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Thursday, October 18, 2012

F-Words: Fairness and Freedom in Contract Law

I am participating in a online symposium on Concurring Opinions, where we are discussing Larry Cunningham's fantastic new book, Contracts in the Real World, and where you should check out the rest of the commentary.

As I read "Facing Limits," Larry's chapter on unenforceable bargains, I had to pause and smile at the following line:

People often think that fairness is a court's chief concern, but that is not always true in contract cases (p. 57).

I still remember the first time someone used the word "fair" in Douglas Baird's Contracts class. "Wait, wait," he cried, with an impish grin. "This is Contracts! We can't use 'the f-word' in here!"Of course, Larry also correctly recognizes the flip side of the coin. If courts are not adjudicating contracts disputes based on what is "fair," we might think that "all contracts are enforced as made," but as Larry points out, "that is not quite right, either" (p. 57).

Pedagogically, Contracts in the Real World is effective due to its pairings of contrasting casebook classics, juxtaposed against relevant modern disputes. In nearly every instance, Larry does an excellent job of matching pairs of cases that present both sides of the argument. I don't mean to damn with faint praise, because I love the project overall, but I feel like Larry may have missed the boat with one pairing of cases.

As I mentioned, the chapter on Facing Limits is in part about the difficulty of balancing fairness, or equitable intuitions, against freedom of parties to be bound by their agreements. Larry pairs In re Baby M, a case where the New Jersey's highest court invalidated a surrogacy agreement with Johnson v. Calvert, a case where the California Supreme Court upholds such an agreement. As I discuss after the break, I'm troubled that the Court in Baby M could be on the wrong side of both fairness and freedom. 

Facing Limits on Surrogacy Agreements

In re Baby M was arguably the first case on surrogacy agreements to reach national prominence. The court found unenforceable a surrogacy agreement between William and Elizabeth Stern, who hoped to raise a child that Elizabeth could not bear, and Mary Beth Whitehead, who wanted to give another couple "the gift of life" and agreed to bring William's child, Baby M, to term. Mrs. Whitehead and her then-husband Richard were in tight financial straits, and the surrogacy deal promised $10,000, "on surrender of custody of the child" to the Sterns.

Once she gave birth, Mrs. Whitehead found it difficult to part with the baby girl she called Sara Elizabeth, but the Sterns planned to name Melissa. To avoid relinquishing the child, the Whiteheads fled to Florida with the baby. When Baby M was returned to the Sterns and everyone made it to court, the trial judge determined that the interests of the baby were best served by granting custody to the Sterns. The Supreme Court of New Jersey agreed with that assessment, but on its way to that conclusion, rejected the validity of the surrogacy contract itself, in which all parties stipulated, prior to the birth of Baby M, that it was in the child's best interest to live with the Sterns.


The Supreme Court's decision ostensibly turned on the unenforceability of the contract because, even in America, "there are, in a civilized society, some things that money cannot buy" (p. 55). But the decision is full of language suggesting that, in the Court's opinion, Mrs. Whitehead didn't know what she was doing. In the very paragraph that the Court assumed that she could consent to the contract, the Court marginalized her capacity to consent. 

The Court bought into two tropes often trotted out by those who aspire to protect the poor from themselves: the coercive effects of money, and the inability of the poor to fully understand the consequences of their decisions. The Court was troubled that Mrs. Whitehead, "[t]he natural mother," did not "receive the benefit of counseling and guidance to assist her in making a decision that may affect her for a lifetime." The Court was perhaps suspicious she could not. After noting the distressing state of her financial circumstances, the Court posited that "the monetary incentive to sell her child may, depending on her financial circumstances, make her decision less voluntary."

Fairness and Freedom

It strikes me as unfair to conclude that a mother of two is incapable of considering what it might mean to give birth to a third. Holding the surrogate to the bargain can seem unfair at the difficult moment where she hands over the baby, but I struggle to see how it is any less unfair to allow the parents to invest their hearts and energy into planning for a baby that will come, but will not become theirs. 

Turning to the question of the coercive effect of money, the problem with paternalistic protections is they often protect the neediest from the thing they ostensibly need the most. Many interested parties find ways to make money on adoption and surrogacy. It's puzzling, if we are truly serious about protecting the needy, that we would protect them from also acquiring some of the money that we seem to assume they so desparately need.

Here's another way to make the same point: in the wake of Baby M, some states allow surrogacy contracts, and some don't. Hopeful parents who can afford to enter into surrogacy contracts will go to states, like California, where those contracts are enforced. Surrogacy providers who hope to make their money as an intermediary will focus on markets where their contracts will survive judicial scrutiny. Our potential surrogates, however, are more likely to be tied to the jurisdictions in which they reside, at least if the assumptions about poverty in the Baby M opinion are generalizable. So altruistic surrogates will be able to carry a child to term in every state, but those who desire to make a bargain can do so only in those states willing to recognize them. To me, that sounds neither free nor fair. 

Larry takes some comfort in the common law inquiry into the best interests of the child, and with that I take no issue. In a case where the contract and the child's interests are at loggerheads, it seems appropriate in the abstract for the best interests to be a heavy thumb on the scale, or even to trump the prior agreement. I'm just not sure that In re Baby M -- a case where the Court knocked out the contract even though the contract terms and best interests were essentially in line -- is a case where the value of the best interest test are best brought to light.

Cross-posted at Concurring Opinions and ContractsProf Blog.

1 I may have slightly dramatized this exchange, although my classmates assure me I did not invent it from whole cloth.


Posted by Jake Linford on October 18, 2012 at 12:50 PM in Books, Current Affairs, Science, Things You Oughta Know if You Teach X | Permalink


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Would you say (I haven't read the decision) the Court treated this like an adhesion contract?

The poor are subject not only to absolute deprivation but in affluent countries like ours relative deprivation as well, in which case we often see distorted (i.e., irrational) preferences owing to socio-economic factors which constrict or pervert the process of rational preference formation such that money can and often does play the role the Court attributed to it, namely, unduly constricting the parameters of autonomous choice. For example, those who are intimately and long familiar with what money can buy owing to their comfortable possession of and ongoing ability to accumulate same are often those best equipped to see the limits of money as it were, to realize that the best or most important things in life are not subject to a monetized metric, and thus for whom money may not have the allure it would for those desperately seeking to satisfy basic needs or attain a minimal sense of socio-economic security (I'm not sayin the poor cannot ever have such appreciation, it's just that it's much rarer because more difficult if not 'accidental'). Consider the studies of the young and fairly affluent students who questioned "the system" in the 1960s: they had their fill (or were full) of it, failing to find anything intrinsically satisfying or rewarding in the achievements of high status, privilege, middle class ambition and anxiety, professional ladder climbing, and so forth. To those who are far from such things they appear that much more enticing, less subject to critical scrutiny or questioning. So the meaning of money for the poor can be a bit different and we should be sensitive to such differences, which reflect a concern for the vulnerability associated with their socio-economic status. And if that's paternalism, it's of the benevolent and beneficent sort, and I'm all for it. Indeed, why do the courts accord more presumptive scrutiny to adhesion contracts (i.e., contracts in which there are gross disparaties in 'bargaining' power)?

Posted by: Patrick S. O'Donnell | Oct 18, 2012 2:08:09 PM

Patrick, thanks for the comment. I don't think the Court reads this as an adhesion contract. Ostensibly, this was a case about letting the legislature make the important decisions. What bothers me is the subtext that the surrogate couldn't possibly think through the decision until the baby was in her arms. I find it hard to believe for the reasons I outlined in my original post.

While the Court held that any money changing hands at any point was illegal, it was more worried about coercion before the baby was born than at birth. That strikes me as backwards, for reasons I wrote about in the context of kidney donation: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1420486.

When I took a look at the science regarding decision making, I found that study participants offered a choice between less money now or more money later often took the smaller, immediate amount. The choice fired up the limbic system, connected with impulsive behavior. When study participants were offered a smaller amount in the near future (a few weeks), or a larger amount after a longer wait, participants were more likely to take the larger amount of money. In addition, the structure of the decision fired up the prefrontal cortex, associated with long term planning. If this holds true in the adoption context, we might actually prefer a deal that is forward-looking, where the benefit and the costs are both removed in time, rather than a deal where the natural mother is asked to decide whether to give up the child with a check staring her in the face.

I'm not entirely unsympathetic to the question of the potential coercive effect of money, but I'm not persuaded by the Court's rhetoric here. It is also interesting to me that the Court even cast some doubt on the heath concerns of Mrs. Stern, suggesting that a pregnancy wouldn't have endangered her health as much as she thought.

Posted by: Jake Linford | Oct 18, 2012 2:55:01 PM

Thanks...and interesting. I find the what the limbic system does or the prefrontal cortex does during decision making according to brain imaging techniques absolutely uninformative as to the moral psychology and ethics of decision making and therefore useless.

That the "the surrogate couldn't possibly think through the decision until the baby was in her arms" does not at all surprise me, as my students often cannot think about the consequences of not studying properly for their exams until the grades for same are in their hands, only then do the consequences become "real" (because now tangible). Alas, for many folks it's apparently too difficult to contemplate the possibility or reality of global warming unless they intimately experience the effects of a prolonged drought (which may or may not be directly linked to such warming). And it appears to have been hard for many folks who were homeowners to have properly understood the nature of their financial situation and the hazards of a heavy credit burden until they received their first warning of imminent foreclosure or the foreclosure notice itself: only then did it become "real" for them, a distinct possibility....

As to the Court being worried about "coercion" before the baby was born, I see no reason to be troubled about that (I'll have to read your paper to see precisely why that bothers you) if it has bearing upon contract formation.

I understood you were not persuaded by the court's "rhetoric," which I assume is equivalent to not being persuaded by the court's reasoning as expressed in this rhetoric.

Posted by: Patrick S. O'Donnell | Oct 19, 2012 7:19:34 AM

I think that something missing from this discussion (and from similar discussions regarding organ donations and even the legalization of prostitution) is the notion that even if the choice on the part of an economically disadvantaged party to be a surrogate/donate an organ/whatever *is* rational -- that is, even if the party *can* think through the consequences of their actions and make an informed decision -- they should be prevented from making that choice based on (for lack of a better term) "ethical" grounds. This is, I think, a slightly stronger statement that Patrick's, since he's concerned with the way socioeconomic factors distort rational decisionmaking, whereas I'm assuming, for the moment, that the decisions are, in an economic sense, rational.

An example in the organ donation context: poorer college students are often forced to work while in school, while students from higher-income families are given money by their parents and told to focus on their studies. This is unfair, of course, but it's the kind of unfairness that we as a society are prepared to live with; I don't think that (for most people) the poorer student's being forced to work a couple jobs implicates any basic notions of social ethics. But what if students could get a college scholarship for donating an organ, as per Professor Linford's proposal? It might be that the poorer student could (rationally) decide that such an option would be in their best interest, factoring in the potential future health effects, risks of surgery, etc. In this isolated case, it's perhaps not clear that the student should be restricted from making that choice; since it *is* a rational choice, it seems that perhaps our basic ethical notions of fairness should not be offended. But the aggregate effect of these individually rational decisions -- the net flow of organs from the poor -- is, at least in my opinion, ugly and ultimately incompatible with basic ethical notions of human dignity. The problem in this case is not that the promise of scholarship money is coercive so as to lead to irrational decisionmaking, but that the socioeconomic gap and the scholarship money combine to create an overall state of affairs that offends our (or at least my) notions of social ethics.

One more thing: "It's puzzling, if we are truly serious about protecting the needy, that we would protect them from also acquiring some of the money that we seem to assume they so desparately need."

I don't think they're being protected from acquiring money, but from acquiring money in a particular way that (possibly) causes them to (irrationally) undervalue certain aspects of their personhood.

Posted by: Andrew R. Missel | Oct 19, 2012 11:08:15 AM


Thanks for the feedback. You stated "I find the what the limbic system does or the prefrontal cortex does during decision making according to brain imaging techniques absolutely uninformative as to the moral psychology and ethics of decision making and therefore useless." I'm curious about this response. Is it because you doubt the validity of the brain imaging techniques, or because you find irrelevant information about what is more or less likely to "coerce" a decision? I can understand the skepticism regarding the former, but I'd love to hear more if your perspective is closer to the latter.

As for rhetoric vs. reasoning, I see a slight difference between them in this case. I would be far less uncomfortable with a narrow decision that the state legislature has preempted enforcing surrogacy contracts or other forms of "baby selling," the ostensible reason for the correcting the trial court's analysis of the contract, if they hadn't spent so much time entertaining the rhetoric that, as I read it, women need to be protected from the decisions they make.

Posted by: Jake Linford | Oct 22, 2012 8:01:22 AM


Thanks for your thoughtful approach. I can appreciate your perspective that enforcing surrogacy contracts or allowing a student to sell a kidney as an alternative means to fund her education is unethical, "ugly," or "incompatible with basic ethical notions of human dignity," but I don't share the perspective. I find it just as ugly and morally objectionable to suggest we can't trust certain groups to make decisions in their own interest, or that some decisions they would rationally make in their own interest are impermissible because we find them ethically objectionable.

Posted by: Jake Linford | Oct 22, 2012 8:08:26 AM


The former: I doubt many of the inferences drawn from brain imagery techniques. A spirited summary of some of the reasons why is provided by Raymond Tallis (a physician who has also done clinical research in neuroscience and now writes as a poet, philosopher and cultural critic) in Aping Mankind: Neuromania, Darwinitis, and the Misrepresentation of Humanity (2011).

Posted by: Patrick S. O'Donnell | Oct 22, 2012 9:26:50 AM


I haven't seen that book, and will have to take a look. Thanks.

Posted by: Jake Linford | Oct 22, 2012 10:43:26 AM

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