If Parties are to have maximum substantive freedom, constraints on the substance of what can be agreed to should be kept to a minimum
Introduction:
The principle of substantial liberty is centered on enhancing the well-being and autonomy of individuals [1]. In essence, significant liberty pertains to the expansion of freedoms aimed at enriching the lives of individuals, fostering their status as social entities, and enabling their engagement with the societal milieu in which they dwell. Substantial liberty embodies a freedom-centric approach that seeks to augment the autonomy of the involved parties within a given contract, encompassing both the process leading up to the agreement and the substantive terms that may be mutually consented to [2].
A fundamental tenet of legal doctrine is that each individual or party possesses the freedom to contract as they see fit, provided no inequity or unlawfulness is involved. This paper assesses the significance and legitimacy of substantive freedom, particularly in the context of specific legal domains such as contract law. This examination encompasses contracts involving constraints on trade, agreements on terms, contracts necessitating the implication of terms, contracts bearing penalties, and those prescribing prohibitions leading to significant frustration and liability.
Discussion:
It has been contended that when parties possess maximum substantive or procedural freedom to agree, it necessitates that the legal framework defines the fundamental concept of agreement in a manner that upholds principles of liberalism, fairness, and restrictiveness only in cases warranting contractual agreements to be nullified due to procedural impropriety [3]. This underscores that when certain parties enjoy maximal substantive freedom, constraints or limitations on the content of agreements should be minimized.
[1] Sen, Amartya. “Freedom of choice: concept and content.” European Economic Review 32, no. 2-3 (1988): 269-294.
[2] Stoop, Philip N. “The concept ‘fairness’ in the regulation of contracts under the Consumer Protection Act 68 of 2008.” PhD diss., 2013.
[3] Phillips, Michael J. “Thomas Hill Green, Positive Freedom, and the United States Supreme Court.” Emory LJ 25 (1976): 63.
Within substantive law, substantial freedom is to maintain equilibrium between the interests of specific parties engaged in a contract while safeguarding their procedural and substantive interests [4]. The rights and obligations conferred by the contract terms can influence the parties’ crucial proprietary, physical, economic, and social interests. From a freedom-oriented standpoint, terms may be deemed unfair when they unduly compromise the parties’ interests [5]. Procedural interests are influenced by the processes leading to the formation of the contract.
When parties possess maximum substantive freedom in binding agreements, substantive law governs the conduct of contract parties, defining their rights and responsibilities within civil law and delineating penalties and criminal offenses in criminal law [6]. Substantive law may be codified within statutes or emerge through precedents in common law.
English law represents the substantive common law that regulates and confines the freedom of contract, examining the control exercised within this domain. Disputes between contracting parties, arising from attempts to regulate their duties and rights through agreements, can manifest in various forms [7]. Several documented cases assert that distinctions between contracting parties may arise due to differences in the contractual nature or precise effects, scopes, or continuance of their agreements.
[4] Dawkins, Cedric E. “The principle of good faith: Toward substantive stakeholder engagement.” Journal of Business Ethics 121, no. 2 (2014): 283-295.
[5] Prassl, Jeremias. “Freedom of Contract as a General Principle of E.U. Law? Transfers of Undertakings and the Protection of Employer Rights in E.U. Labour Law: Case C-426/11 Alamo-Herron and others v Parkwood Leisure Ltd.” Industrial Law Journal 42, no. 4 (2013): 434-446.
[6] Ripstein, Arthur. Force and freedom. Harvard University Press, 2010.
[7] Weber, David P. “Restricting the freedom of contract: A fundamental prohibition.” Yale Hum. Rts. & Dev. L.J. 16 (2013): 51.
The case of Parker v South Eastern (1877) [8] is relevant in this context, which elucidated that notice may incorporate terms contingent on contextual interpretation and the logical and reasonable expectations stipulated within the given context. This case posits that a plaintiff should not receive preferential treatment because of their exceptional ignorance, incompetence, or carelessness.
However, the railway company failed to adequately communicate to the passengers that the tickets contained specific conditions. The Railway Company accepted goods for deposit without obtaining the passengers’ consent to terms that limited their liability. In such instances, judgment is rendered through the principle that freedom of contract does not condone parties making undue promises, and specific laws curtail the unfairness of contracting parties.
Furthermore, it can be posited that the court plays a substantial role in delineating constraints on the substance of agreements, aiming to keep them minimal.
Nevertheless, a question emerges regarding whether the court is confined by the parties’ intentions or is empowered to discern what the contracting parties have articulated. Decisions may be rendered, or the court may interpret and analyze the parties’ relationship, arriving at independent conclusions.
If the former perspective holds, it could be argued that the court passively oversees contracts by conferring legal validity upon the contracting parties’ endeavors. If the latter view prevails, the courts actively shape and regulate contractual relationships, sometimes even formulating them.
[8] Parker’s Case, 2 C.P.D. 416 (1877).
[9] Kennedy, Duncan. “Form and substance in private law adjudication.” Harv. l. rev. 89 (1975): 1685.
Agreements on behalf of the parties themselves [10]. This assertion underscores that, despite maximal substantive freedom, contracting parties remain subject to specific constraints concerning the content of their agreements. To fully exercise maximum substantive freedom over a contract, parties must minimize restrictions on the substance, such as default rules and regulations. This can be achieved through substantive law encompassing statutes relevant to agreements and laws governing duress.
Additionally, the provisions of the Sale of Goods Act 1893 underscore that agreements between parties must be legally upheld, with offer and acceptance aligning to form a contract, subsequently leading to the determination of mutually agreed-upon terms [11]. The precedent of Harvey v Facey [1893] AC 552 [12] is germane in this context, illustrating that offer and acceptance hinge upon the terms consented to by both parties, as seen in the sale contract of Bumper Hall Pen, which set certain restrictions on the good. This limitation on substantive freedom highlights the necessity for parties to establish equitable standards with minimal constraints on the substance, including default regulations, which can be enacted through substantive law encompassing statutes relevant to contracts and laws governing duress, among others.
[10] Macneil, Ian R. “Contracts: Adjustment of long-term economic relations under classical, neoclassical, and relational contract law.” Nw. U.L. Rev. 72 (1977): 854.
[11] Battersby, G., and A. D. Preston. “The Concepts of ‘Property,’ ‘Title’and’ Owner’used in the Sale of Goods Act 1893″ (1972).” MLR 35: 268.
[12] Harvey v. Facey, 1893 A.C. 552 (1893).
The doctrine of duress posits that contract law is fundamentally oriented towards ensuring equity and averting inequity within contractual relationships through imposing legal norms on intrinsically equitable contracts [13]. Substantive equity underscores that negotiations between parties should be conducted fairly, with a mutual commitment to impose minimal constraints on the agreement’s content, thereby precluding coercion, unlawful pressure, and causation. Failure to uphold these constraints on the substance may invoke the doctrine of duress, rendering the contract void.
This underscores the concept that heightened constraints on the substance exert pressure on a party, stifling its substantive freedom to contract. Substantive freedom is curtailed when contracts offer no genuine choice to the parties involved and impose significant restrictions on the substance. A pertinent case in this regard is that of Dyson J in DSND v Petroleum Gas Services (2000) [14], where it was elucidated that misrepresentation of contractual terms could potentially constitute duress. Duress represents an unlawful practice that is proscribed by the law of contracts.
Instances of contract breach related to duress can infringe upon the substantive freedom of parties that seek to maintain minimal restrictions on the substance. Nevertheless, the case of Dimskal Shipping Co S.A. v International Transport Workers Federation (The Evia Luck) (No.2) [1992] [15] stands apart as an exemplar of contractual breach through duress, conclusively substantiated and evidenced. This illustrates that in exercising substantive freedom in contract engagement, parties should adopt an approach that imposes minimal constraints on the agreement’s content, ensuring fairness and transparency without misrepresentation.
Furthermore, it is contended that various external factors, including social, industrial, and commercial considerations, may influence the contractual arrangements forged between parties [16].
[13] Dressler, Joshua. “Exegesis of the law of duress: Justifying the excuse and searching for its proper limits.” S. Cal. L. Rev.62 (1988): 1331.
[14] DSND Subsea Ltd v. Petroleum Geo-Services A.S.A., 2000 B.L.R. 530 (2000).
[15} Dimskal Shipping Co S.A. v International Transport Workers Federation (The Evia Luck) (No.2) [1992] 2 A.C. 15
[16] Caves, Richard E. Creative Industries: Contracts between art and commerce. No. 20. Harvard University Press, 2000.
This underscores that external considerations and constraints may hold significant sway compared to the unencumbered exercise of parties’ freedoms. It is essential to clarify that this does not imply that parties are devoid of contractual freedom. Still, external constraints represent crucial and relevant factors capable of altering the very nature of a contract. Consequently, the legal character of contractual relationships and agreements is safeguarded by the judiciary, which arbitrates disputes arising from perceived control over contracts.
Courts sometimes navigate the intricate landscape of contractual situations by applying various legislative standards. In this context, courts are compelled to exert considerable effort to affirm and sustain the existence of a contract between the involved parties, conducting a comprehensive evaluation to ascertain the presence of a substantive contractual accord. To exercise substantive freedom in contracting, the contractual intent must be discernible to both parties. All contractual associations should align with the law that enforces the parties’ freedom.
It is worth noting that parties who do not wish to be bound by contract law may, through a legal or legitimate process, seek to nullify the general consequences of an agreement. This underscores that the burden does not rest on proving the efficacy of parties’ substantive freedom but rather on recognizing that their freedom of contract may be invoked or curtailed by substantive law, which asserts that parties are at liberty to concur in their agreements but within the bounds defined by the courts.
It is posited that contracting parties’ intentions remain unfettered, yet parties must concur on minimal constraints about substance [18]. In such instances, the court adopts what can be characterized as an equitable approach to elucidating the contractual obligations and rights of the parties. An illustrative example can be found in the case law of Campbell Discount Co. v. Bridge [3], wherein it is elucidated that a hire-purchase contract encompasses a hirer who intends to reimburse a sum through depreciation.
[17] Gaillard, Emmanuel. “Transnational Law: A Legal System or a Method of Decision Making?.” Arbitration International 17, no. 1 (2014): 59-72.
[18] Campbell Discount Co. v. Bridge, 2 All E.R. 97 (1961).
Therefore, ensuring that the article’s owner is guaranteed a sale at a minimal cost, coupled with a clause stipulating a penalty for the buyer in case of a breach of the hire-purchase contract terms. This highlights the importance of parties establishing equitable terms and conditions before entering into a contract to fully exercise their substantive freedom of contract with minimal constraints on substance.
Conclusion:
In summary, based on the comprehensive analysis presented above, it can be deduced that the court’s role becomes pivotal in making equitable and reasoned judgments when it passively engages in decision-making by attentively considering the assertions of both parties. In this context, it becomes evident that the court plays a significant role in constraining the content of agreements to a minimum.
However, a pertinent query arises concerning whether the court is constrained or obligated by the parties’ interests, such that the articulated intentions of the contracting parties solely shape its decisions. Alternatively, the court may possess the latitude to interpret and analyze the nature of the relationship between the parties and arrive at independent conclusions.
Furthermore, it has been elucidated that in cases where parties possess maximal substantive freedom in binding agreements, substantive law governs the behavior of the contract parties, delineating their responsibilities and rights within civil law and stipulating penalties and criminal offenses in criminal law. Substantive law may be established through codified statutes or evolve through precedents within common law. Exploring various legal doctrines underscores that parties ought to establish and adhere to equitable standards, minimizing constraints on the content, including default rules and regulations. This objective can only be realized through the framework provided by substantive law, encompassing statutes pertinent to contracts and the law of duress, among others.
Regarding the law of duress, it can be surmised that contract law ensures fairness and prevents contract inequity by imposing legal norms on inherently equitable agreements. Substantive justice is predicated on the notion that agreements between parties must be fair, entailing a commitment to impose minimal constraints on the substance, thereby mitigating elements such as coercion, illegitimate pressure, and causation.
Should these constraints transcend the boundaries of substance, the law of duress may be invoked, rendering the contract illegitimate. This underscores the principle that when conditions on the essence become excessive, one party is subjected to undue pressure, suppressing substantive freedom in the contract.
In conclusion, the intricate interplay between substantive freedom, legal constraints, and the court’s role highlights the importance of carefully negotiating and defining the terms and conditions of contracts. Parties must endeavor to establish agreements that align with principles of fairness, transparency, and minimal substance constraints, ensuring substantive freedom in contract law.
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