munity were legally bound to abstain from handling the watch without the watchmaker's consent, and to compensate the latter for any injury that might be caused to the watch through their negligence; henceforward it is the customer whose consent is required, and to whom compensation will be due. In short, the agreement of these two persons has affected what jurists call their "rights in rem ; i.e. rights corresponding to obligations imposed on other members of the community generally. But in its narrower and more usual sense the word contract denotes an agreement that only confers what jurists call a "right in personam;" i.e. a right corresponding to an obligation imposed only on a particular individual. E.g. "Suppose that instead of the instantaneous sale of the watch, the agreement has been merely for its purchase at a future day," in this case there is a contract that does not transfer the ownership of the watch, but merely imposes on the watchmaker an obligation to sell the watch at the time and for the price agreed upon, and gives the customer a corresponding right, capable of being enforced against the watchmaker, but not directly affecting his legal relations with other persons. Now, from the point of view of formal jurisprudence the difference between agreements that give rise to rights in rem, and those that only give rise to rights in personam, is doubtless fundamental. But in a general discussion of the functions of government, the distinction appears to me to have only subordinate and secondary importance. We have already had occasion to notice that if rights in personam are valuable and transferable, they come to be regarded for practical purposes as a kind of property under ordinary circumstances, my control over "money in the bank" being practically as complete as my control over money in my purse, I naturally think of the two moneys as property of the same kind though differently situated: it is indifferent to me that in the former case my legal right only consists in an obligation imposed on the banker to pay me coin or bank notes : on demand, while in the latter case the world at large is under an obligation to refrain from meddling with my sovereigns. And, speaking more generally, we may say that, from our present point of view, the resemblances between (1) sale or other agreement by which property is transferred, and (2) an agreement giving the legal right to a future service, are more important than the differences. In the most important cases of either-and those to which our consideration may conveniently be limited in the first instance there is a transfer of utility, from A to B, in view of a corresponding transfer of utility on the other side; and not only are the general grounds of expediency for giving legal force to such agreements mainly the same in both cases, but the special conditions under which it is inexpedient to give them such validity are also to a great extent identical. It will, therefore, I think, save trouble and tend to give a clearer grasp of the subject if we first direct attention to the conditions of valid exchanges of utility which are common to the two cases-transfer of rights of property and engagements to render services. I shall then consider the conditions peculiar, from the nature of the case, to agreements to which the term contract is more ordinarily limited; ie. in which the utility which one of the parties agrees to transfer is a future service. § 2. Let us begin, then, by considering the conditions and limitations that apply equally to both kinds of agreements; -those that modify the rights in rem of the parties, and those that merely give rise to rights in personam. The general rule, summarily stated, is, that legal validity should be given to all exchanges of utility (1) deliberately made between persons possessing at the time mature reason, if they have been made without (2) coercion, or (3) wilful or careless misrepresentation on either side; and (4) if the effects they were designed to produce involve (a) no violation of law or (b) cognisable injury to the community. There is a general presumption that the carrying into effect of agreements made under these conditions will involve an G increase of utility to the parties agreeing, without causing mischief to others this follows from the general individualistic principle that a sane adult can on the whole be trusted to look after his own happiness if secured from interference of others. But if any of these conditions is not fulfilled, the presumption so far fails, and there is a primá facie ground for interfering to prevent or modify the agreement, or allowing it to be invalidated in whole or in part; so far as this can be done without disappointing the legitimate expectations of persons other than those who made the agreement. Let us examine more closely the different kinds of conditions. The first condition, that the agreeing parties should be at the time in possession of mature reason, excludes—or at least sets aside for further consideration-the agreements of the three following classes of persons: (1) those who have not yet come to the full use of reason; (2) those who have lost it for an indefinite period through disease; and (3) those who have transiently lost it through intoxication, or some similar cause. It does not follow that all such agreements should be incapable of being legally enforced :-e.g. there is a manifest expediency in the regulation that minors should be legally capable of making contracts of a kind clearly beneficial to them. But there is in all these cases primá facie need of some limitation of the general rule of enforcing agreements since the intellectual condition of one of the parties concerned precludes any general presumption that the agreement will be for the advantage of both. Our second condition was that exchanges of utility, to be valid, should be made without coercion. Here the term "coercion" requires careful definition. So far as it merely means illegal coercion-i.e. actual or threatened violation by one party of the other's legal rights-the condition presents no difficulty: it is manifestly inexpedient, generally speaking, that the law should supply inducements to illegal conduct by interfering to secure advantages to the lawbreaker.1 But suppose A induces B to enter into an agree 1 I do not know why—as is commonly said to be the case in English law— ment by threatening some act or omission which is not illegal or in itself immoral, but which will as a matter of fact be seriously annoying to B, while it is not conducive to A's interests otherwise than by enabling him to obtain B's consent to the agreement, and certainly would not have taken place except for A's desire to obtain it: Is there an adequate reason for invalidating such agreements, or interfering to prevent them from being made? The question is not easy to answer decidedly: since, on the one hand, it is obviously desirable to prevent pressure of this kind, so far as this can be done without causing mischief in other ways; on the other hand it seems difficult to prevent it in any complete way, without seriously interfering with the freedom of persons to declare intentions in themselves innocent.1 It is a different question again whether the law should interfere to prevent a contract in which A gains by the distress of B, even though A is in no way responsible for the distress nor legally bound to relieve it. Such a contract, in popular political discussion, is sometimes said not to be free; but it seems clear that, on the individualistic principle, there is no ground whatever for interfering to prevent it, if it be granted that we have the ordinary reasons for assuming that B is in a better position than he would have been apart from the contract. If A is not legally bound to help B merely because he is in distress, and if he is free to contract or not as he likes, I see no consistency in legally obliging him to make a contract-if he does make one-more favourable to B than he would make without legal interference. Such interference, in fact, is essentially socialistic. I do not the "duress" that renders a contract voidable is confined to "actual or threatened violence or imprisonment;" and does not include the threat of irreparable injury to property. I can find no justification for this restriction. The rule in the Indian Code is wider and more reasonable. 1 The "Undue influence" which renders a contract voidable, according to English law, seems in some cases to include pressure of this kind, at least according to the dicta of the Judges. But I am informed that these dicta go beyond the decided cases; which do not support the general proposition that an agreement obtained by "pressure" is invalid, if by "pressure" is meant expressed intention of doing something lawful but injurious to the other party. therefore say that it may not be sometimes expedient: but it cannot, I conceive, be defended on the ground that B is "not really free," in the sense in which individualistic legislation aims generally at securing his freedom. §3. Let us now examine the third of the conditions above mentioned that there must be no wilful or negligent misrepresentation of material facts. We have to observe in the first place that though there is a general presumption that exchanges freely made between persons in the possession of mature reason will be for the advantage of both parties, experience continually shows us cases in which an exchange of utility has actually been disadvantageous to one of the parties, owing to an erroneous idea of the value of the thing or service bargained for. The question then arises how far the law should interfere to prevent or repair this disadvantage. Now it is obvious that if a seller's erroneous idea of the value of a purchased commodity, even when shared by the buyer, were broadly held to be a ground for treating the transfer as substantially invalid, the insecurity thus introduced into agreements would be so widespread as to be intolerable: no purchaser (e.g.) of a picture would ever know whether the exchange was really completed or not. The only question that raises any doubt is, whether A should not be bound to disclose all material facts known to him, which are such as would affect B's judgment, if he knew them, supposing B to be a person of ordinary common sense. I think that our first impulse would certainly be to affirm that he ought: but reflection seems to show that if the knowledge was of a kind that it was equally open to B to acquire, each party ought, on the individualistic principle, to have the whole advantage of his own knowledge, and to bear the whole loss arising from his ignorance, provided that his mistake is not caused in some positive manner by the other party to the agreement. And even when as in ordinary cases of sale the seller may be supposed to have superior knowledge of the qualities of the articles sold to the buyer: still it is prima facie in accordance with the principle of mutual non-interference that each should |