3 Freedom of contract the starting point

As a rule, natural and legal persons should be free to decide whether or not to contract and with whom to contract. They should also be free to agree on the terms of their contract. This basic idea is recognised in the DCFR.1. It is also expressed in the first article of the Principes directeurs.2. In both cases the freedom is subject to any applicable mandatory rules. Parties should also be free to agree at any time to modify the terms of their contract or to put an end to their relationship. These ideas are also expressed in the DCFR3. and in the Principes directeurs.4. In normal situations there is no incompatibility between contractual freedom and justice. Indeed it has been claimed that, in some situations, freedom of contract, without more, leads to justice. If, for instance, the parties to a contract are fully informed and in an equal bargaining position when concluding it, the content of their agreement can be presumed to be in their interest and to be just as between themselves. ‘Qui dit contractuel, dit juste.’5. In normal situations there is also no incompatibility between contractual freedom and efficiency. In general terms it can be assumed that agreements made by parties who are both fully informed and of equal bargaining power will be profit-maximising in the sense of bringing gains to each party (the exact division of the gain is a distributive question of little concern to economic analysis.) The only caveat is that the agreement should not impose costs on third parties (externalities). This is why in most systems certain contracts which are likely to have detrimental effects on third persons are rendered void as a matter of public policy.