Contracts

In a typical day, most of us enter into several contracts, usually without giving them much attention. When we buy a newspaper, get a haircut, take a ride on a bus or make a long-distance telephone call, whether we know it or not we are entering into a contract. Our contracts can be verbal or written. They may be direct or implied, simple or complex. The purchase of a carton of milk at the local grocery store is an example of a simple, implied and verbal contract. A person takes his or her purchase to the counter, the store clerk asks for a sum of money, and the customer tenders the required sum and takes the milk out of the store. It is understood by both the customer and the store owner that there is to be an exchange of money and goods by which the customer will come to own the milk and the store will get to keep the money. A bus ride is a more complex transaction. Posted on the vehicle are lengthy written terms related to payment, risk and proper conduct. By entering into the bus, the passengers are assumed to have read and agreed to all of those written terms. Similarly, if we purchase goods using a credit card, we are expected to have read and accepted all the terms set out in the agreement that accompanies the issue of the credit card.

At another level, the law will imply certain terms and conditions into a sale of goods, such as “merchantability” and “fitness for description.” The implied term of merchantability means that if the milk we purchase at the grocery store turns out to be sour, the store will be required to replace the carton or refund the purchase price. The implied term of fitness would give the patron of the hair salon the right to a remedy if she asked for an auburn tint and ended up with flaming orange hair.

Understanding Contracts

It is no accident that contracts are an everyday feature of our lives. Alongside covenantal forms of interconnecting, the contractual form of transaction is one of the basic forms of human interaction and relationships. Moreover, contract is the building block of our legal and social structures. It is therefore important for the Christian to understand what contracts are all about, how and when to enter into contracts, biblical principles regarding contractual behavior, how to respond when contracts are broken, and under what circumstances and in what relationships the contractual model would be inappropriate.

Black’s Law Dictionary defines a contract as “an agreement between two or more persons which creates an obligation to do or not to do a particular thing. Its essentials are competent parties, subject matter, a legal consideration, mutuality of agreement and mutuality of obligation.” The above definition alludes to certain basic contract essentials, in the absence of which there would be no enforceable contract at law. Of course, we all enter into agreements that are not intended to be legally enforceable, such as an agreement with a child to read her a story if she helps set the table for dinner. Such an agreement would not be a contract at law because the child could not be considered “competent” as a minor. The first essential to contract is that the parties be legally competent, meaning of legal age and of sound mind. Undue influence or duress upon one of the parties can also defeat a contract.

A second contract essential is the existence of an offer and the acceptance of that offer by the person receiving the offer. An offer can be made in writing or verbally, directly or implicitly. Stores implicitly “offer” to sell their wares by displaying merchandise with a stated price, and customers “accept” the offer by tendering cash, check, credit card or debit card to the store clerk. At a garage sale, the buyer may make an “offer” to the seller to buy a particular object for a stated price, which may be “accepted” or rejected by the seller. In the earlier example of a bus ride, the transit company offers to provide a transportation service and sets out the terms of its offer in writing either at the bus depot or on the vehicle itself. The passenger “accepts” the offer by purchasing a ticket or by boarding the bus and paying the fare.

A third contract essential is the concept of “consideration”: an exchange of rights and obligations between the contracting parties. While the law does not attempt to regulate the value or inherent fairness of what rights go back and forth, nonetheless if all of the rights flow only in one direction, there is no contract and thus nothing to enforce at law. By way of example, an agreement to sell an entire city block for a mere ten dollars is enforceable, whereas an unsolicited promise to give a stranger a free book is not enforceable.

Finally, it is important to have “certainty” about the contract. The basic terms of the contract must be sufficiently clear to allow for a common understanding of the rights and obligations between the contracting parties. An agreement to build a cabin for a specified amount may fail as a contract if there is nothing said about when the work is to be carried out or completed. There would also likely not be an enforceable contract if the owner and builder had failed to agree on the specifications of the cabin to be built. On the other hand, failure to specify the exterior color of the structure would not be considered fatal to the contract, as color is not an essential term of the contract.

Entering into Contracts

While some of our contracts are routine and even seemingly mindless, there are many times when we enter into contract as a result of negotiations. Negotiation styles and skills are acquired at an early age and often do not change in adulthood. We learn to negotiate positionally by determining what we want and assessing what we are prepared to give up in order to obtain what we want. If what we want overlaps with what the other party is prepared to give up and vice versa, then a bargain is achieved and a contract can be entered into. The problem with this negotiation strategy from the Christian’s perspective is that it is inherently selfish. Christ commands us to love our neighbor as ourselves (Luke 10:27). Is it possible to live out Christ’s Great Command as we enter into contracts? The answer is a definite yes.

There is an entirely different approach to negotiations, which is “interest-based” as opposed to positional. In interest-based negotiations, both parties look at each other’s interests (consisting of wants, needs and fears), and together they attempt to create an agreement that meets as many of those interests as possible. Where interests are mutually conflicting, the parties attempt to find some external objective criteria to help them in choosing between those conflicting interests. Not only does this approach lead to collaborative and relationally healthful negotiating, but also it increases the likelihood that agreement will be achieved and that the agreement will be a mutually satisfactory one. Consider the following situation: Susan very much wants to buy John’s car but can afford to pay only $2,000. John has his eye on another vehicle and needs to get at least $2,500 for his old car. Positional bargaining results in no deal and leaves both of the parties irritated with each other. However, if John and Susan had entered into interest-based negotiations, they may have discovered that Susan operated a daycare service and that John had been looking for an opening in a daycare facility for his son. By exchanging $500 worth of services, Susan and John could have reached an agreement on both the car and day care, and both would have been very satisfied with the result.

Christians should carefully consider their contract-negotiating style. There are a wealth of resources on interest-based negotiations. Consider Paul’s admonition to the Philippian church: “Each of you should look not only to your own interests, but also to the interests of others” (Phil. 2:4).

Conduct in Contracts

There are numerous examples in both the Old and the New Testament of God’s people entering into contracts:

• the owner of the vineyard contracted with workers to buy their services (Matthew 20:1-16);

• Joseph was sold by his brothers to Midianite merchants for twenty shekels of silver (Genesis 37:28);

• the “shrewd manager” contracted with his master’s debtors to greatly reduced their debts in exchange for early payment (Luke 16:1-9);

• Moses contracted with Pharaoh to pray to God for relief if Pharaoh released the Israelites (Exodus 8:8).

While there are few direct references to contracts in scriptural teaching (Leviticus 25 perhaps comes the closest to articulating rules of contracting), there are many relevant scriptural principles to guide the Christian in contractual relationships. The Christian should be fair in agreements and not take advantage of others (Leviticus 25:14). Special consideration should be given to the poor (Leviticus 25:25, 35; Proverbs 28:28). Exhortations to honesty and integrity in all business dealings appear frequently throughout the Bible. God’s people are to use honest scales and measures (Leviticus 19:36; Deut. 25:13; Proverbs 11:1). “Woe!” says the prophet Micah to those who act in a fraudulent manner (Micah 2:2). Isaiah laments the lack of integrity of his people (Isaiah 59:4). The book of Proverbs contains several principles that would be applicable as Christian behavior in a contractual setting: generosity, restraint, special care for the poor, honesty, acting without deception and keeping the law (see also Romans 13).

Another common theme, especially in the Old Testament, is justice. The Christian should not use contracts for unjust gain or to take advantage of those who are disadvantaged or disempowered. The law allows the courts to strike down contracts that are considered to be “unconscionable.” How much higher, then, the standard for Christians who, in following Christ, are to act and live out of love in all dealings and relationships.

When Things Go Wrong

In our imperfect and fallen world, commitments made in contract will from time to time fail to be carried out, sometimes intentionally and sometimes for reasons beyond the control of the defaulting party. How is the Christian to respond when others fail to carry out their contractual obligations? First, we are encouraged in Scripture to be patient and long-suffering. Indeed, patience is one of the fruits of the Spirit (Galatians 5:22). Tolerance and a willingness to give others a second chance ought to characterize the Christian’s response to broken contracts. We are also told not to repay evil for evil (Romans 12:17). Thus, our response to another’s default ought never to be an act of vengeance or “evening the score.”

But when the breach of contract is serious or repetitive, what is the Christian to do? Again, as with the process of entering into a contract, the normal choice is between a positional approach and an interest-based approach. A positional approach may be to confront in an attacking manner or perhaps to seek legal recourse in a court of law. An interest-based approach would be to deal directly with the other party in the manner described earlier, seeking to bring out the needs, wants and fears of the parties to the contract. This may be very difficult when the relationship has been strained through a breach of contract. Fortunately there are professional mediators skilled in interest-based negotiations who can assist the parties toward a collaborative resolution (see Conflict Resolution). The interest-based approach is appropriate for Christians both because there is a scriptural admonition against lawsuits (1 Cor. 6:1-8) and because the positional adversarial approach is usually antithetical to the response of love commanded in the Gospels.

When the Contractual Model Is Not Appropriate

While there are no general or specific biblical prohibitions on contracting, there are situations and relationships where it would be inappropriate for the Christian to act or think in contractual terms. Our relationship with God is clearly not to be thought of in contractual terms. Such a view would lead quickly to a doctrine of justification through works: if one obeys God’s commands, then one can earn God’s love. But, argues Paul, “all have sinned and fall short of the glory of God, and are justified freely by his grace through the redemption that came by Christ Jesus” (Romans 3:23-24). God has chosen not to contract but rather to covenant with his people. Whereas a contract involves an exchange of rights and duties, the biblical notion of covenant involves a unilateral act of love and promise on the part of God and a promise that all can appropriate. This results in a loving and grateful desire on our part to live according to God’s purposes, priorities and values.

The covenantal model of relationship is the New Testament standard not only for God but for his followers. We are instructed by Jesus to love our neighbor not on a contractual basis (an equitable exchange of one’s rights and duties) but on a covenantal basis, out of response to being first loved by God. That is the point of the parable of the unmerciful servant (Matthew 18:23-35). The best that the state can legislate is mutual tolerance toward each other: that is all that public law can accomplish. But God’s call to love one another is a much higher standard. We understand this in our relationship with our children. Our love for them is not conditional upon their behavior. In our marriages we make vows or covenants to behave in a certain way regardless of the response of our spouse. Now the challenge is for followers of Christ to act and behave covenantally in all of their relationships and bring his covenantal grace into our contractual relationships.

» See also: Integrity

» See also: Justice

» See also: Law

» See also: Promising

—Peter Mogan