Theoretical concepts for the state’s recognition of the binding effect of private contracts

Abstract

     “Contracts” serve as a tool provided by the state to individuals for creating legal relationships among themselves. Members of society engage in numerous contracts in diverse forms. Particularly in today’s technology-driven world, contracts are not only increasing in number but are also being formed at a significantly faster pace than in the past.  Examples include online purchase agreements, online hotel reservations, and contracts formed through a simple click of an “Agree” or “Accept” button to indicate consent to the terms and conditions of mobile applications or computer software, and so on.  It is commonly understood that once a contract is formed, the contracting parties are legally obligated to perform their respective duties under such agreement, and any failure to do so constitutes a breach of contract. From a legal perspective, when such a breach occurs, the aggrieved party (the creditor) is entitled to seek judicial enforcement through the courts, which are state-authorized institutions. The right to bring an action before a state court inherently reflects the state's recognition of the binding nature of contracts voluntarily entered into by individuals.
     This article presents the underlying concepts that justify the state’s recognition of the binding force of contracts entered into by private individuals, drawing upon perspectives from philosophy of law, legal concepts and economic concepts to gain a deeper understanding of this matter through various perspectives. From the philosophy of law perspective, the theoretical concepts supporting this principle are rooted in the doctrines of Natural Law and the Social Contract Theory. In terms of legal theory, the principle is reflected in the doctrines of Private Autonomy and the Freedom of Contract. From an economic perspective, the principle may be justified through the allocation of resources based on the theory of Utilitarianism. However, although it is generally accepted that the state recognizes the binding nature of contracts entered into by individuals, this principle must nonetheless operate within reasonable and appropriate boundaries.