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

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