Sustainability and freedom of contract
At the time of writing this blogpost (18th of September 2024), large parts of eastern and central Europe are drowning in historical floodings. Would I have started writing this blogpost earlier on, I could have referenced to raging wildfires at the gates of Athens; floodings in southern Germany; record heatwaves in eastern Europe; and so forth and so on. That climate change is currently happening is, or should be, a commonplace. The explanations for its occurrence are as intricate as they are multiple. And yet, as a common denominator, it seems safe to say that our unsustainable way of living, is at the root of anthropogenic climate change, it’s very perceivable acceleration and a rapid loss of biodiversity.
This is as true as it is, relatively, unspecific: sustainability is so widely used a notion that its sense may become elusive. In the 1987 Brutland report of the United Nations, “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” (Chap. 2, nr. 1) In this definition, the concept of needs stands central. Sustainability is a vision on transgenerational social justice on a global scale, in which an environment capable of providing the conditions for such global social justice can be realised.[1] Environmental protection is the condition for the possibility of future social justice.
As “sustainable development seeks to meet the needs and aspirations of the present without compromising the ability to meet those of the future” (Chap. 1, nr. 49), the underlying idea is to restrict the freedom to act of today’s generations not only in the interest of their peers’ needs, but also of future generation’s needs. Crucially, this differs from maximising free choice. Instead, the focus of sustainability lies on needs, not on free choice (Schirmer, 2023). This means that in a sustainable framework, free choice only is permissible to the extent that meeting the needs of current and future generations is guaranteed. This resonates with Hans Jonas ethic of responsibility: “Act in such a way that the effects of your actions are compatible with the permanence of real human life on earth” (Jonas, (1979) 2017, p. 36).
Now, given that freedom of contract is the legal translation of the – very roughly – status quo economic aim of maximisation of free choice as efficient allocation of resources. In turn, a sustainable understanding of freedom of contract would be the legal translation of an economy aiming at sustainable development. Hence, reflecting on a sustainable understanding of freedom of contract becomes a crucial lever for transitioning towards (more) sustainable development (Ralf Micheals at Collège de France; also forthcoming article Towards Sustainable Private Law Theory). Whether a legislative change should steer and precede an economic one may be doubtful to some (Halfmeier, 2024). Yet, and irrespective of the stance one may take on this question, reflecting on the legal-structural elements allowing for a transition towards a sustainable understanding of freedom of contract and (hopefully) more sustainable development, is worthwhile.
Sustainable freedom of contract
At first, it may seem that freedom of contract is so fundamentally a bastion of unbridled liberalism that it hardly can be reconciled with sustainability. Yet, that impression is deceptive, for an extensive liberalist reading of freedom of contract is but one possible approach to understanding freedom of contract. In his book Privatautonomie und Kontrahierungszwang, Jan Busche advocated in 1999 an understanding of freedom of contract of the one as limited by the needs of the other:
“A claim to the conclusion of a contract does not exist per se, but only under the condition that the possibility of pursuing the interests of an interested party is completely thwarted by a refusal to enter into a contract.”[2]
Though Busche did not make the link with sustainability, his approach essentially is a sustainable one to the extent that it suggests a freedom of contract as limited by the needs of other – be it limited to contemporary – individuals. Hence, freedom of contract should be limitable in cases of dependence, thereby consequentially extending the prohibition of abuse of a (relative) position of power into contract law.
Faced with such a radical statement, the outcry must be anticipated. It is. The suggested approach is not one of forcing each party to contract with all individuals in need. A befriended economist asked me whether each business confronted with going out of business would have a right to contract at its conditions with a supplier it may be dependent on in that case. The answer is: no. Yet, the party in the position of dependence should be entitled to due consideration of its needs by the party it is dependent on. In more legal-technical terms, this means that a party in a position of dependence to whom the needed contract conclusion is refused, should be entitled to renegotiations. So, if shop A is confronted with a refusal to conclude a contract for supply by B, both parties should enter renegotiations, for instance to negotiate a short supply period to have shop A find an alternative supplier. Where, in those renegotiations, both parties provide reasonable efforts without coming to an agreement, no contract will result. That may be a bleak reality for the shop, but legally speaking defensible. Yet, where no reasonable efforts have been provided by the party in a position of power, this should not be seen merely as bleak reality, but as an injustice. The reaction should then be, that the party in a position of dependence has a right to have a reasonable offer submitted by itself accepted by the party it is dependent on. This should set incentives straight.[3]
So far, the needs of future generations have remained undiscussed. The question of how to integrate these interests into a legal framework, is not an easy task and can only be approximated in the existing legal framework, as it seems. That can be done via the prohibition to conclude contracts irreconcilable with public order. In 2023 the Belgian legislature has codified in article 1.3, fourth paragraph of the Belgian Civil Code that “is public order, the legal rule that touches the essential interests of the state or of the community or that determines, in private law, the legal bases for society, such as the economic order, the moral order, the social order or the environmental order.” Pierre Lequet, in L’ordre public écologique, understands the environmental order as norms “protecting the environment which are imposed upon private parties.” (Lequet, 2022, p. 25, nr. 19)
This means, that a contract or clause(s) that contravenes norms imposed on private parties which protect the environment and are considered so fundamental as to belong to public order, is considered null and void. Each third party with standing could invoke that nullity and a court is to invoke it on its own motion. If, for instance, a contract for oil drillings or mining contravenes a fundamental norm of environmental protection, such illegality could be invoked by third parties or by the court. This is highly interesting as the mechanism provides a claim to third parties that can legally enforce environmental protection.
Even more specifically, one could imagine that certain norms protect the needs of future generations and are considered of public order. Third parties would then have a claim to protect the interests of future generations. This could then lead to declaring null and void a contract or clause(s) that compromise(s) the needs of future generations (Mattei and Quarta, 2019, p. 118). Mining contracts or oil drillings could be typical cases, with extremely intricate evaluations for judges in perspective: pondering the interest of affordable energy or likewise for present generations against the cost for future generations is particularly difficult. Workable tools for such an assessment must be provided.
Liberticide and sustainability
All of this may seem very far-fetched. To some it may seem implausible, to others doctrinally speaking thin air and to yet others, it will look highly liberticidal or undemocratic (Heidenreich, 2023). This is understandable. And yet, provided one wants to transition towards a (more) sustainable development, it appears necessary to rely on a sustainable understanding of freedom of contract for a sustainable economy. Hence, re-interpreting freedom of contract in a more nuanced way than simply to maximize free choice of individuals (put somewhat polarizingly).
The internal logic of a private law system may be perceived as alien and resistant to sustainability considerations (Schirmer, 2023, pp. 31-116). Yet, I have tried to show that this by no means must be the case. Re-reading some structurally crucial concepts can provide an entry for sustainable considerations and lead the way towards a more sustainable understanding of freedom of contract. This should empower individuals to claim their rights related to sustainability and thereby allow for a decentralized transition towards a more sustainable development. How realistic and desirable this is to some, is another question. I here mean to provide legal-technical tools and insights for such a transition, assuming that such a transition has the necessary democratic backing.
Many of the details remain to be defined – such as the definition of ‘dependence’ from a sustainability perspective (needs/aspirations (Chapter 2, nr. 42)) or what a ‘reasonable offer’ is – and the theoretical background to be consolidated. This will take a collective effort, and it is to this collective effort that I hope to contribute by thinking freedom of contract sustainably.
[1] The role western national systems of private law can play in bringing about social justice on a global dimension is an intricate question which outgrows the scope of this blogpost.
[2] J. BUSCHE, Privatautonomie und Kontrahierungszwang, Tübingen, Mohr Siebeck, 1999, p. 657. Free translation. Original text: “Ein Anspruch auf Abschluß eines Vertrages besteht nicht per se, sondern nur unter der Voraussetzung, daß durch eine Vertragsverweigerung die Möglichkeit der Interessenverfolgung für einen Vertragsinteressenten vollständig vereitelt wird.”
[3] I have developed this in more detail in my dissertation which will be published with Routledge under the title ‘A European Structure for ‘No-Contract Law’ in the 21st Century’ (working title).
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