Libertarian Answer Man: Fine Print, The Doctrine of Unconscionability, Good Faith, Forced Heirship, Lesion Beyond Moiety

by Stephan Kinsella on December 12, 2025

Not a normal answer man segment since this was not an unsolicited query, but rather from a private discussion with some libertarian friends.

We were discussing Hedge fund ordered to pay bonus to trader who made 97% of its revenues. In this case a London trading firm indicated the trader would likely get a discretionary bonus if he hit a $10M target; he ended up far exceeding this and making 97% of its revenues that year.

Still, the boss told him he would not give him a bonus because they were not happy with negative publicity from a dispute with the SEC from previous employment activities. He sued and one. I said ULTIAAO, “unlibertarian things I almost approve of.” One friend disagreed, saying the contract said the bonus was discretionary so that settles it.

I said

not sure if it’s unlibertairan. just a contract dispute

One friend: “Is it unlibertarian if the contract clearly states that the bonus is discretionary, but the court rules that this is “unfair” and makes it mandatory?”

My response:

What the contract “states”? the contract is not necessarily the writing. It’s more of a legal-factual question as to what the agreement actually was. Context matters.

One way to decide these issues when there is a vague or ambiguous or disputed term in a contract is to ask: if the parties had seen X coming and decided to address it in the contract, what would they have agreed to? That works in a lot of scenarios. This one, I am not sure. The court could call witnesses and ask them to suss this out. It’s all about context.

So suppose the firm had said “you know if you make $10M that will almost certainly result in a generous bonus, assuming we are profitable and we have a pool of bonus money to distribute.” Then what if the guy had said “look, will you put that in writing”? We can imagine the employer saying “uh, no, it’s discretionary, we might not have the money, you might do something to piss us off like getting into an embarrassing SEC problem, so no, we cannot guarantee it.” If that would be the answer, then maybe they should win.

But what if he had said ‘Okay I get that, but if I make 97% of the entire fund’s revenue, would you legally promise to pay me bonus in that case?” So really, what would an employer say–“no, even if you earn 100% of our money and make $200M for us, we still might decide not to pay you. If you don’t like it, you can leave.” It’s not so clear to me that this is what they would say. Maybe they would say “well sure, in that case, we would have no problem guaranteeing your bonus, since it’s so unlikely and it would be so obviously unfair to withhold it.”

BTW this type of reasoning is why I argue that contracts are not always what the fine print says, since there is an overriding obligation of good faith. Even if good faith is not stated, it can safely be presumed because if you had asked the parties at the time of forming their agreement, “do you both agree the agreement can be construed according to standard principles of good faith,” then if either one said NO this would be a huge red flag and the deal probably would not proceed. See The Libertarian View on Fine Print, Shrinkwrap, Clickwrap.

And this concept of good faith is essential to construing contracts and also to the concept of fraud. (The Title-Transfer Theory of Contract, Part IV.C)

As I mentioned there:

You could even argue there is an implicit duty of good faith, that means that the vendor is implicitly promising that his fine-print terms are “reasonable” or “default/normal” ones, and if others are “snuck in” it’s a type of fraud.

As I note here: The Title-Transfer Theory of Contract, n.8:

On good faith as it pertains to contractual matters, see La. Civ. Code, art. 1759: “Good faith shall govern the conduct of the obligor and the obligee in whatever pertains to the obligation” and art. 1983: “Contracts must be performed in good faith.” See also Levasseur (2020, ¶¶ 39–43; 2010, §8.1.2), and Litvinoff (2001, §1.8).

Do you agree with this at least and my view that not all fine print is operative? I mean what if you sign and buried in there is some sneaky clause like “you owe us $1k upon completion of tree removal and then you also owe us $10% of your income for life”?

I would say there is no meeting of the minds on this and that for the other side to insist on that violates their obligation of good faith and they would be estopped from making such an argument. It is legal positivism to assume the contract is the writing. The writing is just evidence of the agreement and not always the best or even good–there is even such a thing as a simulation, e.g. La. Civ. Code art. 2025:

Art. 2025. Definition; simulation and counterletter
A contract is a simulation when, by mutual agreement, it does not express the true intent of the parties.
If the true intent of the parties is expressed in a separate writing, that writing is a counterletter.

Another friend said

Of course this is all correct. I suppose it also explains the doctrine of unconscionability. As a libertarian law student, it struck me as objectionable interference with contract, but really (at least in its most appropriate form) it acknowledges the reality as you describe here.

Me:

Yes. It explains part of it, but maybe not all of it. There is an element also of consumer protectionism in the doctrine, but then there is an element of consumer protectionism in fraud law as well–we don’t always say caveat emptor, do we.

There are some doctrines that were more or less organically developed that I am not so sure we can cast out from our armchairs as obviously unlibertarian. I see some wisdom in all of them and can see how they might arise, and be justified in context, and adhering to Chesterton’s fence admonition, we ought be cautious about removing them from our armchairs. See e.g. KOL474 | Where The Common Law Goes Wrong (PFS 2025):

we could imagine a given society adopting the general legal principles and some existing body or bodies of private law insofar as they are compatible with general libertarian principles. Rules of the Roman law or common law that are incompatible with the past bodies of private law will cautiously rejected, and the law going forward improved and moved in a more just direction.

Why cautiously? Because of humility, awareness of our limits, respect for the fact that the modern bodies of law took an accumulated two millennia to develop, and because of Chesterton’s Fence:

In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, ‘I don’t see the use of this; let us clear it away.’ To which the more intelligent type of reformer will do well to answer: ‘If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.’

Or as Sebastian Wang noted in “Stephan Kinsella on the Common Law: Lessons from Bodrum 2025,” Libertarian Alliance [UK] Blog (Sep. 19, 2025):

The theme that ran through Kinsella’s lecture was caution. Libertarians are often tempted to imagine that if only the state collapsed tomorrow, we could draft a perfect libertarian code and live happily ever after. History gives no reason to believe this. Roman law did not emerge in a day. English common law was not decreed by Magna Carta. Both grew slowly, through countless cases and revisions. Even the Napoleonic Code, written in clear French prose, was the distillation of custom, not the invention of a committee.

The construction of libertarian law will likewise take centuries. For a long time, it will contain much that libertarians regard as unjust. But change must be organic. Rules that appear irrational may serve hidden functions. Rules that appear trivial may prevent great evils. The presumption must be in favour of the accumulated wisdom of the past, rebuttable only when clear injustice can be shown.

For example, in the civil law, there are doctrines such as the presumption of community property and co-ownership in indivision between spouses, which as a rebuttable presumption I think is hard to inveigh against (no offense, bitter manosphere losers who hate the idea of community property); but even institutions like forced heirship and lesion beyond moiety. For forced heirship it seems to me parents who bring kids into the world should be obligated to take care of them before they become a public charge; this would align incentives to be good parents and raise responsible kids because you are on the hook and can’t pawn them off on the welfare state. I mean maybe the stigma against unwed births would re-emerge. As for the other, it seems a bit consumer protectionist but… I kinda like it. If the sale price is too low, something is probably … off. See Louisiana Civil Code art. 2589:

Art. 2589. Rescission for lesion beyond moiety
The sale of an immovable may be rescinded for lesion when the price is less than one half of the fair market value of the immovable. Lesion can be claimed only by the seller and only in sales of corporeal immovables. It cannot be alleged in a sale made by order of the court.
The seller may invoke lesion even if he has renounced the right to claim it.