CON · S01Session 1 · 26–27 Sep · 6 min read

Why should a contract be binding?

Parliament makes a statute. Two private parties make a contract. Seven theories explain why a court enforces what the parties made, and the ICA is built on one of them.

ICA ss. 2(h), 10 · Fried · BarnettReleased week of 28 Sep

s. 2(h)

1. The question

Key point

A statute binds everyone because Parliament made it. A contract binds only its two parties, and they made its terms. This session asks why a court enforces those terms.

StatuteContractMade byParliamentThe two partiesBindsEveryoneOnly the partiesQuestionWhy obey? Parliament made itWhy should a court enforce it?

Seven theories answer this question. They fall into four groups:

Why should a contract bind?

Moral dutyPromiseWillConsent

Protecting the other sideReliance

ExchangeBargain

Outside testsEfficiencySubstantive fairness

No theory decides whether a given agreement is a contract. Section 10 of the ICA decides that.

Fried

2. Promise

Key point

A promise creates a moral duty. The law enforces the promise because of that duty.

Charles Fried says a promise invites the other party to trust you. When you keep it, you respect the autonomy of both parties.

Social moralitybinds everyone, for example the duty not to trespass

Promissory moralitybinds only the people who made the promise

Weakness

The law does not enforce every moral duty. You should help an old person cross the road, but you commit no legal wrong if you do not. So promise theory cannot explain why a court forces you to perform.

Will

3. Will and reliance

Example from class: a hotel agrees to buy 100 kg of tomatoes from you at ₹15/kg.

Will theory: both parties willed the obligation. If the hotel backs out, it defeats your will as well as its own. This turns the moral duty into a legal duty.
Reliance theory: you stop looking for other buyers because you rely on the hotel. The law protects that reliance (Fuller and Perdue, Atiyah).

Weakness

Will is subjective. A court cannot test what a person privately willed.
Reliance theory is circular. People rely on a contract because the law enforces it.

Reliancemakes the contract bindingis why people relyBinding contract

L&E

4. Efficiency

Law and economics says the law should enforce contracts because enforcement helps markets work. This theory judges a contract by its effect on the economy. It does not look at the duty between the parties.

The same theory supports efficient breach. Suppose you must pay ₹20,000 in damages if you breach, and a third party offers you ₹30,000 for the same goods:

A third party pays you+₹30,000

You pay the buyer damages−₹20,000

Your gain after breach₹10,000

You gain ₹10,000 even after you pay damages, so on this view breach is the efficient choice.

Continue on page 2Fairness and bargain6 more sections: Fairness and bargain, Consent, The theories in the ICA, The seven theories, Exam traps, Readings

Practice · Session 1

Test yourself on this session

All 5 adapted from past NLSIU exam papers, 2025

Question 1 of 5ICA ss. 2(h), 10A promises to sell B his car for ₹5 lakh, and B promises to pay. C promises his wife a saree for her birthday. Both are agreements. Which statement best explains why only the first is likely to be a contract?

Answer all of them, then submit to see your score.5 questions · about 4 minStart MCQsAnswers and why after you submit. Your score is saved to Session 1.