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Lees, Matthew --- "Contract, Conscience, Communitarian Conspiracies and Confucius: Normativism through the Looking Glass of Relational Contract Theory" [2001] MelbULawRw 4; (2001) 25(1) Melbourne University Law Review 82

Contract, Conscience, Communitarian Conspiracies And Confucius: Normativism Through The Looking Glass Of Relational Contract Theory

MATTHEW LEES[*]

[Relational contract theory (‘RCT’) has, since the 1960s, strongly criticised traditional contract law for substantially ignoring the significance of the relationship between contracting parties. This article examines whether RCT contains a normative vision for law, or whether it can serve only a descriptive function. Three such normative visions are identified and used to analyse the equitable doctrine of unconscionable dealing and unconscionable conduct under Part IVA of the Trade Practices Act 1974 (Cth). The article then considers two aspects of the normative visions identified: the structure of rules and social engineering. Both these issues are discussed with reference to Confucian legal philosophy, and parallels are drawn between the concerns of Confucianism and RCT. The article concludes that RCT becomes normative when we seek to base laws on empirically determined norms and values.]

INTRODUCTION: REFLECTIONS ON THE RIDDLES OF RELATIONAL CONTRACT THEORY

It has been claimed that Stewart Macaulay and Ian Macneil’s development of a ‘relational’ perspective of contracting has altered ‘the foundations of the subject’ of contract law.[1] Yet, Professor Gordon also concedes that the impact of relational contract theory (‘RCT’) on conventional contract thinking has been slight compared with that of law and economics.[2] Similarly, as part of a recent symposium on RCT,[3] Professor Eisenberg argued that, although RCT ‘has led to important insights concerning the economics and sociology of contracting’, it ‘has not ... led to a body of relational contract law’.[4] How is it possible that such an acclaimed theory has apparently had little effect on both ‘conventional contract thinking’ and the content of substantive law? This is the first riddle of RCT.

RCT is founded on Macneil’s thesis that all contracts are embedded in a matrix of social relations — contracts are ‘relational’.[5] Macneil criticises traditional contract law for generally treating contracts as if there were no such relations.[6] However, despite having identified law’s deficiency in this regard, Macneil has rarely advocated specific outcomes in particular cases or ‘reasonably particularistic legislation.’[7] Whitford has even made the accusation that ‘[a]t times Macneil seems to eschew almost any implications of relational contract theory for the substantive content of contract law’.[8] In complete contrast, others have argued that Macneil’s theory promotes communitarianism.[9] These conflicting interpretations and Macneil’s ambivalence towards the rectification of contract law’s deficiencies prompt consideration of the normative aspect of RCT — they are further riddles.

The central thesis of this article is that these apparent riddles are the product of conflicting normative visions within RCT: a dispute regarding the normative implications of the theory for law and the legal system. In Part II, reasons for Macneil’s ambivalence towards law reform will be proposed and three normative visions within RCT will be identified. The extent to which each of these visions is capable of overcoming Macneil’s concerns will be examined. Substantive law will then be analysed using these normative visions.

The areas of substantive law which will be examined in this article are the equitable doctrine of unconscionable dealing[10] and unconscionability in Part IVA of the Trade Practices Act 1974 (Cth).[11] Both these areas draw on the concept of conscience–unconscionability in their operation. Over recent decades, this concept has become the rationale for the expanded use of equitable doctrines in Australia and has been increasingly used to frame legal rules by both Parliament and the courts.[12] Unconscionable dealing and TPA unconscionability warrant analysis in terms of RCT because ‘modern cases on unconscionability show a high level of engagement with the facts’[13] and have been seen as a shift away from legalistic, abstract rules.[14] The link between RCT and these areas of law has now been suggested by one commentator in relation to franchising.[15]

Thus, Parts III and IV will consider the extent to which unconscionable dealing and TPA unconscionability, respectively, constitute a relational approach to contracts. Here, ‘relational approach’ refers to an approach which caters (in some way) for the relations which Macneil claims exist in all exchanges.[16]

Two issues which will arise from Parts II–IV will then be further considered: the structure of legal rules and social engineering.[17] Both issues are relevant to normative visions of law based on RCT and are important relational aspects of unconscionable dealing and TPA unconscionability. The implications of these issues for RCT will be analysed using comparisons with another theory that is based on social relations, Confucianism. A sophisticated analysis of Confucianism in terms of RCT is beyond the scope of this article. It will not be argued that Confucianism is an historical form of RCT. Rather, the issues in Confucianism of rule structure, social engineering and the enforcement of law will be used as a counterpart to discuss the significance of the same issues to RCT.

Finally, this article will conclude by emphasising that normative RCT encompasses not only the construction of legal contract rules and, arguably, what those rules should be, but also the way in which those rules are applied and enforced. This has profound consequences for courts when contract rules give courts discretion and for bodies, such as the Australian Competition and Consumer Commission (‘ACCC’), which are charged with ensuring the effective operation of those rules outside the courtroom. Further, the analysis of Confucianism suggests that contractual disputes should be resolved according to common values. When law takes this approach, RCT crosses the border between descriptive and normative theory.

II RELATIONAL CONTRACT THEORY: MIRROR OR MAP?

A From Empiricism to Theory with a Lingering View of Law

RCT began with Stewart Macaulay’s empirical studies of two aspects of the way that businesspeople use contracts: planning of the transaction for future contingencies and the use of actual or potential legal sanctions for breach of contract.[18] Macaulay concluded that contract law is marginal to the operation of exchanges in reality and that ‘the occasional resort to formal legal sanctions’ by parties are ‘mostly opportunistic and tactical ... maneuvers to improve their bargaining positions’, rather than the parties ‘appealing to shared values embodied in legal rules, or seeking moral vindication’.[19] Macaulay also demonstrated the ineffectiveness of legislation designed, for example, to assist automobile dealers facing termination of their franchise.[20]

Macaulay’s views thus implied that law is no ally of RCT. They suggested that law reform to address the concerns of RCT would be of limited practical significance and may even be opportunistically exploited. Rather than motivating law reform, Macaulay considered that RCT’s importance lies in challenging political claims of neutrality, autonomy and rationality by proponents of the formal system.[21]

Drawing on Macaulay’s efforts, Macneil, principally, has developed the concept of the relational contract, that is, a contract that is embedded in a matrix of social relations.[22] Macneil argues that all contracts are in fact relational contracts. However, Macneil acknowledges that in some contracts the relations are of greater significance than in others. This led to Macneil’s formulation of the ‘discrete–relational spectrum’, a classification of contracts according to the importance of the relations between the parties. Contracts in which the relations between the parties have great significance lie at the ‘relational end’ of the spectrum; contracts in which the relations are of minor significance lie at the ‘discrete end’ of the spectrum. The location of a contract on the spectrum thus shows how important the relations are to that contract.[23] For example, a contract that would lie close to the discrete end of the spectrum is the purchase of petrol at a petrol station on an isolated highway which one will never visit again.[24] An example of a contract near the relational end of the spectrum is a franchising agreement.[25]

However, the terminology has been somewhat misused. It is incorrect to describe a contract which lies at the relational end of the spectrum as a ‘relational contract’; a ‘relational contract’ is one in which there is a relationship between the parties — that is, all contracts. It is similarly incorrect to describe a contract which lies at the discrete end of the spectrum as a ‘discrete contract’; a ‘discrete contract is one in which there is no relationship between the parties’ — that is, no contracts. The terms ‘relational contract’ and ‘discrete contract’ can only really be used in the senses in which they are used in the following statement: ‘Traditionally contract law treats contracts as if they were discrete whereas they are really all relational.’[26] In this article, to avoid confusion, contracts which lie towards the relational end of the discrete–relational spectrum will be described as ‘relatively relational contracts’; contracts which lie towards the discrete end will be labelled ‘relatively discrete contracts’.[27]

Another important concept developed by Macneil is ‘presentiation’. ‘Presentiation’ describes the process by which executory contracts allow parties to plan the future by making future obligations immediately binding; it is ‘the bringing of the future into the present.’[28] Macneil considers this aspect of contract so important that he has defined contract itself as ‘the projection of exchange into the future’.[29]

It will now be considered whether Macneil’s theories contain a negative attitude towards law similar to that arguably conveyed by Macaulay. This requires an explanation of a further concept in RCT developed by Macneil: ‘contract norms’.

B Macneil’s Contract Norms: Normativism versus Neutrality

The ‘contract norms’ proposed by Macneil are intended to connote ‘both how people do behave and how they ought to behave’.[30] Macneil has formulated them as follows:

The ten common contract norms are (1) role integrity (requiring consistency, involving internal conflict, and being inherently complex), (2) reciprocity (simply stated as the principle of getting something back for something given), (3) implementation of planning, (4) effectuation of consent, (5) flexibility, (6) contractual solidarity, (7) the restitution, reliance and expectation interests (the ‘linking norms’), (8) creation and restraint of power (the ‘power norm’), (9) propriety of means, and (10) harmonization with the social matrix.[31]

The meaning of these norms deserves some explanation. Role integrity means that each party acts according to an expected pattern of behaviour.[32] It requires consistency of behaviour over time and with limitations on that role. (The limitations may be set by society or the parties.) Role integrity creates a conflict between a party’s desire to act in their own interest and desire to act in the other party’s interest (according to the role) or the long-term interest of their relationship. ‘Complexity’ arises through, for example, this conflict and the complexity of particular roles. Reciprocity, or ‘mutuality’, requires that ‘all participants perceive a possible improvement from their pre-exchange positions.’[33]

The norm of implementation of planning recognises that the planning of the future is usually an important aspect of a contract and suggests that the parties work towards the implementation of that planning.[34] Effectuation of consent allows a party to hold the other party to that to which that other party has consented to be held.[35] Macneil argues that consent plays only a ‘triggering role’ and should not be equated with ‘the full scope of complex planning’,[36] which to some extent will be provisional. Because future planning is partly provisional, a contract must have ‘a capacity for change’ (flexibility) or it ‘breaks apart under the pressures of change.’[37] The norm of flexibility assumes greater importance in long-term transactions, particularly as there is a greater chance of a significant change in external circumstances. Contractual solidarity is the norm of ‘holding exchanges together.’[38] It includes internal forces (such as mutual benefit) and external forces (such as contract law).

Macneil explains that the restitution, reliance and expectation interests are norms which suggest a party should receive what that party has expected to receive, relied on receiving and should therefore receive as restitution — whether or not a ‘promise’ was made.[39] For example, a long-term employee may expect decent treatment in relation to retirement because of decent treatment throughout that employee’s career.[40] Macneil describes restitution, reliance and expectation as ‘linking norms’ because they are linked to other norms (for example, restitution is linked to reciprocity, all three interests provide for flexibility) and because of how they link the breach of contract norms with concepts of loss.[41] This is recognised in contract law through the awarding of damages for expectation loss.

The norm of creation and restraint of power is a recognition that contracts create power in parties — through promises and in other ways, for example, due to long-term dependence.[42] Relative imbalances of power must be restrained to avoid damage to other norms, such as reciprocity.

The norm of propriety of means is based on ‘relevant-community standards of appropriate behaviour’ and ‘embodies obligations to use only proper means — avoiding deceit, for example’.[43] Harmonisation with the social matrix represents the force for contracts to comply with social values such as privacy and liberty.[44]

Macneil argues that the common contract norms are relevant to all contracts. However, he acknowledges that some norms are more important to relatively discrete exchanges and some norms are more important to relatively relational exchanges. Macneil formulates a norm for relatively discrete exchanges which particularly ‘reflects both behavior and the oughts growing out [of] it’: the ‘discrete norm’.[45] The discrete norm is ‘the product of great magnification’ of the norms of implementation of planning and effectuation of consent.[46] Similarly, relatively relational contracts are reflected by the ‘relational norms’: ‘role integrity’, ‘preservation of the relation’, ‘harmonization of relational conflict’, ‘propriety of means’ and ‘supracontract norms’.[47] Preservation of the relation and harmonisation of relational conflict are described as ‘intensifications’ of, respectively, the common contract norms of contractual solidarity and harmonisation with the social matrix.[48]

Macneil argues that contract norms provide only restricted normative implications for law:

In terms of policies for positive law of sovereign states, [relational contract theory] itself offers direct guidance only when imposition of norms on contracts within the state either erodes norms within them beyond viable limits or is essential in order to preserve contract norms at the minimum levels necessary for the contractual relations to continue. Those who read relational contract theory as necessarily or presumptively supporting great sovereign intervention are mistaken.[49]

Further, RCT is ‘fundamentally neutral in terms of choice, consent, planning, equality, power, sovereign imposition of norms on contracts, and the like.’[50]

Another relational theorist, Gidon Gottlieb, also advocates a restricted view of law because, Gottlieb argues, its operation is significantly conditioned on acceptance by the parties.[51] Gottlieb argues that ‘juridical norms’ in a relational order come primarily from agreements between the parties; a law of the state only governs a relationship ‘to the extent that the parties are willing to adopt [the law] as a rule of conduct or to the extent that the State is able and willing to enforce its law.’[52] Law should merely impose ‘necessary contraints [sic] on the operation of relational orders’ which allow parties primarily to regulate themselves. As for normativism, relationalism ‘suggests only how law must necessarily function under the shadow of the informal system. ... Relationalism does not outline an ideal form of legal relations but rather a necessary one.’[53]

Macneil and Gottlieb’s views have much in common. Macneil has formulated Gottlieb’s ‘necessary constraints’ on a relational order: the preservation of contract norms at the ‘minimum levels necessary’.

In a more recent article, Macneil has tentatively accepted slightly wider normative implications.[54] Firstly, however, Macneil labels his version of RCT as ‘essential contract theory’[55] — apparently out of frustration at having normative implications ascribed to his views. Macneil then reluctantly concedes that ‘[i]n essential contract theory there is a somewhat general assumption that typically the law will more or less track the common contract behavior and norms.’[56] By ‘track’ common contract behaviour and norms, Macneil apparently means take the implications of these norms (in light of the behaviour) ‘into significant account’.[57]

But Macneil quickly denies further normative implications of this ‘observation’. Macneil argues that: (i) relational contracts may sometimes be dealt with by relatively discrete contract law because of the discrete elements in common contract norms; (ii) relational contract law need not always ‘track closely’ the behaviour of contracts and norms; and (iii) laws need not aim to preserve relations.[58]

However, contract norms can be considered to motivate law reform because they connote ‘how people ought to behave’.[59] For example, in contrast to Macneil’s third proposition, Paul Gudel views the formulation of contract norms as motivating law reform to ‘reinforce’ those norms by promoting relational exchanges.[60]

Macneil downplays this proposal. He has argued[61] that ‘in circumstances not approaching outer viable limits’ RCT provides only ‘social analytical guidance’ and ‘indirect political guidance’.[62] The distinction between direct and indirect political guidance does not have a firm conceptual basis. Since the ‘outer limits of viability’ cannot be determined precisely — nor even barely — the distinction between direct and indirect guidance is unhelpful in practice. Further, Macneil does not justify why RCT’s guidance is of a lesser quality when contract norms are not at breaking point.

Macneil’s argument boils down to the notion that it is more important to have regard for contract norms when action must or must not be taken to prevent contractual relations from becoming impossible. While this is clearly true, it does not necessarily imply that the guidance of RCT is worthless when relations may be able to continue in some, diminished form. Macneil also ignores the point that some exchanges are essential to (at least one of) the parties, for whom the contractual exchange must take place regardless of the state of the relations. Consideration of the effects of power relations between the parties will be seen to be important in the discussion of unconscionable dealing and TPA unconscionability in Parts III and IV.

In this writer’s opinion, Macneil distinguishes between direct and indirect guidance not because the guidance is less valid further from the limits of viability, but because Macneil wishes to discourage any normative vision for law. Possible reasons for Macneil’s antipathy towards law reform will now be considered.

C Legal Problems: The Transformation of Imposed Contract Norms, Bureaucratisation and the Operation of the Legal System

Macneil argues that the legal imposition of contract norms, in contrast to their generation within the contractual relationship, transforms the contract’s ‘values’.[63] Contract ‘values’ are the values reflected in the parties’ goals and means, in internal principles and rules of contract behaviour and in ‘external social responses to contract’ (which include social mores, public opinion, media responses and political and legal responses).[64] Macneil views legally imposed norms as a dangerous intrusion into contractual relations which ‘can so destroy [the] internal operation of common contract norms as to destroy the contract’.[65] This ‘transformation’ provides a theoretical basis for Macaulay’s observation that laws intended to promote contract norms are often ineffective or exploited.[66] Macneil argues that imposed norms are theoretically and practically different from internally generated norms.[67]

An example of the ‘transformation’ of imposed norms is provided by Gudel.[68] Gudel explains how legal recognition of contractual obligations in employee handbooks prompted employers to insert, reluctantly, glaring disclaimers.[69] These disclaimers arguably ‘undermine[d] the handbook’s partial goal of improving employer–employee relations.’[70]

However, Macneil appears chiefly concerned with how ‘the propriety of means’ is transformed by bureaucratisation.[71]

By and large, norms can be imposed by large bureaucratic organizations, such as government, only by detailed rules. Detailed rules require administration not only by the ruler, but also by the organization being ruled. Such internal administration adds to the need for rational planning and performance respecting activities collateral to [the organization’s primary function].[72]

Macneil cites the creation of affirmative action offices within large corporations as an example of internal bureaucracy resulting from the sovereign imposition of norms.[73] Macneil argues that the ‘detailed rules of bureaucracies’ increase discreteness and presentiation so that relations can be judged under those discrete, detailed rules. In fact, ‘[e]very bureaucratic effort to regulate in detail is putatively an effort aimed at presentiation and discreteness’ and bureaucratisation is ‘the greatest blossoming of discreteness and presentiation the world has ever seen’.[74]

Professor Kidwell presents a further argument against a relational approach to contract law. Kidwell advocates the retention of ‘formal’ legal rules based on the discrete transaction paradigm because of the operation of the judicial system.[75] Kidwell argues that a court firstly ‘processes a dispute’ and, secondly, ‘sends messages, often very explicitly, to non-disputants’ regarding how courts will deal with particular types of disputes.[76] Kidwell considers the second function to be the primary way in which law promotes the keeping of agreements. According to Kidwell, legal rules ‘must be to some extent formal’ and cannot consider ‘all the facts and circumstances’ of the relationship.[77] Otherwise, the general applicability of ‘messages’ would be undermined by the factual idiosyncrasies of individual cases.[78] Further, Kidwell ‘doubt[s] the capacity of the legal system to generate and apply doctrine based on the richer factual descriptions of contracts embedded in the context of long-term relationships.’[79] Hence, ‘we are committed to a transactional model because it is the only one which existing legal institutions are capable of administering’ and because formality increases ‘reliability and cost-effectiveness’.[80] Kidwell argues that it is appropriate for ‘the market and social system, and moral norms’, rather than courts, to implement ‘values not reflected in existing contract doctrine (fairness, or community, for example)’.[81]

However, it is submitted that Kidwell’s view is open to criticism because he assumes that non-disputants receive a ‘message’ from courts that includes doctrinal interpretation. Macaulay’s research showed that parties are often substantially unaware of their legal rights and obligations.[82] This suggests that parties often do not appreciate doctrinal interpretation and application. The circumstances of cases, coupled with the result, can be more readily appreciated by non-legally trained parties than legal doctrines. This suggests that the ‘messages’ received by non-disputants are already highly contextualised and, indeed, relational.

Macneil, for example, describes law as, firstly, ‘a back-up system seldom used actively, but always used passively’ and, secondly, an ‘index’ which ‘tell[s] society what is most important among its customs and practices.’[83] But the ‘messages’ sent are broad: ‘Contract law, for example, says to all in our society: it is important that you pay your bills.’[84] In this writer’s opinion, the messages received usually revolve around facts and outcomes, rather than detailed legal doctrines. But this view remains open to empirical investigation.

D Conflicting Normative Visions: Law in a Relational World

The transformation of imposed norms, bureaucratisation and the limits of the legal system are much firmer arguments for rejecting broad normative implications for law than Macneil’s distinction between direct and indirect guidance. By disclaiming normative implications, Macneil isolates RCT from critics of the (often flawed) operation of particular relational laws.[85] An alternative explanation for Macneil’s antipathy towards law reform is that he desires to retain the image of ideological neutrality that can be claimed by RCT’s founding empirical studies.

However, the problems identified only deter efforts to legally address RCT’s concerns to the extent that those problems cannot be overcome. For example, perhaps bureaucratisation could be avoided if laws were not formulated as detailed rules with precise, determinative criteria for conformity.[86] This idea will be further explored in the discussion of unconscionable dealing and TPA unconscionability in Parts III–IV.

Also, Kidwell’s analysis suggests that courts can only reinforce contract norms by ‘sending messages’ to non-disputants. The settling of disputes occurs only after the relationship has already broken down — Gudel’s metaphor for litigation is ‘an autopsy’.[87]

In a recent article, Jay Feinman has advocated two normative implications of RCT for law: ‘contextualisation’ and ‘the relational method’.[88] Both flow from Macneil’s common contract norms. According to Feinman, the norms highlight the relational context of the particular features of individual contracts.[89] This motivates the creation of laws which ‘contextualise’ contracts (in their relational context).[90] Thus, laws should differentiate between contracts according to general categories such as ‘standardized consumer transaction’ or ‘long-term relationships between sophisticated commercial parties’.[91] Contextualisation, it can be seen, is a relatively basic form of tracking.

Secondly, Feinman has proposed the ‘relational method’ — a process of adjudicating on contracts. Feinman argues that case facts must be ‘filtered through the structure of the relational method’.[92] This ‘structure’ is a normative framework which consists of the common contract norms and external norms. The external norms include social values (which may or may not be reflected in the parties’ relations), positive law and the customs or rules of the relevant industry, trade or professional organisation or any other relevant group.[93] In any given case, the strength of each norm’s guidance depends on its relevance to the contract and the contractual relation in question.

The application of this ‘normative structure’ ‘looks much more like policy analysis’ than the ordinary ‘doctrinal method’.[94] By ‘doctrine’, Feinman refers to

rules and standards taking a deductive form about legal consequences (eg, ‘substantial performance satisfies a constructive condition’) while policy consists of arguments in a consequential form (eg, ‘contract terms should be interpreted to avoid forfeiture’).[95]

The relational method works like this: facts, ‘when seen through the [normative] structure’, ‘suggest that the law ought to reach a certain result.’[96]

Thus Feinman advocates close tracking through contextualisation and a new form of legal rules (the relational method).

As Feinman’s relational method relies on a contextualised normative analysis similar to policy consideration, rather than the application of detailed rules, laws based on the relational method may avoid bureaucratisation. Also, attempted exploitation of laws based on Feinman’s relational method could be recognised through the examination of facts using the normative structure. Prevention of tactical exploitation would remove a major cause of the transformation of imposed norms.

It is submitted that, under Feinman’s relational method, courts would still be able to send messages to non-disputants because concerned non-disputants would already be familiar with the external norms (such as industry practice) and could appreciate the aim of common contract norms (such as reciprocity). However, courts would need to be explicit and consistent — where circumstances are sufficiently similar that other relational considerations do not hold sway — about the normative framework they are applying.

Professor Eisenberg rejects the normative vision that proposes laws which specifically deal with relatively relational exchanges but leave relatively discrete exchanges to be regulated by current rules. This approach is tacitly based on the idea that relations are important only within a special subcategory of contracts — relatively relational contracts.[97] Eisenberg argues that virtually all contracts contain a relational aspect and thus rules designed to apply to relatively relational contracts are either ‘good for all contracts and therefore should be general principles of contract law’ or are ‘not good for any contracts.’[98] Similarly, Feinman has argued that neoclassical contract law deliberately marginalises relational considerations.[99]

Finally, RCT is commonly considered communitarian.[100] Randy Barnett argues that communitarianism pervades Macneil’s theories.[101] Also, Gottlieb’s idyllic relational orders appear akin to visions of ‘community’.[102] Macneil has advanced communitarian views but has always carefully described these as an ‘application’ of, and separate from, RCT.[103] This separation is consistent with Macneil’s general denial of normative implications.

Feinman concludes that RCT’s emphasis on co-operation is primarily corrective of neoclassical contract doctrine’s advocacy of self-interest.[104] In this author’s opinion, it would be hasty to equate RCT with the gamut of the communitarian agenda.[105] After all, even Barnett argues that ‘the core of [Macneil’s] relational theory’ can accommodate liberal theory.[106]

When considering a relational normative vision for law, one further point provided by Macneil is worth noting. Macneil criticises basic tests of voluntariness and fairness in the adjudication of contractual disputes because these tests are ‘far too narrow to encompass such basic relational norms as role integrity, reciprocity, contractual solidarity, balancing power [etc]’.[107] In this writer’s opinion, however, such tests can also be too broad. An inquiry into voluntariness can be too narrow because it may be conducted at a superficial level without delving into relational considerations — the relationship (for example, of dependence) between the parties. But the general concept of fairness, on the other hand, is an unsatisfactory inquiry because it does not clearly direct the decision-maker to engage in a relational analysis of the case. Relational considerations are given no pre-eminence over other, possibly idiosyncratic notions of fairness; unfettered fairness is at once too broad and too narrow to form the basis of a relational approach. Macneil’s criticism of these tests shows, despite his assertions to the contrary,[108] that any relational approach must involve close tracking of contract norms.

In this Part, three normative implications (or ‘relational approaches’) for law have been identified: (i) law should ‘track’ common contract behaviour and norms (including contextualisation); (ii) Feinman’s relational method; and (iii) law should ‘reinforce’ contract norms. Given Macneil’s criticism of simple tests such as voluntariness and fairness, it seems that the first suggestion (tracking) is an essential part of any relational approach. In contrast to this fairly fundamental requirement, the relational method proposes a particular structure for legal rules and the third suggestion advances a particular purpose for contract law. Further, Macneil’s concerns with normativism provide important insights into the problems which must be overcome by any relational approach: the transformation of imposed norms, bureaucratisation and the operation of the legal system.

This article will now analyse actual areas of law using the relational approaches identified in this Part. Drawing on this analysis, the structure of legal rules and the reinforcement of contract norms will be further addressed in Parts V and VI.

III UNCONSCIONABLE DEALING: CONSCIENCE, BARGAINING AND DISCRETIONARY JUSTICE UNDER THE RELATIONAL MICROSCOPE

Although the circumstances amounting to unconscionable dealing cannot be definitively described,[109] the doctrine generally applies when

(i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or ‘unconscientious’ that he procure, or accept, the weaker party’s assent to the impugned transaction in the circumstances in which he procured or accepted it.[110]

These circumstances place an onus upon ‘the stronger party to show that the transaction was fair, just and reasonable’.[111]

The principal remedy is rescission of the contract.[112] However, rescission can be partial[113] or made conditional on partial performance of contractual obligations,[114] which increases the remedy’s flexibility.[115]

A Tracking through a Conceptual Haze: Disability and Procedural Unconscionability

By considering the power relations between the parties, unconscionable dealing tracks the power norm. Further, courts can consider non-legal forms of power. RCT recognises that these forms of power are often the most important to the parties’ relations, but they are routinely ignored by discrete law.[116] A discrete treatment of contract both ignores the identity of the parties, ‘lest relations begin to creep in’,[117] and accepts ‘as a given’ the ‘power status quo before an exchange.’[118]

1 The Special Disability

Traditionally, the ‘special disability’ has been confined to serious, identified conditions: ‘poverty or need of any kind, sickness, age, sex,[119] infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation [etc]’.[120] Courts have emphasised that the disability must seriously impair the weaker party’s ability to judge their own best interests and be more than a mere difference in bargaining power.[121] This approach prevents courts from tracking power relations beyond the question of whether such a disability exists. However, David Harland has argued that courts now consider the relationship more broadly[122] and circumstances which ‘affect the ability [of a party] to conserve [their] own interests’.[123] This is broader because there may be reasons why a party is unable to conserve their own interest other than an inability to ‘judge’ (or understand) that interest. Further, courts have affirmed that the disability may be a product of the parties’ relationship, rather than a pre-existing or externally caused disability.[124]

However, a broader approach to the special disability has also been criticised. Investigation of the circumstances becomes extremely dependent on factual interpretation. Lisa Sarmas describes the resulting interpretative process as ‘storytelling’ and highlights the difficulties in Louth v Diprose[125] in deciding between competing factual interpretations — in that case between an exploited infatuation and an abusive obsession.[126] Sarmas’ concerns support Kidwell’s view that courts are simply unable to apply relational rules.[127]

Further, Bridgewater v Leahy[128] has been criticised for escalating fears of uncertainty in the law.[129] Anne Finlay argues that the finding of unconscionable dealing in that case was based on the donee’s close relationship with the donor and the donee’s suggestion of the gift rather than on any ‘special disability’ of the donor.[130] Finlay considers that the case ‘points to a weakening test for “special disability”’[131] and means that intending donees must ensure ‘that the transaction is very transparently at arm’s length.’[132]

Such a requirement would enhance discreteness. For example, in Bridgewater v Leahy, the donor would be (further) prevented from gradually transferring the property of the family farm to the donee (the donor’s nephew) as their relationship evolved. Instead, a discrete, arm’s-length transaction would be necessitated. This would constitute the transformation of an imposed norm (reciprocity), resulting in the unintentional imposition of discreteness and erosion of flexibility and propriety of means.

Such consequences should have been considered by the Court and the failure to advert to them represents inadequate tracking of the norms in danger of erosion.

2 Unconscionability in Bargaining

The concept of unconscionability itself allows the tracking of common contract norms and behaviour. It has been argued that conscience is an element of creating a ‘just contractual relationship’ and ‘[j]ustice is a relational concept.’[133] Further, unconscionable dealing also tracks contract norms by inquiring whether (using Deane J’s formulation) the defendant’s procurement or acceptance was unconscionable ‘in the circumstances[134] of that procurement or acceptance. However, such tracking will be limited unless ‘the circumstances’ include, not facts alone, but also the contextualisation of facts in the context of the parties’ relationship.

As with the concept of a special disability, the concept of unconscionability is broad and difficult to define.[135] Unconscionability leaves undetermined how far courts should go in requiring honesty, reasonableness or even good faith. Sir Anthony Mason has suggested that the various standards possibly required may lead to disagreements amongst judges.[136] For example, in Stern v McArthur[137] Mason CJ (in dissent) argued that to grant relief against forfeiture because of unconscionability in that case ‘would be to drain unconscionability of any meaning.’[138] Another example is Finlay’s argument that Bridgewater v Leahy[139] represents a weakening of the test for unconscionability.[140]

As with the special disability, uncertainty in relation to the ‘standard’ of conscience required can enhance discreteness. Courts must always endeavour to decide cases according to a predictable rationale. In a relational approach, the rationale will involve relational considerations.

Unconscionable dealing is primarily concerned with ‘procedural unconscionability’ during negotiations.[141] ‘Procedural unconscionability means unfairness in the bargaining process’, whereas ‘substantive unconscionability’ ‘refers to unfair substantive terms’ and ‘the overall unjust result of the transaction.’[142] However, in unconscionable dealing unfair terms are evidence of both the weaker party’s disability and the stronger party’s exploitation.[143]

The restriction to examination of conduct during the bargaining process substantially prevents unconscionable dealing from tracking the norm of flexibility. John Swan explains that it is artificial to find the offer or acceptance of certain terms in a long-term contract to have been unconscionable when the blameworthy conduct is really a continued insistence on those terms after circumstances have changed over time.[144] Swan criticises this insistence on evaluation of conduct at formation because it means that the contract is ‘either valid and enforceable or void, [and so] the parties have little or no incentive to work things out and none to deal with the new situation’.[145] This criticism amounts to an argument in favour of laws which promote relational behaviour.

In deciding a case on unconscionable dealing, courts may be required to choose between refusing to grant relief to a party bound to an anachronistic long-term contract and an artificial conclusion that the offer or acceptance of the initial contract was unconscionable. The latter alternative constitutes judging conscience in light of circumstances not envisaged at the time of formation. Perhaps addressing relational aspects outside the bargaining process is simply beyond the scope of unconscionable dealing. And it is worthwhile to remember that unconscionable dealing is not the only possible ground for relief against contractual obligations on the basis of unconscionability.[146] However, the emphasis in unconscionable dealing on conduct during bargaining, leading to a final agreement, reveals a refusal to track flexibility.

B Equitable Discretion and Feinman’s Relational Method

There are strong similarities between Feinman’s relational method and the process of finding unconscionable dealing. Unconscionable dealing considers various consequential considerations. For example, the weaker party should (not must) be encouraged to seek independent legal advice.[147] Another example is that the consequence of the establishment of a special disability and an awareness of that disability is a presumption. Thus rather than automatic (deductive doctrinal) consequences, a consequential consideration is invoked: the transaction should be fair, just and reasonable. As the considerations relevant to unconscionable dealing include factors which suggest particular outcomes (consequential considerations), the determination of unconscionability is somewhat analogous to policy consideration.

Further, investigation of the special disability and unconscionability are considered ‘in all the circumstances’. This suggests a normative structure based on norms of behaviour that the court considers appropriate to the relationship between the parties. Courts do consider contract norms, such as whether there was reciprocation in the exchange,[148] whether the parties behaved as expected in the context of that relationship (role integrity),[149] the propriety of means[150] and external norms based on custom — such as that of receiving independent legal advice.[151]

According to Patricia Loughlan, contextualisation has been an historical feature of equity.[152] She argues that early Chancery cases were decided according to the ‘rules of equity and good conscience’ and there was no advance selection of the considerations that were relevant to a case. Adjudication was therefore ‘contextual and pragmatic.’[153] Loughlan’s claim suggests that this need for contextualisation was recognised in that era of equity. The relational method differs from this approach, however, in that the normative framework has a firm theoretical foundation and is based on empirical studies and findings, rather than judges’ individual experiences and conceptions of contract norms. To avoid being merely an undirected test of ‘fairness’, courts must be careful to track contract norms when contextualising contract disputes and applying discretion.

The discretionary nature of unconscionable dealing and its contextualised concepts of special disability and conscience conform well to Feinman’s relational method. With regards to the norms contained in the normative structure of unconscionable dealing, social mores will clearly be relevant to any conception of unconscionability. However, the inability to consider flexibility after formation is a clear defect in the normative structure.

C Fair Bargaining and Healthy Norms

Absent empirical evidence, it is plausible that extraordinary facts and a dramatic result in a case like Amadio[154] would send a strong message to non-disputants. Also, unconscionable dealing can reinforce contract norms by discouraging and rescinding the formation of contracts which erode contract norms through, for example, unfair terms. In addition, unconscionable dealing can be seen to some extent as the restraint on ‘relative imbalances of power, however they may have come about’ that Macneil considers essential for healthy contractual relations.[155] However, unconscionable dealing cannot promote the norm of flexibility beyond the bargaining process.

Further, unconscionable dealing is often considered restricted to cases where the stronger party exploits the weaker party’s disability.[156] This requirement is substantially reduced by the adequacy of both constructive knowledge of the special disability and passive acceptance of the contract as the unconscionable act.[157] However, unconscionable dealing may not be made out where the weaker party’s assent is ‘compelled’ by the stronger party’s market dominance or other power, rather than a special disability. Severe market dominance can seriously erode contract norms, such as reciprocity and contractual solidarity. In such situations, courts may resort to the idea that independent legal advice would have overcome the influence of the power relations — even when no other bargain would have been accepted by the stronger party.[158]

Also, findings of unconscionable dealing may result in carefully crafted compliance procedures on the part of stronger parties, rather than reinforced contract norms. Courts are ill-equipped to investigate this consideration. However, this task is not beyond the capabilities of Parliament and the executive. We thus turn to statute law.

IV TPA UNCONSCIONABILITY: A LEGISLATIVE FORAY INTO CONSCIENCE

Sections 51AA, 51AB and 51AC of the TPA all prohibit species of conduct that are ‘unconscionable’ by ‘corporations’.[159] Section 51AC also applies to persons.[160] Section 51AA prohibits ‘conduct that is unconscionable within the meaning of the unwritten law’.[161] However, conduct that is prohibited by ss 51AB and 51AC is excluded from the scope of s 51AA.[162] Section 51AB deals with consumer transactions. It prohibits ‘unconscionable conduct’ in connection with the supply of goods and services[163] ‘of a kind ordinarily acquired for personal, domestic or household use or consumption’[164] and not for resupply or use in trade or commerce.[165] Section 51AC prohibits ‘unconscionable conduct’ in connection with the supply or acquisition of goods or services to or from a small business (a company which is not publicly listed).[166]

Breach of ss 51AA, 51AB and 51AC allows the court discretion to grant injunctions under s 80 or any other compensatory order (including termination, rescission or contractual amendment) under s 87.[167] Further, breach of s 51AC automatically entitles the injured party to damages under s 82.

A Tracking through Unknown Territory, Tracking with a Partial Guide

1 Section 51AA

The second reading speech reveals that this section was intended to extend remedies under the TPA to the already existing doctrine of unconscionable dealing.[168] However, in Olex Focas Pty Ltd v Skodaexport Co Ltd, Batt J referred to the dictionary definition of ‘unconscionable’: ‘[s]howing no regard for conscience; not in accordance with what is right or reasonable’.[169] Then, relying on Stern v McArthur,[170] his Honour held that enforcing one’s contractual rights can be unconscionable under s 51AA.[171] Another interpretation was applied by French J in Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd.[172] After considering that various equitable doctrines may be unified around the concept of unconscionability,[173] French J held that ‘unconscionable’ conduct in s 51AA encompasses all of these doctrines.[174] This would include unilateral mistake, estoppel, unjust enrichment and, potentially, economic duress.[175]

These wider views, particularly the Olex Focas[176] approach, would give courts scope to consider the relational aspects of cases. However, as was argued in Part II, such open-ended formulations will not be an effective relational approach unless they promote the tracking of contract norms.[177] For example, Buckley argues that the importance of the autonomy of documentary credit agreements shows that fraud, rather than s 51AA, was an appropriate ground for the decision in Olex Focas.[178] This suggests that the Court may have overlooked an important relational consideration and failed to adequately track implementation of planning.

A consideration of whether the numerous doctrines which could fall under the Berbatis Holdings interpretation adequately track contract norms is beyond the scope of this article. However, courts do sometimes have regard to relational considerations. One interesting example of tracking is Kirby P’s decision in Austotel Pty Ltd v Franklins Self-Serve Pty Ltd to reject a claim of estoppel where there were ‘two groupings of substantial commercial enterprises, well resourced and advised,’ engaged in a ‘sort of cat and mouse game’.[179] When dealing with a relationship far removed from the co-operative spirit generally associated with RCT, Kirby P’s judgment reveals an awareness of the somewhat bizarre norms involved: ‘[C]ourts should in my view, be wary lest they distort the relationships of substantial, well-advised corporations in commercial transactions by subjecting them to the overly tender consciences of judges.’[180] This is a good example of the use of discretion to prevent parties from opportunistically exploiting contract law contrary to its intended purpose.

2 Sections 51AB and 51AC

Both these sections are clearly contextualised. Section 51AB is designed to protect household consumers.[181] Relational concerns have often been addressed by legislation in consumer protection,[182] even though the archetypal relatively discrete exchange is the one-off sale.[183] Section 51AC is designed to promote ‘fair trading’ with respect to small business.[184] This section was created specifically to address problems faced by small businesses with retail tenancy, franchising and finance agreements.[185] Separate provisions regarding each type of problematic agreement could promote closer tracking of the relational aspects relevant to each, but this approach would result in an explosion of the amount of legislation required.

Under ss 51AB and 51AC, courts must determine whether conduct is unconscionable ‘in all the circumstances’.[186] The only guidance that courts are given in each of these tasks is a list of matters they may consider, although courts are not required to consider the listed matters and may also consider anything not listed.[187] The list for s 51AC (a more recent provision than s 51AB) contains all the matters listed for s 51AB and also specifies some further matters. The listed matters in both sections encourage courts to track various contract norms and behaviour. We consider first the factors listed for both sections.

Firstly, courts are invited to consider the relative bargaining strengths of the parties.[188] This factor tracks the power norm. The tracking of the power norm by this provision is closer than the tracking of the same norm by unconscionable dealing because the latter requires a ‘special disability’. In contrast, this factor encourages courts to take into account, for example, the relationship between a large retailer and an ordinary customer, who suffers no ‘special disability’ — at least according to human, as opposed to corporate, standards. Further, RCT recognises that the availability of alternative arrangements (and absence of excessive dependence) is a major source of reciprocity — particularly in market economies.[189] And so consideration of bargaining strength can also track reciprocity.

Also, courts are invited to consider whether the weaker party (consumer or small business) was required to comply with conditions not reasonably necessary to protect the stronger party’s interests[190] and for what amount and under what conditions the weaker party could have obtained the same deal from someone other than the stronger party.[191] These factors consider whether the bargain respects (and even advances) each party’s interests in a balanced way and thus also track reciprocity, which is eroded by one-sided exchanges.[192]

Further suggested factors are whether the weaker party was able to understand any relevant documents relating to the transaction[193] and whether the stronger party used undue influence, undue pressure or unfair tactics.[194] Unfair acts on the part of the stronger party erode the propriety of means, which is based on relevant community standards of appropriate behaviour.[195] This norm is thus tracked. These factors also consider whether there was real or legitimate consent on the part of the weaker party. They therefore also track effectuation of consent.[196]

We turn now to the factors contained only in s 51AC. Firstly, courts are invited to consider whether the stronger party’s conduct towards the weaker party was consistent with the stronger party’s conduct towards parties similar to the weaker party in similar transactions.[197] This tracks consistency of behaviour, an element of the norm of role integrity.[198] However, consistency also involves conduct between the parties (‘internal consistency’).[199] It would be open for a court to hold that the weaker party is itself a party ‘similar’ to the weaker party, with the result that similar transactions in past dealings could be considered under this factor. On the other hand, this reasoning appears somewhat contrived and courts may prefer to rely on the basis that the list of factors is a non-exclusive list of considerations. Regardless of how courts justify the inquiry, examination of any past dealings between the parties is important for the tracking of role integrity; a weaker party is more likely to expect conduct of the stronger party that is consistent with what it, rather than a third party, has previously experienced.

Under s 51AC courts are also invited to consider any relevant industry codes.[200] This factor encourages courts to track the norm of harmonisation with the social matrix because industry codes can be constructed to embody the values of the relevant industry.[201]

Another listed factor in s 51AC is whether the stronger party unreasonably failed to disclose to the weaker party any intended conduct or risks for the weaker party arising from that conduct.[202] This factor tracks ‘internal conflict’, another element of role integrity. This is because ‘internal conflict’ — conflict between the stronger party’s interest and the weaker party’s interest — often arises in relation to disclosure.[203] Also, by considering the extent to which the stronger party helps conserve the interests of the weaker party, this factor also promotes the tracking of contractual solidarity.

Tracking of the norm of flexibility is encouraged by considering the extent to which the stronger party was willing to negotiate any contract.[204] However, this factor seems limited to the bargaining process (negotiations) and does not explicitly promote the tracking of flexibility in the enforcement of terms, even in long-term contracts. However, it is again worth remembering that the list of factors is non-exclusive. Further, Duggan has argued that even under s 51AB, relief against enforcement of terms may be available notwithstanding that the offer or acceptance of the term was not unconscionable.[205] The broader list of factors in s 51AC suggests that Duggan’s reasoning applies a priori to this section. It may be of crucial importance that both s 51AB and s 51AC examine conduct that is unconscionable. This gives courts scope to track flexibility, solidarity and other norms in relation to conduct after the bargaining process has concluded. For example, courts could consider whether the enforcement of contractual terms or a refusal to renegotiate could constitute unconscionable conduct in the context of a long-term contractual relationship.

Finally, under s 51AC courts are encouraged to consider the extent to which the stronger party acted in good faith.[206] This factor is broad and conceivably promotes the tracking of numerous norms, for example, contractual solidarity, harmonisation with the social matrix (by using social mores in determining unconscionability) and role integrity (internal consistency).[207] However, a potential problem with this factor is that its form does not explicitly direct courts to track contract norms. As with unfettered tests of ‘fairness’, the concept of good faith does not necessarily give relational considerations greater normative strength than more idiosyncratic notions of fair play. In applying concepts such as ‘good faith’, courts are well advised closely to track contract norms to prevent these concepts becoming amorphous.

3 Relational Remedies and the ACCC

The broad range of remedies available, and the discretionary basis on which remedies are selected — except for the right to damages for breach of s 51AC under s 82 — suggest that a court may be able to award remedies which are appropriate for the parties’ relationship. For example, in long-term contractual relationships contract variations[208] may be appropriate; where one party is a large corporation it may be appropriate to award enforceable undertakings to the ACCC to implement a TPA compliance program.[209]

With some relationships, litigation will only ever be an autopsy because of the devastating erosion of contractual solidarity. However, for relationships in which less contractual solidarity is required, future dealings between the parties may be possible after the unconscionable conduct has been eliminated. For example, an individual consumer may return to a large retailer once unconscionable policies have been reformed; the same may even be possible with a small business which is only one of many customers of a large business. Further, compliance programs which eradicate unconscionable conduct in relation to all of a stronger party’s business partners may aid the other partners, even if the weaker party which actually brings the action under the TPA is unable to continue dealing with the stronger party.

4 Bureaucratisation and the Transformation of Imposed Norms

Compliance programs are suggestive of bureaucratisation. However, David Knoll argues that, because s 51AC is not ‘black-letter law, and specific rules for compliance cannot be developed’, ‘compliance programs [should] focus upon the integration of concepts of fairness and ethical conduct into the corporate culture.’[210] By ‘black-letter law’, it appears that Knoll is referring to deductive doctrines because it is deductive doctrines that have calculable consequences for specific conduct. Knoll’s argument applies also to s 51AB, but perhaps less to s 51AA since — leaving to one side a broader interpretation of unconscionability in that section — unconscionable dealing is more of a deductive doctrine because, for example, of the categories of special disability. Compliance with the doctrine of unconscionable dealing may involve little more than ensuring that a person who fits into one of the categories of special disability receives independent legal advice regarding the effect of the proposed transaction, rather than, for example, being prepared to negotiate (fair) terms.

Knoll explains that the difference with s 51AC is a deliberate consequence of the government’s desire to ‘induce behavioural change’ in business conduct, rather than merely furnishing small businesses with legal rights to enforce through the courts.[211] Because s 51AC is not a deductive doctrine, it may be that the section does not create bureaucratisation through compliance regimes. This argument is also valid with respect to s 51AB, which also uses consequential considerations, rather than being a deductive doctrine.

As with unconscionable dealing, the discretion involved in all three sections should allow courts to prevent parties from opportunistically exploiting these sections. This, consequentially, reduces the possibility of the transformation of imposed norms.

B Finding TPA Unconscionability and Feinman’s Relational Method

1 Section 51AA

Unconscionable dealing has already been considered in relation to Feinman’s relational method.[212] With regards to the broader interpretations of unconscionable conduct within s 51AA, it will again be necessary to carefully consider whether the principles of those doctrines track contract norms sufficiently closely to form an adequate normative structure for the relational method.[213]

2 Sections 51AB and 51AC

The factors listed in ss 51AB and 51AC clearly suggest the construction of a normative structure for analysis of ‘unconscionability’. The factors facilitate and partially require tracking of common contract norms to varying extents.[214] The sections suggest a structure that also includes external norms, particularly with s 51AC. For example, social mores relate to good faith and the concept of unconscionability itself. Customs are taken into account through the consideration of industry codes. The normative structure for these sections is superior to that of unconscionable dealing because of the greater direction to track contract norms. These sections also offer the possibility of tracking flexibility after bargaining.[215]

The process of adjudication under ss 51AB and 51AC resembles policy consideration because the factors listed create consequential considerations. For example, the stronger party should be willing to negotiate the terms of any contract. Also, courts are afforded discretion to consider further factors and appropriately adjust the normative strength of each factor — and hence adjust the normative strength of the contract norms which are tracked by those factors.

C Towards Better Business Conduct: Norm Reinforcement Regimes

Section 51AC was specifically designed to ‘induce behavioural change’ and ‘[improve] standards of commercial conduct’ rather than ‘create a more litigious commercial environment.’[216] Section 51AA was enacted partly for the ‘educative and deterrent effect of a legislative prohibition’.[217] Section 51AB was apparently ‘aimed at promoting fair business practices and competition’.[218] Thus, all three sections aim to reinforce contract norms and can be considered a form of social engineering.

An examination of the government’s justification of s 51AC is instructive in revealing the extent to which the section is based on relational considerations. In the second reading speech, the government argued that competition requires an ‘efficient and equitable basis’.[219] This is an endorsement of RCT’s view that basic restraints are required on relative power inequalities.[220] Further, the government’s recognition that few cases will be litigated[221] reveals an appreciation of the studies like those of Macaulay and others. This appreciation motivated the government not only to strengthen the substantive legal rights of small businesses but also to ‘improve enforcement of rights and access to remedies’.[222] Hence the provisions for the ACCC to take representative actions.[223] In fact, it should also be remembered that the provision was proposed by a parliamentary committee following empirical investigation of the difficulties faced by small businesses.[224] Perhaps most interesting, however, is that the use of consequential considerations in ss 51AB and 51AC reveals that Parliament is aware of the limits of deductive doctrines, particularly in such a relational area of law. The similarities between these two sections and Feinman’s relational method are striking.

The threat of ACCC ‘crackdowns’ is also a force that motivates behavioural change.[225] The ACCC has an important role to play in relation to these sections because, unlike courts, it can independently investigate the practical operation of laws and either intervene to ensure that those laws are not subverted or suggest amendments.

The discussion of unconscionable dealing and TPA unconscionability in Parts III and IV greatly assists understanding of the normative visions of RCT identified in Part II. Unconscionable dealing and TPA unconscionability help show, for example, the importance of tracking contract norms. Tracking is the basis of any relational approach to contract law, including approaches based on the relational method and approaches which seek to reinforce contract norms.

V CONSTRUCTING RELATIONAL RULES: TRACKING IN A

NORMED SPACE

A Individualised Justice versus Formalism; Confucianism versus Legalism

As was shown in Parts III(B) and IV(B), unconscionable dealing and TPA unconscionability go a remarkable way towards fulfilling Feinman’s vision of a relational method. This is most clear with ss 51AB and 51AC, where the list of suggested, suggestive factors (not deductive doctrines) forms a normative structure through which the facts of cases must be viewed in order to decide whether the conduct is ‘unconscionable’. Unconscionable dealing, on the other hand, consists of a mixture of consequential rules and a normative structure. The strict requirement of an identifiable ‘special disability’ is a deductive doctrine because the absence of such a circumstance automatically prevents the claim.

The requirement of a special disability can be contrasted with the consideration of the relative bargaining strengths of the parties under ss 51AB and 51AC. This factor is a consequential consideration method of considering the same facts because the absence of inequality does not automatically prevent the claim, and the degree of inequality of bargaining strength determines the significance of this norm. In contrast, a claim of unconscionable dealing is necessarily prevented by the absence of any special disability (a deductive doctrine) and a mere inequality of bargaining power (no matter how great) would almost always be inadequate.

However, the consideration of surrounding circumstances in unconscionable dealing gives courts some scope to apply an, albeit restricted, normative framework. For example, the rule that lack of independent legal advice suggests unconscionability is a consequential consideration. The extent to which a relational approach exists, however, will depend on the extent to which courts track contract norms and behaviour in exercising the discretionary concept of unconscionability.

Some extra-curial commentary assists in an understanding of how courts apply discretionary concepts such as unconscionability. In 1995, Murray Gleeson (then Chief Justice of the Supreme Court of New South Wales) argued that unconscionable dealing and TPA unconscionability represent ‘moves away from the formality, or formalism, of the previous law of contract.’[226] Sir Anthony Mason has also recognised the increasing prevalence of ‘the application by courts of generalised concepts and standards instead of rigid rules.’[227]

Chief Justice Gleeson has located the cause of this ‘seemingly irreversible move towards subjectivisation of issues’[228] in changed social attitudes:

These legal developments reflect the spirit of the times. The demands of justice, as seen through modern eyes, are much less likely to be met by formal and inflexible rules which treat hard cases with the dismissiveness sometimes manifested in earlier times. The citizens of the late 20th century have an attitude towards all forms of authority which is questioning, demanding and self-assertive. They seem to place less value upon predictability than former generations ... Even so, there is a balance to be maintained ...[229]

In other words, modern society demands a standard of justice that is incompatible with inflexible formalism. Modern society demands that individual circumstances be properly taken into account (tracking of contract norms) and this requires flexible rules based on consequential considerations (akin to the relational method) rather than deductive doctrines.

The opposition of RCT to formalism provides a fascinating comparison with the opposition of Confucianism — another theory based on social relations — to legalism. Confucianism sought a harmonious social order based on a universal social hierarchy: ‘The young serve the old; the inferior serve the noble; the degenerate serve the worthy — this is the pervading rule of the universe.’[230] Further, ‘[r]ighteousness is (the accordance of actions with) what is right, and the greatest exercise of it is in the honour paid to the worthy.’[231] Thus, the ideal society was one ‘in which honorableness and humbleness, superiority and inferiority, seniority and juniority, nearness and remoteness were clearly defined’.[232] Confucianism sought to implement this differentiation through li (礼), ‘rules of behavior varying in accordance with one’s status defined in the various forms of social relationships’.[233] Li are more than simply ‘rites’ and

include the full range of social customs, ethical norms, and political principles embodied in the complex relations, organizations, and institutions of society. They are culture-specific norms, the contingent, ever-changing values of a particular society.[234]

Also, Confucianism advocated that li should be implemented through the influence of the moral example of leaders, rather than punishment of violation.[235]

Confucianism was opposed by legalism. Legalists denied that moral influence alone was sufficient for social order. Rather than creating an idyllic society, legalists argued that the role of law was merely to prevent evil conduct.[236] Instead of li, legalists advocated fa (法), rules against evil conduct that were enforced through reward and punishment.[237] Some legalists even advocated draconian punishment of minor crimes in the belief that this would eventually prevent all crime, so that the cruel punishments would then no longer be carried out.[238] Legalists rejected the view that rules of behaviour should vary in accordance with an individual’s status as defined under Confucianism. Instead, they argued that all should be equal before the law.[239] Fa aimed to be ‘written, clear and easy to understand, applied objectively and universally, and binding on the lawgiver’.[240]

Confucianists often assumed judicial responsibility.[241] The ancient Chinese legal system allowed judges considerable freedom in interpreting and applying the law and frequently ‘judicial judgments based on Confucian theory went beyond the article of the code’.[242] It is thus possible to consider Confucianism as, to some extent, creating a form of individualised justice as the requirements of li were affected by the parties’ status as determined by their social relationship. Schwartz argues that the result of the Confucian view is that judges will be guided by li. They will ‘(within limits) simply think of the legal code as providing certain guidelines [and] rely very heavily on the unique features of the circumstances of the case.’[243] Also, Ch’ürecords that principles from a Confucian text were invoked in judgments by several Confucianists.[244]

While the consideration of status may not alone warrant describing Confucianism as prescribing a form of individualised justice, it is important to remember that these social relations were fundamental to Confucianism. In contrast to Confucianism, legalism promoted many of the principles of formalism: clarity, objective application and universal application.

Chief Justice Gleeson does not claim to exercise discretion according to a universal social and moral hierarchy, but he does emphasise the need for discretionary decisions to track case circumstances and be principled:

In their nature, discretionary powers require attention to the circumstances of the particular case. Judicial discretion must always be exercised in a principled fashion and is confined at least by the objects of the statute conferring the discretion. Nevertheless, the grant of discretionary power to alter or modify the effect of contractual arrangements, now a common feature of our statute law, inevitably compels an examination of issues of individual detail.[245]

B Principles of Structure

Chief Justice Gleeson acknowledges a tension between the application of universal principles (to the extent of formalism) and complete consideration of case circumstances (individualised justice). By its nature, a deductive doctrine cannot take into account all case circumstances — a deductive doctrine cannot be infinitely complex. Under a deductive doctrine, only a finite list of circumstances can be considered and the result of the circumstances can only be the satisfaction or non-satisfaction of conditions in the doctrine. As all possible circumstances cannot be completely categorised, some circumstances must be ignored.[246]

This deficiency of universal rules is by no means a new concept in equity. The Court of Chancery developed in response to the need for discretionary relief from the rigid, universal rules of the common law.[247] Loughlan has argued that early equitable jurisprudence was informed by the Aristotelian concept of equity: the rectification of law where it is deficient due to its universality.[248] She gives the example of the following passage by Lord Ellesmere: ‘The cause why there is a Chancery is that for men’s actions are so diverse and infinite that it is impossible to make any general law which may aptly meet with every particular act and not fail in some circumstance.’[249]

Consider the following example of a deductive doctrine:

A contract is unenforceable if at the time of execution:

  1. there was an inequality of bargaining power; and
  2. the weaker party did not understand all legal consequences of the transaction; and
  3. the consideration provided to the weaker party was less than 60 per cent of the objectively ascertainable market price.

This deductive doctrine contains three considerations: relative bargaining power, genuine consent and mutual benefit. The ‘considerations’ are really conditions: all three must be satisfied for unconscionability to be made out. Further, the conditions are deliberately framed so as to be (relatively) objectively determinable: they involve as little discretion as possible.

Note, however, that Feinman’s example of a deductive doctrine (‘substantial performance satisfies a constructive condition’)[250] contains some discretion in the application of the imprecise standard of substantiality. The deductive characteristics of this rule are:

  1. that the consequences are completely specified by satisfaction/non-satisfaction of the condition(s);
  2. that there is only one consideration/condition (the extent of performance), and so a court has no discretion in the comparative weighing of different factors; and
  3. the discretion under the rule is meagre — ‘substantial’ does not permit such a spectrum of meanings so as to permit the consideration of a host of relational considerations.

The example deductive doctrine I have formulated is deficient because of the possible circumstances it fails to take into account. For example, it does not consider whether the weaker party was required to comply with terms that were not reasonably necessary. Clearly more considerations, such as those contained in ss 51AB and 51AC could be included — but only a finite number. Consideration of the infinite variety of possible factors requires discretion — in determining both the consequences of the considerations and what the relevant considerations are. However, it is obviously desirable for a legislature or court to suggest some considerations so that the purpose of the provisions is conveyed to courts applying the rule in the future. In other words, what is needed is a non-exclusive list of suggested factors, the importance of which is decided by courts in each case. This explains the structure of ss 51AB and 51AC and the comparative deficiencies of the structure of unconscionable dealing.

Laws based on the relational method described by Feinman can really be described by two characteristics: (1) they track contract norms; and (2) tracking takes place using consequential considerations. The examination of unconscionable dealing and TPA unconscionability in Parts III and IV suggests a third characteristic: the law does not exclusively specify the consequential considerations.

C Principled Discretion

As Chief Justice Gleeson explains, the difficulty with granting courts discretion, as opposed to the application of deductive doctrines, is that it makes the application of the rule uncertain.[251] However, the application of rules which specify a non-exclusive list of consequential considerations can utilise principled discretion if there is some clear, guiding principle behind the specification of the rule’s consequential considerations. For example, the principle may be that small businesses should be able to act without being subject to unfair conduct which can be carried out by big businesses due to their size and consequent superior bargaining position. Parties will expect courts to exercise their discretion according to this principle.

The relational method, at least, avoids the uncertainty which arises from courts creatively interpreting deductive doctrines in order to take into account further considerations. For example, under my example deductive doctrine, courts could decide that the presence of unreasonable or unfair terms (i) is evidence of an inequality of bargaining power, (ii) is evidence that the weaker party did not fully understand the agreement, or (iii) must be considered when calculating the market price. The relational method also obviates the need for courts to distort deductive doctrines to overcome the strict requirements of these doctrines.[252]

Principled discretion, to a significant extent, can regulate — if not restrict — uncertainty for parties regarding the circumstances that courts will consider. The circumstances that will be considered will inevitably involve some uncertainty when the list of considerations is non-exclusive. However, this uncertainty will be minimised if the principle behind the list of specified considerations is clear and has a sound theoretical basis — as with RCT. Uncertainty, instead, will arise in the weighing of the importance of those circumstances — but parties will expect courts to weigh factors so as to achieve a just outcome in the individual case. This is the maximum amount of certainty and predictability consistent with individualised justice.[253]

VI CONSCIENCE, CONFUCIUS AND OTHER SOCIAL ENGINEERS: REINFORCING CONTRACT NORMS

A The Nature of Reinforcement

As was explained in Part II(B), contract norms connote ‘both how people do behave and how they ought to behave’.[254] Gudel has argued that contract law should aim to ‘reinforce these norms’.[255] It is now necessary to consider what it actually means to reinforce contract norms and what the consequences of reinforcement would be.

It makes little sense to say that law should reinforce ‘how people do behave’. This would be merely trying not to disturb contractual behaviour — which would conform well with some of Macneil’s views.[256] However, it seems unlikely that this is Gudel’s intention. It makes much more sense to say that law should reinforce how people ‘ought to behave’ — but this provides no guidance as to how people ought to behave. Perhaps the closest translation possible is that law should reinforce the aspects of contractual behaviour which accord with how people ought to behave.

This definition does not completely specify how people ought to behave. However, it does place a significant restriction on what may be considered to be how people ought to behave in contracts: a consideration of how people ought to behave must be based on how people actually do behave. For example, altruism and charity, while extremely desirable for society, do not connote how people behave in contracts — they are not contract norms. Thus an attempt to introduce altruism or charity into contractual relations could not be described as reinforcing contract norms.

On the other hand, the contract norms identified by Macneil are suitable subjects for reinforcement. So, theoretically, law could aim to reinforce role integrity, reciprocity, flexibility, contractual solidarity, propriety of means, harmonisation with the social matrix, etc.[257] For example, unconscionable dealing and TPA unconscionability could be considered to reinforce the norms of the propriety of means and (according to Chief Justice Gleeson) harmonisation with the social matrix.[258]

B The Results of Reinforcement

Various possible purposes for reinforcing contract norms can be mooted. For example, is the purpose simply to rewrite the parties’ agreement into a form where the benefits of the transaction are more fairly distributed? Or is there some actual, intrinsic benefit to the parties, their relationship, or even society if contract norms are reinforced?

To some extent, distributive justice may be a motivation.[259] This perhaps explains partly why RCT has been dogged by accusations of communitarianism. The extent to which benefits under an agreement will flow to the party which — at the time of negotiation of a contract or during the life of the relationship — has some advantage in bargaining is partly determined by (1) the type and extent of advantage, and (2) the extent to which the law allows the stronger party to exploit that advantage at the relevant time. For example, unconscionable dealing sets a limit on the degree to which a stronger party can exploit its superior bargaining power by proscribing the exploitation of a ‘special disability’. This is a reinforcement of contractual solidarity and reciprocity. The interesting question now becomes what type of exploitation should be prohibited, because it is not necessarily the case that the reinforcement of norms should aim to eliminate all inequality of bargaining power.

The examples of unconscionable dealing and TPA unconscionability suggest that the law will generally act against the exploitation of superior bargaining power which severely erodes contract norms. For example, unconscionable dealing erodes contractual solidarity and reciprocity to the point that there is such distributive injustice that it is prohibited. These are cases where the actual behaviour does not comply with contract norms. For example, in unconscionable dealing the ‘negotiation’ does not ‘look like’ contractual negotiation (should).

The example of unconscionable dealing shows, however, that the arguments for redistributive justice as a motivation are clearest in extreme cases of distributive injustice — when at or beyond the ‘outer limits’ of viability, as Macneil would say. In this case, we are not dealing with making minor adjustments to agreements to undo gains won legitimately — which we will define as done without erosion of contract norms — in the bargaining process. Such an approach would erode the norms of implementation of planning and effectuation of consent. Superior bargaining power need not lead to erosion of contract norms: the question is whether the conduct of the party which has superior bargaining power erodes contract norms to such an extent that that conduct should be prohibited. This implies that conduct which does not erode contract norms is not prohibited under a relational approach. For example, a relational approach would not render contracts unenforceable on the ground that they are not sufficiently altruistic or charitable. This point may be of guidance in the consideration of a requirement of good faith in contracts; it specifies the only type of bad faith that should be prohibited — that which erodes contract norms.

The extent to which erosive conduct is legally permitted may be determined by both moral and political considerations. Erosive conduct offends moral standards primarily because it erodes contract norms and appears to be a subversive manipulation of the institution of contract. Whether a group of weaker parties should be protected against a group of stronger parties in a certain way will also be a political matter because it involves the resolution of conflicting interests. However, it is always important to remember that one norm must not be reinforced to the extent that another is eroded. For example, contractual solidarity must not be imposed to the extent that the norm of implementation of planning is eroded.

The extent to which contract norms are legally protected will also be affected by whether there is some intrinsic benefit (to anyone) of contract norms being reinforced. This is, in effect, to ask the question: why ought people behave according to contract norms? Macneil seems to suggest that at the extremes of erosion the relationship will become impossible.[260] But if one party is irreversibly dependent on the other, then the dependent party may be forced to continue in the relationship regardless of the extent to which the other party erodes contract norms. In such a situation, there may be moral and political — depending on the political influence of the weaker parties — pressures to grant relief. People ought to behave according to contract norms because that is what defines contract norms. The norms ‘connote’ how people ought to behave — apparently based on observations and conceptions of contractual relationships that work well in reality. If the norms do not, for some reason, in some circumstances connote how the parties ought to behave, then the norms should be reformulated.

C Morality and Education

The extent to which law is governed by moral suasions is another fascinating consideration. It was argued in Part VI(B) that the erosion of contract norms through the subversive manipulation of the institution of contract offends moral standards. It may also be that the continued reference to the term ‘unconscionability’, with its substantial moral overtones, is an appeal to these moral standards.

The promotion of ethical, rather than legalistic, norms is also a Confucian idea. Confucianists argued that li should be implemented through ‘ruling by virtue’ (which refers to moral influence) and ‘ruling by men’ (which refers to the actual ruler who leads by moral example).[261] Confucius (孔夫子) maintained that this moral rule is superior to legal rule (punishment of evil conduct) because ‘moral rule influences conscience and hence its influence is universal and unlimited.’[262] ‘The superior sage does not intend to rule the acts of people, but to rule the hearts of people.’[263] According to Confucius, punishment only motivates people to avoid the punishment, rather than to become good; whenever ‘the net of legal entanglements’ could be avoided, ‘the individual would still be evil since he had undergone no change of heart.’[264] Legalistic fa only makes people litigious and ‘skilled in the ways of manipulating laws to suit their own interests.’[265]

Use of the term ‘unconscionability’ can also be seen as an attempt to influence conscience. The aim of TPA unconscionability, similarly to li, is to create more harmonious social relations — albeit restricted to a particular area of society — when it seeks to foster ‘better business conduct’, rather than litigation. Hence, as with li, the method of enforcement of TPA unconscionability is a crucial issue. A central figure in the enforcement of TPA unconscionability is the ACCC. Similarly to the Confucianists, the ACCC has a preference for education, rather than litigation:

The Commission’s approach in enforcing the Trade Practices Act is to educate the market and promote dispute avoidance and resolution schemes where there is essentially a business versus business dispute. However, where there is blatant disregard or systematic breaches of the Act, then the Commission is willing to use its enforcement powers.[266]

And even Confucianists recognised that penalties are sometimes, regrettably, required.[267]

The ACCC plays an important role in enforcing the TPA. As the ACCC is a regulatory body, it has a unique capacity to undertake certain tasks which reinforce contract norms and promote social change.[268] For example, the ACCC can generate negative publicity for companies which breach the TPA and is able to lobby business to adopt compliance programs. These programs ‘aim to prevent law-breaking, they promote a culture of compliance and they encourage “good corporate citizenship.”’[269]

It is timely to remember Knoll’s argument that because s 51AC is not a deductive doctrine (using the terminology of this article), compliance programs require ‘the integration of concepts of fairness and ethical conduct into the corporate culture.’[270] Knoll effectively argues that, because of the nature of the section, parties are unable to simply ‘avoid the net of legal entanglements’ or skilfully manipulate this law to suit their own interests. Further, if the section forces parties to integrate fairness and ethical conduct into their corporate culture, then it has truly succeeded in ruling their corporate hearts. In such a result, the ‘good’ corporate citizen is ‘good’ in the Confucian-like sense in that its ‘heart’, and not merely its conduct, is ‘good’. Also, we can again appreciate the moral overtones — this time in Knoll’s recommendation of ‘fairness and ethical conduct’.

Encouragingly, cases have shown that courts appreciate the importance of compliance programs.[271] In order for the aims of RCT to be met, different legal bodies will need to support each other’s actions — guided by an understanding of RCT.

VII CONCLUSION: THROUGH THE LOOKING GLASS — NORMATIVE RELATIONAL CONTRACT THEORY

In this article, it was shown that conflicting normative visions for law exist within RCT. The relational approaches of tracking (including contextualisation), Feinman’s relational method and the reinforcement of contract norms were identified. Tracking is the foundation of any relational approach to law. The relational method specifies a rule-structure (consequential considerations) and a manner of exercising discretion in judgment (principled discretion). It was argued that Macneil’s reluctance to advocate normative implications is primarily due to the transformation of imposed norms and bureaucratisation, rather than any defect in the normative guidance provided by RCT. Although Macneil’s concerns are valid, it was suggested that they could be overcome through careful tracking of contract norms and use of the relational method described by Feinman.

It was further suggested that unconscionable dealing and TPA unconscionability may avoid these concerns because of the extent to which they utilise judicial discretion, track common contract norms and apply a process strikingly akin to the relational method. The extent to which ss 51AB and 51AC correspond with Feinman’s theoretical structure provides a powerful indication of the applicability of that model. That RCT and Parliament should arrive at the same rule-structure is a ringing endorsement of the relational method’s validity. The correspondence is not entirely unpredictable because RCT is based on empirical studies and concepts closely connected to the real operation of contracts. Bodies which also advert to the real operation of contracts, although not explicitly using RCT, may well reach the same conclusions if RCT is an accurate empirical theory — which it appears to be.

It was also argued in this article that ss 51AB and 51AC have substantially superior normative structures to unconscionable dealing because their non-exclusive list of factors invites closer tracking of contract norms by courts. Unconscionable dealing, on the other hand, has restricted tracking due to the requirement of a special disability and the restriction to consideration of the bargaining process.

However, much of this is speculative. The enduring lesson of RCT’s roots is that theoretical supposition must always yield to that which is verified empirically. For example, RCT should thus privilege procedures that are effective in practice, such as alternative dispute resolution. While the use of close tracking, the relational method, consequential considerations and principled discretion make it theoretically possible that ss 51AB and 51AC may avoid bureaucratisation and the transformation of internal norms, the extent to which these provisions achieve their aims and avoid these problems is a matter to be finally determined by empirical investigation. The real effect of these provisions will be influenced by other considerations, such as the application by courts of any discretion and the effectiveness of enforcement.

This is why RCT must consider more than just the aims of rules enacted by Parliament or formulated by the courts. It must consider whether the structure of those rules conforms with the relational method. It must consider whether courts exercise their discretion in a principled manner which is informed by RCT. It must consider whether regulatory bodies, such as the ACCC, also exercise their functions according to relational considerations.

Many of these issues are analogous to issues relating to Confucianism. The harmonious society sought by Confucianism, with its emphasis on social relations determining behaviour, can be considered a relational order. In a classic explanation of the relationship between li and social change, Confucius said:

If the people are to be guided by law, and non-observance of law is to be corrected by punishment, they will learn to avoid punishment but have no sense of shame. If the people are to be guided by virtue, and non-observance of law is to be corrected by li, they will have the sense of shame, and, also, they will transform themselves into better persons.[272]

In RCT terms, this passage might be translated as:

If parties are subjected to deductive doctrines, then they will learn to subvert them and there will be loss of contractual solidarity and harmonisation with the social matrix (through the transformation of imposed norms and bureaucratisation). If parties are guided by contract norms, enforced through relational laws (based on the relational method and applied with principled discretion), then solidarity and harmonisation with the social matrix will increase and the parties’ behaviour will better conform with contract norms.

Peerenboom provides an explanation of why Confucianists sought to resolve conflict using li:

[L]i are important not merely as the amassed wisdom of the ages, but also because they are the communally-owned repository of shared meaning and value on which people can draw in times of conflict. ... By tapping areas of commonality, one may be able to find the ground upon which to build consensus, to forge new harmony.[273]

By using moral concepts such as ‘conscience’ and ‘good faith’, both the courts and Parliament continue in the quest to tap areas of commonality in the resolution of disputes. Tied up in these concepts are ethical norms of social behaviour which have some common recognition across society and can be applied to all social situations — including those arising in contractual relationships. For courts, the appeal to moral concepts helps to legitimise what may be seen as a contrived interpretation in order to reach just results. For Parliament, these concepts have a powerful communicative value: they suggest to courts the way in which discretion should be applied, and to parties — in non-legal terms — the behaviour that is expected of them.

RCT, too, is an appeal to shared values. The criticism that traditional contract law fails to reflect empirically observed contract behaviour is based on the premise that law should reflect this behaviour. The reason why law should reflect this behaviour is that this behaviour, in turn, reflects the shared values of contracting parties. These values are the most legitimate basis on which contractual disputes can be settled. The notion that how parties do behave reflects their common values also explains why Macneil’s contract norms describe both how the parties do behave and how they ought to behave — the behaviour of contract parties reflects the ‘values’ of that contract,[274] in accordance with which the parties should act.

When approaching these moral concepts, the task — particularly for courts — becomes understanding what norms are produced by these concepts in particular situations, for example, understanding the norms produced in contractual relationships. Courts are an institution ill-suited to an investigation of the values of parties in particular industries or other groups. This is where a sound, empirical, descriptive theory is needed — and where that descriptive theory very soon becomes normative. A descriptive theory may dictate limits on the application of moral concepts. For example, RCT implies that altruism and charity are not legitimate values to impose on contracts.

Normative RCT is an adventure beyond descriptive theory. It requires analysis of all the constituents of the legal system.[275] It relies on both theory and empirical observations. It can be informed by other social theories, such as Confucianism. The riddles of RCT are resolved when viewed from the other side of the looking glass — a normative approach. But the questions for law that this raises will take a much longer time to answer.


[*] Student of Science/Law, The University of Melbourne. I would like to thank Dr Andrew Robertson for his initial suggestion of a link between relational contract theory, unconscionable dealing and ss 51AA–51AC of the Trade Practices Act 1974 (Cth). I would also like to thank Dr Andrew Robertson and Sean Cooney for their comments on earlier drafts of this article.

[1] Robert Gordon, ‘Macaulay, Macneil, and the Discovery of Solidarity and Power in Contract Law’ [1985] Wisconsin Law Review 565, 565. See also William Whitford, ‘Ian Macneil’s Contribution to Contracts Scholarship’ [1985] Wisconsin Law Review 545.

[2] Gordon, above n 1, 565.

[3] ‘Relational Contract Theory: Unanswered Questions — A Symposium in Honor of Ian R Macneil’ (2000) 94 Northwestern University Law Review 735.

[4] Melvin Eisenberg, ‘Why There Is No Law of Relational Contract’ (2000) 94 Northwestern University Law Review 805, 805.

[5] Ian Macneil, ‘Relational Contract: What We Do and Do Not Know’ [1985] Wisconsin Law Review 483, 485–91; Ian Macneil, ‘Relational Contract Theory: Challenges and Queries’ (2000) 94 Northwestern University Law Review 877, 881. See also Paul Gudel, ‘Relational Contract Theory and the Concept of Exchange’ (1998) 46 Buffalo Law Review 763, 766.

[6] See, eg, Ian Macneil, The New Social Contract: An Inquiry into Modern Contractual Relations (1980) 72–7; Macneil, ‘Challenges and Queries’, above n 5, 891.

[7] Whitford, above n 1, 551–2.

[8] Ibid 552, fn 22.

[9] See below nn 100–6 and accompanying text.

[10] The term is used in the sense of the doctrine expounded in Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447 (‘Amadio’) and is also known as ‘unconscionable conduct’ and ‘unconscientious conduct’.

[11] That is, the offences under the Trade Practices Act 1974 (Cth) ss 51AA–51AC (‘TPA’), which also rely on a concept of unconscionability.

[12] Ian Renard, ‘Fair Dealing and Good Faith’ in Cheryl Saunders (ed), Courts of Final Jurisdiction: The Mason Court in Australia (1996) 63, 64, 69.

[13] N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract (7th Aust ed, 1997) 908.

[14] Ibid 906–7.

[15] Stephen Corones, ‘Implied Good Faith and Unconscionability in Franchises: Moving towards Relational Contract Theory’ (2000) 28 Australian Business Law Review 462. But the link was first suggested to me by Dr Andrew Robertson.

[16] For an explanation of the confusion regarding the two senses of ‘relational’ that are used, see below n 27 and accompanying text.

[17] In this article, the terms ‘social engineering’ and ‘social engineer’ do not intend to connote insidiousness or an intrusive abuse of power. They are labels used without any judgment of the means or ends, regardless of whether the social engineer’s motives are purely altruistic or purely selfish.

[18] Stewart Macaulay, ‘Non-Contractual Relations in Business: A Preliminary Study’ (1963) 28 American Sociological Review 55, especially at 55. See also John Wightman, Contract: A Critical Commentary (1996) 37–40.

[19] Whitford, above n 1, 572.

[20] Stewart Macaulay, Law and the Balance of Power: The Automobile Manufacturers and Their Dealers (1966).

[21] Stewart Macaulay, ‘An Empirical View of Contract’ [1985] Wisconsin Law Review 465, 477–8.

[22] See Gudel, above n 5, 763–4; Macneil, ‘What We Do and Do Not Know’, above n 5, 508–11.

[23] See further Gudel, above n 5, 764–5.

[24] Ian Macneil, ‘Contracts: Adjustment of Long-Term Economic Relations under Classical, Neoclassical, and Relational Contract Law’ (1978) 72 Northwestern University Law Review 854, 857. Cf Macneil’s descriptions of the complex relations (even at the international level) which control the price of bananas in supermarkets (‘banana relations’): Macneil, ‘Challenges and Queries’, above n 5, 885–6.

[25] See Corones, ‘Implied Good Faith’, above n 15.

[26] For an explanation of the way that these two uses of the term ‘relational’ have caused confusion, see Macneil, ‘Challenges and Queries’, above n 5, 894–5. The confusion has led Macneil to attempt to relabel relatively relational contracts as ‘intertwined contracts’, but he admits that this term has not caught on: at 895.

[27] The distinction between the two meanings of relational is important when discussing a ‘relational approach’. In this article, a relational approach caters in some way for the fact that all contracts are relational. For the dangers of creating laws designed specifically for relational contracts in the other, incorrect sense (relatively relational contracts), see Eisenberg, above n 4, 813–19; below nn 97–9 and accompanying text.

[28] Macneil, The New Social Contract, above n 6, 60.

[29] Ian Macneil, ‘The Many Futures of Contracts’ (1974) 47 Southern California Law Review 691, 712–13.

[30] Ian Macneil, The New Social Contract, above n 6, 59.

[31] Ian Macneil, ‘Values in Contract: Internal and External’ (1983) 78 Northwestern University Law Review 340, 347.

[32] Macneil, The New Social Contract, above n 6, 41–4.

[33] Ibid 44 (emphasis in original).

[34] See further ibid 47.

[35] Ibid 47–50.

[36] Ibid 50.

[37] Ibid.

[38] Ibid 52.

[39] Ibid 52–4.

[40] Ibid 54.

[41] Ibid 54–5.

[42] Ibid 56–7.

[43] Macneil, ‘Values in Contract’, above n 31, 347, fn 20, (emphasis in original). The idea of propriety of means was developed by Macneil later than the other common contract norms, and was not mentioned in Macneil, The New Social Contract, above n 6.

[44] Macneil, The New Social Contract, above n 6, 58–9.

[45] Macneil, ‘Values in Contract’, above n 31, 346; see further at 349–50 and Macneil, The New Social Contract, above n 6, 59–64.

[46] Macneil, The New Social Contract, above n 6, 59–60.

[47] Macneil, ‘Values in Contract’, above n 31, 361; see further at 361–6 and Macneil, The New Social Contract, above n 6, 64–70. Propriety of means is omitted in Macneil, The New Social Contract, above n 6, 64–70 and, strangely, in Macneil, ‘Values in Contract’, above n 31, 350.

[48] Macneil, The New Social Contract, above n 6, 66–9; see also Macneil, ‘Values in Contract’, above n 31, 350.

[49] Macneil, ‘Values in Contract’, above n 31, 410 (emphasis added, citations omitted). See also at 369.

[50] Ibid 410. See also at 414.

[51] Gidon Gottlieb, ‘Relationalism: Legal Theory for a Relational Society’ (1983) 50 University of Chicago Law Review 567.

[52] Ibid 601.

[53] Ibid 600.

[54] Macneil, ‘Challenges and Queries’, above n 5.

[55] Ibid 893.

[56] Ibid.

[57] Ibid 897.

[58] Ibid 898–9.

[59] Ian Macneil, The New Social Contract, above n 6, 59 (emphasis added).

[60] Gudel, above n 5, 797. See also at 778.

[61] In a footnote. The argument is thus somewhat obscure. Randy Barnett has previously criticised Macneil’s use of footnotes: Randy Barnett, ‘Conflicting Visions: A Critique of Ian Macneil’s Relational Theory of Contract’ (1992) 78 Virginia Law Review 1175, 1202.

[62] Macneil, ‘Values in Contract’, above n 31, 410, fn 216.

[63] Ibid 370.

[64] Ibid 342–3.

[65] Ibid 370 fn 83 and 369 fn 77.

[66] See Macneil’s illustration of these points with the perverse operation of employment law with regard to unfair dismissal: Macneil, ‘Values in Contract’, above n 31, 371–2.

[67] Ibid 370; see also Jay Feinman, ‘The Significance of Contract Theory’ (1990) 58 University of Cincinnati Law Review 1283, 1302–3.

[68] Gudel, above n 5, 795–6.

[69] Ibid 793.

[70] Ibid.

[71] Macneil, ‘Values in Contract’, above n 31, 379–82.

[72] Ibid 381 (citation omitted).

[73] Ibid.

[74] Macneil, The New Social Contract, above n 6, 77.

[75] John Kidwell, ‘A Caveat’ [1985] Wisconsin Law Review 615.

[76] Ibid 618.

[77] Ibid 619 (emphasis in original). See also Robert Scott, ‘The Case for Formalism in Relational Contract’ (2000) 94 Northwestern University Law Review 847.

[78] Kidwell, above n 75, 619.

[79] Ibid 620.

[80] Ibid 622. See also Scott, above n 77.

[81] Kidwell, above n 75, 621.

[82] Eg, in relation to a right to cancel orders: Macaulay, ‘Non-Contractual Relations in Business’, above n 18, 61.

[83] Macneil, The New Social Contract, above n 6, 94.

[84] Ibid.

[85] For laws Macneil considers to be relational and an attempt to shield RCT from criticism of them, see Macneil, ‘Challenges and Queries’, above n 5, 897–9.

[86] See above n 71 and accompanying text.

[87] Gudel, above n 5, 797.

[88] Jay Feinman, ‘Relational Contract Theory in Context’ (2000) 94 Northwestern University Law Review 737, 741–2.

[89] Ibid 741.

[90] Ibid.

[91] Ibid 742.

[92] Ibid.

[93] Ibid.

[94] Ibid 743.

[95] Ibid.

[96] Ibid. In this article, these two types of rules will be referred to as ‘deductive doctrines’ and ‘consequential considerations’.

[97] Eisenberg, above n 4, 817.

[98] Ibid 818.

[99] Feinman, ‘Relational Contract Theory in Context’, above n 88, 740–1.

[100] See, eg, Gunther Teubner, ‘Contracting Worlds: The Many Autonomies of Private Law’ (2000) 9 Social and Legal Studies 399, 404–5. For a remark on the prevalence of these views, see David Campbell, ‘The Limits of Concept Formation in Legal Science’ (2000) 9 Social and Legal Studies 439, 445.

[101] For Barnett’s defensiveness and accusations, see Barnett, above n 61, 1201–3.

[102] Gottlieb, above n 51.

[103] Macneil, ‘Values in Contract’, above n 31, 416–18; Macneil, ‘Challenges and Queries’, above n 5, 900. See also Macneil, The New Social Contract, above n 6, 108–17; Ian Macneil, ‘Bureaucracy, Liberalism, and Community — American Style’ (1985) 79 Northwestern University Law Review 900, 936.

[104] Feinman, ‘Relational Contract Theory in Context’, above n 88, 743.

[105] See, eg, Henry Tam, Communitarianism: A New Agenda for Politics and Citizenship (1998); Daniel Bell, Communitarianism and Its Critics (1993).

[106] Barnett, above n 61, 1205–6.

[107] Macneil, ‘What We Do and Do Not Know’, above n 5, 503. See also Gudel, above n 5, 782.

[108] See above n 54 and accompanying text.

[109] Amadio [1983] HCA 14; (1983) 151 CLR 447, 462 (Mason J).

[110] Ibid 474 (Deane J) (emphases added). See also at 462 (Mason J).

[111] Ibid 474 (Deane J).

[112] Ibid.

[113] Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102. See also Amadio [1983] HCA 14; (1983) 151 CLR 447, 481 (Deane J).

[114] See, in relation to the granting in equity of rescission that is conditional on partial performance, Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449.

[115] See further Renard, above n 12, 77–8; Seddon and Ellinghaus, above n 13, 562–3; David Harland, ‘Unconscionable and Unfair Contracts: An Australian Perspective’ in Roger Brownsword, Norma Hird and Geraint Howells (eds), Good Faith in Contract: Concept and Context (1999) 243, 252.

[116] Macneil, The New Social Contract, above n 6, 56.

[117] Ibid 61.

[118] Ibid 84.

[119] This factor is now disputed: see European Asian of Australia v Kurland (1987) 8 NSWLR 192, 200 (Rogers J).

[120] Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362, 405 (Fullagar J) (citation added).

[121] Amadio [1983] HCA 14; (1983) 151 CLR 447, 462 (Mason J).

[122] Harland, above n 115, 249.

[123] Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362, 415 (Kitto J) (emphasis added). Harland cites Geelong Building Society (in liq) v Thomas [1996] V Conv R 54-545; Teachers Health Investments Pty Ltd v Wynne [1996] ASC 56-356.

[124] Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621.

[125] Ibid.

[126] Lisa Sarmas, ‘Storytelling and the Law: A Case Study of Louth v Diprose[1994] MelbULawRw 8; (1994) 19 Melbourne University Law Review 701.

[127] See above nn 7581 and accompanying text.

[128] (1998) 158 CLR 66.

[129] Anne Finlay, ‘Can We See the Chancellor’s Footprint? Bridgewater v Leahy(1999) 14 Journal of Contract Law 265, 265.

[130] Ibid.

[131] Ibid 270.

[132] Ibid 275.

[133] Rick Bigwood, ‘Conscience and the Liberal Conception of Contract: Observing Basic Distinctions — Part I(2000) 16 Journal of Contract Law 1, 1, 25.

[134] Amadio [1983] HCA 14; (1983) 151 CLR 447, 474 (emphasis added).

[135] Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362, 405 (Fullagar J). Cf Seddon and Ellinghaus, above n 13, 908–9.

[136] Sir Anthony Mason, ‘Contract, Good Faith and Equitable Standards in Fair Dealing’ (2000) 116 Law Quarterly Review 66, 89–90. See also Harland, above n 115, 266–7; Renard, above n 12, 66.

[137] [1988] HCA 51; (1988) 165 CLR 489.

[138] Ibid 505.

[139] (1998) 158 CLR 66.

[140] Finlay, ‘Bridgewater v Leahy’, above n 129, 270.

[141] Seddon and Ellinghaus, above n 13, 556.

[142] John Peden, The Law of Unjust Contracts (1982) 25.

[143] Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362.

[144] John Swan, ‘Party Autonomy and Judicial Intervention: The Impact of Fairness in Commercial Contracts’ (1994) 7 Journal of Contract Law 1. Swan illustrates this point with the case of Zang Tumb Tuum Records Ltd v Johnson [1993] EMLR 61: at 6–8.

[145] Swan, above n 144, 18. In Zang Tumb Tuum Records Ltd v Johnson [1993] EMLR 61, the English Court of Appeal applied Lord Reid’s decision in Schroeder Music Publishing Co Ltd v Macaulay [1974] 3 All ER 616, 618 that formation was the time for assessment.

[146] See Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395.

[147] Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362; Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457.

[148] Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621; Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457.

[149] Amadio [1983] HCA 14; (1983) 151 CLR 447; Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621.

[150] Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362; Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621.

[151] Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362; Amadio [1983] HCA 14; (1983) 151 CLR 447; Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457.

[152] Patricia Loughlan, ‘The Historical Role of the Equitable Jurisdiction’ in Patrick Parkinson (ed), The Principles of Equity (1996) 3.

[153] Ibid 7.

[154] [1983] HCA 14; (1983) 151 CLR 447.

[155] Macneil, The New Social Contract, above n 6, 57.

[156] See, eg, Seddon and Ellinghaus, above n 13, 560.

[157] Amadio [1983] HCA 14; (1983) 151 CLR 447.

[158] See, eg, Amadio [1983] HCA 14; (1983) 151 CLR 447. See also Finlay’s criticism of the reliance placed on the lack of independent advice, particularly with ‘passive acceptance’, in Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457: Finlay, ‘Bridgewater v Leahy’, above n 129, 275.

[159] TPA ss 51AA(1), 51AB(1), 51AC(1).

[160] TPA s 51AC(2).

[161] TPA s 51AA(1).

[162] TPA s 51AA(2).

[163] TPA s 51AB(1).

[164] TPA s 51AB(5).

[165] TPA s 51AB(6).

[166] TPA ss 51AC(1)–(2).

[167] TPA s 87(2)(a)–(b).

[168] Commonwealth, Parliamentary Debates, House of Representatives, 3 November 1992, 2407–8 (Michael Duffy, Attorney-General). For the way in which unconscionable dealing tracks contract norms and behaviour, see above Part III(A).

[169] [1998] 3 VR 380, 402–4 (‘Olex Focas’). For a finding that a broad interpretation of unconscionability in this section is open, see Pritchard v Racecage Pty Ltd [1997] FCA 27; (1997) 72 FCR 203, 223 (Branson J). See further Anne Finlay, ‘Unconscionable Conduct and the Business Plaintiff: Has Australia Gone Too Far?’ (1999) 28 Anglo-American Law Review 470, 482–9; Ross Buckley, ‘Sections 51AA and 51AC of the Trade Practices Act 1974: The Need for Reform’ (2000) 8 Trade Practices Law Journal 5.

[170] [1988] HCA 51; (1988) 165 CLR 489, 527.

[171] Olex Focas [1998] 3 VR 380, 404.

[172] [2000] FCA 2 (Unreported, French J, 14 January 2000) [23] (‘Berbatis Holdings’).

[173] His Honour referred to Paul Finn, ‘Unconscionable Conduct’ (1994) 8 Journal of Contract Law 37, 39: ibid [24]. See also Mason, above n 136.

[174] Berbatis Holdings [2000] FCA 2 (Unreported, French J, 14 January 2000) [25].

[175] Buckley, above n 169, 15.

[176] [1998] 3 VR 380.

[177] See above n 92 and accompanying text.

[178] Buckley, above n 169, 11–13. Although Batt J did refer to the ‘nature and ... effect on commerce and especially international commerce’ in refusing relief against the call up of performance bonds: Olex Focas [1998] 3 VR 380, 403.

[179] (1989) 16 NSWLR 582, 585.

[180] Ibid 586.

[181] Commonwealth, Parliamentary Debates, House of Representatives, 19 March 1986, 1627 (Lionel Bowen, Attorney-General).

[182] See, eg, Macneil, The New Social Contract, above n 6, 86; Macneil, ‘What We Do and Do Not Know’, above n 5, 494.

[183] Macneil, ‘Adjustment of Long-Term Economic Relations’, above n 24, 857. See above n 24 and accompanying text.

[184] Commonwealth, Parliamentary Debates, House of Representatives, 30 September 1997, 8799 (Peter Reith, Minister for Workplace Relations and Small Business).

[185] See Peter Reith, Commonwealth of Australia, New Deal: Fair Deal — Giving Small Business a Fair Go (30 September 1997), reproduced in Commonwealth, Parliamentary Debates, House of Representatives, 30 September 1997, 8765–71, see especially at 8768–70 (Peter Reith, Minister for Workplace Relations and Small Business). This ministerial statement was the federal government’s response to the House of Representatives Standing Committee on Industry, Science and Technology, Finding a Balance: Towards Fair Trading in Australia, Parl Paper No 83/97 (1997) (‘Reid Report’).

[186] TPA ss 51AB(1), 51AC(1)–(2).

[187] TPA ss 51AB(2), 51AC(3), 51AC(4).

[188] TPA ss 51AB(2)(a), 51AC(3)(a), 51AC(4)(a).

[189] See Macneil, The New Social Contract, above n 6, 45.

[190] TPA ss 51AB(2)(b), 51AC(3)(b), 51AC(4)(b).

[191] TPA ss 51AB(2)(e), 51AC(3)(e), 51AC(4)(e).

[192] See Macneil, The New Social Contract, above n 6, 44. For a discussion of the link between reciprocity (or ‘mutuality’) and restraint of power, see at 84–90.

[193] TPA ss 51AB(2)(c), 51AC(3)(c), 51AC(4)(c).

[194] TPA ss 51AB(2)(d), 51AC(3)(d), 51AC(4)(d).

[195] Macneil, ‘Values in Contract’, above n 31, 347, fn 20 and 362–3.

[196] See further Macneil, The New Social Contract, above n 6, 47–50.

[197] TPA ss 51AC(3)(f), 51AC(4)(f).

[198] Macneil, The New Social Contract, above n 6, 40–2.

[199] Ibid 41–2.

[200] TPA ss 51AC(3)(g)–(h), 51AC(4)(g)–(h).

[201] See further W D Duncan and Sharon Christensen, ‘Section 51AC of the Trade Practices Act: An “Exocet” in Retail Leasing’ (1999) 27 Australian Business Law Review 280, 284–5.

[202] TPA ss 51AC(3)(i), 51AC(4)(i).

[203] See Duncan and Christensen, above n 201, 295.

[204] TPA ss 51AC(3)(j), 51AC(4)(j).

[205] A J Duggan, ‘Trade Practices Act 1974 (Cth), Section 52A and the Law of Unjust Contracts’ [1991] SydLawRw 13; (1991) 13 Sydney Law Review 138, 165.

[206] TPA ss 51AC(3)(k), 51AC(4)(k).

[207] See further Stephen Corones, ‘Does “Good Faith” in s 51AC of the Trade Practices Act Deny Self-Interest?’ (1999) 27 Australian Business Law Review 414, 416–17.

[208] TPA s 87(2)(b). See also TPA s 87(2)(ba).

[209] TPA s 87B. See further Allan Fels and Ross Jones, ‘The Trade Practices Act: The First Twenty-Five Years!’ (1999) 7 Trade Practices Law Journal 126, 139–40.

[210] David Knoll, ‘Protection against Unconscionable Business Conduct — Some Possible Applications for s 51AC of the Trade Practices Act 1974(1999) 7 Competition and Consumer Law Journal 54, 77. See also below n 216 and accompanying text.

[211] Ibid. See also Frank Zumbo, ‘Restraining Unconscionable Commercial Conduct: An ACCC Challenge’ (1999) 7 Trade Practices Law Journal 145, 151.

[212] See above Part III(B).

[213] See above Part IV(A)(1).

[214] See above Part IV(A)(2).

[215] See above nn 205–6 and accompanying text.

[216] Commonwealth, Parliamentary Debates, House of Representatives, 30 September 1997, 8801 (Peter Reith, Minister for Workplace Relations and Small Business).

[217] Commonwealth, Parliamentary Debates, House of Representatives, 3 November 1992, 2408 (Michael Duffy, Attorney-General).

[218] Commonwealth, Parliamentary Debates, House of Representatives, 19 March 1986, 1629 (Lionel Bowen, Attorney-General).

[219] Commonwealth, Parliamentary Debates, House of Representatives, 30 September 1997, 8802 (Peter Reith, Minister for Workplace Relations and Small Business).

[220] See above n 116 and accompanying text.

[221] Commonwealth, Parliamentary Debates, House of Representatives, 30 September 1997, 8801 (Peter Reith, Minister for Workplace Relations and Small Business).

[222] Ibid 8800.

[223] Ibid.

[224] See the Reid Report, above n 185.

[225] See, eg, Frank Zumbo, ‘ACCC Tests Small Business and Franchising Reforms’ (1999) 7(11) Law Society Journal 67; Zumbo, ‘An ACCC Challenge’, above n 211.

[226] A M Gleeson, ‘Individualised Justice — The Holy Grail’ (1995) 69 Australian Law Journal 421, 427.

[227] Mason, above n 136, 94.

[228] Gleeson, above n 226, 430.

[229] Ibid.

[230] T’ung-Tsu Ch’ü, Law and Society in Traditional China (first published 1961, 1980 ed) 227, citing Xunzi (Hsüntze) in Homer Dubs, The Works of Hsüntze (1928) 89.

[231] Ch’ü, above n 230, 230.

[232] Ibid.

[233] Ibid 230–1.

[234] R P Peerenboom, ‘What’s Wrong with Chinese Rights? Toward a Theory of Rights with Chinese Characteristics’ (1993) 6 Harvard Human Rights Journal 29, 45. See also the explanation of the difference between li and ‘rites, ceremonies, or propriety’ in Ch’ü, above n 230, 230, fn 11. See further at 226–41 and Richard DeAngelis, ‘People’s Republic of China’ in Alan Katz (ed), Legal Traditions and Systems: An International Handbook (1986) 243, 244.

[235] Ch’ü, above n 230, 247–57. But see further below n 267.

[236] Ibid 261.

[237] Ibid 257–67; Benjamin Schwartz, ‘Attitudes toward Law in China’ in Milton Katz (ed), Government under Law and the Individual (1957) 27, reproduced in John Barton et al (eds), Law in Radically Different Cultures (1983) 104, 104–6.

[238] Ch’ü, above n 230, 266–7.

[239] Ibid 247; DeAngelis, above n 234, 245.

[240] DeAngelis, above n 234, 245.

[241] Ch’ü, above n 230, 275–6.

[242] Ibid 275; see also Schwartz, above n 237, 109.

[243] Schwartz, above n 237, 109.

[244] Ch’ü, above n 230, 276.

[245] Gleeson, above n 226, 428.

[246] See D J Galligan, Discretionary Powers: A Legal Study of Official Discretion (1986) 69.

[247] Loughlan, above n 152, 5.

[248] Ibid 6.

[249] Earl of Oxford’s Case (1615) 13 Jac 1; 21 ER 485 cited in Loughlan, above n 152, 7.

[250] See above n 95 and accompanying text.

[251] Gleeson, above n 226, 426.

[252] See, eg, Finlay’s criticism of the distortion of the ‘special disability’ requirement in Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457: Finlay, ‘Bridgewater v Leahy’, above n 129 and accompanying text.

[253] Cf Finlay, ‘Has Australia Gone Too Far?’, above 169; Buckley, above n 169.

[254] Macneil, The New Social Contract, above n 6, 59.

[255] Gudel, above n 5, 797.

[256] See above Part II(B).

[257] For a list of contract norms identified by Macneil, see Macneil, ‘Values in Contract’, above n 31, 347.

[258] Gleeson, above n 226, 428–30.

[259] Cf Bigwood, above n 133.

[260] Macneil, ‘Values in Contract’, above n 31, 410; see above n 62 and accompanying text.

[261] Ch’ü, above n 230, 254; see further at 247–57.

[262] Leonard Shihlien Hsü, The Political Philosophy of Confucianism (1932) 172.

[263] Ch’ü, above n 230, 248, fn 115, translating Wang Fu, Ch’ien-fu lun 8, IIA.

[264] Ch’ü, above n 230, 249.

[265] Shwartz, above n 237, 109.

[266] Allan Fels, ‘Launch of “Fair Game or Fair Go”’ (Speech delivered at Melbourne, 9 July 1999) available from <http://www.accc.gov.au/speeches/fs-speeches.htm> at 5 February 2001 (copy on file with author).

[267] Confucianists never rejected punishment outright and ‘only objected to replacing moral influence by [sic] punishment’: Ch’ü, above n 230, 268. After the code formulated by the legalists was adopted by the government, Confucianists ‘tried to introduce into the code the principle and spirit of the li together with its concrete rules of behavior and to enforce them by legal sanction’: at 274. This process is known as the ‘Confucianization’ of law: see at 267–79. See also Schwartz, above n 237, 108.

[268] The importance of enforcement is emphasised by Gottlieb, above n 51, 600–1; see above n 52 and accompanying text.

[269] Allan Fels, ‘Compliance Programs: The Benefits for Companies and Their Stakeholders’ (Speech delivered in Sydney, 27 July 1999) available from <http://www.accc.gov.au/speeches/9_8_99/safedis.html> at 5 February 2001 (copy on file with author).. This speech by Professor Allan Fels is itself a good example of the work that can be done by a regulatory body such as the ACCC. See also text accompanying above n 225 and accompanying text.

[270] See Knoll, above n 210, 77. See also above n 211 and accompanying text.

[271] See Australian Competition and Consumer Commission v Nissan Motor Co (Australia) Pty Ltd [1998] FCA 1048 (Unreported, von Doussa J, 28 August 1998); Trade Practices Commission v CSR Ltd (1991) 13 ATPR 41-076; Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd [1997] FCA 450 (Unreported, Goldberg J, 30 May 1997) (‘Tip Top Case’). See further ACCC, What Have the Courts Said about Compliance Programs? <http://www.accc.gov.au/compliance/courts.htm> at 5 February 2001 (copy on file with author); ACCC, ACCC v Nissan Motor Company (Australia) Pty Ltd <http//www.accc.gov.au/compliance/nissan.htm> at 5 February 2001 (copy on file with author).

[272] This is a passage from the Confucian Analects (Raymond Dawson trans, 1993) 6, book 2 no 3. The translation I have given here is that of DeAngelis, above n 234, 244.

[273] Peerenboom, above n 234, 45.

[274] The term is Macneil’s: see above nn 63–7 and accompanying text.

[275] See further Antony Allott, The Limits of Law (1980); Iredell Jenkins, Social Order and the Limits of Law (1980); David Copp, Morality, Normativity and Society (1995).