The Relation Between Contract Law and Public Policy

The relationship between contract law and public policy is that while contract law promulgates the general concept of freedom of contract, contracts that violate public policy, such as contracts which are against the law, or contracts which are considered to do harm to the public, fall outside of the realm of the freedom to contract standard and are usually voidable and unenforceable. [1] Contract law, just as most other types of law, is a byproduct of legal positivism. [2] Laws are heavily influenced by public policy since legislation is often the result of a reaction to some stimulus or event that has had an effect on the population.

Should lawmakers be required to regulate contracts which are contrary to a certain set of morals or values? The Court in Powell opined on this question. Powell is a Supreme Court case where the State of Pennsylvania passed a law banning the manufacture and sale of oleomargarine butter (margarine). [3] The state claimed the public consumption of the margarine was a public health risk. Powell claimed his right to liberty of contract was guaranteed by the Fourth Amendment to the United States Constitution and Pennsylvania’s ban was unconstitutional. [4]

The court’s rationale in the decision against Powell was that a State which has a responsibility to preserve the “public health and the public morals,” cannot divest itself of that responsibility, and that the “fourteenth amendment was not designed to interfere with the exercise of that responsibility by the states.”  In essence, Powell has given the authority to States regulate contracts so that we do not enter into contracts contrary to a certain set of morals or values. But, Powell especially does this when speaking about whether the manufacture or sale of the margarine should be banned or regulated it cited:

Suppression of the business, rather than its regulation in such manner as to permit the manufacture and sale of articles of that class that do not contain noxious ingredients, are questions of fact and of public policy which belong to the legislative department to determine. [5]

I agree with the Court and the court makes a statement in that it acknowledges the limits of the rights of an individual when those rights are in conflict with the health and safety of the public. [6]

In considering whether it is patriarchal to regulate contracts, if we are using patriarchal in the context of big brother watching over us, then yes, the regulation of contract is patriarchal, but it is consistent with supporting established societal norms. [7] Saying that, I agree that certain areas should be regulated. I refer back to Powell, and reiterate the Court’s citation that questions of public policy belong to the legislative departments. But, we need to scrutinize the types of public policy concerns that rise to the level of infringing on freedom to contract liberties.

Lastly, courts may find difficulty in distinguishing whether a contract is illegal, or whether it violates public policy because “sometimes the law does not actually forbid a particular contract.” [8]


[1] Brian A. Blum, Examples & Explanations: Contracts 4 (6 ed. 2013).

[2] Leslie Green, Legal Positivism Stanford Encyclopedia of Philosophy (2003), (last visited Apr 5, 2017).

[3] Powell v. Pennsylvania, 127 U.S. 678 (1888).

[4] Id. at 679

[5] Id. at 685

[6] Id.

[7] Blum, 468.

[8] Id. at 470

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