Bart Jansen

Nyenrode Business University

PhD researcher Ethics and Law
Lecturer Business Law, Business Ethics, Philosophy of Law
University of Leiden
Lecturer Philosophy of Law
University of Amsterdam
Lecturer Sociology of Law
Philosophy of Contract Law
 • In public law
Philosophy of
• In private Law
the Contract
• in a business Environment
Contract Philosophy in Public Law
State versus Civilian
Institutions according to ‘trias politica’

Monarchy Aristocracy Democracy

Vigor, Quality, wisdom Legitimacy
decisiveness

Executive Judicial Legislative

Power Power Power
Explanation trias politica: the contract
Fictive presumption: ‘state of nature’
Similarities > Differences = ‘homo æqualis’
 Explanation trias politica: the contract
Fictive presumption: ‘state of nature’
Th. Hobbes
Similarities > Differences = ‘homo æqualis’

Leviathan, 1651
• SoN: ‘War of all against all’.
• Man is a wolf.
• Man must give up the right to
self-direction.
• Absolutely sovereign,
monarch.
• Task: peace / security.
• Transfer all rights except right
to life.
• No right to object against the
state.
Explanation trias politica: the contract
Fictive presumption: ‘state of nature’
Similarities > Differences = ‘homo æqualis’

J. Locke
2nd Treatise of Government, 1689
• SoN: peaceful, possibly
conflicts.
• Man is a social animal.
• Strive for peace / conflict
resolution.
• Mixed government.
• Inalienable rights.
Right to life, health, freedom,
property.
• People remain sovereign.
• Right to object.
Explanation trias politica: the contract
Fictive presumption: ‘state of nature’
Similarities > Differences = ‘homo æqualis’

J-J. Rousseau
Du Contrat Social, 1762
• SoN: absolute
• Man is an angel
• “Man is born free, and
everywhere he is in chains”
• General will cannot go astray.
• The collective and individual
become one, they share the
same interests.
• People need to be asked about
their wishes, what they want,
their 'will'.
 Explanation trias politica: the contract
Fictive presumption: ‘state of nature’
Similarities > Differences = ‘homo æqualis’

J-J. Rousseau
Th. Hobbes

Leviathan, 1651
• SoN: ‘War of all against all’.
• Man is a wolf.
• Man must give up the right to
self-direction.
• Absolutely sovereign,
monarch.
• Task: peace / security.
• Transfer all rights except right
to life.
• No right to object against the
state.
J. Locke
2nd Treatise of Government, 1689
• SoN: peaceful, possibly
conflicts.
• Man is a social animal.
• Strive for peace / conflict
resolution.
• Mixed government.
• Inalienable rights.
Right to life, health, freedom,
property.
• People remain sovereign.
• Right to object.
Du Contrat Social, 1762
• SoN: absolute
• Man is an angel
• “Man is born free, and
everywhere he is in chains”
• General will cannot go astray.
• The collective and individual
become one, they share the
same interests.
• People need to be asked about
their wishes, what they want,
their 'will'.
 Verklaring trias politica: het contract
Fictieve presumptie: natuurtoestand
Overeenkomsten > verschillen = homo æqualis
Th. Hobbes
Leviathan, 1651
• NT: Oorlog van allen tegen
allen
STATE
• De mens is een wolf
• Opgeven recht eigenrichting
• Absoluut soeverein, monarch
• Taak: vrede/veiligheid
• Alle rechten overdragen,
behalve recht op leven
• Geen recht op verzet
J-J. Rousseau
J. Locke
2nd Treatise of Government, 1689 Du Contrat Social, 1762
• NT: vredig, evt. conflicten • NT: absolute vrijheid
• De mens is sociaal dier • De mens is een engel
LIBERAL
• Streven naar
vrede/conflictbeslechting
• Mixed government
DEMOCRA
• “De mens wordt vrij geboren
en is alom geketend”
• Algemene wil kan niet dwalen
• Onvervreemdbare rechten
Recht op leven, gezondheid,
vrijheid, eigendom
TIC
• Collectief en individu worden
één, zelfde belangen
• Mensen moeten worden
• Volk blijft soeverein gevraagd naar hun wil
• Recht op verzet
“LIBERAL DEMOCRATIC STATE”
Contract Philosophy in Privat Law
Civilian versus Civilian
 • What is a contract?
• Contract embodies specific form of mutual
human relationships = mutuality.
• Mutuality can be distinguished from reciprocity
Development and rational reciprocity.
• Meaning of a contract for freedom
of the Contract (development up to the 19th century).
• Problematic side contract (visible from the end
of the nineteenth century).
• Law repairs undesirable consequences.
 • Contract is an agreement.
• “An agreement is established through an
What is a offer and its acceptance.”
Contract? • Contract is a bilateral obligation whereby
the parties are bound by what they have
agreed (legally enforceable).
• Contract Freedom:
• The person is free to determine whether or not he will conclude
an agreement.
• The person is free to determine with whom he wants to conclude
an agreement.
• The person is free to determine the content of an agreement.
• In other words: the freedom of legal subjects to
Freedom of
determine the content, effect and form of contract.
• This means that there is freedom of negotiation.
Contract
• "A legal act that is contrary to good morals or public
order because of its content or purport is invalid.“
• No full contractual freedom.
For the 18th century:
reciprocity

• Founded on gift: give something with the

expectation of getting something back someday.
• Not the object of contracting central but the
bond.
• Not only in family or among friends, but also in
feudal relationships (gentleman and servant).
• Performance not clearly defined, not
enforceable.
• Gift is natural if personal recognition.
• Multiple relationships, includes whole person.
• Trust.
 • Contract and free market.
• Exchange of clearly defined performance and
consideration.
• For what belongs, cross over immediately.
• It is not so much the bond that matters.
• Enter into your (employment) contracts of your
18th and 19th choice.
• Contract relationship does not include the entire
centuries: person.
• Object or work performance is central, not the
mutuality bond.
• Based on distrust, that's why agreements are
precisely recorded.
• Also extends to strangers.
• Liberating: withdrawing from feudal power
structures, problematic sides become visible from
the 19th century.
18th and 19th
centuries: mutuality

• Appreciation free market and contract

freedom based on mutuality.
• Orientation on own interest: serves social
interest.
• Adam Smith (1723-1790), An Inquiry into
the Nature and Causes of The Wealth of
Nations, Book IV Chapter 2.
Adam Smith (1723-1790), An Inquiry into the Nature
and Causes of The Wealth of Nations, Boek IV, c. 2:

“Every individual endeavours to employ his

capital so that its produce may be of the
greatest value. He generally neither intends to
promote the public interest, nor knows how
much he is promoting it. He intends only his
own security, only his own gain. And he is in
this led by an invisible hand to promote an end
which was no part of his intention. By pursuing
his own interest he frequently promotes that of
the society more effectually than he really
intends to promote it.”
 Problematic Sides of a Free
Market

1. No material equal freedom.

2. Problem of collective
action.
3. Commodification and
commercialization.
1. No material equal freedom.

• Formal freedom does not

imply material equal
freedom.
• Free market (laissez faire)
and industrialization:
poverty in large parts of
the population (freedom to
contract?).
2. Problem of
Collective Action
• Collective good: good with every interest,
and nobody can be excluded from the
advantage of that good. Examples:
• Dijk.
• Defence army.
• Clean Air.
• Problem collective action: collective good
does not come about, as each individual is
inclined to withdraw from activities aimed
at realization (free-rider).
• Two reasons for attractiveness free-rider
option:
• Most advantageous is that all others achieve well
collectively, and you do nothing yourself.
• Distrust of others, anticipation of their choice for
free riding.
2. Problem of
Collective Action

Solutions:
• Voluntary cooperation
(presupposes mandatory
standard).
• Forcing from outside
(mandatory or via tax).
 Basis development welfare state.
• Also based on gift, but not on
personal recognition.
1900 to 1980: • Gift, because not exactly certain
rational performance and consideration.
reciprocity • Willingness to give indirectly to
strangers.
• Based on trust in institutions
(government and law).
After 1980: revaluation of the
contract, i.e. mutuality.
• Especially visible as around 1980: marketing and
privatization are seen as a remedy for
undesirable effects of the welfare state.
• Danger of commodification: the transformation
of goods, services, ideas and people into
commodities or objects of trade that were
previously performed as a matter without
compensation.
• Two objections:
• The intrinsic value of goods / services can be
corrupted by making them available for payment.
• Inequality.
 Development of the Contract

>19th
<18th Century
Century until 1980

18th and >1980

19th
Century
The Contract in a
Business Environment
Stewart Macaulay: ‘Non-contractual relations in
business: a preliminary study’, American Sociological
Review 28: 55-67, 1963.

• Description of the functioning of

contract law in the business world.
• Most influential contribution to post-
war sociology.
• What is the use of contract law?
• Who uses it?
• When and how?
• Law in the books vs law in action.
 • Macaulay used a large number of business
people and lawyers for his research.
Meaning of • A contract is nothing more than a way in which
contract law in exchange transactions are entered into with the
possibility of enforcing compliance with
a business sanctions and with a rational planning of the
contract.
world • The term "contract" is an abstract term that
indicates a certain type of relationship.
 • Regulate the consequences of default
When drafting a (“wanprestasi”): “Every failure to fulfill an
obligation obliges the debtor to compensate the
contract it can damage that the creditor suffers as a result,
unless the failure can not be attributed to the
be important to debtor.”
plan or • Including legal sanctions as a stick (penalty
clause for late delivery).
negotiate
• Establishing everyone's obligations (non-
certain matters, competition clause).
for example: • Determine the consequences of uncertain
events for obligations (a strike).
 • Many businessmen appear to have no need for concluding
contracts in practice.
• They rely on someone's word and even take great financial
risks for granted.
• In practice, many things are not planned at all by the
companies.
• Disagreements with regard to the interpretation of the
agreement and the adjustment of contracts are often more
informal in the business world than entering into the
agreement itself.
Observations • If a businessman / entrepreneur wants to continue to rely
on his relationships in the future, he would be wise to
settle disputes with the other party in a non-legal manner.
• A businessman said: "You can settle any dispute if you keep
the lawyers and accountants out of it.“
• Reference to sanctions or to your lawyer is therefore
exceptional.
• Few proceedings are also brought before the courts for
breach of contract.
Why is contract law often not used in practice?

Own standards:
• An appointment is almost sacred:
fulfillment is almost inevitable.
• They are obliged to deliver a good
product.
• The contract is not sacred within business.
• Other factors play just as important a role in doing
business.
• The most important of these is building sustainable
relationships between the parties.
• Many believe that the law does not take sufficient
account of these sustainable relationships because
contract law would only be based on incidental
transactions.
• This is called the doctrine of the relational contract.
• In all this, however, it should be noted that the role
Conclusions
of the lawyer, the arbitrator and the mediator in
disputes within the American business community
has been growing strongly lately.
• Increasing competition has encouraged companies
to take increasingly greater risks (more and more
changing partners).
• As a result, the sustainability of business
relationships has decreased, which means that
contract law has increased in significance.
 • In public law
Contractual
• In private Law
Thinking
• In a business environment