Page 99 - Berkshire Encyclopedia Of World History Vol Two

448 berkshire encyclopedia of world history

Contract Law: A Brief Overview

Contracts are promises between two parties that are law, as well as by private law. Private law principally
legally enforceable. The law provides remedies if a includes the terms of the agreement between the par-
promise is breached (not honored) and recognizes the ties who are exchanging promises. This private law
performance of a promise as a duty. Contracts arise may override many of the rules otherwise established
when a duty does or may come into existence, by state law. Statutory law (in the form of codes) may
because of a promise made by one of the parties.To require some contracts be put in writing and executed
be legally binding as a contract, a promise must be with particular formalities. Otherwise, the parties
exchanged for adequate consideration.Adequate con- may enter into a binding agreement without signing
sideration is a benefit or detriment that a party a formal written document.The Uniform Commercial
receives which reasonably and fairly induces them to Code, whose original Articles have been adopted in
make the promise. For example, promises that are nearly every U.S. state, represents a body of statutory
purely gifts are not considered enforceable because law that governs important categories of contracts.
the personal satisfaction the grantor of the promise Contracts related to particular activities or business
may receive from the act of giving is normally not sectors may still be highly regulated by state and/or
considered adequate consideration. Certain prom- federal law.
ises that are not considered contracts may, in limited On an international level, in 1988, the United
circumstances, be enforced if one party has relied to States joined the United Nations Convention on
his detriment on the assurances of the other party. Contracts for the International Sale of Goods that
In the United States, contracts are governed pri- now governs contracts within its scope.
marily by state statutory and common (judge-made)
Benjamin S. Kerschberg

substantive contract law.This customary law was closely Roman law considered “like” contracts (obligationes ex
bound to the social structures of each society: the Confu- quasi contractu), such as the giving of gifts, to be a source
cian familial and clan hierarchy in China and the feudal of legally binding relationships. Even in modern business
system of traditional Japan. In China, the Confucian practice, as Stewart Macaulay has observed, contracts are
ideal of the family, which dictated strict obligations less a means of regulating exchange than a method of
between individual family members, relationships of building relationships, and a breach of contract is a seri-
whole family units to each other, and to the society as a ous break which “often results in a ‘divorce’ ending the
whole, superseded any individual contractual relation- ‘marriage’ between the two businesses, since a contract
ships. In other words, contractual relationships were action is likely to carry charges with at least an overtone
bound first by the Confucian system, and only secondar- of bad faith” (Macaulay 1963, 65).
ily by the individual agreement. Traditionally in China,
recourse to the courts was considered the very last resort The Economic Functions
in a contract dispute; arbitration was almost always of Contracts
preferable, because an irresolvable dispute signified a The English legal scholar Henry Maine wrote that a shift
small breakdown in the traditional Confucian order. Sim- from “status to contract” was fundamental to the creation
ilarly in Japan, contract disputes were almost always sub- of modern social and economic systems (Maine 1917,
ject to mediation, except that where in China the family 100). In other words, modern (i.e., Western) legal sys-
or clan formed the basis of arbitration, in Japan the feu- tems, contractual relationships, and economic systems
dal village more than the family was the operative unit. In depended on the social equality of the parties, the abil-
the West, contract law formed part of a broader law of ity to freely enter into exchanges, and the confidence the
obligations which similarly defined social relations. The law would enforce these exchanges. In ancient Greece,
intricacies of the Roman system of patronage meant that by comparison, although Athenian contract law allowed