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Seeking Due Process Dimensions for Freedom of Contract Michael Pillow

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Seeking Due Process Dimensions for Freedom of Contract Michael Pillow Florida A & M University Law Review Volume 8 Number 1 The Rule of Law in an Age of Constitutional Article 5 Uncertainty Fall 2012 Liberty over Death: Seeking Due Process Dimensions for Freedom of Contract Michael Pillow Follow this and additional works at: http://commons.law.famu.edu/famulawreview Part of the Contracts Commons, Fourteenth Amendment Commons, and the Jurisprudence Commons Recommended Citation Michael Pillow, Liberty over Death: Seeking Due Process Dimensions for Freedom of Contract, 8 Fla. A&M U. L. Rev. (2012). Available at: http://commons.law.famu.edu/famulawreview/vol8/iss1/5 This Article is brought to you for free and open access by Scholarly Commons @ FAMU Law. It has been accepted for inclusion in Florida A & M University Law Review by an authorized editor of Scholarly Commons @ FAMU Law. For more information, please contact [email protected]. LIBERTY OVER DEATH: SEEKING DUE PROCESS DIMENSIONS FOR FREEDOM OF CONTRACT Michael Pillow* CONTENTS INTRODUCTION. ................................................... 39 I. COMMON LAW CONTRACT RIGHTS .......................... 40 II. SUPREME COURT JURISPRUDENCE.......................... 44 III. LIBERTY AND PROPERTY INTERESTS........................ 48 IV. PROTECTING A LIMITED LIBERTY ........................... 50 CONCLUSION ..................................................... 52 INTRODUCTION Presumably there is widespread acceptance for the notion of freedom of contract as a fundamental part of our legal, government and economic systems., In at least a general way, the freedom of, or liberty to, contract is enshrined as a right.2 Likewise, few would ques- tion that this freedom is subject to certain limitations under common law as well as modern constitutional jurisprudence.3 Questions re- volve around the contours of this right and particularly the extent to * Michael Pillow is a Visiting Instructor of Law at Florida A&M University College of Law. He holds a J.D. from the University of Pittsburgh Law School and a B.A. from the University of Virginia. The author expresses his appreciation for the sage counsel, specific comments, and continuing encouragement provided by Professor Richard Hurt of the FAMU College of Law. 1. See, e.g., Rowe v. Great Atlantic & Pacific Tea Co., 385 N.E.2d 566, 569 (N.Y. 1978). See generally JAMES E. MuRAy, JR., MURRAY ON CONTRACTs, § 350, at 735-736 (2d ed. 1974) [hereinafter MURRAY]. Numerous articles have delved into both the history of, and more modem approaches to, freedom of contract. See generally Carolyn Edwards, Freedom Of Contract And FundamentalFairness For Individual Parties: The Tug Of War Continues, 77 UMKC L. REv. 647 (2009) [hereinafter Edwards]. 2. Muller v. Oregon, 208 U.S. 412, 421 (1908). See also Washington v. Glucksberg, 521 U.S. 702, 760 (1997) (Souter, J. concurring), quoting Allgeyer v. Lousiana, 165 U.S. 578, 589 (1897). 3. Frisbee v. United States, 157 U.S. 160, 165-66 (1895). As to common law limits, see, e.g., Edwards, supra note 1, at 655-657. The constitutional limits were clearly explicated in West Coast Hotel v. Parrish, 300 U.S. 379 (1937). See also Planned Parenthood of Southeastern Pennsylvania v. Casey, 505 U.S. 833, 958-961 (1992) (Rehnquist, J. concurring in part and dissenting in part). 39 40 FLORIDA A & M UNIV. LAW REVIEW Vol. 8:1:39 which this right emanates from or is protected under the United States Constitution. This article reconsiders the constitutional dimensions of free- dom of contract as applied to potential decisions, regulations or restrictions by states under the Fourteenth Amendment's Due Process Clause.4 This article's essential premise is that freedom of contract merits some degree of constitutional due process protection. In some contexts, this protection may only be procedural. Case law lends some support to this premise.5 In other contexts, this seemingly precious freedom should be considered so integral that substantive due process applies. The author does not propose an expansion of due process rights for breaches of contract. That topic has been explored in considerable detail elsewhere.6 The article also does not advocate resurrection of the approaches used during what constitutional scholars have long dubbed "the Lochner era."7 The principal concern here is to ensure a sufficient bulwark against laws, doctrines or policies, including judicial decisions that hamper parties, especially businesses and other sophis- ticated parties, from freely negotiating commercial contract provisions. I. COMMON LAw CONTRACT RIGHTS Common law generally intends to enforce contracts freely en- tered by competent persons.8 This general rule is subject to traditional common law exceptions, such as illegality, duress, fraud and mistake.9 Freedom of contract derives from philosophical perspectives that un- 4. The principal concern here is with state rather than federal actions with respect to contracts; hence the Fifth Amendment's Due Process Clause is not addressed. 5. See infra notes 42-73 and accompanying text. 6. See, e.g., Leonard Kreynin, Breach of Contract as a Due Process Violation: Can the Constitution be a Font of Contract Law?, 90 COLUM. L. REv. 1098 (1990). 7. The name of this era derives from the famous or infamous case of Lochner v. New York, 198 U.S. 45 (1905); see also Adkins v. Children's Hospital, 298 U.S. 525 (1923). Countless thorough and provocative articles have been written concerning the history and current treatment of Lochner. See, e.g., Victoria F. Nourse, A Tale of Two Lochners: The Untold History of Substantive Due Process and the Idea of FundamentalRights, 97 CAL. L. REV. 751 (June 2009) [hereinafter Noursel; David E. Bernstein, Lochner Era Revisionism, Revised: Lochner and The Origins of FundamentalRights Constitutionalism,92 GEO. L.J. 1 (2003). Scholars dispute the exact time period of the "Lochner era," but generally place it from the 1890s to 1937. See Nourse, 97 CAL. L. REv. at 754, n.16. 8. MURRAY, supra note 1, at 735-736; see also, JAMES J. WHITE & ROBERT S. SUMMERS, PRINCIPLES OF SALES LAw § 5-1, at 253 (2009). 9. Id. 2012 LIBERTY OVER DEATH 41 derpin the common law.10 American courts have normally refrained from refusing to enforce even "bad" deals absent one of these defenses. "This reluctance can be explained by the widespread acceptance of a view of contractual freedom that was predicated on an expansive con- ception of individual rights. This conception of freedom attempted to demarcate a sphere within which the individual could act without in- terference by the state. The laissez-faire policies of the nineteenth and early twentieth centuries reflect this concept of freedom."" The rule of general enforceability is also limited by the more modern doctrine of unconscionability, as most famously delineated in Article 2 of the Uniform Commercial Code ("UCC"). 1 2 This doctrine has roots in the equity or chancery courts, where equitable concepts of unfairness carried more weight.13 The vagueness of this provision has been much discussed and often criticized. 14 Fortunately, courts have taken a restrictive approach to the amorphous doctrine of unconsciona- bility. Consistent with the historical origins of the UCC provision, most courts require a finding of both procedural unconscionability (ab- sence of meaningful choice) and substantive unconscionability (unfair or adhesive terms).15 In upholding a ruling against a claim of uncon- scionability, Judge Posner aptly summarized the concerns in Amoco Oil Company v. Ashcraft:16 There can be no objection to using the one-sidedness of a transac- tion as evidence of deception, lack of agreement, or compulsion, none of which has been shown here. The problem with unconsciona- bility as a legal doctrine comes in making sense out of lack of "meaningful choice" in a situation where the promisor was not deceived or compelled and really did agree to the provision that he contends was unconscionable. Suppose that for reasons unrelated to any conduct by the promisee the promisor has very restricted op- portunities. Maybe he is so poor that he can be induced to sell the clothes off his back for a pittance, or is such a poor credit risk that he can be made (in the absence of usury laws) to pay an extraordi- narily high interest rate to borrow money that he wants 10. Philip Bridwell, The PhilosophicalDimensions of the Doctrine of Unconscionability, 70 U. CHI. L. REV. 1513, 1518 (2003). 11. Id. at 1518, 1519. 12. U.C.C. § 2-302. 13. See Arthur Allen Leff, Unconscionabilityand the Code - The Emperor'sNew Clause, 115 U. PA. L. REV. 485, 528-529 (1967). 14. Id. at 488. See also M.P. Ellinghaus, In Defense of Unconscionability,78 YALE L. J. 757 (1969); Symposium, Unconscionability:An Attempt at Definition, 31 U. Pirr. L. REV. 333 (1970). 15. See, e.g., Williams v. Walker-Thomas Furniture Co., 350 F.2d 445, 449 (D.C. Cir. 1965); see also, Leff, supra note 13. 16. Amoco Oil Company v. Asheraft, 791 F. 2d 519 (7th Cir. 1986). 42 FLORIDA A & M UNIV. LAW REVIEW Vol. 8:1:39 desperately. Does he have a "meaningful choice" in such circum- stances? If not he may actually be made worse off by a rule of nonenforcement of hard bargains; for, knowing that a contract with him will not be enforced, merchants may be unwilling to buy his clothes or lend him money. Since the law of contracts cannot compel the making of contracts on terms favorable to one party, but can only refuse to enforce contracts with unfavorable terms, it is not an institution well designed to rectify inequalities in wealth . This may be why Indiana is so unfriendly to the defense of unconscionability.17 Additional common law exceptions to enforceability have evolved through case-by-case adjudication, especially during the twen- tieth and twenty-first centuries. Some contract clauses may be considered unenforceable on the ground that they violate public policy or the public interest.18 These standards may not be easy to ascertain and are certainly subject to variation.
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