Lonang Principles of Contracts
I. Sanctity of Promise
- A. Promise (Vow).
- 1. God makes promises to man. Gen 12:1-3.
- a. God has authority to promise
- b. God has liberty whether to promise
- c. God must keep His word. Num. 23:19; Ezek. 12:28; 1 Pet. 1:25.
- 2. Man makes promises
- a. to God, i.e., Nazirite vow (Num. 6).
- b. to man, i.e., Jacob serving Laban for Rachel, Gen. 29:18.
- c. Man has both authority and liberty to make promises. (Freedom not to promise.) See, Ecc. 5:5.
- d. Law of vow – Num. 30.
- 3. Absolute nature of obligation. Eccl. 5:1-7; Deut. 23:21-23.
- a. Fraud notwithstanding. Joshua 9:3-21.
- b. Foolishness notwithstanding. Judges 11:30-35.
- B. Oaths (promise coupled with a curse). “I will do this, or else let that happen to me.”
- 1. Example of Rahab: Joshua 2:12-14.
- 2. God swears by himself. Heb. 6:16-18.
- 3. Oaths are risky. Lev. 19:12. Psalm 15:4.
- – Matt. 5:33-37 – Don’t be truthful only under oath, but tell the truth all the time. Jesus: oaths are unnecessary, but still permissible. Jesus himself submitted to a judicial oath imposed on him by the priest at his trial, Matt. 26:63.
- C. Agreement (reciprocal promises). Parable of Matt. 20:1-16.
- 1. Liberty to set contract terms.
- 2. Unequivocal duty to keep the promises made.
- 3. Enforceability not linked to concepts of “fairness.”
II. Principles of Contracts
- A. Liberty of Contract – Which law forms a part of the contract?
- 1. Majority in Ogden v. Saunders.
- a. Rejects law of nature – “merely moral obligation”
- b. Incorporates state law as a part of every contract.
- c. State law cannot impair what it creates.
- 2. Marshall legacy – dissent in Ogden v. Saunders.
- a. Contract liberty not civilly conferred
- b. Civil government to secure only more effective remedy for breach
- c. Only contracting parties can set terms
- B. Civil enforcement
- 1. Authority to remedy breach (Rom. 13:4)
- a. How to prove breach (Evidence)
- (1) Rules of drafting
- (2) Statute of frauds
- b. Recording, Witnesses
- c. Right to a hearing
- 2. Security of inalienable rights
- a. Man is a created being with God-given rights which are unalienable
- b. The purpose of civil government is to secure unalienable rights
- c. Unalienable rights include pursuit of happiness
- – Declaration of Independence; Allgeyer v. Louisiana.
- (1) Freedom of choice and economic/dominion liberty
- (2) Individuals free to set their own contract terms
- (3) No authority to legislate happiness
- 3. No impairment of contract obligations, notwithstanding
- a. injury to parties; or
- b. impossibility. Why? Cannot make illegal what was legal at the time
- c. Fletcher v. Peck (Supp. 214) – the common law rule. The state (Georgia) legislature must keep its promise, no matter what. How does Fletcher uphold the sanctity of vow?
C. Unenforceable agreements
- 1. Law of Love.
- a. Is the relationship governed by love or commerce?
- b. Gifts => love relationship. Love is not enforceable, thus, at common law, undelivered gifts were not enforceable. Similarly, moral obligations are enforceable by God only.
- c. Consideration => commercial relationship, thus, enforceable.
- (1) Illusory promises (“I promise to do what I want to do.”) lack commercial character, thus, are unenforceable.
- (2) “Promises under seal” under common law acknowledged sanctity (enforceability) of promise even where consideration is lacking, i.e., relationship under seal was not governed by love.
- 2. Illegal agreements (malum in se). “Illegal” means the purpose of the contract violates law (of nature). Otherwise, enforcement of immoral obligations.
- a. Bribery
- b. Gambling
- c. Prostitution. But see, as sex crimes have become decriminalized, courts have begun enforcing contracts for cohabitation (Lee Marvin case), formerly regarded as illegal in se.
- d. Murder
- 3. Prohibited agreements (malum prohibitum)
- a. Usury. Deut. 23:19-20.
- (1) Biblical definition of usury – any interest charges. Enforceability depended on love v. commerce, or relationship of parties (legal determination).
- (2) Modern definition of usury – excessive interest charges. Enforceability depends on reasonableness of terms (factual determination).
- b. Statutes prohibiting the unauthorized practice of law, for example, in their root prohibit non-lawyers from making certain kinds of contracts. If one person wants a friend to handle a lawful transaction for him, is it up to the state to decide whether his friend can do that?
III. Demise of Contract Liberty
- A. Intrusive regulation
- 1. Minimum wage/price fixing
- 2. Limitation of parties (utilities, regulated industries)
- 3. Comparable worth
- B. Failure to enforce obligations
- 1. Impracticability – favors the rich/great.
- 2. U.C.C. §2-302 “Unconscionability” – favors the poor/small.
- 3. Reasonableness standard. Deprives vow-breakers of God’s promise to reward the covenant-keeper. Ill gotten gains do not profit. Prov. 10:2.
- 4. Jones v. Star Credit Corp..
- a. Judge contrasts law v. fairness, rules in favor of fairness.
- b. UCC enacts “moral sense” of the community. Are purely moral obligations enforceable by civil rulers?
- c. Basis for holding: size of profit justifies modification of contract.
- C. Compulsory agreements
- 1. In Re Bollinger Corp.. Statute required security agreement to be a writing signed by the debtor. Debtor signed no security agreement, yet court still found one to exist. How can a contract be said to exist?
- 2. Closed-shop union memberships
- 3. Antidiscrimination laws (employment, housing, etc.)
- 4. Mandatory auto insurance