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

266 Maria Rosaria Marella
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.