Over the years of existence of contracts and contract law, different perspectives ands views have developed with time. These perspectives can be called the theories of contract law which help use to view the contract law from different angles and understand the propose and functioning of contract law in various angles and get a broader perspective of the extent and purpose of contract law. The four horsemen theories are,

Classical Theory

The ‘Classical Theory,’ also known as the ‘Will Theory,’ is the oldest contract theory. A contract is enforced to respect the will of the parties who have entered into the contract, according to this theory.

A well-known lawyer Salmond believes in the will theory. Will theory also lays the stage for one of the most important aspects of contract formation: a meeting of the minds, or consensus ad idem. The freedom of parties to enter into a contract is also emphasized by the will theory: this is a jurisprudential notion that asserts that contracts are based on mutual agreement and free choice of the parties. As a result, contracts should not be impeded by outside oversight. As a result, unless the consideration for such a contract is unlawful, a contract between parties who are free and willing to contract and agree to do or not do anything should be enforced.

Promise Theory

The keystone of this theory is promise, If a promise is made that is both valid and supported by a legal consideration, it is legally enforceable.

Promise theory is based on the principle of reciprocity, which states that everyone in society expects the person for whom they have done something to return the favor. One of the proponents of the promise theory is Kant, who claims that keeping a commitment to another person is what leads to a rational society. Promises are similar to modern money, according to Roscoe Pound, and it is critical to uphold the enforcement of such promises in order to retain wealth as the foundation of civilization. Any commitment made in the course of a business transaction must be kept.

Social Theory

Roscoe Pound, a well-known jurist and lawyer, proposed this notion. Pound’s’social engineering’ theory aims to establish a balance between opposing interests in society by ensuring the fulfilment of the greatest number of wants with the least amount of friction.

The origins of ‘social theory’ can be traced back to the sociological school of law. The privity of contract isn’t as important in this view because it advocates for the enforcement of claims made by a stranger to a contract. The goal is to give the promised relief while simultaneously promoting a healthy, responsible economy.

Economic Theory

Contracts can also be viewed from the lens of economies. According to Richard A. Poser, whose seminal work is titled, An Economic Analysis of Law.

According this perspective of contract law, there are three significant functions performed by contract law,

• Individuals are given financial incentives to exchange commodities and services efficiently.
• As the terms and conditions of a contract are laid clearly, the expenses of economic transactions are decreased.
• It warns the parties involved about impending problems; if the parties are aware of previous conflicts, it is easier to avoid them in the future.

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