English Contract Law - Walford v Miles - Case Study Example

The aim of the work is to try to identify the key contract law case in the English contract law in the 20th century. It is necessary to describe the case and to define the major reasons for considering it to be one of the major cases. The case to be described is the case of Walford v. Miles and its meaning is in revisiting the principles of good faith in the English contract law. English contract law case (Walford v. Miles) The description of the case It is stated, that connection of the legal rights and good faith principles have always been a problem for English contract law (Feinman, 1983) and a word for an English businessman has always been his bond in any business relationships. The case is connected with the situation when the parties were negotiating on the subject of Walford's buying the photography business belonging to Miles. They have come to a certain agreement as for the purchase, and Walford was going to provide Miles with the bank comfort letter with the purchase price; Miles in return was obliged and has agreed to terminate any other negotiations as for selling his business with any other third parties. Against previous agreement, Miles sold his business to the third party and thus Walford had to bring the case to the court for breaching the previous agreement. Traditionally, such kind of agreement would be called a 'lock-out' agreement, when one of the parties agrees not to perform negotiations for a certain period of time with any other third party; however, it was also concluded that the case lacked two essential components to be a 'lock-out' agreement: the period of time during which negotiations had to be stopped had not been defined, as well as any provision as for determining negotiations by Miles was absent. Despite the fact that Walford was insisting on the applicability of the good fait principle in the case, the Judge of the case, Lord Ackner, was sure that the principle of good faith was not applicable to negotiations, as it was contradicting the essence of negotiations as a notion. It was supposed that the principle of good faith is inconsistent with the notion of negotiations in the contract law, because it contradicts with the opposite opinions and positions the parties take in negotiations. However, the case should be viewed from another viewpoint: whether Lord Ackner was thorough in his research to state that the principles of good faith are inapplicable in the contract law, while they are absolutely acceptable in the US Law, and whether it is absolutely impossible to use the argumentative notions of good faith in the English contract law. Significance of the case The significance of the case is in many factors, which are worth being described in more details. First of all, in the classical contract doctrine, which is used as the basis for the contract law cases' resolution, English judges have not been stubborn and advanced in application of the good faith principles; this role has usually been left for the Parliament to make the necessary reforms in this relations. Though some judges display the desire to consider the cases in the light of the new requirements, understanding that ambiguous notions of estoppel and good faith should be used a solid grounds for the correct resolution of many cases. The opinion of Lord Ackner in the case of Walford v. Miles can be cited as follows: 'A duty to negotiate in good faith is as unworkable in practice as it is inherently inconsistent with the position of a negotiating party. It is here that the uncertainty lies. In my judgment, while negotiations are in existence either party is entitled to withdraw from these negotiations, at any time and for any reason. There can thus be no obligation to continue to negotiate until there is a 'proper reason' to withdraw. Accordingly, a bare agreement to negotiate has no legal content'. (Cumberbatch, 1992) The significance here is in the fact, that the judge had the right to assert that the principles of good faith are absolutely inapplicable to the notions of negotiations; it is even more significant that recent cases have shown more capability of judges to apply such principles to the contract law cases. The connection of good faith and uncertainty has become the major milestone in the case; this is one more reason for making this case significant. In previous studies conducted by Feinman (1983), it was stated that 'the courts would strive not to invalidate a provision for uncertainty and would, wherever possible, uphold commercial practices'. Moreover, it has been considered, that such 'lock-out' agreements which have been described in this paper, are not integral with the negotiations, are not subject to any contracts and are just instruments for conducting such negotiations. (Lord Steyn, 1997) Does it mean that the case of Walford v. Miles, despite the fact of making good faith principles inapplicable, still acknowledged the necessity to look at 'lock-out' agreements in the flow with the negotiations process. The ambiguity of the case was in the understanding that the lock-out agreement had not have any prescribed time for its validity and action, and thus it was difficult to admit that this agreement could be a contract between two businesses. However, in opposition to Lord Ackner, in the literature sources used for the work, one can read an opinion of Lord Bingham on the case and in relation to specifically the lock-out case: in the case he saw 'no obstacles in the agreement remaining in force for a reasonable time which would end if the parties reached 'a genuine impasse'; on the facts it is impossible to accept that the defendant's reasons for ending the negotiations could be an impasse bringing the plaintiff's period of exclusivity to the end'. (Lord Steyn, 1997) The case has become significant for its attempt to prove that application of good faith principles to the contract law will impose certain difficulties on the interpretation of the cases and contexts; however, this opinion is doubtful. The English contract law has always been characterized by the tendency to respond to the cases similar to Walford v. Miles without any reasonable application of good faith principles. Lord Ackner was sure, that application of good faith principles to the case was impossible for the fact, that 'for a contract to negotiate in good faith having no binding force is that the court could not estimate damages because no one could possibly tell whether negotiation will be successful or not.' (Cumberbatch, 1992) The issue of whether the court will uphold the obligations between the parties to negotiate in good faith has been a reason for disagreement for many years; but still Walford v Miles remains to be the leading case in the attempt to resolve this issue. It is interesting to take into account the legal considerations of several judges as for why the concept of good faith is inapplicable in the English law and why it still remains the issue, making the case of Walford v. Miles one of the unique cases in the English contract law. 1. Lord Bingham: 'In many civil law systems, and perhaps in most legal systems outside the common law world, the law of obligations recognizes and enforces an overriding principle that in making and carrying our contract parties should act in good faith; this does not simply mean that they should not deceive each other, a principle which any legal system must recognize; its effect is perhaps most aptly conveyed by such metaphorical colloquialisms as 'playing fair', 'coming clean', or 'putting one's cards face upwards on the table'. It is in essence a principle of fair and open dealing'. (Feinman, 1983) 2. Roy Goode: 'The predictability of the legal outcome of a case is more important than absolute justice. It is necessary in a commercial setting that businessmen at least should know where they stand The last thing that we want to do is to drive business away by vague concepts of fairness which make judicial decisions unpredictable, and if that means that the outcome of disputes is sometimes hard on a party we regard that as an acceptable price to pay in the interest of the great majority of business litigants'. (Feinman, 1983) However, how is the decision of the lords on the Walford v. Miles case in relation to inapplicability of the good faith principles concerns the following statements which can be found in literature and which have direct connection with the English contract law: 'A party, which has negotiated or broken off negotiations contrary to good faith and fair dealing is liable for the losses caused to the other party'. (Lord Steyn, 1997) Can the significance of the case be see through understanding that Lord Ackner was reluctant to apply the notions of good faith, making the case, though predictable, and fair on the surface, absolutely unfair in its essence Conclusion The significance of the case of Walford v Miles is in the fact that the notions of good faith have always been attempted to be applied to the contract law, but this case has become the bright example of the situation, when the judge states that these notions cannot be applied to any case in the contract law and even contradict it; the notions of good faith as it has been seen, can and should be applied to the sphere of contract law. The significance of the case is also in the fact that the precedent has become the basis for the similar decisions in the later years without going too deep into the reasons and grounds of the decision on Walford v. Miles, while in case there had been more analysis of the case, it would be possible to state that good faith principles had worked for the benefit of the future contract agreements. The case has been chosen for the consideration and analysis because its significance is evident. In the disagreement between Miles and Walford there are many contradictions, but these contradictions have not been resolved. Lord Ackner has become a bright figure and his unacceptability of the good faith principles is cited in many literature sources for being an example of landmark in the history of the English contract law. Despite the oral agreement between Miles and Walford, and despite the fact that the agreement had not any definite term of action, according to the principles of good faith the agreement should have been valid through the reasonable period of time, and it is known that the party which has breached the laws of good faith can become liable for the losses which are carried as a result by another party. This is why Miles could become liable for the losses carried by Walford in the disagreement, and thus the case can be viewed as a bright example of the incomplete decision due to the reluctance of the judge to apply the principles of good faith. References Cumberbatch, J. (1992). In freedom's cause: the contract to negotiate. OJLS, 12: 587-560 Feinman, Jay M. (1983). Critical approaches to contract law. UCLA L. Rev. 30: 829-836 Lord Steyn. (1997). Fulfilling the reasonable expectations of honest men. LQR 113: 433-439 Read More