Democratic Defaults

Prominent analyses of contractual default rules are ex ante in orientation. According to economic accounts, default rules, like the rules of contract interpretation, should be designed to further the substantive objective of social welfare maximization either by filling gaps with terms that maximize the parties’ joint welfare or by giving parties incentives to write such terms themselves. According to accounts that view the freely given assent of the parties as morally salient, what matters morally is that the filling of contractual gaps doesn’t interfere with their procedural freedom to set their own terms for their relationship. So long as that constraint is satisfied, contractual default rules may be designed to further other values.

On my democratic conception of contract, by contrast, what matters is that default rules, like the rules of interpretation, help the parties to realize a plausible shared joint vision of justice for their relationship. The parties are the ones who are morally authorized to resolve morally uncertain matters of justice between them, but, because the ultimate ground of their moral authority is substantive justice, they are duty-bound to do so in good faith together. A morally valid contract is a product of such efforts. Thus, procedurally, it must reflect the parties’ good faith joint effort to resolve moral uncertainty about justice, and substantively, it must constitute a plausible resolution of what justice between the parties requires.

Contract law ought to be designed to facilitate such efforts. Courts should elaborate the parties’ agreement in a way that makes sense of it as a joint vision of justice for their relationship, while also ensuring that judicial judgments don’t displace the parties’ own joint judgments about what justice between them requires. In the realm of interpretation, this means that a robust duty to treat one another in good faith must be part of any morally valid agreement, but that courts must be suitably deferential to the joint judgments of the parties when determining what that duty entails. In the realm of gap-filling, it means that the defaults the law constructs ought not simply to try to approximate what the parties would have decided at the moment of contracting. Instead, they should design neutral benchmarks that facilitate the parties’ ex-post deliberations about how gaps ought to be filled, while also ensuring that a reasonably just vision for the parties’ relationship is implemented should such deliberations fail. The upshot is that the democratic conception supports the construction of “majoritarian default rules.” This is not for the standard reason sometimes offered by economists that such defaults promote efficiency, a rationale that is unlikely to hold up when contracting parties are sufficiently heterogeneous. On the democratic conception, majoritarian defaults are desirable because they inform the parties about the typical case without second guessing relationship-specific matters of justice, thus setting a fair and neutral baseline for the parties’ own deliberations about how gaps should justly be filled.