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

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