1. It is not rational to enter into such a demanding contract that you might not ever be able to break the contract for fear of violent retaliation. If that is the contract your society has entered into with each other, that's fine, who am I to get in there way. However, I would probably go for something more akin to cancelation of services, rather then threat of violence. Again, I would personally have no dispute with someone who entered into a contract like that, and wouldn't try to protect him from the consequences of his own foolish enterprises. I don't care with the guy who takes out a loan with a loan shark, I don't care about this guy.
2. We are not saying that laws don't exist. Just because there is no ultimate arbiter doesn't mean that the case could not be taken to court the same way that anyone could be taken to court now. The difference is that it is my view that private courts would be less likely to partial one way or another, as they would be competing against each other for impartiality.
In a free society, all the just laws that exist today, common, tort, contract would all be fairly the same. The difference is that the legislation wouldn't exist.
There does not need to be a bigger agency imposing its rules on on contract associations it believes its wrong, just as there does not need to be a bigger agency imposing its rules on murder, theft, fraud etc... There could be competitive agencies.
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