The necessity of the rational, fair with good faith governance in limiting freedom of contracts in international commercial contracts

Eskini, Rabia; Niazi Shahraki, Reza

doi:10.30497/law.2016.1955

The necessity of the rational, fair with good faith governance in limiting freedom of contracts in international commercial contracts

Type : Research Article

Authors

10.30497/law.2016.1955

Abstract

The principle of sovereignty of will and contractual freedom states that individuals’ wills govern both the formation of contracts and their consequences, as well as all legal relations. According to this principle, stated in Article 10 of Iran’s Civil Code regarding uncertain (untitled) contracts, the principle of freedom of contract is recognized in most legal systems and international commercial instruments. Article 1 of the Principles of European Contract Law (PECL) (2002) declares that “Parties are free to enter into a contract and to determine its contents.” Alongside this article, the theory of “the necessity of rational, fair, and good-faith governance in limiting freedom of contracts in international commercial contracts,” together with other international principles, can complement international law. It supplements the provisions of the Principles and may take precedence over them when strict adherence would lead to a manifestly unjust result. The result of this theory is that the principle of good faith and fair dealing must be respected by governments in the exercise of their sovereignty; therefore, governments must not enter into contracts for personal political goals or enact irrational legislation—such as Article 968 of the Iranian Civil Code or Article 477 of the Iranian Criminal Procedures Code—that would harm merchants.

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