" FREEDOM OF CONTRACTComparison of development of civil law and common law with regardto the influence of SriLankan Legal systemLaw of Contract; Author Department of Law HISTORICAL DEVELOPMENT OF CIVIL LAW AND COMMON LAWCONTRACTS WHICH INFLUENCES THE SRI LANKAN LEGAL SYSTEMTREMENDOUSLYAbstractThis article explores the evolution of civil law and common law in the law of contract. Briefly addressingthe historical perspectives of both systems and analyses general features of the central aspects of contracttheory in civil law and common law jurisdictions. Mainly, focuses on the analysis of the achievementtowards the doctrine of freedom of contract in respect of the influence of Sri Lankan Legal System.Further this paper stress on the part of contemporary application and the effectiveness of the doctrine offreedom of contract in Sri Lanka with some suggestions to aggrandize the implementation of suchrecommendation.IntroductionContract law is a key component of a free society. Through contract, a participant in civilsociety is differentiated from the atomistic individual. Autonomous human beings have therational ability and natural right to make their own life choices. A necessary condition of acting1 autonomously is the possibility of freely making mutually binding agreements . Autonomy thusrequires freedom of contract. Better connections between persons can be made by contract,which works to mutual benefit. Common law and civil law contracts have been traditionally seen2 as distinctive and fairly diverse. Each belongs to a tradition that has been regarded as quite3 different.1 Philosophical Foundations of Contract Law,George Letsas,Page 1172Glenn, P.H., “Are Legal Traditions Incommensurable?” (2001) 49 Am J Comp L 133; Merryman, J.H., The CivilLaw Tradition: An Introduction to the Legal Systems of Western Europe and Latin America (Stanford: StanfordUniversity Press, 1985), p 1. V s3 Rua, C. and Cesar, J., “The Future of the Civil Law” (1977) 37 La L Rev 645. Historical Development of civil and common law contracts Contract law in Anglo-American Law traces its origins to primitive Roman law4 5 concepts. In the civil law of contract portrays the massive defect on its early history . Because,6 earlier there was no room for the freedom in the contract . For an instance; in case of civil lawcontracts in Sri Lanka there is no obligation to collect all social security contributions and grant7 leave to the employee, where the employers enjoyed a privileges . In the early common law there was no means whereby strangers could enter into8 executory relationships. Medieval English law was a formulary system, developed around thewrits which a litigant could obtain from the chancery to initiate litigation in the royal courts; it is9 the special formality called contract under seal ; Important agreements were commonly reducedto agreements whereby the parties entered into bonds to pay penal sums of money unless they10 carried out their side of the bargain ; Informal or parol agreements are concerned in mediaeval11 common law was more restrictive .th th Evolution of common law contract in 18 and 19 centuries4 Alterini, A.A., ContratosCiviles, Comerciales, de Consumo. Teoria General (Buenos Aires: AbeledoPerrot, 1999),p 15. The terminology of both common law and Roman law is curiously parallel. W.W. Buckland and Arnold McNair, Roman Law and Common Law, A Comparative in Outline (Cambridge: CambridgeUniversity Press, 1952), p 195. 5 6This information was retrieved at www.justiceservices.gov.mt/DownloadDocument.aspx?app=lom/zdvdkhdu539/757gb237 Smith and Roberson's Business Law, Richard A. Mann,Barry S. Roberts, pg. 7258Nichols, P. M., “A Legal Theory of Emerging Economies”(1999)39 Va J Int?l L 229, 293. According to Nichols,“those means that did exist were based on religion, social status, or exogenous relationships – indicia of a relationalsystem”. 9 In some respects now superseded the best introduction is still Maitland The Forms of Action at Common Law(1954)10 Note: Thus if C wished to lend D $100, D would execute a bond binding himself to pay C $200 on a certain day;the bond would have a condition that it became void(a condition of defeasance) if $ 100 was paid before the day,and D would hand over this bond as he received the loan of $ 100. 11This information was retrieved at,https://books.google.lk/books?id=MgSDm38wwC&pg=PA169&lpg=PA169&dq=informal+agreements+are+restr icted+in+common+law&source=bl&ots=LERpu8SQ6p&sig=2xwSEHIy6Oniidg2Kd0TiRAggA&hl=en&sa=X& ved=0ahUKEwiT64aawIXMAhVoHKYKHfngAqQQ6AEIMjAF#v=onepage&q=informal%20agreements%20ar e%20restricted%20in%20common%20law&f=false The evolution was done through two forms of action: action of debt (indebitatus12 assumpsit) and action of assumpsit. The gist of the action of debt, which derives from German13 Law, is that the defendant owes the plaintiff and wrongfully withholds the debt. The assumpsitaction was based on a fictitious promise to pay an antecedent debt. Such an action could bebrought on a simple contract debt, and the subsequent promise could be set up by way of14 replication to a plea of the statute of limitations.th Result of commercial pressure, as well as cultural and intellectual influences in 18 andth 15 19 centuries, common law evolved in Europe throughout the revolutionary economic andpolitical change. The traditional society of the mid-eighteenth century was rapidly giving way to16. individualistic and capitalistic society According to the doctrine of laissez faire (let him act, lethim do) which became the cornerstone of the nineteenth century economic thinking- if theindividuals were allowed to pursue their self-interest free from governmental interference, they17 would inevitably maximize their own profits and the wealth of society as a whole .12 Ames, J., “The History of Assumpsit” (1888) 2 Harv L Rev at 16. 13See Holmes (n 41 above), p 246. 14 Restat 2d of Contracts, § 82. 15 See Nichols (n 43 above), p 260. 16 Roscoe Pound, Liberty of Contract, 18 Yale L. J (1909), pp.454, 457.17 Adam Smith, Wealth of Nations (1976), passim. Smith insisted that government should have only a negative rolein economic life (national defense and internal security) since the competition of individual self-interest wouldresult in social harmony through the agency of the “invisible hand.” Individual parties were the best judges of their own interests and that they would freely18 enter into contracts in pursuit of self-interest . So if the parties freely and voluntarily entered19 into a contract, the sole function of the law was thought only to enforce it . Consequently andconversely, it became an underlying principle of contract law that a signed contract including allits terms in a particular document, was freely entered into. Complaining party could notdischarge this burden of proof without successfully pleading one or another of such defenses as20 21 22 23 24 fraud, misrepresentation, duress, undue influence or mistake . In my opinion, one couldnever question the validity of the presumption that when a party signed a particular contract, heunderstood and accepted the particular terms contained within the contractual document. Thedocument itself was, well, worth nothing less than proof of the agreement.Factors affecting the modern contract lawHowever, the process of contract formation has drastically changed by the turn of thiscentury. Mass-production has become an integral part of the modern economic order. To savetime and trouble in bargaining, and to facilitate planning, modern industries have introduced anew system of contracting, that is, the pre-printed and mass-produced standard-form contract25 which would be used over and over again .18Adam Smith.19See for instance in Parker v. South Eastern Ry. Co. (1877), 2 CPD, 416 at 421, where Mellish, L.J. said: “In anordinary case where an action is brought on a written agreement which is signed by the defendant, the agreementis proved by proving his signature and in the absence of fraud, it is wholly immaterial that he has not read theagreement and does not know its contents.” The same was also held by the American courts, see for exampleJames Takott, Inc. v. Fullerton Cotton Mills Inc. 208 F2d, where the court said; “The vice in the judgment of thetrial court stems from the failure of the court in its findings to give effect to the rule of law that a party signing anotherwise enforceable agreement will not generally be heard to assert that such agreement was not intended tohave any legally binding effect. Contracts cannot thus be avoided..” Williston on Contract (3rd Ed.) S.90A, p.292.20 George Urguhartv. McPherson, (1879), 3AC, 831 at 837/838 per Sir Montague who delivered the judgment of thePrivy Council, “Contracts which may be impeached on the ground of fraud are not void but avoidable only at theoption of the party who is or may be injured by the fraud.”21 Derry v. Peak (1889), 14 AC, 337 at 359, per Lord Herschel, J “Where rescission is claimed, it is only necessary toprove there was misrepresentation then, however honesty it may have been made…”22 Cumming v. Inc. (1847), 11 QBD, p.112.23 Allcardv. Skinner (1882), 36 Ch.D.H.35, p.145, at 181.See also the American case: New Jersey Steam NavigationCo.v.Merchants Bank, 6 Howard 344. (1848).24 Howastonv. Webb (1907) 1 CH. 53725Kessler, op. cit. 361.See also VeraBolar, The Contract of Adhesion, American J. of Comp. Law, Vol.17 (1972),p.54 at 55. Standard-form contract entered into partially or totally according to pre-drawn termswhich the ordinary consumer does not often read the small print. Moreover, naturally, it is drawnunilaterally by the party in the stronger bargaining position, and with little if any considerationfor the other party?s interests. Contractual concepts of meeting of the minds and the assumptionof balance and mutuality in the formation of contracts are often no more than legal fictions in the26 context of standard-form consumer contracts . Freedom of Contract in Sri Lanka In the following papers I shall examine the various ways in which the problem offreedom of contract and exemption clauses in standard contracts has been controlled in SriLanka. Use of exemptionclauses in the standard-form contract has become a potent weapon forthe exploitation of economic power against the poor.Sale of Goods Ordinance itself allows the parties to contract out of the statutory impliedterms (Exclusion of liability for terms implied under section 13, 14, 15 and 16 of the Sale of27 Goods Ordinance) through the operation of Section 54 .28This weakness in the original act, referring to section 55 of the English SOG Act of29 1893 . Due to lack of legislative action the English courts developed a series of judicial tools to26 D. Slawson, “Standard Form Contracts and the Democratic Control of Lawmaking Power,” (1970-71), 529.27 „Where any right, duty or liability would arise under a contract of sale by implication of law, it may be negativedor varied by the express agreement or by the course of dealing between the parties, or by usage, if the usage be suchas to bind both parties to the contract.?28Is aptly summed up by Professor Goode when he says „the laissez-faire policy of the Sale of Goods Act 1893,with its express encouragement to contract out of the statutory implied terms, was allowed to hold sway for aremarkably long time.?29 Section 55 of the Act provided:“Where a right, duty or liability, would arise under a contract of sale by implication of law, it may be negatived orvaried by express agreement, or by course of dealing between the parties, or by such usage as binds both parties tothe contract.” 30 be employed against exemption clauses operating through this section . In Harbutt?sPlasticine?31 Ltd v Wayne Tank Co. Ltd where Lord Denning referred to the doctrine of „fundamentalbreach?, served to ensure that a party would not be able to „fall back on an exemption clause tosafeguard himself from the consequences of a breach so grave as to frustrate the commercial32 purpose of the contract? . Following the belated English response to this problem, in Sri Lanka, the Unfair ContractTerms Act, No 26 of 1997 sought to remedy the difficulty caused by the operation of section 54. Sections 7(a) and 8(a) of this Act renders ineffective any contract term which attempts to exclude33 or restrict the operation of section 13, 14, 15 or 16 of the Sale of Goods Ordinance .Statutory prohibition is another affecting factor of the doctrine of freedom of contract.Express statutory prohibition (in Sri Lanka) is illustrated by sections 11-12 Rubber ControlOrdinance (Cap 436), which render, it illegal for any person to sell or purchase rubber in excessof the prescribed quantity, unless he is a licensed dealer. The Lotteries Ordinance No. 8 of 1844provides that all lotteries “shall be deemed and are hereby declared to be common nuisances andagainst law”.Acceptability of the restrictions imposed on the freedom of contractContracts falling under the Public policy and for the administration of justice can beacceptable and also justifiable in some extent. Eventhough those impose some restrictions on thefreedom of contract.34 Agreements contrary to public policy in the law of Sri Lanka are; Agreementsconflicting with the interests of the State (National Security, Public Service, Administration ofJustice), Agreements conflicting with considerations of morality and Agreements restraining30 This trend came to it culmination in the case of Karsales (Harrow) Ltd v Wallis(1956) 2 All ER31(1970) 1 QB32 Op Cite Goode p 10233 Section 7(a), Section 8(a) of the Unfair Contract Terms Act, No 26 of 199734 Weeramantry pages 363 -364, para 365 individual freedom. Next the following appear to be the principal examples of agreements voidunder this category; Stifling of criminal prosecutions;Agreements to give or suppress evidencefor another person;Agreement to commit a crime; Maintenance and champers and agreementsousting the jurisdiction of courts.Contemporary situation of Sri Lanka “Global survey by the International Finance Corporation (IFC) and World Bank said “InSri Lanka there are equally few limitations to freedom of contract, but resolving the standardizeddispute through the courts takes 1,318 days – almost four years”. Sri Lanka also has made payingtaxes more costly for companies by increasing the reduced corporate income tax rate for35 qualifying small and medium-size enterprises”Suggestions to aggrandize the doctrine of freedom of contractThe freedom to contract refers to the ability of individuals to engage in contracts freely36 without any restrictions by the government. It is important to a free market . To functioneffectively, there is a need for the freedom to contract so that contractual relations such asemployer-employee can be fostered efficiently and it is possible that a free market would ceaseto exist without freedom to contract. This is because a free market is one which is based on themarket forces of supply and demand to work. Without freedom, the government would be the37 determining the supply and demand of labor, services and goods . Even though freedom to contract is associated with the lack of government intervention,there is still a need for Legislature to pass laws to regulate employment relationship. This isbecause the balance of power between employer and employee would be severely tilted towardsthe employer should such laws not be implemented. This can result in disastrous consequencessuch as widening social gap and abuse of power which would erode the rationality behind thefreedom to contract because it would eventually be an uneven contract whereby employerswould coerce or pressure employees to agree to a certain form of contractual relationship thatmay be infringe on certain rights and liberties of employees.35 http://www.ft.lk/2014/10/30/doing-business-gets-worse-in-sri-lanka/36 “Chapter 9. The Doctrine of Freedom of Contract”37 This would mean the end of the free market (Younkins, 2000). "