Reproduced with permission of Jason W. Neyers, Richard Bronaugh & Stephen G.A. Pitel eds., "Exploring Contract Law", Hart Publishing (2009). To order this book, go to <http://www.hartpub.co.uk/books/details.asp?isbn=9781841139067>.
Jason W. Neyers, Richard Bronaugh & Stephen G.A. Pitel
The chapters in this book arose from the 'Exploring Contract Law' symposium held at the University of Western Ontario, Faculty of Law, on 10-11 January 2008. The symposium brought together leading contract scholars, private law theorists and judges from around the common law world. The purpose of the symposium was to have these thinkers examine contract law with fresh eyes -- to explore it anew. Thus, the presenters were asked to explore contract law (or its related doctrines) in one of three ways. First, they could (re)explore doctrines that are considered tangential or antiquated. This task was undertaken, for example, in the presentations by Mindy Chen-Wishart and Gerald Fridman. Secondly, they could explore what appeared to be settled principles in light of recent case law developments. This was done most clearly in the presentations by Robert Stevens, Kelvin Low and Rick Bigwood. Thirdly, they could explore black letter contract law from a theoretical or comparative perspective. Many of the presentations did this in one form or another.
As noted by Justice Binnie in his foreword, collectively these explorers can also be divided into two groups, though not without overlap. Some explorers, particularly the authors of the articles which open this collection, took a theoretical perspective. Others took a more practical view, concerned with doctrine and its impact on practitioners and the courts. Depending on their own leanings, readers will find that some of the resulting articles blaze new trails through terrain that feels more familiar to them, while others bushwhack into less charted territory.
Beyond the formal presentations, which have become articles in this collection, the symposium was enriched by commentary and questions from scholars and theorists such as Peter Benson, Ralph Cunnington, Daniel Markovits, John McCamus, Michael Pratt  and John Swan  [page xi] and from justices of the Supreme Court of Canada, the British Columbia Court of Appeal and the Court of Appeal for Ontario. For two days, those assembled were treated to a rich diet of scholarship and informal exchange and this collection is the result of that endeavour.
* * *
Stephen Smith's article opens the book by seizing on its theme of exploration. He does this not in the way of those seeking out new lands in distant places but in the way of those who 'advance tentative observations' on what is already in place. Thus he wishes to improve the existing map of contract law, that is, to be a logical, local cartographer and not a scout. To this taxonomical end, he argues that many of the rules that are conventionally regarded as contractual, and that, as a consequence, are regularly invoked to support a particular theory of contract law or explained on the basis of such a theory, are not in fact contractual at all. Instead, they should be regarded as belonging to the (hitherto unrecognised) general -- which he labels 'vertical' -- part of the law of obligations. Smith concludes that failing to pay attention to contract law's special border -- which he labels 'horizontal' -- with the general part can lead 'scholars, judges and lawyers to apply the wrong principles to understand legal rules, to draw the wrong inferences from those rules, and to fail to make appropriate generalisations'.
Helge Dedek's article is inspired by the works of Peter Birks in general and Stephen Smith in particular and offers a comparative law perspective on the taxonomic debate in common law scholarship. Of course, the attempt to impose a logical order on the law is the hallmark of civilian, and particularly German, 'legal science' of the nineteenth century. Without seeking to discredit the undertaking, Dedek acknowledges that modern approaches have surpassed nineteenth century formalism by explicitly taking the normative (or, as Smith puts it, 'moral') implications of legal classification into account. However, drawing from experiences with the German Civil law, Dedek focuses on the downside of dividing the law of obligations into a 'general' and a 'special' part, namely technical problems regarding the formulation and application of abstract 'general' rules and the problem of the 'hardening of categories,' a phenomenon which could lead to an intellectual rigidity that curtails the argumentative potential of legal discourse. The latter problem is illustrated by comparing how different legal traditions conceptualise the 'reliance interest' in contract damages. [page xii]
In his article, Stephen Waddams examines the concept of principle -- that is, what we mean by calling something a principle -- in relation to the doctrine of consideration. Whereas Smith and Dedek are concerned with the general and special borders of contract law, Waddams is more concerned with content and substance than with form and taxonomy. Yet this concern has formal or taxonomical effects relevant to the prior two articles. Waddams notes that Blackstone did not think of contract as an independently existing field of law but rather thought of it as part of several different areas of the law. Hence it would have no special borders and would be found in several different places on a map. Waddams argues that a historical study cannot establish either (a) the correct meaning of the word 'principle' or (b) the 'correct' rules of contract law. Being unable to find historically a single or fixed content for the doctrine of consideration, Waddams concludes simply that the regular appeal by the courts to the concept of principle has historical significance and shows that neither the usage nor the law (and its taxonomy) is immutable or eternal.
Catherine Valcke's article compares two national legal systems and so further complicates the issue of the taxonomy and content of contract. Her aim is twofold: (a) to demonstrate that there are peculiarly different French and English thought structures animating the intellectual life and law of French and English societies, and (b) that one of the purposes of comparative law, as a self-standing academic discipline, is to uncover and compare these different thought structures. The article draws parallels between French contract law (subjective intention as it informs issues of mistake and interpretation) and Rousseau's conception of the state, and draws parallels between English contract law (objective intention as it informs the same issues) and Hobbes' conception of the state. Valcke argues that although these conceptions may differ in their social value, they are internally accurate in that each correctly reflects the distinctive self-understandings of contract law in the two nations. Such a conclusion has clear implications for exploring or 'mapping' contract law through form and content.
Andrew Gold examines yet another border issue for contract law, namely the line between a moral agent's understanding of the obligation of promising in ordinary life and promissory obligation as enforced in contract law. Gold addresses the claim, recently made by Seana Shiffrin, that the doctrine of consideration presents a troubling divergence from [page xiii] promissory morality. Noting that Shiffrin considers matters only from the promisor's point of view, Gold takes up the position of the moral promisee. Here Gold finds that promissory morality and contract law do not diverge. He affirms that when a gratuitous promise is broken, the moral promisee gains a right personally to rebuke the promisor, but no more -- neither in morality nor in law. But when the promise received by the promisee is part of an agreement grounded in an exchange then a stronger right to performance is acquired by the promisee, both morally and legally. In fact, this emergent moral right is to a remedy from the promisor in case of breach and justifies creating (as substitute for self-help) the legal power for coercion through the state -- something well beyond rebuke. The existence of contractual consideration thus serves, Gold argues, to justify an augmented moral right, a right that cannot exist in this way when the promise has been gratuitous. This conclusion is contrary to Shiffrin's divergence thesis about the consideration doctrine. The quid pro quo requirement of the bilateral contract should not present an embarrassment for the agent seeking to live a moral life.
Gold's article makes the moral and legal right to a remedy, typically damages, a consequence of a promisee's having provided consideration in a bilateral contract to the promise breaker. Yet Smith, in the first article in this volume, would not regard damages as part of contract law proper. To understand damages, he holds, one must look up to what is more general in law because 'the duty to pay damages is not uniquely a response to breach of contract'. Still, one cannot deny (and Smith does not deny) that damage rules must be understood in order to appreciate the practice of enforcing contracts.
One turns then to the article by Charlie Webb, who asks what justifies an award of damages for breach of contract when performance clearly is what a party contracts for. Webb observes that: 'To obtain performance is one thing; to receive a sum of money to make up for the losses caused by not obtaining performance is something different.' For example, if the right to performance is taken seriously, then it would seem that specific performance should be the natural remedy. Nonetheless, the occasion for the performance may be past or its reclamation may demand undue supervision by the court. What then? Webb claims that this contractual right 'can, sometimes, be effectuated through an award … which the claimant uses to purchase an equivalent "performance" from an alternative [page xiv] source'. The aim is to find remedies which as much as possible adhere to the 'special' domain of contract law. Any damages award that goes beyond simulating performance, Webb claims, requires reflection on 'the norms and ideals which shape and justify the law'. Thus, Webb would seem to be responsive to Smith's distinction between 'special' and 'general' since it appears that once one leaves the realm of specific performance and damages which simulate performance, it appears as if one must depart from the 'specific' and pass through into the 'general' area of the law of obligations.
In the second damages article, Robert Stevens assesses whether the recent House of Lords decision in Golden Strait Corporation v Nippon Yusen Kubishika Kaisha (The Golden Victory) was rightly decided. His ultimate conclusion is that the result is defensible if one differentiates between damages representing the right to performance (Webb's focus) and those awarded for consequential losses. Using examples drawn from a wide range of contracts (such as sale, carriage and construction) Stevens argues that this differentiation is necessary since: (i) the rules for the assessment of these two types of damages (such as mitigation, remoteness, timing of assessment and ancillary benefits) are quite different, and (ii) it is the only coherent way to justify otherwise inexplicable differences in damages quantification. Thus Stevens argues that although damages for breach of contract are commonly thought to be awarded only to compensate the claimant for loss or, more rarely, to strip the defendant of a gain, 'general' damages are commonly quantified by reference to the value of the contract right which the defendant has infringed, despite the absence of any consequential loss. Moreover, he claims that once awards of 'substitutive' damages are accepted, it is doubtful whether there is significant authority supporting the award of a remedy assessed by reference to the defendant's gain.
Having considered the general border of contract law through the law of remedies, there is the special border still to be examined. How does contract interact with or separate itself from other areas of law on the same plane of a legal structure? This is the place where every field of law, while 'special,' can be interactive with others. The next five articles explore the special or horizontal border.
In Anglo-Australian law, it is unclear whether proprietary and equitable estoppel form part of the law of contract, part of the law of wrongs, or a separate part of the law of obligations. Adopting Birks' taxonomy that organises private law according to various rights-creating events, Andrew [page xv] Robertson argues that these estoppels cannot be seen as part of the law of wrongs because it is possible to identify a series of events which give rise to primary rights that are recognised by the law prior to and independent of any infringement of those rights. Robertson then argues that these doctrines cannot be seen as part of the law of contract either because a promise is neither necessary nor sufficient to establish liability. As a result, Robertson concludes that proprietary and equitable estoppel must be classified as sui generis and therefore belong in Birks' category of 'other' events. They are specially (horizontally) separate from contract law and indeed not interactive.
Gerald Fridman's article is about excessive crossing of the border between tort and contract. By investigating the tort of inducing breach of contract, he assesses the protection that the reasonable expectations of the contractual parties receive in the law of tort. Fridman's argument is that the foundational, yet extremely controversial, decision in Lumley v Gye, was not supported by precedent and is a significant example of judicial activism. He criticises the courts, old and new, for being too willing to use tort law to protect contracts. In the second half of the article, Fridman argues, in opposition to the recent judgment of the High Court of Australia in Zhu v Treasurer of New South Wales, that the defence of justification on moral grounds should be significantly expanded to better protect those who induce breaches of contracts.
In his contribution, Mark Gergen examines American law on the effectiveness of agreements that absolve an actor from liability for misleading another. This is to consider the interaction of contract and the law of wrongs. Although American courts are divided on the issue, Gergen contends that the courts that refuse to enforce provisions which exculpate from fraud are correct. He argues that innocent parties can be adequately protected from baseless accusations by rules requiring that fraud be pled with specificity and proven by clear and convincing evidence. In relation to inadvertent misrepresentation, Gergen argues that terms that bar a contract claim on a representation should also bar claims in rescission, restitution, or negligent misstatement since this is a contract law issue rather than one of equity, restitution or tort. Turning to negligent misstatement, Gergen observes that an exculpatory agreement will determine the existence and scope of an actor's duty of care since invited reliance is a sine qua non of liability. In this important respect, Gergen argues [page xvi] that negligent misstatement resembles contract, in particular the doctrines of promissory estoppel and third beneficiary in American law, and is unlike the general tort of negligence.
The rights under a contract can and frequently are assigned to a third party. Less frequently, a contracting party can create a trust of the rights under a contract in favour of a third party beneficiary. In his article, Andrew Tettenborn compares and contrasts these two approaches to transfer. The distinction is particularly important in light of two relatively recent English cases, Don King Productions Inc v Warren and Barbados Trust Co v Bank of Zambia. These cases take the position that the two approaches are different, and if one is unavailable -- for example because of an express prohibition on assignment -- the other remains open. Tettenborn challenges these decisions as failing to reflect commercial reality and creating a distinction lacking any real difference. Tettenborn's approach takes a broad and strong view of clauses in a contract which prohibit the benefits under the contract from being assigned to a third party. On that view, such clauses should prohibit the creation of a trust of the contract's benefits.
In contrast, Chee Ho Tham's article argues for a minimalist approach to such 'third party' clauses. He supports the analysis in Don King and is critical of Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd, a case in which the House of Lords relied on an anti-assignment clause to invalidate a purported equitable assignment. In Tham's view, equitable assignment should be understood as involving only a transfer of the right to grant a release and its corollary, the right to decide to bring legal proceedings on the chose in action. Anti-assignment clauses thus cannot prevent an assignor from effectively transferring, in equity, his or her right to grant such a release. Tham's claim is that these clauses are less effective than the courts currently think they are.
The final group of articles deals with the concrete doctrines of common law that seek to protect parties in situations of information or power imbalance. This time the border is not between special fields of law horizontally considered or as fields captured by general, vertically appreciated, principles of law. The issue here is about the relationship between persons involved in making an agreement within the bargaining confines of contract formation. In his contribution, Kelvin Low examines the English Court of Appeal's recent judgment in Great Peace Shipping Ltd v Tsavliris Salvage, [page xvii] which reformulated the law of common mistake by overruling Solle v Butcher. Low finds it surprising that The Great Peace has found itself under such sharp criticism -- a development which demonstrates a mellowing of views of both academics and judges over Denning LJ's excesses in Solle v Butcher. In fact, instead of criticising The Great Peace, he claims that it has wrought two principal improvements to the law: the abolition of a dual jurisdictional approach to cases of common mistake which caused an unnecessary amplification of uncertainty, and the clear severance of the doctrine of common mistake from the implied condition precedent theory. Low contends that these improvements allow the common law scope for developing its remedies of mistake beyond the blunt instrument of declaring the contract void ab initio.
Mindy Chen-Wishart's article examines the foundational and controversial case of Smith v Hughes and the objective theory of contract formation. She concludes that situations that are said to represent examples of subjectivity trumping the objective approach are straightforward applications of objectivity when a context-specific view is taken. In fact, she argues that when this view of objectivity is applied, there is no need, indeed no room, for a resort to subjectivity. Her article also attempts to stabilise the language of 'mistake', 'defective consent' and 'void' and make distinctions between contract formation and vitiation. Her argument is that this distinction explains why known non-correspondence of any term prevents contract formation, while mistaken assumptions must be shared and fundamental to void a contract. This distinction also allows us to map the related areas of rectification, non est factum, mistaken identity and misrepresentation.
In the final article of the book, Rick Bigwood examines the nature of undue influence, a doctrine frequently employed by vulnerable parties to set aside contracts. He explains the different categories of cases, in particular highlighting the differences between cases where the undue influence is established on the facts of the case and cases where the undue influence is rooted in the relationship between the parties. He analyses in detail the fiduciary elements on which this second category of cases has been based, and is critical of the House of Lords for having lost sight of these important underpinnings in its more recent decisions, notably National Westminster Bank plc v Morgan and Royal Bank of Scotland plc v Etridge (No 2). [page xviii] In Bigwood's view, the court's move away from strict fiduciary regulation in relational undue influence cases is a retrograde step.
* * *
Both the symposium and this book have benefited from generous support and assistance. We are indebted to the faculty, staff and students at Western Law, particularly Dean Holloway, Acting Dean Brown, Associate Deans Edgar and Huscroft, and our conference coordinator, Michelle Bothwell, for their enthusiastic support of the symposium. We are also grateful for the financial support provided by Western's Research Promotion Fund, which financed the operating costs of the symposium, and from the Foundation for Legal Research, which allowed us to have the editorial assistance of two talented law students, Jean-Michel Corbeil and Carrie Ann Miller. We are also indebted to the law firm of Cohen Highley LLP for graciously sponsoring the symposium banquet and to Justice Ian Binnie for providing the foreword to the collection.
We hope that you will enjoy reading the articles in this book as much as we enjoyed hearing them presented as papers at the symposium. We are confident that they will be helpful guides to anyone who is interested in exploring contract law. [page xix]
1. P Benson (ed), The Theory of Contract Law: New Essays (Cambridge, Cambridge University Press, 2001).
2. R Cunnington and D Saidov (eds), Contract Damages: Domestic and International Perspectives (Oxford, Hart Publishing, 2008).
3. D Markovits, 'Contract and Collaboration' (2004) 113 Yale Law Journal 1417.
4. JD McCamus, The Law of Contracts (Toronto, Irwin Law, 2005).
5. M Pratt, 'Promises, Contracts, and Voluntary Obligations' (2007) 26 Law and Philosophy 531.
6. J Swan, Canadian Contract Law (Markham, LexisNexis Butterworths, 2006).
7. 'The Limits of Contract' ch 1.
8. Ibid, at Part VIII.
9. 'Border Control: Some Comparative Remarks on the Cartography of Obligations' ch 2.
10. 'Principle in Contract Law: the Doctrine of Consideration' ch 3.
11. 'Contractual Interpretation at Common Law and Civil Law: An Exercise in Comparative Legal Rhetoric' ch 4.
12. 'Consideration and the Morality of Promising' ch 5.
13. S Shiffrin, 'The Divergence of Contract and Promise' (2007) 120 Harvard Law Review 708.
14. 'The Limits of Contract' at text following n 21.
15. 'Justifying Damages' ch 6.
16. Ibid, at text following n 10.
17. Ibid, at Part VII.
19. 'Damages and the Right to Performance: A Golden Victory or Not?' ch 7.
20.  2 AC 353 (HL).
21. 'Estoppels and Rights-Creating Events: Beyond Wrongs and Promises' ch 8.
22. 'Lumley v Gye and the (Over?)Protection of Contracts' ch 9.
23. (1853) 2 El & Bl 216, 118 ER 749 (QB).
24. (2004) 218 CLR 530 (HCA).
25. 'Contracting Out of Liability for Deceit, Inadvertent Misrepresentation and Negligent Misstatement' ch 10.
26. 'Assignments, Trusts, Property and Obligations' ch 11.
27.  Ch 291 (CA) [Don King].
28.  EWCA Civ 148,  1 Lloyd's Rep 495 (CA).
29. 'The Nature of Equitable Assignment and Anti-Assignment Clauses' ch 12.
30.  1 AC 85 (HL).
31. 'Coming to Terms with The Great Peace in Common Mistake' ch 13.
32.  QB 679 (CA) [The Great Peace].
33.  1 KB 671 (CA).
34. (1871) LR 6 QB 597.
35. 'Contractual Mistake and Intention in Formation and Vitiation: the Oxymoron of Smith v Hughes' ch 14.
36. 'From Morgan to Etridge: Tracing the (Dis)Integration of Undue Influence in the United Kingdom' ch 15.
37.  AC 686 (HL).
38.  2 AC 773 (HL).