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The Proportionality Puzzle in Contract Law: A Challenge for Private Law Theory?
Published online by Cambridge University Press: 18 February 2020
Abstract
This article explores the emerging use of the proportionality concept in the contract law of the Anglo-common law world, first to understand its internal logic, and secondly, to situate its invocation within private law theory. What are judges doing when they appeal to “proportionality”?, and what does this say about the ideology of adjudication? I draw insights from the use of proportionality in other domains, in particular public law, to uncover its internal rationality as a means-ends rationality review coupled with a process of balancing competing considerations, which I illustrate with reference to the illegality, penalty, and cost of cure doctrines. I argue that proportionality reflects a method of pragmatic justification, expressing an aspiration towards a structured and transparent mode of argumentation that is anti-formal and anti-ideological, focusing from the bottom-up on contextual considerations, and occupying a distinct space against existing theories in private law driven, for instance, by “top-down”? rights-based ideologies or critical and communitarian perspectives.
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- Research Article
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- Copyright
- © The Author(s) 2020
Footnotes
An earlier version of this paper was awarded the Hart Publishing Prize for the best paper by an early career scholar at the Ninth Biennial Conference on the Law of Obligations (July 2018), the judging panel of which comprised Professor Andrew Burrows, Justice James Edelman, and Professor Barbara McDonald. I am grateful to participants at the conference and particularly to the anonymous reviewer at CJLJ for very helpful comments.
References
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6. Aharon Barak, Proportionality: Constitutional Rights and their Limitations (Cambridge University Press, 2012) at ch 7.
7. Associated Provincial Houses Ltd v Wednesbury Corporation, [1948] 1 KB 223 at 230.
8. R (Daly) v Secretary, [2001] UKHL 26 at paras 26-28.
9. See useful overviews in Paul Craig, Administrative Law, 8th ed (Sweet & Maxwell, 2016) at 656-68; Mark Elliott & Jason NE Varuhas, Administrative Law: Texts and Materials, 5th ed (Oxford University Press, 2017) at 304-08; Anne CL Davies & Jack Williams, “Proportionality in English Law” in Sofia Rachordas & Boudewijn de Waard, eds, The Judge and the Proportionate Use of Discretion: A comparative study (Routledge, 2016).
10. Recent literature includes Grant Huscroft, Bradley W Miller & Grégoire Webber, eds, Proportionality and the Rule of Law: Rights, Justification, Reasoning (Cambridge University Press, 2014); Vicki C Jackson & Mark Tushnet, eds, Proportionality: New Frontiers, New Challenges (Cambridge University Press, 2017).
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12. See Nicola Lacey, “The Chimera of Proportionality: Institutionalising Limits on Punishment in Contemporary Social and Political Systems” (2015) 78:2 Md L Rev 216; Morris J Fish, “An Eye for an Eye: Proportionality as a Moral Principle of Punishment” (2008) 28:1 Oxford J Legal Stud 57.
13. See Pnina Alon-Shenker & Guy Davidov, “Applying the Principle of Proportionality in Employment and Labour Law Contexts” (2013) 59:2 McGill LJ 375.
14. See Duncan Kennedy, “A Transnational Genealogy of Proportionality in Private Law” in Roger Brownsword, Hans W Micklitz, Leone Niglia & Stephen Weatherill, eds, The Foundations of European Private Law (Hart, 2011).
15. See Francois du Bois, “The Impact of Human Rights on English Contract Law” in Luca Siliquini-Cinelli & Andrew Hutchison, eds, The Constitutional Dimension of Contract Law: A Comparative Perspective (Springer, 2017); Jane Wright, “A damp squib? The impact of section 6 HRA on the common law: horizontal effect and beyond” (2014) Public Law 289; Hugh Collins, “Private Law, Fundamental Rights, and the Rule of Law” (2018) 121:1 W Va L Rev 1; Hugh Collins, “On the (In)compatibility of Human Rights Discourse and Private Law” in Hans W Micklitz, ed, Constitutionalization of European Private Law (Oxford University Press, 2014).
16. The Illegality Defence (UK Law Com CP No 189, 2009) at para 3.142 [The Illegality Defence] [emphasis added].
17. Cavendish Square Holding BV v Talal El Makdessi; ParkingEye Ltd v Beavis, [2016] [2015] UKSC 67 at para 32 [Cavendish] [emphasis added].
18. Ruxley Electronics and Construction v Forsyth, [1996] AC 344 (HL (Eng)) at 361, per Lord Mustill [Ruxley] [emphasis added].
19. Lacey, supra note 2 at 30.
20. Ibid at 30-31.
21. See Ruth Chang, “Incommensurability (and Incomparability)” in Hugh LaFollette, ed, The International Encyclopedia of Ethics (Blackwell, 2013).
22. Eric Engle, “The History of the General Principle of Proportionality: An Overview” (2012) 10 Dartmouth LJ 1 at 5.
23. Ibid.
24. Fish, supra note 12 at 57.
25. Lacey, supra note 12 at 216.
26. Alice Ristroph, “Proportionality as a Principle of Limited Government” (2005) 55 Duke LJ 263 at 266.
27. Engle, supra note 22 at 4.
28. Barak, supra note 6 at 175.
29. Kai Möller, “Proportionality: Challenging the Critics” (2012) 10:3 Int’l J Con L 709 at 715.
30. Thomas Poole, “Proportionality in Perspective” [2010] NZLR 369 at 387.
31. Möller, supra note 29 at 710.
32. Ibid at 711-16.
33. Barak, supra note 6 at ch 19.
34. Dieter Grimm, “Proportionality in Canadian and German Constitutional Jurisprudence” (2007) 57:2 UTLJ 383 at 388.
35. Barak, supra note 6 at ch 20.
36. Möller, supra note 29 at 714-15.
37. See Robert Alexy, “Constitutional Rights and Proportionality” (2014) 22 Revus 51; Robert Alexy, “The Absolute and Relative Dimension of Constitutional Rights” (2017) 37:1 Oxford J Legal Stud 31.
38. Collins, supra note 15 at 28.
39. John CP Goldberg, “Pragmatism and Private Law” (2012) 125 Harv L Rev 1640 at 1640.
40. Julian Rivers, “Proportionality and the Variable Intensity of Review” (2006) 65:1 Cambridge LJ 174 at 175. The two concepts are, of course, not wholly similar, with the former undergirded by the idea that contextual circumstances differ across states, while the latter applies intra-state for the above reasons of institutional competence and democratic legitimacy, see Davies & Williams, supra note 9 at 98-103.
41. Elliot & Varuhas, supra note 9 at 291-303.
42. International Transport Roth GmbH v Secretary of State for the Home Department, [2003] QB 728 at para 87, per Laws LJ.
43. See A v Secretary of State for the Home Department, [2004] UKHL 56.
44. Rivers, supra note 40 at 177.
45. [2005] EWCA Civ 963.
46. Ibid at para 51.
47. Ibid at para 114.
48. I am grateful to the reviewer for raising the issues discussed in this section.
49. Robert Alexy, “Thirteen Replies”, supra note 4 at 344; Robert Alexy, “Proportionality and Rationality” in Jackson & Tushnet, supra note 10 at 20-22 [Alexy, “Proportionality and Rationality”].
50. See R v Keegstra, [1990] 3 SCR 697.
51. See R v Minister for Agriculture, Fisheries and Food, ex parte Fedesa, C-331/88, [1990] ECR 4023.
52. Protected under Article 8 of the European Convention on Human Rights (ECHR), incorporated in the UK by the Human Rights Act 1998, see R (Aguilar Quila) v Home Secretary, [2011] UKSC 45.
53. Pursuant to Article 8 of the ECHR, see Manchester City Council v Pinnock, [2010] UKSC 45; Hounslow LBC v Powell, Leeds CC v Hall, Birmingham CC v Frisby, [2011] UKSC 8; Sims v Dacorum BC, [2014] UKSC 63.
54. These are particularly pronounced in UK administrative law, where views on jettisoning traditional Wednesbury unreasonableness review in favour of the more structured and searching proportionality standard range from strong endorsement (Paul Craig, “Proportionality, Rationality and Review” [2010] NZLR 265), to adopting proportionality universally but in a somewhat less intensive form (Davies & Williams, supra note 9), to partial endorsement, such as reserving proportionality for rights-based cases and conventional Wednesbury rationality for other “public wrongs” (see Michael Taggart, “Proportionality, Deference, Wednesbury” [2008] NZLR 423), and rejection in all areas apart from EU law and ECHR rights, see Phillip Sales, “Rationality, Proportionality and the Development of the Law” (2013) 129 Law Q Rev 223.
55. See St John Shipping Corpn v Joseph Rank Ltd, [1957] 1 QB 267.
56. Jacob Weinrib, Dimensions of Dignity: The Theory and Practice of Modern Constitutional Law (Cambridge University Press, 2016) at 240.
57. Ibid at 217.
58. Ibid at 222-25.
59. See Mattias Kumm, “The Idea of Socratic Contestation and the Right to Justification: The Point of a Rights-Based Proportionality Review” (2010) 4:2 L & Ethics HR 141.
60. Jackson, supra note 1 at 3143.
61. Beatty, supra note 3 at 183.
62. See Richard A Buckley, “Illegality in the Supreme Court” (2015) 131 Law Q Rev 341.
63. [2016] UKSC 42 [Patel]. See Andrew Burrows, “Illegality after Patel v Mirza” (2017) 70:1 Current Legal Probs 55; James Goudkamp, “The end of an era? Illegality in private law in the Supreme Court” (2017) 133 Law Q Rev 14.
64. Patel, supra note 63 at para 101 [emphasis added].
65. [1995] HCA 25, [1995] 184 CLR 538.
66. Ibid at 612-13, referred to in Patel, supra note 63 at para 53.
67. [2012] EWCA Civ 1338, [2013] QB 840 [ParkingEye].
68. Patel, supra note 63 at para 108.
69. [2014] SGCA 28, [2014] 3 SLR 609 (Singapore) [Ting].
70. Ibid at para 77.
71. Ibid at para 70.
72. Ibid at para 61.
73. Patel, supra note 63 at para 25.
74. The Illegality Defence, supra note 16 at para 3.142.
75. [2018] EWCA Civ 84, see also the UK Supreme Court decision in Singularis Holdings Ltd v. Daiwa Capital Markets Europe Ltd [2019] UKSC 50.
76. Ibid at para 65.
77. Ting, supra note 69 at paras 83-85.
78. [2004] EWHC 231 (QB).
79. Ibid at para 19.
80. ParkingEye, supra note 67 at para 13.
81. Ibid at para 14.
82. Patel, supra note 63 at para 254.
83. Ibid at para 239 [emphasis added].
84. [2018] EWHC 508 (Ch) [Harb].
85. Ibid at para 232.
86. Ibid at para 230.
87. Ibid at paras 226-29.
88. Cavendish, supra note 17. See further Jonathan Morgan, “The Penalty Clause Doctrine: Unlovable but Untouchable” (2016) 75:1 Cambridge LJ 11; Andrew Summers, “Unresolved Issues in the Law of Penalties” [2017] LMCLQ 95; James Fisher, “Rearticulating the Rule against Penalty Clauses” [2016] LMCLQ 169.
89. Cavendish, supra note 17 at para 32 [emphasis added].
90. Ibid at para 255.
91. Roger Halson, Liquidated Damages and Penalty Clauses (Oxford University Press, 2018) at 57.
92. [1915] AC 79 (HL (Eng)) [Dunlop].
93. Ibid at 91-92.
94. Lordsvale Finance plc v Bank of Zambia, [1996] QB 752.
95. Cavendish, supra note 17 at para 148.
96. Ibid at para 99.
97. Ibid at para 31.
98. Dunlop, supra note 92 at 87.
99. Hayfin Opal Luxco 3 SARL v Windermere VII CMBS plc, [2016] EWHC 782 (Ch) at para 142.
100. [2017] EWHC 350 (Ch).
101. Ibid at 355.
102. Ibid at 354-55.
103. Cavendish, supra note 17 at para 32.
104. Ibid at para 35.
105. [1905] AC 6 (HL (Eng)).
106. Ibid at 20.
107. [2016] EWHC 3220 (Ch).
108. Ibid at para 163.
109. Cavendish, supra note 17 at paras 99 and 109.
110. Summers, supra note 88 at 112.
111. Fisher, supra note 88 at 174.
112. See Andrews Burrows, A Restatement of the English Law of Contract (Oxford University Press, 2016) at 121-22.
113. Ruxley, supra note 18 at 361.
114. Ibid at 353.
115. Ibid at 367.
116. Lea Valley Developments v Derbyshire, [2017] EWHC 1353 (TCC) at para 38.
117. Robinson v Harman (1848), 1 ExCh 850 at 855.
118. See David Pearce & Roger Halson, “Damages for Breach of Contract: Compensation, Restitution, and Vindication” (2008) 28:1 Oxford J Legal Stud 73.
119. See a fuller analysis in Kit Barker, “‘Damages Without Loss’: Can Hohfeld Help?” (2014) 34:4 Oxford J Legal Stud 631.
120. See Birse Construction Ltd. v Eastern Telegraph Co Ltd, [2004] EWHC 2512 (TCC) at para 51.
121. See Ewan McKendrick, “Breach of Contract and the Meaning of Loss” (1999) 52:1 Current Legal Probs 37.
122. (1954) 90 CLR 613.
123. Ruxley, supra note 18 at 359, per Lord Jauncey.
124. Ibid at 360-61.
125. See Alexander Loke, “Cost of Cure or Difference in Market Value? Towards a Sound Choice in the Basis for Quantifying Expectation Damages” (1996) 10 J Contract L 189 at 200-01.
126. 129 NE 889, 230 NY 239 (1921).
127. 112 F Supp 167, 125 Ct Cl 422 (1953).
128. (1976), [1977] Ch 106.
129. See Jobson v Johnson, [1989] 1 All ER 621 at 633.
130. See Addis v Gramophone Co Ltd, [1909] AC 488 (HL (Eng)), and the contrasting approach of the Supreme Court of Canada in Whiten v Pilot Insurance Company, 2002 SCC 18 at paras 68-74. See further discussion in Solène Rowan, “Reflections on the Introduction of Punitive Damages for Breach of Contract” (2010) 30:3 Oxford J Legal Stud 495.
131. Barak, supra note 6 at 177.
132. Moshe Cohen-Eliya & Iddo Porat, “Proportionality and the Culture of Justification” (2011) 59 Am J Comp L 463 at 481.
133. Moshe Cohen-Eliya & Iddo Porat, Proportionality and Constitutional Culture (Cambridge University Press, 2013) at 111-15.
134. Jackson, supra note 1 at 3142-44.
135. Beatty, supra note 3 at 184.
136. Barak, supra note 6 at 463-64.
137. See Burrows, supra note 112 at 225-29 and the literature cited therein.
138. Patel, supra note 63 at para 101.
139. In unpacking “proportionality”, Lord Toulson indicated that “I would not attempt to lay down a prescriptive or definitive list because of the infinite possible variety of cases. Potentially relevant factors include the seriousness of the conduct, its centrality to the contract, whether it was intentional and whether there was marked disparity in the parties’ respective culpability.” See Patel, supra note 63 at para 107.
140. A good overview of the topic is Robert B Talisse & Scott F Aikin, Pragmatism: A Guide for the Perplexed (Continuum, 2008) at ch 3.
141. Benjamin Zipursky, “Pragmatic Conceptualism” (2000) Legal Theory 457 at 469-70.
142. Ibid at 473.
143. See Brian Z Tamanaha, Law as a Means to an End: Threat to the Rule of Law (Cambridge University Press, 2006) at ch 4.
144. Ernest J Weinrib, The Idea of Private Law, revised ed (Oxford University Press, 2012) at 12-13.
145. Ibid at 18-21. For a starting point into the many extensive discussions on corrective justice, see Sandy Steel, “Private Law and Justice” (2013) 33:3 Oxford J Legal Stud 607; Peter Cane, “Corrective Justice and Correlativity in Private Law” (1996) 16:3 Oxford J Legal Stud 471.
146. For a recent example of this type of critique see John Murphy, “The Heterogeneity of Tort Law” (2019) 39:3 Oxford J Legal Stud 455.
147. Robert Stevens, “Damages and the Right to Performance: A Golden Victory or Not?” in Jason W Neyers, Richard Bronaugh & Stephen Pitel, eds, Exploring Contract Law (Hart, 2009) at 190-91.
148. I will refrain from addressing this issue from within the conceptual frameworks on the will and interest theories of rights, given that the density of these debates may take us too far afield. The recent state of play is reflected in Mark McBride, ed, New Essays on the Nature of Rights (Hart, 2017).
149. Indeed, this is the case with various pluralistic theories of proportionality in the constitutional law discourse, which do not seek to flatten rights entirely but find various ways of accommodating these alongside competing considerations, see Kai Möller, “Proportionality and Rights Inflation” in Huscroft, Miller & Webber, supra note 10.
150. See Duncan Kennedy, “Form and Substance in Private Law Adjudication” (1976) 89 Harv L Rev 1685.
151. Roberto Unger, The Critical Legal Studies Movement: Another Time, A Greater Task (Verso, 2015) at ch 6.
152. See Andrew Burrows, “Challenges for Private Law in the Twenty-First Century” in Kit Barker, Karen Fairweather & Ross Grantham, eds, Private Law in the 21st Century (Hart, 2017).
153. Ibid at 69.
154. In recent years, Hanoch Dagan has (together with Michael Heller) articulated a theory of contract that views autonomy as an overarching value and important constraint on the goods of contract, which are defined as utility and community. Autonomy’s preeminence is secured by providing a diversity of normatively attractive contract types with their own set of mandatory and default rules tailored to reflect the goods of contract, see Hanoch Dagan & Michael Heller, The Choice Theory of Contracts (Cambridge University Press, 2017). It is not abundantly clear how the lexical priority given to autonomy in Choice Theory is consistent with Dagan’s previous commitment to the realist mode of adjudication. It may be that the general theme of “autonomy through choice” is compatible with judges balancing autonomy against community and efficiency considerations within local contract spheres, but this is a (partly exegetical) issue which I will not attempt to resolve here. I am grateful to the CJLJ reviewer for raising this point.
155. See Hanoch Dagan, Reconstructing American Legal Realism and Rethinking Private Law Theory (Oxford University Press, 2013), and Todd D Rakoff, “The Implied Terms of Contracts: Of ‘Default Rules’ and ‘Situation-Sense’” in Jack Beatson & Daniel Friedmann, eds, Good Faith and Fault in Contract Law (Clarendon Press, 1995).
156. Kennedy, supra note 14 at 187.
157. Kennedy, supra note 14 at 214-15, speaking in the context of European private law and the publication of the Draft Common Frame of Reference in 2008 by the Von Bar Group.
158. Lacey, supra note 2 at 44.
159. Ibid.
160. Cavendish, supra note 17 at para 82.
161. See Francisco J Urbina, “Incommensurability and Balancing” (2015) 35:3 Oxford J Legal Stud 575; Virgílio Afonso Da Silva, “Comparing the Incommensurable: Constitutional Principles, Balancing and Rational Decision” (2011) 31:2 Oxford J Legal Stud 273.
162. Patel, supra note 63 at para 263 [emphasis added].
163. Chang, supra note 21 at 2596.
164. See Ruth Chang, “Value Incomparability and Incommensurability” in Iwao Hirose & Jonas Olson, eds, The Oxford Handbook of Value Theory (Oxford University Press, 2015).
165. Barak, supra note 6 at ch 12.
166. Da Silva, supra note 161 at 285-86.
167. Chang, supra note 164 at 209.
168. See, e.g., Möller, supra note 29 at 727-30. I am grateful to the reviewer for clarifying this point.
169. Alexy, “Proportionality and Rationality”, supra note 49 at 23.
170. See Kit Barker & Darryn Jensen, eds, Private Law: Key Encounters with Public Law (Cambridge University Press, 2013); William Lucy, “Private and Public: Some Banalities About a Platitude” in Cormac Mac Amhlaigh, Claudio Michelon & Neil Walker, eds, After Public Law (Oxford University Press, 2013).
171. See Robert Ellickson, Order without Law: How Neighbors Settle Disputes (Harvard University Press, 1991).
172. See Ross B Grantham & Darryn Jensen, “The Proper Role of Policy in Private Law Adjudication” (2018) 68:2 UTLJ 187.
173. Human Rights Act 1998 (UK), ss 3 and 4; see also Wilson v First County Trust Ltd (No. 2), [2003] UKHL 40.
174. Human Rights Act 1998 (UK), ss 6(1), 6(3)(b), 6(5); see also Aston Cantlow and Wilmcote with Billesley Parochial Church Council v Wallbank, [2003] UKHL 37.
175. Human Rights Act 1998 (UK), ss 6(1), (3)(a); see also McDonald v McDonald, [2016] UKSC 28.
176. See Mattias Kumm, “Who is Afraid of the Total Constitution? Constitutional Rights as Principles and the Constitutionalization of Private Law” (2006) 7 German LJ 341.
177. Collins, supra note 15 at 45.
178. See Hugh Beale & Nicola Pittam, “The Impact of the Human Rights Act 1998 on English Tort and Contract Law” in Daniel Friedmann & Daphne Barak-Erez, eds, Human Rights in Private Law (Hart, 2001); Joe Atkinson, “Implied Terms and Human Rights in the Contract of Employment” (forthcoming in Indus LJ, advance access at https://doi.org/10.1093/indlaw/dwz001); Philippa Collins, “The Inadequate Protection of Human Rights in Unfair Dismissal Law” (2018) 47:4 Indus LJ 504.
179. Collins, supra note 15 at 56-57.
180. With credit to Vicki C Jackson, “Being Proportional about Proportionality” (2004) 21:3 Constitutional Commentary 803 for the graceful turn of phrase.