American Contract Law for a Global Age, 2017a

Against Public Policy. In many situations, a particular contract is not
specifically illegal, but enforcing the deal would require the court—an agency of the
government—to act contrary to other important government interests.
For purposes of analyzing these “public policy” types of cases, it is useful to
start with a simple framework. First, is there a significant public policy involved?
Such policies may be found in statutes or in the common law, but the initial step is to
figure out exactly what the policy is. Second, would enforcement of the contract
conflict with that policy? What exactly is the interference that is threatened? Third,
do the public policy concerns outweigh the public interest in enforcing contracts
generally? These situations can vary a great deal from one jurisdiction to the next,
making it difficult to make any categorical statements about American law here.
Consider, for instance, the In re Baby M surrogacy contract from the beginning of the
course. What New Jersey found unenforceable might find a welcome home in another
state. Review Chapter 8 (“Unenforceability on Grounds of Public Policy”) of the
Restatement (Second) of Contracts (§§ 178 – 199) to get a general feel for the current
state of public-policy analysis in contract law.
As you might gather, public policy is often in the mind of the beholder. Courts
(and legislatures, too) can and do strongly disagree amongst themselves over the
existence of particular policies, over whether particular contracts conflict with those
policies, and over how conflicting policies should be weighed against one another.
Three of the most common and important categories of contracts that involve public
policies are (1) contracts that restrict competition, (2) contracts that limit tort
liability, and (3) contracts that impair family law obligations. We already saw the
third category in the Baby M case, so the readings below will address the first two.
Unconscionability: Policing Fairness. Beyond the long-established concept of
contracts against public policy is the much more recent doctrine of unconscionability.
Historically, the common law did not let people out of bad bargains unless they fell
under one of the assent-based defenses—fraud, misrepresentation, duress, undue
influence, or mistake. In some contracts, no one has lied, no threat has been made,
no party’s free will has been taken away, and no party has made a fundamental
mistake. Despite the absence of traditional defenses, the deal itself seems so unfair
that courts will refuse to enforce it. These were sometimes said to be contracts that
“no honest man would offer and no sane man would sign.” Despite its noble intentions,
unconscionability doctrine has proven to be a particular challenge in its actual
application.
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308 CHAPTER V: CONTRACT DEFENSES