Freedom of contract
“No state shall enact any legislation impairing the obligations of contracts,” according to Article I Sec 10 of the United States Constitution, which places limitations on the state. Virtually, freedom of contract is divided into two parts; one is before the making of the contract, and another is after the making of a contract. As a result, if the conditions of a contract are improper or coerced, one can always refuse to sign it. The parties have complete control over the content of their contract. Hence, they can decide terms like:
The rights and responsibilities of each party to the contract,
the obligation of each party related to performance and non-performance,
obligation related to what to do or not to do,
terms related to payment,
terms related to warranties,
terms related to applicability of law,
terms related to dispute settlement, and
terms related to the termination of the contract.
Along with this, parties also have the freedom to choose the form of contract, whether verbal or written.
Limitations upon Freedom of Contract
The party’s right to freedom of contract is not absolute; no freedom is absolute because it comes with certain restrictions or some attached duties. If one person is given absolute freedom in society, it certainly curtails another person’s freedom somehow. That is why the freedom of contract should be restricted to maintain societal balance, protect consumers, and maintain public order or morality. Generally, there can be two types of limitations: the parties to the contract and the statutory provisions. Limitations from parties come into effect after the making of the contract, whereas; statutory limitations may affect either formation or performance of the contract. Some examples that limit freedom of contract are as follows:
When essential ingredients of a valid contract are missing.
When one or more conditions of a valid contract are not there.
The object of the contract is unlawful, and
the contract is against public order.
Freedom from Contract
It is an established principle that a party entering into a contract has to follow all contractual obligations. Sometimes, there may be circumstances where it is impossible to fulfill these obligations; in such cases, the party has the freedom to terminate a contract. Some reasons related to the termination of the contract are the impossible performance of the contract, fraud, misrepresentation, breach of contract, or any other previous agreement. Parties to a contract have some duties related to formation and performance. Along with this, parties also have rights related to the termination of a contract. Such rights depend upon the type of termination, whether in case of default or termination for convenience. The parties can decide,
The manner of termination of the contract.
Terms and conditions of such termination, if any.
Obligations towards each other after termination.
Validity of status of third parties.
Management and disposal of various types of assets and liabilities.
If a contract is for a new company as a joint venture, then related to the fate of the newly formed company. In case such a company is not dissolved, then partition of joint resources and properties.
In case a separate contract is formed for termination, then jurisdiction clause regarding disputes.
Copyright and trademark-related issues.
Intellectual property ownership issues at the time of termination or afterward.
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