Contracts

Contracts.—A contract may be deined as a mutual agreement concerning the transfer of a right.

1. A contract is a mutual agreement, i.e., there must be consent of at least two parties to the same object. An offer made but not accepted is not a contract, for only one party consents.

2. The contractants transfer a right which produces in most instances under justice a corresponding obligation of doing or omitting something. Promises, pledges, pacts, etc., while they impose obligations based on truthfulness, loyalty, etc., are not contracts. See 1888 (a).

3. The obligation in justice may be on both sides (bilateral) or only on one side (unilateral), but consent must be on both sides.

The elements of a contract are made up of essentials and accidentals. (a) The essentials include the subject-matter, the parties contractant, their agreement, and the external form that manifests the agreement. (b) The accidentals include bonds, oaths, conditions and modes.

The subject-matter of a contract—that is, the thing or action or forbearance with which the agreement is concerned—must have the following qualities:

(a) it must be something possible, for one may not undertake what one cannot perform. Thus, one cannot bind oneself by an accessory contract (such as suretyship), if the principal contract itself is ipso facto invalid. But if the impossibility is only moral (i.e., great difficulty), one who knowingly undertakes the arduous is bound to fulfill his promise; if it is only partial, one is held to the part that is possible; if it is culpable, one is bound to repair damage caused the other party through non-fulfillment;

(b) it must be something disposable, for one may not transfer that over which one has no right of control or transfer. Thus, one may not contract to sell public property that is extra commercium, or property of which one has only the possession, or goods over which others have a claim (e.g., a debtor may not bestow gifts to the detriment of creditors’ rights), or goods not transferable for pay (e.g., payment for a favorable decision by a judge, or property owed to a third party) or for money (e.g., academic degrees, public offices, Sacraments, indulgences);

(c) it must be something existent and determinable, for no one wishes to contract for a right that is valueless and illusory. Thus, one may not sell shares of a stock company that has no assets, or an indefinite house or lot or chattel;

(d) it must be something good and lawful, for one may not bind oneself to iniquity. If it is sinful (e.g., a contract to sell a house in order to spite a third party), the agreement is per se valid. But if the substance is evil (e.g., a contract for fornication made with a prostitute), the agreement is null before the performance of the promised sin; but it seems to many that after performance of the sin the promisor is obliged to pay the money promised, unless the law makes the contract void (see 1886 c). If the law merely denies protection to a sinful engagement, or forbids it under penalty, it would seem that after performance of the sin one may follow, as far as strict justice is concerned, the rule that right is with the possessor. In the United States immoral and illegal contracts and those that are opposed to public policy are generally regarded as null, but in some cases the law declares immoral conditions de futuro non-existent and considers the agreement to which they are added as valid (e.g., wills and gifts inter vivos in some codes).

Sinful Contracts.—There is no form of contract that may not be made sinful as to its substance on account of the wicked offer or consideration (e.g., sale may deal with immoral objects, labor may be given to criminal projects), but there are certain forms of contract that are particularly open to abuse and hence are frequently associated with evil circumstances or results. Some contracts are often illicit according to natural law.

(a) Thus, a gift is sinful, on the part of the donor, when it is made by an employer for the purpose of seducing a servant, and on the part of the servant, when it is accepted for the purpose of encouraging the unlawful attentions of the employer; but if the gift is unconditional, there is no obligation in justice to return it.

(b) Borrowing is sinful, when the lender is in greater need, or when one becomes unduly obligated to the lender; lending is sinful when the lender cannot afford to part with the thing loaned, or when the borrower is encouraged in thriftlessness, or when he will make evil use of the thing borrowed, etc.

(c) Wagers are frequently sinful, since many of them are incitements to sin (e.g., a bet that another is afraid to get drunk), or results of sinful motives (e.g., bets made in order to deceive, or to satisfy avarice, or to live without work), or causes of great evils (e.g., destitution of families, frauds, scandal, and corruption).

(d) Gaming is sinful when the form of the sport is objectionable (e.g., the ancient gladiatorial fights in which the combatants killed each other), or when the motives or circumstances are wrong (e.g., to play as a professional gambler so as to avoid work, to play cards all day Sunday, to play for higher stakes than one can afford, to spend time in “gambling hells”).

(e) Lottery is sinful when the object is bad (e.g., the raffle of an important office with the risk that incompetent persons may be chosen), or when the circumstances are bad (e.g., if persons are led into superstition or idleness and prodigality).

(f) Speculation is sinful in many instances, since it often brings on a gambling fever that makes the speculator useless to himself and his dependents, and causes poverty and crime.

(g) Pawning of property is often unjustifiable, since it makes persons deprive themselves of necessary property in order to indulge in some useless or extravagant whim with borrowed money.

Illegal Contracts.—For reasons of public policy the positive law puts its disapproval on many of the above-mentioned contracts, at least in certain instances.

(a) Thus, sometimes the law makes a contract unenforceable in court, though the natural obligation is not affected. Hence, if a wager is only denied a hearing before a judge, the winner may keep his gains, and the loser should pay.

(b) If the law merely declares that a contract is illegal, the effect seems to be that the contract retains its natural validity unless the party who has suffered by it wishes to disavow it. As to the sinfulness of such a contract, that depends on whether or not the law is penal or preceptive in intent. Thus, many regard laws that make betting illegal as preceptive under venial sin, while others regard them as punitive only. Other examples of illegal contracts are: gifts made to a judge in connection with a trial; lottery, in Great Britain and the United States; certain games of chance, in some States; and in Canon Law, as regards the clergy, alcatory games for money, speculation and trading (Canons 138, 142).

(c) If the law makes a contract voidable, the effect is that the contract possesses its natural force until adverse decision is given by court. Hence, if a wager is voidable in law, the winner may keep his gains until obliged by a judge to give them up, but the loser is not bound to pay, unless he confirms the wager.

(d) If the law makes the contract ipso facto void, the agreement loses its natural force (see 558-560). In most of our States, wagering contracts are illegal and void whether by statute or by judicial decision. In many of these States the statute permits the recovery of the money from the winner or the stakeholder. Gifts offered as bribes are invalid, and those who give or take such gifts are guilty of serious sin and of a criminal offense. In some of our States, certain gaming contracts are also null.

Qualities Necessary in the Parties Contractant.—The parties contractant must have the following qualities:

(a) from natural law it is necessary that they have the use of reason sufficient to understand what they are doing. Incompetent are babies and the insane, and also those who are totally drunk or otherwise temporarily deranged. Less competent are the half-witted and those who need a guardian in important matters;

(b) from positive law it is necessary that they be not legally excluded. In Canon Law administrators of church property and solemnly professed religious are unable to make certain contracts (Canons 1527, 536). In civil law there are restrictions on the contractual powers of minors, wives, aliens, guardians and corporations. Persons not yet conceived are not capable in civil law of receiving a donation, and there are many prohibitions against the tender or acceptance of gifts by those who can reasonably be suspected of exercising undue influence or of being subject to undue influence.

Legal Privileges of Minors.—The law grants certain benefits to minors and the like; for example, in some cases they are not bound by a non-executed agreement, while the other party is bound, or in an executed contract they may recover property without restoring or offering to restore the consideration, if they have nothing with which to replace it.

(a) Minors and other persons who are legally incompetent to contract, may avail themselves of the benefits of the law with a good conscience, if they are in good faith; for it is just that the law should protect those who are unable to protect themselves, and those who make contracts with such persons should know that they (the competent parties) act at their own risk.

(b) Minors and other persons legally incompetent may not avail themselves of the benefit of the law if they have acted in bad faith (e.g., if a minor by deceit induced the other party to sell to him).

Qualities Necessary for Valid Consent.—The agreement or consent of the contracting parties must have the following qualities:

(a) it must be internal, that is, one must accept in will and not merely in words the proposal or consideration offered by the other party. If one consents only to the form of the contract, the contract is null, and the same is probably true if one does not accept internally the obligations of the contract; if one consents to the obligations, but does not intend to fulfill them, the contract is valid, but unlawful. One who contracts invalidly sins, and is bound in the external forum to keep the contract seriously made, and in the internal forum to repair the damage to the other party by giving true consent or making restitution. One who contracts unlawfully also sins, and is bound to the engagement;

(b) it must be external, that is, one must manifest in some sensible way one’s agreement to the proposition contained in an offered contract. Silence gives consent only when the contract is favorable to the party who is silent, or when that party should and easily could manifest his lack of consent, if the proposal did not please him. In the case of contracts between parties who are not in each other’s presence, the intimation to the offerer of the offeree’s acceptance is not necessary for validity, if the contract is gratuitous; but the contrary seems to be true, at least per se, if the contract is onerous. We shall speak later (1885) on the legal formalities required in contracts;

(c) it must be mutual, that is, there must be a meeting of minds in the same sense, or agreement of both parties to the same thing. Mutuality requires that consent be contemporaneous, that is, that the acceptance of one be given while the offer of the other still holds good. But it does not require that the parties be in each other’s presence, or that they contract through direct personal communication, or (at least according to natural law) that the knowledge of the accomplishment of mutual agreement be known to the offerer. The law in the United States generally is that an offer may be withdrawn immediately or after a reasonable time, unless it was made on time for a consideration; and that a contract between the absent begins only on receipt by the offerer of the acceptance of the offeree, if the former stipulated for this, or if the offerer uses one means of communication as his agency and the offeree another. In other cases it begins the moment that acceptance is entrusted to the agent of the offerer;

(d) it must be free, that is, it must have the advertence and voluntariness necessary for a human act. If the contract is of grave import, there should be the same kind of deliberation as is necessary for commission of a mortal sin (see 173 sqq.); if it is of lesser import, the deliberation should correspond with the seriousness of the case. But some authors think there should be perfect deliberation in every contract, since the contractants are assuming obligations of justice.

Defects that Invalidate Consent.—The defects that vitiate consent by taking away knowledge or choice render contracts either void or voidable (see 40-55). These impediments are the following:

(a) error, which is a judgment of fact or of law in reference to the contract, not in harmony with the truth, but not maliciously caused by other persons. If error is substantial (that is, about the nature of the contract or the nature of the subject-matter of the contract), the agreement is naturally void; if error is only accidental (that is, about features of the contract, subject-matter or co-contractant, that are only incidentally intended), an onerous agreement is naturally valid, but positive law in the interest of freedom will often grant the privilege of rescindment (see Canon 1684, n. 2). But if error cannot be proved, courts will stand for the validity of a contract;

(b) fraud, which is error or mistake about a contract caused in one of the parties by the dishonest representations of the other party or of a third person (e.g., when an insurance agent deceives about the benefits, or a policy-taker deceives about his age or health). Fraud exists, then, when there is intention, at least indirect, to mislead, and statements, acts or omissions calculated to mislead; but the usual boasts of vendors and advertisers about the wonderful excellence of their wares are not fraudulent, since the public understands that such talk must be taken cum grano salis. The effects of fraud on the value of contracts are the same as those produced by error; but it should be noted that the person guilty of the fraud is bound to make good the losses of the injured party, even though the contract be valid and not rescindable, or though the guilty person be not a party to the contract;

(c) fear, which is a disturbance of mind caused by the belief that some danger is impending on oneself or others (see 41 sqq.). It makes a contract invalid in natural law, when it takes away all consent (e.g., when it overpowers the reason, or makes one dissent internally from what is agreed to externally), and probably also when it takes away perfect freedom in a gratuitous contract, or makes one enter into a contract for immunity from an unjust vexation; it renders an act or engagement invalid according to positive law in many special cases (e.g., the Canons declare null elections, resignations, marriages, vows, etc., which are made under the influence of fear). Contracts are considered naturally voidable if one of the parties unjustly extorts the consent of the other by grave fear, or if a third party intimidates a person into bestowing something through gratuitous contract; and the positive law generally treats agreements entered into under grave fear as rescindible (see Canon 103, n. 2). Fear unjustly caused, even though it does not make a contract void or voidable, is at times a reason for the duty of restitution, as when a third party by his unjust threats forces an innocent person to make expensive contracts as a measure of protection, and probably also when a third party directly constrains one to make an onerous contract with a person who knows nothing about the coercion. Fear, no matter how great, does not in any way weaken a contract, if there is consent and the fear is induced by a natural cause (e.g., a storm), or by a human cause acting justly (e.g., an injured man threatening a lawsuit);

(d) violence or coercion, which is like to fear, the latter being moral force and the former physical force (see 52). According to natural law, violence invalidates a contract, unless we suppose that it is only concomitant, as when Sempronius uses coercion to make Balbus sign a contract which Balbus is really willing to sign. Positive law does not recognize, or will set aside, agreements made under overpowering constraint (see Canon 103, n. 1).

Form of Contract.—The form of a contract is the external manner in which, according to the positive law, the internal consent of the parties must be expressed and manifested.

(a) Thus, Canon Law in certain contracts (e.g., engagement of marriage, marriage, alienation of church property) requires specified solemnities under pain of nullity of act.

(b) Civil law in the United States designates various formalities to be used in transfers of property (e.g., that a deed for real estate be written, signed, sealed and attested; that a gift be made by delivery or equivalent act; that certain contracts be in writing; that no contract be of worth unless it be for a consideration, or else be on paper with seal attached). The law has the right to annul informal contracts ipso facto, but whether this is the intention in modern codes is a matter of dispute. The practical rule to be followed, then, is that the possessor is to be favored, unless there has been a court decision against his claim. It should be noted, too, that some legal conditions, such as valuable consideration in simple contracts, are required for enforceability, not for validity, and hence a good contract wanting some such condition, though indefensible before the courts, is obligatory in conscience.

The Accidentals of a Contract.—(a) Bond is the agreement by the obligor of a contract to pay a certain forfeit to the obligee, if the former does not perform his contract or does not perform it before a certain date. This agreement obliges in conscience, if the promise was seriously made, if the penalty is not excessive, and if the breach of agreement is culpable.

(b) Oaths added to contracts have moral effects on the contracts themselves and also on acts contrary to them. As regards the contract, an oath adds the obligation of religion to that of justice, if the contract is valid and irrescindable; and the common opinion is that it strengthens a contract extrinsically, that is, it induces an obligation of religion to keep the promise, if the oath is invalid or rescindable by positive law only and in favor of a private privilege; but an oath in no way strengthens a contract that is naturally invalid or rescindable positively on account of the public good. As regards acts that are contrary to an invalid or rescindable contract that was confirmed by a valid oath, they are sinful, as being irreligious, but not invalid nor unjust (see 2260).

(c) Conditions are accidents or circumstances so added to a contract that the consent or dissent is made dependent upon their existence or fulfillment. An immoral condition, if unfulfilled, takes from the contract all obligation, exception being made for separable parts that are not affected by the immoral clause; but if it has been fulfilled, it seems that there is a moral obligation to pay the consideration promised (see 1878 d).

(d) Modes are accidents or circumstances so added to a contract as to qualify the rights or duties of the contractants, or the purpose, matter or time of the contract, but not so as to make the consent dependent on the fulfillment of the thing designated. Thus, if Titus leaves money to Balbus, chiefly because Balbus is his nephew, and secondarily because he imposes on Balbus the obligation of using the money for his education, Balbus in accepting the money accepts also the obligation, but the gift does not lapse if the obligation is not complied with. If a donor adds an immoral mode to his gift (e.g., that the donee use in immoral ways the money left him), this purpose is regarded as non-existent and the gift stands in spite of it. If an agent violates a mode (e.g., he pays $1001 when he was directed to pay $1000) but not a condition (e.g., that he purchase land and not a house), the contract stands.

The Moral Obligation of Entering into a Contract.—(a) There is a duty of justice when one is under public or private engagement to make a contract. Examples are a merchant who opens a store for public patronage, or an auctioneer who holds a sale before invited patrons, or an owner who makes with another person a contract to sell, or a man and woman who make solemn espousals.

(b) There is a duty of charity when a neighbor is in such need that he deserves to be helped, for example, by a loan or by assistance to make a loan: “From him that would borrow of thee turn not away” (Matt., v. 42); “A good man is surety for his neighbor” (Ecclus., xxix. 18).

Every valid contract obliges to faithful performance as a duty of conscience, even though it be unenforceable and without civil obligation. We shall discuss the properties of this obligation.

(a) Quality of the Obligation.—Onerous contracts oblige in virtue of commutative justice and under pain of restitution; gratuitous contracts oblige according to some from justice, according to others from fidelity, according to others from fidelity or justice as the obligor intends (see 1692, 1753). In practice one may follow the rule that a liberal promise or wager or other gratuitous contract obliges only from fidelity with no duty of restitution, unless it be certain that the promisor intended to bind himself in justice. One is responsible, however, for damages resultant on breach of promise. The obligation seems to be one of legal justice only when the thing promised is something on which a pecuniary value cannot be set and consists in compliance with law (e.g., in suretyship or bail for keeping the peace or appearing in court).

(b) Quantity of Obligation.—In onerous contracts the degree of obligation depends on the importance of the subject matter, and hence it is a mortal sin to violate a contract in which a grave right is concerned; in gratuitous contracts the degree of obligation depends entirely, according to some, on the will of the person who liberally binds himself, but others hold that it depends on the importance of the subject-matter.

(c) Subjects of Obligation.—The parties to the contracts and those who take their place (e.g., heirs, executors) or who are responsible for the contract (e.g., those who commanded the agreement) are morally bound to fulfill the agreement, while others are bound not to interfere with the fulfillment.

(d) Objects of Obligation.—Directly, there is the duty of observing what is contained explicitly or implicitly in the agreement, and indirectly of making good any losses caused by breach of contract. A rescindable contract obliges until it is lawfully disaffirmed by the party who has the right to break it; a quasi-contract imposes on the party who has benefited by the services or expenses of another a moral obligation of making compensation. If a contract transfers ownership (e.g., contract of sale passing title to buyer, mutuum), the transferee must bear the risks and expenses of the thing transferred; but if it does not transfer ownership (e.g., contract to sell, commodatum) or has not yet done so (e.g., contract of sale in which title will pass later, on delivery or payment), the transferer has the risk and expense (see 1796).

Cessation of Obligation.—The obligation of a contract ceases in various ways: (a) by action of the contractants, as when a promisee renounces his right, or each of the parties to a promise has made a gratuitous promise in favor of the other and one refuses to keep his word; (b) by action of law, for example, by prescription, by annulment; (c) by impossibility, as when a thing freely promised has become unlawful or useless, or when the donee of a gift mortis causae dies before the donor.