Freedom of Contract includes Freedom from Contract

by on October 30, 2008 · 24 comments

Alex’s excellent post on the enforceability of shrink-wrap contracts produced a lively debate that’s worth checking out. In particular, my friend Wilson mounts a spirited defense of the proposition that if a customer has a reasonable expectation that a Gateway computer will arrive with a contract attached, and if Gateway offers to pay for return shipping if the customer does not wish to be bound by the contract, then it’s reasonable to consider the the customer bound by the contract if he does not return the computer to Gateway.

I think there are several reasons to be skeptical of this position, but rather than re-hash the arguments I made in the comments to Alex’s post, I think it’s worthwhile to step back and consider the broader principle at stake here. Libertarians are, of course, in favor of freedom of contract, but it’s important to understand what freedom of contract means. Some libertarians seem to think that being in pro-freedom of contract means being pro-contract in the sense that the government should make contract formation as easy as possible and should enforce as many contracts as possible. For example, a few weeks back I criticized an article by F. Scott Kieff that seemed to take this kind of view with respect to patent law.

I think this is a mistaken conception of what freedom of contract is all about. At its heart, freedom of contract is about peoples’ freedom to enter or not enter contractual relationships, and to be confident that the government will enforce valid contract in a predictable manner. The “or not enter” part is important. It violates freedom of contract for the state to fail to enforce a contract to which both parties have consented. But it’s no less a violation of freedom of contract to enforce a contract to which one of the parties did not consent.

And I think we should be extremely skeptical of inferring an affirmative obligation based on someone’s failure to take some action demanded by another party. Complying with such a demand always has costs (I might live far from the nearest post office and not have a car, for example), and I shouldn’t have to bear costs simply to avoid being a party to a contract I never indicated interest in being party to in the first place. And no, the fact that computers often come with attached EULAs doesn’t mean that I “should have known” that there would be a EULA in the box. Courts can’t read minds; the enforceability of contracts needs to be about peoples’ actions, not speculation about what they did or should have known.

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