The Old and the New Limits to Freedom of Contract in Europe

The Old and the New Limits to Freedom 

of Contract in Europe 

MARIA ROSARIA MARELLA* 

Abstract: The structure of the relationship between the individual and the community or the 

state is not definite at the European level. However this is a crucial point for the definition 

of the ground-rules in private law, considering, in particular, that European jurists normally 

ascribe to private law a constitutive role both in the functioning of the integrated market 

and in the construction of a European citizenship. In contract law the relationship between 

the individual and the community or the state is mainly designated by the definition of freedom 

of contract and its limits. On the scene of European law, however, the question of the 

limits of freedom of contract finds very different and contrasting solutions. This article identifies 

three different modes of approaching the question, which we have experienced and are 

currently experiencing in Europe; they are respectively described as the paternalistic, the social 

and the perfectionist model. Although recent developments in the harmonisation process 

show a propensity for a combination of the first and the third model, this paper argues that 

the social model still has a chance to achieve a key role in European contract law. 

I. Introduction 

Last August, while having a glass of wine on the porch of his wonderful 

eighteenth-century house in the New England countryside, an American 

colleague observed: ‘It is still puzzling to me why European jurists are working 

so hard on the harmonisation of private law. Why do you think you need 

it so badly? In the USA we don’t have any harmonised law of contracts, tort 

law or family law, nevertheless the market functions and we are a nation after 

all!’ The answer to this question is so complex that I don’t even dare to try to 

reply … We are certainly not a nation; maybe we hope to build our own 

through harmonisation. It seems to me that at least one aspect of the problem 

is the uncertainty and the vagueness that characterises the structure of the 

relationship between the individual and the community/the state at the European 

level, a relationship which is crucial for establishing the ground rules in 

private law, considering, in particular, that we European jurists normally 

ascribe to private law a constitutive role both in the functioning of the integrated 

market and in the construction of a European citizenship. So my hypothesis 

is that we need to harmonise private law also in order to establish what 

the relation between the individual and the community in Europe should be. 

* Professor of private law, University of Perugia.

258 Maria Rosaria Marella 

ERCL 2/2006 

Now in contract law the relationship between the individual and the community 

or the state is mainly designated by the definition of freedom of contract 

and its limits. 1 Public policy is used to define a general limit to freedom of 

contract. On the scene of European law, however, the question of limits of 

freedom of contract finds very different and contrasting solutions. In this 

paper I describe three different modes of approaching the question, which we 

have experienced and are currently experiencing in Europe; three models of 

setting the limits of freedom of contract that are related to three different 

ways of conceiving the relationship between the individual and the community. 

I will define them respectively the paternalistic, the social and the perfectionist 

model. My sense is that all these three models still coexist in our 

legal systems or at least in some of them, although I will describe them as 

developing one after another in a diachronic dimension. 

European contract law has to cope with these models, choose one of them or 

possibly none of them … . 

II. Harmonising the Limits of Freedom of Contract: the Techniques 

Before of describing the three models and their respective problems, I will 

talk briefly about the possible techniques of harmonising rules or principles 

regarding the limits of freedom of contract. By this expression we usually 

understand the legal problems that mandatory rules and general clauses like 

the bonus mores, ordre public and public policy normally confront. Although 

not all the European civil law systems implement the same standards (no 

ordre public clause is provided by the German BGB, for example) this circumstance 

does not make any significant difference as to the extent of freedom 

of contract. Limits to freedom of contract are enforced in the different 

legal systems in order to respond to several and comparable needs: basically 

to protect the public interest in efficiency, morality or equity that might or 

might not overlap with the interests of the parties, the interests of one party 

representing a specific(ally protected) social group, or the interests of third 

parties. 2 However, the national solutions to these needs can be and actually 

are disparate. 

1 S. D. Grimm, ‘Soziale, wirtschaftliche und politische Voraussetzungen der Vertragsfreiheit. 

Eine vergleichende Skizze’, in La formazione storica del diritto moderno in Europa: 

atti del terzo congresso internazionale della Società Italiana di Storia del Diritto, vol III 

(Firenze: Olschki, 1977) 1221, 1224: ‘welche Verträge frei abgeschlossen werden können, 

charakterisiert darum eine Gesellschaft’. 

2 C. G. Paulus / W. Zenker, ‘Grenzen der Privatautonomie’ (2001) Juristische Schulung 1.

ERCL 2/2006 The Old and the New Limits to Freedom of Contract in Europe 

259 

Now, on the one hand, the phenomenon of an increasing contractualization 

of social life makes the definition of limits of freedom of contract urgent, as 

new spheres of social life, traditionally imagined as external to the market 

realm, are progressively ‘corrupted’ by a market rationale. Undoubtedly the 

definition of limits to freedom of contract is an issue at stake in the harmonisation 

process. Some provisions of the European Charter of Fundamental 

Rights clearly show that this problem has already been perceived and confronted 

at the European level. By introducing a market-inalienability rule for 

body parts, Article 3 of the Charter aims to ban the very idea of exchange 

from this area, notwithstanding the increasing impact of biotechnologies on 

society both from a cultural and an economic point of view. Article 8 restricts 

the viability of market transactions concerning personal data by imposing 

special requirements for their circulation. The general principle of human 

dignity sanctioned by Article 1 is a potential source of new limits on freedom 

of contract in European law. 3 

On the other hand, the peculiarity of the topic makes its harmonisation quite 

problematic. Unlike most topics in contract law, the question of limits of freedom 

of contract is widely perceived as a not a –merely technical question; on 

the contrary it is regarded as a matter of highly political choices, the harmonisation 

of which involves an intrusion into the intangible sphere of national 

sovereignty. For this reason the harmonisation projects have been so far very 

cautious or even laconic in this respect. Article 2 of the Pavia project of a 

Code Européen des Contrats mentions mandatory rules, bonus mores and ordre 

public provided by the Code itself, by EC law and by the laws of Member 

States as general limits of freedom of contract. The implementation of such a 

provision presupposes a body of common background rules, both of judicial 

and legislative origin (criminal law rules, administrative pronouncements etc) 

and a uniform interpretation of general clauses, whose vagueness makes the 

harmonisation on this specific point infeasible. 

The Principles of European Contract Law (PECL) came late to this point. 

The first move was to leave the question aside given the great variety among 

the legal systems of Member States. Later the solution was found in the following 

(and predictable) formula: ‘A contract is of no effect to the extent that it is 

contrary to principles recognised as fundamental in the laws of Member States 

of the European Union’ (Article 15: 101). The provision implies a conver- 

3 For this schematization of the limits to freedom of contract set by the EU Charter see 

G. Resta, ‘Diritti della personalità e limiti della libertà contrattuale nell’evoluzione del 

diritto europeo’, paper presented at the conference ‘Diritti fondamentali e formazione 

del diritto privato europeo’, Università di Roma Tre, 28 June 2002, on file with author.


ERCL 2/2006 

gence of the EU Member States around what has to be conceptualised as fundamental 

limits of freedom of contract. Here one faces a general problem that 

usually arises with the so-called common core approach: from the point of 

view of methodological accuracy, one ought to establish what the rules are, 

what the exceptions are, and separate sharply the rule from the exception for 

each European legal system, in order to identify a framework of converging 

rules providing comparable solutions to the same problems. In any case, this 

method usually leads to the acceptance of any rule that seems to be shared by 

all the national systems in question, and to the exclusion of whatever national 

solution can be seen as an exception. The result merges with the minimum 

common factor strategy, that is the attempt commonly pursued by the EU 

institutions to create a European law that does not collide with any national 

legal rule, principle or institution, in order to preserve the idea of the intangibleness 

of national sovereignty on legal issues supposedly influenced by 

policy-making. 4 

At this very point, however, a second, specific problem arises: the combination 

of the common core approach with the minimum common factor strategy 

necessarily leads to an extremely narrow notion of freedom of contract. 

This seems to be an undesirable and infeasible outcome in the light of the 

latest developments in European law. It would even clash with the current 

general tendency toward an increasing contractualization of social life and 

against a common understanding of contracts ‘as a facility for expanding 

valuable choices and as providing the necessary security for the pursuit of 

more detailed plans in life.’ 5 

Let us consider for instance the legal treatment of prostitution and related 

commercial activities in different Member States: prostitution is no longer 

criminalised in the Netherlands, Belgium and in Germany. According to these 

laws (explicitly in the German Prostitutionsgesetz) 6 the contract between the 

prostitute and the client is enforceable. In addition, any other kind of (not 

otherwise criminalised) sex-work enterprises (like sex-chat lines, peepshows, 

etc) can be supported by enforceable contracts and, according to some interpreters, 

even agreements between spouses or partners concerning sexual 

intercourse inside and outside of marriage or cohabitation will be held as 

valid, as the question at stake is no longer the possibility of taking money 

4 On the multiple strategies in the harmonization process see M. R. Marella, ‘The Non- 

Subversive Function of European Private Law: The Case of Harmonisation of Family 

Law’ (2006) 12 European Law Journal 78–105. 

5 H. Collins, The Law of Contracts (London: Butterworths, 4 th ed., 2003) 106. 

6 Gesetz zur Regelung der Rechtsverhältnisse der Prostituierten, 20 December 2001, Bundesgesetzblatt 

2001 I, 3983.


261 

from bodily services according to the law, but rather turning sexual transactions 

into enforceable contracts. 

In contrast, other Member States have enacted a total (Sweden) or partial 

(France) abolitionist policy. Consequently not only the prostitute/client 

transactions, but also commercial contracts even indirectly related to prostitution 

(like landlord/tenant contractual relations, according to the dominant 

interpretation in French case law) 7 are treated as void. 

Now, the combination of the common core approach with the minimum 

common factor strategy would require setting the notion of freedom of contract 

– in reference to sexual transactions and the like – at the level established 

by Swedish law. In other words, the consequence of harmonising the notion 

of immoral/illegal contract would be to select and enforce the narrowest 

notion of freedom of contract among those enacted in Europe. However, this 

outcome conflicts with the increasingly common idea that courts should 

enforce contracts in respect of all types of social relations, as long as they do 

not break conventional moral standards and do not frustrate the fair distributive 

scheme. 8 Moreover, in the Jany case, 9 the ECJ has followed the opposite 

point of view as far as the relation between prostitution and the market is 

concerned! More precisely the Court has stated that prostitution is not 

contrary to public policy in the EC and sex-workers enjoy freedom of movement 

and establishment within the European Union borders. 

III. The Limits of Freedom of Contract in Europe: the Models 

1. The Paternalistic Model 

This is the most traditional model. The ideological framework is the individualism 

of Classical Legal Thought. The state is entitled to interfere with selfdetermination 

of individuals (freedom of contract) as long as its intervention 

is legitimated by the superior moral authority of the law and is restricted 

to very narrow ambits. The law enforces the free will of the parties unless it 

collides with various interests pursued by the state. 

Contracts are basically set aside when they threaten the integrity of the state 

and its institutions (by restoring, for example, feudal structures) or funda- 

7 S. M. Iacub / P. Maniglier, Antimanuel d’éducation sexuelle (Rosny Cedex: Bréal, 2005) 

236. 

8 Collins, n 5 above, 99. 

9 Case 268/99 Jany v Staatsecretaris van Justitutie, ECJ 20 November 2001.


ERCL 2/2006 

mental freedoms and rights of the parties (contracts restricting personal or 

sexual liberty, for instance). In the latter case, the state (courts or legislature) 

is supposed to decide better than individuals about their own interests: restrictions 

on a person’s choice are imposed for his/her own good. This is 

what is normally meant by ‘paternalism’. The classic liberal argument runs 

this way: ‘(T)he reason for not interfering, unless for the sake of others, with 

a person’s voluntary acts is consideration for his liberty … But by selling 

himself for a slave, one abdicates his liberty … The principle of freedom cannot 

require that he should be free not to be free’. 10 

Limits to freedom of contract are generally introduced in order to protect the 

public interest for the purposes of efficiency, morality or equity and/or to 

protect definite interests of the parties, of the one party representing a specific 

social group, or specific interests of third parties, which are not directly 

involved in the contract, but could nevertheless be affected by it: in all these 

cases the legal relationship at issue cannot be ruled by any contract (see, as an 

example, the nullity of ‘pactes sur succession future’ in the French model) or 

by a contract that diverges from the substantive terms imposed by the state as 

part of a scheme of regulation (see the Erbvertrag in the German model, for 

instance). These are the basic explanations for limits of freedom of contract 

endorsed in the fields of family law, succession law and personality rights, as 

well as for limits imposed to transactions concerning bodily integrity, body 

parts and sexuality. 

The idea underlying this model is that the main function exerted by law in 

setting limits to freedom of contract is to trace a sharp divide between what is 

inside/what is outside of the market, the first realm being mostly ruled by 

laissez faire, the latter by the intervention of the state according to a paternalistic 

approach. Here the state curtails personal choices with the goal of satisfying 

the individual’s deep preferences. 11 

In the era of the so called constitutionalization of private law, all private law 

fields and contract law, in particular, are now reinterpreted in the light of the 

constitutions, and general clauses are commonly considered as major tools in 

this undertaking. The increasing complexity of legal systems specifically 

leads to an interpretation of public policy with regards to constitutional 

principles: in so doing interpreters try to find a new equilibrium between the 

10 J. Stuart Mill, On Liberty (Gertrude Himmelfarb ed, Penguin Books 1974) (1859) 

157–158. 

11 F. H. Buckley, ‘Perfectionism’ (2005) 13 Supreme Court Economic Review 133.


263 

basics of liberal law, property rights and freedom of contract, and new instances 

of civil rights protection and social justice. 12 The respect of the human 

being, on the one hand, and the market rationale, on the other hand, are the 

two poles of a new set of interpretive options in contract law. In this framework, 

the definition of limits of freedom of contract mainly overlaps with the 

attempt to place general boundaries on the market realm. In other words, 

freedom of contract has to be restricted in order to establish a tight control 

over the supposedly increasing phenomenon of commodification of human 

beings (of personhood, human body, sexuality, etc). 13 And in this respect the 

paternalist model is inherently flawed and bound to degenerate into the rival 

perfectionist model. 

More generally this model displays a basic deficiency: according to paternalism, 

the person is unable, under certain circumstances, to identify her/his 

own preferences; this basic assumption leads the law to hold the contract void 

even though the contract itself makes the party the law intends to protect 

better off. [A classic example from American contract law – Hill v Missouri 

Pacific Ry Co illustrates this. 14 After an accident at work Mr Hill promised to 

continue in his employment and to relinquish any claim for the injuries he 

had suffered because of the accident. The railroad agreed to employ Hill 

until he was eligible for pension (about nine years later). After some months, 

the railroad broke the promise and Hill brought suit to recover damages for 

breach of contract. The court held the contract to be void because it was 

made in violation of a statute prohibiting adults to bind themselves to labour 

for terms longer than five years. The labour statute was evidently adopted as 

a protection of workers against peonage; however, the reading offered by the 

court turned it into ‘a shield behind which the employer might with impunity 

contract with its servants’. 15 In other words, the prohibition prevented employees 

from making good deals, like the one assuring the security of tenure 

in Mr Hill’s employment, though it was intended to prevent a worker’s own 

exploitation. 

Recent Italian case law concerning spouses’ agreements in contemplation of 

divorce offers another significant example of such inconsistency. By making a 

private contract of this kind, spouses want to arrange the economic consequences 

of divorce differently from the statutory regime, which is imposed 

12 With specific reference to the notion of ordine pubblico in Italian law see U. Breccia, 

‘Causa’, in Alpa-Breccia-Liserre, Il contratto in generale, t III, ‘Trattato di diritto privato’ 

diretto da Mario Bessone, XIII, (Torino: Giappichelli, 1999) 172. 

13 In the Italian literature see for example Breccia, n 12 above, 176 ff. 

14 8 F Supp 80 (W D La 1933). 

15 W. Gellhorn, ‘Contracts and Public Policy’ (1935) 35 Columbia Law Review 679.


ERCL 2/2006 

by the state in order to protect the weaker party (normally: the wife). Now, 

these agreements are regularly treated as void by Italian courts because made 

in violation of public policy. 16 In so doing Italian courts express their concern 

or even their distrust for wives’ ability to identify and fulfil their own good. 

Bargaining occurs in a context where emotional bonds overcome rational 

choices and contracts are likely to defeat the legislator’s protective intent. 

However, case law shows that most of the time the husband brings suit asserting 

that the contract is void and consequently his financial obligation has to 

be assessed according to the legal regime! Thus the private ordering that the 

Italian courts resist could enhance rather than worsen wives’ entitlements 

whereas the limit imposed on spouses’ freedom of contract in order to protect 

the weaker party has the effect of weakening her further rather than 

making her better off. 17 

In my own view, the first model also embraces Gunther Teubner’s understanding 

of German judicial law on family guarantees. 18 This was the case for German 

courts to establish a new content for the bonus mores clause of § 138(1) 

BGB by drawing on a ‘social’ notion of contractual fairness. The paramount 

decision is the so called ‘collateral’ case, 19 where the Federal Constitutional 

Court (FCC) established constitutional standards to be applied to private 

contracts when there is reason to believe that there exists an inequality of bargaining 

power. 20 In the light of a revised notion of freedom of contract which 

substantially overlaps with the fundamental right to self-determination and 

to this extent justifies a constitutional control of private law relations, the 

FCC annulled a collateral guarantee between the bank and the debtor’s 

daughter with respect to a loan that the debtor had received from the bank. 

Teubner’s standpoint represents the reaction of a liberal theorist against the 

way of conceiving limits to freedom of contract that I will define as ‘the social’ 

model. According to Teubner, the question involved by the ruinoese 

Burgeschaften decisions is not one of inequality of bargaining power, 21 nor a 

16 E multis Cass, 11 giugno 1997, n 5244, (1998) Giurisprudenza italiana, I, 1, 218. 

17 S. M. R. Marella, ‘La contrattualizzazione delle relazioni di coppia. Appunti per una 

rilettura’ (2003) 21 Rivista critica del diritto privato, 3; idem, ‘The Family Economy 

v. the Labor Market’, in J. Conaghan / K. Rittich (eds), Labour Law, Work and Family. 

Critical and Comparative Perspectives (Oxford, London, New York: OUP, 2005) 205. 

18 G. Teubner, ‘Ein Fall von struktureller Korruption? Die Familienbürgschaft in der Kollision 

unverträglicher Handlungslogiken (BVerfGE 89, 214 ff.)’ Kritische Vierteljahresschrift 

für Gesetzgebung und Rechtswissenschaft (1999–2000) 83, 388. 

19 FCC, Decision of 19 October 1993, BVerfGE 89, 214. 

20 S. P. Zumbansen, ‘Public Values, Private Contracts and the Colliding Worlds of Family 

and the Market’ (2003) 11 Feminist Legal Studies 71, 75. 

21 Teubner, n 18 above, 389.


265 

problem of violation of individual fundamental rights. 22 It is rather the clash 

of incompatible legal spheres or rationales, more precisely, the case of corruption 

of the solidarity-based family sphere by the logic of contract law and the 

underlying dynamics of the market. 23 Any concern for fairness in contract 

law is banned from this perspective: it is just not an interpretive issue here. 

On the contrary, the analysis concentrates on legal and social aspects different 

from those concerning the contractual relation between the bank and the 

consumer as unequal bargaining partners. The focus here shifts to the ‘impossibility’ 

of a guarantor, who is at the same time supposed to be bound to the 

debtor by ties of familial solidarity and to be led to the rational choice by the 

typical individualism of a market actor. The evidence of such impossibility 

requires more rigorous boundaries to freedom of contract in order to preserve 

non-market-like social realms from the corruptive influence of the 

market rationale. In Teubner’s view, such boundaries find their constitutional 

foundation in those principles of the Grundgesetz that construe social institutions 

like the family, art, 24 education, etc, upon values other than the rationality 

and the individualism of the market. As to our discourse on freedom 

of contract, this amounts to assigning to constitutional principles or constitutional 

rights 25 – the role of defining impenetrable areas of market inalienability 

by removing specific rights or entitlements from the individual’s ability to 

dispose of them freely by contract. Therefore, although Teubner’s interpretation 

of the bonus mores clause explicitly rejects paternalist motives, for the 

simple reason that it does not focus on the individual/State relationship, it 

ultimately fits in the general scheme of this first model. 

2. The Social Model 

According to classical liberal thought freedom of contract is a basic condition 

for fulfilling the wellbeing of society and justice. 26 Therefore limits to freedom 

of contract, as already seen in the paternalistic model, are theoretically 

conceived as exceptions, although they are in fact valuable tools for enacting 

state policies and goals. 

At the beginning of the 19 th century another strand of socio-philosophical 

and legal thought produced an alternative vision, according to which freedom 

22 Ibid, 390. 

23 Ibid, 392. 

24 See also C. Beat Graber / G. Teubner, ‘Art and Money: Constitutional Rights in the 

Private Sphere’ (1998) 18 Oxford Journal of Legal Studies 61. 

25 Beat Graber / Teubner, n 24 above. 

26 Grimm, n 1 above, 1232.


ERCL 2/2006 

of contract is unable to produce people’s well-being and social justice: on the 

contrary freedom of contract is a significant source of injustice, as long as 

it reinforces social inequality. This is the starting point of the second social 

model. 27 

Unlike the paternalistic model, the social model sets limits to freedom of contract 

to make relations inside the market conform to a solidarity rationale. It 

is an attempt to change the market from within. 

In this framework freedom of contract is not only limited by reference to 

specific social relations or groups, as the paternalistic model also admits (such 

as the restrictions enacted by the legislature in employment law or landlord/tenant 

contracts), but also in consideration of particular social conditions 

that can affect the parties’ bargaining power in any contractual transaction. 

In general terms, the social perspective claims that contract law should not 

ignore interdependence as well as inequality in bargaining power between the 

parties and the groups they represent. As a critique of the individualism of 

classical private law, it advocates a program of social justice that involves private 

law rules as distributive devices. 28 Along with this agenda general clauses 

like bonus mores and ordre public, particularly in Germany and France, have 

been enforced according to distributive goals. In the 1970’s, with reference 

to consumer credit cases, some German courts produced an interpretation of 

§ 138 Satz 1 BGB – the general clause of bonus mores – that directly addressed 

the problem of structural inequality of bargaining power between the 

poor and the rich. Not only the sanction of immorality has to grant transparency 

and fairness in market transactions in order to make possible the 

access to credit of the poor as a group; more radically the central idea is that 

the general limit to freedom of contract has the specific function of correcting 

and/or compensating a sort of original lack of solidarity and proportionality 

that inheres to freedom of contract. 29 

Today the most popular European version of this social model seems to focus 

on solidarity and the ‘weak parties’ rhetoric rather than on equality and re- 

27 Although this set of critiques has been very influential in the further developments of 

legal sociology, it did not produce at that time any legal change. Legislations and courts 

in Europe did not follow them: as a matter of fact, legal orders in the 19 th century the 

Napoleonic Code and the German BGB, for instance were firmly grounded on freedom 

of contract. Grimm, n 1 above, 1246 ff. 

28 D. Kennedy, ‘Thoughts on Coherence, Social Values and National Tradition in Private 

Law’ (2005) forthcoming. 

29 U. Reifner, Alternatives Wirtschaftsrecht am Beispiel der Verbraucherverschuldung (Neuwied 

/ Darmstadt: Luchterhand 1979) 393.


267 

ciprocal social responsibility. 30 It shows a stronger ethical inspiration, which 

is reflected in a new conceptualisation of the limits of freedom of contract. 

This tendency has been epitomised by the German Federal Constitutional 

Court, which reinterprets freedom of contract according to the following 

pattern. First, the making of a contract is to be controlled (and eventually restricted) 

by the state as long as weak parties confront strong parties. This implies 

the identification of weak parties in relation to strong parties: women 

are weak in relation to men, the poor are weak in relation to the middle and 

upper classes, wives are weak in relation to husbands, young people are weak 

in relation to grown-ups, children in relation to parents, etc. Second, the 

making of a contract is to be restricted when there are a weak and a strong 

party and unfair contractual terms. Here comes the fundamental rights argument 

and – third – the intervention of the state in terms of limits to freedom 

of contract is required because the unfair contract disregards the weak party’s 

fundamental rights. 

This set of arguments is deployed in two renowned cases concerning, respectively, 

a family guarantee (1993) and a prenuptial agreement (2001). In the 

first case the debtor’s young (and poor) daughter confronts a big bank; in the 

second a pregnant woman, who already has a child, has to choose between 

either getting married after subscribing to a marital support waiver or raising 

two children on her own. 

In both cases the FCC identifies a typical structure of inequality of bargaining 

power. In both cases the bonus mores clause (§ 138 BGB) is enforced in 

order to fulfil the constitutional dignity of freedom of contract: this will be 

defeated every time the very notion of freedom of contract does not correspond 

to the right to self-determination (Article 2 Basic Law) of both contractual 

parties. In the end the disregard of the weak party’s fundamental 

rights is what reveals the abuse of freedom of contract. 

The FCC’s interpretation of freedom of contract is strongly distributive: the 

strong party has to make concessions to the weak party, for the good of the 

weak party and so freedom of contract becomes the vehicle through which 

the state enacts solidarity within the community. But in contrast with the 

1970’s approach, solidarity is strongly tied to the rhetoric of human rights 

and human dignity. Freedom of contract is now to be reassessed within the 

framework of constitutional values. The social interpretation of the limits to 

freedom of contract shifts from a concern for social inequalities (better than a 

30 Kennedy, n 28 above.


ERCL 2/2006 

state intervention in the social conflict regarded as such) to the achievement 

of the social equilibrium that is granted by respect of fundamental rights. 31 

There are two classic arguments against the social model and the rhetoric of 

weak parties. One is that new limits to freedom of contract for family guarantees 

or prenuptial agreements, for instance, generate the indirect effect of 

restricting access to credit and to marriage respectively, at the expense of the 

beneficiaries of the protecting policy themselves. The second argument is that 

strong protection of weak parties generates a pattern of cross-subsidies at the 

expense of the weakest social groups. The protection of the weak parties 

turns out to exclude people at the bottom of the social pyramid: there will 

always be weak parties that are weaker than the weak parties protected by 

protecting policy. 32 Or there are always weak parties that are not acknowledged 

as such. How about mistresses or best friends, as inthe case of family 

guarantees? How about non-pregnant women as to the case of prenuptial 

agreements? And what about domestic contracts concluded by unmarried 

partners? 

In my own view, however, there is a strong argument against this European 

social model: it is that it shapes limits to freedom of contract on the basis 

of the indeterminacy of fundamental rights (constitutional principles might 

entail moral or efficiency reasons that conflict with one another); that it emphasises 

fundamental rights rather than equality or it emphasises inequality 

only through the violation of fundamental rights. In so doing, it not only 

31 By contrast, in the liberal interpretation offered by Teubner, n 18 above, the Bundesverfassungsgericht’s 

enforcement of constitutional principles is to be interpreted not in 

relation to the (questionable) violation of individual fundamental rights, but in consideration 

of the defence of those constitutional ground rules that govern the different 

areas of social life, like the family, with its Grundnorm: solidarity, and the market, 

based on the individual rational choice. 

Another way of putting the question is the idea that claims of freedom in contract law 

are not to be exclusively balanced against claims of social welfare and distributive 

justice; that contractual doctrines have not only an enabling but also a cautionary function; 

that contract law should endorse not only freedom of contract but also freedom 

from contract. See T. D. Rakoff, ‘Is “Freedom from Contract” Necessarily a Libertarian 

Freedom?’ (2004) Wisconsin Law Review 477. Limits to freedom of contract are not 

necessarily limits to liberty: on the contrary, some contracts are not permitted and some 

others are permitted only if legal requirements are fulfilled in order to protect freedom 

from contract. The Weberian idea that ‘how freedom of contract works out in practice 

depends on social conditions’, underlies this position as well as the social interpretation 

of para 138 BGB. 

However the same is true for freedom from contract, too. Also freedom from contract 

performs its libertarian role if social conditions permit it. 

32 Kennedy, n 28 above.


269 

produces indeterminate and/or unclear outcomes in terms of social justice, 

but also sets the stage for the perfectionist model. 

3. The Perfectionist Model 

In the paternalist model the state interferes with an individual’s choice in 

order to give effect to his true desires: the underlying assumption is that the 

individual’s judgement is clouded by mental biases or weakness of the will. In 

other words the subject is unable to identify and pursue his preferences. 

Recently on the European stage we find a harder kind of paternalism, that 

theorists of ethics call perfectionism. According to this theory, the interference 

of the state with the person’s choice is justified by the circumstance 

that the subject has a wrong set of preferences. Here the state enunciates a 

conception of the good life and frowns on choices which are inconsistent 

with it! 

While paternalism restricts our bargaining freedom only in the name of satisfying 

our deepest set of preferences, the perfectionist is a moralist who is prepared 

to ignore our deepest wishes when these are deemed unworthy. Instead 

he identifies the good ends we have to pursue and obliges us to seek them, 

whether we want them or not. 33 

The perfectionist option is currently imposed by German and French courts 

when they restrict freedom of contract in the name of human dignity. Unlike 

paternalism, which deploys general clauses whose content is historically and 

socially determined (thus relative), this perfectionist pattern relies on a principle 

which is supposed to be absolute, transcendent and pre-existing to any 

political or social experience. 

a) The principle of human dignity 

In the constitutional traditions of EU Member States we find two different 

notions of dignity: social dignity and human dignity. The notion of social 

dignity refers to the right to a dignified life in terms of material and economic 

conditions. It has a positivist essence, implies a commitment to distributive 

policies and aims to achieve social justice and equality. The notion of human 

dignity is today overwhelming. It has a natural law essence, pre-exists the 

State and its law, and has several possible meanings, merging with individual 

freedom, autonomy and self-determination on the one hand, with the protection 

of the community’s basic values, on the other. 

33 Buckley, n 11 above.


ERCL 2/2006 

In Germany the human dignity clause is enclosed in Article 1 Basic Law s the 

utmost fundamental right. As such the right to dignity cannot be waived by 

the person whose dignity is concerned and cannot be balanced with other 

fundamental rights. In fact the human dignity principle shows a strong communitarian 

inspiration which justifies the sacrifice of individual’s wishes. Particularly 

when its natural law version overwhelms, dignity has a very controversial, 

unclear relation to liberty. For this reason what characterises today 

the enforcement of the dignity clause is mainly its operation as a (new) limit 

to private initiatives and to freedom of contract, notwithstanding the emphasis 

that several theorists put on a supposed role of dignity as enhancing individual 

self-determination. It has been enforced so far in disparate cases, 

including abortion, different aspects of free speech and housing. 

Following the same multifaceted pattern, French case law has recently (from 

1994) implemented the dignity clause as a basic principle implicitly endorsed 

by the Constitution. From bioethics issues to housing, free speech and abortion, 

dignity is invoked at the same time as the basis and as a limit to individual 

self-determination. 

The EU Charter of Fundamental Rights and Liberties includes the dignity 

clause in the same terms as the German wording. In the Charter dignity is a 

pervasive principle which names an entire title of the Charter itself. The 

human body and body parts, human life, etc are ruled as issues of human 

dignity. In accordance with the notion of common constitutional traditions as 

fundamental basis in the ECJ decisions, it is to be expected that the ECJ will 

implement the Charter by making its own case law on dignity conform to 

German constitutional case law. 34 This could have significant implications for 

the harmonisation of contract law in Europe, specifically on the regulation of 

contracts’ illegality/immorality. Therefore, one can fairly expect that, with 

the enactment of the Charter, a re-assessment of the limits of freedom of contract 

will take place in European law and the general clauses of public policy, 

ordre public, bonus mores, Sittenwidrigkeit will be reinterpreted in the light 

of human dignity according to the perfectionist model. 

b) The Tyranny of Dignity versus The Tyranny of The Self 

Both in German and French case law, the respect of human dignity has been 

envisaged as a mighty weapon against the perils of commodifying the human 

body. Human dignity withdraws the human body and its parts to the market 

invasion of all aspects of social life. 

34 J. Jones, ‘“Common Constitutional Traditions”: Can the Meaning of Human Dignity 

under German Law Guide the European Court of Justice?’ (2004) Public Law 167.


271 

For this purpose human dignity acts as a limit to freedom of contract and relies 

on three basic assumptions: i) human dignity has to be protected even 

against the wishes of the person whose human dignity is concerned (inalienability); 

ii) only the judge – not the individual whose human dignity is concerned 

– is entitled to assess individual human dignity and its violations; 

iii) the respect of human dignity can prevail over the social dignity of the individual 

whose human dignity is concerned. 

These features clearly emerge from German and French case law. In the two 

German Peep Show Cases a violation of human dignity is identified in the 

woman’s objectification, namely in the fact that her erotic performance is 

offered to customers within a kind of automatic and depersonalised context; 

that she is ultimately treated as a means (of somebody else’s sexual stimulation) 

rather than as an end, according to the renowned Kantian statement. 35 

Sex-work is again the occasion for dignity violations in the Telefonsex cases 

where § 138 BGB is reinterpreted in the light of human dignity and the contract 

between the telephone company, the erotic chat line and the costumer is 

held void as inherently immoral. 36 

In France the respect of human dignity is assumed as a necessary component 

of the ordre public clause in the famous Dwarf Throwing Case. 37 In 1991 two 

French municipalities forbade the game asserting that it infringed human 

dignity. Mr Wackenheim, whose job consisted in being thrown in disco 

shows, contested these orders, alleging by contrast that that the job provided 

him with a good income. Two administrative tribunals upheld his claim, 38 but 

the Conseil d’Etat stated that the game is against ordre public, because it 

violates the human dignity of people with disabilities. 39 Mr. Wackenheim 

appealed to the ECtHR and then to the Human Rights Committee of the 

35 BVerwG, 15 December 1981, (1982) Neue Juristische Wochenschrift 664; BVerwG, 30 

January 1990, (1990) JuristenZeitung 382. 

36 See for example BGH, 9 June 1998, (1998) Neue Juristische Wochenschrift 2895. 

37 This is a game originally played in Australia, which became popular in France and other 

European countries: a ‘dwarf’ protected by football apparel is thrown by clients of the 

disco on a huge pneumatic mattress; the winner is the person who throws the dwarf the 

farthest. 

38 T. A. Versailles, 25 February 1992, (1992) Revue française de droit administratif 1026. 

39 Conseil d’Etat, Ass, 27 October 1995, Ville d’Aix-en-Provence, (1996) Dalloz 177; Conseil 

d’Etat, Ass, 27 October 1995, Commune de Morsang-sur-Orge, (1995) Dalloz 257. 

With reference to the French debate see P. Martens, ‘Encore la dignité humaine: réflexions 

d’un juge sur la promotion par le juges d’une norme suspecte’ in Le droits de 

l’homme au seuil du troisièmemillénaire: mélanges en hommage à Pierre Lambert, 

(Paris: Bruyllant, 2000) 561; C. Girard / S. Hennette-Vauchez (eds), La dignitè de la 

personne humaine. Recherche sur un processus de jurisdiction (Paris: PUF, 2005).


ERCL 2/2006 

United Nations, claiming there was discrimination of his labour rights. 40 The 

Human Rights Committee rejected his claim assuming the violation of human 

dignity and denying any discrimination against him. 41 

Both the German and the French decisions raise the following questions. 

Whose dignity has been violated? For whom is the show or the performance 

degrading? In the name of dignity Mr Wackenheim’s freedom has been severely 

restricted; moreover he claims that that the job had enhanced his social 

dignity by granting good incomes, notoriety and his whole self-realisation. 

Who is the true recipient of human dignity protection then? Women performing 

peep shows would probably not prefer a job as cashiers in a supermarket: 

who is harmed by their performances? For all these questions ‘the 

community’ or ‘the group’ seems to be the right answer. Women’s dignity 

is offended by other women’s sex-work, dwarves’ dignity is offended by 

Mr Wackenheim’s unusual job, and the (willing) viewers’ dignity is offended 

by undignifying shows. The interpretation of human dignity that German 

and French case law embraces introduces a strong opposition between the 

community/individual into the rights rhetoric with the effect of reinforcing 

the group or minority identity against individual choice. This dignity clashes 

with the individual’s own sense of dignity and prevails over one’s own freedom; 

42 it protects the individual against the individual him/herself. 

To be sure, this use of dignity is a reaction against what has been perceived as 

an overflow of the market rhetoric, as an abuse of (self-determination and) 

freedom of contract, as a sort of tyranny of the self. 

IV. Back to the Social (or Social Dignity versus Human Dignity) 

The definition of the limits to freedom of contract in line with the perfectionist 

model shapes the relation between the individual and the (state) community 

in its own way. After the individualism of the first model, after the 

solidarity paradigm of the second model, we confront now a different idea: 

according to which the community’s dominant values are potentially hurt by 

the individual’s free choice, which needs to be restricted in the name of those 

values. 

40 The application to the ECtHR (no 29961/1996) was judged inadmissible on the 16 October 

1996. 

41 M. Levinet, ‘Dignité contre dignité. L’épilogue de l’affaire du “lancer de nains” devant 

le Comité des droits de l’homme des Nations Unies’ (2003) 55 Revue Trimestrielle des 

Droits de l’Homme 1024. 

42 S. G. Resta, ‘La disponibilità dei diritti fondamentali e i limiti della dignità (note a margine 

della Carta dei Diritti)’ (2002) XLVIII Rivista di diritto civile II, 801.


273 

Is this our future? We can imagine a European scenario where freedom of 

contract – in line with a very thin version of the paternalistic model – will be 

widely conceived and enforced in reference to trade, labour, B2B and (most) 

B2C transactions, and by contrast intensely restricted – according to the 

perfectionist model – in relation to people’s existential choices, involving 

sexuality, the body, family relations and the like. This trend will probably 

couple a parallel strategy in the harmonisation process, with the victory of 

the maximum standard mode as to the former area and the success of the 

minimum common factor approach as to the latter. In my own view this is a 

quite frightening perspective. 

So far the ECJ has not directly enforced the human dignity clause as a fundamental 

principle of the EU Charter. However in the Omega case it balanced 

(and actually restricted) the Treaty free movement of goods and services with 

a fundamental principle of a Member State legal order, namely with the respect 

of human dignity endorsed by the German Basic Law. 43 

Now, there are good ‘technical’ motives to resist the triumph of today’s prevailing 

conception of human dignity on the European scene. As a limit to 

freedom of contract, dignity is a too indefinite and uncertain notion, for two 

different reasons. First, unlike the way courts normally interpret standards 

like bonus mores and public policy that are historically determined and relative, 

and therefore likely to work as an objective limit to judiciary discretion, 

the human dignity doctrine presents dignity as a transcendent, pre-legal value, 

which is not influenced or defined by historical or social circumstances. As 

such it is completely detached from objective standards, so that the court is 

the only and absolute judge of it. 

Second, in the most significant case law the case could have been decided in 

two opposite ways, both based on dignity protection. In fact, courts prohibit 

an activity alleged as violating human dignity while the same activity is 

assumed by the person whose dignity is concerned as enhancing her/his social 

dignity. Social dignity has not disappeared from the wording of national 

courts. In another French dignity case the Conseil constitutionnel explicitly 

refers to human dignity in relation to the right to a decent home for everybody 

as precondition to a normal family life. 44 Similarly the Italian Constitutional 

Court affirmed the nature of fundamental (social) right of the right to 

housing as a necessary prerequisite for a dignified life. 45 

43 Case 36/02 Omega v Oberbürgermeisterin der Bundesstadt Bonn [2004]. 

44 Cons const, 19 May 1995, 94-359 DC. 

45 Corte cost, 7 April 1988, n 404.


ERCL 2/2006 

However, the prevailing interpretation of human dignity does not correspond 

to, but rather clashes with, social dignity, just as it does not grant – 

but sometimes denies – dignified material conditions of life. In the ‘dwarfthrowing’ 

case Mr Wackenheim’s personal dignity was undermined by the 

deprivation of his employment. The enforcement of the human dignity doctrine 

not only affected his personal liberty, but also turned his life into an undignified 

one. In the German cases of peepshows and sexy chat lines, the prohibition 

of the shows and/or the contracts’ nullity will not have effects on the 

sex workers whose dignity has been supposedly harmed other than that of 

inducing them to work on the streets as prostitutes, which is not less degrading 

from the point of view of the courts themselves. In the perspective of the 

Prostitutionsgesetz’s invalidation in the name of human dignity – which some 

German scholars today advocate – 46 prostitutes will not have any legal remedy 

against the client’s breach of contract. Not only will this worsen their 

economic conditions, but also the harm produced by being kicked out of the 

realm of legality will undermine the social dignity of prostitutes, also in terms 

of acceptance within the community. 

I believe that the notion of social dignity still has an opportunity in Europe. 

In turn social dignity is an opportunity for the social model to survive in the 

harmonisation process. In the scenario I have sketched above, European contract 

law would be ruled in this respect by the paternalistic model to a larger 

extent and by the perfectionist model in a limited area of transactions. The 

social model would disappear from sight … Now the inclusion of the dignity 

principle in the EU Charter represents a big chance for the social model to be 

vigorously reaffirmed if dignity is interpreted in its social meaning. The contrast 

between human dignity and social dignity emerging from French and 

German case law and the social use of dignity in the Constitutional case law 

of some Member States prove that freedom of contract should be regulated 

in the light of the redistributive outcomes a contract might or might not produce. 

It’s time to disentangle the social model from the rhetoric of fundamental 

rights, to look clearly at the social conflicts underneath market transactions, 

and to take the distributive effects of contract rules seriously. 

46 S. H. Hagen, ‘Menschenwürde und gute Sitten. Gedanken zum Prostitutionsgesetz’, in 

Gedächtnisschrift für Jürgen Sonnenschein (Berlin: De Gruyter, 2003) 581.

The Old and the New Limits to Freedom of Contract in Europe

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