Constitutional Values and Freedom of Contract

1.1 Protection of the Weaker Parties

In perhaps the most famous book on freedom of contract, the great English lawyer Patrick Atiyah analysed the rise and fall of the principle of freedom of contract.^[6] Its211 birth is linked to property, under the influence of the ideas of Hobbes or Locke. The period between 1870 and 1970, on the other hand, marks its gradual decline, inaugurated by the first major consumer and social legislation.

American history provides a particularly good account of these movements. In what is now commonly referred to as the ‘Lochner era’, named after a famous 1905 case (Lochner v People of State of New York), the US Supreme Court used the notion of economic or contractual freedom to invalidate early social legislation. In this case, it ruled that a New York State law limiting working hours in bakeries to 10 h a day or 60 h a week, and imposing minimum hygiene and cleanliness conditions, should be invalidated. Roosevelt, who feared for the implementation of his New Deal, played a decisive role in overturning this ruling, which was accomplished in 1937.^[7]

European countries have experienced the same movement. Thus, the entire history of labour law or consumer law has consisted of imposing certain obligations, or on the contrary prohibiting certain clauses, in other words limiting contractual freedom.

This historical background explains why the French ‘Conseil constitutionnel’, for example, had long hesitated to make freedom of contract a principle of constitutional value^[8] so as not to prohibit the legislator from regulating the content of contracts and thus to limit contractual freedom in order to rebalance a relationship. However, yielding to contemporary illusions of freedom, the French Constitutional Council has, since the late 1990s, taken a liberal turn and the constitutionalising of freedom of contract has had the consequence, as in the Lochner decision, of limiting the possibility for the legislator to protect weak parties.^[9] 212

The Court of Justice of the European Union has also made freedom of contract a fundamental principle of the Union, deriving it from the freedom to conduct a business,^[10] thus clearly giving it the sole objective of favouring the freedom of the market.

Thus, the end of the 20th century and the beginning of the 21st century saw a revival of freedom of contract which has been invoked to validate contracts even if they were very unbalanced. It is clear that in balancing freedom of contract against constitutional values, the constitutionalisation of the former gives it considerable additional weight, and thus automatically weakens the other traditional values to be protected.

The recent evolution of labour law is very typical of this movement, where with the so-called ‘uberisation’ of society, all the most economically dependent workers are made to believe that they would in fact be free and autonomous, which allows them to bear all the risks of their activity which, however, essentially benefits others than themselves.

Consent is seen as a universal sesame that would allow all agreements to be validated.^[11] We see this again in the consents expressed by a simple ‘click’ on the Internet, which are nothing more than parodies of consent.

History repeats itself, and we accept without flinching a return to the rhetoric of the Lochner decision of more than a century ago, which had allowed ‘liberals’ to oppose the beginnings of social progress: In order to declare unconstitutional a law limiting the working hours of bakers, the American Supreme Court had affirmed at the time that ‘there is no contention that bakers as a class are not equal in intelligence and capacity to men in other trades or manual occupations, or that they are not able to assert their rights and care for themselves without the protecting arm of the State, interfering with their independence of judgment and of action’. Employees threatened with redundancy and/or relocation are certainly no less213 intelligent than others, nor are undocumented workers who ‘consent’ to all sorts of illegal clauses and hardly protest against their exploitative conditions, but that is of course not the point.

Yet the same argument comes up, unchanged, almost a century later. In Johnson v Calvert, a case of surrogacy, a 29-year-old black woman,^[12] Anna L. Johnson, refused to give the Calvert couple the child she had initially agreed to carry for them. In a decision of 20 May 1993, the California Supreme Court agreed with the original judges that the surrogate mother had no parental rights to the child, on the grounds that ‘in the present case it cannot seriously be argued that Anna, a licensed vocational nurse who had done well in school and who had previously borne a child, lacked the intellectual wherewithal or life experience necessary to make an informed decision to enter into the surrogacy contract’.

The continuation of the story begun by Atiyah thus shows a new rise of freedom of contract, which began just after the publication of his book, with the victory of ultraliberal ideology in the 1980s. The second volume of his updated book should therefore be entitled ‘Rise again’.

We should remember Lacordaire’s famous phrase: ‘Entre le fort et le faible, entre le riche et le pauvre, entre le maître et le serviteur, c’est la liberté qui opprime, et la loi qui affranchit’^[13] (‘Between the strong and the weak, between the rich and the poor, between the master and the servant, it is freedom that oppresses and the law that sets free’). In the name of freedom of contract, the law that sets free once again gives way to the liberty that enslaves.^[14]

1.2 Contemporary New Challenges

One of the main shortcomings of the European Union, which has been denounced several times, and which is what one might call the fundamental misunderstanding of the European Union, consists of an aspiration, which is always disappointed, to see values defended other than the sole establishment and proper functioning of the214 market in Europe.^[15] Yet this remains the self-proclaimed objective of the European Union,^[16] and has even become more rigid with the gradual constitutionalising of an ordo-liberal economic policy that has thus been excluded from democratic political debate.^[17]

The disappointment is all the greater since the substitution of the term European Union for the European Economic Community could have led to the belief that the values pursued were broader. European texts proclaim many other fundamental values, especially in the magnificent Charter of Fundamental Rights of the European Union, which the judges of the Court of the European Union have though never ceased to empty of any legal force.^[18]

However, this charter clearly contains many principles and issues (many ‘constitutional values’) that could be implemented and thus enrich the classic objective of protecting the weak party.^[19] 215

This is particularly the case for the need to protect the environment. Article 37 of the Charter of Fundamental Rights of the European Union contains provisions on the protection of the environment.^[20] Contract law could contribute to this objective by limiting contractual freedom. More precisely, it is not a question of prohibiting a certain contractual content but rather of imposing a certain contractual content, in order to promote what one author has rightly called a ‘sustainable contract’.^[21] In the various European laws, there are indeed tools enabling the judge to impose implied obligations.^[22] We have explained elsewhere^[23] that among the implied obligations that the judge may impose in the contract, there could be an obligation to produce the promised products under sustainable social and environmental conditions. Traditionally, contract law has been concerned only with whether or not the promised obligations have been performed, but not with how they have been performed. A sustainable contract law could introduce this requirement and impose it on the parties despite the silence of the contract or even despite their will to the contrary.

Many other limits on the content of the contract could usefully be forged by judges depending on the type of contract concluded. For example, one could conceive of developing warranty obligations in order to combat the programmed obsolescence of various machines, which leads to frenetic consumption that is very harmful to the environment. The right to have non-conforming products repaired rather than replaced could also be encouraged wherever possible; as the 2019 directive on certain aspects concerning contracts for the sale of goods states, ‘enabling consumers to require repair should encourage sustainable consumption and could contribute to greater durability of products’.^[24] 216

We could use also Article 36 of the Charter of Fundamental Rights of the European Union which aims to promote and guarantee access to services of general economic interest.^[25] This objective could also be very valuable in modernising contract law.^[26] With the general privatisation of our societies, some public services are now provided by private companies, and are therefore only available through private contracts. This makes them ‘crucial’^[27] and vital to the individual. This is more or less what the designers of the concept of ‘life time contracts’ were trying to say.^[28] Principle 8 of these life time contracts raised the issue of access to contracts, but restricted it to a too simplistic principle of non-discrimination which, moreover, is common to all contracts and not just life time contracts. The special feature of life time contracts is that they enable individuals to meet their essential needs. The first guarantee would then be to enshrine a right of access to these crucial goods or services. In the absence of a public service guaranteeing all these goods or services, these contracts are the only means of accessing rights considered fundamental: the right to health, culture, education or, in today’s world, access to the Internet or banking services. They are thus necessary to ensure respect for human dignity, as defined in the 1948 Universal Convention on Human Rights, i.e., the right of every individual to have his or her basic needs met.^[29] 217

The Court of Justice of the European Union could also develop (it is not forbidden to dream…), as the European Court of Human Rights has done for a long time, a concept of ‘positive obligations’ of States to implement fundamental rights.^[30]

The notion of right of access implies equal access for all, without discrimination, but above all for the benefit of all people and not just the weakest. By their very definition, these contracts are intended to meet the basic needs of all human beings, not just a certain category of them. This is precisely why the category of life time contracts is original, and not limited to the usual and now classic prism of protecting the weakest party.

Access to these contracts could involve obligations to contract on the part of certain suppliers of these basic services. It also presupposes that the price offered for crucial goods or services is reasonable. We should take advantage of this to go beyond the classic contractual analysis, which remains strictly inter-individual. The notions of contractual justice and fair price must now be understood in the context of a fair distribution of wealth and added value, particularly in production chains and also in distribution chains.^[31] This objective is also addressed by Article 31 of the Charter of fundamental rights of the European Union on Fair and just working conditions.^[32]

Several other constitutional values could be used and interpreted to promote a fairer and more sustainable contract. As is often the case, it is not so much the legal techniques that are lacking as the political will of legislators or the boldness of judges.

Yet states have all the power to decide which contracts it agrees to enforce or not to enforce. A legal system could refuse, for example, to help to enforce purely218 speculative contract, as Katharina Pistor recently proposed.^[33] It could be argued that purely speculative contracts, such as gambling, do not fall within the activities that the law is designed to defend,^[34] in other words that they do not allow any of the fundamental common values of society to be realised. This would be technically very easy to do. Thus, in French law, the law does not grant any action for a gambling debt or for the payment of a bet,^[35] and the winner will not have the help of the law to force the loser to pay his debts. It is interesting to note that a special statute law took the trouble to say that this classical rule does not apply to stock exchange transactions,^[36] which was indeed a confession of the similarity of the two transactions!

To conclude this first part, we have seen how constitutional values are limits to contractual freedom.

I would now like to try to show that the subject ‘Constitutional Values and Freedom of Contract’ should also be approached in a different way. Certain constitutional values are chronologically primary and make it possible to set up and protect freedom of contract. They are thus not only limits to freedom of contract but overall guarantees of freedom of contract. In other words, limits on freedom of contract serve not only to protect constitutional values; they also serve to protect freedom of contract itself.219

2.1 ‘Non-Contractualisable’ Values

At the turn of the 20th and 21st centuries, a new notion of liberty emerged, which is neither specific freedoms (freedom of conscience, freedom of religion, or freedom of association), nor a general right to security, but a right to personal autonomy. Thus, in 2002, in the famous Pretty case, the European Court of Human Rights stated that ‘although it has not been established in any previous case that Article 8 of the Convention entails a right to self-determination as such, the Court considers that the notion of personal autonomy reflects an important principle underlying the interpretation of the guarantees of Article 8’.

According to the European Court, the test of personal autonomy is the consent expressed by each person to the life they wish to lead. But the equation220 ‘consent = liberty’ is in many ways a bit short.^[38] Consent is not the normal way of exercising freedoms, and all specialists in contract law know that, on the contrary, consent creates an obligation to do what one has promised even if one no longer wants to.

This choice reveals indeed the different cultures of freedom or liberty.^[39] For a French person, the figure of liberty is that of the martyr and the hero: the one who never consents, who never gives in, who never admits defeat, and is ready to pay the price; liberty is in the ‘no’; consent is in the ‘yes’.^[40] In the same sense Pier Paolo Pasolini said: ‘I pochi che hanno fatto la storia sono quelli che hanno detto di no’ (‘The few who made history are those who said no’). American history is very different and shows an intimate link between the idea of freedom and property that can still be seen today. Finally, in the German model, the vision of the free man is that of a member of a community with a voice; we can still find traces of this in Habermas, where it is from common discussion that norms emerge.^[41]

However, the current ideology has led to consent being the only criterion of liberty, including in matters of fundamental rights and freedoms, and therefore also in matters of constitutional values.

The question is not only theoretical. Today we often see freedom of contract being used to waive certain fundamental rights or values.

Thus, more and more, workers can renounce all their protections and rights and pretend to be independent contractors. In several countries, however, the courts have played their part well and have reclassified these contracts as employment contracts.^[42] 221

There are many other examples of contracts involving the human body. For example, the European Court of Human Rights has held almost 20 years ago, in the case of KA and AD v Belgium, that sexual practices involving the torture of a woman could not be contested if the woman had consented. The court added: ‘the criminal law cannot, in principle, intervene in the area of consensual sexual practices, which are a matter for the free will of individuals’. This is also what we see today in the contracts signed in the pornographic industry, where a woman can agree to be ‘demolished’ by 20 men.^[43]

Yet, the Preamble to the famous French Declaration of the human rights of 1789 speaks of ‘inalienable and sacred rights’.^[44] The US Declaration of Independence of 1776 also speaks of ‘unalienable rights’.^[45]

Consent should therefore not be enough to allow for a contractual waiver of certain constitutional values.^[46]

The law is about protecting people, not against themselves, as we hear the critic today (criticism of supposed paternalism), but against others. The meaning of the words is obviously perverted if the protection of the person against others is called the protection of the person against oneself – and therefore disqualified as being ‘paternalistic’ – as soon as that person has consented to the infringement.

Consent in a situation of dependence is too fragile to guarantee the freedom of individuals. Moreover, the criterion of consent is very difficult to apply. When the law lays down a criterion, it must be able to control its application. In contract law, it is relatively easy to control consent. For example, a person has concluded a contract and explains that he/she was the victim of a mistake or fraud. If he/she shows that his/her consent has been vitiated, he/she can hope to show that without this defect they would not have entered into the contract. But in almost all the difficult cases222 where consent is to play an exclusive role, people say that they consented, for example employees who accept undignified working conditions say that they consent, as do migrants who have to accept whatever is offered to them. We could also take the example of consent to the collection of personal data on the Internet.

How can consent be controlled when the person says that he or she consents? In a liberal and democratic society, we cannot, except in a few special cases (minors or the insane, for example), call into question the consents given by individuals. Nor do we have machines to detect false consents such as lies.

The limit must therefore be an objective limit. Certain constitutional values should be an intangible minimum of which the persons cannot be deprived, nor may they deprive themselves by contract. These are mainly values linked to the person and his/her body.

To those who support the extremist position denying any limit to the justificatory power of consent, we must respond with the extreme examples of ‘consented’ murder, ‘consented’ sale of organs, or even ‘consented’ incest. So there are necessarily limits that each society must define. The democratic debate we then need to have is about accepting (or not) the ever-increasing scope of the market, and the objective complicity between the vaunted social progress and the needs of the market.^[47]

Of course, the boundaries are not easy to draw,^[48] and they require interpretation and discussion. But is not that the case with almost all legal concepts?

The same principles apply, probably even more so, to the framework that makes contractual freedom possible and guarantees it.

2.2 The Intangibility of the Framework that Guarantees Freedom of Contract

Contractual freedom, like all freedoms, presupposes that it is established and also guaranteed by the legal system. Today, there is a tendency to forget that without a binding framework, freedoms and, more generally, constitutional values cannot be223 guaranteed. In particular, we forget that freedom of contract itself presupposes such an intangible framework which cannot be left to the free disposal of the parties.

The preamble to the 1948 Universal Declaration of Human Rights had though put it very clearly: ‘it is essential… that human rights should be protected by the rule of law’.

It is therefore not enough to focus on the content of the contract; one must also focus on contract law itself. And what we are now witnessing is a trend towards the privatisation of law, especially contract law.

Business practice is thus giving rise to new contracts, forged with the help of large law firms, which are increasingly moving away from the model taught in contract law courses. These new contracts provide much more explicitly, in a whole series of specific clauses,^[49] not only complex obligations, but above all the precise legal regime intended to govern them.^[50] The contract thus provides for the contract law that will apply to it.

The development of private arbitration is leading to a similar evolution. Even states are now caught in its nets, particularly with investment arbitrations. The United States was a forerunner, but the floodgates are now open everywhere in terms of matters in which access to a judge can be prohibited by imposing one of the parties to resort to private arbitration, which can even happen nowadays in employment or consumer contracts.^[51] Arbitration tends to become autonomous,^[52] and disengaged not only from domestic law but also from classical private international law.^[53]

But contract law cannot, at the same time, protect freedom of contract and allow parties to dispense with contract law. 224

In other words, there must be a minimum framework for contracting parties that escapes the contracting parties’ freedom of contract. Freedom of contract must not allow the parties to wipe out with a stroke of the pen what guarantees it, otherwise the whole system will collapse.

This has to do with Russell’s famous paradox. We all know the famous example of the Cretan who says that ‘all Cretans are liars’: either he is telling the truth, and then he is lying, or he is lying and then he is telling the truth.^[54] Russel solved this paradox with the no less famous ‘type theory’, implying that the statement must not apply to the one who makes it.

To conclude, limits to contractual freedom are needed to protect constitutional values, but also to protect contractual freedom itself. Thus, while in general the constitutionalisation of private law^[55] has led to greater protection of fundamental values, which have been established as constitutional values, the conclusion is arguably more mixed when it comes to the constitutionalisation of freedom of contract.

In reality, it would probably be appropriate to refine and distinguish within the principle of freedom of contract.

Everything that has been said about the dangers of constitutionalising the principle of freedom of contract relates solely to the freedom to choose the content of the contract: as we have seen, constitutionalisation risks preventing the imposition or prohibition of certain obligations or, more broadly, certain clauses in order to give precedence to the objectives of protecting weaker parties or other crucial issues (the environment, for example).

On the contrary, the freedom to contract or not to contract is an essential principle and should therefore have constitutional value: a contract is in essence a voluntary commitment, so that this qualification is not possible if a person is obliged (or prohibited) to contract.

As for the third element of the principle of freedom of contract, namely the free choice of the co-contractor, it is conceivable that, in fact, this free choice could be limited, for example in the case of a de facto monopoly, as long as the person remains free to contract or not to contract, which is decidedly the soul of the contract and the heart of the principle of freedom of contract.