The Essence of Freedom of Contract

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Table of Contents

Introduction
Legal Description
Liberalism and Contract
Preventative Aspects
Contemporary Regulatory Measures
Overview
Conclusion
References

Introduction

The concept of the freedom of contract is a highly unregulated area of legislation, which presents both a wide range of opportunities alongside issues. The given notion is an integral part of the law of contract, which means that it is highly critical and relevant in the commercial world since the interactions between parties can be dictated by the degree of freedom provided within a nation. The legal roots of the notion of freedom of contract are manifested in the ideals of liberalism and theoretical capitalism, where the former values individual freedom and the latter values marker efficiency and effectiveness. Both of these benefits can be achieved through freedom of contract laws, but it requires the absence of regulation in the given area to be fully functional, which explains why there is very little regulation in this regard. Although the current restrictions are minor, they mainly revolve around anti-trust laws and consumer protection laws. However, there are still certain downsides to the idea of freedom of contract, where some services can lead to the dehumanization of moral and ethical ideals. In addition, the negative aspects of freedom of contract are predatory businesses, which target vulnerable populations.

Legal Description

The freedom contract is a central concept of any capitalistic market system, which values its freedom and effectiveness. The main reason is that little to no regulation in this area can make the interactions among market entities efficient as well as be the cornerstone of democracy and freedom for the citizens. For example, Australian contract law, as many other such laws, is rooted in the English common law, which is partially accompanied by statutory protection laws (Johnson & Millar, 2021). It is stated that: “the basic principle of Australian contract law is freedom of contract, under which parties are at liberty to strike whatever bargain they choose” (Johnson & Millar, 2021, para. 1). In other words, the emphasis is put on the core idea of democratic freedom, where market parties are free to establish and determine the overall contract rules. In addition, one should be aware that there are little to no limitations on the freedom of contract laws, except third party involvements and exclusive trading, which contradicts the Competition and Consumer Act 2010, where the latter is designed to regulate any form of anti-trust provisions.

Liberalism and Contract

Moreover, one should also add that the concept of freedom of contract is an instance of the liberal conception of law, where the focus is put on opportunity equality rather than outcome equality. The liberal conception of law is an important aspect of liberalism, where the prioritization is put on providing procedural or operational fairness without putting much emphasis on the results (Swedberg, 2018). The given approach assumes that a person or individual can be considered as the most accurate and effective determiner of one’s preferences, wants, needs, and interests, where the government should play a little to no role or influence in this regard. The liberal law understands the fact that focusing on an outcome is a highly intricate and complicated process, which undermines one’s right to autonomy and freedom, and it also robs the market of its efficiency and effectiveness. In other words, the concept of freedom of contract is deeply rooted in the liberal view of the marker and citizens in general.

Many Western societies, and especially Australia, approaches the overall notion of the freedom of contract and capitalism in laissez-faire terms, where total freedom and non-engagement from the regulatory bodies are ensured. Historically, the idea cannot be traced to its origins of Anglo-Saxon legislative measures because it is a byproduct of the emergence of two major philosophical foundations, which are theoretical capitalism and classical liberalism (Swedberg, 2018). The key basic ingredient of these ideas is the fact that human activity is primarily dictated by his or her desire to achieve profit as the basis of self-interest, which is the key driving force under the capitalist market settings. Max Weber claims that the expectation of profit and the actions of an individual entity for self-interest promotion is a cornerstone of capitalist free market forces, which needs to be supplemented by the freedom of contract and negotiation (Swedberg, 2018). Therefore, the liberal ideas affected the development of the term profoundly, but theoretical capitalism also plays a vital role in this regard.

Preventative Aspects

One should be aware that the freedom of contract can have a wide range of different countermeasures, which are designed to limit the overall influence and predominance of the given legal unit. For example, it is stated that: “Australian courts have struggled with balancing the broad statutory protections afforded to consumers and businesses whilst giving effect to the contractual bargains of well-advised, sophisticated commercial entities” (Bellas, McComish, Hickman, & Holloway, 2018, para. 1). However, it is also stated that the recent changes are indicating the overall shift towards statutory rights (Bellas et al., 2018). In other words, the current legal system is constantly changing dynamically, but these fluctuations in the approaches are still insignificant because this area of the law is still unregulated.

One of the main catalyzers of the specified shift is rooted in the countering aspect of the Australian Consumer Law or ACL, which seeks to invoke consumer protection statutory laws despite the ideals of the freedom of contract. Contracts can be created between consumers and product or service providers, where the freedom of contract dictates that both parties should be free to set the terms of the contract as well as establish all financial elements. However, large and sophisticated companies can leverage their expertise and knowledge to out-promote their self-interests and potentially deceive their clients to gain the upper hand and high levels of profitability.

Based on the previous assessments, it is clear that consumer protection laws are naturally in opposition to the freedom of contract laws because two parties seek to establish self-favoring conditions and terms of the contract. However, an individual consumer can be put in a disadvantageous position due to the other party being a large corporation, which is far more sophisticated in the overall comprehension of legal terms and one’s boundaries of individual rights.

Therefore, one might assume that this is an uphill battle for an individual consumer, which is why ACL’s presence is critical to ensure that there is some form of protection. However, the freedom of contract laws remains highly unregulated due to the fact that courts and legal institutions favour and defend the freedom of contract against the doctrine of preventative measures (Warnock, Weissman, & Armitage, 2018). Any push-back or restrictive alterations to the freedom of contract can lead to major ramifications and implications in the overall functionality of the market because parties will be able to utilize these new restrictions to cause market inefficiencies and clogging in the legal system. In other words, there is a strong reluctance to implement changes in the area of the freedom of contract laws because the latter requires the absence of regulations to thrive both functionally and structurally.

Contemporary Regulatory Measures

The idea of freedom of contract assumes that there will be little to no regulation to successfully operate within a specific market. One of the key aspects of laissez-faire economics is the fact that parties are free to negotiate and establish the terms and conditions of the contract without intervention from third-party forces. As it was stated previously, contemporary regulatory measures in Australia revolve around consumer protection and other statutory prevention laws and anti-trust laws. However, they are not specifically applied or outlined within the freedom of contract laws but rather exist as separate regulatory units, which can go as a contradictory law. In other words, there is still no extensive or even moderate regulatory presence in regards to the subject at hand because it requires the lack of regulatory measures to be effective. In addition, the court might be shifting their favor towards the prevention laws, but the general trend is still manifested in ensuring the freedom of contract.

However, one should be aware that the specified recent trend is a natural response to newly emerging limitations of the freedom of contract laws. One of the most extreme examples of such limitation is centered around the idea of gestational surrogacy, where parents, who are unable to conceive a child on their own, make a contract with a surrogate mother, who will carry and give birth to a child, which genetically belongs to the parents and not surrogate mother (Allen, 2018). Since this is a highly sensitive and ethically volatile subject, the concept of freedom of contract can be put to the test. There is an evident and direct argument that the lack of regulatory practices, which makes the freedom of contract functional, makes the bond between a mother and child inherently dehumanizing (Allen, 2018). In other words, one can see that a surrogate mother becomes a mere vessel for the child, despite their genetic differences.

It is important to note that genetics is not a primary determinant of the humanization of the bond between a child and mother. The main reason is that naturally born children within their natural mother’s womb are still carrying the different genetic makeup, which comes from the father. Therefore, the freedom on the contract might push the boundaries of ethical and moral connection between a surrogate mother and child to make them strangers who have nothing in common besides the pregnancy and surrogacy.

One can effortlessly observe that the given example shows the dehumanizing aspect of the freedom of contract, where the ideas of capitalistic market efficiency and individual freedom are put above deeply human values, such as the bond between mothers and children. The lack of extensive regulation can easily lead to highly unethical and immoral practices, where contracts focus on surrogate mothers as mere vessels or natural human 3D printers despite the fact that the process of pregnancy and birth is deeply emotional and psychologically interconnected.

One might also argue that the presented example is a mere exception, which can be tackled separately, but such occurrences are predominant in Australia and the world in general. One of the major problems of consumer protection efforts is the prevalence of predatory businesses, which abuse the freedom of contract laws to target vulnerable consumers (Consumer Action Law Centre, 2015). These include credit repair companies, for-profit debt negotiators, private car parks, and in-home sales (Consumer Action Law Centre, 2015). For example, the case of for-profit debt negotiators demonstrates that such companies promise to settle the debt at a lower amount, but the customer needs to pay a certain fee upfront. However, their contract does not specify they guarantee a successful settlement or negotiation, which means that they are likely to abandon their customers after receiving the fee.

Refusal to fulfill an agreement, refusal to fulfill an obligation, termination of an agreement unilaterally is also a form of unilateral transactions. However, in the first two cases, it may not necessarily be about the complete termination of the corresponding rights and obligations of the participants in the legal relationship. It is quite permissible to talk about changing the term for the execution of the contract while maintaining the legal fate of the contractual connection. If nevertheless, the result is the termination of the contract, then the mechanism of actions aimed at realizing this goal is not identical to actions related to the withdrawal from the contract.

In this regard, it is important, from the point of view of the order of execution, the question of what distinguishes actions to refuse to fulfill a contract or to refuse to fulfill an obligation from actions to terminate a contract unilaterally. It seems to the author that those rules that establish the right to freely withdraw from the contract, and those that are aimed at protecting the rights of a bona fide counterparty by applying an operational sanction in the form of withdrawal from the contract, should be indicated through a combination of withdrawal from the contract. Other norms that are not focused on a failure in relations between counterparties, as well as norms that allow one to demand termination of the contract unilaterally through the court, should contain the concept of termination of the contract. Such certainty of legal norms will allow minimizing technical and legal errors that complicate the implementation of the principle of freedom of contract in the process of law enforcement and law enforcement.

Overview

Freedom of contract is one of the basic principles of civil law. Characterizing the principles of freedom of contract, it is necessary to proceed from the fact that the adequacy of understanding and analysis of the functional role of this principle induce to look for its expression not only in the stages of formation of contractual relations, but also in the stages of the subsequent development of civil law relations based on the contract, and its change and termination. Hence, it is quite logical to assert that the expression of contractual freedom is also the endowment of the parties with a broad opportunity to determine the further fate of the contract. This is true since those who have the right to enter into a contract of their own free will should, in principle, be just as open to terminating it or changing certain contractual terms.

Therefore, the analysis of the beginning of the freedom of contract and its functional role, taking into account the dynamics of contractual relations, as well as the provision that freedom of contract presupposes the autonomy of will, the initiative of counterparties, both at the stage of establishing contractual relations and in the process of their implementation and termination, seems more reasoned. However, there is no absolute freedom at any of the listed stages, therefore the beginning of freedom of contract has quite justified restrictions. For them, in the form of the corresponding imperatives, not to infringe on the real freedom of contractors in contractual relations, it is required to clearly define the internal content of the categories. With the help of these restrictions established, the question is how far they can go and in what terms they can be expressed.

Conclusion

In conclusion, it is critical to understand the concept of freedom of contract that emerged as the joint development of theoretical capitalism and liberalistic ideas. The core notion lies in the fact that an individual is the best determiner of his or her interests and needs, which means that both individual freedom and market efficiency are achieved through the laws of the freedom of contract. However, there are evident limitations to the given idea, where the current measures include anti-trust laws and consumer protection laws. The concept of freedom of contract requires the absence of regulations to be functional and effective, but it comes with certain costs, such as predatory businesses and unethical practices.

References

Allen, A. A. (2018). Surrogacy and limitations to freedom of contract: Toward being more fully human. Harvard Journal of Law & Public Policy. Web.

Bellas, S., McComish, S., Hickman, K., & Holloway, B. I. (2018). Australia: Statutory protections vs. freedom of contract: A shift in the balance? Mondaq. Web.

Consumer Action Law Centre. (2015). Discussion paper: Unfair trading and Australia’s consumer protection laws. Web.

Johnson, M., & Millar, J. (2021). Doing Business in Australia: Contract law.Clayton UTZ. Web.

Swedberg, R. (2018). Max Weber and the idea of economic sociology. Princeton, NJ: Princeton University Press.

Warnock, D., Weissman, M., & Armitage, A. (2018). Freedom of contract trumps the doctrine of prevention.Norton Rose Fulbright. Web.

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