An Introduction to Law: Ratio Decidendi and Obiter Dicta - Case Study Example

Q1. 'Although it is the ratio decidendi which is crucial when one is considering whether a case is binding, that is not to say that the obiter dicta are of no value.' Explain the significance of this statement within the English legal system. Ans: Ratio Decidendi and Obiter Dicta are the two parts of any decision making during the court proceeding. Ratio decidendi actually means "reason for deciding" but otherwise in law, it is any legal reason which judges use to make the decision of the case. It also forms the precedent which is than used for all future legal reasoning. When we talk about Ratio decidendi, it means the court is adjudicating over a matter and that case has similar facts and circumstances like a previously decided case than the court is generally bound to go by the earlier decision. However in this scenario, the court only considers the legal rules and principles decided in the earlier case. The court is not bound by the complete decision of the previous case. It is the holding of the principle of the law on which the case gets decided. It is the Ratio-Decidendi that sets the precedent and it's binding on the courts in future and it should be considered in combination to their facts of the case1. Obiter dicta actually mean "outside words". While in law, it is measured as the extra comments made by the judges during the proceedings. These are usually some examples which are related and judge discusses them. It should not be misunderstood as a part of precedent like Ratio Decidendi. The obiter dictum is the language in a decision that is not necessary to the decision. The guiding principles on which the judge and the court give the decision are the Ration of the case and other than this all the other statements made by the single judge or the bench is called the Obiter Dicta. Obiter Dictis is also known as the passing statements. A bench comprises of three judges, if one of the judge dissents against the judgment of the other two judges than the majority view would be called the Ratio Decidend.i Whereas, the dissenting judgment would be part of the obiter dicta of the whole judgment. Ratio Decidendi is binding on the lower courts as they act in the form of examples for them. Obiter Dicta can be just influential but not compulsory. It is also true that the part of the judgment that forms the part of Obiter Dicta are not wholly irrelevant and in some cases under the English legal system have espoused some important legal principles that have acted as a guiding force in a number of later decisions. Obiter Dicta act as a persuasive statement under the English legal system which is not binding. Although, some cases have elaborated on this part of the judgment and have come up with extensive and thorough analysis that though part of the obiter dicta of the judgment have later on acted as persuasive statements and as a guiding light in a number of subsequent cases in the English legal system2. Like in the case of 'Mama v. Flora Sasoon 55 IA360', the Privy Council's full judgment on the case of specific performance was obiter dicta as the Privy Council held 'there was no concluded contract at all'. However, the decision is binding on all courts as it settled the law on particular performance. Similarly, in 'Lawson v. Commissioner of Patents (1970), 62 C.P.R. 101 (Ex. Ct.)' The ratio decidendi or the decision was claiming straight to the "subdivided parcel of land" also does not fall within the description of "invention" in section 2. Especially, a sub-divided parcel of land is not represented as either an "art" or "manufacture" in section 2. The Court gave this narrow ratio, but also discussed in an elaborated manner if a method of subdividing land might constitute an "art" under section 2 (concluding that it would not), even though no such method claim was put before the Court to be decided. An ideal instance of both ratio decidendi and obiter dictum can be found in the judgment in the most famous of all insurance law cases, Castellain v. Preston (1883) in which the principle of indemnity in relation to a policy of fire insurance came up for adjudication. A passage from the judgment reads: "The very foundation, in my opinion, of every rule which has been applied to insurance law is this, namely, that the contract of insurance contained in a marine or fire policy is a contract of indemnity, and of indemnity only, and that this contract means that the insured, in case of a loss against which the policy has been made, shall be fully indemnified, but shall never be more than fully indemnified."3 This case has to decide whether a policy of fire insurance is a policy of indemnity or not In the judgment the words like 'a marine or' were obiter dictax. Before the Castellain judgment came, this principle of policy of marine insurance considered as a policy of indemnity, an already settled law and this judgment was not to be used as a persuasive precedent in future cases relating to marine insurance. On the contrary, this judgment acted as a persuasive precedent in cases of property insurance like theft etc4. In cases heard in courts like the House of Lords and the Court of Appeal in a bench of more than two judges, various ratios emerged pertaining to the point in contention but the majority view prevails and the minority view or the dissenting part of the judgment forms the obiter dicta of the judgment. However, it acts as a persuasive precedent in a number of cases. Q2. Hunter owned an old house which was empty and in need of repair and redecoration. His friend Marion needed somewhere to live, so Hunter agreed to let her stay in the property. As Marion had some spare time she carried out all the work that needed doing on the property. When Hunter saw the transformation of his old house he said : 'I cannot let you pay for all this; give me the receipts for all the materials and I will give you the money. I will also add something for all of your time and effort.' Advise Marion who gave Hunter the receipts two months ago but has not yet received anything from him. Ans: This issue pertains to the role of consideration played in Law of Contract. Consideration can be of many types like executory and executed consideration or past consideration. In Currie v. Misa (1875)L.R.10 Lush J. stated: A precious consideration, in the sense of the law, may consist in some right, interest, profit, or benefit accruing to one party, or some forbearance, damage, loss, or accountability given, suffered, or undertaken by the other5. The present problem relates to past consideration and according to the law of contract past consideration is not relevant. Past consideration is a mere sentiment of gratitude or honour prompting a return for benefits received. In the case of past consideration, the promise is subsequent to the act and independent of it; they are not in substance part of the same transaction. Thus if X saves Y from drowning, and Y later promises X, a reward and X's action cannot be relied on as consideration for Y's promise for it is past in point of time. Past consideration is, in effect, no consideration at all; that is to say it confers no benefit on the promisor, and involves no detriment to the promisee in return for the promise6. It is purely an act or moderation in past by which a person has benefited without incurring any legal liability. If afterwards, whether from good feeling or interior motives, the person who has benefited makes a promise to the person whose act or forbearance led to the benefit, and that promise is made upon no other consideration than the past benefit, it is unreasonable and cannot be enforced. 'Roscorla v. Thomas'(1842)3Q.B.234 adequately illustrates the principles of past consideration. In this case, the plaintiff purchased a horse from the defendant, who afterwards, in consideration of the previous sale, warranted that the horse was sound and free from vice7. It was in fact a vicious horse. The court held that the sale itself created no implied warranty that the horse was not vicious. The warranty had therefore to be regarded as independent of the sale and as an express promise based upon a previous transaction. It fell, therefore, 'within the general rule that a consideration past and executed will support no other promise than such as would be implied by law'.8 Thus, it can be said that Hunter's promise was subsequent to Marion's act and it can be best described as an act of appreciation. Therefore, Marion cannot sue Hunter on the base of his statement that comes under the purview of past consideration and will not under any case can be read as a valid promise. Q3. Kieron, who operates a small business running buses, enters into negotiations with a large bus company to purchase the right to operate one of their out-of-town routes. Kieron asks Fallon, the company's representative, how many passengers he can expect to use the route. After considering the figures for previous years, Fallon replies that he can expect 1500 passengers per week. Fallon overlooks the fact that the majority of these passengers are employees of a large food processing plant along the route. The plant is soon to close down, as Fallon should have known. Kieron is happy with this reply and enters into a formal written contract to purchase the right to operate the route. The contract makes no mention of the number of passengers that use the route. Three months after taking over the route, the plant closed down and only 400 passengers now use the service each week. As a result Kieron only just covers his costs each week. Advise Kieron as to any legal action that may be available to him. Ans. The present problem relates to the misrepresentation of facts by one of the parties in a contract. Kieron can take legal action under the 'Misrepresentation Act 1967' and can ask the Court for declaring the contract null and void because of the Negligent representation committed by the company's representative Mr. Fallon. Kieron also seek damages from the company under the provisions of the same act. Under Common Law a person who has been induced to enter into a contract as the result of a negligent misrepresentation made to him/her by the other party to the contract is entitled to rescind as in the case of fraud9. But before the passing of the Misrepresentation Act 1967, in the absence of a fiduciary relationship 'Nocton v. Lord Ashburton(1914)A.C.932' , there was no definitive authority for the proposition that there was also an entitlement to claim damages. In 1963, in the case of Hedley Byrne & Co. Ltd. V. Heller & Partners Ltd.(1964)A.C.465' the House of Lords extended liability in damages in tort to negligent misstatement and held that a duty of care could exist where there was an assumption of responsibility such as to create a 'special relationship' between the person making the statement and the person to whom it was made10. The principle is not restricted to statements that induce a contract (Box v. Midland Bank Ltd.(1979)2lloyd's Rep.391) and the effect of this decision on such statements and the law relating to misrepresentation was not directly considered, nor were the tests advanced by their Lordships for determining the existence of this special relationship uniform in their terminology.'(1964)A.C.465' however, it is clear that the existence of a contract between the parties does not exclude a parallel or concurrent duty of care in tort. 'Henderson v. Merett Syndicates Ltd.(1995)2A.C.145' Moreover, it has been held that into a contract can give rise to an action for damages in tort for negligent misstatement if the person making it has or professes to have special knowledge or skill in respect of the facts stated 'Eso Petroleum Co. Ltd. v. Mardon(1976)Q.B.801' or if the representation, in the framework is regarded as neither casual nor unconsidered, but to be relied on11. 'Howard Marine and Dredging Co. Ltd. v. A. Ogden & Sons Ltd.(1978)Q.B.574' The burden of proving negligence rests on the party alleging it, i.e. on the representee. Measure of Damages. Again the tort measure applies, but for a negligent misstatement only losses that are foreseeable can be recovered. Recent cases have considered the Position where the duty is not to advice but is only to take care that information is correct, for example the valuation of a property by a surveyor or a information given by a solicitor to a client. In such cases, the damages are not based on the assessment of what the injured party's position would have been had accurate information been given, which might, where that party would not have entered into the transaction at all, have included a fall after the date of the contract in the market value of the property purchased. It has been held 'South Australia Asset Management Corp. v. York Montague Ltd.(1997)A.C.191' that because the duty of the valuer is to take care to ensure that information concerning value is correct, a valuer is only accountable for the foreseeable loss of the information being wrong, so that the damages are the difference between the valuation given and the true value of the property at the time of the breach. This has been criticized as inappropriately capping the tort measure by reference to the contractual bargain 'Stapleton(1997)113L.Q.R.' and as redefining 'duty' in a way that prevents inquiry into the other legal issues; namely causation, remoteness, and measure of damages. 'Kenny & Good Pty Ltd v. M.G.I.C.A.(1992)163A.L.R.611' The uncertainities concerning the way in which the principle laid down in the case of 'Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd.' operated in respect of pre-contractual statements were largely removed by section 2(1) of the Misrepresentation Act 1967, which establishes a statutory right to damages: 'Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation made fraudulently, that person shall be so liable, notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented are true'12. The use of the words 'reasonable ground to believe' might suggest that the duty imposed upon the representor is equivalent to the duty of care in negligence, the extent of which may vary according to the circumstances in which the representation is made. So, in the light of the above discussion involving the legal principles concerning the present problem can give this notion that Kieron can seek damages from the company because of the misrepresentation about the actual facts made to him by the company's representative Fallon and which led Kieron to enter in to a formal contract with the company for running buses on a particular route and suffer losses as a result. Q4. Floyd agreed to build a garage for Landis. The contract provided that the price was to be a lump sum of 1700 payable on completion of the work. Floyd claims the work has been completed and seeks payment. Landis refuses to pay because a length of guttering is retaining rainwater and requires adjustment so the work is not yet complete. Advise Landis. Ans. Landis can sue Floyd for damages and breach of the contract due to the incomplete performance by Floyd. This position will be clearer from the following discussion. The general rule is that performance of a contract must be precise and exact. That is, a party performing an obligation under a contract must perform that obligation exactly within the time frame set by the contract and exactly to the standard required by the contract13. Sometimes, the standard will be strict. This is so in the case of many common law obligations such as a seller's obligation to load cargo 'Kurt A. Becher G.m.b.H. & Co. K.G. v. Roplak Enterprises S.A.' , not to ship dangerous cargo 'The Anathanasia Cominos(1990)1 Lloyd's Rep.277' and to obtain an export license. 'Pagnan SpA. V. Tradax Ocean Transportation SA.(1987)3 All E.R.565' It is also so in the case of the statutory implied terms of quality in contracts for the sale and supply of goods. 'Sale of Goods Act1979, ss.12,14' Sometimes, as in the case of contracts for services, it will only require the exercise of reasonable care 'Thake v. Maurice(1986)Q.B.644' or due diligence. Whether the alleged performance satisfies this criterion is a question to be answered by construing the contract, so as to see what the parties meant by performance, and then by applying the ascertained facts to that construction, to see whether that which has been done corresponds to that which was promised. If there is a slightest deviation from the terms of the contract, the party not in default will be entitled to say that the contract has not been performed and will be entitled to sue for damages for breach, and, in certain cases, to elect to be discharged. Thus in 'Re Moore& Co. and Landauer & Co.(1921)2K.B.519' D agreed to buy from P 3,000 tins of canned fruit from Australia to be packed in cases containing 30 tins. When the goods were tendered it was found that a substantial part of the consignment was packed in cases containing 24 tins. D was entitled to reject the whole consignment. Even if the performance affected is commercially no less valuable than that which was promised, there is a default in performance. So a contract to ship goods direct from Singapore to New York was held not to have been performed by shipping them to the American Pacific Seaboard and thence to New York by train. 'Re L. Sutro & Co. and Heilbut Symons & Co.(1917) 2 K.B.348 14. According to the above discussion it can be stated that Landis can not only refuse to pay Floyd because a length of guttering is retaining rainwater and requires adjustment so the work is not yet complete. He can even claim damages and sue for breach of contract by Floyd. Q5. Chambers Ltd agreed to sell three jet skis to Christie. Both parties were aware that Christie intended to operate the jet skis on Lake Lindford where water sports have been a thriving activity. Some weeks after the contract was made, the local authority with responsibility for lake Lindford unexpectedly passed a bye-law banning powerboats or jet skis on Lake Lindford with effect from the following year. Advise Christie, who has not yet taken delivery of the jet skis or paid for them and does not want to do so. Ans. Christie is in a safe position as far as the facts and circumstances of this case are concerned. The conditions under which this contract was made, keeping in mind the ultimate objective that was to be attained by Christie, this fact was clear in the mind of both the parties. The change of law has frustrated the very objective and the subject matter of the contract and Christie is discharged from his liabilities due to the frustration of the contract. This point will be more clear from the following discussion : The performance of a contract may be made legally impossible either by a change in the law or by a change in the operation of the law by reason of new facts supervening. The law may actually forbid the doing of some act undertaken in the contract. 'Denny,Mott & Dickson Ltd. v. Fraser & Co. Ltd.(1944)A.C.265' or it may take from the control of the promisor something in respect of which it has contracted to act or not to act in a certain way,as, for example, where, a piece of land subject to a restrictive covenant against building is compulsorily acquired and built upon by act of Parliament. 'Baily v. De Crespigny(1869)L.R.4Q.B.180. Such cases are explained by policy and 'the elementary proposition that if further performance of a contract becomes impossible by legislation having that effect the contract is discharged. 'Reilly v. The King(1934)A.C.176' For there to be frustration, the change in the law must be such as to strike at the root of the agreement, and not merely to suspend or hinder its operation in part. So it has been held that a 99 year building lease was not frustrated by Government restrictions on building for only a small part of the term, 'Cricklewood Property and Invetment Trust Ltd. v. Leighton's Investment Trust Ltd.(1945)A.C. 221' and that the rights of a payee of a cheque drawn on a bank in Holland were not discharged by an enemy invasion and occupation of that country rendering presentation for payment there illegal, but not elsewhere. 'Cornelius v. Banque Franco-Serbe(1942)1 K.B.29' The outbreak of war is another event which, by changing the operation of the law, may have the effect of abrogating obligations outstanding under a contract by reason of supervening illegality, if one of the parties resides in this country and the other in enemy-occupied territory and the contract is one which involves commercial dealings with the enemy. 'Ertel Bieber & Co. v. Rio Tinto Co. Ltd.(1918)A.C.' The above discussion put the points in a clear perspective that if there has been a change in Law or Public policy that results in the Destruction of the Subject matter or frustration of the contract or the objective to be attained through the contract between the parties then the parties can opt out of their respective contractual obligations citing Discharge by frustration. Bibliography Authoritative Report. 1995. House of Lords. Retrieved on 16th February 2009. Bailli.org. 2000. United Kingdom House of Lords Decisions. 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Edition: 4, reprint. Publisher: The Lawbook Exchange, Ltd. pp 1-2 Read More