Summary HC week 48

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Summary - HC week 48

  • 1 Introduction

  • What is the class about?
    General principles of English contract law.
  • What are the focusses?
    Formation of contracts, interpretation of contracts, non-performance and remedies.
  • What are the 5 starting points of English contract law?
    1. There is a general law of contract.
    2. Common law principles and rules.
    3. Limited role for the courts to intervene in the contract.
    4. No general overriding duty of fairness, reasonableness or good faith.
    5. Commercial contracts are generally longer.
  • What does a general law of contract mean?
    A general approach of contract is general. In England there are no special contracts.
  • How does an English lawyer see the contract?
    What the contract is, whether it is a contract, what the terms of the contract are depends on the intention of the parties.
  • What is additional to the general law of contract?
    There is a general concept of contracts, which occasionally gets tweaked by particular regulation for particular contexts.
  • When is the most of the modern Englsih contract law developed?
    In the 2nd half of the 19th century.
  • Why is it important to understand this?
    The way a law develops has a context.
  • Which context?
    The social context of the 2nd half of the 19th century is the freedom of contract.
  • What was the result of this context?
    Those are the kind of underlying ideas, which the judges were responding to when they built what we now recognize as the common law of contract.
  • What was a 2nd half of the 20th century phenomenon?
    The idea of protecting weak parties through special rules and saying consumers are a group of people that need special protection.
  • What is the function of contract according to English lawyers?
    To regulate between two parties who are equal and need the facility of the law to enable them to enter into transactions on an equal level, at arm's length.
  • What does that mean?
    There is a very limited role for the courts to intervene in the contract.
  • What's the courts job?
    To resolve disputes arising out of the contract. Their job is to find the solution and apply the remedies for the solution.
  • What is ridiculous?
    The notion of redelijkheid en billijkheid.
  • What is the approach of the English lawyer?
    Certainty, predictability and clarity.
  • Why is that?
    Not wanting to leave broad principles of discretions in the court, even if they're not used very much.
  • What is the main principle?
    Freedom of contract?
  • What is the result of that?
    The law should facilitate the contract, not regulate it.
  • What is a contract?
    An economic instrument between parties bargaining at arm's length.
  • What is the difference in writing contracts between English lawyers and civil lawyers?
    Contracts of English lawyers will be five times as long and way more detailed. 
  • What will you tend to find?
    Detailed express provisions.
  • Why is that?
    One of the reasons we have detailed express provisions is because we have general law of contract. We tend not to have lots of provisions that will automatically be goverened by the code, because we don't have one. Another reason that a Dutch contract can be shorter is if you know what kind of contract it is, then your code automatically regulates it.In a system that doesn't have special contract regulation, you need to write the things out.
  • What if there is detailed statutory regulation?
    The instinct of an English lawyer is not to rely on that being part of the contract but to repeat it in the contract anyway.
  • Why is that?
    There is a strong view of the English lawyer that the document should be complete.
  • What if there are obligations that you didn't mention in the contract?
    It would become part of the contract because of the nature of the contract, if some legal rule will put it in there --> implied term.
  • What is an entire agreement clause?
    The only obligation in contract exists between two parties is those written in this contract.
  • Why do we do it?
    We do it partly because we can't fill the gaps so easily and partly because the parties want to make their contract judge proof.
  • What is really out of the window during the negotiations in English law?
    The Dutch idea of entering into negotiations creates a legal relationship, which you might have to pay to get out of if you break off the negotiations without a good reason.
  • What happened in Walford v. Miles?
    Argument about what the parties ha done to agree to negotiate with each other. There was even an express agreement to negotiate and to lock out other negotiations.
  • Can you do that?
    No. The idea that you can lock yourself into negotiating with the other party doesn't work. You can lock yourself out of negotiating with third parties as long as it is precise and definable. 
  • What did the lord say?
    The concept of a duty to carry on negotiations in good faith is inherently repugnant to the adversarial position of the parties when involved in negotiations. Each party to the negotiations is entitled to pursue his own interest, so long as he avoids making misrepresentations. To advance that interest he must be entitled, if he thinks it is appropriate, to threathen to withdraw from further negotiations or to withdraw in fact in the hope that the opposite party may seek to reopen the negotiations by offering him improved terms.
  • At which moment do you have a legal relationship to an English lawyer?
    When you got formation of contract.
  • What's the general approach up to that point?
    You don't owe the other party any duties. You're entitled to look at your own interests.
  • What are the limitations on that?
    You're not allowed to make misrepresentations. 
  • Why can't you contract for a general principle of negotiate in good faith?
    The words 'in good faith' don't mean anything. How is a court suppose to know what constitutes good and bad faith when there is no general duty to negotiate in the first place?
  • What doesthis mean?
    There is no positive duty of good behaviour during negotiations, except not to tell lies basically.
  • How can I contract not to withdraw?
    There is a possibility of giving you a guarantee time to accept by you having an option. A contract of option is where i say you have till thursday and if you contract, you buy the right to have until thursday.
  • How do we call that?
    Letter of intent.
  • What is a misrepresentation?
    Making a misrepresentation is actively by words or by conduct giving the wrong impressions to the other party about something. It must be active.
  • What does English law thinks it's fundamentally different?
    Failing to disclose something.
  • What does that mean?
    There is no duty to disclose information as a rule in English law.
  • What is the English approach?
    Each party has to be aware. If there is something that really atters to me, What i got to do is to ask you to confirm the facts and if you tell me something that is false, then i got a remedy against you.
  • There are some particular duties. Which?
    In the financial sector for example. The reason we have to have specific regulation on specific duties of disclosure in English law is precisely because there is no background general duty of disclosure in general contract law.
  • What's the result of that?
    There is a very strong practice of due diligence.
  • What are warranties?
    What warranties do is having done the check on all the details about the company, you then ask the company to confirm in a contract that what they've told you and there is nothing that they haven't told you.
  • What do we have during the negotiations?
    A general law of respecting confidence.
  • Why are there situations where you can get sanctions against you behaving badly?
    Beaus you've done a very particular thing that's wrong and recognized by the law as wrongful rather than because we have a general principle of looking to the othter parties interest. Thefocus is on particular wrongs.
  • Why do we do that?
    A lord develops law case by case. Our judges in the common law don't create general principles in their cases, what they do is answer a particular situation. We build up the law bit by bit by case law.
  • What is the result?
    At the end of the day you can see the overall picture but to a common lawyer you don't start general and then see how it works in particular.
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How should you properly characterize the loss in this case?
Even if you give the respondent the money, he wouldn't spend it on digging out the pool again because the pool does the job anyway.  The implication is that if they dug a pool 3 feet deep, you should get 21500 pounds to get it properly. Not only was the economic value the same but the utility of it was the same as well. No reasonable person would spend the money on redigging the pool.  it would be economically wasteful to do it.  If it’s not reasonable to spend the money requiring it to be redone, we shouldn’t award it as damages. Damages would be a waste of resources. It would in effect be punishing the defendant for not doing the job properly because of making him pay more damages for a loss he hasn't really made in economic terms to the other party.          
What's the loss?
What was the value of the asset you were promised and what was the value of the asset you've had? It costs more to build it but the thing that's deliverd to you has the same value. How much money do you need to enable you to get the acutal performance that you failed to be given? if that's what we mean by economic loss it was 21.500 pounds
What's the remedy?
Damages.
What were the facts in Ruxley Electronics & Construction v. Forsyth?
Contract for a domestic swimming pool being built for the price of 18.000 pounds. Contract required a maximum depth of 7 feet 6. What actually happened, the contractor built it with a maximum depth of 6 feet.
Wanneer specific performances?
Alleen bij goeeren die niet in de markt replaceable zijn. Ook nooit bij services.
Can a tenant be ordered to reopen and trade in accordance with the contractual obligation?
specific performance is a discretionary remedy. The starting point in English law is the rights to damages and it’s always a matter of the court’s discretion whether the court is prepared to order a specific enforcement of the contract.  Specific performance will not be ordered when damages are an adequate remedy.  The problem is, what happens if they don't properly fulfil the order?  You get the court order, so the supermarket comes back in and puts one packet of cornflakes on the shelf. You’ll end up straight away with a litigation and you got 20 years of that. First of all, the obligation is not so unclear it can’t be a contract but it’s not so clear that there won’t be arguments about whether it is properly fulfilled.  A remedy which enables him to secure, in money terms, more than the performance due to him is unjust. From a wider perspective, it cannot be in the public interest for the courts to require someone to carry on business at a loss if there is any plausible alternative by which the other party can be given compensation. It is not only a waste of resources but yokes the parties together in a continuing hostile relationship. The order for specific performance prolongs the battle.            
What are the arguments to enforce a company to perform?
They obligated themselves. The big stores have often got a low price to get them in with an obligation to stay because the whole point is that you want them there. Whose going to lose with compensating through damages? the other stores. there not in the leasecontract.
What were the facts in Cooperative Insurance v. Argyll services?
You have a 35 year lease of a space in a shopping center. Somebody puts up a big shopping center and you have two or three big stores and lots of small stores. This is one of those kind of shopping centers. One of the big spaces was for a national chain of supermarkets. There was a clause in the lease which requires the tenant to keep premises open for retail trade during the usual hours of business for the whole period of lease. You have 35 year lease with a 35 year obligation to keep the supermarket open and trading at normal business hours. It turns out that there was a recession. For various reasons the super market chain viewed its financial position and decided that it couldn't keep open all of its stores. So they closed this one. 
What was the argument?
Equity. As soon as you even allow the possibility of the court doing that, that straightaway undermines the certainty.
There is a breach of contract. What is the consequence of that?
The principle that equity will restrain the enforcement of legal rights when it would be unconscionable (unfair) to insist upon them has an attractive breadth. But the reasons why the courts have rejected such generalisations are founded not merely upon authority… but also upon practical considerations of business (commercial terms). These are, in summary, that in many forms of transaction it is of great importance that if something happens for which the contract has made express provision, the parties should know with certainty that the terms of the contract will be enforced. The existence of an undefined discretion to refuse to enforce the contract on the ground that this would be ‘unconscionable’ is sufficient to create uncertainty