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To Alter Or To AbolishChapter 9Contracts and AgreementsWritten by Darrell Anderson. . . . we may say that the movement of the progressive societies has hitherto been a movement from Status to Contract. Henry Maine, Ancient Law The concept of property implies a liberty to consume a resource, but also to abandon, give away, or exchange the title to those resources.[1] Fundamental to the concepts of boundaries and mutual survival is the concept of peaceably exchanging property titles. That idea is exercised though the concepts of contracts and agreements.[2] Through peaceable exchange people acknowledge the reciprocating benefits of recognizing the boundaries established by the concept of property titles and rights. The concept of property is a human invention used to provide jurisdiction to resources — specifically control of certain energy flows. Contracts and agreements recognize how that control and jurisdiction is managed and exchanged. Contracts and agreements are social inventions for sustaining energy flows through peaceable transfer rather than adversarial raw acquisition. Contracts and agreements are not the same but often are treated similarly. Contracts are agreements but agreements are not necessarily contracts. A contract represents a relationship between two or more parties that include recognized enforceable obligations.[3] Contracts today are recognized by several elements:[4]
Contracts are considered consummated when one party:[5]
There are several perspectives about how one obtains protection through contracts.[6] One idea is to protect the promisor or the seller, the idea of caveat emptor. Another idea is to protect the promisee or the buyer, the idea of strict liability. Protection also is sought through the idea of economic efficiency, that there ought to be a balance between benefits received and costs expended. People embracing the idea of substantive fairness try to evaluate what might be a “just price,” what is adequate or reasonable consideration, and what is conscionable. Other people believe that protection is based upon the contracting process itself; that is, the straightforward act of bargaining and consideration creates a sense of mutuality. Lastly there is a consent theory of contracting, which declares that that merely consenting to be bound by the terms of a contract is the only foundation that should apply. There are two general models regarding contracts:[7]
The expectations model is built upon promises and expectations. The title-transfer model is built upon actual exchanges of alienable property titles. Under the former model, a contract essentially can be considered active by a mere promise; the latter only after one party has knowingly and willingly transferred title to alienable property.[8] With the expectations model, an individual might (intentionally or unintentionally) break a promise to deliver and then later be compelled to provide specific compensation. Proponents of the expectations model hope to promote social stability and predictability.[9] Often difficult to decide, however, is when to enforce promises because expectations are subjective mental images only, not knowable boundaries.[10] Certainly, when individuals keep their promises human action is more stable and predictable, but under the title-transfer model breaking a promise merely denounces the individual in the “social” realm as being a liar.[11] Breaking a promise means a distressed party might have already made plans and incurred expenses in preparation for an exchange that never occurred. Under the title-transfer model, if no property titles were exchanged then such expenses are not losses through a broken promise, but merely an entrepreneurial risk. All conscious human action demonstrates a particular belief based upon accumulated knowledge and interpretations. What cannot be determined all the time with reasonable certainty is upon what knowledge and interpretations that action is based.[12] Although that action might have been based upon reasonable reliance,[13] part of that action also must be based upon whether a promise is knowingly enforceable.[14] Despite disappointment from a broken promise, the only thing that is knowable is the specific boundaries of property — defined by titles. Despite a broken promise, no knowable boundaries were trespassed or transferred. Close inspection reveals that the expectations model is a subset of the title-transfer model. The reason is the ability to contract is almost limitless. Therefore, if a party wants to avoid potential unexpected expenses associated with a broken promise, that party should ensure the contract contains a compensation clause. Conversely, if a party desires not to be held accountable for such expenses, a similar clause should be in the contract. Or, performance bonds could be posted to cover such risks.[15] The root challenge with the expectations model is not how to enforce subjective promises, but a lack of adequate negotiation skills of the contracted parties. Ultimately, failing to meet contractual obligations results in a liability, not from a broken promise but from the theft that results in receiving title to property and not reciprocating. Theft is trespass, and a violation of another individual’s right to property. Contractual obligations can be classified as either something to do or something to give.[16] With respect to enforcement, however, those parties who have failed to perform some act in accordance with certain conditions will be obligated to provide the damaged party some sort of compensation. Thus, all contracts essentially are obligations to give something — directly or indirectly. Indirectly, failure to perform a contracted act results in giving the damaged party title to some other form of property.[17] All contracts are based upon the idea of transferring title to some form of property. No other kind of contract is enforceable.[18] Contracts can be voided if there is a mistake, fraud, misrepresentation; or threat, duress, or coercion is involved. Similarly, a contract can remain legitimate but become unenforceable if something happens to prevent a party from delivering, such as an overwhelming accident or natural disaster. There is an old maxim that nobody can be compelled to perform that which is impossible. In other words, one cannot squeeze blood from a turnip. Although many contracts are written and therefore explicit, contracts can be implied. For example, a customer agrees to purchase goods from a store owner or pay for food eaten at a restaurant. The terms of an implied contract are knowable through direct conversation or well-known and accepted social customs, such as a customer expecting to receive certain value from a purchase. The implied contract is nonetheless based upon the concepts of property, rights, and transfer of actual titles. Enforcing contracts depends upon the principle of trespass. If trespass occurs, then one party has standing to enforce the obligations of a contract. If no trespass occurs, then there are no grounds for enforcement. With respect to the title-transfer model of contracts, promises are not enforceable — only an improper possession of property title is enforceable. A pivotal difference between contracts and agreements is that contracts are based upon the idea of transferring title to property rights. Although often binding and enforceable, agreements do not necessarily exchange anything. From Black’s Law Dictionary, sixth edition: Agreement: A meeting of two or more minds; a coming together in opinion or determination; the coming together in accord of two minds on a given proposition. From Noah Webster’s 1828 American Dictionary of the English Language: Agreement: Concord; harmony; conformity. Union of opinions or sentiments. Resemblance; conformity, similitude. An agreement is two or more parties accepting a common outcome. Although a contract contains the elements of an agreement, the converse is not true. Accepting who sits where at a dinner table does not constitute a contract, whereas exchanging title to one commodity for another necessarily constitutes both an agreement and a contract. Consenting to meet a friend for lunch at a restaurant is an agreement, not a contract. Although probably difficult to enforce if you renege, agreeing to pay for your friend’s lunch as a condition for meeting constitutes a contract. In most cases a unilateral contract is not binding and is nothing more than a gift. Under the title-transfer model, if an individual promises to deliver property and then does not, all that person has proven is that he or she is a liar. The so-called receiving party lost nothing and such an agreement cannot be considered a contract. However, if the individual agrees to pay pursuant to specific conditions, and the other party performs, then the unilateral contract becomes binding. Agreements become binding only if the enjoined parties agree to specific outcomes. A non-disclosure agreement commits an individual not to disclosing or exposing information received from an another party because the property owner has provided a conditional license to access that information. Receiving that information is considered a negotiated right or privilege. If that agreement is violated, the violator becomes a trespasser according to the terms of the agreement because the property owner provided licensed access to property. Usage rights were violated. The available remedies outlined in the agreement then can be enforced. However, such an agreement becomes binding only when explicit consent is provided and the enjoined parties are fully informed. Unless bound by an explicit contract, or the written restrictions and covenants of a contractual community or association, consenting not to mow your lawn at 3 AM is a social agreement, not a contract. Unless your lawn mower is silent, mowing your lawn at that time means you interrupt a common agreement for when such noise is generally tolerated. Thus, you might be liable for damages if you have trespassed against another individual’s boundaries (the quiet and peaceable use of their property). You could declare a lack of knowledge of such a general agreement but neighbors will quickly provide you that knowledge. Although such a first-time trespass can be forgiven, thereafter you will have no standing to claim ignorance and not being informed. Similar to a non-disclosure agreement, titles to property are not exchanged. However, generally most societies embrace various penalties for certain abuses of the usage rights of other people. Finis. Next: Chapter 10 — Consent Endnotes [1] Rothbard, The Ethics of Liberty, p. 133. [2] Barnett, “A Consent Theory of Contracts,” pp. 294–295. [3] Kinsella, “A Libertarian Theory of Contract,” p. 2. [4] Reader’s Digest Family Legal Guide, p. 221. [5] Reader’s Digest Family Legal Guide, p. 221. [6] Barnett, “A Consent Theory of Contracts,” pp. 271–291. The discussion in the following three paragraphs are from “A Consent Theory.” [7] Evers, “Toward A Reformulation of the Law of Contracts,” pp. 3–13. [8] Evers, “Toward A Reformulation of the Law of Contracts,” p. 7. [9] Evers, “Toward A Reformulation of the Law of Contracts,” p. 5. [10] Evers, “Toward A Reformulation of the Law of Contracts,” p. 6. [11] Evers, “Toward A Reformulation of the Law of Contracts,” pp. 4–5. [12] Kinsella, “A Libertarian Theory of Contract,” p. 7. [13] Barnett, “A Consent Theory of Contract,” p. 275. [14] Kinsella, “A Libertarian Theory of Contract,” p. 8. [15] Rothbard, The Ethics of Liberty, p. 136. [16] Kinsella, “A Libertarian Theory of Contract,” p. 3. [17] Kinsella, “A Libertarian Theory of Contract,” p. 3. [18] Rothbard, The Ethics of Liberty, p. 133. |
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