THE CONTRACT VIEW OF BUSINESS' DUTIES TO CONSUMERS

Business Ethics MGT610

LESSON 35

THE CONTRACT VIEW OF BUSINESS' DUTIES TO CONSUMERS

In the contract view of business' duties to consumers, the relationship between a firm and its

customers is essentially contractual. When we purchase an item, we enter voluntarily into a

"sales contract" with the firm, who then has a duty to provide a product with the characteristics

they have agreed to supply. Consumers therefore have a correlative right to receive the product

they have been promised.

This theory rests on the view that such contracts are free agreements that impose on each side

the duty of complying with the terms of the agreement. Both Kant's and Rawls' theories offer

justification for this view, and traditional moralists also remind us that contracts are subject to

three moral constraints (mentioned in Chapter Two): both parties must have full knowledge of

the agreement, neither party must misrepresent the facts, and neither party must be forced to

enter it. The same sorts of arguments that Kant and Rawls use to justify the basic duty to

perform one's contracts can justify these secondary constraints.

Hence, the contractual theory of business' duties to consumers claims that a business has four

main moral duties: the basic duty of (a) complying with the terms of the sales contract, and the

secondary duties of (b) disclosing the nature of the product, (c) avoiding misrepresentation, and

(d) avoiding the use of duress and undue influence. By acting in accordance with these duties, a

business respects the right of consumers to be treated as free and equal persons--that is, in

accordance with their right to be treated only as they have freely consented to be treated.

First, businesses must provide a product that actually lives up to the express claims that they

make about it. In addition, they must also carry through on any implied claims they knowingly

make about it. Generally, such claims refer to one of four areas: reliability, service life,

maintainability, and product safety. Businesses, therefore, must provide products that are as

reliable, long-lasting, easily maintained, and as safe as consumers are led to believe them to be.

Since a contract cannot bind where both parties do not have full knowledge, the seller also has

a duty to disclose to the buyer any facts about the product that would affect the consumer's

decision to purchase it. Sellers also must not misrepresent their products. Even more than not

disclosing information, misrepresentation makes freedom of choice impossible; it is, in reality,

coercive. Coercion itself also renders a contract void, because people act irrationally when

under the influence of fear. Sellers must not take advantage of gullibility, immaturity, or

ignorance, which reduce the buyer's ability to make a free rational choice.

The main objections to the contractual theory maintain that the assumptions on which the

theory is based are unrealistic. Manufacturers do not deal directly with consumers. They do

deal indirectly with them through advertisements, however, and promoters of the theory argue

that advertisements forge the indirect contractual relationship between seller and the buyer.

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