Rethinking Freedom of Contract


Abstract: Many liberal egalitarians support laws that prevent people from making exploitative and unconscionable contracts. These contracts may include low-wage labor agreements or payday loans, for example. I argue that liberal egalitarians should rethink their support for laws that limit the freedom to make these illiberal contracts, as long as the contracts are voluntary and do not violate people’s other enforceable rights. Paternalistic considerations cannot justify limits on illiberal contracts because they are not only likely to misfire; they also express condescending and inegalitarian judgments of citizens. I then consider Seana Shiffrin’s argument that officials may avoid paternalism while still deterring illiberal contracts if they instead refuse to use public institutions to accommodate contracts that are contrary to the fundamental values on which those institutions are based. This argument encounters a dilemma. Officials may refuse to enforce illiberal contracts and ban private enforcement of illiberal contracts, but this strategy encounters the charges of paternalism it aimed to avoid. Or, officials may refuse to enforce illiberal contracts but tolerate private enforcement, but this approach would make the worst off members of society even more vulnerable and marginalized. Therefore, liberal egalitarians should support public enforcement of illiberal contracts because the alternatives are worse.