The Law of Contract - Essay Example

Law of Contract As Used in Courts Today Perceives Market in an Out d Vision and Privileges Certainty, Form and Finality over Relationships and Fair Dealing At the elementary level, contract law seeks to remedy breaches and secure expectations1. Market economies embrace capitalist principles, most of which oppose reasonable logics as applied by courts in relation to contract law.2 With respect to contract law, two conflicting policies are consumer-welfarism and market individualism3.In view of the courts’ intervention in regaining normalcy in unfair practices, market fair dealings and contractual terms may face difficulties with the appropriateness of the interpretations thereon. Courts dissect the terms and conditions of the agreement in case of a dispute and the inconsistencies therein and consider formalities and finality as much as certainty and appear to dismiss fair dealings and agreements arrived at by consent. This happens if the courts hold the opinion that the contract defied reasonable agreement tenets that equality upholds. Equality as an opposing principle practiced under capital regimes exposes the markets to uncertainty before the courts with regard to compliance with the law of contract. Certainty is a key theme in courts of equity, which comes at a cost of overlooking relationships and fair dealings in the modern contract law setting. This implies that the government through the judiciary intervenes in various spheres of market operations by enforcing stipulated contract rules and procedures against all odds of relationships and fair dealings.4 The privilege given to certainty in contract law is seen in many cases, a case in point being Gibson v Manchester City Council.5 In the case, the Court of Appeal held that no contract had been established between the two parties, considering that the council’s letter did not present a contractual offer. In this case, there was no certainty regarding the offer. Another case that exemplifies the privilege given to certainty is Carlill v Carbolic Smoke Ball Company.6 In this case, the Court of Appeal held that a contract had been formed between Carbolic Smoke Ball Company and Carlill, considering that the advert posted by the latter regarding the effectiveness of the product on offer presented all the elements of a binding contract.78 Certainty in the terms of the contract is emphasized in the words of Lord Justice Lindley ‘We are dealing with an express promise to pay $100 in certain events’.9 Freedom of contract encompasses the ideals of fairness and equality10. Equity as the main principle in contract law provides for certainty and clarity against other factors that complicate a judge’s perception of wisdom11. A formalized set of rules in the contract law jurisprudence affects the free market setting in which the modern economic procedures take place. In the description of the free market economies, application of a strict and rigid legal regime often translates into complication of freedom of contract, as the economy requires. In this discussion, the principles of contract law in force illustrate the apparent disconnect with the freedom of contract, relationships and fair dealing. Mitigating principles under contract law implies that the parties to a contract must accept the exchange value forwarded by the other party to avoid sustaining avoidable loss.12 In terms of fairness interpretation, mitigation principles may not apply in cases where the relationship between the parties does not allow such cooperation as would reduce loss. Market setting based on business rivalry and competition may not allow such conditions as would enable the parties to partake in contractual obligations of mitigating losses even when aggrieved. In terms of remoteness as observed in Transfield Shipping Inc. v Mercator Shipping Inc. (The Achilleas),13 mitigation is particularly difficult in realization of contractual obligations. It is impossible for mitigating procedures to be distinguished from acceptance of the contract, which makes contract law unfair on the aggrieved parties. In terms of the extent to which mitigating steps do not amount to acceptance of the contract, the courts offer little remedy to contractual parties undertaking extra efforts beyond their mandate and obligations. In terms of market procedures, customer-seller relationships depend on factors beyond reasonable interpretations as mitigation factors assume. Over the years of practice, the judiciary has partaken in remodeling of the law of contract and eventual introduction of principles of that override the importance of fairness and relationships. Relationships, according to Stychin, embody and achieve the specific ideals of contract14. Presumed intent as originally applied in contractual dealings no longer forms the courts’ adjudication highlight since the judicial reformation that diluted the freedom of contract. In view of the abandonment of intent over what the courts’ presumed justice, market values based on free economic processes continue to experience bottlenecks from the courts. Perhaps one of the most important obstacles in the implementation of a free contract regime that coincides with the free economy is the equitable reformation of the prevalent contract law jurisdiction. Exceptions created in the reformation concentrate on the satisfaction of the contractual provisions originate from the interpretation of the contract by the judiciary, as opposed to the intent of the contract. Subsequently, contractual satisfaction as a measure of meeting contractual obligations among the contracting parties exposes the adjudication process to limitless possibilities of contestation and disputes. Contractual formalities surrounding the modern regime in terms of contractual interpretations complicate the complementarity needed for the free economy setting. Courts have for a long time depended on the formality of the judicial procedures to determine disputes in contracts. Formality in contract law is perhaps among the most rigid jurisdictions in the modern interpretations and applications. As an illustration, a number of contracts must be sealed in writing and signatures appended for authentication. Several contractual procedures also require specific formality compliance including exchange of particular documentation and instruments. This perception implies that a party cannot have a fair claim on a deal completed without following the formalities defined by contract law. For instance, the sale of a piece of land must follow the formal documentation transfer procedures that fail to recognize transfer of consideration alone. In several interpretation settings, courts embrace the use of the contextual definition of the contract as opposed to the implied terms of fairness and relationship influence. Alternatively, the courts continually find it difficult to interpret the difference between economic interpretation and implied terms at the time of contract. As mentioned above, intent captured by the contracting parties during engagement refer to standards that the current laws cannot enforce.15 The impact of the courts’ direct participation in the interpretation of contractual terms without regard of contracting parties’ relationship exposes the whole interpretation to excessive and harmful judicial influence. In terms of the freedom of the market economy in which contractual deals take place, such interventions as seen from the courts translate to influence of the state in commercial procedures. Commercial law reminiscent of the special circumstances of the contractual environment must not bear ordinary influence of the judiciary as witnessed in modern contract law. In contract law in the UK and in many other jurisdictions, the definition of fairness in terms of pricing fails to capture the direct interpretation of fairness as a free market would want.16 Despite the spirited interventions that the law of contract makes in adjudication of commercial processes, it fails to capture the idea of a fair price and courts dismiss fair price arguments. Fairness in contracts would imply that the courts have a definite mechanism to intervene in the definition of prices, having engaged in clarification of nearly every other commercial aspect. Despite the possibility that such a move would only tighten courts’ interference with commercial processes, it would make the intervention not as selective as it is in the current state. In light of the developments in the contract law over the years, it may have increasingly become difficult to define fair price for any contractual consideration. Despite the difficulty in defining fair price, current contract law attempts to impose good faith in contractual deals. In terms of the good faith as encapsulated in several jurisdictions, good faith forms central adjudication criteria for courts to determine compliance with contractual obligation.17 Good faith inclusion as an expressly enforceable aspect of contract law is a development in the right direction but misses various enforcement criteria. Difficulties in the determination of the meaning of good faith during negotiations as different interpretation factors would make it more remotely conceivable by the courts. The diversity of the contractual obligations to include express and implied classes leaves the law of contract inadequate to handle a number of uncertainties with appropriate subjectivity. Under the provisions of current contract law, certainty takes precedence over relations and fairness. In view of the consideration of the process of negotiations, parties to a contract can dismiss obligations where a contract has terms relating to ‘subject to contract’. Such a setting exposes the contractual obligations to uncertainty, which would be overcome if the regime considered good relations and fairness. For example, the case Dickinson v Dodds18 relates to the effectiveness of notification by a third party in regards to the withdrawal of an offer in spite of the uncertainties that may arise with respect to the identity of the third party. The court in this case, ruled that any reliable third party can communicate the withdrawal of an offer by an offeree. Common law jurisdiction in contracts does not consider substantive fairness in the contractual consideration exchanging hands. The terms of contract may, however, be revisited to determine the level of intervention necessary to determine the adequacy of the consideration. In various applications, the threshold set for such intervention regarding consideration must touch on the impact of ‘shocking the conscience’. Substantive unfairness before courts implies that contracts can be adjudicated on availability of the consideration on which the negotiations proceed without requiring equality as a threshold for transfer.19 Equally, consideration agreed in the negotiations prevails over fairness, which amounts to a serious market misrepresentation. In view of ordinary market procedures, the courts would fail to accomplish principles of marketing that heavily rely on relations that also depend on fairness rules. In the determination of the extent to which consideration constitutes the courts’ adjudication in contracts, fairness standards may not satisfy the courts as different sets of considerations such as form and finality take precedence. The privilege given to finality in contract law can be exemplified using the case Fisher v Bell.20 The case which involved the requirements of offer and acceptance was heard by the High Court. The defendant, who had displayed a flick knife in the window of his shop with a price tag placed next to it, was accused of offering the good for sale against the law. The court held that merely displaying the product did not constitute an offer and was, instead, an invitation to treat. While it was true that the sale of weapons of the nature stipulated in the Restriction of Offensive Weapons Act of 1959, Bell was acquitted on the premises that there was no finality in the supposed contact as acceptance is made at the point at which one makes payment. Adequacy of consideration forms a part of courts’ interpretation of fairness in terms of the exchange supported by the contract. This threshold may not capture ordinary interpretation of fairness in terms of value that parties may claim in the contract. Old court practices did not highlight adequacy in consideration but fairness issues marring the contract law over the years pushed the jurisdiction on contracts to embrace principles highlighting genuineness and adequacy. Interventions of reasonable principles incorporated in contract law over the years continually enshrined the doctrine of adequacy into the main issues facing value attachment to the consideration. Whereas reasonable principles in attaching adequacy appears to introduce fairness in allocation of value exchanging hands, several loopholes exist in the procedures followed by courts to determine the adequacy of consideration. This approach adopted by the courts does not tackle the absolute resolution of market realities in value allocation. Forces of demand and supply drive markets and it may not occur to the courts that value and adequacy considerations would face difficulties in liberalized perceptions by the parties. Courts’ intervention in allocation of value in consideration directly affects free bargaining, which is an excess on the role of the judiciary in commercial interventions. Courts’ investigation on the adequacy of consideration would take a socialism approach where rules of market freedom face stiff opposition from the state mechanisms. The case Barry v Davies involved an auction without a reserve price.21 The court heard that a bidder had placed a bid of Ј200 which the auctioneer thought was too low a price for the goods. The court held that a bid in an auction has the possibility of being accepted unless it is otherwise withdrawn. Although the price was not fair, the court held that the auctioneer’s benefit to drive up the price bid was enough consideration. Bibliography A Simpson, ‘Quackery and Contract Law: The Case of the Carbolic Smoke Ball’ (1985) 14 (2) Journal of Legal Studies 345–389 Barry v Davies [2000] EWCA Civ 235 C Hugh, The Law of Contract (Cambridge University Press 2003) C Stychin, ‘De-Meaning of Contract’ Paper presented at the annual meeting of the The Law and Society, (J.W. Marriott Resort, Las Vegas, NV, 2009) http://www.allacademic.com/meta/p17235_index.html accessed 1 December 2012 Carlill v Carbolic Smoke Ball Company [1893] EWCA Civ 1 Dickinson v Dodds [1876] 2 Ch D 463 Fisher v Bell [1961] 1 QB 394 Gibson v Manchester City Council [1979] UKHL 6 J Adams and R Brownsword, The Ideologies of Contract Law (1987) 7 Legal Studies 205-213 J Gross, ‘Teaching Humanities Softly: Bringing a Critical Approach to the First-Year Contracts Class Through Trial and Error’ (2012) 3 California Law Review 19–25 J Milhaupt and K Pistor, Law and Capitalism: What Corporate Crises Reveal about Legal Systems and Economic Development around the World (University of Chicago Press 2008) J Poole, Casebook on Contract Law (Oxford University Press 2003) L DiMatteo, ‘An Analysis of the Twentieth Century’s Equitable Reformation of Contract Law’ (1999) 33 (2) Law Review 265–357 R Dore, ‘Goodwill and Market Capitalism’ (1983) 34 (4) British Journal of Sociology 459–482 R Hillman, ‘The Crisis in Modern Contract Theory’ (1988) 67 Texas Law Review 103–136 R Shamir, ‘Capitalism, Governance, and Authority: The Case of Corporate Social Responsibility’ (2010) 6 Annual Review of Law and Social Science 531–553 S Macaulay, ‘An Empirical View of Contract’ (1985) Wisconsin Law Review 465-482 The Achilleas or Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48 Read More