Skip to main content

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated Cookie policy, Privacy policy and Terms & Conditions

hausmann77_erhui1979_getty images_contract erhui1979/Getty Images

Should Profane Contracts Be Sanctified?

Contracts are protected and sanctified by the courts, but they can be written in order to violate the law – and to shield the crime itself from the law. Such profanity does not deserve, and should not receive, the legal blessing its authors seek.

CAMBRIDGE – Is there such a thing as too much sanctity? After all, even the word sanctimonious indicates an excessive show of devotion. The fervor for sanctification may hide darker motives, and attaining it may be deeply counterproductive. The sanctity of contracts, especially those involving the public sector, is a case in point.

Sanctity of contract rests on the notion that “once parties duly enter into a contract, they must honor their obligations under that contract.” If you give your word, you should abide by it, because a person is only as good as his or her word. Violating this maxim is a sin before others, if not before God.

Economics provides a strong rationale for this argument. People enter into agreements that involve time: you do something for me now, and I do something for you later. The problem is that such agreements are not self-enforcing: once you have done something for me, I am better off not paying you for your service or not returning the money you lent me. That is why collateral was invented: if I do not repay the money you lent me, you can take possession of something worth more than the loan.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

https://prosyn.org/Hi6Uzyl;
  1. pisaniferry106_Mark WilsonGetty Images_phase one agreement trump china  Mark Wilson/Getty Images

    Explaining the Triumph of Trump’s Economic Recklessness

    Jean Pisani-Ferry

    The Trump administration’s economic policy is a strange cocktail: one part populist trade protectionism and industrial interventionism; one part classic Republican tax cuts skewed to the rich and industry-friendly deregulation; and one part Keynesian fiscal and monetary stimulus. But it's the Keynesian part that delivers the kick.

    0
  2. yu49_ShengJiapengChinaNewsServiceVCGviaGettyImages_G20trumpjinpingshakehands Sheng Jiapeng/China News Service/VCG via Getty Images

    PS Say More: Keyu Jin

    Keyu Jin assesses the “phase one” US-China trade deal, questions whether the US can ever accept China’s development model, and highlights a key difference in how the Hong Kong protests are viewed inside and outside China.
    0