Tensions in Corporate Contractarianism: Rhetoric Rather than Logic

Abstract The dominant conceptual approach in Anglo-American corporate law literature is to represent the company as a series of voluntary bilateral arrangements. Under such a contractarian approach, the role for company law is to facilitate private bargaining and transactions. This representation is far from uncontroversial, and is frequently challenged on both descriptive grounds (that it does not accurately describe company law) and normative grounds (that its claims as to what the law should be are unfounded). Yet it remains the primary analytical paradigm within corporate law. It presents as an internally coherent representation, which can adequately defend itself from external challenges. The purpose of this article is to explore tensions within the internal argumentation structure of certain claims of this representation. Specifically, this article identifies and unpacks tensions of logical coherence within two key moves advanced within this representation. First, hasty generalisations are provided, extrapolating from unrepresentative samples. Second, there is a circularity in normative claims as to the allocation of corporate rights: the fact that rights are currently provided is frequently used as a reason to justify such rights being initially allocated. This commits the logical fallacy of ‘begging the question’. These two main weaknesses of contractarianism undermine its claim to be an inevitable result of logic. Instead, it is best seen as a series of rhetorical moves: they arise as a result of pre-existing value judgments, and therefore cannot be utilised to justify such value judgments.