ABSTRACT
In this chapter, the link between the regulatory functions of transnational commercial contracts and the supply chain governance is explored. Commercial contracts regulate trade within the chain and externalities on third parties for violations of due diligence obligations. The integration of the regulatory function in commercial contracts may cause some conflicts because the interests of aggrieved parties, within the chain, may differ or even contrast with those of harmed third parties outside the chain. Hence some principles are needed to define how these divergences can be resolved. The shift from voluntary corporate social responsibility to mandatory due diligence requires giving priority to preventing and remediating third parties’ harm over the protection of the commercial interests of the parties within the chain. Hence, as the example of responsible exit shows, the freedom of terminating the contractual relationship may be limited to ensure the fundamental rights’ protection of third parties. Commercial interest in terminating contracts must take into account the need to protect harmed third parties by internalizing social and environmental externalities. Innovative solutions may require a revision of conventional contractual doctrines such as the third-party beneficiary or its functional equivalents.
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Fabrizio Cafaggi, Regulatory contracts, fundamental rights and third parties’ protection, pp 202–239 in Fabrizio Cafaggi, Paola Iamiceli and Federico Pistelli (eds), Sustainability, Due Diligence and Value Chain Governance (Elgar, 2025). Published: 23 October 2025.
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