You can scribble an agreement on a napkin or hire lawyers to negotiate a contract that is hundreds of pages long. Either way, most of your contractual obligations won’t be in your agreement. They will be in the background rules contract law applies without your express consent. Some of these rules are mandatory, fixed even if both parties prefer otherwise. But most rules are defaults, changeable if both parties choose. Getting the defaults right is a core task of contract law; justifying those defaults is a core task of contract theory.

In a new article, we provide the first conceptually coherent and normatively attractive account of contract law defaults. We start from the position, introduced in our Choice Theory of Contracts book, that contract law is, at its root, justified to the extent it enhances human freedom, that is, it supports individual autonomy defined as self-determination. Building from this normative commitment, we arrive at the theory of autonomy defaults. Defaults are justified to the extent they enhance our ability to write and rewrite the story of our lives. As we show, most existing defaults are already autonomy-enhancing. And this is not a surprise, given the liberal principles that animate American law. We celebrate these defaults. But many defaults are not freedom-enhancing. For those, we show the path to reform.

The ample field of contract defaults includes not only “technical” gap-fillers, but also many of contract law’s core doctrines, including most of the rules governing contractual performance and remedies. These rules apply if, but only if, the parties have not opted for a different arrangement – which is most of the time for most of these rules. Often, a rule will explicitly announce its default status (as in, “Unless a different intention is manifested”). Other times, a rule’s mutability is less transparent but still widely recognized (think, for example, about “as is” clauses that opt out of disclosure duties). And throughout the vast array of contract’s default rules, there are degrees of “stickiness” – some defaults are easily contracted around, others require quite substantial effort.

We offer a coherent theory for all contract default rules at all levels of stickiness. Our core claim is that in a liberal setting, contract law’s default rules are, for the most part, already autonomy-enhancing. In cases where they are not – and we identify examples in our article – the default is normatively unjustified and should be changed.

Defaults serve their autonomy-enhancing function in one of two ways: either by empowering individual self-determination or by safeguarding it.

(1) Empowering defaults proactively facilitate people’s autonomy. Sometimes, parties to a commercial contract are legally sophisticated, symmetrically situated players who just want to get wealthier. For these utilitarian contracts, enhancing autonomy is straightforward: Defaults should aim, in most cases, to maximize the parties’ joint welfare, and they should do so by adopting majoritarian preferences to the extent they can be reliably identified. Put simply, if contracting parties just want to get rich, the default should be set so it most likely makes them richer. In these cases, the welfare-maximizing default is the autonomy-enhancing one.

But there’s a catch. The welfare-maximizing setting turns out to be what economists call a “corner solution,” useful for the special case of heavily lawyered contracts between sophisticated commercial parties, but insufficient for the vast run of contracts between ordinary people doing ordinary things – getting jobs, getting married, buying homes, buying stuff. As we move away from the corner case (utilitarian subject matter and roughly equal parties), the autonomy-empowering default is increasingly likely to diverge from its efficiency-based counterpart. The divergence arises either because of distributive concerns or because the contract asymmetrically affects the autonomy interests of the typical parties to that contract type. In these cases, contract law committed to human freedom must opt for an autonomy-enhancing default, even at the price of some inefficiency – as it does, for example, with pro-consumer and pro-homeowner defaults.

(2) But contract law does not only enhance autonomy. Our voluntary commitments also, inescapably and to an extent, limit our self-determination. This dual nature of contracting – enhancements offsetting limits – does not mean that the autonomy perspective is agnostic among default rules. Nor does it imply that autonomy concerns only the identity of winners and losers. There is no reason to think that contract’s autonomy effects must be a zero-sum game. To be justified on autonomy principles, contract law must attend to contracts’ potential autonomy-diminishing effects. This is why, alongside empowering defaults, contract law must – as it indeed does – offer safeguarding defaults.

There are two types of safeguarding defaults. One class ensures that contracts made today do not unnecessarily impinge on the autonomy of promisors’ future selves. The other class safeguards the autonomy of vulnerable parties, a concern that arises because of the sequential nature of typical contract performance. Safeguarding defaults limit a contracting party’s ability to exploit opportunistically either that party’s own future self or vulnerable counterparties.

Both empowering and safeguarding defaults – which together comprise autonomy defaults – advance autonomy and justify state coercion of private contracts. But they do so in different ways, using altering rules that vary depending on the challenge to autonomy posed by that category of default rule. This is as it should be. Empowering defaults that follow the majoritarian welfarist paradigm should be easy to alter. Easy opt-outs here pose little threat to autonomy. For other empowering defaults, as well as for safeguarding defaults, altering rules typically are, and indeed should be, more stringent, even if they are not mandatory.

Our theory of autonomy defaults places us in opposition to much of the received wisdom in contract law and theory. To show why our approach improves on what’s come before, we counterpose our view to the two main schools of thought, which we dub the “traditionalist” and the “welfarist.” The traditionalist view has more sway in Toronto and parts of Europe; the welfarist view is overwhelmingly dominant in American contract law and theory. Both accounts disappoint.

(1) In a nutshell, traditionalists argue that default rules are best understood as implied-in-fact terms that express the presumed intent of the actual parties. Law’s role in this respect is strictly one of making implied intentions explicit and its ambition is strictly limited to enforcing the parties’ joint will (that is, the content of their mutual consent). A strength of this approach is its healthy concern for justifying, from first principles, the coercive nature of contract law. But the traditionalist view falls apart because of its remarkable inability to account for much of contract law’s doctrinal terrain and because of its radically limited vision of contract’s potential for human empowerment. This failure renders its interpretive credentials dubious and erodes its normative standing.

(2) The welfarist view, by contrast, sets a more ambitious mission for contract law. Led mainly by legal economic analysts, this view conceptualizes contract’s defaults as “gap-filling rules.” More precisely, the welfarist claim is that these rules should, and largely do, follow majoritarian preferences as a means to minimize parties’ transaction costs and maximize their contractual surplus. This approach fares better than does the traditionalist one in linking normative goals with existing doctrine – the fit dimension. Welfarism has become the approach most American law professors teach their students, and it’s now the framework that lawyers and judges overwhelmingly use in evaluating defaults. But the welfarist view marginalizes the challenge of justification. And when this challenge is faced head on, the approach collapses as a free-standing normative project. Welfarists end up defending defaults and proposing reforms that cannot be justified.

Our account of autonomy defaults – comprising empowering and safeguarding rules – resolves the pitfalls of both traditionalists and welfarists. We capture the texture of contract law as it actually exists, and we point the way to reforms that bring it closer to its liberal principles.

This post comes to us from Hanoch Dagan, a professor at Berkeley Law School, founding director of the Berkeley Center for Private Law Theory, and Stewart and Judy Colton Professor Emeritus of Legal Theory at Tel Aviv University, and from Michael Heller, Vice Dean for Academic Affairs and the Lawrence A. Wien Professor of Real Estate Law at Columbia Law School. It is based on their recent article, “Autonomy Defaults,” available here.