The Future of the Law of Contract

Michael Furmston, Michael Furmston

• Publisher: Informa Law from Routledge
• Year: 2020
• ISBN:
  9780429509438
• Edition: 1
• Topic: Jura
• Subtopic: Rechtstheorie & -praxis

The Future of the Law of Contract brings together an impressive collection of essays on contract law. Taking a comparative approach, the aim of the book is to address how the law of contract will develop over the next 25 years, as well as considering the ways in which changes to the way that contracts are made will affect the law.

Topics include good faith; objectivity; exclusion clauses; economic duress; variation of contract; contract and privacy law in a digital environment; technological change; Choice of Court Agreements; and Islamic finance contracts.

The chapters are written by leading academics from England, Australia, Canada, the United States, Singapore and Malaysia. As such, this collection will be of global interest and importance to professionals, academics and students of contract law.

Chapter 1

An overview

Michael Furmston

Introduction

1.1 I gave my first lecture on the law of contract at the University of Birmingham in October 1958, the beginning of my second year there. In nearly all the subsequent 60 years I have taught some parts of the law of contract either at British universities (Birmingham, Belfast, Oxford and Bristol) or more recently at Singapore Management University and Sunway University, Malaysia. During periods of leave I have taught at the National University of Singapore, in Australia (at Sydney, Melbourne, Adelaide and the University of Western Australia) and in Sri Lanka and in Hong Kong. I have taught the common law of contract in civil law countries (at Leuven in Belgium (four times) and Bolzano in Italy). I have also spoken at conferences in Toronto and Chicago. For the first 20 years I also taught the Roman law of contract.

1.2 One point of this historical reminiscence is that my view of the next 25 years must, for good or ill, be affected by my experience of the last 60 years. The second is that it is not limited to any one system. We are trying in this book to look forward to developments across the common law of contract. The team includes authors from Australia, Canada, England, Malaysia and the United States (alphabetical order here and elsewhere). In addition, three of us have taught in Singapore.

Diversity and unity

1.3 When I started teaching contract in 1958 I knew that the American law of contract was different. The library had copies of Williston and Corbin and the Restatement but I assumed the Australian and Canadian contract law were the same as English. I had tutorials in Oxford in contract from Otto Lang, who was doing the Bachelor of Civil Law (BCL) and went on to become a professor at the University of Saskatchewan and then a successful national politician. I do not remember any suggestion that the Canadian law of contract was different.

1.4 This is not the case today. There are books entitled Australian Law of Contract, Canadian Law of Contract, Malaysian Law of Contract, New Zealand Law of Contract, Singapore Law of Contract, and so on. I do not think there are any books entitled American Law of Contract or English Law of Contract. The systems are different but they are not very different.

1.5 The relationship is illustrated by the recent decision of the UK Supreme Court in Patel v Mirza.¹ In this case the court sat exceptionally with nine judges in an attempt to grapple with the difficulties posed by illegality in the law of contract. Six judgments were delivered. All agreed in the result but three disagreed fundamentally on the reasons. Six judgments were delivered and all cited with approval the impressive judgment of the Canadian Supreme Court in Hall v Hebert.² The Court was agreed on the result but deeply divided on the reasons. The majority view was that the existing law should be replaced by an approach which involved considering and balancing a range of factors.

1.6 The decision of the Supreme Court was considered and rejected by an enlarged five judge Court of Appeal in Singapore in Ochroid Trading Ltd v Chua Sion Lui.³ It is also receiving anxious consideration in Malaysia where it was cited in Pang Mun Chung v Cheung Huey Chuen.⁴

Doctrine

1.7 If I had been asked in 1958 about a requirement that contracts should be performed in good faith, I would perhaps have talked about bona fides in the four consensual contracts of Roman law (Sale, Hire Partnership and Mandate). The position would be very different today. The requirement that contracts should be performed in good faith has been a feature of American law for some time and has recently been adopted by the Supreme Court of Canada. These developments are discussed in Chapters 2 and 3 by Howard Hunter and Stephen Waddams. There must be a serious possibility that this notion will be adopted in other common law jurisdictions. There have been a number of decisions of the New South Wales Court of Appeal to this effect but not yet any decision either way of the High Court of Australia. At the moment England and Singapore stand at the opposite end of the spectrum.⁵ It is clear that jurisdictions which have adopted the notion of good faith performance do not apply it in exactly the same way but the present tendency is to expand rather than to contract its scope.

1.8 A quite different manifestation of good faith is to be found in insurance law, where it has been held since 1775 that those entering into insurance contracts have a duty of good faith to disclose to the other party information which is material to that party’s decision to enter into the contract. Here the path of evolution is in the opposite direction. Both English and Malaysian law have passed legislation significantly limiting the duty of disclosure of a consumer insured. There are important possibilities of development here which are discussed by Cheah You Sum in Chapter 4.

1.9 A quite different but also important doctrinal question concerns the place of objectivity. Conventional accounts tend to say that the common law adopts an objective test both of whether a contract exists and as to its content and meaning. This is not wrong but it is incomplete. There are cases where it is also necessary to apply a subjective approach. It is also essential to be clear what we mean by the subjective and objective tests. This is not always simple as John Carter and I seek to show in Chapter 5.

1 [2016] UKSC 42.

2 [1993] 2 SCR 159.

3 [2018] SGCA 5.

4 [2018] 8 CLJ 683.

5 There is a general survey of good faith in Commonwealth countries in Michael Furmston and JW Carter, Eppur Si Muove: The Age of Uniform Law., Essays in Honour of Michael Joachim Bonnell to Celebrate his 70th Birthday (UNIDROIT 2016).

Evolution and revolution

1.10 Anyone who has sought to edit a book on the law of contract will know that the law this year is not the same as the law last year. That is why new editions regularly appear. To some extent this is a natural evolution of a case law system. There can be questions which have not come to court before and judges have to decide the correct answer.

1.11 A rather larger group will consist of cases which are the product of an earlier case. So in Patel v Mirza ⁶ the majority of the Supreme Court completely changed the law as to the effect of illegality on contracts by introducing a test based on the evaluation of a range of factors. It is completely certain that there will be cases which the court has to answer by applying this approach and that there will be disputes about the process which lead to presently unforeseeable decisions.

1.12 Sometimes courts generate a new discussion of their own motion. A striking example is the question whether a clause providing how damages for breach of contract should be calculated should be struck down as a penalty. For 100 years this has been treated as a straightforward question governed by the speech of Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v New Garage Motor Co Ltd.⁷ This case was reconsidered and its effect significantly modified by the Supreme Court in Cavendish Square Holdings v Talal El Mahdessi.⁸ By a striking coincidence the question was also considered by the High Court of Australia in Andrews v Australia and New Zealand Banking Group ⁹ which took a different view of the law, particularly as to whether the penalty doctrine could have been applied to an event which was not a breach of contract.

1.13 It is clear that changes in the way people contract may foreseeably lead to particular kinds of dispute. So, some of the law relating to offer and acceptance was stimulated by the development of an efficient post in England. Similarly the ‘ticket cases’ arose out of the development of the railway system in England in the mid-nineteenth century.

1.14 It is clear that we are undergoing very substantial changes in the way we do business. Electronic developments mean that there are contracting parties who can reach millions of possible partners at the same time and that anyone on the internet is liable to receive many offers all the time. The possible consequences are considered by Roger Brownsword in Chapter 6 and Eliza Mik in Chapter 7.

6 See n 1.

7 [1915] AC 79. For fuller discussion see my article ‘New Zealand Illegal Contracts Act 1970 – an English View’ (1972) 5 New Zealand Universities Law Review 151.

8 [2015] UKSC 67.

9 2012 HCA 30. Elaborately criticized by no fewer than five leading Australian contract lawyers at (2013) 30 Journal of Contract Law 99.

1.15 A completely new type of situation is that electronic communication has made it possible for organizations to contract with billions of people at the same time. This is the position for instance with Facebook. It is clear that things can go wrong here and there has been extensive government action across the world. There are important and difficult questions as to the rights of individuals receiving messages from Facebook. Most of them are not paying but the transaction is hardly gratuitous as can be seen from Facebook’s bank balance. The problems which arise here are considered by Cirami Mastura Drahaman in Chapter 8.

1.16 An allied but older problem is the control of exemption clauses. In some form this has been troubling common law courts for 150 years. The common law evolved extensive controls which in many countries were thought not to go far enough, so that legislation has been added, in many cases extensive in effect. It seems unlikely this process h...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• List of contributors
• Table of cases
• Table of legislation
• List of articles
• Chapter 1. An overview
• Chapter 2. The implied obligation of good faith
• Chapter 3. Good faith in the Supreme Court of Canada
• Chapter 4. The quagmire of utmost good faith in insurance law: A comparative study of Malaysian, Australian, and English laws 
in consumer insurance contracts
• Chapter 5. Objectivity
• Chapter 6. Automated transactions and the law of contract: When codes are not congruent
• Chapter 7. The resilience of contract law in light of technological change
• Chapter 8. A collision of contract and privacy law in a digital environment—an accident waiting to happen! A comparative study
• Chapter 9. Setting out a comprehensive legal framework to govern exemption clauses in Malaysia: Lessons from the United Kingdom and Australia
• Chapter 10. Economic duress: Present state and future development in England, Australia and Malaysia
• Chapter 11. The validity of choice of court agreements in international commercial contracts under the Hague Choice of Court Convention and the Brussels Ia Regulation
• Chapter 12. De-identification of Islamic finance contracts by the common law Courts
• Index