Are Contracts About Morality?

Law and morality can be an unhappy double act; as if Ant had slept with Dec’s mother. Legal theorists have a great time deciding if law in its central case is moral, or if legal validity depends on morality, or if there is de facto moral good in having law, or if a judge should think in moral terms when deciding hard cases, or if they are entirely unconnected. And many other links, non-links and permutations.[1]

One area that has also received a lot of attention is the basis of contract law: why do we have legally binding contracts that can be enforced? Is there a moral reason for it?

The argument (in simple form) runs that breaking a promise is morally bad. Therefore when you make a promise that you intend to be bound by, the law of contract creates a legal obligation to match the moral compulsion.

This is not a standard and accepted reason for why contracts are enforced. A diametrically opposite view would be one like that of Oliver Wendell-Holmes, who said “the duty to keep a contract at common law means aprediction that you must pay damages if you do not keep it, and nothing else”. This view is predicated on the idea that contracts are a matter of economic usefulness. When a breach is more efficient (i.e. I break my contract with you because I can make a better deal elsewhere that covers the cost of my breach and makes me money too) then breach is A-OK.

Other views include a great emphasis on notions of reliance, or  take alternative and composite views.

But the point here is that contract law is often (and not improperly) thought of as a dry topic, where dull men of business make boring things happen. To think of a breach as an immoral act, and damages for breach as in some way the penalty and the compensation for that immoral act, stands at odds with aspects of contract law that treat contracts simply as hardnosed, arms-length agreement.

Finally, the theory of contract law is a tangly mess. There is no one accepted theory. One reason is that theories match up with different parts of legal realities. How, for example, does the morality of promising as a basis for contract law fit with the need for ‘consideration’ (i.e. both parties need to give the other party something for a contract to be valid)? If promises are morally important, is it right that you can’t make punitive provisions in a contract for breach? If promises are important, why is specific performance not a normal remedy?  Equally and oppositely, if contracts are just about economic efficiency, why do we have doctrines to protect weak and vulnerable contractors? Why do we abhor misrepresentation?

This sort of stuff keeps academics awake at night. Commercial solicitors don't normally worry about it too much!

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[1] Anybody doing any legal theory could do worse than having  a play around on this website. The example theories cover (in an embarrassingly rough way) Finnis, Fuller, [many theories in many ways], Legal Positivism and Dworkin.