The Limits of Contract

Friedrich Kratochwil ¹

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I. Introduction

The roots of many international legal institutions in private law have been well established. The creative moment in which legal scholars attempted to understand the changing nature of authority after the demise of imperial formations and the intellectual assault on the viability of an ontologically based moral order has been recounted by legal scholars and political theorists alike.² But even more importantly, the generative force of private law institutions for the development of the international legal order can be seen in their capacity to provide `standard solutions'³ to new problems by means of analogy. One of the most recent examples is perhaps the sic utere tuo⁴ principle which has been put to good use in charting a new course for regulating trans-border pollution problems.

However, no analogy has attained as pivotal an importance as `contract'. It `solved' the problem of how `persons of sovereign authority'⁵ were to relate to each other in international politics, i.e. on the basis of consent and exchange. Thus, treaties as analogues to contracts gave rise to voluntarily created rights and obligations, while at the same time preserving the sovereigns' independence and authority. Of course, some obvious problems exist in using the private law structure as an analogue to an international law construct. Problems like custom and the ability of actors in that arena to determine and modify the public order - which private persons cannot do by their contracts - come readily to mind.

But such `first order objections' did little to challenge the pivotal importance of the contract metaphor for understanding the international game. As a matter of fact, its centrality was further reinforced when it was able to accommodate fundamental changes in the constitution of the actors themselves. By the l9th century, persons of sovereign authority, who originally held their title on the basis of `tradition' or even `divine' rights, could coexist with `agents' empowered by the `people' on the basis of an `original contract'.

Finally, even the further differentiation between `state' and `society' in which the members of society reserved their rights as to the proper exercise of authority by the `agent' did not necessitate a major conceptual adjustment. Despite its revolutionary implications, `popular sovereignty' seemed to fit neatly into the existing scheme. All that was necessary was to follow the generative logic of `contract' itself and to reconceptualize the emerging differences between state and society again in contractual terms. Locke's `double contract' provides here the appropriate template. Domestic as well as international order could be understood as a series of consensual acts in accordance with the contractual paradigm.

Against these tenets I wish to argue that considerably more than consent is required in order to explain the emergence of political authority and obligation. Contrary to the belief that what matters is the exchange, I shall argue that it does matter what we exchange and that, therefore, the farther we move from spot exchanges in a market to more complex social arrangements, the less is explained by the institution of contract as opposed to other elements.

These objections, then, cast considerable doubt on the possibility of reducing the choice of political institutions to a contractual paradigm as exemplified by a theory of `justice'. I also want to argue that these flaws in the contractual paradigm are not simply the result of the obliviousness to the initial assignment of `rights' without which the notion of consensual exchange is meaningless. It seems rather that the two institutions of the contractual paradigm, consent and property, have contradictory implications, because of the failure of the contract metaphor to specify criteria for membership in the contracting group. While such a neglect is of no importance in the case of bilateral `spot contracts' in which we assume no further social bonds or lasting effects outside the exchange, such an assumption is incoherent in the case of contracts setting up political authority and negotiating distributive schemes.

These difficulties are compounded when we move from bilateral, incomplete contracts to `implicit', incomplete contracts, which is precisely the situation of the hypothetical construct of the `original' contract in the state of nature. Contractual solutions to the problems of authority have either to assume the existence of a well-established community, or they have to rely on a deus ex machina, i.e. `territoriality', in order to delineate the `members'. To that extent, both legal theory and the prevalent theories of international politics assume that the `people' are always the same whether they appear as `citizens', as members of a nation, or of an `ethnos'. International relations theory speaks then simply of `units' in which the people, the state, the nation and the `ethnos' are neatly packaged, and the legal theory `solves' this problem by assuming that the guarantee of `self-determination' is ensured by endowing individuals with rights of citizenship and participation. Above all, sovereignty and its contemporary manifestation of the territorial state, provide all the necessary conceptual tools.

However, such a theoretical construct is all the more unsatisfactory as international migrations, the revival of ethnic assertiveness, and changing notions of citizenship/nationality make a return to simple territoriality unfeasible. Domestically, the `democratic deficits' caused by the existence of increasing numbers of refugees and long time resident aliens has not only worried political theorists; the question of their legal status requires answers which cannot be obtained from the traditional conceptual grid or from the mere assertion of `human rights'. In particular, if group membership is so important, not only for practical but also analytical reasons, and if this problem remains unaddressed by contractarians and `rights' advocates, it seems that the discourse on rights and contractual thinking can provide less guidance than is usually claimed for the problem of `justice' either domestically or internationally.

While I obviously do not possess a fully-fledged alternative for the solution of these conceptual puzzles, this article has two more modest goals: one is to show the limits of two currently fashionable contractual paradigms in relation to the liberal reduction of the problem of domestic and international order to a question of `justice'; and two, to advocate a mode of analysis which utilizes the structure of well- established institutions and attempts to understand the logic of their extension to other areas of social reality. This mode of analysis is at odds with the usual attempts to create `grand theories' whether in the areas of `law' or `politics', or to `apply' some theory imported from some other discipline to social issues. The former attempts usually fail because of the difficulties in formulating sensible demarcation criteria that establish conceptually distinct spheres and which, therefore, quickly end up `subsuming' or marginalizing the other spheres or parts of social reality. The latter are in danger of degenerating into mistaken analogical thinking or of providing simple redescriptions in terms of the new framework rather than generating new insights.

Opting for a conceptual analysis of well-established institutions, I believe that these twin dangers are minimized by a more modest approach, i.e. it is heuristically more fruitful to examine institutions and their conceptual extensions because `anomalies' are less likely to be ignored or `normalized' instead of becoming new starting points for theoretical puzzles. Furthermore, such a procedure, because of its `realism', bears more promise than the grand `imported' theories which arrive as ready-made models that are then prematurely dispatched in search of their range of application.

In order to make good these claims, my argument will take the following steps. In Section II, I begin with the examination of different types of contracts. In this context I will distinguish the spot contract (simultaneous and sequential exchange), the long-term iterative contract, the incomplete contract and, in particular, the incomplete contract establishing `authority relationships'. My analysis focuses on `problems' of enforcement and demonstrates that, contrary to the assumptions made by the `grand theories' of neoclassical economics and international politics (that view `self-help' as resulting from `anarchy'), self-help is pervasive in domestic as well as international affairs. Consequently, both the general equilibrium model as well as the predominant `theory' of international politics are badly in need of revision. In Section III, I address the difficulties which arise when the incomplete contract model is applied to ongoing relationships that are either nonspecific as to scope and duration, or where these elements are simply `implied'. For this purpose, I examine the institution of marriage as a contract and, more importantly, the invocation of the contractual paradigm for the determination of political obligation. Section IV draws out some of the conceptual puzzles which arise in this context when a solution is attempted by means of a Rawlsian `hypothetical contract'. My interest here is not to provide a comprehensive evaluation of the Rawlsian `original position' and its recent modifications, but rather to assess the importance of the contract and consent metaphor for a `theory' of the political and legal order, domestically as well as internationally. I argue that consecutive extensions of the contractual paradigm can no longer successfully integrate the different pulls these additions have generated, and that therefore, the contractual paradigm becomes incoherent. To the extent that grand theories of `politics' and `law' originate in a contractual paradigm (social contract), I argue that they also quickly reach the limits of their capacity to provide insights for solutions to contemporary problems of domestic and international order.

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1 University of Pennsylvania. I wish to thank Mlada Bukowanski, Rey Koslowski, Nicholas Onuf and Amir Pasíc for comments on an earlier draft. I also gratefully acknowledge the support of the Lawrence B. Siman chair which made this article possible.

2 For a comprehensive treatment of the origins of many international legal institutions in private law see Sir H. Lauterpacht, Private Law Sources and Analogies of International Law (1927). For a more historical account of the intellectual ancestry of international law see H. Bull, B. Kingsbury and A. Roberts (eds), Hugo Grotius and International Relations (1990). See also C.F. Murphy, The Search for World Order: A Study of Thought and Action (1984).

3 For the importance of `standard solutions' for the development of international law see Onuf, `Legal Theory', in N. Onuf (ed.), Global Law-making and Law-making in the Global Community (1982) 1-82.

4 See, e.g., Lake Lanoux Case (Arbitration between France and Spain; 1866 - ILR 101, 1957) and Trail Smelter Case (U.S. v. Canada - 3 U.N.Rep.Int.Arb.Awards 1911; 1941).

5 This is Hobbes' term in Leviathan (1968) Chapter 13.

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