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Prof. Tess Wilkinson-Ryan on the psychology of contracts and the lender-borrower relationship

December 10, 2012

It’s been a decade since Tess Wilkinson-Ryan arrived at Penn Law as a 1L, but in less time than it took to find her locker, she knew it was a place where she belonged.

Wilkinson-Ryan, who grew up in rural Maine and studied psychology at Harvard as an undergraduate, earned her JD here in 2005. She completed her Ph.D. in psychology at Penn in 2008 and joined the Law School faculty in 2010, after completing a Sharswood post-graduate fellowship.

One of many Penn Law faculty members whose scholarship crosses disciplinary boundaries, Wilkinson-Ryan uses behavioral research to understand how people interpret the law, how they conceive of their rights and obligations, and how social and moral norms interact with legal rules.

She spoke with Penn Law recently about her scholarship and teaching.

Penn Law (PL): What led you to a career in legal academia?

Wilkinson-Ryan: I loved law school. From the beginning it was the most exciting academic experience I’d ever had.

PL: What in particular attracted you?

Wilkinson-Ryan: I am a believer in the Socratic Method, which derives, in part, from my own experience with it. The idea of learning by challenging your own thinking, I think, is just right. People learn better when they try to think of reasons why they might be wrong, and the Socratic Method has that sort of logic.

The other thing that I liked about law school was that the stakes were so high. In some disciplines, by the time you get to graduate-level specification, you’re asking questions that start to seem trivial. Even if you turn out to be right, you think, “Is anybody going to care about this?” But in law school, you’re asking big questions about how our society structures itself. So it was both intellectually engaging and work that really mattered.

PL: How did you find your way into law and psychology?

Wilkinson-Ryan: I was trying to figure out what my academic path would look like, and I became interested in the burgeoning field of behavioral law and economics. I was really attracted to the idea of using methods from cognitive and moral psychology to address questions that had previously been considered at only an abstract or theoretical level. I wanted to think about real people with real world motives and constraints.

PL: Please describe the research you do.

Wilkinson-Ryan: I try to ask questions about how ordinary people think about their legal obligations and how they actually understand their role as citizens. Specifically, I work on the moral psychology of contracts. A lot of my questions ask when do people think that their contracts are moral obligations that they ought to honor, and when do they think that breach of contract is essentially an option? In other words, when do they think that breaching and paying damages is just an alternate performance of the obligation?

PL: That sounds relevant to the mortgage crisis.

Wilkinson-Ryan: The mortgage context is fascinating because mortgages are such high-stakes contracts. I wrote a paper about strategic mortgage defaults where I tried to show that all kinds of informal norms influence the lender-borrower relationship. On the one hand, most people have moral qualms about breaching their contracts, even when the financial incentives are clear.

On the other hand, the nature of the lender-borrower relationship is changing and mortgage lenders are increasingly perceived as remote, profit-obsessed entities undeserving of moral concern. Borrowers feel less morally obligated to a bank that they perceive as greedy or exploitative. Another factor is whether the originating lender assigned the loan to a third-party. That is an absolutely normal thing to do, but the transfers also remind homeowners that they are fungible entities rather than trusted counterparties.

PL: What new directions is your scholarship taking?

Wilkinson-Ryan: Some of my work is starting to move into the area of how consumers conceive of their contracts and how their moral intuitions affect everyday transactions. People have really strong intuitions about the role of promissory morality. If, say, a contract for a checking account has 15 pages of boilerplate and on page nine is a clause about a fee you have to pay every time you withdraw money from a non-home bank, people will say you should absolutely be held accountable for that fee, even though almost everyone will freely admit that neither they, nor anyone they know, has ever read this particular kind of contract and think it’s unreasonable to expect people to do so.

PL: That sounds quite honorable.

Wilkinson-Ryan: I was curious to find some boundaries on this intuition, actually. I gave people a scenario in which I asked whether members of a gym should be held to a term buried in a long contract that says that they may be photographed or videotaped at any time and that the image may be used for advertising purposes. That was one of the few cases I have seen where people said, “Wait a minute. If you’re going to embed a weird clause like that in a 15-page contract that nobody reads, then the consumer should not be held liable for it.”

On the other hand, there does seem to be a fairly wide range of ways in which the other party may try to take maximum advantage and people think, “As long as you signed it, you’re stuck with it.”  

PL: Turning from your scholarship, you received the A. Leo Levin Award for Excellence in an Introductory Course last year. What do you try to accomplish in the classroom?

Wilkinson-Ryan:  Like all contracts teachers, I’m trying to get students to think about the purpose of contact law and how the doctrines interact with one another in the constant tradeoff between justice and fairness, on the one hand, and efficiency and predictability, on the other hand. And then I am also trying to make them think systematically about what real parties to contracts are thinking about. I try to ground the conversation in how ordinary people interacting with the legal system make and break contracts, what factors affect their decision-making and how legal doctrines take those intuitions into account.

PL: How would you describe your teaching style?

Wilkinson-Ryan: My teaching style is born of my experience as a student here. I understood and appreciated the institutional vibe, for lack of a better word, as being one that was intensely intellectual, yet absolutely collegial. And that’s what I want my class to feel like, that we are really all in this enterprise together and that what my students say matters. Even though I have a traditional Socratic class structure, I prefer a fairly informal discourse.

One of my concerns about law school is that people don’t speak up in class because they are afraid of saying something stupid. And my preference for my class is to encourage students to get comfortable talking. Giving a wrong answer is not a big deal. And in fact participating in discussion is part of each student’s responsibility to the rest of the class. I want students to take some responsibility for the scholarly enterprise without spending too much effort competing with one another.