CONTRACT, the legal term for a bargain or agreement; some writers, following the Indian Contract Act, confine the term to agreements enforceable by law : this, though not yet univer sally adopted, seems an improvement. Enforcement of good faith in matters of bargain and promise is among the most important functions of legal justice. It might not be too much to say that, next after keeping the peace and securing property against vio lence and fraud so that business may be possible, it is the most important. Yet we shall find that the importance of contract is developed comparatively late in the history of law. The common wealth needs elaborate rules about contracts only when it is ad vanced enough in civilization and trade to have an elaborate sys tem of credit. The Roman law of the empire dealt with contract, indeed, in a fairly adequate manner, though it never had a com plete or uniform theory; and the Roman law, as settled by Justin ian, appears to have satisfied the Eastern empire long after the Western nations had begun to recast their institutions, and the traders of the Mediterranean had struck out a cosmopolitan body of rules and custom known as the Law Merchant, which claimed acceptance in the name neither of Justinian nor of the Church, but of universal reason. It was amply proved afterwards that the foundations of the Roman system were strong enough to carry the fabric of modern legislation. But the collapse of the Roman power in western Christendom threw society back into chaos.
In this condition of legal ideas, which it would be absurd to call jurisprudence, the general duty of keeping faith is not recog nized except as a matter of religious or social observance. Those who desire to be assured of anything that lies in promise must exact an oath, or a pledge, or personal sureties; and even then the court of their people—in England the Hundred Court in the first instance—will do nothing for them in the first case, and not much in the two latter. Probably the settlement of a blood-feud, with provisions for the payment of the fine by instalments, was the nearest approach to a continuing contract, as we now understand the term, which the experience of Germanic antiquity could fur nish. It is also probable that the performance of such undertak ings, as it concerned the general peace, was at an early time re garded as material to the commonweal ; and that these covenants of peace, rather than the rudimentary selling and bartering of their day, first caused our Germanic ancestors to realize the im portance of putting some promises at any rate under public sanc tion. The history of the law, and even, the present form of much law still common to almost all the English-speaking world, can be understood only when we bear in mind that our f ore fathers did not start from any general conception of the State's duty to enforce private agreements, but, on the contrary, the State's powers and functions in this regard were extended gradu ally, unsystematically, and by shifts and devices of ingenious suitors and counsel, aided by judges, rather than by any direct provisions of princes and rulers. Money debts, it is true, were re coverable from an early time. But this was not because the debtor had promised to repay the loan ; it was because the money was deemed still to belong to the creditor, as if the identical coins were merely in the debtor's custody. The creditor sued to recover money, for centuries after the Norman Conquest, in exactly the same form which he would have used to demand possession of land; the action of debt closely resembled the "real actions," and, like them, might be finally determined by a judicial combat; and I down to Blackstone's time the creditor was said to have a prop erty in the debt—property which the debtor had "granted" him. Giving credit, in this way of thinking, is not reliance on the right to call hereafter for an act, the payment of so much current money or its equivalent, to be performed by the debtor, but merely suspension of the immediate right to possess one's own particular money, as the owner of a house let for a term suspends his right to occupy it. This was no road to the modern doctrine of contract, and the passage had to be made another way.
In fact the old action of debt covered part of the ground of contract only by accident. It was really an action to recover any property that was not land; for the remedy of a dispossessed owner of chattels, afterwards known as detinue, was only a slightly varying form of it. If the property claimed was a certain sum of money, it might be due because the defendant had received money on loan, or because he had received goods of which the agreed price remained unpaid ; or, in later times at any rate, because he had become liable in some way by judgment, statute or other authority of law, to pay a fine or fixed penalty to the plaintiff. Here the person recovering might be as considerable as the lord of a manor, or as mean as a "common informer" ; the principle was the same. In every case outside this last class, that is to say, whenever there was a debt in the popular sense of the word, it had to be shown that the defendant had actually received the money or goods ; this value received came to be called quid pro quo—a term unknown, to all appearance, out of England. Never theless the foundation of the plaintiff's right was not bargain or promise, but the unjust detention by the defendant of the plain tiff's money or goods.
We are not concerned here to trace the change from the ancient method of proof—oath backed by "good suit," i.e., the oaths of an adequate number of friends and neigh bours—through the earlier form of jury trial, in which the jury were supposed to know the truth of their own knowledge, to the modern establishment of facts by testimony brought before a jury who are bound to give their verdict according to the evidence. But there was one mode of proof which, after the Norman Con quest, made a material addition to the substantive law. This was the proof by writing, which means writing authenticated by seal. Proof by writing was admitted under Roman influence, but, once admitted, it acquired the character of being conclusive which be longed to all proof in early Germanic procedure. Oath, ordeal and battle were all final in their results. When the process was started there was no room for discussion, though any formal irregularity was fatal. So the sealed writing was final too, and a man could not deny his own deed. We still say that he cannot, but with modern refinements. Thus the deed, being allowed as a solemn and probative document, furnished a means by which a man could bind himself, or rather effectually declare himself bound, to any thing not positively forbidden by law. Whoever could afford parchment and the services of a clerk might have the benefit of a "formal contract" in the Roman sense of the term. At this day the form of deed called a bond or "obligation" is, as it stands settled after various experiments, extremely artificial; but it is essentially a solemn admission of liability, though its conclusive stringency has been relaxed by modern legislation and practice in the interest of substantial justice. By this means the perform ance of all sorts of undertakings, pecuniary and otherwise, could be and was legally secured. Bonds were well known in the i3th century, and from the i4th century onwards were freely used for commercial and other purposes; as for certain limited purposes they still are. The "covenant" of modern draftsmen is a direct promise made by deed ; it occurs mainly as incident to convey ances of land. The mediaeval "covenant," conventio, was, when we first hear of it, practically equivalent to a lease, and never became a common instrument of miscellaneous contracting, though the old books recognize the possibility of turning it to vari ous uses of which there are examples; nor had it any sensible in fluence on the later development of the law. On the whole, in the old common law one could do a great deal by deed, but very little without deed. The minor bargains of daily life, so far as they in volved mutual credit, were left to the jurisdiction of inferior courts, of the Law Merchant, and—last, not least—of the Church.
Popular custom, in all European countries, rec ognized simpler ways of pledging faith than parchment and seal. A handshake was enough to bind a bargain. Whatever secular law might say, the Church said it was an open sin to break plighted faith; a matter, therefore, for spiritual correction, in other words, for compulsion exercised on the defaulter by the bishop's or the archdeacon's court, armed with the power of excommunication. In this way the ecclesiastical courts acquired much business which was, in fact, as secular as that of a modern county court, with the incident profits. Mediaeval courts lived by the suitors' fees. What were the king's judges to do? However high they put their claims in the course of the rivalry between Church and Crown, they could not effectually prohibit the bishop or his official from deal ing with matters for which the king's court provided no remedy. Continental jurists had seen their way, starting from the Roman system as it was left by Justinian, to reduce its formalities to a vanishing quantity, and expand their jurisdiction to the full breadth of current usage. English judges could not do this in the i 5th century, if they could ever have done so. Nor would simpli fication of the requisites of a deed, such as has now been intro duced in many jurisdictions, have been of much use at a time when only a minority even of well-to-do laymen could write.
There was no principle and no form of action in English law which recognized any general duty of keeping promises. But could not breach of faith by which a party had suffered be treated as some kind of legal wrong? There was a known action of tres pass and a known action of deceit, this last of a special kind, mostly for what would now be called abuse of the process of the court ; but in the later middle ages it was an admitted remedy for giving a false warranty on a sale of goods. Also there was room for actions "on the case," on facts analogous to those covered by the old writs, though not precisely within their terms. If the king's judges were to capture this important branch of business from the clerical hands which threatened to engross it, the only way was to devise some new form of action on the case. There were signs, moreover, that the court of chancery would not neg lect so promising a field if the common law judges left it open.
The mere fact of unfulfilled promise was not enough, in the eyes of mediaeval English lawyers, to give a handle to the law. But injury caused by reliance on another man's under taking was different. The special undertaking or "assumption" creates a duty which is broken by fraudulent or incompetent mis carriage in the performance. I profess to be a skilled farrier, and lame your horse. It is no trespass, because you trusted the horse to me ; but it is something like a trespass, and very like a deceit. An action on the case was allowed without much difficulty for such defaults. The next step, and a long one, was to provide for total failure to perform. A builder, instead of doing bad work, does nothing at all within the time agreed upon for completing a house. Can it be said that he was done a wrong? At first the judges felt bound to hold that this was going too far; but suitors anxious to have the benefit of the king's justice persevered, and in the course of the i 5th century the new form of action, called assumpsit from the statement of the defendant's undertaking on which it was founded, was allowed as a remedy for non-per formance as well as for faulty performance. Being an action for damages, and not for a certain amount, it escaped the strict rules of proof which applied to the old action of debt ; being in form for a kind of trespass, and thus a privileged appeal to the king to do right for a breach of his peace, it escaped likewise the risk of the defendant clearing himself by oath according to the ancient popu lar procedure. Hence, as time went on, suitors were emboldened to use "assumpsit" as an alternative for debt, though it had been introduced only for cases where there was no other remedy. By the end of the i6th century they got their way; and it became a settled doctrine that the existence of a debt was enough for the court to presume an undertaking to pay it. The new form of action was made to cover the whole ground of informal contracts, and, by extremely ingenious devices of pleading, developed from the presumption or fiction that a man had promised to pay what he ought, it was extended in time to a great variety of cases where there was in fact no contract at all.
The new system gave no new force to gratui tous promises. For it was assumed, as the foundation of the juris diction, that the plaintiff had been induced by the defendant's undertaking, and with the defendant's consent, to alter his posi tion for the worse in some way. He had paid or bound himself to pay money, he had parted with goods, he had spent time in labour, or he had foregone some profit or legal right. If he had not com mitted himself to anything on the strength of the defendant's promise, he had suffered no damage. To sum up the foregoing in modern language, the plaintiff must have given value of some kind, more or less, for the defendant's undertaking. This something given by the promisee and accepted by the promisor in return for his undertaking is what we now call the consideration for the promise. In cases where debt would also lie, it coincides with the old requirement of value received (quid pro quo) as a condition of the action of debt being available. But the conception is far wider, for the consideration for a promise need not be anything capable of delivery or possession. It may be money or goods; but it may also be an act or series of acts; further (and this is of the first importance for our modern law), it may itself be a promise to pay money or deliver goods, or to do work, or otherwise to act or not to act in some specified way. Again, it need not be anything which is obviously for the promisor's benefit. His acceptance shows that he set some value on it ; but in truth the promisee's burden, and not the promisor's benefit, is material. The last and not strictly logical refinement of holding that, when mutual prom ises are exchanged between parties, each promise (though by itself of no value) is a consideration for the other and makes it binding, was conclusively accepted only in the i7th century. The result was that promises of mere bounty could no more be enforced than before, but any kind of lawful bargain could; and there is no reason to doubt that this was in substance what most men wanted. Ancient popular usage and feeling show little more encouragement than ancient law itself to merely gratuitous alienation or obliga tions. Also (subject, till quite modern times, to the general rule of common-law procedure that parties could not be their own witnesses, and subject to various modern statutory requirements in various classes of cases) no particular kind of proof was neces sary. The necessity of considera f or the validity of simple contracts was unfortunately confused by commentators, almost from the beginning of its history, with the perfectly different rules of the Roman law about nudum pactum, which very few English lawyers took the pains to understand.
The doctrine of consideration is in fact peculiar to those juris dictions where the common law of England is in force, or is the foundation of the received law, or, as in South Africa, has made large encroachments upon it in practice. Substantially similar results are obtained in other modern systems by professing to enforce all deliberate promises, but imposing stricter conditions of proof where the promise is gratuitous.
As obligations embodied in the solemn form of a deed were thereby made enforceable before the doctrine of consideration was known, so they still remain. When a man has by deed declared himself bound, there is no need to look for any bargain, or even to ask whether the other party has assented. This rugged frag ment of ancient law remains embedded in our elaborate modern structure. Nevertheless gratuitous promises, even by deed, get only their strict and bare rights. There may be an action upon them, but the powerful remedy of specific performance—often the only one worth having—is denied them. For this is derived from the extraordinary jurisdiction of the chancellor, and the equity administered by the chancellor was not for plaintiffs who could not show substantial merit as well as legal claims. The sing ular position of promises made by deed is best left out of account in considering the general doctrine of the formation of contracts; and as to interpretation there is no difference. In what follows, therefore, it will be needless, as a rule, to distinguish between "parol" or "simple" contracts, that is, contracts not made by deed, and obligations undertaken by deed.
From the conception of a promise being valid only when given in return for something accepted in consid eration of the promise, it follows that the giving of the promise and of the consideration must be simultaneous. Words of promise uttered before there is a consideration for them can be no more than an offer; and, on the other hand, the obligation declared in words, or inferred from acts and conduct, on the acceptance of a consideration, is fixed at that time, and cannot be varied by sub sequent declaration, though such declarations may be material as admissions. It was a long while, however, before this consequence was clearly perceived. In the i8th century it was attempted, and for a time with considerable success, to extend the range of en forceable promises without regard to what the principles of the law would bear, in order to satisfy a sense of natural justice. This movement was finally checked as late as 184o, and traces of it remain in certain apparently anomalous rules which are indeed of little practical importance, but which private writers, at any rate, cannot safely treat as obsolete. However, the question of "past consideration" is too minute and technical to be pursued here. The general result is that a binding contract is regularly constituted by the acceptance of an offer, at the moment it is accepted. It also follows that an offer before acceptance creates no duty of any kind; which is by no means necessarily the case in systems where the English rule of consideration is unknown. The question what amounts to final acceptance of an offer is, on the other hand, a question ultimately depending on common sense. The rules that an offer is understood to be made only for a reasonable time, according to the nature of the case, and lapses if not accepted in due time; that an expressed revocation of an offer can take effect only if communicated to the other party before he has accepted; that acceptance of an offer must be according to its terms, and a conditional or qualified acceptance is only a new proposal, and the like, stand on general convenience as much as on any technical ground.
Correspondence.—Great difficulties have arisen, in other sys tems as well as in the English, as to the completion of contracts between persons at a distance. There must be some rule, and yet any rule that can be framed must seem arbitrary in some cases. On the whole the modern doctrine is as follows : The proposer of a contract can prescribe or authorize any mode, or at least any reasonable mode, of acceptance, and if he specifies none he is deemed to authorize the use of anY reasonable mode in common use, and especially the post. Acceptance in words is not always required; an offer may be well accepted by an act clearly referable to the proposed agreement, and constituting the whole or part of the performance asked for—say the despatch of goods in answer to an order by post, or the doing of work be spoken; and it seems that in such cases further communication— unless expressly requested—is not necessary as matter of law, how ever prudent and desirable it may be. Where a promise and not an act is sought (as where a tradesman writes a letter offering goods for sale on credit), it must be communicated; in the absence of special direction letter post or telegraph may be used; and, fur ther, the acceptor having done his part when his answer is com mitted to the post, English courts have held for about half a century (since 1879), after considerable previous doubt, that any delay or miscarriage in course of post is at the proposer's risk, so that a man may be bound by an acceptance he never received. It is generally thought—though there is no English decision— that, in conformity with this last rule, a revocation by telegraph of an acceptance already posted would be inoperative. Much more elaborate rules are laid down in some Continental codes. It seems doubtful whether their complication achieves any gain of substantial justice worth the price. At first sight it looks easy to solve some of the difficulties by admitting an interval during which one party is bound and the other not. But, apart from the risk of starting fresh problems as hard as the old ones, English principles, as above said, require a contract to be concluded between the parties at one point of time, and any exception to this would have to be justified by very strong grounds of expediency. We have already assumed, but it should be specifically stated, that neither offers nor acceptances are confined to communications made in spoken or written words. Acts or signs may and con stantly do signify proposal and assent. One does not in terms request a ferryman to put one across the river. Stepping into the boat is an offer to pay the usual fare for being ferried over, and the ferryman accepts it by putting off. This is a very simple case, but the principle is the same in all cases. The term "implied contract," current in this connection, is ambiguous. It sometimes means a contract concluded by acts, not words, of one or both parties, but still a real agreement ; sometimes an obligation im posed by law where there is not any agreement in fact, for which the name "quasi-contract" or "constructive contract" is more appropriate and now usual.
The obligation of contract is an obligation created and determined by the will of the parties. Herein is the characteristic difference of contract from all other branches of law. The business of the law, therefore, is to give effect so far as possible to the intention of the parties, and all the rules for inter preting contracts go back to this fundamental principle and are controlled by it. Every one knows that its application is not al ways obvious. Parties often express themselves obscurely; still oftener they leave large parts of their intention unexpressed, or (which for the law is the same thing) have not formed any inten tion at all as to what is to be done in certain events. But even where the law has to fill up gaps by judicial conjecture, the guid ing principle still is, or ought to be, the consideration of what either party has given the other reasonable cause to expect of him. The court aims not at imposing terms on the parties, but at fixing the terms left blank as the parties would or reasonably might have fixed them if all the possibilities had been clearly before their minds. For this purpose resort must be had to various tests: the court may look to the analogy of what the parties have expressly provided in case of other specified events, to the constant or general usage of persons engaged in like business, and, at need, ultimately to the court's own sense of what is just and expedient. One important application of this principle is the doctrine of "frustration of the adventure" now largely developed in cases arising out of the World War. Where the fulfilment of a contract according to the true intention is rendered impossible by emergent facts not within the control or contemplation of the parties, the court will treat the contract as if it had been conditional and hold performance excused : a strictly exact statement cannot be given in a short compass, but the result is that the possibility of liberal per formance has ceased to be an adequate test, and various detailed rules and exceptions are now brought under a more general con cept. All auxiliary rules of this kind are subject to the actual will of the parties, and are applied only for want of sufficient declara tion of it by the parties themselves. A rule which can take effect against the judicially known will of the parties is not a rule of construction or interpretation, but a positive rule of law. How ever artificial some rules of construction may seem, this test will always hold. In modern times the courts have avoided laying down new rules of construction, preferring to keep a free hand and deal with each case on its merits as a whole. It should be observed that the fulfilment of a contract may create a relation between the parties which, once established, is governed by fixed rules of law not variable by the preceding agreement. Marriage is the most conspicuous example of this, and perhaps the only complete one in our modern law.
There are certain rules of evidence which to some extent guide or restrain interpretation. In particular, oral testimony is not allowed to vary the terms of an agreement reduced to writing. This is really in aid of the parties' deliberate intention, for the object of reducing terms to writing is to make them certain. There are apparent exceptions to the rule, of which the most con spicuous is the admission of evidence to show that words were used in a special meaning current in the place or trade in question. But they are reducible, it will be found, to applications (perhaps over subtle in some cases) of the still more general principles that, be fore giving legal force to a document, we must know that it is really what it purports to be, and that when we do give effect to it according to its terms we must be sure of what its terms really say. The rules of evidence here spoken of are modern, and have nothing to do with the archaic rule already mentioned as to the effect of a deed.
Every contracting party is bound to perform his promise according to its terms, and in case of any doubt in the sense in which the other party would reasonably understand the promise. Where the performance on one or both sides extends over an appreciable time, continuously or by instalments, questions may arise as to the right of either party to refuse or suspend fur ther performance on the ground of some default on the other side. Attempts to lay down hard and fast rules on such questions are now discouraged, the aim of the courts being to give effect to the true substance and intent of the contract in every case. Nor will the court hold one part of the terms deliberately agreed to more or less material than another in modern business dealings. "In the contracts of merchants time is of the essence," as the Supreme Court of the United States has said in our own day. Certain an cient rules restraining the apparent literal effect of common pro visions in mortgages and other instruments were in truth control ling rules of policy. New rules of this kind can be made only by legislation. Whether the parties did or did not in fact intend the obligation of a contract to be subject to unexpressed conditions is, however, a possible and not uncommon question of interpretation, as we have noted above. One class of cases giving rise to such questions is that in which performance according to the real intent of the parties is frustrated by some external cause not due to the promisor's own fault. As to promises obviously absurd or im possible from the first, they are unenforceable only on the ground that the parties cannot have seriously meant to create a liability. For precisely the same reason, supported by the general usage and understanding of mankind, common social engagements, though they often fulfil all other requisites of a contract, have never been treated as binding in law. The singular case has actually occurred of parties framing a complete business agreement and adding an "honourable pledge clause" which expressly excluded legal juris diction. Here the manifest intention not to create an enforceable obligation prevents the other specific terms, however precise, from creating any.
In all matters of contract, as we have said, the ascertained will of the parties prevails. But this means a will both lawful and free. Hence there are limits to the force of the general rule, fixed partly by the law of the land, which is above individual will and interests, partly by the need of securing good faith and justice between the parties themselves against fraud or misad venture. Agreements cannot be enforced when their performance would involve an offence against the law. There may be legal offence, it must be remembered, not only in acts commonly recog nized as criminal, disloyal or immoral, but in the breach or non observance of positive regulations made by the legislature, or per sons having statutory authority, for a variety of purposes. Again, there are cases where an agreement may be made and performed without offending the law, but on grounds of "public policy" it is not thought right that the performance should be a matter of legal obligation, even if the ordinary conditions of an enforceable con tract are satisfied. A man may bet, in private at any rate, if he likes, and pay or receive as the event may be ; but for many years the winner has had no right of action against the loser. Unfortunate timidity on the part of the judges, who attempted to draw distinc tions instead of saying boldly that they would not entertain actions on wagers of any kind, threw this topic into the domain of legisla tion ; and the laudable desire of parliament to discourage gambling, so far as might be, without attempting impossible prohibitions, has brought the law to a state of ludicrous complexity in both civil and criminal jurisdiction. But what is really important under this doctrine of public policy is the confinement of "contracts in re straint of trade" within special limits. In the middle ages and down to modern times there was a strong feeling—not merely an artificial legal doctrine—against monopolies and everything tend ing to monopoly. Agreements to keep up prices or not to compete were regarded as criminal. Gradually it was found that some kind of limited security against competition must be allowed if such transactions as the sale of a going concern with its goodwill, or the retirement of partners from a continuing firm, or the employ ment of confidential servants in matters involving trade secrets, were to be carried on to the satisfaction of the parties. Attempts to lay down fixed rules in these matters were made from time to time, but they were finally discredited by the decision of the House of Lords in the Maxim-Nordenfelt company's case in I
Contracts "in restraint of trade" will now be held valid, provided that they are made for valuable consideration (this even if they are made by deed), and do not go beyond what can be thought rea sonable for the protection of the interests concerned, and are not injurious to the public. (The Indian Contract Act, passed in 1872, has unfortunately embodied views now obsolete, and remains unamended.) All that remains of the old rules in England is the necessity of valuable consideration, whatever be the form of the contract, and a strong presumption—but not an absolute rule of law—that an unqualified agreement not to carry on a particular business is not reasonable.
Where there is no reason in the nature of the contract for not enforcing it, the consent of a contracting party may still not be binding on him because not given with due knowledge, or, if he is in a relation of dependence to the other party, with inde pendent judgment. Inducing a man by deceit to enter into a contract may always be treated by the deceived party as a ground for avoiding his obligation, if he does so within a reasonable time after discovering the truth, and, in particular, before any innocent third person has acquired rights for value on the faith of the con tract. (See FRAUD.) Coercion would be treated on principle in the same way as fraud, but such cases hardly occur in modern times. There is a kind of moral domination, however, which our courts watch with the utmost jealousy, and repress under the name of "undue influence" when it is used to obtain pecuniary advantage. Persons in a position of legal or practical authority—guardians, confidential advisers, spiritual directors and the like—must not abuse their authority for selfish ends. They are not forbidden to take benefits from those who depend on them or put their trust in them; but if they do, and the givers repent of their bounty, the whole burden of proof is on the takers to show that the gift was in the first instance made freely and with understanding. Large voluntary gifts or beneficial contracts, outside the limits within which natural affection and common practice justify them, are indeed not encouraged in any system of civilized law. Professional money-lenders were formerly checked by the usury law : since those laws were repealed in 1854 courts and juries have shown a certain astuteness in applying the rules of law as to fraud and undue influence—the latter with certain special features—to trans actions with needy "expectant heirs" and other improvident per sons which seem on the whole unconscionable. The Money-lenders Act of 'goo and subsequent amendments have fixed and (as finally interpreted by the House of Lords) also sharpened these develop ments. In the case of both fraud and undue influence, the person entitled to avoid a contract may, if so advised, ratify it after wards; and ratification, if made with full knowledge and free judgment, is irrevocable. A contract made with a person deprived by unsound mind or intoxication of the capacity to form a rational judgment is on the same footing as a contract obtained by fraud, if the want of capacity is apparent to the other party.
There are many cases in which a state ment made by one party to the other about a material fact will enable the other to avoid the contract if he has relied on it, and it was in fact untrue, though it may have been made at the time with honest belief in its truth. This is so wherever, according to the common course of business, it is one party's business to know the facts, and the other practically must, or reasonably may, take the facts from him. In some classes of cases even inadvertent omission to disclose any material fact is treated as a misrepresenta tion. Contracts of insurance are the most important; here the insurer very seldom has the means of making any effective enquiry of his own. Misdescription of real property on a sale, without fraud, may according to its importance be a matter for compensa tion or for setting aside the contract. Promoters of companies are under special duties as to good faith and disclosure which have been worked out at great length in the modern decisions. But company law has become so complex within the present generation that, so far from throwing much light on larger principles, it is hardly intelligible without some previous grasp of them. Some times it is said that misrepresentation (apart from fraud) of any material fact will serve to void any and every kind of contract. It is submitted that this is certainly not the law as to the sale of goods or as to the contract to marry, and therefore the alleged rule cannot be laid down as universal. But it must be remembered that parties can, if they please, and not necessarily by the express terms of the contract itself, make the validity of their contract conditional on the existence of any matter of fact whatever, in cluding the correctness of any particular statement. If they have done this, and the fact is not so, the contract has no force; not because there has been a misrepresentation, but because the parties agreed to be bound if the fact was so and not otherwise. It is a question of interpretation whether in a given case there was any such condition.
Mistake is said to be a ground for avoiding contracts, and there are cases which it is practically convenient to group under this head. On principle they seem to be mostly reducible to failure of the acceptance to correspond with the offer, or absence of any real consideration for the promise. In such cases, whether there be fraud or not, no contract is ever formed, and therefore there is nothing which can be ratified--a distinction which may have im portant effects. Relief against mistake is given where parties who have really agreed, or rather their advisers, fail to express their intention correctly. Here, if the original true intention is fully proved—as to which the court is rightly cautious—the faulty doc ument can be judicially rectified.
By the common law an infant (i.e., a person less than 2I years old) was bound by contracts made for "necessaries," i.e., such commodities as a jury holds, and the court thinks they may reasonably hold, suitable and required for the person's con dition ; also by contracts otherwise clearly for his benefit ; all other contracts he might confirm or avoid after coming of age. An extremely ill-drawn act of 1874 absolutely deprived infants of the power of contracting loans, contracting for the supply of goods other than necessaries, and stating an account so as to bind them selves; it also disabled them from binding themselves by ratifica tion. The liability for necessaries is now declared by legislative authority in the Sale of Goods Act, 1893 ; the modern doctrine is that it is in no case a true liability on contract. There is an obli gation imposed by law to pay, not the agreed price, but a reason able price. Practically, people who give credit to an infant do so at their peril, except in cases of obvious urgency.
Married women were incapable by the common law of con tracting in their own names. At this day they can hold separate property and bind themselves to the extent of that property— not personally—by contract. The law before the Married Wom en's Property Acts (1882 and 1893, and earlier acts now super seded and repealed) was a very peculiar creature of the court of chancery; the cases in which it is necessary to go back to it are now, of course, very few. But a married woman can still be re strained from anticipating the income of her separate property, and the restriction is still commonly inserted in marriage settle ments.
There is a great deal of philosophical interest about the nature and capacities of corporations, but for modern practical purposes it may be said that the legal powers of British corporations are directly or indirectly determined by acts of parliament. For com panies under the Companies Acts the controlling instrument or written constitution is the memorandum of association. Company draftsmen, taught by experience, nowadays frame this in the most comprehensive terms. Questions of either personal or corporate disability are less frequent than they were. In any case they stand apart from the general principles of our law of contract.
Contract and Property.—The rights created by contract are personal rights against the promisors and their legal representa tives, and therefore different in kind from the rights of ownership and the like which are available against all the world. Nevertheless they may be and very commonly are capable of pecuniary estima tion and estimated as part of a man's assets. Book debts are the most obvious example. Such rights are property in the larger sense : they are in modern law transmissible and alienable, unless the contract is of a kind implying personal confidence, or a con trary intention is otherwise shown. The rights created by negoti able instruments are an important and unique species of property, being not only exchangeable but the very staple of commercial currency. Contract and conveyance, again, are distinct in their nature, and sharply distinguished in the classical Roman law. But in the common law property in goods is transferred by a complete contract of sale without any further act, and under the French civil code and systems which have followed it a like rule applies not only to movables but to immovables. In English law procuring a man to break his contract is a civil wrong against the other con tracting party, subject to exceptions which are still not clearly defined. (F. Po.) BIBLIOGRAPHY.-History: Ames, "The History of Assumpsit," HarBibliography.-History: Ames, "The History of Assumpsit," Har- vard Law Rev., ii. t, 53 (Cambridge, Mass., 1889), and in vol. iii. of Select Essays in Anglo-American Law (Boston, Mass., 19o9) ; Pollock and Maitland, History of English Law, 2nd ed., 184-239 (1898). Modern: Pollock, article "Contract" in Encyclopaedia of the Laws of England (2nd ed., 19o7), a technical summary of the modern law ; the same writer's edition of the Indian Contract Act (with D. F. Mulla, London and Bombay, 5th ed., 1924) restates and discusses the principles of the common law besides commenting on the provision of the act in detail. Of the text-books, Anson, English Law of Con tract, reached a i6th edition in 1923 ; Harriman, Law of Contracts (2nd ed., i9o1) ; Leake, Principles of the Law of Contract (7th ed., by Randall, 1921) ; Pollock, Principles of Contract (9th ed., 1921), third American ed., Wald's, completed by Williston (1906) ; the title "Contract" in Halsbury's Laws of England, vol. vii. (19°9) and Suppl. (1927). An unfinished book by the late Sir John Salmond was edited and completed by Prof. Winfield of Cambridge in 1927. O. W. Holmes (justice of the Supreme Court of the United States), The Common Law (Boston, Mass., 1880 is illuminating on contract as on other legal topics.
In a few points the American law differs from the English. The deed has rather generally been deprived of its full effect in cre ating a contractual obligation without consideration, by legisla tion providing that a seal shall merely raise a rebuttable presump tion of consideration being present. As to usury, the States have almost all maintained in general the older English policy of fixing a statutory maximum. interest rate, and in some manner penalizing the contracting for more. (See USURY; on contracts in restraint of trade in America see especially TRUSTS : Legal Position of: United States.) The rule that inducing one contracting party to break his con tract is a legal wrong to the other contracting party has become of great social importance in the United States in recent years in the field of labour and its relations; this not so much because of the usual remedy for civil wrongs, by way of damages, as because of the willingness of the courts to find an "irreparable injury" threatened, and hence to issue an injunction against inducing such breach. The usual case is that of attempted organization of a non-union factory personnel by union organizers. Where the men are employed from week to week, inducing them to quit work has generally been recognized as enjoinable; and a similar rule has sometimes been applied even where the employment was from day to day. Open shop employers, to bring themselves within the protection of the rule, have often required their emplOyes to sign, as part of their contract of employment, an agreement not to join a union (except, perhaps, a designated company union) while they continue on the job; such an agreement has been held to make an attempt to unionize the men enjoinable.
This leads directly into two other major phases of contracts in the United States: (I) liberty of contract under the Constitution; and (2) the use of standardized contract.
The Federal Constitution not only guarantees contract by forbidding any State to pass "any law im pairing the obligation of contracts," but provides also in the 5th and i4th amendments that neither Congress nor any State shall deprive any person of "liberty or property" "without due process of law." Since the '9os a good deal of legislation which attempted to restrict the theretofore customary scope of property rights or of freedom of economic action has been declared unconstitutional— and therefore invalid—under these clauses. The argument of un constitutionality has been pressed with peculiar force against re strictions on a worker's freedom to contract for employment, irrespective of whether the legislation was intended for the work er's benefit and designed to remedy abuses which his power to choose between jobs seemed insufficient to prevent. Thus statutes have fallen which made it an offenc; to make employment condi tional upon the worker's agreement not to join a union; or re quired him to be paid in money rather than in truck or in a check on the company store; or prescribed a minimum wage for women employes; though hours and sanitary conditions of labour can val idly be subjected to considerable regulation. Unconstitutionality has also afflicted, peculiarly, attempts at price regulation outside the businesses traditionally regarded as public utilities; prices, as the heart of free contract, are to be free from Government con trol; indeed, even private agreements by competitors to raise prices or keep them up are both illegal and penal offences. Finally, various attempts to regulate particular businesses by prescribing certain terms of contracts, e.g., to prevent fraud (maximum and minimum sizes of loaves of bread), have been held invalid by the Supreme Court, as undue deprivations of liberty or property; the two concepts fuse in these cases. It is clear that two policies are here in conflict. One is the traditional view of the i9th century, buttressed by the individualism of a territory far from fully ex ploited; a free hand in acting and bargaining is the country's sal vation—hence the constitutional language should be construed to annul any legislative restraint. The other is the need to control those abuses which emerge repeatedly when the powerful bargainer crushes the weaker, or when the anonymous producer slips fraud ulent or dangerous articles into an uncontrolled market ; under this view no reasonable legislative restraint on contract should be annulled, and a liberal view should be taken as to what is reason able. Which view will prevail in new cases is still extremely diffi cult to predict.
Standardization of Contract.—The freedom of contract thus guaranteed by the Constitution extends to wide freedom in drawing up the terms of association of any group. This is a sort of private self-government, recognized and intended by law. Pri vate government of this sort, but of some persons over others, de velops, however, to an unanticipated extent, where freedom of contract is accompanied by concentration of bargaining power, on the one hand, and by the introduction of standardized forms of contract, on the other. Such standardized contracts are of vast and increasing importance. In a sense the law itself provides them, in such codes as the Uniform Sales Act (see SALE OF GOODS) or the Negotiable Instruments law (see BILL OF EXCHANGE), which lay down a sort of frame for all contracts which come within their terms and hence cover hundreds of unforeseen possibilities which the contracting parties did not stop to consider. But the law in such matters is commonly directed largely to indi cating results where the expressed agreement is silent. It thus be comes feasible and useful for concerns specializing in particular lines to capitalize their experience by building form-contracts which expressly resolve in their own favour all the points com monly lef t to implication. The advantages of this are obvious. Not only are the scales tipped, in most of the possible contin gencies, in favour of the concern drawing the form, but that con cern can automatically make available to untrained clerks or salesmen the full skill, forethought and experience of both the high executives and legal counsel; moreover, the contracts being standardized, the handling of performance as well as of claims and disputes becomes simpler and cheaper. Some effects of standard ized employment contracts have been mentioned above. Those of standardized business contracts fall into two classes. On the one side are the cases where bargaining power on the two sides is somewhat even, as where associated buyers negotiate a form of contract with associated sellers; the uniform bill of lading is in substance of this character, with the consequence of reasonable and careful protection of all parties concerned. On the other side are the cases where bargaining power is not balanced, and ont side must take or leave what the other offers; the forms of resi dence and small office lease, of policies of insurance, of contracts for sale of agricultural implements and of automobile agency con tracts are examples. Here the law has sometimes intervened to hold the scales more even. The courts often "construe the contract strictly" in the interests of fairness; they have often made use of the doctrine of consideration to hold what seemed an unfair con tract to be wholly unenforceable because one side was not suffi ciently bound to do anything for the other; finally, in fields where experience showed the need, there has come in due time legislative regulation of the permissible forms of contract, notably in the case of insurance policies. The whole situation brings out clearly the sometimes neglected fact that free contract, as a device to accomplish the multitude of adjustments no Government can foresee or attend to, is for proper effectiveness none the less condi tioned by the existence and continuance of something approaching equality of power among the bargaining parties. Most legislative interference with freedom of contract, whether constitutional or not, will be found traceable to the absence of such substantial equality.
In closing, it should be noted that during the i9th century the field of contract was the scene of a hitherto unparalleled develop ment of Anglo-American legal theory. Out of a great variety of traditional specific relations—"vendor and purchaser," "buyer and seller of goods," "bailor and bailee," etc.—a sustained effort was made to build a general law and theory of contract. It was the first sweeping attempt to systematize a large field of the common law in the manner in which the civil law of the Continent is systematized. For good or for bad it was really most remark ably successful; the results reaching their fruition in the restate ment of the law of contracts approved in 1928 by the American Law Institute. As yet the movement toward systematization shows less promise in other sections of American law.
See Pound, i8 Yale, L.J. 454 (1908) ; Ely, Property and Contract in their Relation to the Distribution of Wealth (1914) ; Williston, Contracts (192o) ; Isaacs, 27 Yale L.J. 34 (1926) ; Restatement of the Law of Contracts (American Law Institute, 1928). (K. N. L.)
