Final answer:
Belief in a binding contract by both parties does not ensure its legal validity or enforceability, as this is determined by legal principles and the contract's adherence to essential elements. Contractual and property rights enable legal agreements with the backup of legal recourse. A legal system upholding contracts is necessary to maintain reliable business transactions.
Step-by-step explanation:
When both parties believe they have a binding contract, their belief alone is not necessarily controlling when it comes to the validity and enforceability of the agreement. Instead, whether a contract is considered binding and enforceable depends on a variety of legal principles and the existence of essential contract elements, such as offer, acceptance, consideration, and mutual intent to be bound. Contractual rights are fundamentally based on property rights, allowing individuals to make agreements about the use of their property with the assurance of legal recourse in case of noncompliance.
Belief in a contract's enforceability can contribute to the functioning of contractual agreements; however, it is the actual adherence to legal requirements and the backing of a legal system that ensures the terms of a contract are upheld, such as in the example of a patient-surgeon agreement. Without enforcement of contracts by the legal system, economic growth would be hindered due to the unreliability of transactions based on agreements for current or future services.