Title-transfer theory of contract
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The title-transfer theory of contract (TTToC) is a legal interpretation of contracts developed by economist Murray Rothbard and jurist Williamson Evers. The theory interprets all contractual obligations in terms of property rights, viewing a contract as a bundle of title transfers. The TTToC stands in oppositions to most mainstream contract theories which view contractual obligations as the result of a binding promise. Proponents of the approach often claim it is superior on grounds of both consistency and ethical considerations. The TTToC is often supported by libertarians.
Interpretation of contracts
The TTToC considers a contract to be a transfer of property titles between parties to the contract. Title transfers can be conditional, implying a title transfer is to take effect only if a specified condition is met, as well as future oriented implying a title transfer is to take effect at a specified future point in time. For example, in a loan contract the lender transfers title to the principal to the borrower, and the borrower transfers to the lender a future title to the amount of the principal plus the interest. When the loan matures the transfer of title from borrower to lender takes effect, and the lender is entitled to obtain the money, which now belongs to him. Another example is a service provision contract in which the service consumer transfers a future title of money to a service provider on the condition that a certain act of service is performed. If the service is not provided the condition of the transfer is not met and the conditional title transfer of money does not take effect. Contracts can be agreed upon either by explicit verbal agreement (as is the case with formal written contracts) or by implicit representation of agreement (as is the case when a restaurant order is placed by a passerby).
Under the TTToC breach of contract is only what can be interpreted as an act of theft. For example, if a specified condition for a conditional title transfer from party A to party B is not met, yet party B still captures possession of the property he is not entitled to, he has committed theft, whether the possession was taken by force, or by false representation of fact creating the impression the transfer conditions has been met.
If a service provider has failed to perform an act of service, he has not committed theft. In such cases provisions should be made in advanced for the non-breaching party to be entitled to compensation, in the condition of a failure to provide the agreed upon service.
Since the TTToC is based on property rights, it is compatible with the non-aggression principle. The TTToC ensures ownership of every owned good is well defined at any point in time. Contracts regarding unalienable property titles are not binding. Some argue that since ownership of one's body is unalienable, voluntary slavery contracts are not binding under the TTToC. Promises that are not made with the intention of being legally binding are also non-enforceable under the TTToC.
- Rothbard, Murray N. (1982). "19". The ethics of liberty. Atlantic Highlands, N.J.: Humannities Press. ISBN 0-391-02371-3.
Their error is a failure to realize that the right to contract is strictly derivable from the right of private property
- E. Barnett, Randy (July 1992). "Some Problems With Contract As Promise". Cornell Law Review.
- Fried, Charles (1981). Contract as Promise (PDF). Cambridge, Mass.: Harvard University Press. ISBN 0-674-16925-5.
- Kinsella, N. Stephan (Spring 2003). "A Libertarian Theory of Contract: Title Transfer, Binding Promised, and Inalienability". Journal of Libertarian Studies. 17: 11–37.
Ultimately, contracts are enforced simply by recognizing that the transferee, instead of the previous owner, is the current owner of the property. If the previous owner refuses to turn over the property transferred, he is committing an act of aggression (trespass, use of the property of another without permission) against which force may legitimately be used.
Each man has control over his own will and person, and he is, if you wish, “stuck” with that inherent and inalienable ownership. Since his will and control over his own person are inalienable, then so also are his rights to control that person and will. That is the ground for the famous position of the Declaration of Independence that man’s natural rights are inalienable; that is, they cannot be surrendered, even if the person wishes to do so.Missing or empty
But a moral theory of promising, standing alone, would have courts enforcing purely moral commitments, which is tantamount to legislating virtue. Such an open-ended rationale leads to serious problems for the value of freedom of contract. First, it commits courts to enforcing promissory commitments that the parties themselves may never have contemplated as "contractual" or legally enforceable, thereby undermining the value of freedom from contract. Second, once the moral behavior of the promissor is deemed relevant to the issue of enforceability, the promise theory also appears to make relevant to the issue of enforcement other moral aspects of the promisor's behavior that may argue against enforcement, thereby undermining the value of freedom to contract. In this manner, the common-law rights of contract can come to resemble the judicial discretion of a court of equity.Missing or empty
- The Ethics of Liberty. Chapter Nineteen – Original theory presented by Murray N. Rothbard.
- Rothbard, Murray, "Property Rights and the Theory of Contracts", The Ethics of Liberty
- Kinsella, Stephan (2003), "A Libertarian Theory of Contract: Title Transfer, Binding Promises, and Inalienability", Journal of Libertarian Studies, Auburn, AL: Ludwig von Mises Institute, 17 (2), pp. 11–37
- Kinsella, Stephan (2010), "Justice and Property Rights: Rothbard on Scarcity, Property, Contracts…", The Libertarian Standard