Second Section: Contract.

72. In contract property is no longer viewed on the side of its external reality, as a mere thing, but rather as containing the elements of will, another’s as well as my own. Contract is the process which presents and occasions the contradiction by which I, existing for myself and excluding another will, am and remain an owner only in so far as I identify myself with the will of another, and cease to be an owner.

73. Guided by the conception I must relinquish my property not merely as an external thing (§ 65), but as property, if my will is to become a genuine factor in reality. But by virtue of this procedure my will, when relinquished, is another will. The necessary nature of the conception is thus realized in a unity of different wills, which, neverthless, give up their differences and peculiarities. But this identity implies not that one will is identical with the other, but rather that each at this stage remains an independent and private will.

74. For two absolutely distinct and separate owners there is now formed one will. While each of them ceases to be an owner through his own distinct will, the one will remains. Each will gives up a particular property, and receives the particular property of another, adopting only that conclusion with which the other coincides.

75. Since the two contracting parties appear as directly independent persons (a) contract proceeds from arbitrary choice; (b) the one will formed by the contract is the work merely of the two interested persons, and is thus a common, but not an absolutely universal will; (g) the object of the contract is a single external thing, because only such a thing is subject to relinquishment at their mere option (§ 65 and fol.).

Note.—Marriage does not come under the conception of contract. This view is, we must say it, in all its shamelessness, propounded by Kant (" Metaph. Anf. der Rechtslehre," p. 106). Just as little does the nature of the state conform to contract, whether the contract be regarded as a compact of all with all, or of all with the prince or government. [p.78] The introduction of the relations of contract and private property into the functions of the state has produced the greatest confusion both in the law and in real life. In earlier times civil rights and duties were thought and maintained to be a directly private possession of particular individuals in opposition to the rights of prince and state. In more recent years, also, the rights of prince and state have been treated as objects of covenant. They are said to be based on contract, or the mere general consent of those who wish to form a state. Different as these two views of the state are, they agree in taking the phases of private property into another and a higher region. This will be referred to again when we come to speak of ethical observances and the state.

Addition.—It is a popular view in modern times that the state is a contract of all with all. All conclude, so the doctrine runs, a compact with the prince, and he in turn with the subjects. According to this superficial view, there is in contract only one unity of different wills; but in fact there are two identical wills, both of which are persons, and wish to remain possessors. Contract, besides, arises out of the spontaneous choice of the persons. Marriage, indeed, has that point in common with contract, but with the state it is different. An individual cannot enter or leave the social condition at his option, since every one is by his very nature a citizen of a state. The characteristic of man as rational is to live in a state; if there is no state, reason claims that one should be founded. A state, it is true, must grant permission either to enter or to leave it; but this permission is not given in deference to the arbitrary choice of the individual, nor is the state founded upon a contract which presupposes this choice. It is false to say that it rests with the arbitrary will of all to establish a state; rather is it absolutely necessary for every one to be in a state. The great progress of the modern state is due to the fact that it has and keeps an absolute end, and no man is now at liberty to make private arrangements in connection with this end, as they did in the middle ages.

76. Contract is formal when the two elements through which the common will arises, the negative disposal of the thing and the positive reception of it, are so divided, that one of the contracting parties makes one side of the agreement, and the other, the other. This is gift. Contract is real when each of the contractors performs both sides of the double agreement, and is and remains an owner. This is exchange.

Addition.—Contract involves two agreements to two things; I both give up and acquire a property. Real contract occurs, when each yields [p.79] up and acquires possession; in giving up he remains an owner. Formal contract occurs when a person only gives up or acquires.

77. In real contract every one both keeps the same property as he had when he undertook the contract, and also yields up his property. Hence it is necessary to distinguish the property, which in contract remains permanently mine, from the external objects which change hands. The universal and self-identical element in exchange, that with regard to which the objects to be exchanged are equal, is the value (§ 63).

Note.—By the very conception of contract a Iaesio enormis annuls the agreement, since the contractor, in disposing of his goods, must remain in possession of a quantitative equivalent. An injury may fairly be called enormous, if it exceeds half of the value; but it is infinite, when a contract or any stipulation is entered into to dispose of an inalienable good (§ 66). A stipulation is only one single part or side of the whole contract, or a merely formal settlement, of which more hereafter. It contains only the formal phase of contract, the consent of one party to perform something, and the consent of the other party to accept the performance. It must, therefore, be classed amongst the so-called one-sided contracts. The division of contracts into one-sided and two-sided, and many other divisions of the same kind in Roman law, are superficial combinations, arising from some particular and external consideration, as, for instance, the way in which they are made. They may also introduce attributes which do not concern the nature of contract, such as those which have meaning only in reference to the administration of justice (actiones), and to the legal consequences of positive laws, or such as may arise out of wholly external circumstances and injure the conception of right.

78. The distinction between property and possession between the substantive and the external side (§ 45), assumes in contract the form of a distinction between the common will or agreement and the realization of this will in performance. The agreement, taken by itself in its difference from performance, is something imagined or symbolic, appearing in reality as a visible sign. (" Encyclopaedia of the Philosophical Sciences".) In stipulation it may be manifested by gesture or other symbolic act, but usually in an express declaration through speech, which is the most worthy vehicle of thought.

Note.—Stipulation, thus interpreted, is the form in which the content of a concluded contract is outwardly symbolized. But this symbol is only the form. By this is not meant that the content is still merely subjective, [p.80] merely a desideratum, but that the conclusion of the actual arrangement is made by the will.

Addition.—As in property we had the distinction between property and possession, the substantive and th external, so in contract we have the difference between tht common will as agreement and the particular will as performance. It is in the nature of contract that both the common and the particular wills should be manifested, because it is the relation of will to will. In civilized communities agreement, manifested by a sign, is separated from performance, although with ruder peoples they may concur. There is in the forests of Ceylon a tribe, which in trading puts down its property and waits patiently for the arrival of those who will place their property over against it; the dumb declaration of the will is not separated from performance.

79. As stipulation involves the will, it contains, from the standpoint of right, the substance of contract. In contrast with this substantive contract the possession, which remains till the contract is fully carried out, has no reality outside of the agreement. I have given up a possession and my private control over it, and it has already become the property of another. I am legally bound to carry out the stipulation.

Note.—Mere promise is different from contract. What I promise to do, give or perform, is future and a mere subjective qualification of my will. I am at liberty to change my promise. But stipulation is already the embodiment of my volition. I have disposed of my property; it has ceased to be mine, and I recognize it as already belonging to another. The Roman distinction between pactum and contractus is not sound.

Fichte once laid it down that the obligation to hold to the contract began for me only when the other party began to do his share. Before performance I am supposed to be doubtful whether the other had been really in earnest. The obligation before performance is, therefore, said to be moral and not legal. The trouble is that stipulation is not merely external, but involves a common will, which has already done away with mere intention and change of mind. The other party may of course change his mind after the engagement, but has he any right to do so? For plainly I may choose to do what is wrong, although the other person begins to perform his side of the contract. Fichte’s view is worthless, since it bases the legal side of contract upon the bad infinite, that is, an infinite series, or the infinite divisibility of time, material and action. The embodiment of the will in gesture or a definite form of words is its complete intellectual embodiment, of which the performance is the merely [p.81] mechanical result. It does not alter the case that positive law distinguishes between so-called real contracts and consensual contracts, real contracts being complete only when the actual performance (res, traditio rei) is added to consent. Sometimes in these real contracts the surrender to me of the object enables me to carry out my part of the engagement, and my obligation to act refers to the object only in so far as I have received it into my hands. This occurs in loan, interest, deposit, and sometimes in exchange also. These cases do not concern the relation of stipulation to performance, but merely the manner of performance. It is also optional in the case of contract to bargain that on one side the obligation shall not arise until the other party fulfils his share of the engagement.

80. The classification or rational treatment of contracts is deduced not from external circumstances, but from distinctions which are involved in the very nature of contract. These distinctions are those between formal and real contract, between property and possession or use, and between value and the specific thing. The subjoined classification agrees in the main with the Kantian (" Metaphysical Principles of the Theory of Right," p. 120). It is surprising that the old method of classification of contracts into real and consensual, named and unnamed, has not long ago given way before something that is more reasonable.

A. Gift.

(1) Gift of an object or gift proper.

(2) Loan of an object—the gift of a portion of it or of a partial use or enjoyment of it, the lender remaining owner; (mutuum and commodatum without interest). The object is specific, or it may be regarded as universal, or it is, as in the case of money, actually universal.

(3) Gift of service, as for example the mere storage of a property (depositum). The gift of an object on the special condition that the receiver shall be owner on the giver’s death, when the giver can no longer be owner, is bequest, and does not come under the conception of contract. It presupposes the civic community and positive legislation.

B. Exchange.

(1) Exchange as such.

(2) Rent (locatio, conductio), relinquishment of the temporary use of a property for rent or interest,

(3) Contract for wages (locatio operae)—relinquishment, limited in time or otherwise, of my labour or services, in so far as as they are disposable (§ 67). Akin to this is the brief and other such contracts, in which the performance depends upon character, confidence, or special talents. Here the service cannot be measured by its money value, which is not called wages, but an honorarium or fee.

C. Completion of a contract (cautio) through a security.

In contracts where I dispose of the use of a thing, as in rent, I am no longer in possession of it, but am still the owner. In exchange, purchase, or gift, I may have become owner, without being as yet in actual possession. Indeed, in every contract, except such as are directly on a cash basis, this separation is to be found. Security or pledge is concerned with an object which I give up, or an object which is to be mine. It either keeps or puts me in actual possession of the value, although in neither case am I in possession of the specific thing. The thing which I have either given up, or expect to receive, is my property only as regards its value; but as a specific thing it is the property of the holder of the pledge, who owns also whatever surplus value the object may have. Pledge is not itself a contract, but only a stipulation (§ 77), which completes contract on the side of possession of property.—Mortgage and surety are special forms of the pledge.

Addition.—In contract it was said that by means of an agreement a property becomes mine, although I have not possession as yet and shall have possession only by performing my part. If I am out-and-out owner of the object, the intention of a pledge is to place me at once in possession of its value; thus already in the engagement the possession is guaranteed. Surety is a special kind of pledge, some one offering his promise [p.83] or credit as warrant for my performance. Here a person does, what in a pledge is done by a thing.

81. When persons are viewed as direct and incomplete, their wills are still particular, however identical they may be implicitly, and however much they may, in contract, be subordinated to the common will. So long as they are direct and incomplete, it is a matter of accident whether their particular wills accord with the general will, which has existence only by means of them. When the particular will is actually different from the universal, it is led by caprice, random insight and desire, and is opposed to general right. This is wrong.

Note.—It is from the standpoint of logic a higher necessity which brings about the transition to wrong. The two phases of the conception of right are (a), intrinsic right or the general will, and (b) right as it exists, or the particular will. It inheres in the abstract reality of the conception that these two phases should be opposed and given independence.—The particular, independent will is caprice and erratic choice, which I, in exchange, have yielded up with regard to only one single thing, but not altogether.

Addition.—In contract the two wills give rise to a common will. This common will is only relatively universal, and thus still in opposition to the particular will. Exchange or covenant, it is true, implies the right to demand performance. But the particular will may act in opposition to the general abstract right. Hence arises the negation, which was already implicit in the general will. This negation is wrong. The general procedure is this, to purify the will of its abstract simplicity, and thus to summon out of the common will the particular will, which in turn takes the field against the common will, the participants, in contract, still preserve their particular wills. Contract is not, therefore, beyond arbitrary caprice, and remains exposed to wrong.