Fundamental Policies and Values of Contract Law
Introduction
While a course on contract drafting may seem dry and technical, there are a
number of strongly held ideological values underlying contract law and its rules
are motivated by conscious and deliberate public policy. Understanding these
policy themes can help a practitioner appreciate the goals and assumptions
underlying the legal rules involved in drafting contracts.
Freedom of Contract
The power to enter contracts and to formulate the terms of contractual
relationships can be regarded as an integral part of personal liberty. For instance,
this respect for the exercise of personal liberty is the policy reason underlying the
rule in contracts that one may not be bound to a contract absent that person’s
assent. In the United
States, the power of contracting is understood to be one of the innate rights
originating in the people and guaranteed by the Constitution. Liberty of contract
also enforces individual rights to hold and deal with property. Like other liberties,
freedom of contract is limited by corresponding rights held by other persons and by
the state’s legitimate interest in appropriate regulation. Such regulation may be
directed, for example, at protecting weaker parties from the free exercise of
overwhelming contractual power by stronger dominant parties. The ideological
basis of contract freedom is reinforced by economic principles, as well. For
example, economic intercourse is most efficient when its participants desire it and
are free to bargain with each other to reach mutually desirable terms.
Morality of Promise
There is also a longstanding moral dimension of contract in law: that there is
an ethical as well as legal obligation to keep one’s promises. Thus, contracts
should be honored not only because reliability is necessary to foster economic
interaction, but simply because it is morally wrong to break them. Although it
often seems that the role that this basic moral value plays in contract law is subtle,
society and courts are not indifferent to the ethical implications of dishonoring
contracts—especially in the case of deliberate breaches that are motivated by bad
faith.
