FREEDOM OF CONTRACT

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Freedom of Contract
The power to enter contracts and to formulate the terms of contractual relationships can be regarded as an integral part of personal liberty. For instance, this respect for the exercise of personal liberty is the policy reason underlying the rule in contracts that one may not be bound to a contract absent that person’s assent. In the United States, the power of contracting is understood to be one of the innate rights originating in the people and guaranteed by the Constitution. Liberty of contract also enforces individual rights to hold and deal with property. Like other liberties, freedom of contract is limited by corresponding rights held by other persons and by the state’s legitimate interest in appropriate regulation. Such regulation may be directed, for example, at protecting weaker parties from the free exercise of overwhelming contractual power by stronger dominant parties. The ideological basis of contract freedom is reinforced by economic principles, as well. For example, economic intercourse is most efficient when its participants desire it and are free to bargain with each other to reach mutually desirable terms.