In this section, we will address the issue of valid contracts versus invalid contracts. Today, in the legal, judiciary system, there are ways to invalidate contracts. There are all manners of rationales and excuses allowing judges to throw contracts away or to decree that certain conditions can be ignored. Judges, not contracting people. Strange, isn’t it? That contracting people have no saying in it. But we digress…
The point we will be making is that all those justifications are legalisms and technical juggling that only complicates matters and makes sure judges don’t lose their jobs. Job security through legal monopoly and designer complications. Nice. Where do I sign to get such a job? Never mind.
In an Absolute Austro-Libertarian system, none of those complications are necessary. The distinction between valid and invalid contracts does not exist. As we own our bodies absolutely, we also have absolute rights to contract. Once the contract is agreed upon, there are only three possible outcomes: either the contract is fulfilled, the contract is broken or the contract is re-negotiated between contracting people.
None of this valid vs. invalid is necessary. None of this judicial mumbo-jumbo is required. Don’t believe us? Please keep reading.
This is when involuntary errors are found in a contract. According to the current judicial system, mistakes can be classified as:
- Mistake of Law: a contract was written with terms that go against a law. In this case, mistakes affect the contract and may make it void.
- Mistake of Fact: it is when a critical element of the contract is misunderstood. In this case, the contract is void.
In term, Mistakes of Fact can be classified in:
- Unilateral: one party made a mistake. In some cases, particularly with calculations, the contract can be dismissed.
- Mutual: both parties make a mistake about one key element of the contract. The contract may be void.
- Common: both parties hold the same mistaken belief of contract elements. The contract may be void.
In each one of these categories and sub-categories, there are sub-sub-categories, further divisions, modifiers, and many other so-called legal principles, and rules.
Does it sound ridiculous to you? Of course! It is.
There is no need for all this pyrotechnical display of legal techno babble.
The facts are simple. There is a mistake in a contract. Contract parties may choose to:
- Fulfill the contract, if they agree that they can live with the mistake
- Break the contract, if one party feels that it is detrimental and prefers to pay damages
- Re-negotiate the contract, in which case we are back at the core of Absolute Austro-Libertarian thinking, which are voluntary agreements.
There is absolutely no need whatsoever to let a judge set aside either a contract or a contractual condition, based on existing rules and regulations. A contract is an agreement between people, and such an agreement does not include a judge. It is ridiculous to inject an artificial higher authority into a private affair between people.
This is when a law limits a person or organization from contracting freely. There are many types and classifications of “incapabilities” Some of them are:
Infants or minors
The definition of when a person becomes and adult depends of the jurisdiction. Apparently, people become more responsible and intelligent at different speeds in different parts of the globe. Also, in some jurisdictions, minors can enter into agreements while in others, even if they do, the contract is automatically void. Or, there are special rules and regulations defining what may or may not be done in each case and under which conditions they may be applicable.
This disgusting mix of ideas, concepts and subjective points of view is beyond credibility. It is just plain stupid, as it cannot be otherwise, originating from government bureaucrats.
In an Absolute Austro-Libertarian system, the issue is quite simple. Until the time where a child becomes emancipated, the child does not consider him/herself capable of assuming autonomy. Therefore, the child is not capable of understanding contracts. Therefore, any contract that a child enters before emancipation cannot be enforced against the child because it is not a voluntary agreement. In other words, there never was a contract to begin with. Period.
However, enforcement does not mean logistics or practicality. In real, day-to-day life, a child may operate as if a contract exists. For example, a child may go and buy bubble gum. The shop owner may accept money from the child and give one bubble gum to the child. This act is not prohibited, it is just not enforceable. The shop owner cannot demand money from the child and if challenged, the shop owner must return the money. It is entirely up to the shop owner, an emancipated person, to determine if the risks involved in dealing with children are worth or not.
This is probably the only case where the Absolute Austro-Libertarian system approaches the Democratic system. In the latter, a person with insufficient mental capacity cannot agree to a contract and, if it does, the contract is void.
In the former, since this person is incapable of understanding the terms of the contract, even if a contract is signed, there is no contract. This is so because a voluntary contract requires capacity to understand it. Therefore, such a signed contract is not a voluntary contract and as such, it is not a contract at all.
The difference between both systems is that in the Democratic system a person could be declared mentally incapable. This declaration is a blanket judgment that prevents this person from all contractual activities. In our system, capacity is determined on a case-by-case basis. This is common sense and real life.
For example, a person with diminished mental capacity may not be able to understand all the intricacies of purchasing a house, but this person is perfectly capable of going grocery shopping.
Temporary diminished capacity
These are situations where for one reason or another, our capacity to understand a contract has been diminished. For example, temporary insanity or influence of psychoactive substances.
Different laws in different countries have different philosophies to this regard. Some will allow a contract signed under such conditions to be repudiated, but most won’t. The legal excuse for self-induced conditions is that those conditions were self-induced. Yes, it is a circular argument and it makes no sense whatsoever. Never mind. Who said that the law makes sense?
This is all rubbish, of course. In the Absolute Austro-Libertarian system the question is simple, did a person under diminished capacity had the capacity to understand the terms of a contract? Yes or No. If the answer is yes, then the contract stands. If the answer is no, then there is no contract because it is in-voluntary, and as such, a non-contract.
This approach is much more balanced. There is no black or white answer. It is a gigantic gray area that matches human behavior. The Absolute Austro-Libertarian system reflects life, not arbitrary and theoretical legal arguments.
If a person is incapable of paying off debts, this person becomes bankrupt. Under such conditions, many countries around the world limit the capacity of this person to contract.
This, again, is ridiculous! One fact has nothing to do with the other.
In the Absolute Austro-Libertarian system, although a debtor has lost all its rights (except exemption from slavery) to the debt holder, it has not lost anything to other people. This person is still fully capable of entering into contracts with other people. One thing is unrelated to the other. It is up to other people to figure out if it is a good idea to contract with a bankrupted person.
Furthermore, the Master Contract encourages the debtor and debt holder to reach a voluntary agreement as a means to settle the debt.
What happens with organizations? How are their capacities defined? Throughout the world, different countries limit their capacities in different manners.
Corporations’ capacities depend of jurisdictions, but the general rule is that anything beyond the constitutive documents is not enforceable. For example, if a company was created to manufacture dog food and it signs a contract to act as a financial advisor, the contract is not enforceable.
Unions are limited to issues related to union activities.
Insolvent corporations or business may not contract or have their contractual abilities limited.
Again, this is nonsense.
In an Absolute Austro-Libertarian system, one contract or condition of an organization is totally unrelated with any other contract. It is up to people wishing to contract with such organizations to determine if it is a good idea to do so.
Note: please see the Glossary if you are unfamiliar with certain words.
Continue to Contracts Are The Key To Coexistence - Part 5