Contracts are promises that courts enforce. But promises are often seen as primarily moral obligations. So why would we need a court to legally enforce them? Let’s take a closer look at the purpose of contracts and why society might need them. When two people trust each other, they don’t need contract law to enter into binding promises. People, in fact, make all sorts of promises with each other without the expectation that they're going to sue if things go badly. For example, if you say to your wife, I promise to pick you up at the airport today, and you're not there, she's probably not going to sue you over it. But there may be repercussions. Or if you promise your neighbor that you will paint his house in return and you don't do it, you might get a bad reputation in the neighborhood as someone who doesn’t fulfill their obligations, making it less likely that people will trust you in the future.. There's a sort of reputational effect that occurs between people who know each other in society so that we have a reputation that’s a value to us and maintaining that reputation is a good reason to keep our word. Plus there is a moral dimension. Trustworthiness and keeping one’s promises is a virtue and a person's word is, as is said, his or her bond. It’s not necessary for a court to enforce moral or ethical promises because people perform them out of a sense of obligation anyway. The types of transactions we need contracts for are the types that wouldn’t occur if we didn’t have legally enforceable promises. Not everyone in society trusts each other. In fact, most people in this big world of ours might want to do business but don't even know each other. People on opposite sides of the world have no basis for thinking that someone else will keep their promises to ship them some good or perform some service. If not for contracts, it may be impossible to hire a programmer in Bangalore to write a piece of code and keep your intellectual privacy secret and confidential. So contracts are a way of broadening our world and creating a new range of possibilities for contractual counterparties. Transactions between distant counterparties are the main focus of contract law. Or for that matter, contract law as a way to create relationships between non-natural persons like corporations, who don’t really have morals and ethics per se. The law provides a substitute, not a perfect substitute, but a partial substitute for trust. Thanks to contracts, you can get involved in a legally binding relationship with a person knowing that if they don't perform their promises you have some recourse, outside the usual societal mechanisms for enforcing promises.

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