Overview
This lecture covers two contract law theories—promise theory and consent theory—exploring their core principles, critiques, and how they explain the formation and enforcement of contracts.
Promise Theory
- Promise theory centers on the principle that individuals are morally obligated to keep their promises.
- Contracts arise from voluntary promises between parties, not from state imposition.
- The theory draws from will theory and emphasizes the freedom to contract.
- Contract terms should be interpreted based on what was explicitly promised, minimizing court-imposed terms.
- Morality underpins the theory, with obligations binding because individuals "ought" to honor commitments.
- Freed describes a moral spectrum: respect → trust → communication → promises, amplifying moral obligation at each step.
- Critics argue the theory enforces virtue, questioning why the law only enforces promises with consideration.
- Another criticism is its limited explanatory power when parties’ intentions or promises are unclear, requiring courts to fill gaps.
Consent Theory
- Consent theory views contract law as a system for transferring rights based on the owner's consent.
- It originated in the 1980s, with Randy Barnett as a leading proponent.
- The theory emphasizes that rights ownership is fundamental—one must have rights to transfer them through contracts.
- Consent must be objectively manifested, not just subjectively felt, to be legally valid.
- The validity of a contractual obligation depends on clear, outward evidence of consent.
- It addresses the issue of implied terms by arguing that parties indirectly consent to default rules.
- Critics highlight issues when genuine consent to all terms is unclear, especially with unread standard terms or unexpected conditions.
Key Terms & Definitions
- Promise Theory — The view that contractual obligations arise from voluntary, morally binding promises between parties.
- Consent Theory — The perspective that contracts are valid based on the owner’s objective manifestation of consent to transfer rights.
- Consideration — Something of value exchanged between parties, required for contract law to enforce promises.
- Implied Terms — Contract provisions imposed by courts to fill gaps when the parties' agreement is incomplete.
Action Items / Next Steps
- Prepare for discussion/debate on the strengths and weaknesses of both promise and consent theories.
- Review assigned readings on contract law theories for the next class.