Formal and Informal Contracts

Nothing so far has turned on the difference between formal and informal, a distinction which cuts across the division between general and specific tests. A form sometimes provides a mode of contracting, as with the deed: any promise can be made binding with the use of that formality.

What is meant by formality? It is not always easy to say whether a given requirement should be regarded as a requirement of form. You have to ask yourself what the �natural’ or informal way of doing the thing in question would be. Then a formal requirement will be one which either adds to what would be �naturally’ done or restricts the modes in which it could so be done by excluding some which would seem to work just as well if the law would let them. The requirement of a seal is a super-added formality: nobody’s natural vision of a promise would include it. A general requirement of writing would be a restrict­ive formality. In the natural version you can alter a promise by word of mouth or semaphore or writing; in short by any manner of communication.

By this test, stipulation must count as formal whether or not special words had to be used. For the insistence on spoken words is in itself an artificial restriction, exactly on a par with the insistence on writing contemplated in the last paragraph.

The relativity of formality (which is just shorthand for the observa­tion that the decision to call something a formality depends sometimes on your view of the natural phenomenon in question) is well illustrated by the common law’s doctrine of consideration. If you take the view that the natural phenomenon which the common law is looking for is �the bargain’ or �the non-gratuitous promise’, there is nothing to say for the view that the requirement of consideration is a requirement of formality. For the consideration is the very element of reciprocity which �naturally’ indicates a bargain or shows the promise to have been bought at a price, however trivial. But if you think that what the common law is really looking for is the seriously intended promise, the promise meant to bind, then you may well begin to see the insistence on consideration as something super-added to the commonsensical phenomenon by the courts. By taking literally the doctrine that the adequacy of consideration is not to be inspected, the law has made it possible for parties to behave as though this latter view were right. How do you make a gratuitous promise binding? Either put it in the form of a deed or exact some nominal consideration. The nominal consideration, a peppercorn or a rose at midsummer, here becomes as much a formality as the red sticker which now replaces a seal.

What is the point of formality? It serves to concentrate the mind. That is, the person about to incur the obligation (or trigger the other legal consequences, whatever they may be) knows exactly when it is going to happen. He has the opportunity therefore to give it his serious consideration. Nowadays it is a familiar device for consumer protection to insist that the consumer be given a written document and a set time in which to contemplate its finality. Whenever you execute a deed (or make a will) you cannot help being aware that you are taking a serious step. So formality warns.

It also militates against fraud and uncertainty, though not all formal­ities are equally effective or operate in the same way. Writing obliges people to make themselves clear and provides good evidence, espe­cially when all other evidence of the act in question is excluded. The ceremony of mancipatio made acts public and well-witnessed.

The assertion that formal requirements have these good purposes should not close our eyes to the fact that they may also get built into the law by accident or may outgrow the purposes for which they were introduced. And, further, they can have bad side-effects. Where the law insists on formality, people sometimes go on following common­sense. And that can be an engine of fraud. If the law says I can only give you my house in writing, what if I take your money and let you in without the trouble of any document? The obvious Roman version of this is the case in which I am selling a res mancipi but decide to skip the mancipatio. Something had to be done to stop me treacherously taking advantage of the technical effects of ignoring the formal requirements.

Formal requirements always carry this kind of difficulty, an in-built overkill.

Is this section on formality a digression? The topic is the organisation of Roman contract. So how does formality come in? Neither Gaius nor Justinian makes anything of the division between formal and informal. They do not divide the four groups (re, verbis, litteris, consensu) in this way.

The snag is that Justinian imposed a requirement of writing on all contracts, to an extent which remains controversial. And, even before that, writing was for purely practical reasons very important right across the board.

This means that a division between formal and informal contracts cannot be neatly slipped over the groupings used in the Institutes. But even so this division remains useful. Nor will the coherence of the Roman categories be disturbed by bringing into a discussion of formal contracts the consideration of the role of writing in the whole law of contract. For that can conveniently be done in connexion with the contract litteris. The treatment of contracts in these lectures will comprise two chapters on formal contracts (litteris, verbis), followed by two on informal contracts (consensu, re).