Law Notes: Contract Theory

    The Theory of Contract Law

The rights to enter into and benefit from a contract are ‘gifts of the Enlightenment’ when we in the ‘West’ threw off the shackles of religious dogma and secularized our society.  The right to contract is the epitome of individual self-autonomy and is fundamentally unlike a person’s rights in tort or restitution because the rights (and obligations) are self-imposed.  In effect, the parties to a contract chose to impose the terms of a contract upon themselves by choice not by the operation of law. 

Contract law, does not promulgate rights and duties generally, as such, but sets down a number of limiting principles within which the parties can create their own rights and duties based on a ‘promise of performance’ in action.  The law of contract is a set of principles and rules that governs when a promise between two parties will have legally binding effect. 

A right in contract differs from a right in tort in that it is said to exist ‘in personam’ (against a particular person) as opposed to a right ‘in rem’, which exists against all persons in general.  In modern terms an example of the latter is a construction lien which is technically held against a property not the owner, so the right does not transfer if the property is sold.  A contract for personal service, like employment, sale of chattel, or even getting a haircut is a right in personam and does not generally transfer with property or otherwise. 

Historically contract law originated out of an archaic legal system based on a ‘writ’ of Debt-Detinue, whereby a person claimed another had retained something unjustly to which that person was not entitled.  Debt was for the recovery of money while Detinue was for recovery of personal property.  It was only through judicial developments, some of which are lost in the shadows of time, that ‘the promise’ became the underlying principle on which contract law was based.  Understanding this development is not crucial to a comprehension of contract in modern times and is rather convoluted so an outline here is rather superfluous for our purposes on these pages.