hi folks and welcome back to contract a videos this week is week one and we are looking at theory and before I hear the groan and see the pain to look in your face I actually think there is a really useful thing to look at first up it's a kind of nice bookend for your degree program because we take a little a very tentative look at theory today just dip our toe into to the water so to speak and but then you follow up on theory much more index and in a far more satisfactory fashion in jurisprudence so you kind of just a little tiny bit now and then you really look at the whole thing in detail much much later but today it's really just an entree into theory as it were so without further ado let's have a look at Prezi for this week so first thing we're going to have a little look at theory and its role for us as squares and then just two more I guess thought bubbles at the end of this week's video and they are basically one okay where does that leave us where is contract law in the grand scheme of the legal universe and secondly a little bit more nuts in multi if that's a phrase what's the roadmap for us in contract law how will these two units meld together what are we gonna get out of it at the end of the day okay let us look at theories okay so see I have posted a little teaser on Moodle and Facebook for you proposing that theory was in fact a waste of time it was a little facetious of me because I actually don't think there is a waste of time and neither does the lp IV or the lack the stand bodies that require us to look at the content in a law degree theory is actually required as part of contract law and it makes sense as I said just before not just in terms of looking at a little bit of theory now and a lot of theory later in jurisprudence but there is a sound reason why we need to look at theory in contract law now before I hear you say okay we've got to push through this I actually think theory is well that can help louder than I thought and I actually think theory is a pretty interesting part of contract law and it's part of what feeds in at the really pointy end of things when judges are having a hard time and for that reason it's useful as a kind of comfort blanket for judicial decision-making in times of perhaps stress so before we push into theory let's have a look at what makes good theory okay so for those that have had a little look at the nice PowerPoint that I've put up on Facebook I'll pop it I thought so on to Moodle for you it's just it's not essential reading or anything like that it's just a little set of PowerPoint slides that I found on the web that help us think a little bit about what theories and what theory does basically there are a whole lot of super complicated and seemingly random phenomena out there in the world and the nature of human beings is to try and make sense of it all somehow how do you make sense of a problematic possibly and seemingly random cluster of events or phenomena things and theory is like a system of ideas or a framework that helps us kind of rationalize and workout to understand what's going on in amongst all of these little disparate factors events things now technically theory in terms of the scientific disciplines tends to exhibit certain factors that we should think about so if it's gonna be a theory it has to be falsifiable that is you should be able to prove that theory false and that is what what scientific theorists try to do they come up with a theory they say this could be a possible explainer for what's going on and then they pitch cricket balls at it until it falls over okay now once it's fall over obviously it's been disproved and you've got to come up with a new theory to try and explain that set of events okay if you can't disprove a theory then it's not really a theory because the theory is gonna be either true or false so far as scientists are concerned okay so if it can't be disproved it's really a philosophy okay and I think that's probably technically where you put most legal theory but anyway in terms of theories what are the good qualities that you should have in a theory it should be simple okay there's no point coming up with this ladder that has 53 steps just to get up 10 centimeters okay you want something that's nice and simple three steps and you there okay or two or one even better you want to have very few internal contradictions in terms of your theory it should logically proceed according to its own terms okay it should be verifiable and that's the flip side of the falsifiable point it should be elegant okay symmetrical simple accurate if you can combine all of those factors together you've got something that's fairly beautiful I equals mc-squared for example should be as general as possible to encompass an explanation for as many of those disparate things as possible it should have few or no anomalies so things that don't fit into the theory okay the goal and that leads me to this point is the explanatory power of a theory how good or how not-so-good does a theory actually work to explain what it purports to explain if you're going to have a whole heap of exceptions to that theory then it hasn't got a whole lot of explanatory power what social scientists would call explanatory power so as I said before legal theory probably doesn't cut the mustard so far as scientists are concerned anyway they would probably call it philosophy or it's been called a whole heap of other things rational reconstruction philosophical foundations constructive interpretation so legal theory when you think about legal theory it's not really theory at all but it's as bad as close as lawyers get anyway to the scientific game of theorizing right so what makes theory relevant to us what makes it exciting that's probably overstating the case what makes it interesting for us as contract lawyers there's a couple of reasons why firstly it's just a generally satisfying intellectual exercise it's what humans do we'd like to make sense of things and if we can see patents in a whole heap of otherwise disparate events then it kind of makes us happy [Music] from all of that from generally adding to our happiness it's particularly useful for contracting lawyers because a contract law unlike other areas of law like law or criminal law that predominantly rely on legislation for legal authority contract law relies on the common law and the common law or judge made law rather than Parliament made law it's all about the system of precedent the doctrine of precedent one case following another case and following another and another and another now generally speaking a case will only really be bound to follow precedent if there are similar enough facts to warrant the similar principles being applied okay but what about those hard cases the judges encounter where the facts aren't terribly similar or you have a completely novel set of facts or no circumstance that means that the previously developed body of principle doesn't squarely fit with what's going on in this particular case and in those kinds of situations you will often find judges searching around and looking through theory to try and assist them in their judicial decision-making and that's precisely where we see Dorkin and more kind of pitching their arguments about you know the analogies that you can make in terms of theory and what judges do there's a nice little tussle presently going on in the UK courts with Mr Justice Liggett in the High Court and fairly openly embracing relational contracting principles being beaten down occasionally but popping up to give the whole thing a go again I put up a couple of articles for you in case you're interested in that we'll look at relational contracting later on in this video it's is theory is part of what can assist us as lawmakers as lawyers that are interested in contract law in terms of keeping the doctrine consistent and logically compelling so that's my best pitch as to why theory is interesting for us or should be perhaps you can tell me if I've convinced you at the end of the video you can argue with me in the zoom and the first theory I want to get our collective heads around is the classical theory this is the big many myths that we need to confront because it is and has been dominant for about 150 years now the contract basically represents the will of the parties so this theory runs we need freedom of contract with minimal state intervention the rationale for the classical theory is it will do better if we bargain for ourselves and pretty much the state leaves us alone okay margin for ourselves we do what we want what we will the background obviously is it's very heavily tied into the world theory and economic theory and given that economic theory has been so influential pretty much since the 80s it really does mean that this classical contract theory is very very heavily entrenched in legal minds and particularly in terms of judicial decision making rose to prominence late nineteenth century England liberal individualist Theory so the hallmarks here are individualism self-reliance and exercise of free will over state intervention why is it important obviously contract doctrine thirty days were in the 1850s onwards in England and that was precisely the time that the contract law was imported into Australia from England in terms of our settlement and it still continues to be a very heavy influence on Australian law making to this day one of the hallmarks contracts are an exercise of individual free will as I said before what makes contracts binding is because the parties have freely of their own volition entered into those particular arrangements so they've taken on those arrangements because they want them alright they've been freely bargained for there's a little bit of an economic undertow creeping in there they've been freely bargained for they represent economic optimism so basically the world would all be a better place if we had contract law representing a balance between the will of the many the good of the many so utilitarianism kind of focused and purely rational self maximizing activity so pure opportunists at one end and all trusts at the other end contract law is kind of this the middle of the seesaw okay and and where we should give as much free rein to free will as we can and as little state intervention as we can and that is where contract law should sit it involves freedom to contract that's your free will component and it also involves freedom from contract that is having obligations imposed on you by the state okay freedom to contract freedom from contract freedom the criticisms leveled against the classical contract theory well many over the years but predominantly the very fundamental issue is that not all terms nor or contracts actually themselves are a result of a freely bargained negotiated position reflecting the will of the parties okay there will be cases where courts need to use objective tests when they are assessing what the will of the parties is and those objective tests are seen in things like where a court is trying to work out whether a contract has been formed they don't actually try and forensically discover what the subjective intent or will was of each of the parties involved but what they do is they look at the the situation from a bystanders quite a few and they say what would the reasonable person conclude after looking at all of the facts of this particular case what would a reasonable person say has a contract being formed or not in terms of looking at the content of a contract what the terms say how the terms should be construed again a objective point of view will be taken by the court what was objectively agreed how did the parties seem to indicate to a third party what they have agreed in this case oftentimes also there are lacunae what a great word in contract terms there are things that have been left out or omitted here a court will have to work out what the actual content of a contract is and I'll have to fill the gaps how do they do that by implying terms once again the court then needs to work out well what would the parties have intended in this particular case so implied terms there is a whole stack of principles that go with implied terms and we'll look at that later on in the term here and contract law eh the other problem with the classical contract theory is that not all contracts are freely negotiated and obviously all of us enter standard form terms and conditions pretty much almost every day where you are looking at buying something from any party pretty much that has corporate power phone contracts internet contracts even buying a car of getting financed mostly the ball is out of your hands when it comes to negotiating terms you will be presented with a contract you might read it you might not you might just sign on the dotted line obviously there's no negotiation that goes on there it's pretty unlikely that that particular contract is going to reflect your will apart from the end game of what the contract actually achieves for you and that is what you're getting transferred to you under that contract there will be an asymmetrical power relationship there and that's largely swept under the rug so far as the classical contract theory is concerned so the people that generally tend to pick apart this theory in terms of the standard form issue asymmetrical power dynamics issue would be people like the critical legal scholars that you would have read in Patterson the state obviously also doesn't really leave us untouched and give us complete free rein to trick ourselves so far as setting contract terms guys there are limits to what you can do and public policy often steps in to do things like striking down offensive terms in contract B you look at penalty clauses the imposition of penalty damages where one party is trying to bind the other party in to contractual form at performance in terrorem so they'll include terms like you know you'll pay me one trillion dollars is that even an amount in damages if you breach this contract and penalty clauses like that the state in the courts will just say sorry no we'll just strike that down it's offensive people shouldn't be allowed to do that stuff the bottom line and that segues nicely one of the principal criticisms is of classical theory is that it tends to leave out ethics and the role for things like public policy it's kind of out of the picture here and that's largely as a result of you know if you think about it where is this theory grew out of a very liberal individualist kind of aligned theory you've got to give the parties what they want in terms of enforcing their will you look at a contract with that goal in mind what's on the paper that's what reflects the will of the parties that's what we should enforce there are some holes in it but there are in most contract law theories so that's the classical contract theory that's where I'll leave it this particular video for week one and hold that thought we'll come back to part two and we'll look at promise Theory thanks guys