract come into being?
○ Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256, CA
● Its regulatory in the sense that it regulates:
○ Who may contract? (legal capacity, agency) → CL regulates who can contract
, ○ What is contracted for? (interpretation, gap-filling)
○ What happens in case of non-compliance? (remedies for breach)
● Hugh Collins, ‘Regulating Contract Law’, in Christine Parker et al (eds), Regulating Law, Oxford University
Press: Oxford 2004, pp. 13-32
○ CL as a mechanism of governance
■ Many kinds of governance mechanisms may contribute to the steering of
social practice / behaviour
■ In addition to private law: legislative interventions, constitutional
provisions, international treaties
■ Rules of CL must contribute to the objective that services are efficient and
effective
■ Regulatory perspective requires that we examine the role played by other
non-legal steering mechanisms on the social practice of making contracts
■ → evaluating contract law from a regulatory perspective: place private law
in the context of overlapping and interacting regulatory mechanisms
● What counts as contractual behaviour / whether a contract counts
as social practice? Carlill v Carbolic Smoke Ball Co. [1893] 1 QB
256, CA
○ Depends on the meaning of events
■ applying a regulatory perspective to contract law:
● Determine the scope of inquiry by reference to social practice
rather than law
● What counts as the relevant social practice (contractual practice)
● Requires to develop a meaning of contract that is independent of
the legal conception of a contract
2) Contracts as regulatory tools / Contracts as regulation = set contract to achieve the
aim; aim to set out the rights and obligations for various actors involved in these chain
● Contracts as a means of regulation
● Contracts regulate the obligations between the parties
● type of regulation governing contractual practices (but at the same time views contracts
as the subject of regulation)
● Contractual practices are used to deliver services to the public and to control different
parts of the governments (Hugh Collins, ‘Regulating Contract Law’, 2004, pp. 13-32)
○ Defines the relationship / Self-regulation at the micro-level /
○ = private ordering → opposed to formal law enforced by legislative
■ Bilateral / multilateral
■ “Contracts as statutes”
■ Many contracts are analogous to regulation themselves, for they purport
to establish binding standards for the future conduct and specify the
sanctions that will be imposed in the event of breach of standards. (Hugh
Collins 2004, p 16)
, ■ Many contracts are a form of self-regulation at a micro level e.g. breach of
contract is determined by self-regulation of the contract itself (Hugh Collins
2004, p 27)
■ CL / enforcing rules of contract is used as regulation by governments
which affects preferences and choices Thaler/ Sunstein
○ Freedom of contract / pacta sunt servanda (must kept the promise)
● Certain type of contracts / terms
○ Type: commercial, long-term (relational)
○ Terms: GTCs / Supplier Code
● Example: Bangladesh Accord on Fire & Building Safety (2021)
○ https://bangladeshaccord.org/about
○ https://bangladesh.wpengine.com/wp-content/uploads/2021/08/1-September-Inte
rnational-Accord-on-Health-and-Safety-in-the-Textile-and-Garment-Industry-publi
c-version.pdf
3) Contract Law being regulated = subject to regulation (top down approach/passive)
● Contract law as an object of regulation
● (Hugh Collins, ‘Regulating Contract Law’, 2004, pp. 13-32)
○ rules of contract law are a regulatory mechanism AND are the subject of
regulatory mechanisms
How can it better deliver on goals of fairness and justice?
● State intervention
○ Public laws introducing, adjusting or removing contract law rules
○ E.g. harmonisation processes of private law through the EU
○ (Hugh Collins, ‘Regulating Contract Law’, 2004, pp. 13-32)
■ Modern legislation frequently creates special exceptions for classes of
contract where regimes involving compulsory terms are imposed on the
sector
● E.g. employer / consumer contracts
● Why is state intervention needed / Why is CL subject to regulation? Thaler/ Sunstein
○ Power imbalance between producers and consumers / positions of dependency
○ To resolve market failures, e.g. information asymmetry → consumers are subject
to bounded rationality
○ → why we have consumer protection and consumer law
○ infusion of economic theory by insights from psychology (Nudge) – bounded
rationality/ bounded self-controlàinformation paradigm is not enough to achieve
that people choose what is in their best interest
● Examples from consumer law: where contract law is regulated
○ Information disclosure rules
■ contact details, qualities product, payments
○ Unfair commercial practices
