Recalibrating Contract Law: Choses in Action, Global Value Chains and the Enforcement of Obligations Outside of Privity

Abstract

Commerce, in its pre-industrial form, consisted overwhelmingly of one-to-one relationships. Throughout the latter half of the twentieth century, however, technological and political advances led to the outsourcing and offshoring of many of the activities necessary for the production of goods. The formerly one-to-one relationships expanded exponentially, and global supply chains were born. In today’s world, global supply chains have stretched even further into what are now commonly called global value chains, sometimes comprising hundreds and even thousands of firms. Historically, contract law has struggled with the rise of global supply chains. This struggle has stemmed from the privity doctrine, which holds that normally only the parties to a contract can enforce it. In global supply and value chains — where multiple contracts link together — privity imposes obstacles in at least two significant ways. This Article examines how firms can enforce obligations against members of a value chain outside of the restrictions of privity in order to increase commercial efficiency and facilitate the enforcement of higher labor and environmental standards. In particular, the article focuses on choses in action, a form of incorporeal property in common law jurisdictions such as the United States, Canada, Australia, and England. Basic rules of property law and equity provide that under appropriate circumstances, a chose in action can be assigned. Once this occurs, the assignee can proceed against the defendant and obtain, on its own behalf, whatever recovery would have been available to the assignor. The Article explains choses in action and illustrates the potential significant impact of this system upon the operation of global commerce.