The Techdirt post Court Rejects Online Terms Of Service That Reserve The Right To Change At Any Time spurred me to post a comment about this, collecting some of the thoughts I’ve had about such matters for a long time.

As I note there, my own theory of contract is presented in my article A Theory of Contracts: Binding Promises, Title Transfer, and Inalienability. And while I of course as a libertarian favor freedom of contract, I am leery of too formulaic or formalistic libertarian positions. Partly this stems from my growing aversion to “armchair” theorizing (see my post The Limits of Armchair Theorizing: The case of Threats). But as an example, and as I noted in the contract article, I disagree with putting so much stock in whether a communication is a “promise” or not (Rothbard, e.g., puts a bit too much emphasis on this, in my view). The question is what the parties meant by their communication–even if the word “promise” is used, this could be intended to effectuate a transfer of title. Another is, say, the over-emphasis on the notion of “incitement” by Rothbard and Block (as discussed in Causation and Aggression). They want to rule out “incitement” as a type of aggression in all cases; to my mind, it’s a more context-dependent determination. Maybe it is, maybe it isn’t.

A similar issue arises in the case of contracts. Many libertarians, often with only a crude understanding of the nature of contracts, just assume, Rand-like, some kind of mystical “power” to “bind” oneself by “a contract”. They tend also to equate contracts with a written agreement. [Note: See update below] They thus tend to think that “if it’s written in ink, it’s binding, no matter what”. To my mind, this is too formalistic. A writing is neither necessary nor sufficient to form a contract. Most contracts are not written. They may be oral. They do not even need to be verbal–I hand you a dollar, pointing to the newspaper; you take my dollar and give me the paper. A sale happens, nonverbally (no oral or written communication). And “what is written” is not necessarily dispositive. To my mind, a written agreement is only evidence of what the parties actually agreed to. But it is rebuttable. The written agreement may be very sparse: in which case in the case of disputes, there is no choice but to resort to “gap-fillers,” default rules, and the like. Or the agreement may contain ambiguities or even inconsistencies–this may require similar construction methods, or even invalidation of the agreement.

The agreement may not even be intended to be binding, such as in the case of a so-called “simulation” (a contract which, by mutual agreement, does not express the true intent of the parties; see my Civil Law to Common Law Dictionary, entry for “Simulation”; Louisiana Civil Code, arts. 2025-27).

Or there may be fraud or deception which nullifies the whole writing or requires certain provisions not to be enforced.

Given all this, in my view we should not just assume that “whatever is in writing” is part of a binding obligation or enforceable agreement. This bears on the issue of fine print, and so-called shrink-wrap and clickwrap agreements (incidentally the law of various countries on this issue is discussed in my book Online Contract Formation–which is not bedside reading, n.b.). Libertarians seem to just assume, too quickly in my view, that all such fine print should be enforceable. These assumptions seem to be made in the absence of the awareness of the nuances noted above.So one problem with click-wrap agreements, for example, is that there is (arguably) often no “meeting of the minds” on the fine print–and the vendor is fully aware of this. If the customers routinely just click the “I have read and agree to these terms” box but never do read it, and the vendor knows this, then it’s a sort of fiction to assume both sides have actually agreed on these terms. For example supposed buried in fine print for a contract for sale of a $20 software program is the provision, “Buyer agrees to give 50% of his income to Vendor for life.” Is this enforceable? Of course not. Why not? Because there was no agreement to this. So the “hidden” terms have to be in some sense reasonable, at the least. (Here, too, “inalienability” concerns may kick in–even if the party is fully aware he is signing away his life income, or his kidney, or life, say, this may not be enforceable for inalienability concerns–see, on this, the contract article noted above, plus my article Inalienability and Punishment.)

I am not saying that clickwrap and fine print is not enforceable–I’m just saying that the libertarian view on property rights and contracts does not require that we formalistically equate “the contract” with “the writing,” and it does not require we figure all this out from our armchairs. The libertarian view can recognize that contracts about consensual, intentional transfers of title; that manifesting such consent is a matter ofcommunication; that making determinations about the nature of a contract, or title transfer, is necessarily a fact-specific, context-bound inquiry.

Update: I stumbled across some interesting language in an older (1825) version of the Louisiana Civil Codes, which beautifully supports what I have said many time to libertarian formalists and literalists who keep equating the contract with the writing:

Art. 1755.–The contract must not be confounded with the instrument in writing by which it is witnessed. The contract may subsist, although the written act may, for some defect, be declared void ; and the written act may be good and authentic, although the contract it witnesses be illegal. The contract itself is only void for some cause or defect determined by law.

I can’t find an analogue in the modern La. Civil Code (see Arts. 1906, 1907 etc.); this provision must have been removed at some point.

Update 2: See my post Masnick: Replying To An Email Does Not Create A Contract (And Does Not Require Walmart Pay $600 Billion).

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