For nearly a year and a half, our country has been in the grips of a global pandemic. Covid-19 has exposed and exacerbated racial and economic inequities that have plagued our society for centuries. As we have grappled with the dual pandemics of Covid-19 and systemic racism, there has been a renewed focus on interrogating historical and current practices that have contributed to the inequalities that many communities of color experience. In her recent thought-provoking essay Contract Law & Racial Inequality: A Primer, Professor Danielle Kie Hart examines the role that contract law has played in creating, maintaining, and perpetuating such inequities. She argues that acknowledgement of this role is critical if America is to become a more equitable society.
Professor Hart begins her essay by detailing the medical and economic harms that members of Latinx, Black, indigenous and immigrant communities have disproportionately experienced during the pandemic. Death rates, job and wage loss, and housing and food insecurity were proportionately higher for communities of color, and, generally speaking, such communities did not share in the increases in wealth that occurred during the pandemic. According to Professor Hart, this disparate reality can be explained, in part, by the historical and present operation of contracts and contract law in our society.
In her discussion of the use of contracts to transfer property, Professor Hart explains the importance of bargaining power and asserts that “in the context of contract law, property also means bargaining power, because property is the original basis of bargaining power.” (Pp. 6-7.) She argues that a property owner’s right to withhold or exclude property from others gives the owner power to compel the non-owner to accept the owner’s terms. “Consequently, the more one person owns, the more potent the owner’s threat to withhold and, therefore, his ability to get his preferred terms becomes.” (P. 7.) Those with more property and, thus, more bargaining power “will be able to reap more gains from each contract that it enters into than it otherwise would with less bargaining power at its disposal.” (Pp. 11-12.) She contends that “[o]ver time, the party with more bargaining power will end up owning more—more land, money, labor, and other resources both tangible and intangible” (P. 12), which contributes to “pre-existing and intersecting hierarchies of race and class.” (P. 12.)
Given that unequal bargaining power is rarely a successful claim to justify the unenforceability of contracts, Professor Hart asserts that contract law’s lack of acknowledgment of the detrimental role such power can play in contract formation contributes to contract law’s “own structural inequality.” (P. 8.) She argues that ignoring this issue is particularly problematic considering the relative ease in which a party can be deemed to have consented to entering into a contract and the considerable difficulty a party will have in seeking to invalidate one. Although contractual defenses including duress and unconscionability remain available to parties challenging the enforceability of contracts, Professor Hart cites to empirical research evidencing that such defenses are rarely successful. Therefore, in order to minimize the reinforcement of structural inequities to which contract law contributes, she advocates for greater recognition and consideration of the societal consequences that can result from the operation of contractual bargaining power (or the lack thereof) in practice.
In examining bargaining power and its role in creating and fostering inequality, Professor Hart situates her discussion in the context of slavery, Emancipation, and Reconstruction, which I found to be quite illustrative. As she acknowledges, prior to obtaining their freedom, enslaved persons were considered to be property with no property rights of their own. Their owners, who had the contractual right to buy and sell them, possessed the power to bargain and negotiate. After Emancipation, freedmen’s newfound “freedom” to sell their labor was significantly hampered by their lack of bargaining power resulting in unfair arrangements that continued the exploitation experienced by Black people during slavery.
Professor Hart provides an informative historical account of the adoption of a “formal equality” (P. 21) approach during Reconstruction whereby newly freed persons were expected to “take care of themselves” (P. 20) rather than a reparative regime in which the government would take a more active role in mitigating the devastating harms of slavery. She makes a compelling argument that this misguided approach, which was based on an inherently false assumption that a “free” post-Emancipation market would produce just and equitable outcomes between private contracting parties, significantly impeded racial and economic progress then and continues to do so today. Professor Hart urges us to confront and interrogate this reality and to no longer overlook or accept contract law’s role “in facilitating and perpetuating” (P. 25) similar assumptions and inequities.
Using the housing market crisis as her example, she recounts the harms that disproportionately fell upon Black and other borrowers of color who were targeted by subprime lenders. Unlike many banks and lenders who were bailed out by the government during the ensuing Great Rescission, the vast majority of borrowers, who were deemed to be private actors who willingly entered into mortgage contracts, found themselves with little or no recourse. This and other examples in Professor Hart’s essay highlight how contract law policies and assumptions can impede racial and economic equality rather than advance it.
With a renewed focus on examining issues of racial and social justice, particularly in the legal academy and profession, Professor Hart’s essay is a timely and helpful contribution. She provides a valuable perspective through which professors, scholars, jurists, and policymakers can reexamine and afford serious consideration to the role contracts and contract law play in contributing to inequities that continue to plague our society. As Professor Hart correctly notes, “there is a particular urgency to any discussions about inequality right now.” (P. 36.) We must all engage in such discussions and take concrete action if we are to achieve real and sustainable progress.