social contract, agreement or covenant by which men are said to have abandoned the "state of nature" to form the society in which they now live. The theory of such a contract, first formulated by the English philosophers Thomas Hobbes (in the Leviathan, 1651) and John Locke, assumes that men at first lived in a state of anarchy in which there was no society, no government, and no organized coercion of the individual by the group. Hobbes maintained that by the social contract men had surrendered their natural liberties in order to enjoy the order and safety of the organized state. Locke made the social contract the basis of his advocacy of popular sovereignty, the idea that the monarch or government must reflect the will of the people. Like Locke, the French philosopher Jean Jacques Rousseau, in Le Contrat social (1762), found the general will a means of establishing reciprocal rights and duties, privileges, and responsibilities as a basis of the state. Similar ideas were used as a justification for both the American and the French revolutions in the 18th cent. Thomas Jefferson held that the preservation of certain natural rights was an essential part of the social contract, and that "consent of the governed" was fundamental to any exercise of governmental power. Although historically important, the theory as a basis of society and the state has generally been discarded by modern social and political scientists.

contract bridge: see bridge.

contract, in law, a promise, enforceable by law, to perform or to refrain from performing some specified act. In a general sense, all civil obligations fall under tort or contract law. Torts are usually characterized as violations of duties that are imposed on all persons and that have been established entirely by law. In contracts, on the other hand, the parties determine, at least in part, what their obligations to one another will be. Special types of contracts are given separate articles, e.g., negotiable instrument, insurance, and deed.

Criteria for Enforcement

For a contract to be valid, both parties must indicate that they agree to its terms. This is accomplished when one party submits an offer that the other accepts within a reasonable time or a stipulated period. If the terms of the acceptance vary from those of the offer, that "acceptance" legally constitutes a counteroffer; the original offering party may then accept it or reject it. At any time prior to acceptance, the offer may be rescinded on notice unless the offering party is bound by a separate option contract not to withdraw. Only those terms expressed in the contract can be enforced; secret intentions are not recognized. For a contract to be binding, it must not have an immoral or a criminal purpose or be against public policy.

Other criteria for the enforcement of contracts have varied. In the earliest type of enforceable promises, it was the form of the contract (e.g., a sealed instrument) or the ceremony accompanying its execution that marked the essence of the transaction; contracts not sealed or not dignified by ceremonies held a lesser status, and were therefore not always enforceable. The importance of promises in commercial and industrial society produced a new criterion, and generally a promise is now enforceable only if it is made in exchange for consideration, i.e., a payment, for some action, or for another promise. In some jurisdictions, statutes have made certain promises enforceable without consideration, e.g., promises to pay debts barred by the statute of limitations. To be enforceable, most contracts must be in writing, to comply with the Statute of Frauds (see Frauds, Statute of).

Since a contract is an agreement, it may be made only by parties with the capacity to reach an understanding. Therefore, individuals suffering from severe mental illness are unable to make binding contracts. Until the late 19th cent., married women were also without contractual capacity, because at common law they were considered the creatures of their husbands and without wills of their own (see husband and wife); this disability has been removed by statute universally. Minors are not bound by their contracts, but they are responsible for the value of goods received in contracts made for necessities of life. Otherwise, a minor may denounce his contracts at any time and on attaining majority may elect whether to affirm or repudiate them (see age of consent).

A contract must also be the uncoerced agreement of the parties; thus, if it is procured by duress or fraud it is void. A contract can be unenforceable if it is so one-sided as to be found unconscionable, where the terms are unreasonably favorable to one party; often the material that constitutes unconscionability is buried in fine print or expressed in obfuscatory jargon. Adhesion contracts, which afford no occasion for the weaker party to bargain over their terms, are often offered to purchasers of consumer goods and services, but are not necessarily unconscionable.

Termination of Contracts

While a contract is still wholly or partly unperformed it is termed executory; contracts may terminate, however, in ways other than by being fully executed. If the object of the contract becomes impossible or unlawful, if the parties make a novation (a new superseding agreement), or if the death of one party prevents that party from rendering personal services he or she had agreed to perform, the contract is terminated. The injured party may also treat the contract as a nullity if the other party refuses to perform. The law provides several remedies for breach of contract. The most usual is money damages for the loss incurred. In cases where some action other than the payment of money was contracted for, a court may grant the plaintiff an injunction ordering specific performance. If one party is unjustly enriched by a contract that he or she then repudiates legally, restitution may be required. A typical example of this is ordering a minor who revokes a contract to restore the things of value that were obtained.

Actual or hypothetical compact between the ruled and their rulers. The original inspiration for the notion may derive from the biblical covenant between God and Abraham, but it is most closely associated with the writings of Thomas Hobbes, John Locke, and Jean-Jacques Rousseau. Hobbes argued that the absolute power of the sovereign is justified by a hypothetical social contract in which the people agree to obey him in all matters in return for a guarantee of peace and security, which they lack in the warlike “state of nature” posited to exist before the contract is made. Locke believed that rulers also were obliged to protect private property and the right to freedom of thought, speech, and worship. Rousseau held that in the state of nature people are unwarlike but also undeveloped in reasoning and morality; in surrendering their individual freedom, they acquire political liberty and civil rights within a system of laws based on the “general will” of the governed. The idea of the social contract influenced the shapers of the American Revolution and the French Revolution and the constitutions that followed them.

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Commercial contracts calling for the purchase or sale of specified quantities of a good at specified future dates. The good in question may be grain, livestock, precious metals, or financial instruments such as treasury bills. Up until the time the contract calls for the delivery of the good, the contract is subject to speculation. Futures contracts originated in the trade in agricultural commodities; for example, American grain farmers were able to sell their harvest in advance on the Chicago Board of Trade, a commodity exchange.

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Agreement between two or more parties that creates for each party a duty to do something (e.g., to provide goods at a certain price according to a specified schedule) or a duty not to do something (e.g., to divulge an employer's trade secrets or financial status to third parties). A party's failure to honour a contract allows the other party or parties to bring an action for damages in a court of law, though arbitration may also be pursued in an effort to keep the matter confidential. In order to be valid, a contract must be entered into both willingly and freely. A contract that violates this principle, including one made with a legal minor or a person deemed mentally incompetent, may be declared unenforceable. A contract also must have a lawful objective.

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