The Declaration of Independence holds that the founding principle of the American society is that all men are created equal and are vested with rights such as the right to life, liberty and the pursuit of happiness, which cannot be taken away. [1] Surely that liberty entails having the freedom to make decisions in the course of one’s life in the pursuit of happiness. A basic understanding of a contract and its accompanying precept of the freedom to contract, is that a contract is a manifestation of a person’s decision to voluntarily exercise his liberty to pursue happiness, as he agrees to enter into a mutual exchange relationship where both parties agree to give up something in order to gain something. [2] The culmination of this contract, or pursuit of happiness, is in obtaining the benefit of the exchange.
However, before a person can offer goods or services as consideration in the exchange, those goods and services must be identified as being lawfully subject to the discretionary ownership rights of the parties. Without laws and doctrine defining the property, or consideration to be exchanged, there would be no legal basis to support the transfer of ownership of property in the exchange relationship. In effect, after close inspection, the idea of entering into an agreement to exchange property, seems to be a function nested in the doctrines of property law with the actual logistics surrounding the exchange being governed by contract law. Because of this, the writer asserts that there is an unbreakable and dependent relationship between contract law and established property law doctrines, which is founded from foundational and Constitutional ideologies relating to the pursuit of happiness.
[1] The Declaration of Independence: Full text, ushistory.org, http://www.ushistory.org/DECLARATION/document/ (last visited Apr 25, 2017).
[2] Brian A. Blum, Contracts 3-4 (6th ed. 2013).
During this discussion, the writer will provide evidence to support this assertion. To bring forth evidence, the writer will use scholarly articles, case law and constitutional doctrine to reveal the unbreakable nexus between contract law and property law doctrines. The impact this discussion will have on contract law is that it may serve to strengthen the critical thinking processes of members of the legal discourse community because the information presented here will remind us to also consider property law doctrines during engagement with contractual issues.
To begin our discussion, we must first define and examine a contract. A contract is a voluntary relationship of exchange between two or more parties where the parties manifest their agreement in oral or written form, with at least one of the parties making a promise. [3] All of which is enforceable by law. [4] The very definition of a contract tells us that because the exchange relationship is voluntarily created, the parties involved will exercise their freedom to contract. Conversely, the parties could also exercise their right to freedom from contract, where they exercise the personal liberty inferred to extend to them by way of the Declaration of Independence, [5] meaning that they have the freedom and autonomy to decide to not enter into an agreement. [6] What is important here is the concept that no matter whether the party contracts or does not contract, he does so in pursuit of happiness. Because of this fact, we can confidently state that the basic underlying tenet of contract formation is the pursuit of happiness.
[3] Brian A. Blum, Contracts 2 (6th ed. 2013).
[4] The Declaration of Independence: Full text, ushistory.org, http://www.ushistory.org/DECLARATION/document/ (last visited Apr 25, 2017).
[5] Blum, at 2.
[6] Id. at 9.
Yet, to understand the nexus between contract law and property law, we must also recognize that the consideration in the exchange relationship may manifest in several forms. The consideration could be real property, personal property, intellectual property, or the consideration could be in the form of a person’s ability to perform some act, or refrain from taking action. While all of these types of consideration differ, there is one underlying principle they all share. But before we discuss the shared principles, let’s look at some of the differences. For instance, real property is land and anything growing on it, or attached to it. [7] Personal property is any movable or intangible thing that is subject to ownership and is not real property. [8] Intellectual property is the product of human intellect. [9] The common denominator between all of these types of consideration is the fact that they are all considered to be property. So, what is property? To the lay person, property is usually associated with a physical item such as their car, or their home.
However, in the legal discourse community, property is known as “rights among people concerning things,” or a bundle of rights. [10] This bundle of rights has important sticks as the United States Supreme Court in Kaiser Aetna v. United States. [11] In Kaiser, the Court was deciding whether the efforts of the Federal Government, which assisted in the further development
[7] Bryan A. Garner, Black's Law Dictionary 1337 (9th ed. 2009).
[8] Id.
[9] Id. at 881.
[10] John G. Sprankling & Raymond R. Coletta, Property: a contemporary approach 26 (3rd ed. 2015).
[11] Kaiser Aetna v. United States, 444 U.S. 164, 176 (1979).
of privately owned real property known as Kuapa Pond, gave rise to the right of the government to deny the owners the right to exclude. [12] The government argued that because of government assistance in the development, the owners lost some essential sticks in the bundle of rights. [13] Specifically, the government argued that the owners lost the right to exclude. Fortunately, the owners prevail in this dispute. [14]
The example provided in Kaiser gives us our first glimpse of evidence that there is an unbreakable and dependent relationship between contract law and property law doctrines. For even before the owners were to consider selling Kuapa Pond, had the Court found against the owners, they would not have the right to exclude. [15] Because of that fact, any subsequent contract for the sale or use of the property could not include provisions for the new owners to have the right to exclude others from the property. The exclusion of this fundamental stick in the bundle of rights would greatly diminish the possibility that the property could be viable consideration in any exchange relationship.
Here we evidence the idea that entering into an agreement to exchange property, seems to be a function nested in the doctrines of property law, because those doctrines will define the rights amongst people in respect to the thing being exchanged, while the actual logistics of how the transaction will occur is a function of contract law.
[12] Kaiser Aetna v. United States, 444 U.S. 164, 176 (1979).
[13] Id.
[14] Id.
[15] Id.
For instance, in a contract for the sale of Kuapa Pond, contract law provisions cannot change or alter the property law provisions which create and define the sticks in the bundle of rights that will be exchanged. [16] But, because Kuapa Pond is Real Property, contract law will require the sales contract to conform to statute of fraud requirements relative to the transaction. The statute of frauds requires that all contracts for sale of real property must be in writing. [17]
Once again, we evidence the unbreakable and dependent relationship between contract law and property law doctrines. We can further illustrate the relationship in the fact that one of the sticks in the Kuapa Pond bundle is the right to transfer. Without that right, the owners would not have a legal basis to be able to transfer ownership of the pond. Therefore, they could not enter into a valid, enforceable contract to sell the pond.
However, because of the dependent relationship between contract law and property law, property law provides the means to discover if a party has the right to transfer by requiring a clear title search. [18] The title search is used to discover the instances where real property has been exchanged in order to provide evidence of the rights attached to the property that will pass onto the new owner upon closing. [19] In this case, as in most contracts for the sale of real property, the most important stick that a seller must possess in order to facilitate the transaction is the right to transfer.
[16] Kaiser Aetna v. United States, 444 U.S. 164, 176 (1979).
[17] John G. Sprankling & Raymond R. Coletta, Property: a contemporary approach 546 (3rd ed. 2015).
[18] Id. at 316.
[19] Id.
Again, we must take note that the contract law cannot provide or establish any sticks in the bundle of rights. That is a function of the property law and the property law provides the basis to enable the exchange of rights. The contract law acts as the facilitator in providing the rules as to how the how the exchange is to occur. The rights in property law which allow us freedom to contract, are a byproduct of public policy which in turn supports our pursuit of happiness. The public policy considerations of property law are based on five theories of property. [20] Those theories are, the protection of the first possession; the encouragement of labor, maximizing societal happiness, ensure democracy and to facilitation of personal development. [21] All of these theories have the promotion of the pursuit of happiness as a basis.
First, we must protect the right of first possession. In order to allocate the bundle of rights we must have a means to assure we can identify the rightful owner of the property. The notion of who “had it first” may be somewhat of an irrelevant consideration when dealing with things such as real property, but the doctrine’s relevancy in terms of personal property is unchallenged because people are constantly coming across items other than real property and claiming ownership.
Constitutionally, when we look at the United States Constitution, we can infer that based on the term bill of rights, that liberty and happiness are concepts fully supported by the constitution and because of that, we can infer that the constitution supports the freedom to contract. [22]
[20] John G. Sprankling & Raymond R. Coletta, Property: a contemporary approach 8 (3rd ed. 2015).
[21] Id.
[22] D. Barlow Burke & Joseph A. Snoe, Property: examples & explanations, App. B 21 (3rd ed. 2008).
For example, the First Amendment guarantees freedom of speech. [23] It is common knowledge that speech can be manifested in both verbal and not verbal ways. Since a byproduct of freedom to contract is the contract itself and the contract is an outward manifestation of a person’s willingness to enter into a binding agreement, we can confidently rationalize that people who enter into contracts do so as a function of their First Amendment right to free speech. At this point in the discussion, we can see how there is an unbreakable and dependent relationship between contract law and established property law doctrines, which is founded from foundational and Constitutional ideologies relating to the pursuit of happiness.
In the Second Amendment, we can see that people have the right to keep and bear arms. [24] In order to procure those arms, a person must enter into an exchange relationship to do so. A contract to govern the exchange is required. Here again, we have evidence to support our assertion. In the third Amendment, the freedom to contract is again supported because there must be an agreement by the home owner in order for soldiers to take up residence in their home. [25]
Next, the Fourth Amendment provides even more evidence of how constitutional provisions, [26] contract law and property law share an unbreakable relationship when the Amendment recognizes the property law theory of the right of first possession because the Amendment bars the government from unlawful seizures of property. [26]
[23] U.S. Const. amend. I.
[24] U.S. Const. amend. II.
[25] U.S. Const. amend. III.
[26] U.S. Const. amend. IV.
This doctrine is instrumental in contracting because without laws preventing the government from seizing property at will, the bargaining power of the person in possession of the subject property (grantor) in an exchange is greatly diminished because the grantee enters into the bargain with an apprehension about whether or not he can indefinitely possess the property. If the transaction closed today, will the government come to seize the property tomorrow?
Without the Fourth Amendment, the flood gates of adhesion contracts might open and bargaining might be reduced to take it or leave it propositions. [27] Yes, there is a definite nexus between contract law, property law and constitutional provisions. Even when considering the seventh through the tenth Amendments, [28] constitutional provisions in the Seventh Amendment, such as a trial by jury in matters exceeding twenty dollars supports freedom to contract in that parties to a contract have an assurance that a jury of their peers will be empowered to make unbiased decisions in contract disputes which may occur. The Eighth Amendment remotely supports the freedom to and the freedom from contract in that excessive bail, fines or the threat of cruel and unusual punishment cannot be used by the government to compel a person to contract or to refrain from contracting. The Ninth and Tenth Amendments support the freedom to contract in that they give notice to the people that their rights will not be abridged. [29] Even though state law governs contracts, the principles and ideas covered in this discussion are relative to any state because state constitutions are inferior to U.S. Constitution. [30]
[27] Brian A. Blum, Contracts 10 (6th ed. 2013).
[28] U.S. Const. amend. VII-X.
[29] Id.
[30] U.S. Const. amend. IV §2.
In conclusion, as we go throughout our normal daily routines we all at some point in time do this such as purchase coffee, lunch, take mass transit, or ride in a taxi. All of these events are fostered by our freedom to contract. In every one of these events, there is an offer, acceptance, and consideration. There will also be some type of relationship between the consideration offered and property. The property may manifest itself as real property, personal property, intellectual property or services that are performed. No matter what form the consideration takes, there will be a property law doctrine associated with it.
Even when the form of consideration is to do or refrain from doing something, we may be able to associate the action to some form of property and property doctrine. For example, a promise to paint a painting will touch upon property law because the painting action is in essence the product of one’s intellect. Therefore, we can rationalize that it is intellectual property.
Just about any exchange agreement will be a product of an unbreakable and dependent relationship between contract law and established property law doctrines, which is founded from foundational and Constitutional ideologies relating to the pursuit of happiness. For we enter into contracts voluntarily to enjoy the benefit of the exchange, and the constitutional provisions, coupled with tenet of the pursuit of happiness made during the formation of this great nation, gives rise to the freedom to contract.