If a party undertakes to renounce its contractual rights, or at least creates in the other party’s mind the reasonable impression that it is doing so, can such a course of action be characterised as a promise? Alternatively, if liability arises in such a situation, does it derive from the reliance placed upon the impression conveyed to the other party? The proper characterisation of the renunciation of contractual rights is considered in this chapter.

Terminology

It is important, before attempting to answer these questions, to note that different English language terms are used to describe an undertaking (express or implied) by one party not to enforce its contractual rights against the other. These terms have often been used inconsistently and interchangeably, making analysis of this area of law very difficult. There are some general patterns of usage of terminology which can be discerned, though if European private law is at some stage to be harmonised this is one area where uniformity of terminology would be of great benefit.

There are a number of principal arguments advanced in this work, among them that promise has played a central role in obligations theory and practice (in part, though not merely, because it has been used to describe the nature of contract), that the idea of promise as a manifestation of human will and commitment is central to an understanding of contract, that this idea explains much of the body of contractual rules and doctrines applied by the courts, and that promise narrowly defined (as a unilateral promise) is a better explanation for a number of circumstances in which voluntary obligations are intended than is the bilateral obligation of contract. However, none of these arguments can sensibly be advanced without first settling the fundamental definition of the idea of a promise and the characteristics of the practice or institution of promising. For that reason, this chapter will address some very basic matters, including: the constituent elements of a promise; how promises are formed; what the party making a promise (the promisor) must intend before a promise can exist; whether the beneficiary of a promise (the promisee) must also intend anything before the promise can be constituted; whether promises must be accepted before they bind the promisor; and whether promises may be made subject to conditions.

INTRODUCTION

Summary of main points

1. (1) Differences between the ‘soft law’ codes, PECL, the Principles of European Contract Law, and UNIDROIT's Principles of International Commercial Contracts (2004) and the common law rules will be considered (21.02 and 21.03).

2. (2) The civil law notion of ‘good faith’ (articulated in each of the soft law codes) will be considered (21.03).

3. (3) The question whether the common law rules should be codified will be considered (21.25).

There are various ‘soft law’ codes:

1. (1) the global ‘commercial’ contract code, UNIDROIT's Principles of International Commercial Contracts;

2. (2) PECL, the Principles of European Contract Law, drafted by the (Lando) Commission for European Contract Law;

3. (3) the ECC, the draft European Code of Contracts, drafted by the Academy of European Private Lawyers, under the direction of Giuseppe Gandolfi; and

4. (4) DCFR, the Draft Common Frame of Reference, prepared by the Study Group on a European Civil Code, and the ‘Research Group on EC Private Law’ (the ‘Acquis Group’).

Project (3) is in part a revision of project (2). There are lucid summaries of these projects in the essay by Bénédicte Fauvarque-Cosson, and of projects (1) and (4) by Stefan Vogenauer. As for (1), Fauvarque-Cosson and Vogenauer note that the UNIDROIT Principles are international, as distinct from (merely) European; and their emphasis is on commercial contracts, and not consumer relations.

INTRODUCTION

Summary of main points

This chapter concerns the process of reaching a consensus. Here the analysis is dominated by ‘offer and acceptance’. The main points of discussion will be:

The process of offer and acceptance

1. (1) In many situations, especially when the parties are in correspondence, English law requires an agreement to result from acceptance of an offer; however, it is admitted that some situations produce a consensus without such a clear-cut form of dealing.

2. (2) An offer can be made to an individual, a member of a group, or even the public at large; acceptance presupposes knowledge of an offer; acceptance must be made by an intended offeree; the general rule is that contracts involving reciprocal obligations (‘bilateral contracts’) cannot be accepted by silence; but sometimes an agreement can arise if the offeree has acted on the offer in a manner indicating implied assent to it (‘acceptance by conduct’).

3. (3) Offers should be distinguished from a mere ‘invitation to treat’; such an invitation is an opportunity for further dealings, but not a communication or presentation rendering the relevant party's goods (or services etc.) open to immediate acceptance; for example, goods on display in shops are not available to be immediately accepted; and most advertisements for goods or services are regarded as ‘invitations to treat’.

4. (4) An offeree can make a counter-offer; if this is rejected, and the original offer is not reinstated, the offeree cannot accept the original offer.

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INTRODUCTION

Summary of main points

1. (1) ‘Interpretation [of written contracts] is the ascertainment of meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.’ See the quotation from Lord Hoffmann in the Investors Compensation Scheme case (1998) at 14.07.

2. (2) Interpretation of written contracts is a matter of law, whereas interpretation of contracts not wholly contained in writing is a matter of fact (14.03). Appeal courts have the power to review first instance errors of ‘law’, but in general defer to findings of fact.

3. (3) The House of Lords in Chartbrook Ltd v. Persimmon Homes Ltd (2009) held that a court can ‘construe’ by wholly recasting a relevant phrase or portion of a written contract when it is obvious that the drafting has gone awry and the parties' true pre-formation shared meaning can be ascertained by consideration of the commercial purpose of the agreement and internal hints in the text (14.21 ff). Such ‘curative interpretation’ has a similar function to the more formal equitable doctrine of ‘rectification’ (see (9) below), because both doctrines have the effect of revising a document. The safer course is to plead both ‘construction’ and ‘rectification’.

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INTRODUCTION

Summary of main points

1. (1) The principle of freedom of contract (1.08) permits negotiating parties to ‘walk away’ from a proposed deal, provided they have not already committed themselves in law to a binding agreement.

2. (2) In the absence of a binding contract, a person's requested performance, whether delivery of goods or performance of services, can give rise to a restitutionary obligation to pay the reasonable market value of the relevant performance (generally on this type of restitutionary claim: 2.04, 18.55).

3. (3) In the situation just mentioned, the law is presently defective in not allowing the recipient of the relevant performance to require a reduction in the financial award to reflect slow performance (2.04).

4. (4) Further points are summarised at 2.06.

A. Berg, ‘Promises to Negotiate in Good Faith’ (2003) 110 LQR 357–63

S. Ball, ‘Work Carried Out in Pursuance of Letters of Intent – Contract or Restitution?’ (1983) 99 LQR 572, especially 576–9, 581–2

P. Giliker, ‘A Role for Tort in Pre-Contractual Negotiations? An Examination of English, French and Canadian Law’ (2003) 52 ICLQ 969, especially 989 to end

English law has fashioned an intricate set of rules governing the pre-contractual context. Readers hoping to find a single formula, such as a pre-contractual duty to negotiate in good faith, will find English law lacking in such simplicity. Our courts have used a ‘Swiss army knife’ for this purpose, rather than a single blade.

I hope that this guide to the English law of contract will be of use and interest to both students and lawyers in practice.

I have provided the reader with introductory summaries to each topic. Chapter 14 reflects the very considerable importance of interpretation of written contracts, which practitioners are not slow to name as the most important aspect of contract law. In addition, I decided to include chapters on illegality and assignment, and a concluding chapter on three topical matters: ‘good faith’, European ‘soft law’ codes, and the (perennial, but perhaps pressing) question of case law technique versus codification. This is an ‘adult book’: ‘minors’, since small, are confined to paragraph 1.09.

By the use of varying fonts, the reader can locate quickly discussion of greater detail, including substantial portions of quoted text, and take appropriate action, perhaps sometimes evasive. Paragraph numbering has facilitated cross-referencing, which is particularly important in this cohesive subject where doctrines are closely connected or overlap. In each chapter there is a short list of further selected reading. At the end of the book there is a copious general bibliography. There is also in the appendix to this book a set of ‘cameo’ biographies of the leading writers and judges (dead or retired) who have shaped this subject.

CHARACTERISTICS OF ENGLISH CONTRACT LAW

English contract law is organised into topics, as set out in the chapter headings of this work. These form the ‘general part’ of the subject. English contract law assumed its current shape in the nineteenth century, although there was much doctrinal development or legislative change during the twentieth century (remarks to this effect by Brian Simpson, Patrick Atiyah, David Ibbetson, Michael Lobban, and Steve Hedley). As Hedley explains:

In modern times, Parliament and judges have consistently assumed the existence of a coherent body of general rules applicable to all types of contracts. Other legal systems organise the subject in a similar fashion, distilling general rules and doctrines of ‘contract law’, and distinguishing this unifying or shared body of law from the particular features of specific contracts, such as sale of goods, insurance, hire, employment, etc.

INTRODUCTION

Summary of main points

1. (1) Duress. This involves the application of illegitimate pressure so that the relevant contract or contractual modification is unsafe and should be set aside. The pressure will normally take the form of a threatened legal wrong (crime, tort, breach of contract, etc.). Exceptionally, it might be the threat of a lawful act (such as reporting a person to the police or some other authority). In the latter type of case, the court might regard the threat as ‘illegitimate’, that is, an unacceptable or morally reprehensible use of pressure; but this can only involve a value judgement because, ex hypothesi, the threat was not to break the law.

2. (2) Undue influence. This is an equitable doctrine. ‘Actual undue influence’ is broader than coercion, although it can take the form of coercion. If actual undue influence is shown, there is no need to show that the transaction is objectively ‘unfair’ and ‘unbalanced’. However, the more common situation is that undue influence involves abuse of a relationship by someone occupying a superior or dominant position. Plainly, unequal relationships include solicitor/client, teacher/pupil, spiritual advisor/follower, trustee/beneficiary. Here, the law acknowledges that the danger of abuse exists. To this extent, the law speaks of ‘presumed undue influence’. In other situations, the claimant must show that, on the particular facts of the case, he ‘looked up to’ and so placed ‘trust and confidence’ in the other.

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