Special Report

▪ 1996

      The "Contract" with America

      BY NINA MASSEN

      Fortified with a significant electoral victory on Election Day 1994, Republican leader Newt Gingrich, the new speaker of the U.S. House of Representatives, initiated a 10-point legislative program called the "Contract with America," a mix of promises to repeal existing statutes and promises to enact new legislation that was based on a document signed the previous September by many Republican candidates. The agenda targeted a vast array of areas in which government action was to be enhanced, redirected, or eliminated. The scope of the mandate was equaled only by the speed with which the speaker and his House colleagues promised that the package would be enacted: a mere 100 days.

      The Contract was headline news for much of the first 100 days of the new Congress. There was debate over the substantive merits of the individual pieces of the legislative package as well as discussion of whether the 10 planks, taken as a whole, would create a fundamentally new relationship between the federal government, the states, and the electorate. Proponents and opponents of the Contract recognized that even if the House passed each of the 10 planks, the ultimate success of the Contract lay with the Senate, the president, and ultimately the voters, all of whom would have to approve of the measures.

      What was absent from the debate, however, was any discussion of whether the Contract was in fact a legal contract. Was the title selected to fit neatly into the nine-second-sound-bite style of 20th-century American politics, or was it a throwback to Jean-Jacques Rousseau's 18th-century social contract? If the term contract was to be taken literally, then a routine application of traditional contract principles raised the possibility that the Contract, regardless of any substantive merit, did not embody a meeting of the minds between the governing and the governed.

      The 10 parts of the Contract with America were variously titled to try to capture the essence of the legislation—the Fiscal Responsibility Act, for example. As the 10 parts wound their way through the legislative process, fulfillment of each basic plank required passage of a group of splinter bills. In the end, however, all but one of the 10 initial measures—the Citizen Legislature Act—was approved by the House in 100 days, by April 13, 1995.

      The Fiscal Responsibility Act contained two budgetary reforms: a constitutional amendment requiring a balanced budget and a permanent line-item veto. As initially posed, the balanced budget bill (H.J. Res. 1) would be an amendment to the Constitution to require that the federal budget be balanced by the year 2002 or two years after enactment of the amendment, whichever was later. The bill passed the House but failed in the Senate. The line-item veto bill (H.R. 2) would give the president the authority to veto specific portions of appropriations acts, unless overridden by Congress. The House version passed, but owing to the substantively different configuration of the Senate bill, the bills were sent to conference in June 1995.

      The Taking Back Our Streets Act was the House Republicans' crime-fighting measure (H.R. 3). It shifted federal spending from crime-prevention programs to prison construction, called for hiring more police officers, and limited the appeal rights of death-row inmates. The House Judiciary Committee divided H.R. 3 into smaller bills, all of which passed. The Senate began hearings on its bill (S. 3) on July 27, 1995.

      The Personal Responsibility Act was a welfare-reform bill aimed at capping welfare spending, encouraging a reduction in illegitimacy by prohibiting welfare benefits to mothers under 18, and creating several large block grants for the states for items such as child care, school meals, and nutrition for young children. Additions to the bill allowed for child-support enforcement and a capped food-stamp-entitlement program. The House bill (H.R. 4) passed on March 24, 1995. A watered-down version of the bill was passed by the Senate after nearly 100 hours of debate on Sept. 19, 1995.

      The Family Reinforcement Act was drafted to provide tax breaks for child adoption and elder care, toughen penalties for child pornographers, and protect the privacy rights of minors and their parents. Bills encompassing this legislation passed the House on April 4, 1995, followed by Senate passage two days later.

      The American Dream Restoration Act was intended to provide tax relief for middle-income families by providing a $500-per-child tax credit, reform the so-called marriage penalty, and authorize more flexible individual retirement accounts (IRAs). The House passed H.R. 6 in early April 1995, whereas the Senate bill entered hearings on June 19, 1995.

      The main goals of the National Security Restoration Act were twofold: to prohibit further cuts in defense spending to finance social-spending programs and to prohibit the use of American troops in UN operations under foreign control. The bill (H.R. 7) passed the House on Feb. 16, 1995. The Senate Foreign Relations Committee began hearings on the Senate bill on March 21, 1995.

      The Senior Citizens' Fairness Act was intended to relieve the financial burdens of the American elderly by permitting them to earn up to $30,000 per year without losing Social Security benefits, repealing the 1993 law that made 85% of Social Security benefits subject to income tax for middle- and upper-income persons, and granting a tax incentive to encourage the purchase of long-term-care insurance. The House passed the bill, and the Senate version went into hearings on June 19, 1995.

      The Job Creation and Wage Enhancement Act was actually several bills that sought to reduce the capital-gains tax, strengthen individuals' property rights, reduce governmental red tape, and overhaul the governmental regulatory process. Four bills, not including the capital-gains reduction, were passed as H.R. 9 and were referred to the Senate on March 9, 1995. (H.R. 1215, which included a decrease in capital-gains taxes, passed the House on April 5.)

      The Common Sense Legal Reforms Act (H.R. 10) encompassed a number of legal reforms, including limiting punitive damages, instituting a modified "loser pays" rule to discourage litigation, and limiting product manufacturers' liability. Portions of the bill, which was split into several provisions, were passed by both the House and the Senate, whereas other provisions were calendared in the Senate.

      The final bill, the Citizen Legislature Act, was a House joint resolution that would have limited the number of terms of House and Senate members. The measure failed in both chambers. Thus, only two contract proposals actually received congressional approval before the 100 days were up: a bill curtailing the ability of Congress to impose "unfunded mandates" on the states and legislation making the House and Senate subject to health, safety, labour, and civil rights laws.

      At the end of the 100 days, the House Republicans celebrated the fulfillment of their part of the bargain while House Democrats challenged that appraisal or warned that Republican successes did not bode well for the country. Polls indicated that most of "the country" did not know that they were parties to a contract. A New York Times/CBS News poll of 1,089 adults conducted April 1-4, 1995, found that only 38% had read or heard anything about it. In a USA Today-CNN-Gallup poll of 1,015 adults on March 27-29, 1995, 47% of those polled said that they were unaware of proposals contained in the Contract with America. This raised the question of whether a contract existed at all.

      A contract is a legally enforceable agreement in which the parties manifest an intention to contract, commonly referred to as a "meeting of the minds." There are two basic types of contracts: bilateral and unilateral, and most contracts are bilateral, which requires an exchange of mutual promises between the promisor and the promisee. (A unilateral contract, on the other hand, is one in which the offer anticipates performance rather than a reciprocal promise.) Formation of a contract requires mutual assent, consideration, and the absence of any legal or factual bar to the creation of the contract.

      Mutual assent consists of an offer—which can be manifested by a promise, an undertaking, or a commitment—and acceptance. There must be certainty in its essential terms, and the offer must be communicated to the offeree. Acceptance is the manifestation of assent to the terms of the offer. It follows that knowledge of the offer is required before there can be a valid acceptance, and silence is rarely an acceptance. In a bilateral contract, acceptance is manifested by the exchange of a counterpromise. (In a unilateral contract an offer can be accepted by undertaking the desired performance.)

      Moreover, there must be consideration, or something of value exchanged for the other party's promise, for a contract to be enforceable. For example, consideration can be doing something, or promising to do something, one is otherwise not legally obligated to do. It follows that past consideration—that is, the performance of an already existing duty—does not suffice, on the theory that one cannot bargain for something that is already accomplished. Thus, the performance of a preexisting duty is not consideration.

      When these basic principles are applied to the Contract with America, it is questionable whether a legal contract exists at all. If the Contract is a unilateral one, then there must have been an offer and acceptance by means of performance of the desired act. The difficulty is that the House Republicans appear to have made the offer to the American public to enact the 10-point platform but then performed it themselves. The promisor and the promisee were the same entity. On the other hand, it is conceivable that it was the electorate that made the unilateral offer to the Republican candidates for House seats, to the effect that "we promise to elect you in exchange for your performance of the Contract." This scenario is legally plausible but unrealistic, given that more than half of the citizens questioned could not identify or situate the Contract with America, an essential term of any contract.

      The Contract with America goes a little farther as a bilateral contract. The exchange of mutual promises could be that the Republican candidates for election to the House promised that they would usher through the House a legislative platform that reflected the issues of most concern to the electorate if the American public promised to elect them to those seats in November. The first difficulty, though, is in determining whether the offer was definite as to the essential terms and whether it was communicated to the offerees, the voting public. The lack of communication is best evidenced by the poll results referred to above, which indicate that most voters did not know what they had contracted for. More important from a legal perspective, there is a question of whether there was consideration supporting the Contract—that is, an exchange of something of value for a promise of performance. Arguably, the voters gave up the right to elect another candidate on the promise that the House Republicans candidates would come through with their promise, but it is not clear what consideration supported the House Republican promise in the first instance. Furthermore, as the Contract with America was presented in its final form after the election, it is arguable that, at best, there was only past consideration supporting the Contract, because once the House Republicans were elected, they had a preexisting duty to heed the mandate of their constituencies. In the absence of consideration, there is not a contract but a gift.

      As for a legal or factual bar, one might question whether the parties had legal capacity to contract, particularly given the fact that most Americans subsequently stated that they either did not know they were party to a contract or did not know its contents. It is also arguable that the Contract is unenforceable because the American public made a "unilateral mistake" (a mistake or misunderstanding as to the terms or effect of a contract, made by one of the parties to it but not by the other) in accepting the offer. Although unilateral mistake is usually insufficient to prevent formation of a contract, there is an exception that could apply here. When the unmistaken party (the House Republicans) knows or has reason to know of the mistake made by the other party (the electorate), the unmistaken party would not be permitted to take advantage of the offer.

      The media spectacle surrounding the announcement of the Contract and its completion by the House, as promised, in 100 days has faded. To be sure, the close of 1995 provided two opportunities for the resuscitation of the Contract with America—the budget debate, with its partial shutdowns of the government, and the upcoming 1996 presidential election—and the Contract played its part. In the budget debate, polls indicated that voters were not willing to sacrifice Medicare, on top of the pullback of federal entitlements, to achieve a balanced budget or substantial tax reductions. On the election front, the Contract was now a litmus test against which declared and undeclared candidates were to be measured. Even here, though, a candidate's adherence to the 10 planks of the original Contract might turn out to be less important than his or her stand on such issues as abortion or school prayer.

      Thus, the Contract with America has become much more, and much less, than it was when first announced. As a legislative agenda comprising 10 specific planks, it has all but disappeared from the landscape. On the other hand, the Contract with America has become a code word defining adherence to Republican ideological orthodoxy.

      From a legal perspective, however, one has reason to doubt the legitimacy and enforceability of the undertaking, owing to the absence of a meeting of the minds. History will show whether the Contract with America was a revolution or a media ploy, but the law does not need to wait that long—whatever it is, or will become, in a legal sense the Contract with America is not a contract at all.

      Nina Massen is an attorney and author who lives in Westchester, N.Y.

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