Contract as Voluntary Commutative Justice

Whenever a court enforces a bargain, it does so against someone who regrets having made it. Why should he be bound? Our thesis is that, in principle, a contract of exchange should be enforced when it is economically fair and voluntary. It is economically fair when the performance that each party is to make is equivalent in economic value to the one that he is to receive. It is voluntary when each party receives something that he deems to be of greater personal value to him than what he gives in return. If not, he should only be bound when it would be economically unfair to the other party to release him. Our theory is a modern version of Aristotle's description of contract as voluntary commutative justice. We show how that idea can be made precise using the insights of modern economics. We show how it can explain the principal legal doctrines that govern when a contract of exchange is enforced: unconscionability, liquidated damages, consideration, impracticability, mistake and frustration of purpose