Untrue Things People Believe
This is the fifteenth article addressing those things most people believe that are not true introduced in the article, "Most Of What You Believe Is Not True." To see all the articles, or any other one, please see the Index.
A contract is a documented agreement between two or more parties (individuals or corporations) that is legally binding.
Though technically a contract does not have to be written, since the whole purpose of a contract is to ensure all parties to the agreement fulfill their obligation giving all parties legal recourse in case of breach of contract, without a written record of the agreement, such contracts are usually unenforceable.
What Is Right About Contracts
When honest individuals wish to agree on some transaction they may simply agree and get on with their business. In cases where the agreement is complex, involving several services, or multiple products, more than a couple of parties, or a long term, a written record is useful for ensuring all parties are aware of the details and of exactly what their obligation is and keeping track of the progress of the agreed transaction. This would not actually be a contract but would serve the only good purpose of one excluding government enforcement.
What Is Wrong With Contracts
Beyond being a good way to keep a good record of the details of a contracted agreement, almost everything else contracts are supposed to be for is mistaken.
Contracts, like corporations and so-called intellectual property, since they are considered legally binding, could have no existence outside the context of a government. It is in fact the "legality" of contracts that is the basis of the widely accepted but mistaken belief that contracts are a kind of universal solution to both social and economic problems.
No piece of paper has ever made anyone do, or not do, anything. The belief that a piece of paper signed by someone has some kind of power to make anyone do what they have agreed to do is sheer superstition.
If one has an agreement with someone who is honest and whose own integrity would never let him breach an agreement, there would be no need for any kind of "legally binding" document. It would be enough to simply have a record of what was agreed to, without any need to have an agreement sanctioned by the government. It is only because people believe a contract gives them protection against individuals (or corporations) that are not honest (or simply not diligent) that they want a legally binding contract, a contract they can have the government enforce.
Not even the government can force someone to do something they are determined not to do, however. In many cases a breached contract means the damage caused is already irreparable. Even when it isn't, there is no way a government can force someone to produce a promised product or perform a promised service they refuse to do; it can only punish the one who breaches a contract, which does nothing for the party damaged by it.
[NOTE: Most contract disputes are much more complicated than a simple breach, and the litigation is usually complex and expensive. Some resolutions might be good, but in most cases everyone loses except the lawyers. No one is going to make contracts go away, but individuals, at least, need to be aware of their real nature. They offer almost no real protection, so one must be very careful not to trust in them and to provide their own protection.]
The belief in contracts is just another of the things people believe government is a solution to, the belief that government can make the world (at least of business and commerce) safe and predictable. It cannot.