A CRITICAL ANALYSIS OF

Abstract

The value of liberty is one of our most fundamental commitments. Given this commitment, judgments concerning coercion are of profound moral significance. The concept of liberty is usually defined as the absence of coercion; so defined, the very important moral and political value of liberty is safeguarded only when coercion is excluded. Presently, the concept of coercion is inadequately defined, and in drastic need of clear analysis. An important area in which individuals express their liberty is through voluntary agreements made under the law of contracts. The moral defense of the law of contracts rests on the belief that contracts facilitate individuals' opportunities for self-determination; liberty being a necessary condition for self-determination necessitates the exclusion of all forms of coercion in contracts. Market interactions have a particular character and occur within a specific institutional framework. Using economic models, I argue that other accounts of coercion have failed to capture the unique character of coercion in market interactions. The "normalcy" criterion, which is the most prevalent approach to distinguishing coercive proposals from noncoercive ones, assumes that a person's status quo is an appropriate point from which to distinguish coercive proposals from noncoercive proposals. I argue that under certain ideal conditions in the market, a perfectly competitive market, this assumption might be legitimate. I utilize game-theoretic models to analyze the nature of coercive proposals in an imperfectly competitive market. The bargaining advantages that agents have, which are a function of certain background conditions, give them bargaining power over others with whom they negotiate. I argue that when the following conditions are present coercion can arise in the market: the status quo of an agent (or his "threat-advantage") is stronger in relation to the agent with whom he is dealing and he takes advantage of his stronger bargaining position, exploiting the deprivation that the weaker agent will face if he does not comply. I apply this analysis of coercion to the law of contracts, specifically, to the doctrines of duress and unconscionability.