A fundamental principle in international trade. The principle of freedom of contract is of paramount importance in international trade. The principle embodies the freedom to decide to whom a company will offer its goods or services and by whom it wishes to be supplied, as well as the terms and conditions of the related transactions. This is inherent to an open, market-oriented and competitive international economic order.
Exceptions and limitations. Regarding the freedom to conclude contracts with any other person, certain economic sectors are in the public interest excluded from open competition (e.g. military goods and materials, nuclear products, technology, raw materials or ingredients that might be used for chemical or biological weapons). In such cases the goods or services can only be ordered from selected suppliers, subject to terms and conditions consistent with the public interest.
Limitation by mandatory rules. Freedom of contract, to the extent that it relates to the subject matter of an agreement, is further limited by mandatory law: laws and regulations from which the parties may not derogate. Such mandatory law is of a national nature and applies by operation of the conflict of laws principles. Although the contracting parties have a great discretion to avoid mandatory law by making a choice of law for a jurisdiction which is more favourable or familiar to them (or whatever other justification, if any, the parties may have), the rules of private international law may qualify specific laws and regulations to prevail despite such choice of law (e.g. laws requiring a certain level of employment conditions or protecting certain weaker parties such as agents).