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CONTRACT THEORY

There are many theories about contracts. They try to answer many questions, from logistical (how should they work) to critical (why should they work). However, the most important one is this: why should contracts be enforced?

There are several answers depending of which theory you ask. Namely:

  • Because there are economic benefits in enforcing bargains.
  • Because promises  must be enforced.
  • Because you must pay damages if you do not keep your obligations.
  • Because there is a trust relationship between contracting people.
  • Because it is a means for the bourgeois rulers to oppress the workers.
  • Because it minimizes contract breach costs.

And many others. Pick one, or two. Makes no difference. They are all wrong.

The truth as to why should contracts be enforced is none of these. The answer is much, much simpler. Contracts are the basis for coexistence. The existence and enforcement of Contracts is what makes coexistence possible. Without enforcing contracts, no agreement is possible because we do not trust each other. It is in our nature. It is survival pure and simple. It’s our genetic “me first” impulse. If no agreement is possible, then, there is nothing from stopping us humans to tear each other apart. It is that simple.

The rest, the economic and social benefits, are nothing but side effects. Positive side effects, true, but side effects nevertheless.

 

CONCLUSION

When we began this lesson, we warned you that this one would be long. We have kept our promise. However, if any, this is the most important lesson of them all. Without contracts, civilization cannot exist. Without civilization, coexistence is not possible. Without coexistence, freedom is not possible.

In the end and at the most very basics, we have that:

CONTRACTS = FREEDOM

It is that simple.

Because we are Absolute Austro-Libertarians, we also wanted to make a more practical point and we believe we did it. This point is simple. We can achieve everything that current contract law can, and far more, without the need for any contract laws. Within an Absolute Austro-Libertarian framework, self-interest does all the work while at the same time enhancing freedom.

The message is clear. We don’t need laws. Laws are redundant and obsolete. Laws impose inherently subjective rules and regulations from a minority to a majority of people. As such, laws are unjust and unfair. Only people contracting freely can determine, one person at a time, what’s just and fair for each one of them. Nothing more is needed.

In the end we could also say that:

Freedom To Contract = Power!

Note: please see the Glossary if you are unfamiliar with certain words.

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