Principles of Contracts: Self-Interest

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Previous Chapter: The Narrowness Principle
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All business deals are based on trust, and it’s a trust backed up by a trustworthy legal system. Without trustworthy courts, high trust between people in a culture, and an environment characterized by trust and reciprocity, business is impossible.

“Trustworthy! Dan, what country are you living in?” I hear some of you cry. “The American courts are kangaroo affairs stripping us of our civil rights, legislating from the bench. The Judiciary is a racist, corrupt tool of criminal violence against the underclasses, and nothing more than a puppet of the special interests and elites in this country.” I hear some of you say that (every day, all around the blogosphere), but I also can’t help but notice that you’re reading a blog series about best practices for contracts, and that upwards of 80% of you reading it live, work, and do business in the United States. This isn’t a coincidence.

A well-functioning economy works because the trust quotient is high, and the reason isn’t too difficult to see: If I can’t trust you to live up to your end of the deal, and you can’t trust me to live up to mine, then why in the world would we do business together?

Oh, and that financial meltdown and credit freeze we just had? That was caused by an erosion of trust.

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