How do contracts work?

Thinking about the issues of child neglect (whether it violates the child's rights) made me realize that I don't fully understand how the contracts work. Or, more precisely, what the ramifications of breaking a contract are. I.e.:

1. I agree to sell you a book for a tomato. You give me the tomato, but I don't you the book. I broke the conditions of our sale. What does that mean practically? Does it mean that you still own the tomato, or does it mean that I own the tomato now but owe you the book? I.e., am I breaking your rights to the tomato or to the book?

2. I take money from you and agree that I will paint your house -- and then don't do it. Can you compell me to paint your house, or can you compell me to give the money back?

3. I agree to teach you Russian alphabet, while you agree to teach me English alphabet. You taught be English alphabet, but I didn't teach you Russian alphabet. Have I violated your rights?

If it is the case that I can owe you some service, because I have contractually obligated myself to perform it to you, can it be the case that I can owe it to you because I promised? I.e.:

4. I promised to teach you Russian alphabet and never did. Have I violated your rights?

 

Why is it that your rights are (presumably) violated in the cases 1–3, but not in 4?

OK ,just to not confuse the issue, lets make sure when you say "violated your rights" you are only talking about contractual rights, not other kinds, like natural rights.(for instance the right to freedom which is assumed and does not require a contract.)

Usually people use the term "violated my rights" when they are referring to the biggies, like my right to life or my right to freedom.

When a contract is broken it would be less confusing if terms like "breach of contract" or lack of specific performance are used.

So in your examples when two parties agree to an exchange and it does not happen, the wronged party has a contractual right to be made whole.

He can sue to get his consideration back (the tomato) and if additional loss was suffered like he could not get married because he now could not speak Russian, or he failed his degree because he did not have the book he bought, he can sue for additional damages.

If there are no additional damages but the person does not return the consideration it is theft.

In the exchange of services; like; I will teach you if you teach me,- lack of performance by the second party is also called theft of services. The remedy is usually in the form of monetary damages as you will find it difficult to force a reluctant person to paint your house or teach you Russian.

A contract requires "skin in the game" called "consideration" from both parties. That is why in the last example where a person promises to teach you something but doesn't, there is no enforceable contract because you did not contribute anything. It is the same as a favor, and the person has the right to priorotise other actions over serving you for free. All you can do is sue to get your consideration back which in this case is nothing anyway. No rights were violated.

PS. I am not a lawyer, I just play one on TV

 

if he didn't give him a book you are a thief and he is allowed to use force to get back his tomato.

I have to disagree wtih Albert. You do not have property rights in expectations. After all, justice only acts to restore property rights.

That's why with contracts, it's property rights that matter. If you had a title transfer, then you may use force to obtain what is (now) actually yours. Yet if there was a mere promise to do something, you cannot use force to have it be done.

1. So, if I promised to bring someone anti-epileptic medicine, but failed, and he had a seizure and suffered some brain damage, can he sue me for the damage? What if I sold him the medicine, but failed to deliver (and he incurred brain damage)?
 

2. If someone makes a deal with me, where a promise is a part of the deal — for instance, he sells me a car and promises a gift, or he promises to give me a free vacation if I move to his company as an employee — do I have the right to the promise (the gift or the free vacation), or do I simply have a right to withdraw my part of the contract (not sell the car or not become an employee)? I.e., in my example, do I have a right to think that I was robbed of what was promised?

Another question:

From the answers above, it seems that exchange is the only kind of contract. But why is that the case?

For instance, if I give you a gift, once it is given to you, it's yours, right? Even if no exchange happened. In that case, why can I not obligate myself to give you a gift? For instance, I can give you stock in my company as a birthday present. It doesn't seem like I could come back and say: "Sorry, I change my mind. And since you did not give me any consideration of yours; therefore, I don't really owe you anything."

Therefore, it would seem that a promise should be binding. (Although, of course, most promises are not enforceable due to lack of evidence.)

A gift involves no exchange, but does involve a title change. The person you gift it to may accept or reject you placing title in their name however. That's why you cannot take back a gift, because it no longer belongs to you. If title is rejected, it's now title-less and you can take it back however.

Right, so why can't one-sided contractual obligation work just like a gift?

An exchange is when two objects change titles simultaneously.

A contract is when two promises of services (or an object and a promise of service) are exchanged simultaneously.

A gift is when one object exchanges title.

A one-sided contract is when one promise is given simultaneously.

Why shouldn't the latter be binding?

FlyingAxe:

Right, so why can't one-sided contractual obligation work just like a gift?

Because if you renege on your promise, the other party has not been harmed, neither have you been harmed. Thus there's nothing for them to demand of you. You were going to exchange title but didn't. Neither did you take any value from the other party. Therefore, they have not been harmed. A "one-sided contract" is just a gift, and no one can be obligated to give a gift, because then it wouldn't be a gift. It would be a fee or a tax.

FlyingAxe:

A one-sided contract is when one promise is given simultaneously.

Why shouldn't the latter be binding?

How can one promise be given simultaneously? There's only one event, the one promise. For anything to be simultaneous you need two events.

The question isn't 'why shouldn't it be binding' but rather can you give any reason why it should be binding.

Anenome:

Because if you renege on your promise, the other party has not been harmed, neither have you been harmed. Thus there's nothing for them to demand of you. You were going to exchange title but didn't. Neither did you take any value from the other party. Therefore, they have not been harmed.

I am an owner of an ambulance company; you call me when you have a heart attack, and I promise to come. I come, load you in the ambulance, but then, half-way to the hospital, I realize that you're a Martian. I hate Martians. So, I turn around and bring you back home, free of charge. Meanwhile, because I did not help you, you suffered some damage to your body.

In this case, you suffered damage specifically because I promised to help but did not. My promise to help lead you to exclude other services.

 A "one-sided contract" is just a gift, and no one can be obligated to give a gift, because then it wouldn't be a gift. It would be a fee or a tax.

If I make a contract to teach you Russian in return to teaching you English, you teach me English, and I never teach you Russian, you also never suffered any loss. You can force me to reimburse you for teaching English, but are you saying that you cannot force me to teach you Russian (or give you enough money to hire another Russian teacher)?

I guess that's the key question -- do you have a right to be reimbursed for your services only, or do you have a right to demand something that I contractually obligated myself in as a part of our contract? Because if the latter is true, then it seems there can be such a thing as a binding obligation.

For instance, we signed a contract, in which I perform work for you and you pay me back certain salary and provide medical insurance. Then, after I performed work for you, you go back on your promise. Do I have the right to sue you just for the cost of my work (i.e., "taking back my consideration"), or do I have the right to sue you for whatever you promised to give me in return for the work (i.e., enforcing the obligation you placed on yourself)?

The question isn't 'why shouldn't it be binding' but rather can you give any reason why it should be binding.

Because once I promise something, I create an obligation no different from any other contractual obligation.

Except, usually, one contractual obligation is mirrored by another, just like transfer of property one way is usually accompanied by a transfer of property the other way. But just like there can be a one-sided transfer of property (a gift), which is binding after the transfer, it seems there should also be a one-sided contractual obligation that would be as binding as any other contractual obligation (one that was accompanied by another obligation going the opposite way). This is assuming the answer to the previous question is that I can sue my employer for whatever he promised, not for the value of my work.

Another thing:

It seems that if promises are non-binding, then permissions can be non-binding (or non-permitting) as well. For instance, I invite you to sleep over in my house. I tell you that you can eat or drink anything you want. Then I give you a bill for my food, claiming that my permission was not really a transfer of property or a promise, and it was in general, "in the air", while the food that you ate was really my property, and you caused me real damage.

FlyingAxe, Eugene's little brother?

FlyingAxe:

It seems that if promises are non-binding, then permissions can be non-binding (or non-permitting) as well. For instance, I invite you to sleep over in my house. I tell you that you can eat or drink anything you want. Then I give you a bill for my food, claiming that my permission was not really a transfer of property or a promise, and it was in general, "in the air", while the food that you ate was really my property, and you caused me real damage.

Okay, so I know I posted these links to you in another thread already, but I really recommend that you read and digest them:

By forum member Clayton:

A Praxeological Account of Law

What Law is

I'll try to answer your question here anyway though.  So, you invite someone to your house and then tell him they can "eat or drink anything" he wants.  If you were to try and charge him afterwards, he would not have to pay.  Why?  It has to do with social norms and expectations.  It is not normal for someone to invite you into their home and offer you food and then expect payment.  However, with restaurants it's just the opposite.  There is a norm that when you go to a restaurant, you pay for the food you order.

Obviously, if it became normal for people to charge guests to eat and drink in the host's home, then your situation would hold.  But, since it is not normal, your example does not work.

FlyingAxe:

Anenome:

Because if you renege on your promise, the other party has not been harmed, neither have you been harmed. Thus there's nothing for them to demand of you. You were going to exchange title but didn't. Neither did you take any value from the other party. Therefore, they have not been harmed.

I am an owner of an ambulance company; you call me when you have a heart attack, and I promise to come. I come, load you in the ambulance, but then, half-way to the hospital, I realize that you're a Martian. I hate Martians. So, I turn around and bring you back home, free of charge. Meanwhile, because I did not help you, you suffered some damage to your body.

In this case, you suffered damage specifically because I promised to help but did not. My promise to help lead you to exclude other services.

True, there's an opportunity cost, also ambulances are not free, so it would indeed be a trade. And, you made a promise contingent on a life-threatening need which carries with it an obligation. In my scenario there are no such stakes. The life-threatening need changes the equation considerably, creating an obligation once you've accepted a call for help and thus leading the other to exclude.

FlyingAxe:

 A "one-sided contract" is just a gift, and no one can be obligated to give a gift, because then it wouldn't be a gift. It would be a fee or a tax.

If I make a contract to teach you Russian in return to teaching you English, you teach me English, and I never teach you Russian, you also never suffered any loss.

Not true. I would not have taught you english unless you had promised to teach me russian. Therefore, you have obtained a value by fraud, we had a contract to trade, and I have suffered a loss since I was purchasing russian lessons by teaching you english. This scenario is not a one-sided contract but a two-sided one, unlike the idea I was talking about.

FlyingAxe:

You can force me to reimburse you for teaching English, but are you saying that you cannot force me to teach you Russian (or give you enough money to hire another Russian teacher)?

Of course I cannot force you to teach me russian. But I would be due compensation to make me whole. What does this have to do with a one-sided contract? You're just going over the basics of contracts and promises here? Where's the one-sided contract? It's not the principle of not being harmed that matters, it's the idea that a one-sided so-called contract is incapable of harming the other, so therefore there's no recourse if one does not fulfill it.

The only potentialy scenario of harm I can see in a so-called one-sided contract is if someone makes a promise, consideration or not, and the other relies on that promise for calculation of future events. Then they are harmed if you do not fulfill. And the law does recognize that as a valid loss for which compensation should be made.

FlyingAxe:

I guess that's the key question -- do you have a right to be reimbursed for your services only, or do you have a right to demand something that I contractually obligated myself in as a part of our contract? Because if the latter is true, then it seems there can be such a thing as a binding obligation.

There is such a thing as a binding obligation. But, it's important to note that one cannot be forced into an obligation. It is always something that you choose to accept or a consequence of your actions. But if you refuse performance of that obligation it's still monetary compensation that will result, not actual performance unless actual performance is literally the only recourse (in some odd situations). Thus, no one can force a father to show up and be a good father, but if he leaves they can demand child support.

FlyingAxe:

For instance, we signed a contract, in which I perform work for you and you pay me back certain salary and provide medical insurance. Then, after I performed work for you, you go back on your promise. Do I have the right to sue you just for the cost of my work (i.e., "taking back my consideration"), or do I have the right to sue you for whatever you promised to give me in return for the work (i.e., enforcing the obligation you placed on yourself)?

Likely most courts would pro-rate your work, otherwise you would be unfairly overcompensated. If you work say 10 hours, why would you expect to get more than 10 hours pay out of a settlement? Are you referring to the medical insurance? That's monetarily compensated as well.

FlyingAxe:

The question isn't 'why shouldn't it be binding' but rather can you give any reason why it should be binding.

Because once I promise something, I create an obligation no different from any other contractual obligation.

Only if the other person is relying on that promise! Thus is you accept a child under your care, that's essentially one sided, but it's not a contract, it's accepting an obligation. All you've done is discover the difference between a contract and an obligation with this entire discussion :P Which is good for the purposes of being clear about something, but ultimately elemental.

FlyingAxe:

Except, usually, one contractual obligation is mirrored by another, just like transfer of property one way is usually accompanied by a transfer of property the other way. But just like there can be a one-sided transfer of property (a gift), which is binding after the transfer, it seems there should also be a one-sided contractual obligation that would be as binding as any other contractual obligation (one that was accompanied by another obligation going the opposite way). This is assuming the answer to the previous question is that I can sue my employer for whatever he promised, not for the value of my work.

Well look, it's called an obligation, and it's something you put yourself under. Adopting a child is an obligation. Having one is too.

Promising to give a gift doesn't sound like an obligation under most circumstances, unless you specify the gift. Like, let's say an uncle says he's going to pay for your college when you grow up. Because of that, your parents don't open an educational savings account for you. You've relied on his promise. Technically you could sue for that if he failed to perform. Doesn't happen much cause it's family and there's other options.

FlyingAxe:

Another thing:

It seems that if promises are non-binding, then permissions can be non-binding (or non-permitting) as well. For instance, I invite you to sleep over in my house. I tell you that you can eat or drink anything you want. Then I give you a bill for my food, claiming that my permission was not really a transfer of property or a promise, and it was in general, "in the air", while the food that you ate was really my property, and you caused me real damage.

I dunno why you say that. Permission is essentially a waiver. It can be rescinded any time up until it has been performed. You cannot rescind it after the fact and hand over a bill, no law process would accept that. Abusive. Permission in specific terms seems to me like a temporary waiver of title. "Eat what you want" says "title transference is open to you, at your whim."

Anenome:

The life-threatening need changes the equation considerably, creating an obligation once you've accepted a call for help and thus leading the other to exclude.

But why should the life-threatening status of the situation need make any difference? It doesn't in any other case (e.g., just because my neighbor's condition is life threatening, I cannot be compelled to help him). If I promise to give you medicine, and it's not life-saving, my promise is non-binding, but if the medicine I promised is life-saving, and if, relying on my present, you don't buy the medicine from someone else, and if, as a result of my defaulting on my promise, you suffer damage, then my promise has become binding?

Of course I cannot force you to teach me russian. But I would be due compensation to make me whole.

My key question is: compensation for what? For Russian class or for English class? I.e., we make a contract: "FlyingAxe teaches Anenome Russian; Anenome teaches FA English."

FA defaults after Anenome had taught him English. Does Anenome get the compensation for the English class or does he get compensation for a Russian class (imagine that market value of English class is $100, but that of Russian class if $150)? In the first case, he is simply taking back his consideration. In the second case, he is forcing FA to make good on the binding contractual promise that FA has made.

The difference is key (and that is why I was using examples of two-sided contracts) because the second scenario shows that there is such a thing as binding obligation, not merely exchange of considerations.

It seems to me that current market practices support the second model. For instance, if I make a contract with an insurance company and then, when I need it to pay for medical treatment, it backs off — what can I use it for? Do I sue it for the premium that I have paid, or do I sue it for whatever it was supposed to pay for the treatment? It definitely seems the second is the case.

Likely most courts would pro-rate your work, otherwise you would be unfairly overcompensated. If you work say 10 hours, why would you expect to get more than 10 hours pay out of a settlement? Are you referring to the medical insurance? That's monetarily compensated as well.

If the employer promised to pay me higher then market value for wages to attract me (or he promised to give me benefits for the same reason), but then, after the contract had been made, and I performed my work, he refused to pay -- do I get the monetary compensation for my work (i.e., 10 hours times profession's hourly rate on the market) or do I get monetary compensation for what he had promised? (I know I already asked this above; I am just clarifying my question.)

Well look, it's called an obligation, and it's something you put yourself under. Adopting a child is an obligation. Having one is too.

Promising to give a gift doesn't sound like an obligation under most circumstances, unless you specify the gift. Like, let's say an uncle says he's going to pay for your college when you grow up. Because of that, your parents don't open an educational savings account for you. You've relied on his promise. Technically you could sue for that if he failed to perform.

First, I don't really see what the difference is whether the parents relied on the promise or not. If promises are non-binding then how did uncle's promised payment for tuition suddenly became the person's property? It sounds like you're making a distinction between a promise and an obligation, but the difference escapes me. (It's actually interesting that in Jewish Orthodox culture, when people say "I will come over tomorrow and help you with your computer", they usually add "bli neder" ["without a vow"] at the end, to make their promise non-binding. That is because in Jewish law making a neder [an vow] and not fulfilling it is a sin. Not that they suspect they will get sued or anything...)

Second, would I be correct to say that you disagree with Rothbard's view on childcare? That was the essential point of starting this discussion for me (not to get your personal views :), but to figure it out for myself). He seems to think that just like you cannot force a person to help his neighbor to raise his children, nobody can force you to care for your own children. (Or, rather, non-caring for children or their neglect is not a crime, since it violates their rights, as they never had a right to their parents' care.)

But it seems, from the discussion above, when parents place themselves under an implicit obligation to take care of children, they contractually owe it to the children. The situation with the children is no different from the situation with the ambulance driver.

Anenome:

The life-threatening need changes the equation considerably, creating an obligation once you've accepted a call for help and thus leading the other to exclude.

But why should the life-threatening status of the situation need make any difference? It doesn't in any other case (e.g., just because my neighbor's condition is life threatening, I cannot be compelled to help him). If I promise to give you medicine, and it's not life-saving, my promise is non-binding, but if the medicine I promised is life-saving, and if, relying on my present, you don't buy the medicine from someone else, and if, as a result of my defaulting on my promise, you suffer damage, then my promise has become binding?

Of course I cannot force you to teach me russian. But I would be due compensation to make me whole.

My key question is: compensation for what? For Russian class or for English class? I.e., we make a contract: "FlyingAxe teaches Anenome Russian; Anenome teaches FA English."

FA defaults after Anenome had taught him English. Does Anenome get the compensation for the English class or does he get compensation for a Russian class (imagine that market value of English class is $100, but that of Russian class if $150)? In the first case, he is simply taking back his consideration. In the second case, he is forcing FA to make good on the binding contractual promise that FA has made.

The difference is key (and that is why I was using examples of two-sided contracts) because the second scenario shows that there is such a thing as binding obligation, not merely exchange of considerations.

It seems to me that current market practices support the second model. For instance, if I make a contract with an insurance company and then, when I need it to pay for medical treatment, it backs off — what can I sue it for? Do I sue it for the premium that I have paid, or do I sue it for whatever it was supposed to pay for the treatment? It definitely seems the second is the case.

Likely most courts would pro-rate your work, otherwise you would be unfairly overcompensated. If you work say 10 hours, why would you expect to get more than 10 hours pay out of a settlement? Are you referring to the medical insurance? That's monetarily compensated as well.

If the employer promised to pay me higher then market value for wages to attract me (or he promised to give me benefits for the same reason), but then, after the contract had been made, and I performed my work, he refused to pay -- do I get the monetary compensation for my work (i.e., 10 hours times profession's hourly rate on the market) or do I get monetary compensation for what he had promised? (I know I already asked this above; I am just clarifying my question.)

Well look, it's called an obligation, and it's something you put yourself under. Adopting a child is an obligation. Having one is too.

Promising to give a gift doesn't sound like an obligation under most circumstances, unless you specify the gift. Like, let's say an uncle says he's going to pay for your college when you grow up. Because of that, your parents don't open an educational savings account for you. You've relied on his promise. Technically you could sue for that if he failed to perform.

First, I don't really see what the difference is whether the parents relied on the promise or not. If promises are non-binding then how did uncle's promised payment for tuition suddenly became the person's property? It sounds like you're making a distinction between a promise and an obligation, but the difference escapes me. (It's actually interesting that in Jewish Orthodox culture, when people say "I will come over tomorrow and help you with your computer", they usually add "bli neder" ["without a vow"] at the end, to make their promise non-binding. That is because in Jewish law making a neder [an vow] and not fulfilling it is a sin. Not that they suspect they will get sued or anything...)

Second, would I be correct to say that you disagree with Rothbard's view on childcare? That was the essential point of starting this discussion for me (not to get your personal views :), but to figure it out for myself). He seems to think that just like you cannot force a person to help his neighbor to raise his children, nobody can force you to care for your own children. (Or, rather, non-caring for children or their neglect is not a crime, since it doesn't violate their rights, as they never had a right to their parents' care.)

But it seems, from the discussion above, when parents place themselves under an implicit obligation to take care of children, they contractually owe it to the children. The situation with the children is no different from the situation with the ambulance driver.

 FlyingAxe, Eugene's little brother? 

Sorry, I don't get the reference.

FlyingAxe:

 FlyingAxe, Eugene's little brother? 

Sorry, I don't get the reference.

 

Eugene (a member of Mises forums) loves creating such incredibly absurd hypotheticals :)