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

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