An essential part of the contracting process is the confirmation that all parties involved have the right to give consent. This is called the “ability” to complete the contract. Capacity is never attributed to certain groups, including minors or adults with developmental disabilities. Other parties may only have the capacity to do so in certain circumstances. A company can enter into a contract if it can prove that it is a true legal entity and that the person who will sign the contract is the signing authority of the corporation. Without these elements, an agreement may be considered void or voidable. Contracts may be concluded in writing or orally. Most companies tend to use written contracts because they are easier to consult later. Written agreements are also less ambiguous, making them easier to enforce. It is questionable whether the law (especially in a liberal state) should impose moral duties associated with the payment of promises. The economic approach of contract law focuses on the roots of the promissory note of the contract and instead situates the justification of the law in the general welfare: the rules of contract law allow for socially productive dependence on promises and mutually beneficial exchange.
This approach is more important among academic lawyers than among philosophers and is widely considered, at least in the United States, as the leading interdisciplinary approach to contract law. A contract is considered binding when all parties sincerely agree to the terms. True consent is only possible if the parties involved understand what the agreement means, including what they need to receive and do. Courts often use the “doctrine of the four corners” when considering a contract dispute. Principles of contract law generally require the parties to include all conditions and considerations in the “four corners” of the document. Contracts do not need to be in writing, but if they do, courts will generally not consider external factors when interpreting the contract itself. Instead, the courts will only look at what was contained in the written contract, or in the “four corners.” Finally, normative assumptions from the economic point of view have been criticized. Dworkin (1975:1061) argues that judges should decide bilateral disputes on the basis of the established rights of the parties and considerations of interpersonal equity, while the development of rules based on the common good should be left “to the political system of representative democracy.” The economic approach seems to ignore these limits of judicial authority. Another normative critique (which is discussed more broadly in the entry on economic philosophy) aims at the definition of well-being, which animates work in this field. Economists tend to equate party welfare with preference gratification, while inferring the strength of preferences based on willingness to pay. This approach distorts efficiency measures in favour of the rich, as willingness to pay is sensitive to basic equipment (Liscow 2018).
In contractual exchanges, an approach to maximizing preferential satisfaction is at least more or less constrained by the Pareto criterion (an outcome is considered a Pareto improvement only if it is preferred by at least one person and rejected by a person), since both parties must agree to each contract before it becomes enforceable. But again, the equivalence between preference satisfaction and well-being remains open to criticism because it is based on an impoverished representation of the social good (Radin, 1987; Murphy, 2014; Mullen, 2016). A more detailed look at teaching is the explanatory challenge. For example, the law does not allow contracting parties to avoid liability by giving advance notice of a breach (for “early rejection”, see Hochster v. De La Tour (1853)). Contractual obligations are imposed notwithstanding a promisor`s attempt to deny his promissory note intent and the promisor`s reasonable confidence immediately after an obvious promise (see Lucy v. Zehmer (1954)). In general, the damage-based view has difficulty explaining why the law imposes liability, even if there is no cost of confidence to the promise or if the promisor is known to be unreliable. In CBS Inc. v. Ziff-Davis Publishing Co.
(1990), the seller of a business, substantiated certain claims relating to the profitability of the business. The buyer confessed, after an independent investigation, that it did not believe that the justified statements were true. The court held that the buyer`s lack of faith and confidence in the veracity of the secured information does not relieve the seller of its obligations under the warranty. Such judgments are prima facie confusing from the damages-based point of view. The second part of this article examines the questions of philosophy of language (according to meaning and interpretation), philosophy of action (metaphysics of intention) and moral and political philosophy (freedom and distributive justice) as they arise in contract law. §2.1 deals with works that provide philosophical tools to questions of contract interpretation. §2.2 examines the notion of freedom of contract through the prism of established doctrine and philosophical works on autonomy. §2.3 examines how the pairing of orthodox contract theory with modern doctrine creates a mystery about the nature of contractual intent. Finally, § 2.4 deals with questions of distributive justice raised by private exchange. Shiffrin and others cited deviations from the morality of promissory notes as reasons for legislative reform.
However, since theoretical work in this area is based on the assumption that it is worthwhile to treat the normativity of contract law on its own terms, there is reason to want a theory that is not too revisionist. While contract theory as a promise is explainably powerful and morally appealing, its relevance ultimately depends on its ability to plausibly explain the tensions it perceives in contract law, an issue that remains largely unresolved.