Friday, April 9, 2010




Commerce would not work without contracts. Contracts provide legal assurance that people will adhere to their commitments. Both commerce and the law presume that men do not naturally hold to their word. But no one would take financial risks if they knew their fellow man would not fulfill his promises. So the law supports commerce by forcing men to do what they say. If they don't, they must face dire economic consequences. Men don't like dire economic consequences, so they adjust their behavior to avoid them.

In theory, contracts reflect a perfectly equal bargain between two perfectly equal commercial parties. One party wants something the other has. Each parts with something in order to gain something from the other. It is not gratuitous; it is methodical. One party suffers detriment in the precise proportion that the other obtains benefit. And there are no flaws in the bargaining process: The law presumes that both parties are rational, shrewd, cynical businessmen who know all the risks before committing to do something. Thus, neither can complain when something goes awry: After all, when two rational, equal adults bargain for something, they have a right to delineate who bears the risk if it does not work out.

But does this sound like commercial reality? Certainly not. In most commercial exchanges, parties are not equal. One party inevitably has more money and power than the other. As a result, the stronger party can leverage his strength to foist more risk and burden on the weaker party. After all, the weaker party needs what the stronger party has. So what authority does the weak party have to influence the bargain? He can take it or leave it. If he leaves it, he does not get what he needs. That is commercial reality: A perennial Hobson's choice. The legal myth of "equal exchange between equal bargainers" is a tiny exception to the rule: Unequal, unfair exchange between parties with gross disparities in power.

I always marvel at inconsistencies between legal myths and practical realities. They always reveal a tension between theoretical aspirations and cruel commerce. After all, theory and reality follow different paths. Just because something exists in theory--as it may in legal doctrine--does not mean that it exists in reality. Theory is just an overlay. Theory concerns objective abstractions; as long as a situation exhibits a few technical requirements, it is "so." But practice is more fluid. It does not restrict itself to formulae or aspirations. In practice, the only inquiry is: "Does it work?" If it works in accordance with principle, fine. If not, no big deal.

In most cases, people just want things to work. That is certainly true in commerce. It is one thing to strike a technically enforceable contract. It is quite another to strike a just one. After all, practical realities reflect existing power structures. Things "work" when they please those who have power. Contracts are usually unfair because they work best when they are unfair. The strong offer terms to the weak in a manner that satisfies legal requirements. As a practical matter, they maintain the unequal relationship. The law has nothing to say about that. And that suits the strong just fine.

On some level, everyone knows this. Everyone suspects that contracts somehow "screw them over." They do not exactly know how. They just know that if the other guy does not deliver, they will have no recourse against him. But if you do something wrong--or if something unforeseeable happens--he will have recourse against you. This is why everyone fears "fine print." It is as if everyone who signs a contract resigns himself to the idea that the bargain is one-sided. They know the "fine print" will work against them when push comes to shove. They just hope it doesn't come to that.

So much for equality in bargaining: Everyone who signs a contract knows that he is subjecting himself to the other's unlimited authority. He doesn't even know how much power he's giving the other guy. He just knows the "fine print" gives the other guy license to do almost anything to him.

I see support for my analysis everywhere. Just yesterday, for instance, I watched a clip from the 1998 movie "Player's Club." In it, Bernie Mac plays a sleazy strip club owner named Dollar Bill. In one scene, his DJ (Jamie Foxx) enters his office to complain about how much money he has to forfeit from his paycheck every week. Bernie Mac looks him straight in the eye and says: "I got a contract between me and you that says you do what I tell you to do. Therefore, shut the fuck up. Don't say nothing, don't speak to me, don't look at me."

That concludes the negotiation. Bernie Mac is the employer with power. Jamie Foxx is the employee without it. The contract symbolizes their unequal relationship. It embodies a fundamental disparity in power. By law, it allows the strong party to tyrannize the weak one; it even allows him to silence the weak one when he complains about the terms. True, the weak party can walk away from the deal. But what if he has mouths to feed? Another Hobson's choice.

These are the practical realities. There is no "equal exchange" between "equal partners" in most commercial relationships. Rather, in most cases, the result is more like the exchange in "Player's Club": One party needs a job and a paycheck; another offers a job and paycheck in return for the power to dictate all the terms and control the employee's conduct. As a practical matter, contracts grant power to one party while subjecting the other to the same power. They generally operate in one direction. And if the weak party complains, the strong party just has to whip out the contract and explain why he has the legal authority to do what he is doing. If there's a dispute, the strong party wins. That's practical reality.

I mention all this because it coincides with my weekly motif concerning employment in the United States. Contracts perpetuate the "Myth of Employment in America" by granting legal authority to strong parties to dominate weak ones. Employment "terms" in America are rarely equal. And they certainly do not reflect full and fair bargaining between two evenly-matched commercial entities. Rather, a weak party needs a paycheck. A strong party offers one; and that gives him the right to dominate the weak party's life in exchange for almost nothing.

According to the law, contracts reflect equality. But practical realities paint a vastly different picture. When it comes to contracts, there is a disparity between law and reality. The real questions are: Who wants what; who's giving it; and who gets to say who does what in exchange for it. Those questions are invitations to tyranny. And when private employers operate under the "profit principle," do you really think they will treat employees in a way that threatens their bottom lines? Certainly not: And that is exactly why contract law allows them to function as they do.

So to all the employees out there who are disgruntled with their lot: "Shut the fuck up, don't say nothing. Don't speak to me, don't look at me."

You signed it. You wanted it (kind of). So live with it.

Go ahead and leave. Think you'll be able to pay your rent if you do? It's your choice.

That's not just practical reality. That's commercial reality, too. It's not a fair game.

1 comment:

Anonymous said...

I tend to agree with you on this because I dislike what I do for a living, but I think we're taking it too far. (Unless we want to live in small self sufficient tribes)

I think a big part of the problem is that a lot of professionals seem to create a demand for their services, and then provide them. we need to figure out what society truly needs.