What Do We Owe Each Other When We Make a Deal?

Imagine you promise your friend you’ll sell them your old gaming console for $100. They start planning around that—they buy games for it, tell their other friends they’ll have one too, maybe even sell their own old console. Then someone else offers you $150 for the same console. Can you take the better offer and just give your friend their $100 back? Or does that break something real—not just a casual promise, but a kind of moral bond that the law should enforce?

Philosophers and lawyers have been arguing about this for centuries. Their answers affect everything from the fine print you click “I agree” to without reading, to how courts decide billion-dollar disputes between companies. And they’re still arguing.

The Basic Puzzle

Here’s the weird thing about contracts. When you make a contract, you’re doing something that seems almost magical: you’re creating an obligation that didn’t exist before. Before you promised to sell that console, you had no duty to sell it to anyone. After you promise, you do. You’ve bound your future self. The question is: why should anyone—including the law—take that seriously?

There are four main answers. Each one is a different theory about what contracts are really about.

Theory 1: A Promise Is a Promise

This is the most straightforward answer. Contracts should be enforced because promises should be kept. That’s it. The philosopher Charles Fried calls this the “promise principle”—the idea that promising is “a kind of moral invention” that lets people create obligations where none existed before.

This theory explains why contract law gives you something called “expectation damages” when someone breaks a deal. If your friend promised to sell you that console for $100, and you could have resold it for $150, the law doesn’t just give you back your $100—it gives you the $50 profit you expected to make. The law puts you in the position you would have been in if the promise had been kept. That’s different from, say, car accident law, where the goal is just to undo the harm.

But there’s a problem. If the law is just about keeping promises, why doesn’t it enforce every promise? If I promise to pick you up from the airport, that’s a promise. But if I don’t show up, you can’t sue me. The law only enforces promises that are part of a “bargain”—you give something in exchange for my promise, or I give something in exchange for yours. This is called the “consideration” requirement, and it’s been around for centuries. Promises made as gifts—even solemn ones—aren’t usually enforceable.

Why would a moral system care whether a promise was part of a bargain? If promising creates obligations, they should exist whether or not you got something in return, shouldn’t they?

Theory 2: Don’t Harm People

Maybe contracts aren’t really about promises at all. Maybe they’re about preventing harm. When you make a promise and someone relies on it, breaking the promise hurts them. They might have passed up other opportunities, spent money, or rearranged their life around your commitment.

The philosopher T.M. Scanlon argues this is the real moral basis for contract law. On his view, what matters isn’t the promise itself but the fact that you intentionally led someone to expect something, knowing they’d rely on that expectation. Breaking that trust is a kind of harm, like lying or misleading someone.

This view has an advantage: it explains why we don’t enforce all promises. If nobody relied on the promise—if you promised something trivial and nobody changed their plans—then breaking it doesn’t cause harm, and the law shouldn’t get involved. That fits with the “consideration” rule: the law wants to see that a real exchange was happening, not just a casual promise.

But there’s another problem. The law doesn’t just protect people from relying on promises and being disappointed. It protects their expectations—even the ones they haven’t acted on yet. If you promise to sell me a rare comic book for $50, and I just sit there happily expecting it, the law will enforce that even if I didn’t spend a cent or pass up any other deals. That’s not about preventing harm from reliance; it’s about something else.

Also, what about promises made to someone who knows you’re unreliable? If I’ve broken a hundred promises to you before, and I promise again, it’s hard to say you “reasonably relied” on my word. Yet the law might still hold me to it. So harm-based views don’t quite fit either.

Theory 3: Make Everyone Better Off

A third approach sets aside the whole question of morality and looks at what contracts do for society. Contracts let people coordinate. Without contract law, you’d be crazy to agree to build something for someone who promises to pay you later—because they could just stiff you. But with contract law, you can trust that the deal will stick. That makes everyone willing to cooperate, invest, and create things together.

This is the “economic” view of contracts, and it’s very influential among lawyers (though less so among philosophers). The idea is that the law should be designed to maximize the total benefits from all the exchanges people want to make.

This view has no trouble explaining “efficient breach”—the idea that breaking a promise can be a good thing if it makes everyone better off. Remember the console example? If someone else offers you $150 for the console you promised to sell for $100, the efficient thing to do is sell it to them, pay your friend $50 in damages (the profit they expected), and keep the extra $10 yourself. Everyone ends up better off than if you’d stubbornly kept your original promise.

But this feels wrong to a lot of people. If you promised something, shouldn’t you do it? The economic view says what matters is maximizing total happiness or wealth, not keeping your word. It also has trouble explaining why the law cares about fairness at all. If two people voluntarily agree to a deal, shouldn’t that be enforced regardless of whether one of them is rich and the other is poor? The law sometimes says no—it has doctrines like “unconscionability” that let courts tear up wildly unfair contracts. The economic view struggles to explain that.

Theory 4: We’re in This Together

A fourth approach starts with the fact that contracts create a special relationship. When you make a contract with someone, you’re not just two separate people who happen to have swapped promises. You’re now in a joint project. You’ve each given the other a kind of authority over your actions.

Think about it. When you contract to sell me that console, you can’t just do whatever you want—I now have the right to tell you what to do (about that console, anyway). And if I release you from the contract, you’re free. That means I have power over you. And you gave it to me voluntarily. This is a strange kind of relationship—somewhere between friendship and being strangers.

Some philosophers think the value of this relationship is what justifies contract law. When you make a contract, you’re recognizing the other person as someone whose choices matter, whose perspective you have to take seriously. You’re treating them as an equal. And that’s valuable, independent of whether keeping the promise makes everyone happier or prevents harm.

But this view has a hard time with the way contracts actually work. Many contracts are between a person and a giant corporation. When you click “I agree” on a terms-of-service page, are you really entering into a relationship of mutual recognition with Microsoft? Or are you just trying to get access to a service? The corporation doesn’t care about you as a person—it cares about profit. And you don’t really care about the corporation either. So where’s the valuable relationship?

The Problem of Clicking “I Agree”

This last point leads to a puzzle that’s especially pressing today. Most contracts aren’t the result of careful negotiation between equals who sit down and work out terms. They’re “form contracts”—standardized documents presented on a take-it-or-leave-it basis. You click a button, and suddenly you’re bound by dozens of pages you’ve never read.

Do you intend to be bound by all those terms? Probably not. You might not have any intention at all besides getting the app to work. Yet the law treats this as a real contract, just as binding as if you’d negotiated every word.

This is a serious problem for any theory that says contracts are based on promises or intentions. If you don’t intend to promise anything concrete, how can you be said to have promised? Some philosophers suggest that maybe you have a vague intention—you intend to comply with whatever the terms are, without knowing what they are. But that’s a pretty strained idea. Can you really intend something you know nothing about?

Should Contracts Make the World Fairer?

Finally, there’s a big question about justice. When two people make a deal, they’re usually trying to split the “surplus”—the extra value created by their cooperation. But how should that surplus be divided?

The obvious answer is: however they agree. If you voluntarily agree to split the profits 50-50 or 90-10, that’s your business. But what if one person has no real choice? What if you’re desperate for money and the other person knows it? Is it fair for them to take almost all the surplus?

The philosopher John Rawls argued that the basic rules of society—including contract law—should be designed to benefit the worst-off. On this view, the law shouldn’t just enforce whatever deals people make. It should actively tilt the playing field to help those who have less bargaining power.

Other philosophers disagree. Robert Nozick argued that as long as the starting conditions are fair and nobody is forced or defrauded, whatever deal people voluntarily make is just. The law shouldn’t try to redistribute wealth through contract rules—that’s what taxes and welfare programs are for.

This debate is still very much alive. Courts sometimes use the “unconscionability” doctrine to throw out deals that are extremely one-sided, but they rarely do so. And there’s no consensus on when a deal is so unfair it shouldn’t be enforced.

What’s Still Unsettled

After centuries of thinking about this, philosophers still disagree about almost every aspect of contract law. They disagree about whether contracts enforce moral duties or just coordinate expectations. They disagree about whether efficiency or fairness should guide the law. They disagree about what counts as voluntary consent.

What almost everyone agrees on is that contracts matter. They’re the legal backbone of almost every economic relationship, from buying a candy bar to building a skyscraper. And the questions about them—what we owe each other when we make promises, when it’s okay to break them, and how to share the benefits of cooperation—are questions about the most basic values we live by.

Appendices

Key Terms

Term	What it does in this debate
Expectation damages	The standard legal remedy for broken contracts: money that puts you in the position you would have been in if the promise had been kept
Consideration	The legal requirement that a promise must be part of a bargain (something given in exchange) to be enforceable
Efficient breach	Breaking a promise on purpose because doing so makes everyone (including the promise-breaker) better off after paying damages
Unconscionability	A legal doctrine that lets courts refuse to enforce contracts that are extremely one-sided or unfair
Form contract	A standardized contract presented on a take-it-or-leave-it basis, like the terms of service you agree to when installing software
Cooperative surplus	The extra value created when two people cooperate in an exchange—the difference between what they’d have alone and what they have together

Key People

Charles Fried – A legal philosopher who argued that contract law is fundamentally about enforcing the moral duty to keep promises.
T.M. Scanlon – A philosopher who argued that contract law is grounded in the moral duty not to harm others by leading them to form reasonable expectations.
John Rawls – A hugely influential political philosopher who argued that society’s basic rules should be designed to benefit the worst-off.
Robert Nozick – A philosopher who argued that as long as exchanges are voluntary and start from fair conditions, the results are just, no matter how unequal.

Things to Think About

When you click “I agree” to terms you haven’t read, have you really made a promise? What would it take for that to be a genuine promise?
Suppose you make a deal that’s perfectly fair at the time, but later the other person falls into desperate poverty. Do you owe them anything? Should the law require you to renegotiate?
Is it ever okay to break a promise because you found a better deal? What if you pay compensation? Does compensation fix the wrong, or is there something irreplaceable about keeping your word?
If two people voluntarily agree to a wildly unfair deal—say, someone agrees to sell their house for $1—should the law enforce it? Why or why not?

Where This Shows Up

In everyday life: Every time you buy something online, rent an apartment, or sign up for a service, you’re entering a contract—and the philosophical debates above determine what rights you actually have.
In the news: Debates about “unconscionable” contracts in things like medical debt, payday loans, and non-compete agreements are really debates about the philosophy of contract law.
In video games: When you buy a game that later removes features or shuts down, contract law determines whether the company actually owes you the experience you paid for.
In social life: The arguments about whether promises create obligations (even small ones, like promising to meet someone) are exactly the same arguments philosophers have about contract law—just without the legal machinery.