§5. In the last two paragraphs we have had chiefly in view contracts in the narrower and more usual sense of the term---i.e. agreements to perform future services. Let us now consider what further limitations of the validity of contract peculiar to agreements of this kind are expedient.
It is evident that if there are no such limitations, a man may exercise his freedom for its own destruction by contracting himself into slavery: and an individualistic system that allowed this would defeat its own fundamental aims. Still, the question is not free from perplexity. For any binding contract to be performed at a future date must diminish to some extent the contractor's freedom of action when the time arrives. How then, it may be asked, can a line be drawn? If A may pledge himself to work for B for a year under conditions, why not for life unconditionally, if he judges this to be for his own interest. How can any limitation be justified except on the anti-individualistic assumption that the average man cannot estimate his own future interest as well as government can?
The answer is that the individualistic principle does not rest solely on the assumption of the actual superiority, generally speaking, of the individual's practical judgment where his own interests are concerned: it is based partly on a belief in the educative value of freedom as developing foresight, and not only foresight, but the moral qualities of self-reliance and energy. Hence it is not on the whole opposed to individualism to treat as invalid any contract resigning the rights to personal liberty and security and the right to acquire and dispose of property: it merely implies that the general assumption that the individual can be trusted to look after his own interests has at a certain point to give way to the general assumption that freedom is good for him.
It does not follow that there should be no enforcement of agreements to render personal services for an indefinite time. No doubt the performance of such a compact may become---through change of circumstances---indefinitely more convenient to the promiser than it is advantageous to the promisee. But this may easily occur in the case of agreements for a definite, even for a comparatively brief, date: and the difficulty may be met, consistently with our principle, in a more satisfactory way without imposing a limit of time. For, as has been before said, what is important from the point of view of utilitarian Individualism is, not so much that promises should be strictly kept, as that the recipients of promises should not suffer from their breach. Hence, generally speaking, when the contract relates not to the transfer of property but to personal services of any kind, it will suffice to exact from the promisee adequate compensation for breach of contract: so that practically the legal obligation arising out of such a contract will be merely the obligation to pay a sum of money if it proves inconvenient to fulfil the contract.
But a further limitation is needful: since the pressure even of pecuniary liabilities that a man cannot hope to discharge may, from an economic point of view, be a serious approximation to the condition of slavery: as it must materially impair the stimulus which freedom gives to industry, if a man's debts are so great that all he can hope to gain by his labour is legally due to others. Hence in all modern systems of law there is an important limitation on obligations to pay money; for all debts cease to be legally due from what we call ``discharged bankrupts''---i.e. persons who have proved their inability to pay and given up their property for division---however rich they may become after their bankruptcy. The utilitarian justification of this arrangement is, that the relief from debt thus given---while generally necessary to restore to a bankrupt the ordinary inducements to useful industry---involves no material sacrifice of the interests of creditors; since, even if their claims were kept legally valid, they would still have no effective means of compelling the defaulting debtor to earn the funds required to satisfy them. The general force of this reasoning is undeniable; though on the other hand there seems to be no reason why the relief given to the bankrupt should be so complete as to remove all inducement to repair the mischief he has caused to others; it seems therefore expedient that a bankrupt who has not paid his debts should remain in a position of marked social inferiority.
But, again, before the time has arrived to render the service agreed upon, it may have become impossible or illegal to render it. On whom should the loss through this non-performance fall? Let us first take the case of physical impossibility. Generally speaking, it would seem that the person who undertakes to perform a service ought to ascertain before undertaking it whether it is in his power to perform it, just as the recipient ought to ascertain whether it is worth while to pay the price asked: using economic terms we may say that the promiser's business is to know the conditions of supply, while the promisee's business is to know the conditions of demand. So that, if the subsequently manifest impossibility is one that might have been foreseen, the promiser should be held responsible for damage through non-performance. In many cases, however, it is either implied in the language used, or may be assumed from the nature of the case, that it was the intention of both parties that the promiser should be only bound to perform if performance be possible. For instance, if a contract is made to render artistic services requiring special physical qualifications---such as singing---for a certain payment; just as it may be assumed on the side of the purchaser of the service that what he intends to bind himself to remunerate is not merely the performance of certain actions, but the production of certain aesthetic effects by means of them; so, it may be assumed on the other side, that it is not intended that the artist should be considered to have failed to perform the contract, if, at the time fixed, he is physically disqualified from producing the desired effects. Perhaps a similar limitation of intention may be assumed where the performance of a contract becomes illegal through change in the law. At any rate, it seems clear that the promiser cannot reasonably be expected to foresee such changes: it is burden enough in a modern civilised community to be legally assumed to know the law as it is: it would be intolerable if one also had to foresee what it is going to be a year hence. If, however, A has paid money to B or performed a service, with a view to B's performance of a future service which, in the meantime, has become illegal through a change in the law, the money should be returned or the past service remunerated.
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