I did not fall in love with contract law when I studied it in second year of my Bachelor of Laws. I was too young (20 years old) to care about the simple intentions of a body of law that exists to ensure people in society honour the bargains they make.
Contract law in Anglo-American jurisdictions has its roots in the seventeenth century and the birth of the British Empire. It started evolving around the same time as the trading company1 to facilitate international trade.
Its simple task is to provide certainty to commerce by providing a mechanism that enforces parties to a bargain to deliver promises made.
Prior to the birth of international trade and the company, if you had goods or services to trade you would likely interact directly with a person you had a personal relationship with. In these instances social bonds were presumably adequate to the needs of society.
But in the eighteenth century banks began to emerge with capital to deploy. Capital can work more efficiently if its owner can utilise it in many more places without the burden of managing all the business operations. So the company evolved to separate ownership from operation: the banks (and its debtors) owned the business; people were employed to manage the business; and contract law developed to ensure everyone did what they promised to do.
I did fall in love with contract law when I started practising law as a twenty-something at a commercial law firm. The lessons of the text books were grounded in the practicalities of trade and commerce then. I was older too, and more available to the glorious language of consideration, obligation, indemnity, repudiation and liquidated damages.
But most deeply I learned that contract law is beautiful because its a manifestation of humanity. That a bargain or promise made in good faith between people of equal standing should be honoured. I recognised that contract law exists to facilitate transactions between people2 in a society slowly but surely becoming more separated from the ties of social bonds.
Another side to contract law
For several years now I have operated my own business and I now know another side to contract law. The side in which it doesn't matter what's agreed unless you have the power to enforce it: perpetual negotiation.
My company has had back-and-forth discussion with clients regarding accounts receivables previously. We've developed policies to protect our interests. But I've never experienced a company or principal unapologetically ignoring the terms of an agreement because it could.
Recently we entered into a contract with another company to provide services for a fee. The terms were stated and agreed in writing and over several weeks we performed our obligations. We received positive (glowing) feedback during our interactions and we invoiced for payment. At this point, the client said (I'm paraphrasing) "we're done with you, we're moving on from this relationship and we're not paying you what we agreed because we can't afford to do business with you".
It's hot in the kitchen yo.
I understand that business, companies, banks, mortgages and thousands of salmon swimming up the stream dictate indifference in trade and commerce. I would love to conduct business by spitting in my hand and shaking on it, like I always imagined my grandfather doing on his farm in rural Australia 65 years ago. But I'm not naive. I realise the world today is just that little bit less personable, that little bit more systemised. That little bit more mercenary, perhaps. And you know, I'm certain banks repossessed farms during drought and war in the twentieth century too.
But what does it say about society when we live in a world in which people actually don't care about a legally binding contractual promise unless you have the power to enforce it?3 Where commerce is a negotiation constrained by the relative power of each party.4 Is this what consumerism is teaching us? A society in which the only framework of substance is power.
The rule of law matters in society
We don't have to take imaginative leaps to see the exemplar of this societal Realpolitik.
The NSA operates in a quasi-legal grey zone in which its existence is constitutional, but its conduct is shrouded in secrecy and deception. What exactly entitled the Director of National Intelligence to lie repeatedly to the US Congress in a formal context, even after the lie was irrefutable? The hubris is laughable if only it wasn't cruel. An eight year old doesn't deny her hand is in the biscuit tin, she at least attempts to justify her actions.
The NSA signals implicitly to society that the rule of law does not matter. The NSA tells us "I can do what I want so long as no one has the power to stop me".
Law is abstracted from humanity and is therefore conceptual.5 Often it works in practice, but at times its separated and irrelevant. I wish we lived in a society in which law helped us be more human, like it is in the vacuum of text books. But for the most part its just there as one of three legs on a three legged table standing up commerce, to be used as a hammer or shield depending on circumstances.6
Is the NSA corrupt because it erodes the efficacy of the rule of law? Or like Kevin Spacey's character Frank Underwood in House of Cards, is it just the ultimate strategic player looking at the environment as it truly is and playing the terrain accordingly?
I'd like to be human in my business dealings. I am real. It's just when I look around its never been clearer where law stops and power starts.
1. The modern company evolved to enable more efficient allocation of capital in trading entities. The company was to separate the operational responsibility of the business from its ownership (those investing the capital) to allow an investor to more efficiently obtain returns given limited personal time.↩
2. By "people" I mean legal persons: actual people as well as legal entities.↩
3. In our matter, the sum of money is neither trivial, nor sufficient to justify remedies via the courts given the cost of access and cost of distraction.↩
4. The ultimate shortcoming of contract law is its assumption the each party is equally powerful to bargain. Borne out of its history protecting trade and commerce between equally resourceful trading entities, this weakness has required swathes of law be created to protect the interests of weak parties entering into agreements with strong parties. An example is consumer protection law and advent of the ombudsman in common law jurisdictions.↩
5. Abstracted in the sense that in the common law tradition law is created over time by the judicial system passing down judgment.↩
6. For example: patent cross-licensing and enforcement among consumer mobile and technology companies; and the RIAA business model of suing 'John Doe' fans with no access to resources and demanding settlement fees.↩