Jacobien W Rutgers, ‘Transformative Law in a Digital World from a Contract Law Perspective’

On Valentine’s day, the Amsterdam Centre for Transformative Law (Act) was launched at the Universiteit van Amsterdam. According to its Mission Statement, it focuses on ‘the role of private law in the making of society, as well as the processes of private law-making in a pluriform world’.

By linking the concept of transformative law explicitly to societal challenges, through the role of private law in the making of society and the process of private law-making, the emphasis seems to be on the regulatory role of private law, regardless of whether it concerns public or private regulation of private law. However, private law can also transform society in other ways.

Businesses, citizens, consumers and other societal organisations can use private law together with, for example, new technology in such a way that it has transformative effects on society. Hereafter, I will restrict myself to examples in contract law. Especially, in the digital world, businesses use contract law to create new business models which change society or, in other words, it changes the way we live, shop and work. (See about the different types of contracts and their rationale: H. Dagan, M. Heller, The Choice of Theory of Contracts, Cambridge: Cambridge University Press, 2017.)

Examples of the transformative use of contract law

E-commerce, for instance, has affected the way we shop (A. Ezrachi, M.E. Stuck, Virtual Competition, Cambridge, Massachussetts: Harvard University Press, 2016, p. 1). We are not bound anymore by the offer of a local shop. It is possible to order nearly anything from anywhere through the web, for instance by using AliExpress or Amazon. Contract law provides the legal infrastructure for these transactions, but also has other effects. In most countries, shops have opening hours, internet does not. This has consequences for the particular hours that we work. Customers can order 24/7 and want to receive their order as soon as possible. As a result, the seller’s working hours are 24/7 to meet the wishes of the customers. Thus, e-commerce does not only affect the way we shop, but also the way we work and live, since not only working conditions and hours are affected, but also, for instance, family life. If people work in shifts in the evening and at night, who reads bedtime stories to children, does the cooking or other household chores?

Another example of the transformative effects of contract law is the way social media, Facebook, Uber, Airbnb and other platforms use contract law to create their own normative order as Dan Wielsch writes (D. Wielsch, Private Law Regulation of Digital Intermediaries, European Review of Private Law 2019, p. 197). Margaret Jane Radin refers to the same phenomenon and calls the world created by standard terms, world B, that exists in addition to world A (M.J. Radin, Boilerplate, Princeton University Press, 2013).

Facebook, Instagram, Netflix all present their business model as a community to its users, whereas it is a contract between a business and most often a consumer. The businesses draft standard terms unilaterally and impose them upon the consumer. The consumer only has the option to enter into the contract or not. In this way, a world B, or their own normative order, is created by businesses in the tech-industry. Radin describes elaborately that this world is characterized by a lack of state interference. Businesses, for instance, Amazon and Facebook, exclude state enforcement of rules by submitting conflicts to arbitration exclusively and excluding collective actions for customers who are based in the USA. This is possible under the law of the United States. European Union law, however, does not allow this. In other words, e-commerce affects the world we live in differently depending where we live.

These examples show that transformative effects of private law do not take place only at a national or a European level. It is also a global phenomenon. Therefore, all these levels should be considered when the role of contract law is discussed.

In these situations, enforcement of contract law is rather complicated for the individual consumer or business. An inhabitant of Amsterdam buys something through AliExpress. This person enters into a contract with Alibaba.com Singapore E-Commerce Private Limited, established and incorporated in Singapore, probably without knowing. In addition, the contract is governed by the law of Hong Kong according to the standard terms. Whether this is a valid choice of law is another question.

Particular focus should be given to the policing and enforcement of contracts. Due to global situations, businesses have an opportunity to create their own world, which in turn presents society with new problems. For instance, how is the weaker party in a contract protected and how are these rules enforced? In this respect the interaction between the national and European Union level is crucial, since enforcement of contract law takes place at the national level, but is also formed by European Union rules and case law.

Jacobien Rutgers is Professor of European Private Law at the Vrije Universiteit (VU), Amsterdam. I would like to thank Ruth Sefton-Green and the people present at the launch of ACT for their comments. All errors are mine.