1. Suppose that you contract to purchase steel at a fixed price per ton. Before the contract is performed, a lengthy steelworkers’ strike causes the price of steel to triple from the price specified in the contract. If you demand that the supplier fulfill the contract, the supplier will go out of business. What are your ethical obligations in this situation? What are your legal rights?

2. Many countries have no Statute of Frauds, and even England, the country that created the original act, has repealed it. Should the United States do likewise? What are some of the costs and benefits to society of the Statute of Frauds?

3. In determining whether an exculpatory clause should be enforced, why does it matter whether the contract containing the clause involves essential services (such as transportation) or nonessential services (such as skiing or other leisure-time activities)?

4. Employers often include covenants not to compete in employment contracts to protect their trade secrets. What effect, if any, will the growth in e-commerce have on the reasonability of covenants not to compete?

The answer to the question just raised is not simple. On the one hand, a common ethical assumption in our society is that individuals should be held responsible for the consequences of their own actions, including their contractual promises. This principle is expressed in the legal concept of freedom of contract. On the other hand, another common assumption in our society is that individuals should not harm one another by their actions.

This is the basis of both tort law and criminal law. In the area of contract law, ethical behavior often involves balancing these principles. In the above example, if you purchased the car and your neighbor later learned its true value and sued you for the difference, very likely no court of law would find that the contract should be rescinded. At times, however, courts will hold that the principle of freedom of contract should give way to the principle of freedom from contract, a doctrine based on the assumption that people should not be harmed by the actions of others. We look next at some examples of situations in which parties to contracts may be excused from performance under their contracts to prevent injustice.