What is Freedom of Contract?

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  • Written By: Mary McMahon
  • Edited By: Nancy Fann-Im
  • Last Modified Date: 06 October 2019
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Freedom of contract is the right to enter legally binding agreements as an adult without interference from the government. Proponents of this concept argue that the government should not restrict the obligations individuals choose to assume, as long as people fully understand the contract and are entering into an agreement willingly. Some people believe all government restrictions should be lifted, while others support the presence of health and welfare laws to prevent the creation of contracts that could significantly endanger people.

The concept of freedom of contract became a hot legal issue in the United States around the turn of the 20th century, when workplaces were changing radically. Mass production was on the rise, and people were often working long hours with few legal protections, from minimum wage laws to basic workplace safety requirements. As some regions began passing laws to do things like limiting working hours, some employers took the matter to court, on the grounds that freedom of contract is part of the Constitution of the United States.

While the Constitution does not specifically include a clause addressing contract law, some readings do include an argument that entering into contracts is a legal right and restricting the nature of contracts could violate the due process clause in the Constitution. On these grounds, the Supreme Court affirmed freedom of contract on multiple occasions, sometimes overturning laws intended to promote worker safety. A famous example from 1905, Lochner v New York, determined limits on working hours to be unconstitutional.


The ability to freely enter legal agreements continues to be protected by law, but certain government restrictions are also part of the process. People cannot be bound to illegal contracts, and they must have all the available information when they sign. In a situation where someone appears to be experiencing coercion or manipulation, the contract may be invalid. Likewise, a person cannot enter a contract that would create danger and violate health and safety laws; for example, a structural steelworker cannot agree to refrain from using a safety harness while working at great heights.

The freedom of contract extends beyond employment law to other areas where people may enter legal contracts. These range from agreements with insurance companies to real estate sales contracts. The government cannot interfere when people enter an ill-advised contract as long as the terms are legal and they are clearly doing so of their own free will.


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