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Why Freedom of Contract Is Necessary

Professor Todd Zywicki argues that freedom of contract might be the most important legal concept. The freedom for people to enter into voluntary agreements and exchange goods is foundational in the common law. Freedom of contract enables individuals to pursue their own interests and goals, and is the basis for a free market society that creates wealth https://youtube.com/watch?v=JOYOwO5xyFU


Freedom of contract, which is the longstanding animating principle of the common law of contracts, is, in my view, perhaps the most essential idea in all of law. Now, why is that? First, because freedom of contract recognizes that individuals have the right to pursue their own happiness, to enter into binding agreements, without having to justify themselves to anybody else in the world, they can, you know, buy whatever they want, as long as they can pay for it. That is really important - to recognize individuals as autonomous people who have the right to govern themselves. Freedom of contract is also important because it is the catalyst for the free market society, which is that voluntary exchange is the way that people make themselves better off. Voluntary exchange is a system whereby both parties are made better off as a result of the exchange. So you can have two parties exchanging something and both be better off. That's how wealth is created. But there is a third and even more overarching principle, which is the common law itself, and contract law in particular, is the foundation of freedom in the Anglo-American world. If you look at the Bill of Rights, for example, it is full of common law concepts. But more essential than that is the common law stands for the idea that if you just are minding your own business and you are entering into exchanges, that don't bother anybody else, what are called externalities, then you're allowed to do that. The state will leave you alone. And one of the big encroachments now of the government and what we see in civil law societies that have very large legislative and regulatory spheres is that more and more and more what we see is the government interfering in voluntary exchanges that parties want to enter into that both parties believe will make themselves better off, but some interest group doesn't like, or some paternalistic regulator doesn't like, or, or something like that. That is a real infringement. Not only that makes us poorer, but also makes us less free.

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