Contract as a Transfer of Ownership

Abstract

All agree that contracts are, and must be, voluntary transactions, in this way differing from transactions that come under the law of tort or unjust enrichment. Unless an agreement is voluntary on both sides, it cannot be binding and so cannot be a contract at all. Voluntary interaction is the essential basis of obligation in contract. Understanding the voluntary character of contract would therefore seem crucial to clarifying its moral basis as well as its distinctive place within private law. But what makes an agreement voluntary? Most would root the voluntariness of contract in the fact that it arises through the parties' consent. Contract is essentially consensual and in virtue of this it is voluntary. So, for example, Samuel Pufendorf begins his classic discussion On the Consent Required in Promises and Pacts with the proposition, which he presents as self-evident, that no more pertinent reason can be advanced, whereby a man can be prevented from complaining hereafter of having to carry such a burden [of the necessity of doing something] than that he agreed to it of his own accord, and sought on his own judgement what he had full power to refuse. (1) The question is what, if any, conception of consent can function as the essential basis of contractual obligation. I have put the question this way because what we are seeking is a unified and coherent moral basis for contract. It is the central question that I address. The legal point of view itself supposes that a certain sort of consent is pertinent to contract law. We begin with this, because our aim is to elucidate and to justify a conception of consent that is at least implicit in the widely recognized principles of contract law and so part of our public reason. Now the sort of consent that is supposed by contract law is one that is necessary and sufficient for contract formation and therefore for the establishment of a relation of right and duty between the parties at the moment of agreement. The relation of right and duty arises through the parties' mutual expressions of assent, prior to and independent of the moment of performance. From a legal point of view, no new rights or duties arise between the parties after formation, whether by performance or by breach. The contractual rights and duties between the parties are completely specified and determined at formation. Performance adds nothing new but is just the fulfillment of the rights and duties established at contract formation. More precisely, performance respects those rights whereas breach injures them. The character and shape of these rights is reflected in the fact that they are specified only as between the parties, not against others who are strangers to the contract, and that their breach is remedied through damages or specific performance, both of which aim to put the plaintiff in the position he or she would have been in had the defendant performed as promised. The law supposes that these remedies are necessary and sufficient to enforce, by way of compensation, the rights and duties that are brought into existence by the parties' consents at contract formation. All this seems relatively clear and uncontroversial. To see that it is not, I turn to the celebrated essay by Fuller and Perdue, The Reliance Interest in Contract Damages. (2) I. THE FULLER AND PERDUE CHALLENGE In their article, Fuller and Perdue begin with the long-established legal principle that the normal remedy for breach of contract is either damages or specific performance and that in giving such remedy, the law aims to put the plaintiff in the position he or she would have been in had the contract been performed. (3) The law takes this expectation principle to be a principle of compensation and, as such, to be a just and ruling principle. (4) This is precisely what Fuller and Perdue challenge. They write that contract remedies give a plaintiff something he never had. …