Sarah Dadush, ‘Prosocial Contracts: Making Relational Contracts More Relational’

The COVID pandemic exposed the selfishness with which fashion brands deal with their overseas suppliers. When it hit, many brands simply abandoned their contracts, without giving notice to suppliers, paying for completed – even shipped – orders, and without considering the serious impacts of cancelation on workers. The pandemic exposed but did not create the extractive relational dynamics in the apparel sector; such dynamics existed long before anyone had heard of COVID-19. Given that the ‘real deal’ of international supply contracting tends to be excessively buyer-friendly, relational contract theorists likely would have correctly predicted that a pandemic-like event would lead to widespread contract abandonments by buyers. However, relational contract theory has little to say about how to improve the fairness of the relational dynamics at play, particularly with respect to non-parties. This Article seeks to take that next analytical step.

It is generally understood that contracts are relational, not just transactional. They both reflect and shape the relational dynamics between the parties. But contracts’ ‘relational power’ extends beyond the parties to encompass relationships with workers and their communities (people and planet). These groups can be understood as ‘contract stakeholders’, even if they have no rights under the contract. As such, contracts contain more than the terms of the deal. They contain the terms of (several) relationships. They express and enshrine relational values. Contracts can, therefore, be upgraded to enshrine better, fairer, more prosocial relational values that do a better job of upholding workers’ human rights. This Article explains why companies should seriously consider upgrading to ‘prosocial contracts’ because it is the right thing to do, but also because of the emergence of mandatory human rights due diligence legislation in Europe. Drawing on the United Nations Guiding Principles for Business and Human Rights (UNGPs), Iris Marion Young’s social connection model of responsibility, and the Model Contract Clauses developed by an ABA working group, this Article offers a practical framework for prosocial contracting. The framework operationalizes a ‘shared-responsibility model’ whereby both parties are responsible for ensuring the social performance of their contract.

Dadush, Sarah, Prosocial Contracts: Making Relational Contracts More Relational (January 5, 2022). Law and Contemporary Problems, volume 85, no 2, 2022.

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