ELEMENTS OF A CONTRACT
In this section, we are going to dissect the different parts of a contract under the light of current judicial thinking and the light of an Absolute Austro-Libertarian system.
This term seems pretty much explanatory, but it is not. As we are Absolute Austro-Libertarians, for us the term voluntary is absolute and this requires an explanation.
Knowing that our right to our body is absolute, it is then logical to conclude that our right to do anything with our body is also absolute; short of slavery, which the Master Contract forbids. This would include agreeing or disagreeing with contracts.
Therefore, the only manner in which somebody can get our agreement on a contract is if we choose to agree. What do we mean by “choose to agree”?
- Our agreement is controlled by our individual volition
- We are capable of understanding the agreement and have the will to agree to it
As this will is absolute, we reject the concept of duress, where somebody can force us to agree to a contract. In our perspective, we always have the choice of saying yes or no. Nobody, under any circumstances, can change this. This topic will be further developed in the upcoming parts of this lesson.
If there is no such thing as “involuntary” (which would be the equivalent of “duress”), why do we insist on the term “voluntary”? We do so for a number of reasons:
- Voluntary means that contracts are not possible if they go against our will, we must agree.
- In order to clarify options and event under “duress” conditions (we are not denying the existence of such conditions, we only deny its capability to create voluntary contracts)
As voluntary means that we are accepting a contract through our will, it is also logical to conclude that our will cannot be exercised if we are not in full possession of it. However, this concept is internal to our body, not an external one. External duress does not affect our will unless it affects our mind.
However, being incapable of understanding the terms of a contract means that we are not in full possession of our will. This is so because our understanding of a contract is part of our will. If we cannot understand a contract, we cannot fully exercise our will.
In summary, “voluntary” for us means that:
- We are capable of understanding the terms and conditions of a contract
- We exercise our will to agree to them
We reject the concept of “competent persons” because it is a legal term and as such subject to written laws (statutes). These laws create artificial reasons for a person to be “incompetent”. None of these reasons are necessary nor are they flexible enough to accommodate all manner of situations. We substitute this term by “capable of understanding” in the sense that was previously explained above.
Having said that, it is to be noted that there are many similarities between the term “competent persons” and “capable of understanding”. It could not be otherwise. The difference is that our concept is much simple and clear and it does not require of artificial rules and regulations.
Offer and Acceptance
Meeting of the Minds
In the current juridical system, in order for a contract to be legal (i.e. valid), people must reach a mutual understanding. In current legal terms this is called a “meeting of the minds”. This meeting of the minds is made obvious by an offer and the acceptance of such offer. However, just because there was an offer and an acceptance, this does not actually mean that there was a “meeting of the minds”.
Because of this flaw in contract theory, contracts may be declared invalid by the courts just because there was no meeting of the minds. For example, two people may sign a vague contract. This vagueness makes so that each person understands something different. Because of this difference, courts may decide that there was no “meeting of the minds” and therefore the contract is invalid.
This is, of course, nonsense. The question is not whether or not a “meeting of the minds” took place. The question is if people signing the contract were capable of understanding it.
We are human beings. As such, we are not perfect. Therefore, no contract will ever be perfect. Therefore, a “meeting of the minds” is a physical impossibility. We cannot reach a perfect agreement simply because all agreements are flawed.
Therefore, the term “meeting of the minds” is subject to interpretation. It is subjective. It is whatever the courts say it is, depending of the circumstances that the courts may review or choose not to review. This is patently ludicrous!
Our definition states that there must be an offer and an agreement. This is a formal requirement that emphasizes the fact that both persons must agree. One person is making an offer and the second is agreeing to it. An offer and an acceptance simply provide evidence that a mutual agreement took place. Nothing more.
There is no further need for “meeting of the minds”. We know that all our contracts will be flawed. Asking for more than an offer and an acceptance is journeying into the realm of the subjectivity and into the hands of “higher authority”, which we totally, utterly and completely reject.
In current law the acceptance of a contract requires that the accepting person notifies the offering person when the contract is accepted. Most of the time, this is done automatically because both people sign both copies of a contract at the same time. What happens if this is not possible? For example, the person making the offer lives in a different continent than the person accepting it. According to current law, a “meeting of the minds” would not have taken place and therefore the contract is invalid. Again, this is just nonsense. The term “meeting of the minds” is polluting legal thinking.
Our right to our body is absolute. Therefore, our right to contract is also absolute. If we choose not to notify the offering person of our agreement, that’s our decision. We have the absolute right to do so. Just because there was no notification, this does not invalidate the contract.
Now, having said that, it is clear that not notifying the offering person is just plain stupid. It will create all kinds of problems. It will make difficult if not impossible for the offering person to fulfill their side of the contract simply because they are not aware that they need to do so. Therefore, we fully expect that in an Absolute Austro-Libertarian system, contracts will specify notification requirements.
Yes, this problem can be solved in this this simple manner without the need of legal rules and regulations.
Bilateral or Unilateral
Current legal thinking classifies contracts in bilateral and unilateral. Bilateral meaning that both persons promised something to each other. Quid pro quo. Unilateral means that only one person promised something to the other. Quid.
This classification is cute but irrelevant. The question is not who promised what to whom, but if there was an offer and an acceptance, a mutual agreement. The content and logistics of that offer and acceptance are irrelevant.
As we stated before, contracts can be entered into or agreed to by behavior. This is another way of saying that by behaving in a certain manner, two people are capable of understanding that they have a valid offer and a valid acceptance. For example, by going to a dentist and receive treatment I agree to pay dentist’s services. It is obvious and intuitive that the dentist will require payment for services. This is a fact that it is implied in my action in going to see a dentist. Therefore, this is a valid contract.
The term “legal capacity” is catch-all bag. It means that a person must be of legal age. It also means that a person can only contract for goods or services to which they have some sort of right. It also means that if they represent other people, they are doing so legally, through some sort of document.
Of course, we reject this term. The term itself is bound to statues and as such to written law, which we do not recognize.
We substitute this term with the concept of “emancipated people who represent themselves or are bound by contract to represent others”
This term of ours is much clearer. A person can only enter into a voluntary agreement if this person is capable of understanding it. The most basic evidence of such capability is the declaration of emancipation. We have seen how emancipation works in the lesson The Rights of the Child. Only emancipated people can enter into voluntary agreements.
However, that is not enough. A person may contract for him/herself; that is our absolute right. But a person can also contract for other people, but in order to do so, these other people must have granted permission to the negotiator. In technical terms, people have granted a privilege to the negotiator. This privilege must be rooted in a contract; otherwise, there is no mutual agreement. If no mutual agreement exists, the negotiator has no privilege to negotiate for other people.
Legal capacity also deals with contracts that seem to be impossible to fulfill. For example, I could contract to turn the sun off. Do I own the sun? No. Therefore, a court may decide that I don’t have the legal capacity to do this. This concept is, of course, nonsense.
As we have absolute rights to our bodies, we have absolute rights to contract for anything and everything we may want. No matter how ridiculous or farfetched the offer may be. This is our right. Of course, it would be immensely stupid to contract for something that we cannot achieve or deliver. In this case, we will be liable to damages for the full extent of the contract.
However, the other option is to have courts decide for us what is or is not contractable, based on subjective rules and regulations. This is not acceptable because contracts are nothing more than economic transactions. As such, they are inherently subjective and the only people that are qualified to make a decision about them is the people actually negotiating a contract. Judges cannot read minds or place themselves in the exact position as negotiators are. This is simply impossible. And so, courts developed the doctrine of a “reasonable person”. They attempt to look at the problem from an “average” and “reasonable” person point of view. This is, of course, ridiculous! Average and reasonable people do not exist. All transactions are subjective and unreasonable to all people except negotiators.
Intention to be legally bound
This is yet another useless legal concept. In the current judicial system there are presumptions as to the intentions of the contracting people. One such assumption is that negotiators intended for the contract to be legally enforceable. In other words, the courts assume that most contracts delegate enforcement decisions and authorities to them.
This is, of course, ridiculous! What a preposterous supposition! The courts are pretending to be able to go back in time and insert themselves into the minds of the negotiators. This process allows the court to examine the intentions of the contracting people and determine that they have indeed assumed that courts may enforce the contract. Ridiculous!
In an Absolute Austro-Libertarian system, there is no need for such preposterous assumptions. All contracts can be enforced in many ways without the need for a judicial system. We have seen this in our lessons Justice in the Austro Libertarian System.
There is no need for such assumption at all.
These are goods or services of any kind (something of value) that are exchanged during a typical contract. I give you money and you give me chewing gum. You give me a sandwich and I give you a beverage. I give you money and you stop smoking it my front lawn. Consideration is something that both contracting people deem of sufficient value to exchange.
How about adequacy of considerations? The judicial system has many rules and regulations to determine if a consideration is “adequate” or not. This is, again, ridiculous! The only people capable of determining if a consideration is “adequate” are the negotiators. A contract is an economic transaction and as such, subjective to the actors of such transaction. Looking at contracts from the outside and trying to determine if something is “adequate” is simply impossible. Not to mention the fact, that we have the absolute right to contract. So, if I accept “inadequate” consideration in a contract, this is my business and my business alone. Courts have no right to interfere. If my judgment is bad, this is entirely my fault.
There could also be a valid contract without the need for considerations. For example, we agree to meet at 8PM in the park. This is a valid contract but there is no consideration. For a valid contract to exist, consideration is no necessary.
This is another nonsensical judicial rule. Considerations are to be exchanged after a contract was signed and not before. Considerations are invalid if there are previous agreements. Considerations are invalid if they cover legal duties.
For example, in the early English case of Eastwood v. Kenyon , the guardian of a young girl took out a loan to educate her. After she was married, her husband promised to pay the debt but the loan was determined to be past consideration and the husband did not have to pay. This is obviously ridiculous. Both parties entered into a valid contract. The judiciary invalidated such a contract based on a theory.
Another example. A captain promised to divide the wages of two deserters among the remaining crew if they agreed to sail home short-handed; however, this promise was found unenforceable as the crew were already contracted to sail the ship. This is, again, stupid. Although the crew was already contracted to sail the ship, the implied contract also specified that they will have a full crew. However, going beyond this technicality, the main point is that both sides of the contract reached a valid agreement because it fulfilled the minimum requirements for a contract. Yet, it was set aside by courts.
Last example. A person points a gun at me and promises not to shoot if I give them my money. If I accept, is this a valid contract? The courts say no because this person has a previous legal obligation not to harm me. This is, again, ridiculous. If I accept, it is most certainly a valid contract. The trick is simply not to accept but not to oppose either. I always have the choice to say no and still save my life by cooperating. Cooperation is not acceptance. The Maser Contract is not a suicide pact.
Mutuality of Obligation
The most common understanding when contracting is that one person will give something of value to the other person. In other words, one person is obligated to the other person and vice versa.
In typical contracts this is true. However, there are contracts where no considerations are exchanged. Is this requirement still valid? Yes. Even when there is no consideration both people have agreed to something, This “something” is an obligation.
For example, we both agree to meet in the park at 8PM. No consideration has changed hands, yet, there is an obligation to be in the park at 8PM.
Obligation does not necessarily mean consideration. It means an agreement on something. If mutual obligations would not exist, then there is no need for a contract since both people already have what they want.
Note: please see the Glossary if you are unfamiliar with certain words.
Continue to Contracts Are The Key To Coexistence - Part 3