Internal and External Restrictions of the Freedom of Contract

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This research clarifies internal and external restrictions over the freedom of contract. The contemporary welfare capitalist countries intervene into a market economy system in order to achieve socio-economic purposes. The background reasons, the methods to intervene, and the degree of intervention differ from country to country, however, most researchers agree that there are three different types, based on the differences of de-commodification and stratification of social services. In the field of legal studies, with regard to intervention through legislation and court decisions, there are two different types, formalism and realism. Within the realism intervention, market-individualism and consumer-welfarerism can be recognized.According to the results of recent research, the freedom of contract has been restricted by traditional ideals of equity and fairness until the end of 18th century. The concepts of a contractual justice, a true nature of contract, and an essential obligation of contract were used in French civil law. In German civil law, principles of the good morals and public policy were used and internal restrictions of contract are included in German Civil Code. In a contemporary welfare society, there are many examples of external restrictions over the freedom of contract based on the idea of the protection of socially and economically weaker parties. In French and German legal studies, these external restrictions are provided by special legislations. The separation of internal and external restrictions of the freedom of contract was not known in Japanese legal research, this research clarified the importance of this separation or classification.