Ozeki Technical 002: The Evolution of Legal Contract Structures – A Historical Overview

For millennia, human behavior has been governed by written law. These early frameworks codifying this law are known as legal codes and serve as one-way agreements between rulers and their subjects. Much like programming code, these codified laws followed a specific structure and represented a unidirectional application of legal principles. However, over time, the evolution of contracting introduced the concept of private party contracting, or more generally, two-way contracting, where mutual agreements could be established between individuals or entities. To fully understand the development of modern contracts, we must first explore their origins and the shift from ruler-imposed agreements to negotiable contracts between equals since even modern-day contracting has borrowed from the successful structures of early law.

For example, the well-known and well-preserved written law known as the Code of Ur-Nammu, written over 4000 years ago, showcases the craftsmanship of the legal minds of its time and demonstrates how well the framework of clauses was put together. The Code of Ur-Nammu is currently housed in the Istanbul Archaeology Museum. Written on clay tablets using the Sumerian language, this law had three parts: the prologue, the body content (the clauses), and the epilogue (Wikipedia).

Scribes would inscribe the text onto wet clay using a stylus, which was then baked to harden the clay and preserve the writing. This method was widely used in Mesopotamia due to the abundance of clay in the region.

Early contracts were non-negotiable, one-way agreements known as "adhesion contracts," often ending with an epilogue that paid respect to the ruler who issued the contract (World History Encyclopedia). The body contained the actual clauses, and the epilogue was more of a summary.

One of the earliest frameworks for negotiable contracts was the Code of Hammurabi, addressing commerce, property, and criminal laws. The Code of Hammurabi was written around 1754 BCE during the reign of King Hammurabi of Babylon. The Code of Hammurabi is currently housed in the Louvre Museum in Paris. This ancient set of laws is one of the oldest deciphered writings of significant length in the world. The full text can be found here: Code of Hammurabi. It also consisted of three parts: the prologue, the body part where the law clauses were written, and the epilogue. The contract contained 282 clauses (World History Encyclopedia) (Historic Mysteies). This contract was written on stone and not clay and sets another step forward towards the development of contracts.

To summarize, in ancient times, contracts were structured as:

Prologue: Often included a historical context or invocation of deities.

Body Content: Detailed the terms and conditions of the agreement.

Epilogue: Sometimes included curses for breaching the agreement or blessings for adherence (World History Encyclopedia) .

In more “recent” times, in ancient Egypt, contracts were typically issued in written form on papyrus, although other materials such as ostraca (pottery shards) and stone could also be used for less formal agreements or for permanent public records.
Contracts typically followed a standard format that included the date, the names of the involved parties, the terms of the agreement, and the names of any witnesses present to validate the transaction. Various types of contracts existed, each tailored to specific transactions. These included sales agreements, marriage contracts, labor contracts, and loans, with each type containing specific clauses relevant to the nature of the agreement.

For example, a typical ancient Egypt commerce contract will be written under the following format:
Date and Place: The contract usually starts with the date, often given in terms of the reigning pharaoh's regnal year, month, and day. For example, "In the year 12 of the reign of Ptolemy VIII, in the fourth month of Peret, on the 15th day..."

Parties Involved: The names and titles of the parties involved are mentioned next. For instance, "The merchant Horemheb, son of Ankhset, has agreed to sell to the scribe Ankhefenmut, son of Paser..."

Terms of Agreement: The detailed terms of the transaction are described, including the item or property being sold, the price, and any specific conditions. For example, "Horemheb agrees to sell one sack of grain to Ankhefenmut for the price of 10 deben of silver, to be paid in two installments..."

Witnesses: The contract lists the witnesses who were present to validate the agreement. Their names and titles are recorded to ensure the contract's authenticity. For example, "Witnesses to this agreement are the overseer of the granary, Neferhotep, and the priest, Merira..."

Papyrus, Ancient Egypt, Marriage Contract, source.

Over centuries, the content and structure of contracts transformed. By the medieval period, contracts still retained the three-part structure but evolved to include:

Introduction: Identifying the parties involved.

Body: The main terms and obligations.

Witnesses: Names of those who witnessed the signing (Ancient Origins) .

In the 17th and 18th centuries, Europe expanded and trade boomed, defining the post-Renaissance era. This led to what is now known as the modern contract framework, which included:

Title Page: Sometimes included, especially for lengthy agreements.

Preamble: Provided context and the purpose of the agreement.

Recitals: Detailed the background and intent behind the contract.

Main Clauses: Specific terms and conditions (Ancient Origins) .

By the 19th and 20th centuries, modern contracts had changed slightly and now possess the familiar format:

Cover Page: Identifies the document as a contract, often including the title and parties.

Preamble: Sets the stage for the agreement, explaining the context.

Recitals: Background information and the intent of the parties.

Main Clauses: Detailed terms and conditions.

Signature Page: Where the parties sign and date the agreement (History of Information) .

Contracts were primarily drafted on paper. Paper had become the standard medium for written communication and legal documents due to its widespread availability, ease of use, and relative durability compared to earlier materials like parchment or vellum.

With the software revolution in the late 20th century, the materials used for contracts shifted from paper to digital formats. Early digital contracts were commonly stored as PDF or Word files. However, the most significant transformation occurred with the legal recognition of electronic signatures. Laws such as the E-SIGN Act in the United States (enacted in 2000) and the eIDAS Regulation in the European Union (enacted in 2016) established a legal foundation for electronic contracting. The introduction of signing rooms, which provided audit trails and electronic verification, revolutionized legal contracting by ensuring security and transparency.

In 2008, the concept of electronic smart contracts, built on blockchain technology, gained prominence. These smart contracts allowed for automated execution of contract terms without intermediaries. As early as 2007, I was developing smart contracts with audit trails and runtime execution directly from databases using scripts, which were the precursors to the modern electronic ledger for cash systems. Today, additional technologies have enhanced legal contracts, incorporating version control based on cloud hosting and enabling instant collaboration and integration with other systems.

In summary, contracts primarily exist due to the lack of trust between the parties involved. While future articles will explore methods to minimize this lack of trust, and in some cases, eliminate it entirely, today's focus is on how the structure of contracts has evolved over millennia.

In the next technical article, I will explain the concept and use of a cover page in modern contracts.

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