Exploring the Enforceability of Promises in Contract Law: Moral vs. Legal Obligations (Full Transcript)

Speaker 1: One of the great puzzles associated with the law of contracts asks this very simple question. Are all promises to be enforceable? As a moral matter, many people say if you make a promise, you ought to keep it. But it's a very different proposition to say that you're under a moral obligation and to say that the entire legal machinery, costly as it is, should be used to enforce these particular promises. The rough social distinction that's made is quite accurate. It says that promises which are essentially designed to encourage social obligations, meeting people for dinner, for example, usually have no intention to create legal relationships. So if they are in breach and somebody doesn't show up for the dinner, it's a set of social sanctions that are going to be applied. On the other hand, when you start having commercial transactions with deal with the transfer of services on the one hand or the supply of goods and land on the other, legal enforcement is generally to be presumed. And therefore, typically after a writing is done, these things will turn out to be enforceable. Whenever there is a bargain between the two parties, where each side agrees to surrender something to the other in exchange for what they get back, these promises supported by consideration are always enforceable. And many contracts by definition fall into this class. You cannot have a contract for sale unless somebody agrees to pay a price for a good, so each side is supplied consideration to another. You cannot have a contract for employment unless it turns out that one guy agrees to supply services and the other party agrees to pay for them. But there are classes of promises which in fact are not in the forms of quid pro quo, and the question is whether these are enforceable. You owe me $1,000 and I tell you forget about it, you could pay me $500. Can I then turn around later and say look, there was no consideration that supported the original forgiveness of the debt, and so therefore you can now be asked to pay the whole thing. The Roman solution was when it came to the discharge of obligations, if you forgave part of an obligation, it could not be enforced. Under the American law and the English law, it's much murkier with respect to this particular element, and so the basic rule is that bargains are a huge portion of the landscape. These one-sided promises are less frequent. Typically in business they're respected because people wish to keep the goodwill of their trading partners, but there are a constant stream of cases in which it's unclear as to whether or not the needed reliance for the enforcement of these one-sided promises is in fact available.