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Subject Area: Political Theory

Rights and Contract - Leonard P. Liggio, Literature of Liberty, January/March 1978, vol. 1, No. 1 [1978]

Edition used:

Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.

Part of: Literature of Liberty: A Review of Contemporary Liberal Thought, 20 vols. 19781-982

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


Rights and Contract

Evers, Williamson M.

  • Stanford University

“Toward a Reformulation of the Law of Contracts.” The Journal of Libertarian Studies (USA), 1 (1977): 3–13.

In the legal theory of contracts, the free market title-transfer model is superior in its internal consistency, rationality, and appropriateness for a free society. The pure “promised expectations” model of contracts or the present hybrid law of contracts cannot compete. The title-transfer model deals more adequately with those problem areas of the law of contract that have perplexed its rival models.

The expectations model of contracts views contracts as conventions that guarantee a person's expectations from promises. An advocate of this theory, Adam Smith declared: “The foundation of contract is the reasonable expectation, which the person who promises raises in the person to whom he binds himself; of which the satisfaction may be extorted by force.” The philosophic school notable for defending the promised expectations model is the utilitarian-pragmatist tradition emphasizing as it does the social utility, stability, and the predictability of promises kept. Utilitarianism argues that since social order is built on trust in promises, legal force should compel individuals to honor promises. Another component of the expectations model is its partial historical derivation from such Norman legal actions as assumpsit that required individuals to fulfill the expectations entailed in their feudal status (e.g., common carriers must be compelled to perform their feudal calling).

The title-transfer model, defended from the natural rights philosophic tradition, views contracts far differently. Contracts here serve as instruments that assign or transfer rights to things, either present or future alienable goods.

Given the mixed parentage of our current contract law (combining elements of both title-transfer and promised expectations), is it preferable to continue along the path towards a pure expectations model as proposed by pragmatist Roscoe Pound [Jurisprudence (St. Paul, Minn. West, 1959), vol. 3, pp. 162–163]? Or, would it be more profitable to change direction towards the title-transfer approach? Title-transfer seems a saner path to follow because it avoids the dubious assumptions of the promised expectations approach. It does not lead to embarrassing conclusions in various problem areas.

The expectations proponents assume spuriously that law courts should hold people to their promises. However, although promise keeping may be virtuous, it does not follow that the courts should enforce every virtuous act (e.g., punctuality, pleasantness, temperance). Free market devices such as performance bonds that fit the title-transfer model, could achieve the social stability sought through law by the utilitarians.

An embarrassment for the expectations model is its position on enforcing specific performance of promised personal services (e.g., marriage proposals withdrawn or a starlet's reneging on a promise to act in a movie). Under title-transfer, the embarrassment disappears since a marriage promise is viewed as a mere promise (a nudum pactum); no real thing has been transferred, only a subjective expectation. Similarly, a starlet's promise to act would not, under title-transfer, obligate her to specific performance. This would be tantamount to enforcing a slave contract (involuntary servitude) and ignore the fact that the human will is not alienable; we cannot exchange our freedom on the basis of unsound philosophy. Title-transfer would demand that, if the starlet received a money advance, she ought to return this real alienable good since it was transferred on the condition that she would perform. Many inconveniences could be anticipated and solved under title-transfer by such devices as performance bonds or detailed specific forfeit clauses in contracts. Finally, the title-transfer model could deal more effectively with the difficult cases involving “death of an offeror,” unilateral covenants, and “purchase breaks hire.”