Contract Theory: Definitions and Implications

Contract Theory

Contract theory outlines the foundational principles governing agreements between parties. Its four essential elements are:

1. Offer: A proposal made by one party to another, indicating a willingness to enter into a contract under specified terms.

2. Capacity: The legal ability of the parties to enter into a contract, meaning they must understand the terms and implications. This typically excludes minors and individuals deemed mentally incapacitated.

3. Consideration: The value exchanged between parties, which can include money, services, or goods. It must be sufficient and have actual value for a contract to be valid.

4. Acceptance: The unequivocal agreement by the other party to the terms of the offer, which must be communicated clearly.

Note: Any claim to a contract that cannot prove these four elements—Offer, Capacity, Consideration, and Acceptance—cannot be enforced.

Implications of Consideration

The use of fiat currencies—money that lacks intrinsic value and is not backed by a physical commodity—raises important questions about consideration in contracts. Fiat currency operates as a government promise to recognize it as legal tender, but it may lack real value if created without backing by tangible assets. Contracts secured with such currency can be problematic, as they may not represent a true exchange of value. If a loan or agreement relies on currency "created from nothing," it may fail to meet the requirement of valid consideration. This undermines the enforceability of the contract, as one party cannot prove a loss or harm in the event of non-payment. Therefore, valid consideration must be grounded in something of tangible value to ensure fair and meaningful exchanges.

Implications of Capacity

Children lack the capacity to enter into contracts because they do not possess the necessary understanding to comprehend the terms and implications. In the context of Abrahamic law, the covenant between God and Abraham included all four elements: God offered blessings, Abraham provided obedience as consideration, he had the capacity to understand, and he accepted the terms. God gave Abraham a sign of this covenant—circumcision—to remind Israel of their commitment.

However, circumcision is sometimes misconstrued as representing an element of the covenant, such as consideration (the foreskin being offered) or an act of acceptance. Since children lack capacity, circumcision cannot fulfill these roles; it is merely a symbol of the covenant made between God and Abraham.

In contrast, baptism serves as a more fitting symbol of the new covenant in Christ, where only believers participate. In baptism, the believer offers their old life as a sacrifice (repentance) and presents their new life given by God as consideration for service. This act is only performed by those who possess the capacity to believe and accept the terms of the covenant. In return, God forgives the sinner's sins and transfers Christ's righteousness to them, fulfilling the covenantal relationship established through faith.

Implications for Secular Government

Secular governments often lack the one critical element necessary to govern justly: the explicit consent of the governed. This principle is enshrined in the Declaration of Independence, where Thomas Jefferson stated that “to secure these ends, governments are instituted among men, deriving their just powers from the consent of the governed.” Without this consent, any claim to authority is inherently flawed, as it does not align with the contractual basis upon which legitimate governance is founded.

Moreover, taxes often lack both consent and consideration, as citizens are compelled to pay without a genuine agreement or reciprocal benefit. This issue extends to many modern laws that fail to satisfy all four elements of a valid contract, resulting in widespread feelings of lawlessness and tyranny. As Jefferson noted, it is the duty of the people to dismiss all contracts that lack these four elements, implying that individuals must ignore and refrain from complying with all non-contractual forms of governance. This creates a moral imperative to challenge systems that operate without genuine authority derived from the consent of the governed.

Source of All Contracts, Covenants, and Governments

The ultimate source of all contracts, covenants, and governments lies in God’s first covenant with Adam, which was fulfilled in the life, death, and resurrection of Jesus Christ. Every person suffers under the sentencing of Adam’s original sin and becomes a party to that sin when they reach the capacity to trust or disobey. As all disobey God’s law, they are guilty of Adam’s sin and face the consequence of eternal damnation.

However, God has provided a remedy for this original contract through the perfect obedience of His Son, Jesus Christ, offered to repentant sinners. In exchange for their renewed obedience, God offers to transfer Christ's righteousness to the believer's account and treats Christ’s death as sufficient punishment for the believer's sins. This covenantal relationship restores what was lost in the Fall and establishes a foundation for all future covenants and governing authorities based on grace, mercy, and truth.

Invitation to Repentance and Commitment

In light of the truths outlined in contract theory and the covenant established through Christ, I invite you to consider your own relationship with God. Each of us has fallen short of His glory and bears the weight of Adam’s original sin. Yet, through repentance and faith, we can accept the incredible gift of Christ’s righteousness.

If you feel the prompting of the Holy Spirit, I encourage you to repent of your sins, accept the free gift of salvation, and commit your life to God. You can express this commitment by praying the Sinner’s Prayer and embracing the Covenant outlined at the following link:

The Covenant of the King

By doing so, you are acknowledging your need for God’s grace and choosing to live in accordance with His will. This decision marks the beginning of a transformative journey, where you can experience the fullness of life promised in Christ.

Post Note:

Since our life and obedience is an asset from God given in exchange for our obedience and worship, all attempts to use reason and logic are forms of theft if applied under the law and the sin of Adam. It is clear that many people understand that debts are not real and governments have no authority. It’s clear from the political discourse that people want to be free but without a proper covenant with God, all attempts to escape the punishment of tyranny are like a man trying to escape jail. The first step is repentance and accepting Christs punishment as your own so that you might walk in His righteousness. This is why only true believers in Christ and those who have given their life to him in payment for his righteousness are able to live in harmony with nature. 

This is also why we would expect the world to be descending into absurdity. Logic, reason, health, and morality are all gifts from God and we don’t deserve them. If we have them at all, they are tools to lead us to repentance, not the arrogance of knowledge.