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CONTRACT DOCTRINE, PREDICTABILITY AND THE NEBULOUS EXCEPTION

Published online by Cambridge University Press:  07 March 2014

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Abstract

There is a tendency in contemporary contract law for judges to “never say never” and permit an open-ended exception from the rule. This nebulous exception is designed to cater for the rare instance where application of the rule would be undesirable in the interests of justice. However, this kind of imprecise exception is deleterious in terms of the unpredictability it generates, as well as the attendant increases in time and costs that result. The “never say never” approach is to be discouraged in contract law where commercial predictability, while certainly not inviolable, nonetheless remains a weighty goal deserving of continued deference.

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Copyright © Cambridge Law Journal and Contributors 2014 

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References

1 See R. Bradgate, “Contract, Contract Law and Reasonable Expectations” in S. Worthington (ed.), Commercial Law and Commercial Practice (Oxford 2003), ch. 23 at p. 668.

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12 Restatement (Second) of Contract, § 72 cmt. b. (1981).

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15 The Morality of Law, at p. 61.

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17 See R. Cranston, “Doctrine and Practice in Commercial Law” in K. Hawkins (ed.), The Human Face of Law (Oxford 1997), ch. 9.

18 H. Collins, The Law of Contract, 4th ed. (London 2003), p. 38.

19 [1995] 1 W.L.R. 474, 479–81.

20 This statement appears in a decision concerning exemplary damages in tort: Bottrill v A [2002] UKPC 44; [2003] 2 N.Z.L.R. 721 at [27].

21 [2009] UKPC 10; [2009] 1 W.L.R. 1988.

22 From The Moorcock (1889) 14 PD 64, 68 and Shirlaw v Southern Foundries (1926) Ltd. [1939] 2 K.B. 206, 277 respectively.

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24 Ibid. at [18].

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31 Ibid.

32 Ibid. This has been rephrased as “manifestly and unconscionably disadvantageous” in Harrison v Halliwell Landau [2004] EWHC 1316 (QB) at [97] and involving “impropriety” in Progress Bulk Carriers Ltd. v Tube City IMS LLC (The Cenk Kalpanoghu) [2012] EWHC 273 (Comm); [2012] All E.R. (D.) 122 at [35].

33 See respectively Harrison at [97] (the “relatively rare category”) and Progress Bulk (“an unusual case”).

34 Lawful act duress failed in Magsons Hardware Ltd. v Concepts 124 Ltd. [2011] NZCA 559 at [34]–[35].

35 [2012] EWHC 273 (Comm); [2012] All E.R. (D.) 122.

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37 The Cenk Kalpanoghu at [37].

38 Ibid. at [39] (emphasis added).

39 M. Chen-Wishart, Contract Law, 4th ed. (Oxford 2012) at p. 325, contends that “arguably” it is the first occasion of lawful act duress being upheld by a court.

40 [2010] UKPC 21.

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42 Ibid. at [31].

43 Ibid. at [35].

44 E. McKendrick, Contract Law: Text, Cases and Materials, 5th ed. (Oxford 2012), 649.

45 [2010] UKPC 21 at [32].

46 Ibid. at [28].

47 See McKendrick, Contract Law, p. 649. See similarly E. Peel, Treitel, The Law of Contract, 13th ed. (London 2011), 442 (Borelli cited for the view that a threat may be illegitimate because it amounts to “unconscionable conduct”).

48 R. Bigwood, Exploitative Contracts (Oxford 2003), p. 308.

49 J. Morgan, Great Debates in Contract Law (Basingstoke 2012), 193.

50 Equiticorp Finance Ltd. (in Liq) v Bank of New Zealand (1993) 32 N.S.W.L.R. 50, 107. See similarly ANZ Banking Group v Karam (2005) 64 N.S.W.L.R. 149 at [66].

51 [2001] 1 A.C. 268, 284–285 (italics in original).

52 Ibid. at 285.

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54 Blake [2001] 1 AC at p. 286 per Lord Nicholls.

55 Ibid. at p. 287.

56 The claim was refused in WWF World Wide Fund for Nature v World Wrestling Federation [2002] FSR 32; AB Corp v CD Company (The Sine Nomine) [2002] 1 Lloyd's Rep 805; Vercoe v Rutland Fund Management Ltd. [2010] EWHC 424 (Ch) at [345]; Jones v Ricoh UK Ltd. [2010] EWHC 1743 (Ch) at [89]; Topline International Ltd. v Cellular Improvements Ltd., N.Z. High Court, Auckland, C.P. 144-SW02, 17 March 2003, Venning J., at [144].

57 [2001] EWHC 458 (Ch); [2001] 1 All E.R. (D.) 324.

58 Ibid. at [56].

59 Ibid.

60 Ibid. at [63].

61 Ibid. at [64].

62 Ibid.

63 Ibid. at [65].

64 The Sine Nomine [2002] 1 Lloyd's Rep. 805 at p. 806.

65 See Addis v Gramophone Co. Ltd. [1909] A.C. 488, 494; Ruxley Electronics and Construction Ltd. v Forsyth [1995] UKHL 8; [1996] A.C. 344, 353 per Lord Bridge of Harwich.

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67 Ibid. at [183].

68 Couch v Attorney General [2010] NZSC 27 at [179]. Couch overturned Bottrill on this point.

69 Whiten v Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595 at [78]–[79].

70 Whiten at [81].

71 Ibid. at [36]. See similarly Fidler v Sun Life Assurance Co. of Canada [2006] SCC 30 at [62].

72 [2008] SCC 39 at [68] (citing Vorvis v Insurance Corp. of British Columbia [1989] 1 S.C.R. 1085, 1104–5).

73 Ibid. at [64], [67].

74 [2006] SCC 30 at [74].

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76 See Lord Hoffman and Lord Rodger of Earlsferry in Chartbrook [2009] UKHL 38 at [35]–[38] and [69]–[70] respectively; McGrath J. in Vector Gas Ltd. v Bay of Plenty Energy Ltd. [2010] 2 N.Z.L.R. 444 at [71] (Sup. Ct).

77 [2009] UKHL 38 at [33].

78 Ibid. at [2], [41], [69].

79 “The Codification of Commercial Law” (1988) 14 Monash U. L. R. 135, 150; Commercial Law in the Next Millennium (London 1998), 23.

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81 Rhetoric and the Rule of Law: A Theory of Legal Reasoning (Oxford 2005), 238.

82 “Can Contract Law be Justified on Economic Grounds?” (2006) 25 University of Queensland L.J. 253, 261 (italics in original).

83 Gava, ibid., at p. 268.

84 See Raban, O., “The Fallacy of Legal Certainty: Why Vague Legal Standards may be better for Capitalism and Liberalism” (2010) 19 Public Interest L.J. 175Google Scholar, 183; Posner, E., “Standards, Rules, and Social Norms” (1997–1998) 21 Harvard J. Law and Pub. Policy 101Google Scholar, 113.

85 See e.g. S. Macaulay, “The Real and Paper Deal: Empirical Pictures of Relationships, Complexity and the Urge for Transparent Simple Rules” in D. Campbell, H. Collins and J. Wightman (eds), Implicit Dimensions of Contract (Oxford 2003), ch. 3.

86 M. Eisenberg, The Nature of the Common Law (Cambridge, Mass 1988), 158.

87 R. Calnan, “Construction of Commercial Contracts: A Practitioner's Perspective” in A. Burrows and E. Peel (eds), Contract Terms (Oxford 2007) ch. 2, p. 19.

88 Bradgate, “Contracts”, at p. 689.

89 Lady Justice Arden, “Coming to Terms with Good Faith” (2013) 30 J. C. L. 199Google Scholar, 211.

90 See e.g. E. McKendrick, Goode on Commercial Law, 4th ed. (London 2009), 1348–9.

91 See Cranston, “Doctrine and Practice in Commercial Law”.

92 Bottrill v A [2002] UKPC 44 at [27] (emphasis in original).

93 See Smillie, “Certainty”, at p. 635.

94 [2006] 3 N.Z.L.R. at [181].

95 Note 67 above.

96 [2001] 1 A.C. at p. 285 (italics in original).

97 Ibid. at p. 299.

98 “Vagueness”, at p. 75.

99 National Association for Advancement of Colored People v Button, 371 U.S. 415, 433 (1963) (Sup. Ct.).

100 Waldron, “Vagueness”, at p. 77.

101 Bayley, J.E., “Prior Negotiations and Subsequent Conduct in Contract Interpretation: Principles and Practical Concerns” (2012) 28 J.C.L. 179Google Scholar, 201, 209. The survey had 63 responses from the 248 lawyers in the UK and New Zealand it was sent to.

102 Ibid. at p. 184 and p. 186. Some 67 percent of the respondents thought that removal of the prior negotiations exclusionary rule would, at worst, marginally increase the costs to clients for advice on contract construction issues; 57 percent of litigators thought that the rule's removal would, at worst, marginally increase the costs of litigation.

103 Ibid. at p. 181.

104 D'Amato, A., “Legal Uncertainty” (1983) 71 Calif. L. Rev 1CrossRefGoogle Scholar.

105 Stewart, A., “What's Wrong with the Australian Law of Contract?” (2012) 29 J.C.L. 74Google Scholar, 80.

106 The Morality of Law, at p. 63.

107 Perry v Sidney Phillips & Sons [1982] 1 W.L.R. 1297.

108 Farley v Skinner [2001] UKHL 49; [2002] 2 A.C. 732 at [24].

109 Waldron, “Vagueness”, at 80; R. Dworkin, Justice for Hedgehogs (Cambridge, Mass 2011), 181.

110 Waldron, loc.cit.

111 Couch v Attorney-General at [243].

112 Blake [2001] 1 A.C. at p. 285.

113 See ibid.

114 Ibid.

115 Ibid. at p. 292.

116 Ibid. at p. 286.

117 Waldron, “Vagueness”, at p. 75.

118 Hart, H.L.A., “Positivism and the Separation of Law and Morals” (1958) 71 Harvard L. Rev 593CrossRefGoogle Scholar, 607.

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120 [2002] 1 Lloyd's Rep. 805, 806.

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122 See e.g. E.W. Thomas, The Judicial Process (Cambridge 2005), at pp. 16, 115.

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128 Puig, G., “The Misalignment of Commercial Law and Commercial Practice” [2012] L.M.C.L.Q. 317Google Scholar.

129 Ibid. at pp. 324, 327.

130 Ibid. at p. 328.

131 The Golden Victory, at [38].

132 Thomas, Judicial Process, at p. 135.

133 Ibid. at p. 137.

134 Ibid. at ch. 5.

135 S. Waddams, Principle and Policy in Contract Law: Competing or Complementary Concepts? (Cambridge 2011), pp. 188, 229.

136 See the judicial statements above fns 5–8.

137 An appellation borne unashamedly by Lord Bingham of Cornhill, “A New Thing Under the Sun? The Interpretation of Contract and the ICS Decision” (2008) 12 Edin. L.R. 374CrossRefGoogle Scholar, 389.

138 Gava, “Can Contract Law”, at p. 259.

139 Atiyah, “Principles to Pragmatism”, at p. 1249.

140 The Achilleas [2008] UKHL 48; [2009] 1 A.C. 61.

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