Freedom of contract
From Wikipedia, the free encyclopedia
Freedom of contract is a natural law concept that individuals should be free to bargain over the terms of their own contracts without government interference. Regulations, subsidies, and taxes are all comonly seen as infringements. It is the underpining of the theory of laissez-faire economics, and justifies it as a benefit to society.
Henry James Sumner Maine proposed that social structures evolve from roles derived from status to those based on contractual freedom. A status system establishes obligations and relationships by birth, whereas a contract presumes that the individuals are free and equal. Modern Libertarianism such as that advanced by Robert Nozick sees freedom of contract as the expression of the independent decisions of separate individuals pursuing their own interests in a "minimal state".
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[edit] Historical background and Common Law
The idea as put forward by theorists such as Adam Smith and Thomas Hobbes is for an individual to use society as a tool for acquiring property and happiness. They opposed artificial restraint on the free-will of the individual to pursue his own self interests. Individualists see the state as a means to an end.
Freedom of Contract as we know it today stemmed from the Enlightenment ideals of John Locke. Lock's Two Treatises of Government argued against the divine right of kings as the supreme authority. Society, Locke reasoned, functioned best when freely determined social contracts governed human behavior. This was the only way to preserve life, liberty, and property. He determined these to be "natural" rights.
[edit] Liberty of Contract in America
In America, fundamental rights have special significance under the 9th Amendment to the Constitution. The framers of the constitution indended for it to be a catch-all amendment to make it clear that rights and liberties were not exclusive or limited to the bill of rights. The 9th Amendment says:
The enumeration in the Constitution, of certain rights shall not be construed to deny or disparage others retained by the people.
The theory was a fundamental part of American legal docrine until the New Deal revolution of the 1930's when it fell out of favor. Liberty of Contract was portrayed in the press as being "pro-business" and "anti-labor". After the Supreme Court used it to strike down several pieces of New Deal legislation, President Roosevelt tried to pack the court to alter their decisions.
[edit] Lochner v. New York
In 1902 a New York baker named Joseph Lochner was fined for violating a state law limiting the number of hours his employees could work. He sued the state on the grounds that he was denied his right to "due process". Lochner claimed that he had the right to freely contract with his employees and that the state had unfairly interfered with that right.
In 1905 the Supreme Court used the "due process" clause in the 14th Amendment to declare unconstitutional the New York state statute imposing a limit on hours of work. In Lochner v. New York, Justice Peckham wrote for the majority: "Under that provision no state shall deprive any person of life, liberty, or property without due process of law. The right to purchase or to sell labor is part of the liberty protected by this amendment..."
Writing for the minority, Justice "Oliver Wendall Holmes" accused the majority of basing it's decision on laissez-faire ideology. He believed that they were making law based on economics rather than interpreting the constitution. Neither did he believe that "Liberty of Contract" existed or was intended in the constitution.
By 1937 politics forced the court to reverse its view in the case West Coast Hotel Co. v. Parrish. In that case the court upheld a State of Washington Law setting a minimum wage.
[edit] Tyranny of the majority
Collectivists emphasize paternalistic government over individual responsibility. Whether this stems from a distrust of human nature or a desire to force others to conform, the reasons do not matter. They tend to see themselves as divinely charged with a duty to prevent harm befalling others. The collectivists are the ones who attempt to construct poltical solutions by attacking the Freedom of Contract and refusing to recognize it as a right.
Many see morality as the basis for distrusting an individual to make sound choices. Most cultures value honour and honesty, and rely on conscience to underpin morality. Dishonesty is generally considered wrong, particularly when one promise induces another person to take action. Equity or similar codes of fairness therefore require a person to obey the dictates of his or her conscience and so avoid causing loss to other people. Therefore, they codify the concept of wrong in tort — the law of private wrongs — which is based on the notions of personal accountability, causation, and, in modern law, negligence.
Both John Stuart Mill and Alexis de Tocqueville described what they called the "Tyranny of the majority". Both men were concerned with minority interests being subject to whim of the majority. They even went so far as to imply that the minority would be victims of tyranny by Ochlocracy. This is why modern consitutions contain bills of rights that limit the powers of the legislature.
[edit] Literature
- Trebilcock, Michael J.:"The Limits of Freedom of Contract" (Harvard University Press) ISBN 13 978-0-674-53429-2
- Atiyah, P.S:"The Rise and Fall of Freedom of Contract" (Oxford University Press, USA; New ed; Dec 12, 1985) ISBN 13 978-0198255277
