Freedom of contract, paternalism, and Maltese law

Abstract

Contract is the means by which the will of two or more parties is consolidated into a legally-binding framework of rights and obligations enforceable in a court of law. It is for this reason that theoretically, parties to a contract are free to choose the terms which govern their rights and obligations in terms of their values and preferences, and what is agreed between them would then generally find the backing of the law. This autonomy is what is more broadly known as the principle of ‘Freedom of Contract’. Whilst at its basis, Maltese contract law seems to embrace this principle (mostly through article 992 (1) of the Civil Code), in some places, it chooses nonetheless to lay down a number of restrictions, either by setting minimum peremptory standards or formalities, or by giving courts the power to alter what is agreed upon between the parties themselves. Often, these restrictions are made to the benefit of their subjects’ welfare; the idea is to impede or correct the subject’s error of judgment with a view to protect his interest, even without his consent. Globally, many have deliberated the principle of freedom of contract, most notably Patrick Atiyah, with his celebrated work, The Rise and Fall of Freedom of Contract (Oxford, 1979). Conversely, there is next to no literature in Malta about this topic, other than some cursory reference in a few court judgments. In this study, the principle of freedom of contract is analysed, first alone, in its pure absolute sense, and then in terms of the paternalistic restrictions in Maltese law. The latter is done following an analysis of the philosophical and economic implications of freedom-diminishing restrictions of paternalism in law. At the end, the findings are collected and examined from a utility point of view, in order to answer one fundamental question: is Maltese contract law unnecessarily paternalistic?