Wed 18 Mar 2009
Have you been paying attention to the mass movement to fight a war on contract law? By now, you’ve heard of those dreaded AIG bonuses and while I agree it’s total crap that bonuses were handed out from government funds, there is something to be said about contractual obligations and contract law.
Imagine if anyone could simply void a contract because they changed their minds or suddenly didn’t like a company. Over the past week I’ve read three key articles that speak to the movement to invalidate centuries of contract law.
First, a bankruptcy judge in California has ruled that a city can
In the first ruling of its kind, a bankruptcy judge held the city of Vallejo, Calif. has the authority to void its existing union contracts in its effort to reorganize, holding public workers do not enjoy the same protections Congress gave union workers at private companies.
Secondly, there is pending legislation in Congress to give bankruptcy judges the ability to
Washington — Legislation that could provide a last-ditch option for Nevada homeowners facing foreclosure has passed the House but is facing a tougher time in the Senate.
The bill, an element of President Barack Obama’s housing recovery plan, would give bankruptcy courts the authority to reduce mortgages as part of an intense court-monitored plan to restructure homeowner debt. Even families who don’t declare bankruptcy could benefit because the law would add pressure on lenders to rewrite loans before homeowners turn to bankruptcy court.
Third, there is great talk of invalidating AIG employees contracts with regards to their bonuses. Don’t get me wrong, I am AGAINST these payouts BUT if the company had a contractual obligation to pay then it had a contractual obligation to pay.
One of the cornerstones of capitalism is contract law. Person A and Person B wanting to conduct business or agree to something do so under a contract and if there is an issue with performance under the contract then a judge & jury can be called upon to settle the differences. Unfortunately, now we’re headed into a situation where a single judge somewhere may arbitrarily change the terms of a contract and essentially force one of the parties to perform unreasonably under the contract. Worse yet is the power of the state to simply void contracts for the “benefit” of the people.
In my view, the four legs of capitalism are: capital (money), people, contract law, industry. It seems the four legs are under assault and weakening day by day. Capital is disappearing, people are being laid off, contract law is under attack and industry is on the verge of bankruptcy. Only time will tell where the assault will lead everyone to at the end of the day. Where is John Galt?