Text, Cases and Materials on Contract Law

Richard Stone, James Devenney

• Publisher: Routledge
• Year: 2022
• Print ISBN:
  9780367222833
• eBook ISBN:
  9781000284737
• Topic: Law
• Subtopic: Contract Law
• Index: Law

Written by leading authors in the field, this clear and highly accessible volume provides full coverage of the topics commonly found in the contract law syllabus, alongside up-to-date illustrative case examples and stimulating commentary.

Composed of approximately one-quarter authors' commentaries and three-quarters cases and materials, including academics' articles and extracts from books and Law Commission papers, this book takes account of a variety of theoretical perspectives, including economic, relational and empirical conceptions of the law.

This book facilitates the development of personal study skills and encourages readers to engage with the leading academic commentaries in the area. Features to support your learning include:

• chapter introductions to highlight the salient features under discussion and signpost topics to guide readers through this comprehensive text;
• additional reading listed at the end of each chapter to assist further study and independent research;
• clear and attractive text design that differentiates between the authors' commentaries and the materials;
• a companion website that provides skills materials and self-assessment tasks to help further your learning.

The range of material covered, straightforward style and targeted updates to this fifth edition make Text, Cases and Materials on Contract Law a comprehensive and invaluable resource for all undergraduate and postgraduate students of contract law.

Chapter 1 Introduction

Chapter contents

1.1 Introduction

1.2 The classical law of contract

1.3 The subject matter of contract law

1.4 Discrete and relational transactions

1.5 Different approaches to analysing contract

1.6 European contract law

Additional reading

1.1 Introduction

This chapter considers issues relating to the nature and scope of the law of contract in England and Wales. It discusses the ‘classical’ law of contract – the origins of which are to be found in the nineteenth century. In broad terms ‘classical’ contract law is anchored to the concept of freedom of contract and the idea that the typical contract involves a ‘one-off’ exchange of promises between two parties. This leads to consideration of the subject matter of contract law: for example, whether contracts are in fact about enforcing promises, or regulating markets, or facilitating exchanges, and the implications of each analysis. As a contrast to the ‘classical’ analysis of contract law, an alternative approach based on the distinction between ‘discrete’ and ‘relational’ contracts is discussed. This challenges the idea that all contracts are a one-off discrete event, and considers the extent to which contracts involve continuing relationships between the parties. We will then explore different techniques for analysing contracts, examining the extent to which a ‘doctrinal’ analysis can be supplemented or replaced by analyses based on economics or sociology. Finally, we shall explore the influence of European law in this area and the impact of Brexit, which is still marked with considerable uncertainty as the U.K. negotiates a new relationship with the E.U.

1.2 The classical law of contract

It is generally agreed that during the latter part of the nineteenth century various writers about contract law, in particular textbook writers such as Anson (whose Law of Contract, written for students, was first published in 1879), produced analyses and rationalisations of the case law that have become to be termed the ‘classical law of contract’. The process is described by Wightman.

Wightman, J, Contract: A Critical Commentary, 1996, London: Pluto Press, pp 48–51

The invention of classical contract

Until the 1970s, the study of contract was divided between those concerned with the modern law and a relatively small group of scholars interested in the evolution of the early precursors of contract before the industrial revolution. Where contract law of the eighteenth and nineteenth centuries was addressed it was usually ahistorically as a part of the modern law which happened to reach further back.

This changed in the 1970s principally as a result of the work of Horwitz, Simpson and Atiyah. They treated the eighteenth and nineteenth centuries as a period of rapid change rather than as the repository of case law the main function of which was to be fitted where possible into modern expository accounts of the law. The switch from regarding the nineteenth century as present to regarding it as history relaxed the presumption of determinacy embodied in the expository tradition and that period of contract history was looked at afresh. In the process, a kind of received wisdom emerged about the flourishing of a particular conception of contract law – classical contract law – by the middle of the nineteenth century, albeit neighboured by controversy over what preceded it and what followed; some scholars saw transformation more easily than others. Classical contract was therefore invented in two senses: it was the nineteenth-century intellectual product of the judges and treatise writers, but it was only identified as such by the invention of the construct of the ‘classical law’ in the 1970s. As we shall see, the emergence of the modern construct was a vehicle both for the criticism of the model of contractual obligation it embodied, and for the attribution to it of greater intellectual coherence than before.

The first step in unravelling the history of contract is to look more closely at the idea of classical contract law which has so dominated modern perceptions of the history: we will consider the broad contours of this dominant view before turning to probe the story in more depth.

The idea of a classical law of contract

A number of modern writers on contract have made the transformation of contract law in the nineteenth century the linchpin of their account. The version of contract dubbed the classical law or classical model is seen as the mature form which emerged out of the less structured pre-classical clutter of cases infused by a conception of substantive fairness, and which was followed by fragmentation at the hands of the regulatory state of the twentieth century. Although I will be strongly disputing its meaning and importance, there can be no denying the influence of the classical law in shaping broad perceptions of the development of the law of contract. We will examine the idea of the classical law in more detail by focusing on three dimensions: its content, the values on which it was based, and the type of transactions where its normative appeal was most plausible.

The leading feature which distinguished the classical law from what went before was the generality of the scope of its rules. By the third quarter of the nineteenth century the law of contract was regarded as consisting of rules which were not only general in form but also applied to most actual contracts. Before the emergence of the classical law there was no sense that the multifarious relations which became analysed as contracts were instances within the general category of contract: rules were more situation-specific with little attempt to develop an overall theory of liability.

It was a necessary property of the generality of the rules that they were abstract. They were addressed to individuals in general (offeror, seller, etc.) rather than to individuals standing in specific social relationships to others. As Lawrence Friedman (1967) put it:

‘Pure contract doctrine is blind to details of subject matter and person. It does not ask who buys and sells, and what is bought and sold … [c]ontract law is an abstraction – what is left when all particularities of person and subject matter are removed’.

(p 7)

Generality and abstractness were ushered in by the spread of the governing idea that both the terms of the contract and its quality of being legally binding were grounded in an exercise of the parties’ wills – the ‘will theory’ of contract. Although the subjectivity of the will theory in its pure form was fairly soon attenuated by emphasising the appearance rather than the reality of consent, its legacy endured in the idea that a contract was formed by the agreement of the parties. A bare agreement – conceptualised as an exchange of promises – came to be seen as a sufficient basis of enforceability, without the necessity for any payment, performance or acts in reliance. This model of contract came to be seen as typical, with the result that all manner of situations were standardly analysed as bilateral executory contracts: bilateral because both parties were bound at once, and executory because the obligations arose before anything was done.

The second dimension of the classical law was the broad moral and political values on which it drew for its justification. At the root was the idea that the only legal obligations imposed on individuals were those not to harm others, which chiefly meant, as far as the civil law was concerned, duties not to interfere with another’s property or person. Beyond this, legal obligation could only be incurred by the individual’s act of will in agreeing or consenting to be bound. Thus the will theory not only provided the content of contract doctrine with a justification, but also connected it with prevailing ideological conceptions of relationships between individuals within a society increasingly penetrated by market relations.

A corollary of the individualistic basis of the classical law was freedom of contract, so that parties were free not only to decide whether to incur consensual obligations at all, but also to determine the extent and content of such obligations. The role of the court was that of neutral referee or umpire, responsible only for enforcing the parties’ agreement and not imposing duties which were not agreed nor removing those which had been agreed.

Where it was necessary to go beyond the parties’ wills and derive the content of obligation from norms of behaviour, then the norms adopted tended to assume a robust attitude to a person’s ability to look after their own interests and would permit advantage to be taken of poor business sense. This was particularly evident in relation to the development of the objective theory of agreement which attended to the appearance of agreement where subjective agreement was not total. The values which underpinned the classical law were at their most persuasive when applied to something like the following idealised picture of the making of a contract:

• the parties are dealing at arm’s length (that is, on a commercial basis without any other connection);
• they are of equal bargaining power (that is, they have similar wealth, knowledge and negotiating skill);
• they negotiate each term of the contract so that the terms are all the product of their deliberation;
• the contract terms provide clearly for all eventualities;
• the parties only come together for one contract (there is no continuing relationship).

Although the classical law could be most plausibly applied to these circumstances, its importance lay in the way it reached out beyond these circumstances and became the default body of rules to apply across a wide range of social relations which came to be regarded as more or less contractual.

The characteristics of the classical contract law model identified by Wightman above apply most obviously to a straightforward commercial contract – for example, a one-off sale of goods contract – and do not necessarily apply easily to more complex transactions. This limitation is considered further later in this chapter, at Section 1.4. At this stage it is appropriate to explore in more detail the concept of freedom of contract, which is central to the classical analysis. As Brownsword has pointed out, freedom of contract has several aspects:

Brownsword, R, Contract Law: Themes for the 21st Century, 2nd edn, 2006, Oxford: OUP, 49–57

As we move on to look more carefully at ‘freedom of contract’ as a distinctive idea within the institution of contract law, it is as well to observe that there is also a background or non-institutional sense in which transactional freedom may be recognised. In this latter sense, we simply mean that it is permissible for agents freely to enter into agreements with one another or to make exchanges and that, concomitantly, agents have a right that others do not interfere with such permissible activity. Whilst, in principle, such transactions can take place in the absence of (or prior to) the development of an institution of contract law, in practice, modern societies develop just such a legal institution, with a whole array of rules relating to what constitutes a contract as well as to who can contract, and with a set of sanctions (remedies) available in the event of non-performance. Once such an institution of contract law is in place, ‘freedom of contract’ comes to be associated with three key principles, each of which seeks to influence the specific design of contract law. These three principles are: (1) that the law should respect the freedom of contracting parties to pursue their own purposes and to set their own terms (i.e. to make their own bargains) (we can call this ‘term freedom’); (2) that the law should respect the freedom of eligible contractors to choose their own partners (that is, the freedom not to contract) (we can call this ‘party or partner freedom’); and (3) that where agreements have been freely made, the parties should be held to their bargains (usually expressed as ‘sanctity of contract’). Unless we indicate otherwise, ‘freedom of contract’ should now be understood in its institutional sense; in this sense, and read broadly, ‘freedom of contract’ signifies ‘term freedom’, ‘partner freedom’, and ‘sanctity of contract’; and, in a narrow sense, ‘freedom of contract’ focuses on term freedom, advocating that the law should recognise the importance of respecting the parties’ own choices and preferences as expressed in the kinds of transactions they enter upon and the particular terms to which they agree. It follows that freedom of contract in the narrow sense argues for a minimalist (i.e. a light regulatory) approach both to the categories of transaction that are treated as illegal and to the kinds of terms that are blacklisted as void and unenforceable.

Freedom of contract

According to Lord Devlin, it is axiomatic within the classical view that free dealing is fair dealing. Thus, in Printing and Numerical Registering Co v Sampson, Sir George Jessel MR famously said:

‘[I]f there is one thing which more than another public policy requires it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by Courts of justice. Therefore, you have this paramount public policy to consider – that you are not lightly to interfere with this freedom of contract.’

Sir George’s remarks suggest that respect for freedom of contract involves two related forms of legislative and judicial restraint. First, freedom of contract enjoins that the parties shall have ‘the utmost liberty of contracting’, in the sense that they are left free to set their own terms. It follows that legislatures and courts should be slow to limit the kinds of transactions, or the kinds of terms, that the parties can agree upon within the domain of contract. An over-restrictive approach disallows options that should be available to the parties and, to this extent, illegitimately trims the parties’ autonomy. Secondly, freedom of contract enjoins that the parties’ freely made agreements shall be enforced by the courts. Courts might be tempted to release parties from hard bargains, but where agreements have been freely made such a temptation must be resisted: even well-meaning paternalism betrays a lack of respect for a person’s autonomy. To mark these two aspects of freedom of contract (in the broad sense), we can call the first form of restraint the ideal of ‘term freedom’ (that is, freedom of contract in the narrow sense) and the second the ideal of ‘sanctity of contract’.

Term freedom

Absolute term freedom implies a licence to write contracts with any content, that is, an absence of legal restriction upon the kinds of bargains, or the types of contractual provision that the parties can agree upon. A legal system guided by the ideal of term freedom will limit such a licence only where it has good reason. Of course, what constitutes ‘a good reason’ will depend upon the background philosophy of the particular legal order. Thus, if a legal system is guided by utilitarian (or by wealth maximising) thinking, countervailing good reasons will involve disutilities (or wealth losses) occasioned by term freedom; whereas, in a legal system that is guided by an individual rights-led morality, the right of freedom of contract will be abridged only where more important rights are at stake …

Sanctity of contract

Closely related to the ideal of term freedom is the ideal of sanctity of contract. Whereas term freedom sets up a presumption against unnece...

Table of contents

• Cover
• Half-Title
• Endorsements
• Title
• Copyright
• Outline contents
• Detailed contents
• Preface
• Acknowledgements
• Table of cases
• Table of UK and international legislation
• Table of statutory instruments
• Table of decisions, directives, regulations, treaties and conventions
• 1 Introduction
• 2 Forming the agreement
• 3 Consideration and other tests of enforceability
• 4 Intention to create legal relations
• 5 Privity
• 6 Contents of the contract
• 7 Clauses excluding or limiting liability
• 8 Misrepresentation
• 9 Mistake
• 10 Duress
• 11 Undue influence
• 12 Frustration
• 13 Illegality
• 14 Discharge by performance or breach
• 15 Remedies
• Index