The evolution of Contracts

Discuss a number ways in which modern contracts have moved away from the laissez faire tradition of contract formation (i.e., what is sometimes called the ‘classical contract’). As part of your analysis discuss how this move away from the classical contract impacts the way we view and deal with contracts today.

Contract formation has evolved immensely throughout history. If we trace contract law back to the 14th century, it was very simplistic in nature (Findlay, 2017). The focus was on criminality and the preservation of ones property (Findlay, 2017). For the longest time, this all that really needed to be governed by contract law. At the turn of the 16th century something changed (Findlay, 2017). Agriculture became big business and the definition of a contract switched. Because agriculture is an entrepreneurial exploit which many folks could participate in, written contract could not keep up (Findlay, 2017). The result was the rise of the laissez-faire contract. These informal, yet effective contracts were verbal agreements between parties (Matheson & Farber, 1985). The importance of these verbal agreements cannot be understated. This turn of events created a culture of collaboration and a delicate trust between people (Matheson & Farber, 1985). Your word was truly your bond. Your reliability as a person (in some cases) directly effected your ability to provide for your family. 

Of course, the flip side of these contracts is an inability to legally enforce (Matheson & Farber, 1985). Many of these informal deals were made between two parties absent a witness (Matheson & Farber, 1985). Should a party not live up to their end of the deal, legal action would be quite tricky (Matheson & Farber, 1985). The law clearly states that not every promise is binding. The continued rise of business and the stakes involved with certain transactions sparked a form of regulation from the people and the government (Matheson & Farber, 1985). Just as they did with personal property and criminal law, they did with nearly every promise possible. 

The rise of the written contract in all avenues of life began and it has not halted since. Sure an argument can be made that this over-regulation slows down industry and a person’s ability to make a quick deal but the change was warranted. Contracts are a big deal now and thoughtful consideration was now warranted in any sort of deal, no matter how small (Rousseau, 1995). People are now protected in their decisions. The legally binding, written contract allows for a system of checks and balances that keeps corporations and humans honest (Rousseau, 1995). Sure there is still a place for the laissez-faire deal but its reliability will always be questioned (Matheson & Farber, 1985). This inherit lack of trust between parties (whether warranted or not) has driven the movement of our society to one that is dictated by contracts (Rousseau, 1995). This is an inconvenient, yet necessary step for all involved. 

When you enter into a contract there are no secrets. Anything and everything you need to know is right there on paper. Sure it might be twenty pages of jargon but the point remains (Rousseau, 1995). We view contracts as a big deal now and rightfully so. We should revere contracts. Entering into an agreement with someone means you must hold up your end of the bargain. Having legal precedent and protection ensures that each side is held accountable (Rousseau, 1995). This allows for less deviance and contract breaking then in the past. If someone is inclined to break a contract, it is no longer a he said she said ordeal (Rousseau, 1995). There are real consequences. Contracts are now revered and rightfully so. Before we enter a contract, most of us ensure that we can absolutely follow up on its stipulations (Rousseau, 1995). This allows for a serious consideration of ones ability to hold up to their end of the bargain. A threat of legal action would absolutely put the fear of god into anyone who thinks they can deviate from a contract. 

Of course, there is still a place for laissez-faire deal. Though its relevance in the professional world has waned significantly (Matheson & Farber, 1985). There are two places where this type of deal rains supreme. Informal deals with friends and family and the criminal underworld. Both of these scenarios still rely on this type of deal because a written contract (in this context) is not usually legally binding (Matheson & Farber, 1985). It is more of a necessity. The courts are unlikely to hold someone accountable for a deal they made with a friend or family (Matheson & Farber, 1985). This is viewed as something that should be dealt with in-house. Often family members provide great services for each other without an expectation of anything in return. These lopsided contracts are all to common in a family setting (Matheson & Farber, 1985). Therefore, a courts legal judgement of what is “fair” is not necessarily indicative of a scenario between family members. These deals are not arm length therefore there maybe an unforeseen special obligation involved (Matheson & Farber, 1985). 

Concerning the criminal underworld, classical contracts are the only option. A contract is legally binding for a reason. If your contract is illegal in nature then a court can not uphold its terms. Criminality in itself, however is an interesting case study in the classical theory of “word is bond”. Contractually, cooperation amongst criminals is very old school in nature. In fact the best time period to equate it to is the 16th century. As mentioned above, there is a mentality of reputation and trustworthiness above all else. Image is extremely important. If you are viewed as trustworthy you are more likely to receive contractual opportunities. If you are the opposite you are shunned or in extreme cases, violently dealt with. 

To conclude, contracts have been prominently featured throughout history. As we have evolved as a society, so to have contracts. Contractual concern has shifted from the primary focus of criminality and property law to every facet of life as we know it. From the purchase of a ticket to a sporting event to the sale of a used car, contracts rule our lives. The jury is still out whether this is warranted or not. However, a contract is viewed as a big deal. A clear statement of expectations and guidelines that are to be followed to a T. Maybe it is good that contracts are this prominent in the world today. People can make fair deals with each other and be held to an acceptable standard. This sort of regulation prevents many people from being exploited by shady dealings. Sure you might have some extra reading to do but a fair and above board deal more then makes up for this small inconvenience. 

Works Cited 

Farber, D., Matheson, J. (1985). Beyond Promissory Estoppel: Contract Law and the Invisible Handshake. Chicago, IL: The University of Chicago Law Review. 52, 903-911.

Findlay, H. Contracts. Retrieved from: https://lms.brocku.ca/portal/site/8e008920-1bb8-4782-9cbd-c5431de7a0aa/tool/2a27ddd8-a780-4221-b048-c5be89a377e3?panel=Main
Rousseau, D. (1995). Psychological Contract in Organizations: Understanding Written and Unwritten Agreements. Thousand Oaks, Cal: Sage Publications. 85-90.


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