“The concept of freedom to contract is a complex theory: is this a myth or reality?”
To begin with, let us consider what contract theory is and what it holds. Contract theory is the study of how individuals and businesses construct and develop legal agreements; analysing how they make decisions under uncertain conditions, and when there is unequal information (Investopedia, n.d.). It is fundamental to know this along with what a contract is, to understand what freedom to contract is. For how illogical would it be that we understand something without knowing the basics first? Primarily, we would need to know how to add, subtract, divide or multiply before engaging in any math problem in order for us to know what we are doing and not get lost....
Freedom to contract is the ability of parties to bargain and create the terms of the agreement as they desire, without outside interference from the government (University, 1992). Surely, this sounds a lot like what a contract is; but no, it is different from it in every way. While contracts are legally binding agreements; freedom to contract holds that ANY contract can be made WITHOUT the government’s meddling, or better said legality.
Freedom to contract then poses a contradiction, do we really have it, or is it a myth? As just stated freedom to contract holds that any contract can be made by any two agreeing parties without any externalities included. The better question should be, is it really so? We live in a world that is shrouded by law; therefore can it be said we have freedom if there are limitations as to what we can do?
Freedom as defined by Webster is, exemption from external control, interference or regulation. This is the meaning of true freedom, and not the freedom we all believe we have but do not; and why freedom to contract poses such a contradiction. This has been the fetish for modern law for many years and the answer is still unclear. Is there truly freedom to contract if we all have to conform to a set of laws and regulations as to what we can do, or cannot do?
These constraints or regulations can be assessed by asking these fundamental...
In other words, how can one enter a contract if he/she does not have the competence to? Do not take my word for it though; let us see what the experts have to say. Kat Kadian who is an online teacher for universities in the U.S gives us this definition. Capacity is the person’s legal ability to enter a contract.
What does this mean? To best explain this let us take a look at some examples of who is forbidden to enter into a contract. To illustrate, any contracting party must be free of any mental illness like schizophrenia, multiple personality disorder or other conditions that challenge a person’s mental health. Imagine taking up a contract with someone and having to take them to court because the person did not abide to the terms of the contract; while the defendant claims it was not him but Julio (his other self) who did the contract with you and that he has nothing to do with it.
Surely enough, testing and documentation will be needed to prove his mental state. If proven the deal will dissolve and the one who will be adversely affected would be the plaintiff. Just imagine lending your “friend” half a million dollars to finish paying his house and end up losing it all because he is mentally unstable. What a catastrophe that would prove to be. It is true that the court has some tests like the cognitive tests and emotional tests for such instances, but at the end of the day these tests are not always the salvation...
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